This year has not been kind to biotech stocks, as the sector’s most popular ETF, the iShares Biotechnology ETF (NASDAQ:IBB), has fallen about 3% so far in 2023. Investors are probably worried about the impact of higher interest rates and potential reforms by Washington, DC on the sector. But I believe that these concerns are way overdone.
As far as rates are concerned, Fed officials have indicated that the central bank is likely done raising rates this year, while Fed Chairman Jerome Powell indicated in his Jackson Hole speech that rates could start coming down even if the Consumer Price Index is above 2%. And the Biden administration has shown little indication of being interested in enacting any major reforms that could harm drug companies.
With the elections coming up in 2024 and the Democrats needing as much money as possible for their campaigns, I doubt whether they will be interested in antagonizing drug makers, which are one of the biggest contributors to the campaigns of both parties, between now and November 2024.
With all of that said, here are three biotech stocks that Wall Street analysts love.
Eli Lilly (LLY)
Analysts are quite bullish on Eli Lilly (NYSE:LLY) as, among those issuing notes in the last 90 days, there are 15 “Strong Buy” ratings, five “Buy” ratings, six “Hold” ratings” and two “Sell” ratings on the name. In other words, there are 20 bullish ratings on it and only eight bearish or somewhat bearish ratings on LLY stock.
Eli Lilly has developed the most “promising” of the weight loss drugs that are in a category called GLP-1 receptor agonists, according to Barron’s. Lilly’s weight-loss drug is called Mounjaro.
On Aug. 9, investment bank Jefferies upgraded LLY stock to “buy” from “hold.” The bank reported that Novo Nordisk’s (NYSE:NVO) weight-loss drug, which is also a GLP-1 receptor agonist, lowered the number of “adverse cardiovascular events in obese or overweight adults without diabetes” by 20% in a trial. As a result, Jefferies expects insurers to eventually cover Eli Lilly’s weight-loss drug.
Jefferies now expects Mounjaro and Lilly’s oral weight loss drug to generate peak sales of “$70B and $8.5B, respectively,” Seeking Alpha reported.
IQV calls itself “a leading global provider of advanced analytics, technology solutions, and clinical research services to the life sciences industry. ”
On March 17, investment bank Truist started coverage of IQV stock with a “buy” rating and a $265 price target. The bank believes that the company’s unit which carries out clinical trials for drug makers is “differentiated” from competing businesses by “the depth of its data.” The unit’s large amount of data allows it “to improve clinical trial design, site identification, and patient recruitment,” Truist stated.
Madrigal Pharmaceuticals (MDGL)
Of the 12 analysts who have issued notes on Madrigal (NASDAQ:MDGL) stock in the last 90 days, seven have “strong buy” ratings, three have “buy” ratings, and two have “hold” ratings.
Madrigal has developed a potential treatment for a form of liver disease called nonalcoholic steatohepatitis, or NASH, with liver fibrosis. The company’s drug –resmetirom –was granted “breakthrough” status by the FDA, indicating that the agency believes that the drug has a great deal of potential. According to Madrigal, there is currently “no approved therapy” for the disease.
As of June 30, the company planned to ask the FDA to grant the drug “accelerated approval” and “Priority Review status.” If those requests are granted, the FDA would have six months from July 17, the date on which the company completed its submission of the application for the drug’s approval, to decide whether to approve the treatment.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.