Barclays turns more cautious on European pharma into 2027, favors these stocks

Barclays is sticking with a Neutral stance on European pharma, biotech and life sciences as 2027 approaches, yet the tone is more measured than before, given the earlier positive outlook.

James Gordon and his team attribute the shift to diminished late-stage pipeline optionality in 2027, with peak pipeline readout potential estimated near $50 billion, down from about $75 billion in 2026. They also flagged slightly softer top-line growth for next year, forecast at 7% in local currency versus 8% in 2026, while the sector moves closer to major patent expiries — roughly $70 billion in 2031 and $50 billion in 2032.

Barclays keeps its large-cap forward P/E multiple for the sector at 15 times, a valuation the analysts say is 'not establishing a market premium.'

In the context of a less active pipeline year and decelerating growth for large caps, the analysts prefer Biotech, mid-cap and Specialty equities. They also predict life sciences companies to deliver relative outperformance, with about two percentage points of faster growth expected in 2027 versus 2026.

For large caps, Barclays is Overweight AstraZeneca because of its 2027 pipeline optionality and re-rating opportunity; it also likes Roche for its long-duration growth and breast cancer launch. Conversely, the firm is Underweight GSK, pointing to the new CEO's mostly completed re-rating, a quiet 2027 and the company's closer approach to HIV loss of exclusivity.

In the biotech arena, Barclays is Overweight Genmab on the risk-reward of its oncology pipeline and Argenx given its sector-leading growth and pipeline optionality. The bank stays Underweight Lakefront, however, citing opaque disclosure, an underdeveloped pipeline and a poor M&A history.

Among mid-caps and specialty stocks, Barclays is Overweight Bayer, Galderma and Grifols, while moving Ipsen to Underweight due to generic competition and margin pressure.

In life sciences, Barclays is Overweight Lonza, Sartorius and Sartorius Stedim Biotech, while it retains an Underweight on Diasorin, citing execution risk and poor visibility.

Additional rating changes accompanied the call: Hikma Pharmaceuticals moved up from Underweight to Equal Weight; Ipsen was cut from Equal Weight to Underweight; and Zealand Pharma was reduced from Overweight to Equal Weight. In European trading at 10:31 GMT, Hikma was up 1.4%, while Ipsen slid more than 4%.

Besides that, the note contained forecast and price-target revisions across Barclays' 28-stock coverage, as well as positive Catalyst Alerts for Genmab and Lundbeck leading into the fourth quarter.