William Blair has hand-picked its top five stock recommendations for 2026, selections that include three clinical-stage biotechs in the bunch.
The analysts’ selections for the upcoming year span numerous indications, with gene therapy gel Vyjuvek-maker Krystal Biotech and nasal allergy spray Neffy-seller ARS Pharmaceuticals taking up two spots.
The three remaining picks belong to Xenon Pharmaceuticals, Terns Pharmaceuticals and Evommune, according to a Dec. 10 note from the analyst.
The rationale behind the Xenon selection centers around the biotech’s lead asset, a small molecule dubbed azetukalner. The investigational KV7 potassium channel opener is designed to treat several neurological conditions, such as focal onset seizures (FOS), generalized tonic-clonic seizures, major depressive disorder and bipolar depression.
The efficacy reported in a phase 2 epilepsy trial derisks Xenon’s late-stage FOS study that is expected to read out in early 2026, wrote analyst Myles Minter, Ph.D. The phase 2b study demonstrated potentially best-in-field efficacy for the difficult-to-treat population.
If the drug’s efficacy is confirmed in the pivotal trial, Minter expects an FDA regulatory submission to follow quickly after, setting up a 2027 market launch in FOS—an indication that wouldn’t have seen a new therapy approval for at least eight years prior.
William Blair models peak global sales of more than $2.6 billion in FOS, with more than a third of patients experiencing refractory seizures despite multiple therapeutic options.
Beyond potentially stronger efficacy, azetukalner’s tolerability is favorable when compared to other common anti-seizure medications. Xenon’s investigational once-daily drug doesn’t require a titration period and can be used in conjunction with other anti-seizure meds.
Biohaven presents itself as a potential challenger to Xenon, with the company touting a Kv7 ion channel activator known as opakalim being studied in late-stage trials for both adult focal epilepsy and depression.
William Blair’s next clinical pick is Terns Pharmaceuticals, a California-based biotech centered around TERN-701, a small molecule treatment that’s undergone phase 1 testing as a potential treatment for chronic myeloid leukemia (CML).
Analyst Andy Hsieh, Ph.D., supports the choice using three main arguments: TERN-701’s validated mechanism and best-in-class potential, the strong market performance of Novartis’ Scemblix and the “takeout potential” by Big Pharma.
Based off findings from an early-stage CML trial, William Blair believes the Terns program could “meaningfully disrupt the CML treatment landscape,” Hsieh wrote.
TERN-701 is an allosteric BCR-ABL inhibitor asset, with a mechanism clinically validated via Novartis’ Scemblix, which has performed well commercially. The third-generation tyrosine kinase inhibitor is currently the leading therapy in second-line CML.
“Despite Scemblix’s current market hold and continued growth, we believe that, pending additional data, TERN-701 could challenge the dominant market share enjoyed by Novartis’s Scemblix today,” Hsieh wrote.
While acknowledging the well-known limitations of cross-trial comparisons, the analyst underscored the high efficacy TERN-701 achieved—at least double that of other drugs in development or on the market.
As of a June 30 cutoff, an overall major molecular response rate of 75% was reported for 32 patients by 24 weeks.
Hsieh also highlighted the program’s tolerability improvements and convenient twice-a-day dosing.
“Therefore, although we recognize the early-stage nature, it is our view that TERN-701 likely achieved a best-in-class efficacy profile despite enrolling a heavily pretreated population with high disease burden and difficult-to-treat characteristics,” according to William Blair.
The firm also believes the Tern program will be “viewed favorably” in an M&A perspective by Big Pharma, and estimated that the candidate could garner an estimated $5.6 billion in global peak sales if it were to gain approval in CML. The therapy has also secured orphan drug status from the FDA.
William Blair’s top picks conclude with newly public Evommune, a clinical-stage biotech working to bring new autoimmune disease treatments to market.
The California-based company’s lead candidate, called EVO756, is a MRGPRX2 inhibitor that William Blair believes has “multi-blockbuster sales potential as a differentiated, safe and effective oral treatment for inflammatory diseases,” Matt Phipps, Ph.D., wrote.
The asset is currently being evaluated in a phase 2b program for both chronic spontaneous urticaria (CSU) and atopic dermatitis (AD), with CSU results expected in the first half of 2026 and AD data slated for the second half of the year.
“We believe the CSU program has been de-risked by initial proof-of-concept data,” Phipps added, citing phase 2 data from 30 adults with CSU that demonstrated clinical responses in 93% of patients at four weeks.
William Blair believes EVO756 in CSU alone has blockbuster potential and that a possible AD success could support a second blockbuster indication, while also boosting confidence in the program’s potential for other conditions.
Across CSU and AD, the analyst firm estimates peak sales of $5 billion for EVO756 in 2035.
When considering deals for MRGPRX2 inhibitors—such as Incyte’s $750 million buy of Escient Pharmaceuticals and Novartis offering Kyorin Pharmaceutical up to $777 million biobucks to in-license its CSU candidate—Phipps wrote that strong phase 2 EVO756 data could “generate significant strategic interest.”
Evommune also houses another clinical asset known as EVO301. The injectable fusion-protein is designed to neutralize the IL-18 inflammatory pathway and is currently being tested out in a midstage AD trial.