According to JP Morgan, U.S. large-cap biopharma stocks have underperformed the broader market for two consecutive years, with mixed sentiment shaping investor outlook for 2025.
Despite strong fundamentals and advancements in drug pipelines, factors such as political uncertainty and sector rotation have hindered the sector's performance relative to the S&P 500.
In 2024, biopharma stocks rose by 9.6%, falling short of the S&P 500's 28.5% surge. However, JP Morgan analysts maintain a positive outlook for several key players.
Eli Lilly And Co. LLY, a top pick for the firm, is projected to see continued growth in its diabetes and obesity treatments, Mounjaro and Zepbound. The analyst also pointed to the company's robust pipeline and forecasted double-digit revenue and earnings growth into the 2030s.
Bristol-Myers Squibb BMY has been added to JP Morgan's Analyst Focus List due to the strong potential of its schizophrenia drug, Cobenfy, which could achieve peak sales of $10 billion.
Similarly, Merck & Co. MRK and Regeneron Pharmaceuticals Inc. REGN are expected to recover in 2025, following challenges in 2024 related to competitive pressures and regional dynamics affecting key products.
Gilead Sciences Inc. GILD is poised for growth with the anticipated mid-2025 launch of lenacapavir for HIV prevention.
The firm also highlighted AbbVie Inc. ABBV for its appealing valuation, supported by strong Skyrizi and Rinvoq sales despite fewer near-term pipeline developments.
Animal health stocks are also projected to rebound in 2025. JP Morgan views Zoetis Inc. ZTS as the strongest pick in the sector, citing its potential for high single-digit revenue growth and margin expansion. IDEXX Laboratories, Inc. IDXX is another solid choice, though its performance depends on a recovery in veterinary visits. Meanwhile, Elanco Animal Health Inc. ELAN faces uncertainties linked to its new product launches.
Specialty pharmaceuticals showed early signs of stabilization in 2024, benefiting from improved pricing stability and supply dynamics. Perrigo Plc PRGO and Viatris Inc. VTRS are highlighted as promising opportunities, while Teva Pharmaceuticals Industries Ltd TEVA may face growth challenges despite delivering strong clinical trial results this year.
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