LIVE MARKETS-Mixed reporting season ahead for European pharma

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MIXED REPORTING SEASON AHEAD FOR EUROPEAN PHARMA

European pharma starts 2026 with limited earnings momentum, stronger prospects in the second half and M&A as a critical lever for growth, Jefferies analysts say.

"We can't see earnings momentum being a significant tailwind, at least not in 1H26, and hence sector performance will have to come from multiple expansion," they say.

European pharma enters 2026 trading at 14x forward PE, slightly below its 15x historical average but well above the 12x trough seen in early 2025, with the analysts attributing the sector’s re-rating to U.S. administration pricing deals with 14 drugmakers, though the long-term prospects remain uncertain.

Reporting season is expected to be mixed, reinforcing a “two halves” narrative for 2026, Jefferies says.

In the first half, GSK GSK.L faces FX drags without strategic updates, Novartis NOVN.S contends with generics and margin dilution, Novo NOVOb.CO absorbs price cuts before volume growth, UCB UCB.BR experiences similar dynamics, and Roche ROG.S does not report Q1 profits. Sanofi SASY.PA and AstraZeneca AZN.L may show early strength, but overall earnings momentum is skewed toward the second half.

While consensus estimates still underplay FX headwinds, limiting near-term upside, M&A remains central as the industry confronts its largest patent cliff, Jefferies says.

Pharma will continue acquiring biotech assets to refresh pipelines. While such moves may dilute near-term earnings, they enhance medium-term visibility and innovation.

(Joice Alves)

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