Pharma stocks have recently emerged as one of Wall Street's hottest trades, with November marking a striking inflection point few had expected.
In an exclusive interview with Benzinga on Wednesday, Tema ETFs founder and CEO Maurits Pot said the pharma sector is entering a new phase of structural change, which may soon redefine how we live with, or even cure, cancer.
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A Historical November Rally For Pharma Stocks
While many continue to debate whether AI is a bubble by pointing to soaring tech valuations, the story looks different in healthcare — where valuations remain cheap, AI is delivering real impact, and performance is only beginning to turn.
After years of broad underperformance, the broader Health Care Select Sector SPDR Fund (NYSE:XLV) is up 10% month-to-date, the iShares Biotechnology ETF (NYSE:IBB) is 8% higher, but the market momentum is accelerating even fastest in the cancer-cure race.
The Tema Oncology ETF (NYSE:CANC) has rallied 45% year-to-date and is up more than 15% this month alone, far outperforming tech and other hot AI trades.
"What often happens is the need precedes the performance, and performance precedes the flows," Pot told Benzinga.
"We're on the cusp of seeing that inflection," he added.
According to the expert sector is undergoing a structural shift fueled by the convergence of artificial intelligence, rising healthcare demand and strategic acquisitions.
"We live in a world where chronic disease is getting worse, not better. Pharma demand has never been stronger," Pot said.
At the same time, Pot indicated that large pharmaceutical companies are facing severe patent cliffs, where blockbuster drugs lose exclusivity and revenue plummets.
These dynamics are creating what Pot views as a powerful demand-and-supply setup: rising global demand for innovation in treatment and an urgent need by major drugmakers to replace revenue from expiring patents.
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Regulatory Fog Clears, M&A Accelerates
Pot noted that after a period of uncertainty around drug pricing policies and political involvement in healthcare — including vaccine bans and pricing controls — the regulatory picture is beginning to clear.
"With regulatory clarity coming in, people realize three things," he said.
"The need for healthcare hasn’t changed — if anything, it’s gone up. Healthcare valuations are very cheap relative to history. And historically, a lot of the returns in healthcare come from big companies buying small companies."
The result is a wave of acquisitions. "You’re now seeing the biggest oncology deal in five years, the biggest cardiometabolic deal in five years," Pot said.
Which Pharma Firms Are ‘Ahead Of The Curve’?
Pot highlighted Eli Lilly & Co. (NYSE:LLY) as a standout player. He highlighted the company's strong execution across key areas like obesity, neurology and oncology.
“I think Eli Lilly has been ahead of the curve in many things,” he said.
Yet, he also indicated that some of the more interesting Innovation is actually happening below the surface, affecting smaller and independent companies.
Pot also weighed in on the competitive dynamic between Novo Nordisk A/S (NYSE:NVO) and Eli Lilly, two giants in diabetes and obesity treatment. "Lilly has just had much better execution," Pot said.
"Novo Nordisk was too bloated, too slow."
AI Driving Efficiency, Not Replacing Discovery (Yet)
According to Pot, AI is helping speed up the R&D cycle, especially in making the process cheaper and faster.
"Drug discovery cycles are getting shorter. Costs are coming down. That means there’s more margin to reinvest in further discoveries," Pot said.
But he clarified that AI isn't yet determining drug discovery on its own.
"Right now, AI is enabling or making drug discovery more efficient — but it’s not actually discovering molecules yet."
The bigger promise lies in what's still developing. Pot mentioned that a significant benefit could be in how AI handles the complex regulatory requirements of the FDA submission process: "A lot of that work can be simplified now with AI."
He said that this matters most when new health issues emerge: "AI may be able to come up with drug solutions faster than the conventional discovery cycle."
Cancer Could Become Chronic — Or Curable
When asked about long-term innovation in oncology, Pot described three major developments that could redefine cancer treatment: gene editing may make certain cancers treatable at the DNA level; cancer could shift from being a deadly diagnosis to a manageable chronic condition; and a cancer vaccine may soon become a reality.
According to Pot, the companies ahead in the cancer-cure race are Merck & Co. (NYSE:MRK) and Moderna Inc. (NASDAQ:MRNA).
“If you were to ask me what the moonshot innovation of this decade is in oncology, it’s either a cancer vaccine or it’s gene editing,” he said.
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