JPMorgan's top biotech and pharma picks for the second half

CNBC

06-06-2025

Biopharmaceutical stocks' underperformance versus the broader market for a third-straight year is an opportunity for investors, according to JPMorgan. Analyst Chris Schott said in the firm's June outlook for biopharma that the sector's poor performance can be traced back to concerns over President Donald Trump's tariffs and his " most favored nation " executive order. The SPDR S & P Biotech ETF (XBI) has pulled back about 7% so far in 2025, while the S & P 500 has notched a nearly 2% gain. The stock action is overdone, according to Schott, as he expects any impact from this policy will be "manageable." Valuations are historically depressed, Schott said, which means the sector has already priced in the the worst possible outcome. "The sector [should be] able to largely mitigate the impact of tariffs in the mid/long term through manufacturing repatriation and 2) [there's] no clear path for MFN ["most favored nation"] to move forward without Congressional approval (outside of IRA price negotiations)," Schott said. Fundamentals for biopharma stocks have improved in recent years, which should support "a more manageable sales/EPS erosion outlook for most names," he added. Here's a look at some of JPMorgan's favorite biotech and pharma stocks heading into the second half of the year. All stocks on the list are rated overweight by the firm. Eli Lilly stock is among JPMorgan's top picks among the group. Shares are about flat in 2025, and have slipped roughly 8% over the past 12 months. The company agreed to purchase SiteOne Therapeutics in a roughly $1 billion deal last week , which could allow Lilly to develop non-opioid treatments for chronic pain conditions. LLY YTD mountain Eli Lilly stock in 2025. Developing non-opioid pain drugs is a key focus for the industry, with Vertex Pharmaceuticals recently approving its Journavx Nav1.8 inhibitor. About 84% of analysts polled by FactSet maintain a buy rating on Eli Lilly stock, with their consensus price target equating to nearly 29% upside. Gilead Sciences is also one of JPMorgan's top picks. Shares have soared more than 20% so far in 2025. GILD YTD mountain Gilead Sciences stock in 2025. Analysts surveyed by FactSet think the stock has more room to run after a strong first half of the year. Alongside a consensus buy rating, the average analyst price target calls for more than 5% upside. The company recently announced key phase three trial data tied to its Trodelvy cancer treatment that showed the drug lowered the risk of a severe form of breast cancer when used in combination with Merck 's Keytruda immunotherapy treatment. Other names on the list include Regeneron Pharmaceuticals and Bristol Myers Squibb .