Emerging Small Biotech Companies Reshaping 2025 Cancer Treatment Landscape

The biotech sector experienced a remarkable surge in 2025, with small biotech companies emerging as key drivers of innovation. The NASDAQ Biotechnology Index showcased the sector’s strength, climbing from 3,637.05 in October 2023 to a peak of 4,954.813 by September 2024, before pulling back to 4,530.69 in August 2025. However, the resilience became evident in the latter half of the year, with the index closing at 5,766.59 on December 29, 2025, delivering approximately 34 percent gains for the year. This performance reflects investor confidence in breakthrough innovations and accelerating deal activities within the biotech space. Among these performers, a select group of small biotech companies with market capitalizations between US$50 million and US$500 million have captured significant investor attention.

Novel Immunotherapy Approaches Emerging from Small Biotech

The cancer treatment frontier is being reshaped by small biotech companies pioneering novel immunotherapy strategies. SELLAS Life Sciences (NASDAQ: SLS) represents one of the most compelling examples, with shares experiencing a year-to-date surge of 210.19 percent by year-end 2025, reaching a market capitalization of US$477.18 million at a share price of US$3.35.

The company’s therapeutic approach centers on teaching the immune system to recognize and eliminate cancer cells by targeting tumor-specific proteins. Its flagship candidate, galinpepimut-S (GPS), functions as a vaccine-like immunotherapy for acute myeloid leukemia patients in remission. The secondary asset, SLS009, represents a selective CDK9 inhibitor gaining traction in Phase 2 blood cancer trials. Investor enthusiasm spiked after the company reported that its Phase 3 REGAL trial for GPS maintenance therapy had progressed to 72 recorded deaths as of December 26, with trial completion expected beyond the initial timeline. This extended duration sparked speculation that patients enrolled are experiencing survival durations significantly exceeding historical baselines.

Similarly, IO Biotech (NASDAQ: IOBT) advanced its position among small biotech companies through immune-modulating vaccine development. The company’s T-win technology platform activates T cells to target both tumor cells and immune-suppressive environments. Its lead candidate, IO102-IO103 (Cylembio), achieved FDA breakthrough therapy designation when combined with Merck’s Keytruda for advanced melanoma treatment based on positive Phase 1/2 data.

The pivotal Phase 3 melanoma trial readout in August demonstrated that combining Cylembio with Keytruda produced 19.4 months of progression-free survival versus 11 months for Keytruda monotherapy. Despite narrowly missing strict statistical thresholds, the clinical signal prompted an FDA meeting to chart a registrational pathway forward. IO Biotech concluded 2025 energized by recent pre-clinical data revealing potential benefits for IO112 (targeting arginase 1) and IO170 (targeting transforming growth factor), signaling pipeline expansion across multiple cancer indications.

Clinical Breakthroughs Diversify Small Biotech Pipelines

Beyond cancer immunotherapy, small biotech companies are advancing therapeutic solutions across neurological and infectious disease domains. Tiziana Life Sciences (NASDAQ: TLSA) achieved a year-to-date return of 124.64 percent, with a market cap of US$184.22 million and share price of US$1.55, driven by clinical momentum in its intranasal foralumab program.

This fully human anti-CD3 monoclonal antibody is being evaluated across multiple conditions leveraging Tiziana’s proprietary intranasal delivery technology. The company initiated Phase 2 trials for amyotrophic lateral sclerosis (ALS) in partnership with the ALS Association, with dosing expected to commence in January 2026. Simultaneously, Phase 2a trials for multiple system atrophy began in August, while Johns Hopkins University and the University of Massachusetts advanced Phase 2 studies in non-active secondary progressive multiple sclerosis.

The most compelling narrative emerged around foralumab’s Alzheimer’s disease potential. In May, positive results demonstrated improved quality of life in non-active secondary progressive MS patients. Subsequent PET imaging data revealed significant reductions in microglia activation associated with neuroinflammation. A December immunologic analysis uncovered an unexpected discovery: increased phagocytosis markers in classical monocytes, suggesting the compound may enhance amyloid plaque clearance while simultaneously targeting neuroinflammation. This dual mechanism represents a paradigm shift in Alzheimer’s therapeutic approaches. The company dosed its first patient in a randomized Phase 2 Alzheimer’s trial in December and submitted comprehensive safety documentation showing over 37 patient-years of treatment with zero serious drug-related adverse events.

Spero Therapeutics (NASDAQ: SPRO) emerged as another standout performer among small biotech companies, generating a year-to-date gain of 119.05 percent with a market cap of US$129.58 million at US$2.30 per share. The company’s tebipenem pivoxil hydrobromide (HBr), developed collaboratively with GSK, represents a late-stage oral carbapenem for complicated urinary tract infections including pyelonephritis.

A 245 percent share surge materialized on May 28 following announcement that the Phase 3 trial met its primary endpoint and triggered early termination for efficacy. In December, GSK filed a new drug application resubmission with the FDA supported by Phase 3 data, triggering a US$25 million milestone payment to Spero anticipated in Q1 2026.

Niche Therapeutic Applications Within Emerging Small Biotech

OKYO Pharma (NASDAQ: OKYO) rounded out 2025 with a year-to-date gain of 60.5 percent, maintaining a market cap of US$74.85 million at US$1.91 per share. This clinical-stage small biotech company targets neuropathic corneal pain and dry eye disease with urcosimod, a non-steroidal anti-inflammatory and non-opioid analgesic.

The compound earned FDA fast-track designation in May following early Phase 2 trial termination for data analysis. July brought positive top-line Phase 2 results, followed by US$1.9 million in non-dilutive funding to support continued development. A September announcement detailed a 120-patient multi-center trial designed to establish optimal Phase 3 registration dosing. The most significant development emerged in December when new imaging data revealed urcosimod’s potential to restore corneal nerve structure, with median increases in nerve fiber count and length compared to placebo median decreases. This neurorestructuring capability could position OKYO as a transformative player in ophthalmologic therapeutics.

Investment Landscape for Small Biotech Companies

The five small biotech companies highlighted above exemplify the broader category’s potential as both innovation laboratories and equity opportunities. These companies share common characteristics: clinical-stage development, FDA engagement through breakthrough or fast-track designations, academic or pharma partnerships, and measurable clinical progress documented through trial readouts and safety data.

However, small biotech companies inherently carry elevated risk profiles. Clinical trial failures, manufacturing challenges, and funding constraints represent material considerations. The concentration of value on single or dual therapeutic candidates creates binary outcome scenarios. Conversely, successful regulatory approvals and partnership expansions can generate outsized returns for early investors recognizing the inflection points.

The 2025 performance of these small biotech companies underscores investor recognition that therapeutic innovation increasingly originates from nimble, focused organizations rather than exclusively from pharma incumbents. As the NASDAQ Biotechnology Index closes 2025 near three-year highs despite market volatility, the trajectory for high-conviction small biotech companies appears positioned for continued investor scrutiny and potential capital allocation.

Disclosure: The author holds no direct investment positions in any companies mentioned in this analysis.