Evercore ISI says three years of biotech underperformance may be ending. Gives its 5 favorite stocks

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Evercore initiated coverage on the biotech sector and named its seven favorite stocks it calls 'The Magnificent Seven.'

The outlook on biotechnology is finally turning positive, according to Evercore ISI, which launched coverage of the sector with "an increasingly constructive view" as it expects more room for upside ahead. "After 3 years of painful underperformance, winter is finally thawing and spring just might be in the air," analyst Cory Kasimov wrote in a Monday note. Biotech stocks broadly peaked in early 2021 when interest rates were at a trough, Kasimov noted.

" "We favor names and are initially launching on cos with clear clinical narratives and/or commercial upside. We've got our hands in all the hot areas … oncology, neuro, rare, cardiometabolic, etc.," Kasimov said. The analyst is overweight on five companies: Regeneron , BioMarin , Neurocrine , BridgeBio and Arcellx . He forecasts strong earnings and cash flows for Regernon and highlighted its broad pipeline. That stock has climbed nearly 11% from the start of the year.

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