Biotech Stocks Are Surging in 2026. This One Stands Out After a Pullback.
The biotech sector has been a stock market outperformer in 2026 after being a laggard for years, finally making up some lost ground.
One of the primary drivers for this biotech rally is a big uptick in M&A activity. Deal volume across the industry in the first half of this year has already exceeded all of that of 2025, which was up from a tepid 2024.
I am being more selective with my biotech and biopharma picks after this surge. However, today I am teeing up a name that recently dropped around 10% on a well-executed capital raise. Company management chose to raise some additional funds after the stock surged following recent positive trial news.
The company in question is Legend Biotech Corp ($LEGN). This midcap biotech name currently trades right around $30 a share and sports an approximate market cap of $6 billion. Chinese biotech GenScript ($GNNSF) owns nearly half of Legend’s shares and the stock trades as a sponsored ADS.
Legend is focused on the development and marketing of cell therapies for the treatment of cancers and autoimmune diseases. The New Jersey-based company has one commercial asset approved that is on the market called Carvykti. This therapy is approved by the FDA for the treatment of second-line or later (2L+) relapsed refractory multiple myeloma (RRMM). Carvykti is marketed in collaboration with Johnson & Johnson ($JNJ).
Legend is also advancing just over a dozen clinical efforts within its pipeline. These consist of either label-expansion opportunities for Carvykti or are around earlier stage candidates.
The focus on Carvykti in Legend’s developmental efforts is to significantly expand its potential target population. The therapy is being investigated in two ongoing J&J-sponsored clinical trials (CARTITUDE-5 and CARTITUDE-6). The first is for transplant-ineligible patients and the second comparing the therapy head-to-head against transplant in transplant-eligible patients. New data from these studies will be out in 2027.
The stock moved up sharply in June thanks to very encouraging data from a Phase 1 trial data from another candidate in Legend’s pipeline. An in-vivo CAR-T approach treating solid tumors showed a 100% objective response rate in the treatment of patients with relapsed/refractory non-Hodgkin lymphoma with no serious adverse effects or toxicities. Granted, the study consisted of a small sample of just six individuals, but the results were impressive.
Leadership took advantage of the surge in the stock to “top off the tanks” and Legend now holds over $1 billion in cash and marketable securities on its balance sheet against no long-term debt. While there are some longer-term concerns that Carvykti will face growing competition in the coming years, Carvykti sales rose 62% year-over-year to nearly $600 million in Q1. Half of revenues go to Legend and half to J&J.
The company is turning profitable and the consensus among Wall Street firms sees revenues rising at percentage in the high 30s this year to just over $1.4 billion. Legend has a reasonable valuation, in my view, given its growth prospects in an overbought market as well as a pristine balance sheet. It sets up well as a covered call trade.
Option Strategy
This is how one can initiate a holding in LEGN with a covered call order. As a reminder, covered call orders involve buying an equity and simultaneously selling just out of the money call strikes against the new position.
Using the January $27.50 call strikes, fashion a covered call order with a net debit in the $23.50 to $24.00 a share range (net stock price – option premium).
At the mid-point of the range, this strategy provides downside protection of approximately 23% with upside potential of nearly 16% even if the equity trades down 11% over the option duration.
At the time of publication, Jensen was long LEGN.
