The biotech world just got another jolt of excitement. On Wednesday, Avadel Pharmaceuticals (AVDL) agreed to be acquired by Alkermes plc (ALKS) shortly after resolving its legal dispute with Jazz Pharmaceuticals (JAZZ).
This isn’t an isolated event. Since mid-September, we’ve seen a flurry of buyouts across the biotech and biopharma space — including Merus N.V. (MRUS), 89Bio, Inc. (ETNB), and Metsera, Inc. (MTSR) — many of them coming with hefty premiums.
The result? Investor optimism is back. You can see it in the rising chart of the SPDR® S&P Biotech ETF (XBI). With “animal spirits” returning to the biotech sector, it’s time to look at which smaller names could benefit most from this M&A-driven momentum.
Below are three small- to mid-cap biotech and biopharma companies I’m adding to my portfolio through covered call strategies.
1. Alkermes plc (ALKS): A Smart, Strategic Expansion
After Alkermes announced it would acquire Avadel, the stock dipped slightly — and I took that as a buying opportunity. Based in Ireland, Alkermes made what I see as a smart bolt-on acquisition that strengthens its existing product lineup and positions the company for renewed growth.
The deal, expected to close in early 2026, will be immediately accretive to earnings. Analysts agree: RBC Capital recently raised its price target on ALKS from $45 to $47, while Piper Sandler bumped theirs from $38 to $45, both with Buy ratings.
Avadel’s star product is LUMRYZ, a once-daily version of sodium oxybate used to treat excessive daytime sleepiness and cataplexy in adults with narcolepsy. LUMRYZ revenue was growing at a remarkable 60% year-over-year, projected to top $270 million in FY2025 and keep expanding thereafter.
This acquisition perfectly complements Alkermes’ existing portfolio, which already includes treatments for alcohol and opioid dependence, schizophrenia, and bipolar I disorder. Before the acquisition, Alkermes was expecting revenue and earnings to dip in FY2025 — but with LUMRYZ added, FY2026 could bring strong sales and profit growth.
With over $1 billion in cash, no long-term debt, and disciplined management, Alkermes is using its financial strength wisely to fuel future growth.
2. Rigel Pharmaceuticals, Inc. (RIGL): Small Cap, Big Growth Potential
Next up is Rigel Pharmaceuticals, a small-cap biotech headquartered in South San Francisco that’s quietly building a powerful lineup of FDA-approved products.
Rigel currently markets three inhibitors:
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Tavalisse, approved in 2018 for chronic immune thrombocytopenia (cITP), delivered nearly $70 million in sales in the first half of 2025 — up 44% year-over-year.
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Gavreto, approved in mid-2024 for a type of lung cancer (RET fusion-positive NSCLC), has already generated $20.8 million in its first two quarters.
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Rezlidhia, approved in 2022 for a rare form of acute myeloid leukemia (AML), posted 31% year-over-year growth to $13.1 million in the first half of 2025.
When Rigel reported Q2 earnings in August, it blew past expectations — and management raised full-year guidance significantly. The company now expects $210–$220 million in 2025 revenue, up from earlier projections of $185–$192 million.
Rigel’s fundamentals are solid. It holds over $40 million in net cash, has two promising pipeline inhibitors (one licensed from Eli Lilly and one fully owned), and analysts expect earnings of $2.30–$2.50 per share in FY2025, rising to $2.90 in FY2026.
At roughly $30 per share and a $550 million market cap, Rigel looks like a value play in a space where growth stories usually trade at far higher multiples.
3. Harrow, Inc. (HROW): A Visionary Growth Story
Finally, I’ve been adding to Harrow, Inc., an ophthalmology-focused company that’s a great example of a GARP stock — “growth at a reasonable price.”
Harrow trades around $38.50 with a market cap just north of $1.4 billion. Nearly half of its revenue comes from its compounding pharmacy business, which just brought on a new CEO to lead expansion.
Beyond compounding, Harrow markets over a dozen eye-care products. Its biggest hit is Iheezo, an ocular anesthetic gel approved in 2022 that already has a reimbursement-friendly J-code — a big win for adoption.
In Q2 2025, Harrow reported $0.24 per share in profit on revenue of $64 million, up 30% year-over-year. The company also acquired the rest of Melt Pharmaceuticals, which develops non-IV sedation and anesthesia drugs — adding another promising layer to Harrow’s future.
Analysts see Harrow’s revenue growing at roughly 40% annually (CAGR) from FY2025 to FY2027. If those forecasts hold, earnings could surge past $4.50 per share by FY2028 — and the stock still looks inexpensive based on those long-term growth projections.
The Bottom Line
Mergers and acquisitions are lighting up the biotech landscape again, and investor confidence is returning to the small- and mid-cap names that often benefit the most from sector momentum.
That’s why I’ve been quietly increasing my exposure to companies like Alkermes, Rigel, and Harrow — each with strong fundamentals, clear growth paths, and the potential to shine as the biotech rally continues.
The message is clear: biotech is back, and for investors willing to dig beneath the surface, the opportunities could be just beginning.
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