Investing.com -- Citi initiated coverage on small- and mid-cap biotechnology companies on early signs of improving sentiment in a sector weighed down this year by policy uncertainty and weak investor interest.

The brokerage launched with Buy ratings on Acumen, Amylyx, Arcellx, NewAmsterdam Pharma, and Protagonist Therapeutics (NASDAQ:PTGX), and a Sell rating on  Novavax  (NASDAQ:NVAX). 

It pointed to deep pipelines and catalysts expected in the second half of 2025 as reasons for optimism in selected stocks despite broader sector underperformance.

Advertisement: High Yield Savings Offers

Earn 4.10% APY** on balances of $5,000 or more  View Offer

Earn up to 4.00% APY with Savings Pods  View Offer

Earn up to 3.80% APY¹ & up to $300 Cash Bonus with Direct Deposit  View Offer

Powered by Money.com - Yahoo may earn commission from the links above.

Biotech shares have lagged the broader market, with the SPDR S&P Biotech (NYSE:XBI) ETF down over 9% year-to-date, while the S&P500 has gained nearly 3%. 

Citi said persistent concerns around U.S. drug pricing policy have weighed on the group but noted signs of "policy fatigue" among investors and a shift back toward company fundamentals.

While large-cap biopharma names such as Eli Lilly (NYSE:LLY), Vertex (NASDAQ:VRTX) and Gilead (NASDAQ:GILD) have led recent gains,

Citi said small- and mid-cap stocks may begin to benefit if sentiment continues to recover. 

Recent deal activity and partnerships suggest a pickup in business development interest, and expectations of a U.S. interest rate cut in September could support further momentum, it added.

Citi emphasized the potential of U.S.-based biotechs in areas such as immunology, cardiology, oncology, and rare neurological diseases. 

It cautioned against companies focused on respiratory vaccines, citing seasonality and political risk.

Related articles

Citi initiates coverage on biotech amid improving sentiment in sector

Trump claims ’we’ have control over Iranian airspace, calls for surrender

Truist raises Etsy price target as Q2 revenue tracks ahead of expectations

View Comments