Investing.com -- Bank of America reinstated coverage of 11 major U.S. pharmaceutical and biotech stocks in a note Tuesday, highlighting mixed sector fundamentals.
While innovation potential in disease areas remains a bright spot, challenges such as "the 3 Ps" — patent cliffs, pricing pressures, and political risks — continue to weigh on the industry, according to the bank.
BofA notes, however, that these concerns may already be factored into valuations.
Eli Lilly (NYSE: LLY ) : BofA believes LLY should be a long-term core holding due to its robust growth and protective "moats" around its obesity-related products, despite potential volatility.
However, the bank cautions that the stock "is likely to see bouts of volatility on obesity-related news flow."
Gilead (NASDAQ: GILD ) : "The investment case is simple: a relatively "quiet" stock (good in this environment) with above-average, durable long-term growth – at a below-average P/E multiple," said the bank.
Merck (NS: PROR ) : The company is said to be arguably the best growth-at-a-reasonable-price (GARP) play, supported by strong Keytruda performance and undervalued long-term growth.
BofA sees limited near-term upside for AbbVie (NYSE: ABBV ), Biogen (NASDAQ: BIIB ), Bristol-Myers Squibb (NYSE: BMY ), Johnson & Johnson (NYSE: JNJ ), and Pfizer (NYSE: PFE ) , with challenges ranging from high valuations to uncertainties surrounding COVID revenue and ongoing litigation.
For example, at current levels, further upside for Bristol-Myers Squibb is seen as "more difficult ", while Johnson & Johnson's valuation is currently at a premium, according to the bank.
Amgen (NASDAQ: AMGN ) : BofA believes Amgen faces pressures from upcoming patent expirations and an obesity premium that's losing momentum.
Moderna (NASDAQ: MRNA ) : For Moderna, struggles with uncertainty around COVID vaccine revenues and mixed late-stage pipeline potential have resulted in the bank assigning the stock an Underperform rating.
Regeneron (NASDAQ: REGN ) : Despite being described as a high-quality company, BofA says Regeneron's leading franchise faces faster-than-expected erosion, with a premium P/E seen as too high.