- Last month, the ALPS Medical Breakthroughs ETF (SBIO) jumped 11.58% as a one-two punch of cheaper financing opportunities (markets pricing more Federal Reserve (Fed) cuts) and re-energized dealmaking pulled capital back into biotech stocks. With blockbuster patents rolling off and $1 trillion+ in mergers & acquisitions (M&A) capacity, Big Pharma is incentivized to buy pipeline drugs and treatments rather than build them—putting SBIO’s late-stage small- and mid-cap (SMid-cap) holdings with near-term clinical trial readouts squarely in the deal sweet spot, unlike mega-cap-heavy health care portfolios where targets are fewer, pricier and harder to absorb.
- SBIO’s September strength was led by its Cardiology & Hematology and DREEN (Dermatology, Respiratory, Eye, Ear, Neurology) names with fresh clinical drug trial wins. Within the Cardiology & Hematology segment, Maze Therapeutics Inc. (MAZE, 0.39% weight*) jumped nearly 79% last month after reporting positive Phase I data for its chronic kidney disease treatment, with the treatment being well tolerated across all trial participants. Heart drug developer Cytokinetics Inc. (CYTK, 3.38% weight*) added to positive drug trial news in September, gaining over 55% following the data release of its late-stage heart disease therapy, Aficamten, which was cited as a best-in-class therapy by analysts. Within SBIO’s DREEN segment, Dianthus Therapeutics Inc. (DNTH, 0.67% weight*) rallied nearly 67% in September on positive Phase II results for its autoimmune disorder therapy, highlighting superior safety outcomes over competing treatments.
- SBIO also saw M&A activity heat up during September, with the Fund's holdings benefiting from multiple partnerships and acquisitions. Tourmaline Bio Inc. (TRML, 0.65% weight*), an SBIO DREEN name and developer of cardiovascular disease treatments, spiked over 100% last month after Novartis AG (NVS, not in SBIO) agreed to acquire the company for $1.4 billion, underscoring Big Pharma’s demand for late-stage immunology assets. Adding to positive deal sentiment, Olema Pharmaceuticals Inc. (OLMA, 0.35% weight*), an SBIO Cancer treatment name, gained over 79% last month following an announced partnership with Pfizer Inc. (PFE, not in SBIO) to evaluate and test a new metastatic breast cancer treatment. September’s announcement established Olema as a collaborator with two of the three major pharmaceutical companies (Novartis, Pfizer and Roche Holdings AG), increasing potential for an acquisition-driven bidding war. Rounding out SBIO names announcing new partnerships, Arrowhead Pharmaceuticals Inc. (ARWR, 2.44% weight*), a gene therapy producer, rose 56.56% last month after partnering with Novartis in a $200 million up-front cash deal with $2 billion milestone potential to develop RNA interference (RNAi) medicines for cardiovascular and neuro-degenerative diseases—including Parkinson’s disease—providing non-dilutive funding and pipeline drug validation.
“Despite underlying policy uncertainty, there is much to like in the current setup for biotech…M&A is at very high levels given that we are not seeing mega merger deals take place, and more big M&A is likely given high patent cliffs and record levels of pharma financial firepower.”
– Stifel Biopharma Market Update, September 16, 2025
SMid-Cap Biotech: Entering the Catalyst Window
- The macro backdrop and M&A tailwinds have improved meaningfully for SMid-cap biotech in 2025. The Fed continued its easing path, and futures imply additional cuts into 2026, which lowers discount rates for smaller biotech firms and re-opens the gates for financing opportunities among long-duration biotech innovators. With Big Pharma facing a ~$180 billion patent-expiry cliff through 2030, accelerated M&A of later-stage biotech treatments will be needed to replace lost revenues and bolster drug pipelines. Moreover, the Food and Drug Administration (FDA) is fast-tracking drug approvals for experimental treatments and recent policy changes are shifting in support of Big Pharma and biotech—where just this week the Trump administration announced a three-year exemption from the proposed 100% tariff on imported drugs for Pfizer/pharmaceutical/drug producers who build and maintain manufacturing plants in the US and partner with the Trump administration on cheaper direct-to-consumer online drug sales. This policy shift underscores the incentive for large pharmaceutical companies to onshore supply and buy US-listed, late-stage drugs to backfill pipelines, a setup that historically boosts SMid-cap biotech acquisition premiums.
- In an easing-rate, M&A-hungry tape with Big Pharma chasing pipeline gaps, later-stage SMid-cap biotechs—rich in near-term catalysts at cheaper acquisition prices—offer a cleaner upside than large-cap biotech or broad Health Care stocks. The ALPS Medical Breakthroughs ETF (SBIO) provides a diversified biotech portfolio concentrated in later-stage, pure-play SMid-cap biotechs (Phase II/III with balance sheet screens), fitting squarely in Big Pharma’s M&A strike zone as policy tailwinds and patent pressures mount. Looking ahead, SBIO’s catalyst density positions investors with a targeted exposure to both an improving rate and active dealmaking landscape where, in Q3 2025 alone, SBIO benefited from three portfolio acquisitions at an average announced premium of 61%.
- As of September 2025, the largest 18 pharmaceutical producers boast $500+ billion in potential M&A firepower without overleveraging their balance sheets above historical norms (comfortable firepower) and ~$1.2 trillion in potential M&A firepower if balance sheet capacity is fully utilized (stretch firepower).
- Since the 2025 lows (Liberation Day, 04/08/2025), SBIO has outperformed the S&P Biotechnology Select Industry Index (broad-based biotech & pharmaceuticals) by over 2,000 basis points (bps) due to its emphasis on smaller, pure-play biotech companies. SBIO exhibits a weighted average market cap among its holdings of $194.6 million vs. the S&P Biotechnology Select Industry Index’s weighted average market cap of $1.38 billion.
Performance Summary
| Cumulative | Annualized |
||||||||
| 1 M | YTD | 1 Y | 3 Y | 1 Y | 3 Y | 5 Y | 10 Y | SI | |
| SBIO - NAV (Net Asset Value) | 11.49% | 17.16% | 7.06% | 33.89% | 7.06% | 10.21% | -0.42% | 4.22% | 4.96% |
| SBIO - Market Price | 11.58% | 17.65% | 7.76% | 33.83% | 7.76% | 10.19% | -0.40% | 4.24% | 5.06% |
| S-Network Medical Breakthroughs Index - TR | 11.55% | 17.32% | 7.29% | 35.10% | 7.29% | 10.54% | -0.03% | 4.57% | 5.44% |
| NASDAQ Biotechnology Index - TR | 4.38% | 13.94% | 3.19% | 32.73% | 3.19% | 9.89% | 3.58% | 5.08% | 4.72% |
Source: Bloomberg L.P. and SS&C ALPS Advisors, as of 09/30/2025
Performance data quoted represents past performance. Past performance is no guarantee of future results so that shares, when redeemed, may be worth more or less than their original cost. The investment return and principal value will fluctuate. Current performance may be higher or lower than the performance quoted. For current month-end performance call 1-866-759-5679 or visit www.alpsfunds.com. Performance includes reinvested distributions and capital gains.
Market Price is based on the midpoint of the bid/ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times.
Fund inception date: 12/30/2014
Total Operating Expenses: 0.50%
* Weight in SBIO as of 09/30/2025
Top 10 Holdings
| Rhythm Pharmaceuticals Inc | 3.62% | Nuvalent Inc | 2.90% | |
| Merus NV | 3.61% | Metsera Inc | 2.84% | |
| Cytokinetics Inc | 3.38% | Krystal Biotech Inc | 2.56% | |
| Avidity Biosciences Inc | 3.34% | Alkermes PLC | 2.53% | |
| Axsome Therapeutics Inc | 3.22% | PTC Therapeutics Inc | 2.46% |
As of 09/30/2025, subject to change
Important Disclosures & Definitions
An investor should consider the investment objectives, risks, charges and expenses carefully before investing. To obtain a prospectus containing this and other information, call 1-866-759-5679 or visit www.alpsfunds.com. Read the prospectus carefully before investing.
Shares of ETFs are bought and sold at market price (not NAV) and are not individually redeemable.
Performance data quoted represents past performance. Past performance is no guarantee of future results; current performance may be higher or lower than performance quoted.
All investments are subject to risks, including the loss of money and the possible loss of the entire principal amount invested. Additional information regarding the risks of this investment is available in the prospectus.
Diversification does not eliminate the risk of experiencing investment losses.
The Fund’s investments are concentrated in the pharmaceuticals and biotechnology industries, and underperformance in these areas will result in underperformance in the Fund. Investments in small and micro capitalization companies are more volatile than companies with larger market capitalizations. Companies in the pharmaceuticals and biotechnology industry may be subject to extensive litigation based on product liability and similar claims. Legislation introduced or considered by certain governments on such industries or on the healthcare sector cannot be predicted.
Companies in the pharmaceuticals industry are subject to competitive forces that may make it difficult to raise prices and, in fact, may result in price discounting. The profitability of some companies in the pharmaceuticals industry may be dependent on a relatively limited number of products. In addition, their products can become obsolete due to industry innovation, changes in technologies or other market developments. Many new products in the pharmaceuticals industry are subject to government approvals, regulation and reimbursement rates. The process of obtaining government approvals may be long and costly. Many companies in the pharmaceuticals industry are heavily dependent on patents and intellectual property rights. The loss or impairment of these rights may adversely affect the profitability of these companies.
The development of new drugs generally has a high failure rate, and such failures may negatively impact the stock price of the company developing the failed drug. Biotechnology companies may have persistent losses during a new product’s transition from development to production. In order to fund operations, biotechnology companies may require financing from the capital markets, which may not always be available on satisfactory terms or at all.
The Fund employs a “passive management” - or indexing - investment approach and seeks investment results that correspond (before fees and expenses) generally to the performance of its underlying index. Unlike many investment companies, the Fund is not “actively” managed. Therefore, it would not necessarily sell or buy a security unless that security is removed from or added to the underlying index, respectively.
Basis Point (bps): a unit that is equal to 1/100th of 1% and is used to denote the change in a financial instrument.
NASDAQ Biotechnology Index: designed to track the performance of a set of securities listed on The NASDAQ Stock Market (NASDAQ) that are classified as either biotechnology or pharmaceutical companies, and is a modified market capitalization weighted index.
Pure-Play: a company that focuses solely on one type of product or service.
S-Network Medical Breakthroughs Index: comprised of small and mid-cap stocks of biotechnology companies that have one or more drugs in either Phase II or Phase III of the US Food and Drug Administration (“FDA”) clinical trials.
S&P Biotechnology Select Industry Index: comprises stocks in the S&P Total Market Index that are classified in the GICS biotechnology sub-industry.
Tailwind: a certain situation or condition that may lead to higher profits, revenue or growth.
One may not invest directly in an index.
ALPS Advisors, Inc., registered investment adviser with the SEC, is the investment adviser to the Fund. ALPS Advisors, Inc. is affiliated with ALPS Portfolio Solutions Distributor, Inc.
ALPS Portfolio Solutions Distributor, Inc. is the distributor for the Fund.
Not FDIC Insured • No Bank Guarantee • May Lose Value
SMB000482 01/31/2026
