Five Small-cap Biotech ETF Options Worth Considering for 2025

One of the most effective ways to gain diversified exposure to the biotech sector is through exchange-traded funds. Unlike picking individual biotech stocks, ETFs allow investors to spread their risk across multiple companies within a single investment vehicle. This approach proves particularly valuable when market volatility strikes—if one holding experiences difficulties, the overall fund’s performance remains cushioned by its broader portfolio.

Below we explore five small-cap biotech ETFs that merit attention heading into 2025. Our selection focused on funds from ETFdb.com with assets under management (AUM) below US$100 million as of October 7, 2025, providing a snapshot of smaller yet potentially dynamic investment opportunities in the biotech space.

1. ALPS Medical Breakthroughs ETF (ARCA:SBIO) — Clinical Trial Focus

Assets Under Management: US$95.57 million

The ALPS Medical Breakthroughs ETF concentrates on small- and mid-cap biotech innovators with promising drug candidates progressing through U.S. FDA clinical trials at Phase II or Phase III stages. Its strategy targets companies with market capitalizations ranging from US$200 million to US$5 billion, creating a portfolio of 102 positions. Approximately 40 percent represent small- and micro-cap ventures.

Cytokinetics (NASDAQ:CYTK) commands the largest weighting at 3.62 percent, followed by Merus (NASDAQ:MRUS) at 3.51 percent and Avidity Biosciences (NASDAQ:RNA) at 3.43 percent. Since its December 2014 inception, this ETF has tracked the development of emerging pharmaceutical breakthroughs.

2. Tema Oncology ETF (NASDAQ:CANC) — Cancer Treatment Specialists

Assets Under Management: US$82.42 million

The Tema Oncology ETF offers targeted exposure to biotech companies specializing in oncology solutions. Established in August 2023, the fund encompasses companies developing diverse cancer therapies, from CAR-T cell approaches to bispecific antibodies. With 51 holdings—just over half classified as small- to mid-cap—the ETF provides concentrated sector exposure.

Key positions include Revolution Medicines (NASDAQ:RVMD) at 6.29 percent weighting, Eli Lilly and Company (NYSE:LLY) representing 5.47 percent, and Genmab (NASDAQ:GMAB) at 5.32 percent, reflecting a blend of emerging and established cancer therapy developers.

3. Direxion Daily S&P Biotech Bear 3x Shares (ARCA:LABD) — Inverse Strategy for Declining Markets

Assets Under Management: US$78.98 million

This leveraged inverse ETF operates fundamentally differently from traditional biotech funds. Designed to deliver three times the inverse daily performance of the S&P Biotechnology Select Industry Index, LABD appreciates when the biotech sector declines and depreciates when it rises. This tool suits traders with bearish short-term outlooks rather than long-term investors.

Importantly, leveraged inverse ETFs carry substantial risks and volatility sensitivity. Rather than holding individual stocks, LABD achieves its objectives through financial derivatives, including futures contracts. The fund is explicitly unsuitable for buy-and-hold portfolio strategies.

4. ProShares Ultra NASDAQ Biotechnology (NASDAQ:BIB) — Leveraged Long Exposure

Assets Under Management: US$62.42 million

Since April 2010, the ProShares Ultra NASDAQ Biotechnology ETF has provided 2x daily leveraged exposure to the broad NASDAQ Biotechnology Index, appealing to investors anticipating near-term bullish movements in pharmaceutical and biotech equities. The fund maintains 260 holdings across its portfolio.

Leading positions feature Vertex Pharmaceuticals (NASDAQ:VRTX) at 5.05 percent, Amgen (NASDAQ:AMGN) comprising 5.01 percent, and Gilead Sciences (NASDAQ:GILD) at 4.93 percent. Financial advisors caution investors with conservative risk profiles or long-term strategies against this leveraged instrument due to its complexity and daily reset mechanics.

5. Tema Heart and Health ETF (NASDAQ:HRTS) — Metabolic and Cardiovascular Focus

Assets Under Management: US$51.68 million

Established in November 2023, the Tema Heart and Health ETF tracks biotech companies developing treatments for diabetes, obesity, and cardiovascular conditions. Following successive rebrandings—first in March and again in June—the fund now emphasizes GLP-1 and cardiometabolic therapies.

The ETF contains 47 biotech holdings, with approximately three-quarters representing large-cap positions and 22 percent mid-cap companies, predominantly U.S.-domiciled. Top holdings include Eli Lilly and Company at 8.47 percent weight, Abbott Laboratories (NYSE:ABT) at 4.58 percent, and AstraZeneca (NASDAQ:AZN) at 4.39 percent.

Key Takeaway: Small-cap biotech ETFs offer investors the opportunity to participate in innovation-driven sectors without concentrating risk in individual companies. Whether seeking clinical-stage exposure, cancer therapy specialization, or metabolic disease focus, these ETF vehicles provide diverse pathways into the dynamic biotech landscape. As always, investors should align fund selection with their risk tolerance and investment timeline.

This analysis represents an updated perspective on biotech ETF opportunities for 2025.