Goldman Sachs analysts maintain bullish outlook on pharmaceutical sector

Goldman Sachs analysts remain optimistic about the pharmaceutical industry, specifically highlighting Eli Lilly, Johnson & Johnson, and Merck & Co. as top picks. Asad Haider, Managing Director at Goldman Sachs, noted that the outlook for 2027 appears constructive due to an innovation surge and continued merger and acquisition activity within the sector.

While rising interest rates and uncertainty surrounding US midterm elections present headwinds for smaller biotech firms, Haider suggests the risks for large pharmaceutical companies are relatively lower, as drug price regulation has become a bipartisan issue. The analysis emphasizes revenue estimates over profit margins, noting that companies can influence earnings through cost-cutting and share buybacks.

Specific drivers for the selected companies include Johnson & Johnson’s strong portfolio and pipeline, including Tremfya, and Merck & Co.’s potential pipeline following the patent expiration of Keytruda.