HSBC has reworked its coverage across major biopharma names, citing what it terms a "lower sector additional risk premium" following a market rally in the second quarter of 2026. The bank's team, led by Rajesh Kumar, says pharmaceutical valuation multiples are now at levels not seen in a decade, a condition that changes how outperformance is likely to be delivered.
Analysts at HSBC argue that further upside will require a medium-term upgrade to growth expectations rather than relying on defensive positioning or benefits from an "out of AI/Tech rotation." To reinforce their view, the team mapped and scored more than 100 clinical catalysts across their coverage universe through 2027 to identify which events could separate winners from laggards.
"The next 12 months look less like 'a rising tide lifts all boats' and more like bottom-up stock picking," the analysts wrote, adding that catalyst quality, franchise adjacency, and loss-of-exclusivity operational gearing will be the key discriminators between winners and value traps.
HSBC moved Novartis higher in its ranking, upgrading the stock to Hold from Reduce and increasing the target price to 110 Swiss francs from 95. The upgrade follows a period of back-to-back trial failures for pelacarsen and del-desiran. While the analysts expect a near-term consensus downgrade cycle, they said they believe "the negative catalyst path has largely played out," and that investor attention is likely to pivot to the upcoming RECHARGE trial readout.
Amgen, by contrast, was downgraded to Hold from Buy, with a target lowered to $425 from $445. HSBC noted the shares have "re-rated on strong operational execution and positive estimate revisions" and now trade close to the bank's target, leaving "near-term upside as more limited." The analysts also highlighted that Amgen's re-rating over the next 12 months will depend on the MariTide obesity trial readout, which they described as "an increasingly crowded space."
Elsewhere in the coverage, HSBC retained a Buy recommendation on AbbVie and raised the target price to $315 from $300. The analysts indicated that pipeline readouts for Skyrizi and Rinvoq could give management scope to raise peak sales guidance in early 2027, potentially shifting 2027-31 growth rates "from low mid-single digit to high mid-single digit."
Bayer also kept a Buy rating, with its price target lifted to 65 from 60. HSBC pointed to a "favourable judgement from the US Supreme Court" on glyphosate litigation and said a September 2026 class-action resolution "could be a meaningful re-rating driver," potentially freeing capital for pipeline reinvestment.
HSBC's preferred names within the coverage group include Buy-rated AbbVie, Johnson & Johnson, Merck, Bayer and Sanofi. By contrast, Eli Lilly was named the least preferred stock and carries a Reduce rating in the bank's hierarchy.
The note underscores a shift in the bank's approach as it weighs lofty sector valuations and a packed calendar of clinical readouts. For investors, HSBC's work suggests closer attention to individual catalyst quality and company-specific operational gearing will be required to navigate potential re-ratings over the next 12-18 months.