Goldman Sachs senior biotechnology analyst in global investment research Chris Shibutani joins Market Domination Hosts Julie Hyman and Josh Lipton to break down how to play biotech and pharmaceutical stocks.

Johnson & Johnson reports earnings on Tuesday, which Shibutani says “typically kicks off earnings season for healthcare, but also for the large-cap pharmas. It really is the beachhead many read across sort of result” given the company’s pharmaceuticals and medical device businesses.

Shibutani says he’s “watching closely the strategic moves that the company has been making in medtech.” The analyst holds a Neutral rating on the stock, but says “it will be interesting to see how they manage through this period of exposure to biosimilars” which could be a potential upside for the company, as well as balancing pursuing patents for “what we call small molecules, pills and tablets” as well as injectables.

The analyst shares his perspective on Pfizer as investors access the company’s role in the post-pandemic market. “When you look at stock performance for Pfizer, it naturally peaked several years back at the height of the pandemic, where the contributions the company made to address the Covid pandemic with the vaccine and the therapeutic Paxlovid were certainly tremendous. The stock, however, has had very challenging relative underperformance over the last few years, and the strategies that the company has been invoking, whether it's through M&A, have generated some mixed results.”

Shibutani says activist investor activity “would be unsurprising given where you see the relative underperformance for the stock,” especially as “attention to some of [the recent] issues does heighten the level of urgency, and that's probably not a bad thing anytime the company is trying to address some of the challenges.”

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This post was written by Naomi Buchanan.