Money flows suggest a small-cap strategy within health care gaining favor. The Powershares S&P Smallcap Health Care Portfolio ETF has seen its assets grow to $392 million, more than double than at the end of 2016, according to Lipper data.

While more than $3.8 billion has flowed out of health care ETFs and mutual funds this year, $66 million has flowed into the Powershares smallcap ETF, according to Lipper.

Similarly, the SPDR S&P Biotech ETF, which weights large, mid and small-cap biotech stocks relatively equally, has drawn $276 million in net inflows this year. The Ishares Nasdaq Biotechnology ETF, which is more heavily weighted to large-cap stocks, has had net outflows of $822 million.

“There’s certainly more innovation in the small-cap space and I don’t think it’s any big secret that the pipelines of the larger companies are kind of looking boring at this point...," said Terry Smith, director of life sciences research at Emerald Advisers, a small-cap investment firm in Leola, Pennsylvania. "So they do need to buy innovation.”

Another factor that could be propelling smaller stocks, including biotechs, is the potential for them to be less in the crosshairs of any concerns over drug pricing, an issue that has clouded the health care sector since the run-up to the 2016 presidential election, investors said.

Smaller biotech companies typically work on fairly innovative therapies or those that address new markets, said David Heupel, a health care analyst for Thrivent Investment Management.

“Typically that is not where we’re so worried about price,” Heupel said. “It’s been more in the areas of, 'I’ve got five diabetes drugs that do the same thing, why are we allowing them to price up 6- to 8-percent every year?'”

Greenwood Capital has an overweight position on health care in its small-cap portfolio, but not in its large-cap fund, according to Walter Todd, chief investment officer for the Greenwood, South Carolina, firm.

“We felt like in health care you had a lot of opportunity with much less risk than the large-cap space,” Todd said.

To be sure, betting on individual small-cap stocks is still a very risky endeavor. For example, biotech companies banking on one product can see huge share swings on single events.