A biotech renaissance

Eli Lilly (NYSE: LLY), boasting a sizable war chest from growing Mounjaro and Zepbound revenues (GLP-1 obesity drugs), has been one of the most active M&A participants, with US$25b deployed across 9 acquisitions in the first 6 months of 2026. Two of these acquisitions were HB Biotechnology portfolio companies: Ventyx (NASDAQ: VTYX) and Centessa (NASDAQ: CNTA).

Consistent with our long-held view, the message from acquirers remains unchanged: innovation is scarce, capital is abundant, and external pipelines are an essential ingredient to sustaining long-term growth for pharmaceutical companies.

Notable Themes throughout FY26

RAS Finally Arrives in Pancreatic Cancer

One of the most important clinical themes to emerge during FY26 was the dawning of a step-change in the treatment of RAS-driven cancers. For decades the RAS oncogene, responsible for driving approximately 90% of pancreatic cancers, was considered one of oncology's most promising but elusive drug targets. During FY26 that changed, with multiple companies demonstrating that effective RAS inhibition can meaningfully alter outcomes in one of the deadliest forms of cancer.

At ASCO 2026, Revolution Medicines (NASDAQ: RVMD) presented mature data for daraxonrasib, its pan-RAS(ON) inhibitor, demonstrating roughly double the expected overall survival in heavily pre-treated pancreatic cancer patients. The results were widely regarded as practice-changing and received a standing ovation during the conference's plenary session. Daraxonrasib is now expected by many clinicians to become a new standard of care in metastatic pancreatic cancer and is currently being evaluated in front-line treatment settings.

As often occurs following a major therapeutic breakthrough, attention has rapidly shifted toward combination approaches that may further improve outcomes and overcome resistance mechanisms. One notable example came from Tango Therapeutics (NASDAQ: TNGX), which reported preliminary Phase 1/2 data combining its PRMT5 inhibitor with daraxonrasib. Although based on a small patient population (n=12) and still early in development, the data were sufficiently encouraging to add more than US$2 billion to Tango's market capitalisation in a single day.

Closer to home, Amplia Therapeutics (ASX: ATX) also reported encouraging pancreatic cancer data during FY26, demonstrating that its FAK inhibitor, narmafotinib, improved overall survival when combined with standard-of-care chemotherapy, including 5 complete responses (from 64 patients / 8% CR rate), an outcome rarely observed in metastatic pancreatic cancer. The announcement resulted in a doubling of the company's share price. Importantly, as the standard of care in pancreatic cancer has arguably changed to include a RAS-inhibitor backbone, Amplia is now developing a strategy to combine narmafotinib with RAS inhibitors, targeting resistance mechanisms that emerge following RAS inhibition.

These developments highlight one of the key advantages of specialist biotechnology investing. Breakthroughs rarely occur in isolation. Once a major therapeutic class emerges, opportunities often develop across a broader ecosystem of combination therapies, resistance pathways and next-generation approaches. At HB Biotechnology we are constantly seeking to invest in companies developing first-in-class and / or best-in-class assets.

Immunology & Inflammation Remains a Strategic Battleground

Another theme we have been actively tracking for several years is the increasing strategic value being placed on differentiated Immunology & Inflammation (I&I) assets.

As previously discussed, HB Biotechnology portfolio company Ventyx Biosciences (NASDAQ: VTYX) was acquired by Eli Lilly in January 2026 for its lead asset targeting the NLRP3 inflammasome—a central inflammatory pathway that has historically proven difficult to target safely and effectively. The acquisition reflects growing industry confidence that next-generation I&I therapies can address large patient populations with significant unmet need.

Another example was AbbVie's acquisition of Apogee Therapeutics (NASDAQ: APGE) for almost US$11 billion, announced in June 2026. Apogee's lead asset, zumilokibart, targets IL-13 and is being developed for diseases such as atopic dermatitis (AD) and asthma. While efficacy in mid-stage trials appears broadly comparable to current market leader, Dupixent, in AD, the potential for dosing every three to six months (compared to monthly administration for Dupixent) has generated considerable interest from physicians, patients and pharmaceutical companies alike. With Dupixent expected to generate approximately US$20 billion in revenue during 2026, even modest market share gains represent a substantial commercial opportunity.

The increasing strategic importance of I&I is evident not only in M&A activity, but also within our own portfolio construction. Exposure to Immunology & Inflammation has increased from approximately 7% of the portfolio three years ago to more than 20% today, reflecting our conviction that this remains one of the most attractive areas of innovation across biotechnology.

The Rise of Chinese Innovation: An Opportunity, Not a Constraint

Another increasingly important theme across the global biotech landscape is the growing influence of Chinese innovation.

While there has been considerable policy debate in the United States regarding potential restrictions on Chinese biotechnology development, we believe that innovation itself is not easily constrained by geopolitical boundaries. China has invested heavily in developing its own biopharmaceutical industry over the past ~10+ years, starting from manufacturing and contract services, through generating fast-follower "me-too" or "me-better" assets (pharmaceuticals) in response to US innovation, but now is increasingly showing true innovation leadership, evidenced by the increasing deal flow of licensing assets from Chinese companies.

From an investment perspective, our focus remains agnostic to geography. We prioritise the quality of the underlying science rather than its origin. That said, commercial success in the world’s most important pharmaceutical market, the United States, typically requires clinical validation in Western (and often US-based) patient populations.

Encouragingly, we are seeing many of our portfolio companies actively engage with Chinese innovation ecosystems, selectively acquiring or licensing complementary assets to strengthen their pipelines. This “global sourcing” approach reflects a pragmatic recognition of where high-quality science is being developed.

At the same time, we acknowledge legitimate geopolitical concerns regarding over-reliance on Chinese manufacturing for critical drug supply chains and active pharmaceutical ingredients (APIs), an issue that was brought into sharp focus during the COVID-19 pandemic. However, we believe attempts to restrict the flow of innovation itself are likely to prove both difficult and counterproductive.

FDA Leadership: Signs of Stabilisation After a Period of Turbulence

Finally, regulatory stability, an area of prior concern, appears to be improving. As discussed in previous reports, the FDA experienced an unusually turbulent period, with leadership changes and internal disruptions leading to perceptions of inconsistency in regulatory decision-making.

Encouragingly, this period now appears to be largely behind us, with the agency beginning to return to a more stable and predictable operating environment. That said, uncertainty remains around the identity and direction of the next FDA Commissioner (the FDA is currently under caretaker leadership by Kyle Diamantas, the prior FDA Deputy Commissioner for Food). We remain hopeful that future leadership will reinforce the agency’s historical role as a science-driven and consistent regulator, providing the clarity and predictability required for efficient drug development.

Outlook for FY27: Fundamentals in the Driver’s Seat

With capital markets re-opened, M&A activity accelerating, and clinical innovation back at the forefront, we believe the biotechnology sector is well positioned for a sustained period of growth. The past year has reinforced a simple truth: When uncertainty clears, markets reward quality, particularly companies with differentiated science and strong clinical data.

Against this backdrop, HB Biotechnology’s portfolio remains well positioned, with a clear focus on high-conviction opportunities where fundamental progress drives value. While cycles in biotech are rarely linear, the combination of available capital, active acquirers, and improving clinical momentum provides a compelling foundation for continued outperformance.