According to the Zhitong Finance APP, after several American pharmaceutical companies have successively announced their latest financial reports, Goldman Sachs recently released a research report stating that, against the backdrop of the cautious sentiment of investors towards the U.S. pharmaceutical sector pointed out by the bank prior to the earnings season, the performance of the U.S. pharmaceutical companies that have reported results so far in the first quarter has not been worse than expected, and in some cases even exceeded expectations.
Goldman Sachs noted that Johnson &amp; Johnson (JNJ.US) delivered impressive performance in its pharmaceutical portfolio, Merck (MRK.US) and Bristol Myers Squibb (BMY.US) reported solid results, while AbbVie (ABBV.US) provided an earnings report that exceeded expectations and raised its guidance amid the current uneasy market atmosphere.
Goldman Sachs added that looking further, based on the management's explanations of key industry uncertainties during the earnings call, the overall sentiment has slightly turned positive compared to a few weeks ago—although considering that the outcome of tariffs remains unclear, the bank will maintain a cautious stance towards excessive optimism.
Regarding the topics and themes of general concern in the U.S. pharmaceutical industry, here is a brief review of the information conveyed by various companies.
Tariff Issues
Regarding specific tariffs in the pharmaceutical industry, companies provided little information on how to quantify the potential financial impact. Merck mentioned that so far, the company has incurred approximately $200 million in tariff costs, mainly from tariffs between the U.S. and China, and to a lesser extent, tariffs between China and Mexico. Gilead Sciences (GILD.US) pointed out that the tariffs currently in place (which are not specific to the pharmaceutical industry) have been incorporated into the company's guidance, and it expects some of the impact to be offset by exchange rate pressures. AbbVie also stated that it has included a small portion of tariff costs in its financial guidance.
In terms of strategies to mitigate the impact of tariffs, company management emphasized various means to absorb potential shocks this year, including inventory management/transfers, supply chain flexibility, alternative sources for active pharmaceutical ingredients (APIs), as well as cost efficiency and productivity enhancement measures. Unsurprisingly, companies also mentioned efforts to strengthen domestic manufacturing bases in the U.S., with significant scale—Merck will reinvest $9 billion in the U.S., AbbVie plans to invest $10 billion over the next decade, and Roche also indicated it will invest about $50 billion in the U.S. over the next five years. Prior to this, Novartis (NVS.US), Eli Lilly (LLY.US), and Johnson &amp; Johnson announced investment commitments in the U.S. ranging from $23 billion to $55 billion. Additionally, company management generally believes that promoting the return of manufacturing and R&amp;D to the U.S. through tax policies rather than tariff measures will be more effective.
Drug Pricing
Regarding the topic of international reference pricing/Most Favored Nation (MFN) clauses, company management generally expressed a consistent view that they hope overseas (especially European) countries will pay higher prices for the innovations brought to the U.S. Goldman Sachs believes this is a new theme worth continuous attention, as the management of U.S. and European pharmaceutical companies seems to have reached a consensus on the overall stance, although the specific implementation mechanisms remain unclear.
Companies also reiterated the importance of reforms in drug benefit management (PBM). AbbVie expressed that they are very encouraged by the &#34;pill penalty&#34; reform mentioned in the recent executive orders introduced by the U.S. government regarding drug pricing issues
FDA Uncertainty
Somewhat reassuringly, regarding the regulatory uncertainty brought about by the restructuring of federal medical agencies, company management teams generally stated that, to date, they have not seen signs of a slowdown in communication with the U.S. Food and Drug Administration (FDA) or delays in short-term filings and key PDUFA (Prescription Drug User Fee Act review deadlines). Goldman Sachs noted that this is an issue it will continue to closely monitor with investors.
M&amp;A Environment/Business Development (BD)
Goldman Sachs indicated that as it entered the first quarter earnings season, it initially felt that, amid broader market uncertainties and the need for capital to be reallocated to localized manufacturing and capital expenditures (CapEx), investor expectations for M&amp;A commentary would weaken. However, quite the opposite has occurred; thus far, comments from company management have highlighted a strong interest from some potential acquirers in M&amp;A.
Merck stated that while the uncertainty in the external environment complicates the advancement of transactions, it has not deterred the company from actively pursuing deals. The company's management pointed out that there remains a mismatch in expectations between buyers and sellers, with sellers yet to adjust their value expectations to fit the current market environment, but they remain confident in completing transactions and noted that projects are already in the pipeline. Additionally, Goldman Sachs noted that Merck confirmed it is in late-stage negotiations with biotechnology company SWTX.
Bristol Myers Squibb reiterated that business development (BD) is its top priority for capital allocation (although it has always been viewed as a priority, it has been relatively quiet recently due to digesting past transactions and is now ready to be more active). Despite the official stance remaining consistent with previous statements, Goldman Sachs believes that the company's emphasis on pursuing BD opportunities has increased (investors in the market are also discussing whether this is related to the disappointing performance of recent catalysts in the company's growth portfolio). Overall, Goldman Sachs views this as part of a positive signal for the M&amp;A environment in the biotechnology sector.
Goldman Sachs stated that this week, market attention will shift to the upcoming first-quarter results from Pfizer (PFE.US) and Eli Lilly. Notably, Goldman Sachs specifically mentioned Merck. Goldman Sachs pointed out that Iovance Biotherapeutics' ivonescimab is seen as posing a potential competitive threat to Merck's cancer drug Keytruda (K drug). Goldman Sachs believes that Merck's stock price has already been negatively impacted twice by the risks facing Keytruda, once due to the patent cliff issue and once due to perceived threats from potential new therapies.
Goldman Sachs noted that Merck's management downplayed these concerns during the earnings call. The firm pointed out that among all the pharmaceutical companies it covers, the market has the most negative implied terminal growth rate expectations for Merck (-7%, compared to the industry average of -1.9%). Goldman Sachs believes this is overly harsh, and if sentiment in the pharmaceutical industry improves in the future, Merck's stock price is likely to rebound, with its implied negative growth rate potentially returning to levels more in line with other peers facing patent expirations

ABBV

Goldman Sachs released a research report stating that although investors are cautious about the U.S. pharmaceutical sector, the Q1 performance reported has not fallen below expectations, with some companies even exceeding expectations. Johnson & Johnson, Merck, and Bristol Myers Squibb showed solid performance, while Abbvie delivered better-than-expected financial results and raised its guidance in a turbulent market. Overall sentiment is slightly turning positive, but Goldman Sachs remains cautious about excessive optimism. Tariff issues remain a focal point, with companies emphasizing inventory management, supply chain flexibility, and other measures in their response strategies

- Goldman Sachs recently reported that the Q1 performance of U.S. pharmaceutical companies has generally met or exceeded expectations, despite initial investor caution.  
- Companies like Johnson & Johnson, Merck, and AbbVie have shown strong results, while concerns about tariffs and drug pricing remain prevalent, with firms emphasizing domestic manufacturing investments.  
- The report highlights a potential shift in sentiment towards optimism in the sector, although uncertainties regarding FDA regulations and merger activities persist.

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Merck

Abbvie

Johnson & Johnson

Bristol Myers Squibb

Goldman Sachs

Pfizer

Gilead Sciences

AKESO

Roche

NOVARTIS AG

Goldman Sachs: Q1 performance of U.S. pharmaceutical stocks is reassuring, industry sentiment is slightly turning positive