Barclays launches U.S. biopharma coverage with four preferred picks

Investing.com -- Barclays launched coverage of U.S. large-cap biopharmaceutical companies, arguing the sector could regain investor attention in an uncertain macro backdrop, while naming Eli Lilly (NYSE: LLY), Merck (NYSE: MRK), Bristol-Myers Squibb (NYSE: BMY) and AbbVie Inc (NYSE: ABBV) as its top picks.

The bank initiated the group with a Neutral industry view, saying pharma remains “a relatively safe haven in times of uncertainty” and could be an area investors “will come back home to in 2026.”

Barclays analysts pointed out several catalysts supporting the sector. They said policy clarity has improved following most-favored-nation (MFN) agreements and related negotiations, which have “substantially de-risked tail scenarios” around U.S. drug pricing.

The analysts also pointed to structural tailwinds, including aging demographics, rising chronic disease prevalence and continued growth in healthcare spending.

Furthermore, pharma’s defensive qualities are being rediscovered, with analysts noting that the S&P Pharma index historically outperformed the broader market during major drawdowns.

They also see AI “as tailwind, not threat,” arguing the industry is positioned as an “AI winner.”

“Unlike legacy media, retail, or financial services, it looks like pharma is leveraging AI to compress R&D timelines and reduce clinical trial costs (30% efficiency gains),” analysts led by Emily Field wrote.

“Therefore, we see Pharma as an “AI winner” as it accelerates pharma’s core competency rather than disrupting its (highly regulated) business model, they aded.

Still, Barclays stopped short of a more bullish sector stance, citing a pipeline calendar in 2026 that is likely to be “more incremental than transformative” and warning that the U.S. policy environment remains fluid.

Within the group, Eli Lilly is the firm’s top pick. Analysts view obesity treatments as a “durable structural shift,” adding that Lilly is likely to remain the market leader despite its premium valuation.

Merck was also rated Overweight on expectations for earnings upside and potential multiple expansion driven by upcoming launches and clinical readouts.

For Bristol Myers Squibb, analysts acknowledged the company faces a significant patent cliff but said “green shoots from the company’s pipeline are starting to emerge,” supporting the Overweight rating.

“We see the stars aligning for upward estimate revisions and multiple expansion at Bristol as we get more pipeline nuggets throughout FY26,” they said.

AbbVie rounded out the preferred list, with Barclays arguing the Street may be underestimating operating leverage and pipeline optionality.

Elsewhere, the bank initiated Gilead Sciences (NASDAQ: GILD), Biogen (NASDAQ: BIIB) and Amgen (NASDAQ: AMGN) at Equal Weight, while starting Pfizer (NYSE: PFE) at Underweight, citing a difficult near-term period marked by major loss-of-exclusivity headwinds and balance sheet deleveraging.

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