Biotech’s Second-Quarter Setup: Why the Season—and the Signals—Matter in 2025

From seasonal strength to structural stress, 2Q earnings reveal a sector leaning on tailwinds but bracing for policy and pipeline risks.

Second-quarter earnings often give biotech stocks a boost - and 2025 is shaping up no differently. Johnson & Johnson and Novartis delivered stronger-than-expected 2Q results, reinforcing a seasonal pattern that typically benefits biopharma: normalized deductibles, favorable gross-to-net dynamics, government payments, and catch-up demand.

In parallel, consensus data from Bloomberg showed 1Q 2025 revenue expectations for the Nasdaq Biotechnology Index (NBI) were overly pessimistic and ultimately beaten - though earnings per share remained sharply negative, reflecting the cash burn and inefficiencies of SMID-cap biotech.

Looking ahead to 2Q 2025, investors should take note: historical tailwinds remain intact, and early signs from large-cap peers are constructive. But the sector also faces intensifying structural headwinds.

Analysts are laser-focused on patent cliffs (Stelara, Entresto), pipeline risk, and potential pricing pressure tied to the Trump administration’s “Most Favored Nation” and tariff proposals.

Meanwhile, a nascent shift toward direct-to-patient (DTP) drug sales - exemplified by Pfizer and BMS’s Eliquis program - suggests pharma may be rethinking its GTN (gross-to-net) model.

For biotech investors, now is the time to be selective - favoring large-cap resilience and SMID-cap catalysts, while staying vigilant to policy changes that could reshape the rules of the game.

Risks to Watch

Policy volatility - including MFN pricing, pharma tariffs, and IRA enforcement - could weigh on margins and forward guidance. Generic erosion (Stelara, Entresto) may accelerate revenue pressure. SMID-cap burn rates remain high. Direct-to-patient strategies are promising but early-stage. Sentiment could shift quickly if late-stage pipeline disappointments or regulatory slowdowns materialize.

Colorado, USA. Hartaj Singh, Winter 2023

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Coming Up on The Biotech Capital Compass

July 2025 – Gene Tech Showdown: Editing, Therapy & the Road Ahead

This July, the teams at Biotech Blueprint and Biotech Capital Compass are launching a three-part primer unpacking the evolving worlds of gene editing and gene therapy, two closely linked but fundamentally distinct technologies. We’ll move beyond the science to explore why these platforms matter, where they’ve stumbled, and what investors need to watch as the next chapter unfolds.

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Biotech Capital Compass: July Newsletter

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About the Author

Hartaj Singh brings over 30 years of experience in drug development, corporate strategy, hedge fund management, and biotech analysis. With a career spanning top investment banks, Hartaj has been a highly ranked analyst, known for providing astute guidance on biotech investments for over a decade. His deep sector knowledge, honed through years of navigating the biotech landscape, is now being put to use to help investors capitalize on biotech opportunities.