Navigating Biotech Volatility: Piper Sandler’s Top Picks for 2025

As market volatility persists in 2025, investors are seeking resilient sectors capable of weathering economic turbulence. Biotechnology, with its steady demand for life-saving therapies and limited exposure to macroeconomic pressures, has emerged as a bastion of stability. Piper Sandler’s recent analysis underscores this resilience, identifying select biotech companies primed for growth despite headwinds. Below, we dissect the firm’s insights, key players, and the broader trends shaping the sector.

The Biotech Sector’s Defensive Edge

Biotech’s defensive nature is rooted in its inelastic demand: patients require treatments regardless of economic cycles. Piper Sandler highlights this advantage, noting minimal tariff exposure and the potential for cost reductions as interest rates stabilize. The sector’s pipeline of innovative therapies—targeting rare diseases, CNS disorders, and oncology—fuels optimism.

Legend Biotech exemplifies this resilience. Its CAR-T therapy, CARVYKTI, is projected to boost sales to $1.75 billion in 2025, up from $963 million in 2024. With a robust liquidity position (current ratio of 4.62) and four recent analyst upgrades, LEGN’s 120% year-over-year revenue growth in 2024 positions it as a cornerstone for volatility-averse investors.

Top Picks: Innovation Meets Execution

Piper Sandler’s eight top picks blend strong pipelines, FDA approvals, and strategic manufacturing to mitigate risks:

1. Neurocrine Biosciences (NBIX):
   The firm’s Ingrezza (for tardive dyskinesia) and newly launched Crenessity (for essential tremor) drive commercial momentum. Neurocrine’s pipeline includes Valtoco for cluster headaches, which Piper Sandler calls a “top conviction pick.”
   

2. Alnylam Pharmaceuticals (ALNY):
   FDA approval of AMVUTTRA for ATTR cardiomyopathy in 2024 marks a turning point. Piper Sandler forecasts a shift to non-GAAP profitability in 2024, driven by this therapy’s revenue growth.

3. Intra-Cellular Therapies (ITCI):
   Capitalizing on the CNS boom, ITCI’s Caplyta (for schizophrenia) benefits from a gap in antipsychotic treatments. The stock has surged 40% since 2024, reflecting investor confidence.

CNS Biotech: A Sector on the Rise

Central Nervous System (CNS) therapies are a bright spot, despite regulatory hurdles. Piper Sandler cites a surge in late-stage assets targeting novel mechanisms, such as Neurocrine’s Valtoco and Axsome’s Auvelity for depression.

The FDA’s 2024 approval of Bristol Myers Squibb’s Cobenfy (for schizophrenia) and Lundbeck’s $2.6 billion acquisition of Longboard underscore the sector’s appeal. However, risks persist: AbbVie’s failed emraclidine trial for schizophrenia in 2024 serves as a reminder of clinical uncertainties.

Headwinds and Opportunities

While select companies thrive, the broader sector faces challenges:
- China Licensing Surge: U.S. firms increasingly source drugs from China due to cost efficiencies, potentially disadvantaging domestic biotechs in dealmaking.
- IPO Backlog: Venture funding has surged, but public market access remains constrained, pushing companies toward private M&A or reverse mergers.
- Valuation Opportunities: Piper Sandler notes 16% of biotechs trade below cash reserves, creating potential for bargain hunting.

Conclusion: A Selective Playbook

Piper Sandler’s analysis paints a nuanced but optimistic picture for biotech in 2025. Investors should prioritize firms with:
1. Defensive Strength: Companies like Legend Biotech and Neurocrine, insulated from tariffs and anchored by FDA-approved therapies.
2. Pipeline Depth: Alnylam and Intra-Cellular, leveraging late-stage assets in high-demand therapeutic areas.
3. Financial Prudence: Entities with strong balance sheets and paths to profitability, such as Soleno (SLNO), which leveraged its FDA-approved VYKAT XR for Prader-Willi syndrome.

The sector’s challenges—funding constraints, regulatory risks, and competitive pressures—demand a disciplined approach. Yet, with 63% projected revenue growth for LEGN alone and CNS therapies commanding premium valuations, the biotech space remains fertile ground for those willing to parse the noise. As Piper Sandler concludes: “The winners will be those who marry innovation with execution in a stock-pickers’ market.”

In 2025, biotech’s promise of life-changing therapies and its inherent resilience make it a compelling, albeit selective, investment opportunity.