Healthcare has defensive characteristics ahead of the Q1 earnings season, with therapeutic drugs and clinical catalysts as the core themes

Overview

This report is HSBC's review of the main debates and catalysts for the global life sciences and healthcare sector ahead of the 2026 Q1 earnings season. The report argues that, against a backdrop of a still-elevated path of rate cuts, geopolitical risk, energy costs, foreign exchange, and AI-related uncertainty, healthcare may attract short-term defensive flows. Therapeutic drugs are viewed as relatively more defensive, while life sciences tools and medical technology are more dependent on greater macro clarity in the second half of the year, a recovery in instrument demand, and improved capital spending.

Core views

The core views are: first, healthcare has near-term defensiveness, but valuations are already high and positioning may be crowded, so it should not be treated as a risk-free safe haven. Second, biopharma re-rating will be driven more by clinical readouts, pipeline quality, and the sustainability of revenue growth than by macro or regulatory factors alone. Third, during the Q1 2026 earnings season, companies may focus on disclosing exposure to the Middle East, energy costs, foreign exchange impacts, and changes in U.S. reimbursement policy. Fourth, visibility into the impact of U.S. payer policy should improve as Medicare Part D redesign and 340B enter their second year. Fifth, the life sciences tools segment still faces investor concerns about medium-term growth visibility, large M&A choices, and the pace of instrument recovery.

Analysis framework

The report uses a top-down and bottom-up combination: top-down, it assesses the impact of rates, geopolitics, inflation, energy prices, AI, and reimbursement policy on healthcare valuation and defensiveness; bottom-up, it reviews company communications, clinical readouts, pipeline events, medical conferences, and demand recovery in sub-segments ahead of the Q1 earnings season, and uses sector valuations, revenue CAGR, relative momentum, and the relationship between P/E and EPS CAGR to support comparisons.

Methodology notes

• Valuation and growthRevenue CAGR and valuation multiple comparison

  Compare the growth quality and valuation alignment of different pharma, med-tech, and life sciences tools companies using 2024-2030e revenue CAGR, 2027e P/E, and 2026e-2029e EPS CAGR.

  The chart shows that Eli Lilly and Novo Nordisk lead on expected revenue growth, while Pfizer, Bristol-Myers Squibb, and Bayer have negative growth; the valuation comparison is used to judge whether high growth has already been reflected in the price.

• Market momentumRelative LSEG Global Healthcare Index momentum quadrant

  Use 3-month returns and 1-week returns to measure a stock's momentum status relative to the global healthcare index.

  The chart classifies individual stocks into Good Momentum, Building Momentum, Losing Momentum, and Bad Momentum to identify short-term capital preference and trend shifts.

• Event-drivenClinical catalysts and medical conference windows

  Assess stock- and sub-sector re-rating opportunities around medical conferences such as ASCO and ADA, as well as key clinical readouts.

  The report focuses on projects such as Ivonescimab, Wainua, Pelacarsen, Camizestrant, and orforglipron because their clinical data or commercialization progress may change the market's view on growth durability and valuation multiples.

Asset mapping & comparison

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

• Therapeutic drugs

  The report's preferred healthcare sub-sector

  Strengths

  More defensive, driven by clinical readouts, pipeline catalysts, and sustainable revenue growth, and may attract relative capital inflows during periods of macro uncertainty.

  Weaknesses

  Valuations are high and some positioning may be crowded; disappointing clinical readouts could lead to a sharp valuation correction.

  Comparison

  Compared with life sciences tools and medical technology, therapeutic drugs are the near-term preferred area in the report.

  Risks

  Drug pricing policy, Medicare Part D, 340B, clinical failure, patent cliffs, and competitive substitution.

• Biopharmaceuticals

  A key catalyst concentration area

  Strengths

  Clinical data, medical conferences, and pipeline progress can drive stock-level differentiation and re-rating.

  Weaknesses

  Growth drivers and earnings momentum still need to be validated, and some companies face product gaps in core franchises.

  Comparison

  Compared with macro-driven factors, the report believes 2026 should focus more on bottom-up clinical and pipeline events.

  Risks

  Trial failure, regulatory review, commercialization coming in below expectations, and core product substitution risk.

• Life sciences tools

  Still a sub-sector with weaker investor preference

  Strengths

  Consumables demand remained relatively stable in 2025; if instruments recover, pharma capex returns, and biotech financing improves, this could support earnings upgrades.

  Weaknesses

  Inflation concerns suppress long-duration growth valuations, medium-term growth visibility is insufficient, and management commentary on growth tends to point to future improvement.

  Comparison

  More dependent than therapeutic drugs on macro clarity and demand recovery in the second half of 2026.

  Risks

  Delayed recovery in instrument demand, further postponement of pharma capex, unsustained recovery in biotech financing, and poor M&A choices.

• Medical technology

  A healthcare sub-sector with higher macro sensitivity

  Strengths

  If the path for rates and inflation becomes clear, valuation pressure may ease.

  Weaknesses

  Its long-duration profile and cost pressure mean it may face pressure when oil prices and inflation rise.

  Comparison

  The report believes its performance may require a clearer macro environment in the second half of 2026.

  Risks

  Inflation, energy costs, foreign exchange volatility, and valuation multiple compression.

Key data

• Report date2026-04-02Unless otherwise stated, all market data in the report are as of the close on 2026-03-31.
• Eli Lilly and Co 2024-2030e revenue CAGR14.3%The highest revenue compound annual growth rate among the sample companies in the chart.
• Novo Nordisk A/S 2024-2030e revenue CAGR9.8%The second-highest expected revenue growth rate.
• AstraZeneca PLC 2024-2030e revenue CAGR6.6%The report cites an AstraZeneca Buy view and mentions the Wainua readout.
• Pfizer Inc 2024-2030e revenue CAGR-7.0%The lowest revenue compound annual growth rate among the sample companies in the chart.
• HSBC current rating definitionBuy/Hold/ReduceDisclosure notes indicate that a target price more than 20% above the current share price is typically a Buy, while one more than 20% below is typically a Reduce; target prices reflect the expected market price over the next 6-12 months.

Impact & implications

The investment implication is that healthcare can serve as a defensive allocation amid macro uncertainty, but the sector should not be treated as homogeneous. Therapeutic drugs and biopharma companies with clear pipeline catalysts, sustainable growth, and earnings momentum are more likely to receive valuation support; life sciences tools and medical technology will need to watch whether instrument demand, pharma capex, and biotech financing recover. If energy prices, inflation, and foreign exchange pressure remain elevated, companies with stronger long-duration growth characteristics and high valuations may come under pressure.

Risks

• Healthcare valuations are already high, so defensiveness may be offset by expensive multiples.
• Crowded positioning may amplify drawdowns if catalysts disappoint.
• Middle East geopolitical risks may affect profits through direct business exposure, energy costs, and foreign exchange.
• The impact of Medicare Part D redesign and 340B policy may still surprise the market.
• Clinical readouts and regulatory meetings carry binary outcome risk, especially for oral SERDs, Lp(a), and immuno-oncology programs.
• If instrument recovery in life sciences tools is delayed, pharma capex remains deferred, or biotech financing is unsustained, earnings upgrades may fail to materialize.
• If oil prices and inflation remain elevated, valuations for medical technology and long-duration growth stocks may continue to face pressure.

What to watch

• Company disclosures during the Q1 2026 earnings season on Middle East exposure, energy costs, foreign exchange, and policy impacts.
• Key clinical data and management commentary around medical conferences such as ASCO and ADA.
• Ivonescimab HARMONi-3 and HARMONi-6 data, and market discussion about their potential to displace Keytruda.
• AstraZeneca's Wainua CARDIO-TTRansform readout and whether the label could include background stabilizers.
• Whether Pelacarsen's Lp(a) HORIZON trial results change a cautious market outlook.
• The ODAC meeting for Camizestrant, readouts from SERENA-6 and SERENA-4, and market confidence in oral SERDs after Roche's disappointing persevERA.
• Progress on the launch of Foundayo/orforglipron and its impact on the oral weight-loss drug market structure.
• Sustained recovery in life sciences tools orders, deferred pharma capex, and biotech financing.
• Whether healthcare valuation multiples continue to normalize, especially relative valuation changes for pharma, medical technology, and tools companies.