In fact, some scientists have described biotech as the future of medicine. And consequently, analyst forecasts predict the biotech sector alone will grow by an annualised rate of 13.96% until 2030, reaching $3.88trn! That’s more than double the current $1.8m estimated market size.

Needless to say, this presents a massive growth opportunity for those willing to invest in biotech stocks. But this growth doesn’t come without its risks. So, let’s explore exactly how these businesses work and the threats a biotech investor needs to know about.

What are biotech stocks?

Biotech stocks both research new treatments and medicines for diseases, run clinical trials to prove efficacy and safety, and then eventually bring their product to market after regulatory approval. They’re a small but rapidly expanding segment of the healthcare industry.

These businesses operate similarly to pharmaceutical companies. However, the key differential in biotechnology is the approach to developing new treatments. Traditional pharmaceuticals use chemicals as the basis for new drugs, whereas biotech uses living organisms such as bacteria and enzymes. As crazy as that sounds, it’s opening many new avenues and solutions for treating genetic diseases and developing highly effective vaccines.

Top biotech shares in the UK

Here are the top biotech stocks on the London Stock Exchange in order of market capitalisation as of January 2026:

AstraZeneca

AstraZeneca is one of the largest pharmaceutical companies and healthcare stocks in the world. Given its access to vast resources, the group develops new treatments for a wide range of diseases. The list includes cancer, cardiovascular, renal, respiratory diseases, and immunology and other rarer conditions.

It already has a diverse portfolio of products on the market and, more recently, is known for its Covid vaccine. With hundreds of drug candidates in the development pipeline and management’s focus on oncology and rare disease, this powerhouse doesn’t look like it’s slowing down. Of course, drug development remains notoriously risky.

GSK

GSK is a global leader in vaccines and pharmaceutical treatments targeted at cancer, HIV, immunoinflammatory, and respiratory diseases. The healthcare company has established research teams and manufacturing facilities worldwide, providing a global distribution network, particularly across the US, Europe and Asia.

With over 1,500 active partnerships with external pharmaceutical organisations and governments, GSK stands out amongst the crowd of healthcare stocks. Until recently, It also had a consumer healthcare division that has since been spun off into its own company called Haleon. The group is now purely focused on developing new treatments.

OXB

OXB, formerly Oxford Biomedica, is a rising gene and cell therapy business specialising in viral vectors. In oversimplified terms, the company re-engineers existing viruses to deliver improved genetic material into patients’ cells.

Management is using this technology to develop its own treatments. However, management also outsources its capabilities to other drug developers via its LentiVector platform. And in 2024, management transitioned the business into becoming a pure-play global contract development and manufacturing organisation (CDMO).

This drastically reduces the cost of developing gene and cell therapies. So, it’s not surprising that pharmaceutical titans like Bristol Myers Squibb, AstraZeneca, and Novartis are all active customers. These customers pay ongoing milestone fees throughout development, as well as a royalty on sales for any drug that makes it to market.

Following the acquisition of a commercial-scale viral vector manufacturing facility in North Carolina, US, the company has begun significantly expanding its international footprint.

PureTech Health

PureTech Health is a mid-stage biotech business with a focus on creating new therapies for diseases with limited or no existing treatment options. The firm specialises in medicines related to the brain, gut, and immune system. It has three drugs with US and European regulatory approval. And as of January 2026, the firm also has a further 29 treatments and candidates in its development pipeline.

Beyond researching and developing its own treatments, management has built up a significant equity interest in other biotech groups. In total, it has a stake in seven different companies, several of which have commercial products or are in late-stage clinical trials.

Avacta Group

Avacta is an early-stage biotech firm specialising in the fields of diagnostics and therapeutics. Its diagnostics division created a proprietary platform called Affimer. This is a portfolio of reagent proteins that can be used to detect specific infections within a given sample. Traditionally, this process uses antibodies. However, manufacturing antibodies is a complex, time-consuming process that Affimer reagents don’t have to go through. 

On the therapeutics side of the business, the company is currently testing its flagship AVA6000 chemotherapy drug in clinical trials. This treatment is being developed with the group’s second chemical platform called pre|CISION. Unlike existing chemotherapy treatments, AVA6000 is highly targeted. As a result, fewer healthy cells are caught in the crossfire, which reduces the severity of side effects.

Investing in the US biotech industry

As with pharmaceutical and healthcare companies, investing in American biotech stocks comes with the same degree of regulatory risk. All treatments need approval from the Food & Drugs Administration (FDA) for commercialisation in the US.

The list of US biotech stocks is significantly longer than here in the UK, as the American healthcare market size is enormous by comparison. With that said, here are some of the largest biotech shares available across the pond in order of market capitalisation as of January 2026.

1. Vertex Pharmaceuticals (NASDAQ:VRTX) – $114.1bn market cap
2. Regeneron Pharmaceuticals (NASDAQ:REGN) – $79.3bn market cap
3. Exelixis Inc (NASDAQ:EXEL) – $12.2bn market cap
4. Twist Bioscience Corp (NASDAQ:TWST) – $2.5bn market cap
5. Novavax Inc (NASDAQ:NVAX) – $1.3bn market cap

The development pipeline for biotech stocks

Before you can invest in biotech stocks, you need to understand the development pipeline. It has five steps:

1. Discovery

Scientists identify a potential drug candidate for treating a specific disease. Typically, firms prioritise treatments with ample market opportunities and little competition in the market or in development.

2. Preclinical trials

Once a candidate is selected, non-human lab testing begins. This can be done using in vitro (in test tubes) and/or in vivo (in animals such as mice) testing. 

3. Clinical trials

If preclinical trials show encouraging results, human trials begin with qualifying patients recruited from hospitals and other medical institutions. This is the longest part of the process and where most drugs fail. 

• Phase 1 – Initial small-scale study where, on average, 60 closely-monitored patients receive different doses. The goal is to determine the highest effective dosage that does not cause severe side effects.
• Phase 2 – Assuming Phase 1 is successful, Phase 2 expands the study to around 120 patients. The goal is to uncover evidence of the drug candidate actually working while simultaneously isolating the optimal dose.
• Phase 3 – This is the longest part of the clinical trial process and can take years to complete. The goal is to prove the effectiveness of the treatment compared to existing drugs. Studies are expanded to include an average of 600 patients. However, patient numbers can venture into the thousands depending on the drug. Phase 3 trials are most commonly run as randomised, double-blind studies. Some patients receive an existing drug and/or a placebo, while other patients receive the new treatment being tested. 

4. Regulatory approval

If Phase 3 trials reveal strong evidence of high efficacy and safety, biotech stocks then file for approval from drug regulators such as the MHRA in the UK and FDA in the US. This process can take anywhere between 6 and 10 months and may require the company to perform further clinical trials if insufficient evidence is provided. If the regulator grants approval, the firm can offer its product on the open market and begin Phase 4 trials.

• Phase 4 – Drugs with regulatory approval still need to be monitored when offered to patients. The goal is to determine whether any long-term health impact occurs that would not have been detected during Phase 3 trials.

5. Commercialisation

After regulatory approval is granted, biotech groups still need to convince doctors and health insurance companies to offer the new drug to patients. This is where sales representatives come into the picture. And dethroning an existing treatment, even if it’s not as effective, can be a challenge.

This product pipeline can span decades. And statistically speaking, over 90% of drug candidates never make it to market. That’s why most biotech shares develop multiple drugs at the same time. Like prudent investors, these companies are diversifying their investments.

But running multiple trials at the same time is a highly capital-intensive process. Consequently, most young biotech businesses have to continuously issue new shares to raise the necessary funds. This causes significant equity dilution. It’s also common to see larger players acquiring younger companies when a drug candidate shows a lot of promise.

Are biotech stocks right for you?

Investing in a biotech company is a high-risk move. Drug development is notoriously challenging and expensive, with most drug candidates failing to get past regulators. In fact, a failure in a clinical trial can often be a death sentence. After all, most pre-commercialisation biotech stocks rely on external financing, which isn’t easy to raise when promoting a failing product.

But, this sector has a lot to offer investors despite its high-risk nature. And an easy solution to reducing risk exposure is to only invest in the firms that already have a product on the market with a sizeable revenue stream that can help fund future developments. 

Having said that, even the largest biotech shares can still be volatile, especially when bad results emerge from ongoing clinical trials. Therefore, the biotech sector is not suitable for everyone. And taking a diversified approach is, as always, a prudent strategy when investing in biotech stocks.

The post Investing in Biotech: Top UK Biotech Stocks of 2026 appeared first on The Motley Fool UK.

In addition to this volatility, investors today may favour companies with revenues now rather than far into the future, due to rising inflation and interest rates. We have witnessed this in real-time with the NASDAQ 100 (a proxy for technology stocks) officially entering a bear market (20% decline or greater) since its peak in November 2021. This could benefit the three companies mentioned below, in my opinion.

The first stock I may add to my portfolio is Shell, which should continue to benefit from a high oil price, as well as the transition to cleaner energy. Oil companies are under pressure by investors to be prudent with capital expenditure on new oil exploration, meaning a sustained higher oil price is likely. Since the market crash in March 2020, the oil price has risen over 300% and, although oil companies did cut their dividends following the crash, I believe this unlikely to happen again due to the huge energy expenditure needed to fuel the renewable energy transition (since all machinery, transportation, etc, still needs oil).

Lockheed Martin (NYSE: LMT) is a defensive company in every sense of the word. It makes fighter jets and other military weapons, as well as other combat machinery. The company has assured revenues because the majority of its business comes from government contracts. This allows it to pay a 2.6% dividend as it generates considerable free cash flow from the sale of its military equipment. Alongside this, the company has also been able to invest its profits into space exploration, a rapidly growing niche. This gives investors the benefit of assured revenue alongside an exciting growth aspect to Lockheed’s business at a reasonable 16x forward price-to-earnings ratio. The company should also benefit from increased defence spending by governments due to the Russia-Ukraine war.

Finally, Regeneron Pharmaceuticals (NASDAQ: REGN) and Bristol Myers Squibb are both extremely cheap, diversified ‘big pharma’ companies with strong free cash flow. Both companies’ share prices have remained strong during the market sell-off this year as investors seek defence in assets with more assured revenue streams. Regeneron has been under-appreciated by the market because of patent expiry for its Eylea drug, used to treat retinal diseases. Once drug patents run out, general pharmaceutical companies can recreate these drugs for a fraction of the price, rendering them worthless to the company that created them. Some of these patents don’t expire until 2030 and the company has a huge pipeline of potential drugs that could bring further revenue in the future. Both companies have recent momentum behind their share prices, and I see them as long-term holdings in my own portfolio.

The post Top dividend stocks to weather market volatility appeared first on The Motley Fool UK.