Credit Suisse analyst Evan Seigerman recently offered investors his pick of the best and worst big biotechnology stocks.
Seigerman selected Vertex Pharmaceuticals (VRTX) as his top pick, Barron’s recently cited the analyst as saying. Seigerman initiated coverage of the company with an “outperform” rating on Monday.
“Among large cap names, we think that Vertex has the best revenue and earnings growth profile,” Seigerman wrote. He praised the cash-flow potential offered by the company’s cystic fibrosis drugs and said it had a solid early-stage pipeline, Barron’s explained.
Seigerman isn’t so bullish on Biogen (BIIB), on which most analysts have slapped a “hold” or “buy” rating in recent months, Barron’s explained.
“We rate Biogen shares as Underperform due to our view that the company’s core base businesses could decline near-term,” he wrote. “We also think the current pipeline remains weak, following the late-stage failure of aducanumab in Alzheimer’s disease.”
To be sure, Oppenheimer & Co. last week said biotech may finally return to favor to round out the year, Bloomberg reported.
Low earnings expectations paired with historically cheap valuations for large-cap companies should draw investors back to the sector and stoke a second-half comeback, analysts led by Hartaj Singh wrote in a a note to clients.
That combination, along with expectations that cutting-edge technologies will fuel growth for smaller companies will push the group higher in the final six months, he continued.
“Ongoing concerns around drug pricing and potential Congressional/White House actions will continue to be overhangs through the first few Democratic Presidential Debates” in June and July, Singh admitted. But tempered expectations and pipeline execution could help deliver upside in the second-half of the year.
The closely watched Nasdaq Biotech Index has underperformed the year’s market rebound and is up roughly 4.5% compared to a more than 12% gain for the broader S&P 500 Index. Adding insult to injury, a basket of large-cap biotechnology stocks is down more than 5% this year, driven by Biogen Inc.’s failed Alzheimer’s study.
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