Biotech has been a “stock-pickers market” — and it could have simply what it takes to stay one in 2023, based on Citi. “Biotech is currently a stock-pickers market, with focus on companies with near-term catalysts, active debates, and strong fundamentals that could continue to drive outperformance in various recession scenarios,” Citi stated in a December be aware. But efficiency throughout the sector will range with the financial system’s. Under a foul recession state of affairs, Citi prefers names with giant money balances and which have already commercialized medication, or that are on the verge of drug approvals. Some names that meet these standards embrace Apellis Pharmaceuticals , Acadia Pharmaceuticals and Amylyx Pharmaceuticals , Citi stated. The reverse could be the case within the occasion of a gentle recession, as traders could be extra prepared to discover names with low-cost valuations, based on Citi. It stated, nevertheless, that even in such a state of affairs, “more mature pipelines with good cash balances would not fall out of favor.” “In an intermediate base case landing scenario, we presume there may be some rotation to the safer names with longer cash runways, though we would still expect biotech investors to find the low market cap names with short cash runways as interesting high-risk opportunities,” Citi added. Top picks for 2023 Citi named some prime picks for the 12 months forward. 1. Beam Therapeutics The financial institution stated its work in sickle cell illness has potential to supply a superior product. Its pre-clinical pipeline may additionally “drive long-term value across a number of large market opportunities.” “[Its] strong cash position makes BEAM attractive even in a hard-landing scenario,” Citi stated. It gave the inventory a goal worth of $62, or almost 69% upside. 2. Apellis Pharmaceuticals Citi stated Apellis must seize solely a “modest” market share to realize about $2 billion in peak gross sales, based mostly on the financial institution’s mannequin. It gave the inventory a goal worth of $86, or about 73% upside. 3. Karuna Therapeutics Karuna has many alternatives to increase its late-stage work on schizophrenia, which may drive $4 billion in peak gross sales if profitable, Citi stated. “Further, in a hard landing/recession scenario, interest from long-only investors and generalists could persist as derisked names with near-term revenue opportunities are favored,” the financial institution stated. It gave the inventory a goal worth of $279, or 45% upside.
Citi names its top biotech stock picks for 2023 — and gives one 73% upside