Biopharma 2025 Preview: 'Piper Sandler Sees Lots of Upside Opportunity'

Piper Sandler analyst Christopher J. Raymond sees lots of upside potential in Biopharma for 2025 despite macro headwinds.

The analyst said: "With the backdrop of continued macro headwinds (policy uncertainty, looming IRA pricing headlines, Medicare Part D reform, continued negative fund flow, etc) we think the phrase “stock pickers market” may never be more appropriate than right now. Indeed, while biotech has seen its share of outperformers this year, numerous valuation indicators for smidcaps indicate that broader valuations remain near all-time lows. At the same time, M&A — always a factor in this space — has been robust, and we expect this to remain the case well into 2025. Given all this, we highlight herein a selection of top picks in the Piper Sandler biopharma universe.

Obviously M&A is the big offset to all this, and we do highlight herein a selection of names we think could make sense as the next potential targets. In addition, we’d highlight a number of top picks with fundamental drivers, independent of M&A or macro factors, that we think provide excellent vehicles for upside into 2025. These names include ARGX and NBIX among large-caps; ITCI, RVMD, BBIO, CRNX, SRRK, CRSP, EWTX, DYN, OCUL, and PRAX among mid-caps; and COGT, TYRA, CRGX, ABVX, TNGX, CRDF, SLDB, CRBP, and SKYE among small-caps.

argenx (ARGX, $37.7B market cap, Bratzel). This name has done well in 2024 (up ~63%); we think the stock can continue to perform on continued commercial momentum for Vyvgart. It's early days for the CIDP launch, but the experience so far has been strong with >300 patients on therapy in its first quarter on the market, and based on KOL feedback, we expect to see this strength continue throughout 2025. Not to be overlooked is gMG growth, which continues to impress (e.g., ~$65M step up q/q in 3Q24), and survey work points to continued growth, particularly in earlier-line patients. We expect the approval of the pre-filled syringe (PFS) which is expected in April will support this shift into earlier-line patients, and longer term view the expansion into ocular MG along with seronegative as a way to cement Vyvgart's competitive positioning long term, relegating newer biologics to the post-Vyvgart setting. Additionally, given what we expect will be top-line strength in 2024, we expect EPS growth will stand out in 2025 and thereafter. As the company's innovation strategy beyond MG and CIDP comes into focus, with the win in myositis a nice recent example and our interest piqued in next-gen FcRn, ARGX-213, we look for increasing pipeline value to work its way into the stock.

Neurocrine Biosciences (NBIX, $14.4B market cap, Amsellem): attractive risk/reward amid continued expansion of the Ingrezza footprint and contribution from Crenessity. Since Neurocrine announced Phase II results for its selective muscarinic M4 orthosteric agonist NBI- 1117568 (‘568) in schizophrenia in August (and to be clear, we believe advancement into Phase III was justified), the risk/reward profile associated with the shares has been and continues to be far more favorable at an EV/2025E EBITDA of ~14x (refer to our upgrade piece on 08/28/24 for more details on our thinking). At these levels, we would argue that there is now optionality on the latestage pipeline (i.e., ‘568 in schizophrenia; AMPA positive allosteric modulator (PAM) NBI1065845 in MDD), with the shares essentially factoring in continued brisk growth out of Ingrezza in the tardive dyskinesia (TD) setting, and risk-adjusted contribution from Crenessity (crinecerfont) in congenital adrenal hyperplasia, which recently gained FDA approval (refer to our note on 12/17/24 for more details). Regarding Ingrezza, the case for continued expansion is relatively straight forward, in our view: a growing rate of TD diagnoses and treatment starts with VMAT2 inhibitors (though penetration is still quite low), readily enabling the product to grow through headwinds associated with IRAassociated Medicare Part D pricing negotiations (and an exclusivity runway into 2038 certainly does not hurt)."

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