Overview
Barclays has initiated coverage of U.S. large-cap biopharmaceutical companies, assigning the industry a Neutral view while pinpointing four names as preferred holdings: Eli Lilly (NYSE:LLY), Merck (NYSE:MRK), Bristol-Myers Squibb (NYSE:BMY) and AbbVie Inc (NYSE:ABBV). The bank argues the group could re-emerge as an investor refuge in a backdrop of macroeconomic uncertainty, with some market participants potentially returning to the sector in 2026.
Catalysts and structural drivers
Analysts at Barclays highlighted several near- and medium-term catalysts underpinning their outlook. They said policy clarity has improved after most-favored-nation (MFN) agreements and associated negotiations, which the bank believes have "substantially de-risked tail scenarios" around U.S. drug pricing. That reduction in policy risk is presented as one factor that could improve the sector's risk-reward profile.
The team also pointed to longer-term structural tailwinds supporting drug makers: aging populations, a rise in chronic disease prevalence and continued growth in healthcare spending. These dynamics are framed as durable demand drivers for pharmaceutical products and services.
Defensive characteristics and AI adoption
Barclays underscored pharma's defensive qualities, noting the S&P Pharma index historically outperformed the broader market during major drawdowns. The analysts further described AI as "a tailwind, not threat," contending the industry is positioned as an "AI winner." In their view, pharma is using artificial intelligence to compress R&D timelines and lower clinical trial costs, citing a 30% efficiency gain as an example of the type of productivity improvement being pursued.
As the analysts led by Emily Field wrote, "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)." They added that the technology appears to accelerate pharma's core competency rather than disrupt its highly regulated business model.
Why Barclays remains cautious
Despite these positive signals, Barclays stopped short of a more bullish industry stance. The bank noted that the 2026 pipeline calendar is likely to be "more incremental than transformative," and warned the U.S. policy environment remains fluid. Those constraints were cited as reasons for maintaining a Neutral industry view rather than upgrading to a stronger positive recommendation.
Preferred stocks and rationale
Within the coverage universe, Barclays designated Eli Lilly as its top pick, arguing that obesity treatments represent a "durable structural shift" and that Lilly is likely to remain the market leader despite carrying a premium valuation.
Merck received an Overweight rating on expectations for earnings upside and potential multiple expansion tied to forthcoming launches and clinical readouts.
For Bristol-Myers Squibb, the bank acknowledged a large patent cliff but noted that "green shoots from the company’s pipeline are starting to emerge," which supports an Overweight stance. As the analysts observed, "We see the stars aligning for upward estimate revisions and multiple expansion at Bristol as we get more pipeline nuggets throughout FY26."
AbbVie completed the preferred list, with Barclays suggesting the Street may be underestimating operating leverage and pipeline optionality at the company.
Other initial ratings
Barclays also began coverage of several other large-cap names. Gilead Sciences (NASDAQ:GILD), Biogen (NASDAQ:BIIB) and Amgen (NASDAQ:AMGN) were initiated at Equal Weight. Pfizer (NYSE:PFE) was started at Underweight, with the bank citing a difficult near-term period characterized by substantial loss-of-exclusivity headwinds and balance sheet deleveraging.
Implications
The initiation of coverage frames large-cap U.S. pharma as a sector with both defensive appeal and selective upside tied to product cycles, pipeline readouts and AI-driven efficiency gains. Barclays' approach balances those positives against near-term pipeline limitations and policy uncertainty, resulting in a cautious industry-level recommendation paired with individual Overweight calls on select names.