Citi's Top Biotech Picks in $2.9B Market, Ionis Gets 50% Upside

Key Takeaway

• Citi highlights Ionis Pharmaceuticals, Intellia Therapeutics, and CSL as top biotech picks in a growing $2.9 billion hereditary angioedema market.
• First-quarter earnings show 77% of S&P 500 companies beating expectations, with a notable 5.6% year-over-year growth.
• Analyst calls impact stocks: Boeing downgraded due to MAX issues; Tesla and Nvidia retain buy ratings for growth and demand prospects.

Biotech Stocks on the Rise

With the anticipation of the first rate cut now expected in September, biotech stocks are gaining attention for their potential growth. Morgan Stanley analysts have observed that biotech stocks typically outperform in the months leading up to an initial rate cut. This sector, diverse in its range, includes promising areas such as hereditary angioedema—a genetic condition causing swelling, which has a market valued at $2.9 billion. Citi analysts predict this market will grow by mid-single digits over the next five years, with several therapies under development adding to the competitive landscape. U.S. firms Ionis Pharmaceuticals and Intellia Therapeutics, along with Australia's CSL, are at the forefront with their treatments for hereditary angioedema. CSL's Garadacimab, expected to launch in 2025, is highlighted for its "best-in-class efficacy" by Citi, which also commends CSL's historical capital deployment and market consolidation abilities.

Earnings Season Expectations

The first-quarter earnings season is in full swing, with more than 77% of S&P 500 companies surpassing analysts' expectations. This has contributed to a 5.6% year-over-year earnings growth for the S&P 500. Several key companies, including tech giants and healthcare leaders like Moderna, are poised to report their earnings, potentially leading to significant stock movements. FactSet's analysis points to stocks like Peloton and Super Micro Computer as ones to watch, given their high expected post-earnings volatility. Peloton, in particular, faces challenges with subscriber growth despite new initiatives, while Super Micro Computer maintains a strong product portfolio amid the AI-driven demand.

Analyst Insights and Market Movements

Wall Street analysts have made significant calls affecting stock prices, with downgrades for Boeing due to ongoing issues with its MAX airplane and reaffirmed buy ratings for Tesla and Nvidia, reflecting confidence in their growth narratives and demand, respectively. Additionally, companies like Pinterest and Amazon are under the spotlight with positive outlooks from Goldman Sachs and Raymond James, emphasizing the digital advertising environment and tactical setups ahead of earnings. These analyst calls and market movements underscore the dynamic nature of stock valuations and investor sentiment.

Street Views

• Morgan Stanley Analysts (Neutral on biotech stocks):

  "Biotech stocks outperform in the months leading up to an initial rate cut, though they underperform in the initial period after rates are lowered."

• Citi Analyst for CSL (Bullish on CSL):

  "CSL has demonstrated over the last 25 years that it can deploy capital at a high rate of return, and has been able to consolidate the global plasma industry to the point where the market structure is well balanced."

• Citi Analyst for Ionis Pharmaceuticals (Bullish on Ionis Pharmaceuticals):

  "Considering current valuation and overall pipeline potential, the risk/reward profile of the shares appears positively skewed."

• Citi Analyst for Intellia Therapeutics (Bullish on Intellia Therapeutics):

  "Its gene editing platform, dubbed 'CRISPR/Cas9,' is truly innovative and could eventually be a transformational modality that could benefit numerous diseases and indications."