By Mackenzie Tatananni

Biopharmaceutical stocks that have lagged behind the broader market may finally have their day in the sun.

BofA Securities analyst Tim Anderson sees promise for a handful of large-cap competitors. In a note Wednesday, he said the biopharma sector has become more defensive over the past few weeks, with certain stocks maintaining their value despite fluctuations and downturns in the market.

Large-cap players including Gilead Sciences, Amgen, AbbVie, Johnson & Johnson, and Eli Lilly have seen inflows that nudged their share prices disproportionately higher. As of Tuesday, these were the top five performers in the firm's large-cap biopharma coverage universe.

"The rally has generally benefited companies that investors commonly view as being less-controversial, lower-risk, and in some cases, historically more defensive," Anderson wrote.

While Gilead, Amgen, AbbVie, and Johnson & Johnson have trailed the S&P 500 for the past three years, the analyst says there is room for upside in the near term and lifted the stocks' price targets accordingly.

Anderson is currently most optimistic about Gilead, maintaining a Buy rating on the stock with a $126 price target, up from $116. Shares were up 0.2% to $115 on Wednesday, with the new price target suggesting a potential upside of just under 10%.

The analyst cited the company's durable revenue and long-term earnings-per-share growth in addition to its "about average" price-to-earnings multiple.

The company's blockbuster HIV drug Biktarvy is likely to continue beating estimates, in Anderson's view. Moreover, Gilead is nearing the launch of two new medicines over the next two years, "which adds an element of excitement to the story," he wrote.

While Anderson maintained an Underperform rating on shares of Amgen, he lifted his price target to $294 from $275. Shares were up 0.6% to $313.96 on Wednesday.

While Amgen's weight-loss drug MariTide was intended to be an answer to GLP-1 receptor agonists from Novo Nordisk and Eli Lilly, it was met with disappointment in November when it failed to deliver the 20% weight reduction in Phase II trials that Wall Street expected.

The drug started two late-stage trials this week, but "may continue to disappoint," Anderson wrote. However, there is room for upside if MariTide turns out to be a greater commercial success than analysts are anticipating.

Anderson expects Johnson & Johnson to perform in-line with peers, rating it at Neutral with a price target of $171, up from $159. The stock was down 0.3% to $164.89 on Wednesday, implying a potential upside of nearly 4%.

The stock carries an "above-average valuation" that may be overlooked by investors, Anderson writes. While Johnson and Johnson may be seen as a "safe haven" at a tumultuous time in the pharma industry, none of its rivals have a similar medical technology business, Anderson asserted.

The Neutral rating reflects about-average earnings growth at an above-average price-to-earnings multiple, Anderson continued, "recognizing that JNJ commonly has a P/E premium to pharma peers because of its MedTech component."

Anderson maintained a Neutral rating on AbbVie shares while boosting his price target to $223 from $200. The stock was up 0.6% to $209 on Wednesday, with the new price target suggesting a potential 7% upside.

He cited the company's "durable and above-average" profit and loss growth as well as "management's consistency with commercial execution."

AbbVie shares climbed at the end of January when the company posted an earnings and revenue beat. Humira, the company's blockbuster autoimmune drug, saw global revenue decline nearly 50% in the quarter.

While the anti-inflammatory medicine lost its market exclusivity in 2023, enabling competitors to produce cheaper versions of their own, Edward Jones analyst John Boylan noted that new product offerings, including Rinvoq and Skyrizi, had the potential to replace lost sales over time.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com

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March 05, 2025 13:31 ET (18:31 GMT)

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