SKN | Barclays Initiates U.S. Biopharma Coverage, Flags Four Preferred Names

Key Takeaways

• Barclays launched coverage of large-cap U.S. biopharma with a Neutral sector view.

• Preferred picks include Eli Lilly, Merck & Co., Bristol-Myers Squibb and AbbVie Inc..

• Analysts cite policy clarity, defensive characteristics and AI-driven R&D efficiency as supportive catalysts.

Barclays has formally initiated coverage of U.S. large-cap biopharmaceutical companies, arguing the sector could regain investor favor amid macro uncertainty while stopping short of a broadly bullish industry call. The bank describes pharma as a relative safe haven, particularly in volatile market environments where earnings durability and defensive positioning become more attractive.

Sector Backdrop: Stability With Structural Tailwinds

Barclays notes improved policy clarity following negotiations tied to most-favored-nation pricing frameworks, which it says have reduced extreme downside regulatory scenarios. While the U.S. drug pricing environment remains fluid, analysts believe tail risks have moderated.

Beyond policy, structural growth drivers remain intact. Aging populations, rising chronic disease prevalence, and steady healthcare spending continue to underpin long-term demand. Historically, pharmaceutical equities have demonstrated relative outperformance during broader market drawdowns, reinforcing their defensive appeal.

AI as an Accelerator, Not a Disruptor

One of Barclays’ more distinctive themes is the framing of artificial intelligence as a tailwind rather than a threat. Analysts argue that AI applications can compress drug discovery timelines and reduce clinical trial costs, potentially driving efficiency gains of around 30%.

Unlike sectors vulnerable to digital disruption, pharma’s regulated environment and core scientific expertise may allow it to harness AI to enhance — rather than undermine — its business model.

Preferred Picks and Investment Case

Eli Lilly stands as Barclays’ top pick, with obesity therapies viewed as a durable structural growth driver. Despite a premium valuation, analysts expect continued market leadership.

Merck is rated Overweight based on anticipated earnings upside and potential multiple expansion tied to product launches and clinical developments.

Bristol-Myers Squibb receives an Overweight rating despite looming patent expirations. Barclays sees emerging pipeline catalysts that could support upward estimate revisions through fiscal 2026. AbbVie rounds out the preferred list, with analysts suggesting the market may be underappreciating operating leverage and future pipeline optionality.

Other Ratings

Barclays initiated Gilead Sciences, Biogen and Amgen at Equal Weight. Pfizer was started at Underweight, reflecting near-term pressure from loss-of-exclusivity headwinds and balance sheet considerations.

Outlook

While Barclays maintains a Neutral industry stance, the firm suggests pharma could attract renewed investor attention in 2026 as macro uncertainty persists.

Pipeline developments, regulatory clarity, and AI-driven R&D efficiency will likely determine whether the sector moves from defensive holding to growth re-rating candidate.

For confidential discussions regarding large-cap biopharma allocation, pipeline-driven valuation modeling, and defensive equity positioning in uncertain macro cycles, our senior advisory team is available for discreet consultation tailored to institutional and cross-border investment mandates.