What drives growth and investment in the biotechnology industry?
Biotechnology is often associated with ground breaking discoveries, but commercial success increasingly depends on the ecosystems that help bring those discoveries to market. With global medicine spending projected to exceed USD 2.3 trillion by 2028, the sector relies on networks that connect research institutions, healthcare providers, investors and pharmaceutical companies.
Switzerland provides a strong example of this dynamic. Despite its relatively small size, it continues to attract biotechnology investment thanks to its world-class universities, highly skilled talent pool, global pharmaceutical leaders and long-standing culture of scientific innovation. Smaller biotechnology companies now account for around 70% of the industry's drug pipeline, highlighting the important role they play in driving innovation.
However, transforming promising science into approved therapies requires far more than research expertise. Capital, clinical development capabilities, regulatory knowledge and commercial infrastructure are all essential. As a result, partnerships, licensing agreements and acquisitions remain central to the industry's growth model. This is evident in transaction activity across the sector, with global biopharma deal value reaching USD 4 trillion in the first five months of 2026, surpassing the USD 3.5 trillion recorded during the whole of 2025.
Why genomics stands out in healthcare innovation
The genomics industry highlights why these innovation ecosystems are so important. Advances in sequencing technologies and precision medicine are expanding the boundaries of healthcare, offering the potential for more targeted and effective treatments. Yet bringing new therapies to patients remains a lengthy, costly and high-risk process. The cost of developing a new medicine now exceeds USD 2 billion, while approximately 90% of drug candidates entering clinical trials never reach the market.
As a result, long-term competitiveness is often determined not only by technological innovation but also by the strength of the institutions, partnerships and commercial networks that support it. Companies operating within robust innovation ecosystems are generally better positioned to navigate development challenges and capture value from scientific advances. We remain constructive on genomics because advances in sequencing technologies and precision medicine are creating significant long-term growth opportunities in healthcare.
Why equity market returns are broadening in 2026
Equity markets have seen a notable shift in recent weeks. After a strong run, semiconductor and other AI-related stocks came under pressure, while areas of the market that had previously lagged started to outperform. Despite this pullback, global equity markets remain close to record highs. This suggests that investors are rotating into different sectors rather than moving away from equities altogether.
Such periods of consolidation are not unusual after strong rallies and can help create a healthier foundation for the future. We expect this broadening of market returns to continue during the second half of 2026, as outlined in our Market Outlook Mid-Year. A positive sign is that equal-weighted US equities are outperforming traditional market-cap-weighted indices this year, indicating that gains are becoming more widely shared across the market rather than concentrated in a handful of large companies.
Within technology, semiconductors may remain volatile in the near term, but the longer-term outlook remains positive. Large cloud and technology companies continue to invest heavily in AI infrastructure, supporting demand for data-centre processors, memory chips and semiconductor equipment. Earnings growth remains healthy, valuations have become more attractive, and signs of recovery are emerging across parts of the industrial and automotive sectors.
Software companies also continue to benefit from strong demand and their critical role in corporate IT systems. By contrast, hardware companies face increasing pressure from slower growth and rising memory costs. As a result, we continue to favour semiconductors and selected software companies over hardware. While the semiconductor rally may pause in the short term, the sector's long-term growth story remains firmly in place.
Conclusion: Look beyond market leaders
The recent broadening of equity market returns points to a healthier investment environment, one in which opportunities are emerging beyond a small group of dominant technology stocks. As investors search for differentiated sources of long-term growth, genomics stands out as a compelling theme supported by powerful structural drivers.
Whether in biotechnology or the broader equity market, the companies best positioned for success are increasingly those operating within strong ecosystems that can support innovation, scale and commercialisation. For investors, looking beyond short-term market rotations and focusing on these long-term foundations may prove key to identifying the next generation of growth opportunities.