Barclays Names AstraZeneca and Roche Top Pharma Picks Amid Cautious Sector View

Barclays has identified AstraZeneca and Roche as its preferred large-cap pharmaceutical stocks heading into 2027, maintaining "overweight" ratings on both companies even as it adopts a more cautious stance on the broader European sector.

Sector Headwinds Prompt Caution

The bank shifted its overall industry view to "neutral," citing several emerging challenges for the European pharmaceutical sector. According to the note, these headwinds include a thinner calendar for late-stage clinical trial readouts next year, expectations for slightly slower top-line growth, and the sector's proximity to a significant wave of patent expiries anticipated in 2031 and 2032.

This outlook suggests that stock selection will become increasingly critical for investors, with a focus on companies possessing durable growth profiles and robust product pipelines capable of navigating the changing landscape.

Barclays' Top Selections

Despite the broader caution, Barclays highlighted two companies it believes are positioned to outperform.

AstraZeneca (AZN)

Ad

Barclays reaffirmed its "overweight" rating on AstraZeneca, though it trimmed its price target to £160 from £165. The bank's positive case rests on what it calls sector-leading medium-term earnings growth.

• It forecasts a 7.4% compound annual growth rate (CAGR) for earnings per share (EPS) between 2028 and 2032, significantly above the large-cap median of 4%.
• The firm also pointed to AstraZeneca having the "richest late-stage pipeline in the peer group," with several Phase 3 readouts that could de-risk future multi-billion dollar sales.
• Key risks identified include disappointing data from major trials and potential challenges in new product launch execution.

Roche (ROG)

Roche also received an "overweight" rating, with Barclays raising its price target to SFr430 from SFr410. The bank's valuation implies a premium to the sector, which it justifies based on several factors.

• The analysts project a core EPS CAGR of 5.1% for 2028–2032, again outpacing the sector median.
• Roche faces comparatively limited pressure from loss-of-exclusivity (LOE) beyond 2031, and its large Diagnostics business provides a stable revenue stream not subject to the same patent cliffs as pharmaceuticals.
• Potential downside risks include pipeline setbacks and faster-than-modeled erosion of sales for assets facing competition.