Piper Sandler reveals its top 3 biotech stock picks for 2024 — and gives one 90% upside

Published Thu, Dec 28 20236:06 PM EST

Amala Balakrishner @in/amala-balakrishner @_amalabk

Piper Sandler named three biotech stocks as its "top picks" for 2024 — citing attractive valuations and pipeline of product launches. The biotech sector has underperformed the S & P 500 index over the past two years, after being in the spotlight at the height of the Covid-19 pandemic in 2021. But things are looking up: The sector is picking up and is expected to get a boost from interest rate cuts from the U.S. Federal Reserve next year. "After another difficult year, there are signs that biotech is recovering into 2024. A pause or even reversal in interest rate hikes is constructive for biotech financing and M & A (mergers & acquisitions) remains active," Piper Sandler's analysts Edward Tenthoff and Thad Barney wrote in a Dec. 22 note to investors. Arrowhead Pharmaceuticals Piper Sandler's analysts like Arrowhead , reiterating their overweight rating for the stock. They cited the company's plan to release phase 3 trial data for plozasiran for the treatment of familial chylomicronemia syndrome in mid-2024, and phase 3 trials for its use in severe hypertriglyceridemia, among other developments. It is also looking to do a cardiovascular outcome trial on either plozasiran or zodasiran to assess their impact on mortality and non-fatal strokes. Plozasiran and zodasiran are therapies targeting specific genes involved in the oxidation of fatty acids for energy production and other needs of the body. Data from analytics company GlobalData , shows that sales of plozasiran and zodasiran will hit $651 million by 2030, and $399 million by 2029 respectively. ARWR YTD mountain Year-to-date share price of Arrowhead Pharmaceuticals Year-to-date shares in Arrowhead Pharmaceuticals were down nearly 20% to $31.03 on Dec. 27. Piper Sandler expects the company's trial pipeline to raise its stock price by 90% over the next 12 months to $59 a share. Legend Biotech Legend Biotech is another one of Piper Sandler's top picks. The investment bank said the pharmaceutical company's Carvykti drug — which is used to treat adults with bone marrow cancer — is "the best in class," with "demand far outpacing supply." Legend Biotech developed and commercialized the Carvykti drug with Johnson & Johnson's Janssen Biotech. Piper Sandler expects Carvykti revenue to jump from $506 million in 2023 to $1.05 billion in 2024, and notes that Legend and Janssen are planning to increase global supply to 10,000 doses annually by the end of 2025. Peak revenue could exceed $5 billion, supported by the rise in production levels, according to the analysts. Aside from Carvykti, Legend is "developing a rich pipeline" of CAR-T Cell therapies for the treatment of different cancers, the analysts wrote. In line with this, the company announced a license agreement with Novartis last month to develop and commercialize cell therapies. LEGN YTD mountain Year-to-date shares in Legend Biotech Year-to-date shares in Legend Biotech were trading 20.5% up at $58.70. Piper Sandler expects shares to rise 53.3% to $90 over the next 12 months. Alnylam Pharmaceuticals Alnylam also made Piper Sandler's list of top picks, given the potential of its phase 3 trials on Amvuttra — a drug used in the treatment of polyneuropathy, a condition that involves the simultaneous malfunction of nerves. Piper Sandler expects Amvuttra sales to jump from $550 million in 2023 to $1.13 billion in 2025. It also cited Alnylam's plans to make progress on drug trials and studies to treat patients with severe hypertension and Alzheimer's disease. ALNY YTD mountain Year-to-date shares in Alnylam Pharmaceuticals Shares in Alnylam were down nearly 16% year-to-date to $196.57. Piper Sandler expects its share price to reach $217 in the next 12 months, giving it around 10.3% potential upside. — CNBC's Michael Bloom contributed to this report.