Guide to Small-Cap Biotech ETFs: 5 Vehicles for Diversified Sector Exposure in 2025

Exchange-traded funds have revolutionized how retail investors approach biotech investments. Rather than betting on individual companies, small-cap biotech ETFs allow you to gain exposure to multiple companies through a single fund, significantly reducing the risk of any single company’s failure derailing your portfolio. This structure makes them particularly attractive compared to standalone stock picks.

The analysis below examines five biotech small-cap ETFs worth monitoring in 2025. All selections were based on funds with assets under management (AUM) below US$100 million as of October 7, 2025, sourced from ETFdb.com. Each fund offers distinct exposure to different corners of the biotechnology sector.

Clinical Trial-Focused Exposure: ALPS Medical Breakthroughs ETF (ARCA:SBIO)

With US$95.57 million in AUM, this fund takes a specific approach to small-cap biotech investing. Since its December 2014 launch, the ALPS Medical Breakthroughs ETF has concentrated on companies with drugs progressing through Phase II or Phase III FDA trials. Portfolio companies must maintain market capitalizations between US$200 million and US$5 billion.

The fund holds 102 positions, with roughly 40 percent allocated to small- and micro-cap securities. Leading holdings include Cytokinetics (NASDAQ:CYTK) at 3.62 percent, Merus (NASDAQ:MRUS) at 3.51 percent, and Avidity Biosciences (NASDAQ:RNA) at 3.43 percent. This concentration in development-stage companies makes it ideal for investors seeking exposure to pipeline potential.

Specialized Disease Focus: Tema Oncology ETF (NASDAQ:CANC)

Launched in August 2023, the Tema Oncology ETF offers a more targeted approach within biotech, concentrating specifically on cancer treatment developers. Its US$82.42 million AUM supports a 51-position portfolio where approximately half represent small- to mid-cap stocks.

The fund captures exposure across various oncology modalities, from CAR-T therapies to bispecific antibodies. Top holdings include Revolution Medicines (NASDAQ:RVMD) at 6.29 percent, Eli Lilly and Company (NYSE:LLY) at 5.47 percent, and Genmab (NASDAQ:GMAB) at 5.32 percent. This specialized focus appeals to investors with conviction in the oncology subsector.

Leveraged and Inverse Strategies: Direxion Daily S&P Biotech Bear 3x Shares (ARCA:LABD)

For sophisticated traders, the Direxion Daily S&P Biotech Bear 3x Shares ETF operates differently from traditional biotech small-cap ETF approaches. Managing US$78.98 million in AUM, this vehicle achieves three times the inverse daily return of the S&P Biotechnology Select Industry Index—gaining value when the sector declines.

Unlike conventional funds holding individual stocks, LABD utilizes financial contracts and futures to meet its objectives. This structure makes it suitable for short-term hedging only, as leveraged inverse products carry substantial risks from volatility drag and are not intended for long-term holding.

Bullish Leverage Strategy: ProShares Ultra NASDAQ Biotechnology (NASDAQ:BIB)

Offering the inverse approach, ProShares Ultra NASDAQ Biotechnology provides two times daily long exposure to the NASDAQ Biotechnology Index. Since its April 2010 inception, this US$62.42 million AUM fund appeals to investors betting on sector strength.

Its 260 holdings are led by Vertex Pharmaceuticals (NASDAQ:VRTX) at 5.05 percent, Amgen (NASDAQ:AMGN) at 5.01 percent, and Gilead Sciences (NASDAQ:GILD) at 4.93 percent. While offering strong upside in bullish markets, analysts caution that risk-averse or buy-and-hold investors should avoid this leveraged product.

Metabolic Health Opportunity: Tema Heart and Health ETF (NASDAQ:HRTS)

Rounding out the list, the Tema Heart and Health ETF highlights the growing intersection between small-cap biotech companies and chronic disease management. Launched in November 2023 with US$51.68 million AUM, this fund tracks companies addressing diabetes, obesity, and cardiovascular conditions—areas experiencing significant investment activity.

The 47-position portfolio skews toward large-cap exposure (75 percent) with 22 percent mid-cap holdings, predominantly US-based. Eli Lilly and Company leads at 8.47 percent weight, alongside AstraZeneca (NASDAQ:AZN) at 4.39 percent and Abbott Laboratories (NYSE:ABT) at 4.58 percent.

Key Takeaway

For investors seeking biotech ETF exposure without the volatility of individual stock selection, these five vehicles provide distinct pathways—from clinical pipeline plays to disease-specific bets to leveraged strategies. The choice depends on your risk tolerance, investment timeline, and market outlook.

Updated analysis of small-cap biotech investment vehicles in 2025.