Wall Street is looking for new ways to park cash in healthcare names, and large-cap biotechs have begun to gain steam.

This asset class differs from traditional large-cap pharmaceutical companies — typically with a $200 billion market cap or more — such as Johnson & Johnson (JNJ), Pfizer (PFE), and Eli Lilly (LLY). Large-cap biotechs, by comparison, tend to range from $50 billion to $100 billion-plus and have at least $10 billion in revenue.

Biotechs are typically smaller companies working on research and development to help address diseases and tend to focus on more complex medicine platforms using biologics. They’re riskier than their larger counterparts, pharmaceutical companies, which are more diversified and work on various platforms at the same time, including both biologics and synthetic chemicals.

Recent examples include Alnylam (ALNY), which has been on a tear this year and is currently valued at $60 billion, and Vertex (VRTX), which has cooled a bit since last year but still sits above a $100 billion market cap. Alnylam has seen its portfolio of RNA interference (RNAi) treatments for genetic diseases grow in the past few years, with five commercial products on the market and an annual revenue of more than $2 billion in 2024. Vertex dominates the cystic fibrosis market with a portfolio of five treatments, as well as a recent blockbuster to treat sickle cell disease, and boasted $11 billion in revenues in 2024.

Pharma companies often acquire biotechs and, more recently, have been focusing on earlier-stage or smaller companies. That’s because they are facing several headwinds, including Chinese competition and D.C. policy pressure to reduce drug pricing.

This is why Wall Street is finding large-cap biotechs more attractive. There’s just one caveat — the companies have to plan to be sustainable at a large-cap level, and to do so requires a robust pipeline.

Trung Huynh, large-cap pharma analyst at UBS, said these large-cap biotechs could soon be considered in the same league as traditional Big Pharma players.

“The definition of big pharma is definitely broadening. The lines are getting much more blurred between your traditional pharma names and the new set of companies,” he said.

“I think historically, big pharma was really just defined by scale and diversification across different therapeutic areas, and, obviously, very durable cash flow,” Huynh said. “You are definitely seeing some of those biotechs reach … comparable market caps, comparable pipeline depth, comparable global reach.”