Small cap and mid cap biotech and speculative pharma stocks have a more constructive outlook heading into 2024, relative to previous years, but the idiosyncratic nature of the space continues to put a premium on stock picking, according to Bank of America analysts. BofA analysts are encouraged by sector fundamentals, including research and development (R&D) output and external demand for biotech innovation as measured by merger and acquisition (M&A) trends. “Our 2024 top picks are focused on companies with high impact clinical catalysts with a disproportionate risk/reward skew to the upside,” the analysts wrote. Their top stock opportunities in the space for this year are Vaxcyte Inc, Teva Pharmaceutical Industries (NASDAQ:TEVA), Intra-Cellular Therapies Inc, and Tarsus Pharmaceuticals Inc. Analysts like Vaxcyte because the company significantly de-risked its Phase 3-ready 24-valent pneumococcal vaccine [VAX-24] with the broadest spectrum of disease coverage, while they see Teva’s brand/generic hybrid poised for a breakout year driven by commercial outperformance of key CNS brands and two high impact clinical catalysts. Intra-Cellular, meanwhile, gets the nod as the company appears positioned to continue to deliver solid Caplyta growth in bipolar depression indication with multiple 2024 opportunities to expand the drug’s label into adjunctive Major Depressive Disorder (MDD) and mixed features depression. And, the analysts favor Tarsus as its Xdemvy for demodex blepharitis quarterly updates could serve as key catalysts for attractive new ophthalmology category with blockbuster potential.
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