Biogen (BIIB) traded lower on Wednesday after HSBC downgraded the company from Hold to Reduce, handing the Alzheimer’s drug developer its only sell-equivalent rating as part of an analysis that included an upgrade on AbbVie (ABBV).
Analyst Rajesh Kumar argued that following a volatile 2025 driven by concerns over tariffs and the Trump administration’s Most Favored Nation (MFN) drug pricing policy, the pharmaceutical sector is positioned to turn a corner.
Noting that in a low-interest-rate environment, defensive stocks such as those related to therapeutics can underperform cyclical sectors, Kumar has focused on companies with a higher potential of generating earnings upgrades.
“As the market climbs the wall of worry on MFN/tariffs, we think quality/growth stocks, especially those with earnings upgrade cycles, might offer an attractive risk-reward balance as sector multiples expand in 2026,” he wrote.
The analyst argued that amid declining royalty streams from Biogen’s (BIIB) CD20 collaboration, the company is at risk of additional cost adjustments, which could weigh on its growth trajectory or hurt margins.
“Assuming a 100% royalty margin, it accounts for over half of operating profit, requiring M&A, on which we have no visibility, to restore growth,” Kumar wrote as he cut his target price on BIIB to $143 from $144.
Upgrading AbbVie (ABBV) to Buy from Hold and raising its price target to $265 from $225, Kumar noted that the Humira maker “offers steady growth at a reasonable price (GARP).”
“With limited risk from MFN and tariffs, we think AbbVie might remain the market’s favored GARP play in 2026,” he wrote, adding that Wall Street has yet to fully reflect on the company’s scale with its long patent moats, its underappreciated pipeline, and its balance sheet capacity.
Heading into next year, HSBC listed the Illinois-based drugmaker among its preferred Buy-rated stocks alongside other pharma giants, Roche (RHHBY), J&J (JNJ), and AstraZeneca (AZN). Meanwhile, Novartis (NVS), Biogen (BIIB), and GSK (GSK) were listed as HSBC’s least preferred Reduce-rated ideas.