JPMorgan is bullish on the US large-cap biopharma sector, with LLY, ABBV, and GILD as top picks

Overview

This is a post-roadshow view update on the US large-cap biopharma sector. JPMorgan said recent investor meetings showed continued strong interest in large-cap biopharma companies, with discussion focused mainly on which stocks should receive incremental capital allocation, rather than concerns over valuation or policy risk. The report believes fundamentals in 2026 are relatively solid, earnings expectations are biased to the upside, there are multiple important pipeline catalysts in 2026-2027, and the sector is in a period of low policy risk.

Core views

The core view is that the sector's recent underperformance has been driven more by positioning and the macro environment than by fundamental or valuation issues; with valuation still at about a 25% discount to the S&P 500, the sector still has room to outperform. At the stock level, LLY, ABBV, and GILD are the top picks. After the recent pullback, LLY is valued at about 21x 2027 EPS, and following downward revisions to Foundayo expectations, Medicare obesity coverage and international launches could improve expectations beyond 2027. ABBV is valued at about 12x 2027 EPS, with Skyrizi/Rinvoq still supporting high-single-digit revenue growth and low-double-digit profit growth, though pipeline progress or M&A is needed to improve sentiment. GILD's Yeztugo is ramping strongly, the $800mm full-year sales guidance is viewed as conservative, and anito-cel and the HIV combination pipeline also enhance the medium-term story.

Analysis framework

The report is mainly based on recent investor meetings and roadshow feedback, combined with stock valuations, 2026-2027 earnings and pipeline catalysts, policy risk, fund positioning, and sentiment and total return performance in the charts, to make relative allocation judgments on the US large-cap biopharma sector and key companies.

Methodology notes

• Investor sentiment trackingRoadshow feedback and HF/LO sentiment observations

  Judge changes in sector and stock sentiment through discussions with hedge funds and long-only investors.

  The report rates overall sector sentiment at around 7/10, and notes that JNJ remains a consensus long, positioning in LLY has become more cautious, views on ABBV are highly divided, and attention to BIIB has increased.

• Valuation comparisonForward PE discount relative to the S&P 500

  Use the forward P/E discount to measure the sector's valuation attractiveness relative to the broader market.

  The report points out that the large-cap biopharma sector trades at about a 25% discount to the S&P 500, so valuation remains undemanding.

• Catalyst analysisEarnings, clinical data, and product launch event table

  Use earnings and pipeline events over the next 12-24 months to assess upside potential for individual stocks.

  Key catalysts include REGN's Phase 3 LAG3 data, updates on LLY's Foundayo and retatrutide, MRK's sac-TMT data, BMY's milvexian and Cobenfy readouts, and ABBV's Phase 2 CD data for the Skyrizi combination.

Asset mapping & comparison

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

• LLY

  One of the top picks

  Strengths

  Medicare obesity coverage will begin on July 1, Foundayo international launches are expected in late 2026 to early 2027, and valuation has fallen to about 21x 2027 EPS.

  Weaknesses

  The market is more cautious on early US TRx uptake for Foundayo and potential price erosion.

  Comparison

  Although still held by many investors, sentiment has been less positive over the past two months than before.

  Risks

  Foundayo uptake below expectations, pricing pressure, and ex-US generic competition.

• ABBV

  One of the top picks with divided views

  Strengths

  Skyrizi/Rinvoq support high-quality growth, valuation is about 12x 2027 EPS, and the balance sheet is better suited for transactions.

  Weaknesses

  The market is concerned about competition from JNJ's Tremfya and Icotyde, while also questioning late-stage pipeline visibility.

  Comparison

  Interest from long-only investors is rising, but hedge fund positioning remains negative.

  Risks

  Pipeline progress or M&A is needed to reverse sentiment, and competition in IBD and PsO could affect expectations.

• GILD

  One of the top picks and a key idea for the 1Q26 earnings season

  Strengths

  Yeztugo prescriptions are strong and may exceed the $800mm sales target, anito-cel is emerging as a promising oncology asset, and the HIV treatment combination pipeline is advancing.

  Weaknesses

  Investors remain focused on Biktarvy and overall HIV TRx trends.

  Comparison

  Compared with some peers, GILD has clearer near-term catalysts from earnings and product ramp-up.

  Risks

  Yeztugo uptake or guidance revisions come in below expectations, or HIV prescription trends are misread or deteriorate.

• JNJ

  Consensus long

  Strengths

  It has gradually moved past the impact of Stelara LOE, while Tremfya, Icotyde, Tecvayli, Inlexzo, Rybrevant, and the pipeline provide earnings upside leverage.

  Weaknesses

  After strong performance over the past year, valuation is about 20x 2026E EPS, with a more apparent premium to peers.

  Comparison

  One of the cleanest stories in the sector, but upside is constrained by valuation.

  Risks

  Insufficient valuation digestion or new product growth below expectations.

• REGN

  A key idea for the 1Q26 earnings season

  Strengths

  Phase 3 LAG3 melanoma data is expected in 2Q, and the report sees a high probability of success with potential differentiation versus BMY's Opdualag.

  Weaknesses

  Near-term earnings themselves may take a back seat to clinical data.

  Comparison

  Compared with ordinary earnings-driven stories, REGN is more driven by key clinical readouts.

  Risks

  LAG3 data failure or insufficient differentiation.

• BIIB

  Rising attention

  Strengths

  After the APLS deal, growth is more diversified, and pipeline events such as felzartamab in AMR and litifilimab in CLE provide de-risking opportunities.

  Weaknesses

  The APLS acquisition itself is controversial, and the company is still moving away from a single Alzheimer's/Leqembi narrative.

  Comparison

  Investor interest is increasing, but the story remains one of improvement.

  Risks

  Pipeline readout failures, acquisition integration issues, or growth delivery below expectations.

Key data

• Sector sentiment scoreabout 7/10Roughly in line with levels at the end of 4Q25.
• Sector valuation discountabout 25%A valuation discount relative to the S&P 500, which the report uses to argue valuation remains undemanding.
• LLY valuationabout 21x 2027 EPSAfter the recent pullback, the report sees the allocation window as more attractive.
• ABBV valuationabout 12x 2027 EPSDespite featuring high-single-digit revenue growth and low-double-digit profit growth, valuation remains low.
• GILD Yeztugo sales target$800mmThe report believes this full-year guidance is becoming increasingly conservative, with room for upward revision.
• YTD stock total returnJNJ 12.0%, BMY 11.9%, MRK 9.7%, GILD 9.5%, PFE 8.9%, AMGN 7.2%, BIIB 6.8%, REGN -0.6%, ABBV -10.6%, LLY -14.5%Year-to-date performance of US large-cap biopharma companies from the report chart.

Impact & implications

For portfolio implications, the report leans toward continuing to look for incremental allocation opportunities within large-cap biopharma, especially favoring LLY, ABBV, and GILD, which combine valuation pullback, earnings visibility, and pipeline catalysts. In the near term, 1Q26 earnings may not materially change the sector's relative positioning, but GILD's Yeztugo trends and REGN's LAG3 data could become more important marginal drivers.

Risks

• If the sector's recent underperformance is not purely a positioning issue, it may reflect a market reassessment of fundamentals or policy risk.
• Drug pricing and potential tariffs could still re-emerge as sources of policy risk.
• Key clinical data, product launches, or prescription ramp-up coming in below expectations would weaken the 2026-2027 upward revision thesis.
• LLY's Foundayo, ABBV's immunology pipeline, GILD's Yeztugo, and REGN's LAG3 data all carry execution or data risk.
• Some stocks such as JNJ may already reflect a significant amount of positive news in valuation, limiting upside.

What to watch

• REGN's ph3 LAG3 data, expected to be released in 2Q.
• LLY's US Foundayo uptake, July 1 Medicare obesity coverage, and international launches in late 2026 to early 2027.
• GILD's Yeztugo prescription trends and whether management raises the $800mm sales target.
• ABBV's Phase 2 CD data for Skyrizi plus a new-mechanism drug combination, as well as potential business development actions.
• Updates on LLY Foundayo, retatrutide, and PFE MET-097 at the ADA conference.
• OptiTROP-Lung05 and VEGFxPD-1 incremental data for MRK sac-TMT at the ASCO conference.
• BMY's Phase 3 readouts for milvexian AF/SPP and Cobenfy in Alzheimer's psychosis.