The best analyst group covering European pharmaceuticals companies hails from Bank of America Merrill Lynch, investors say, and that’s been the case since 2013. Co-captains Sachin Jain and Graham Parry oversee a London-based crew of five researchers that also earns third place in Biotechnology, which is a stand-alone sector for the first time in three years. They publish on nine regional pharma names and are bullish on the space. Following the mid-2015 European market correction and subsequent sectoral underperformance, based on U.S. pricing concerns, these drugmakers are attractively valued for secular growth, the squad contends, with a strong pipeline. Indeed, the analysts’ expectation for a strong product news flow this year underpins their sustained optimism on the prospects for Anglo-Swedish giant AstraZeneca. The drugmaker “has a broad and underappreciated pipeline, which offers potential for premium growth,” insists Jain. Moreover, Phase 3 clinical trial data on five key assets — asthma medicine Benralizumab, Brilinta for prevention of cerebrovascular and cardiovascular disease, the Lynparza and Tagrisso cancer therapies and roxadustat for treatment of anemia in patients with chronic kidney disease — suggest peak sales of $10 billion, he adds. He and his colleagues assign AstraZeneca a price target of 5,200p, which implies a 22.9 percent upside to the stock’s value in mid-January. For now, Jain concludes, “we acknowledge that investor perception needs to shift from the current focus on earnings-per-share quality to longer-term pipeline growth.” Another company BofA Merrill’s analysts are touting is AstraZeneca rival Sanofi. The French developer’s pipeline is similarly undervalued, they reason, and management’s recent lowering of projections for earnings-per-share gains and sales in its key diabetes division have removed overhang. “The stock is cheap even using our cautious low-end-of-guidance diabetes estimates, trading on just 14.5 times our 2017 EPS estimate and a 13 percent compound annual growth in earnings from 2017 to 2020,” Parry advises. Sanofi’s shares closed at €80.05 in mid-January; the team maintains that a price of €110 is justified.