B. Riley Highlights Biotech Opportunities as Rate Hikes Pressure Sector

Investment firm B. Riley has singled out several biotechnology companies as top picks heading into the third-quarter 2026 earnings season, according to a new analyst note. The firm suggests that a recent pullback in the sector, driven by rising interest rates, has created potential buying opportunities for investors focused on company-specific fundamentals.

Macro Headwinds Create Entry Point

The analysis follows the Federal Reserve's recent 25 basis point interest rate hike, which brought the federal funds rate to 4.00% in its first increase since July 2023. B. Riley analyst Mayank Mamtani noted that with the 10-year Treasury yield at its highest level since 2007, small and mid-cap biotech stocks have experienced a "macro-driven drawdown" that has historically presented value.

This pressure is reflected in market performance. While the XBI biotech index is up 27% year-to-date, it has declined 2% quarter-to-date, underperforming the S&P 500's 4% gain over the same period, the report stated.

Analyst's Top Picks

B. Riley's note identified several companies with strong outlooks ahead of their earnings reports, all of which carry a Buy rating from the firm.

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• Axsome Therapeutics (AXSM): With a $300 price target, the company's Q3 report is expected to show the first full quarter of sales from AUVELITY’s expanded use. The analyst models total revenue of approximately $259 million.
• Cytokinetics (CYTK): The firm assigned a $146 price target, citing proprietary data that shows strong wholesale figures for its drug MYQORZO. This could translate to U.S. net product revenue of $42 million to $47 million, roughly double the second-quarter level and well above consensus estimates.
• Eton Pharmaceuticals (ETON): With a $70 price target, the analyst believes the market is recognizing the company's strong margin profile. Adjusted gross margin is forecast to be approximately 74% in the third quarter.
• TG Therapeutics (TGTX): The note highlights the multiple sclerosis franchise's commercial potential with an $86 price target, with key Phase 3 clinical trial results expected in late October.
• Other highlighted companies include Harrow (HROW), with a $60 price target, and Zymeworks (ZYME), with a $44 price target, both noted for upcoming commercial and data catalysts.

Stronger Sector Fundamentals

Despite the difficult macroeconomic environment, B. Riley argues the biotech sector's fundamental backdrop appears stronger than in previous rate-hike cycles. The analyst pointed to a robust year for pharmaceutical mergers and acquisitions, driven by large companies facing patent expirations.

Other tailwinds supporting the sector include the installation of permanent leadership at the FDA and a clearer outlook on drug-pricing risk, according to the note. The firm also anticipates over 40 company-specific catalysts across its coverage list in the latter part of 2026.