Goldman Sachs: 1Q26 U.S. large-cap pharma earnings season to shift from macro volatility to product cycles and catalyst paths

Overview

This report is Goldman Sachs' global healthcare/pharmaceuticals team's multi-company earnings preview and theme review ahead of the 1Q26 earnings season. The report covers U.S. large-cap pharma, biotech, and generics companies, with a focus on ABBV, BMY, JNJ, LLY, MRK, PFE, and TEVA, and extends to related catalysts at GILD, SMMT, REGN, APGE, AMGN, ALLO, and others. The overall view is that macro-driven positioning volatility may ease, and market attention will return to company fundamentals, product cycles, pipeline events, and M&A activity.

Core views

Goldman believes fundamentals in large-cap biopharma remain strong; most covered companies' 1Q26 earnings may be relatively stable, but stock direction will not be determined solely by quarterly results and instead will depend more on each company's visible forward narrative. ABBV needs stronger-than-expected earnings or narrative support to justify a re-rating; BMY is facing inventory destocking pressure in the near term, but the real key is the 4Q clinical catalyst; LLY's Foundayo launch will dominate sentiment over the coming weeks and months; MRK has some short-term revenue disruption, but its event path is active and its setup is favorable; PFE has mechanical upside factors from 2Q onward, but the focus remains pipeline execution and tafamidis litigation; TEVA remains attractive on valuation, long-term growth, and mid-term catalysts.

Analysis framework

The report is mainly based on pre-earnings company discussions, prescription trends, product launch trajectories, clinical and regulatory event calendars, valuation multiples, consensus expectation comparisons, and industry M&A observations. For large pharma, the report breaks down each company's narrative individually; for biotech and generics, it combines market performance, transaction news, and key data readouts for a high-level judgment.

Methodology notes

• Earnings previewPre-earnings company catch-up

  Pre-earnings company communication and narrative tracking

  Through pre-earnings discussions with companies, identify variables such as revenue, inventory, pricing, product competition, pipeline, BD, and regulatory events that may affect 1Q26 earnings and stock reactions.

• Valuation methodsForward P/E and EV/EBITDA valuation

  Forward earnings or EBITDA multiple valuation

  For ABBV, BMY, JNJ, LLY, MRK, and PFE, derive 12-month target prices using Q5-Q8 EPS multiples; for TEVA, derive the target price using an NTM EV/EBITDA approach.

• Factor analysisGoldman Sachs Factor Profile

  Growth, financial returns, valuation multiples, and composite factor percentiles

  Goldman's factor framework compares a stock's growth, financial returns, valuation multiples, and composite attributes with the covered universe and sector peers to provide investment context.

• Event-drivenCatalyst path analysis

  Clinical, regulatory, commercialization, and M&A catalyst paths

  The report highlights that several companies' stock prices in 2026 will be driven by upcoming event paths, such as MRK's HIV and ASCO events, BMY's 4Q clinical readouts, PFE's Sig Vedotin and obesity portfolio, and SMMT's HARMONi-3 data.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• ABBV

  Core covered company, rating Neutral, target price $240

  Strengths

  Skyrizi/Rinvoq still have a growth base, IBD penetration still has room, and the immunology portfolio offers safety, efficacy, and convenience differentiation.

  Weaknesses

  The stock has underperformed for months and has de-rated, the magnitude of Skyrizi/Rinvoq upside has diminished, and aesthetics growth is moderate.

  Comparison

  Relative to peers, ABBV's 1Q earnings matter more because the market needs a new rebound or re-rating trigger.

  Risks

  Skyrizi/Rinvoq growth below expectations, continued weakness in aesthetics, and external risks such as tariffs and the FDA.

• BMY

  Core covered company, rating Neutral, target price $61

  Strengths

  Commercial execution has been solid recently, Eliquis continues to grow, and the growth mix including Camzyos and Opdivo Qvantig has potential.

  Weaknesses

  1Q26 faces sequential revenue pressure from inventory destocking in the U.S. oncology business, and key readouts are concentrated toward year-end.

  Comparison

  Relative to MRK, BMY's stock depends more on the 4Q clinical catalyst path; Goldman believes the roughly $60 share price already reflects much of the pros and cons.

  Risks

  Slower growth-mix revenue, faster erosion in the legacy portfolio, LOE and IRA impacts, and disappointing results for assets such as Cobenfy or milvexian.

• JNJ

  Core covered company, rating Buy, target price $265

  Strengths

  The Icotyde psoriasis opportunity could create upside to consensus data expectations, and year-to-date stock performance has been strong.

  Weaknesses

  New product ramp still needs to be delivered, and Talc litigation and external uncertainty affect the multiple.

  Comparison

  It is a product-cycle focus alongside LLY, but JNJ has had stronger year-to-date performance.

  Risks

  A slower-than-expected new-product ramp, higher-than-expected Talc litigation costs, and a more difficult macro and tariff backdrop.

• LLY

  Core covered company, rating Buy, target price $1,260

  Strengths

  The obesity and diabetes product cycle remains the core growth narrative, and the Foundayo launch will be a key sentiment driver.

  Weaknesses

  Foundayo's early trajectory is expected to trail Novo's oral Wegovy, and FY26 revenue expectations have already been cut.

  Comparison

  It sits at the center of the product-launch narrative with JNJ, but year-to-date stock performance has clearly lagged.

  Risks

  Annual price declines in the obesity market that exceed expectations, market share below expectations, and pipeline data disappointments that reduce medium- to long-term estimates and valuation multiples.

• MRK

  Core covered company, rating Buy, target price $133

  Strengths

  The event path is active, with catalysts from HIV, ASCO, Winrevair/Welireg, and Sac-TMT readouts; Goldman believes the company is well positioned in a key year.

  Weaknesses

  1Q revenue is affected by OUS Keytruda, Japan price adjustments, Argentina biosimilar dynamics, and changes in Gardasil dose recommendations.

  Comparison

  Among BMY, MRK, and PFE, Goldman believes MRK has the best event-path positioning.

  Risks

  Faster-than-expected Keytruda LOE erosion, slower vaccine products, slower new-product ramps, pipeline disappointment, and a tougher backdrop for vaccines/FDA/tariffs/M&A.

• PFE

  Core covered company, rating Neutral, target price $26

  Strengths

  There are mechanical upside factors from Comirnaty-related payments and Eliquis dynamics in 2Q and beyond, and BD capacity still stands at $7bn.

  Weaknesses

  Low Covid incidence and a high base of year-ago contracted deliveries create pressure, and Vynda faces pre-LOE competition and GTN pressure.

  Comparison

  Relative to MRK, PFE depends more on pipeline execution, the obesity portfolio, and sentiment improvement around tafamidis litigation.

  Risks

  Late-stage pipeline setbacks, deterioration in vaccine regulation and commercial prospects, and tariff impacts that hit profits harder for a company with below-peer-average gross margins.

• TEVA

  Generics covered company, rating Buy, target price $45

  Strengths

  Brand-portfolio execution, current commercial products, and upcoming launches support long-term growth, while mid-term catalysts are abundant and the stock trades below 10x FY27 EPS.

  Weaknesses

  Consensus for 1Q may not fully reflect management's comments on gross margin timing, and generic price erosion remains a structural issue.

  Comparison

  Relative to the S&P 500 and XLV, TEVA has been flat year to date but remains volatile; Goldman believes this is mainly driven by macro and valuation debates.

  Risks

  Generic price erosion greater than expected, setbacks in brand commercialization, clinical or regulatory delays, and patent litigation affecting product launches.

Key data

• Report date2026-04-10Goldman Sachs equity research, published at 6:25 PM EDT.
• Large-cap biotech weekly performanceXBI +4.84%; NBI +2.83%; S&P 500 +4.79%The sector moved broadly in line with the market this week, supported by easing geopolitical tensions.
• Large-cap biotech year-to-date performance+7%The report says the sector is one of the better-performing healthcare sectors year to date.
• JNJ and LLY year-to-date performanceJNJ +16%; LLY -13%The two companies sit at opposite ends of large-cap biopharma year-to-date performance, and their product-launch trajectories will draw greater attention.
• GILD acquisition of Tubulis$3.15bn upfront cash + up to $1.85bn milestonesThe deal adds ADC assets TUB-040 and TUB-030, underscoring continued industry M&A activity.
• SMMT HARMONi-3 opportunity$14.9bn peak sales opportunity; checkpoint oncology market >$90bnGoldman believes the mid-term PFS result could be statistically significant and challenge Keytruda's standard-of-care position.
• TEVA valuation<10x FY27 EPS; ~9x FY27 EBITDAGoldman believes the valuation is attractive against the backdrop of double-digit forward EPS CAGR.
• Potential one-off factors for PFEComirnaty-related payment $2.2bn; BD capacity $7bnThese may help reduce FY26 downside and guidance risk, but the pipeline and litigation remain more important.
• Potential MRK Gardasil revenue pressure$750mn-$1bn annual topline headwindGoldman's prior estimate suggests this annualized revenue pressure could arise if both adolescent and adult doses decline.

Impact & implications

The investment implication is that the 1Q26 earnings season may not be a simple earnings-delivery trade, but rather a window to re-rank company narratives and event paths. Companies with clear product cycles, strong catalyst paths, or M&A optionality are more likely to attract attention; companies relying only on low valuations or earnings merely meeting expectations may find it difficult to sustain a re-rating. At the sector level, large-cap biopharma is still viewed as a defensively growing area with solid fundamentals and active M&A, but external policy, tariffs, the FDA, vaccine regulation, and drug-pricing pressure still need to be monitored.

Risks

• Drug pricing, GTN, reimbursement, and Part D changes may compress revenue or margins.
• The FDA, vaccine regulation, tariffs, and the macro environment may affect valuation multiples and earnings expectations.
• Failure of key clinical readouts could lead to downward revisions to medium- and long-term revenue estimates and multiple compression.
• Product launch speed below expectations, especially in obesity, immunology, oncology, and vaccine-related assets.
• LOE, generic competition, and biosimilar entry may accelerate erosion of legacy product revenue.
• If M&A/BD expectations are not delivered, the new investment narratives for some companies may weaken.

What to watch

• JNJ's 1Q26 earnings season starting on April 14 and the launch trajectory of Icotyde.
• ABBV's April 29 earnings, especially Skyrizi/Rinvoq, IBD competition, and BD posture.
• LLY's prescription, pricing, and market-penetration pace after Foundayo launches.
• MRK's HIV events, ASCO investor event, Winrevair CADENCE, and Welireg and Sac-TMT readouts.
• PFE's Sig Vedotin Ph3 Be6A readout, the June ADA obesity-portfolio event, tafamidis litigation, and Vynda competition.
• BMY's year-end concentrated clinical catalysts, milvexian AF, Pumitamig, and whether inventory destocking normalizes on schedule.
• SMMT's 2Q PFS data from HARMONi-3 and its potential impact on MRK's Keytruda and the oncology immunotherapy market.
• Industry M&A, especially whether GILD continues small BD partnerships after integrating Tubulis, ACLX, and Ouro, and progress on Sun Pharma's potential acquisition of OGN.