The spectacular rally of Abivax, with shares surging over 850% following positive Phase III data in ulcerative colitis, has reignited investor confidence and reshaped market dynamics across European biotech. This "Abivax effect" underscores a fundamental shift in today's environment where Phase III readouts have become the ultimate value driver for the sector.
Market Recovery Gains Momentum
While macro headwinds persist including U.S. drug pricing reforms and FDA review delays, market uncertainty has greatly diminished. The NEXT BIOTECH index has climbed 13.7% year-to-date, with most of this advance driven by a sharp rally since April's "Liberation Day," while the STOXX 600 Healthcare has slipped 7.4% over the same period.
The improving fundamentals are evident in key metrics: the number of companies trading below cash has dropped to 16% from 20% in April, signaling renewed interest from investors. This recovery represents a significant turnaround for a sector that had experienced prolonged underperformance.
Capital Markets Show Signs of Life
Equity capital markets remain tight, but September brought a turning point with LB Pharmaceuticals' $285 million IPO marking the first U.S. listing in seven months, alongside follow-ons from Mineralys and Dianthus. In Europe, ECM deal value reached $1 billion in Q3, the highest since early 2024.
The M&A landscape is accelerating rapidly. September alone saw major acquisitions including Pfizer's acquisition of Metsera for up to $7.3 billion, Novartis buying Tourmaline for $1.4 billion, Roche acquiring 89bio for up to $3.5 billion, Servier acquiring Kaerus for up to $450 million, and Genmab acquiring Merus for $8 billion. These deals confirm that pharma companies are willing to acquire late-stage or commercial assets to offset looming patent cliffs.
European Companies in the Spotlight
Investors are now laser-focused on companies with pivotal readouts within 12 months, seeking binary catalysts that can deliver asymmetric returns. Beyond Abivax, two European names dominate watchlists:
Valneva (VLA) stands out with its Lyme disease vaccine VLA15, partnered with Pfizer, representing the only Phase III programme in this indication addressing a $1 billion-plus market. Milestone payments and revenue share could support VLA profitability by 2027.
Nanobiotix (NANO), the French nanomedicine pioneer, is running NANORAY-312, a Phase III trial in locally advanced head and neck cancer. Interim data expected in the first half of 2026 could support early filing and strengthen its $2 billion-plus Johnson & Johnson partnership, validating NBTXR3 as a platform technology in oncology.
Premium Valuations for De-Risked Assets
With patent cliffs forcing pharma to replenish pipelines, late-stage biotechs have become prime acquisition targets. Abivax's Phase III success has already sparked speculation of a $10 billion M&A valuation, underscoring the premium placed on de-risked assets in the current market environment.
The European biotech sector is entering a phase of disciplined optimism. For companies nearing pivotal readouts, the next 12 months represent a unique window not just to validate their science, but to capture investor attention in a market that has regained its appetite for tangible value creation.
