Money Peak: Healthcare Sector Report

25 February – 4 March 2026

🔍 Market Overview

The healthcare sector concluded the reporting week with a modest increase of +0.05% – a seemingly insignificant figure reflecting the sector's character: stable, defensive, and resilient to short-term market fluctuations. In comparison, more cyclical sectors like Real Estate (+2.66%), Utilities (+2.31%), and Financial Services (+1.55%) displayed significantly stronger movements, while the energy sector was the only one to slide into negative territory (–1.07%).

Context matters: In a market increasingly marked by economic concerns and a weaker labor market, defensive sectors regain attractiveness. Healthcare benefits from two fronts – as a stability anchor for risk-averse investors and as a growth field for those betting on medical innovation. Following lean total returns of 0.3% (2023) and 0.9% (2024), the sector delivered around 12.5% in 2025 – a trend reversal that continues to solidify this year.

Within the sector, however, the week was not uniform: while major pharmaceutical companies suffered slight price losses, distributors and select specialists proved significantly more resilient. The disparity between winning and lagging stocks underscores that sector-wide investments are less rewarding than targeted stock selection.

💊 Key Trends and Drivers

Pharma: Pipelines as Key Differentiators

Major pharmaceutical companies presented at the TD Cowen 46th Annual Health Care Conference, highlighting growth agendas in immunology, oncology, and neuroscience.

Johnson & Johnson (Price: USD 246.75, –0.73%) remains strategically ambitious. The company received its fifth FDA Fast-Track Designation for its lupus therapy candidate Nipocalimab – this time for systemic lupus erythematosus (SLE), a chronic autoimmune disease affecting around 3 to 5 million people worldwide. Concurrently, J&J announced plans to spin off its orthopedic business (joint replacement, surgical instruments) from its MedTech division to focus more on high-growth areas like oncology. Growth engines in immunology and neuroscience – including Tremfya, Caplyta, and Spravato – are gaining significance, despite Stelara’s patent expiration pressuring the revenue profile.

Pfizer Inc. (Price: USD 26.58, –2.49%) remains the sector’s most controversial stock. The CEO publicly criticized the FDA’s vaccine department leadership – an unusual move underscoring regulatory environment uncertainties. Simultaneously, the operational side shows remarkable strength: a gross margin of 75.81% and an EBITDA margin of 41.05% are well above the sector average (59.35% and 10.40% respectively). The operating cash flow over the past twelve months reached USD 13.08 billion, comfortably covering dividend payments of USD 9.8 billion – yielding a 6.22% dividend yield. Nonetheless, the stock fell during the week: institutional investors reduced their holdings, and the over 125% payout ratio raises questions about the long-term viability of the dividend.

Merck & Co., Inc. (Price: USD 119.83, –1.30%) underscored its dependency on Keytruda – a PD-1 inhibitor responsible for around 55% of pharmaceutical revenues – at the Cowen Conference. A partnership with AI company Tempus AI for precision medicine was the structurally significant signal of the week: it illustrates how traditional pharma companies actively attempt to accelerate their development processes using data analytics. With a P/E ratio of 16.3 and a gross margin of 81.5%, Merck remains fundamentally solid, although Keytruda’s dependence ahead of its anticipated patent expiration is the central risk investors should monitor.

AbbVie Inc. (Price: USD 233.86, –0.17%) stood out due to positive clinical data this week: the Phase 3 AFFIRM study showed 55% of Crohn’s disease patients achieved clinical remission with Skyrizi (Risankizumab) as a subcutaneous induction therapy – compared to placebo. These results sharpen AbbVie’s competitive position directly against Johnson & Johnson. The ongoing strategic transformation away from Humira towards Skyrizi and Rinvoq, jointly targeting over USD 31 billion in annual sales by 2027, is proceeding as planned. The EBITDA multiple of nearly 16.9 reflects the expectation that this sales shift will succeed.

📊 Key Figures at a Glance

*AbbVie's negative equity (due to acquisitions and share buybacks) makes ROE and Debt/Equity Ratio structurally non-comparable. Free cash flow per share (USD 10.50) and operating margin (26.7%) are more informative metrics here.

Note: UnitedHealth Group is discussed separately in the "Managed Care" section due to its distinct risk profile.

🏥 Managed Care: UnitedHealth Under Pressure

UnitedHealth Group (Price: USD 289.21, –1.94%) was among the sector’s weakest stocks, now 52% below its 52-week high of USD 606.36 – a development highlighting the fundamental shift in the managed-care segment. The Medical Care Ratio (the ratio of healthcare spending to premium income) exceeded 89% last year, significantly affecting operating profitability. Additional ongoing legal investigations into potential breaches of fiduciary duty by executives add further uncertainty.

Despite these pressures, 40 out of 52 analysts recommend a "Buy" or "Strong Buy" – the consensus rating is "Buy." The rationale: UnitedHealth’s size, AI-driven cost optimization, and structural demand from an aging U.S. population offer substantial mid-term recovery potential. The 3.0% dividend yield, with a conservative payout ratio of 65.7%, supports its appeal to income-oriented investors.

🌐 Structural Trends: AI, Digital Health, and Demographic Change

Beyond individual stocks, three structural themes are shaping the sector sustainably:

Artificial Intelligence in Medicine is rapidly gaining importance. Merck’s partnership with Tempus AI is exemplary: pharmaceutical companies are increasingly using data pipelines to streamline clinical trials and precisely identify target groups for new therapies. This development is expected to improve drug development success rates in the mid-term – with direct effects on valuation models.

Digital Health Solutions are witnessing further growth through strategic acquisitions – such as Sword Health's USD 285 million deal to acquire Kaia Health for AI-driven musculoskeletal and respiratory therapies. Particularly intriguing: reimbursable digital therapy models (as in Germany) create regulatory-secured revenue streams.

Demographic Change remains the most enduring tailwind for the entire sector. The aging population in the U.S., Europe, and Asia drives long-term increasing demand for drugs, diagnostics, care, and preventive services – irrespective of the business cycle.

💡 Five Considerations for Investors

The following points are for general informational purposes only and do not constitute individual investment advice. Investment decisions should always be made with consideration to personal risk tolerance, potentially under consultation with a licensed financial advisor.

1. Cash Flow Over Price/Earnings Ratio as Key Measure: Especially for companies like AbbVie, with structurally negative book equity due to acquisitions, free cash flow per share (USD 10.50 TTM) is more telling than traditional metrics. Investors analyzing healthcare positions should pay special attention to this metric.

2. Dividend Yield and Sustainability Should Be Assessed Differently: Pfizer's 6.47% dividend yield sounds appealing – however, the payout ratio of over 125% of earnings indicates that the dividend is financed from substance and cash flow, not organic earnings growth. This is not necessarily a negative signal, but it requires close monitoring of cost optimization programs and pipeline progress.

3. Use Conference Season as an Information Source: This week's TD Cowen Health Care Conference – featuring presentations by J&J, Pfizer, and Merck – provides key information. Such events reveal strategic priorities, pipeline milestones, and management confidence, which are not always visible through quarterly figures alone.

4. Monitor AI Partnerships in the Pharma Sector: Deals like Merck and Tempus AI's mark a structural shift in drug development. Investors should scrutinize which pharmaceutical companies in their portfolio actively engage in AI partnerships and how these might impact development efficiency – a factor scarcely included in traditional valuation models.

5. Keep an Eye on the Regulatory Environment: Pfizer's CEO's statements about FDA leadership and ongoing investigations at UnitedHealth serve as reminders that the regulatory environment in the health sector is a constant risk factor. Historically, the sector has absorbed major regulatory changes like the Affordable Care Act well, but short-term uncertainties can create volatility and potentially present entry opportunities in fundamentally sound companies.

This report was prepared by Money Peak / finAgent based on publicly available market data and company news. It is solely for general informational purposes and does not constitute individual investment advice under the German Banking Act (KWG) or BaFin regulations. Investment decisions should always be made with consideration of personal financial situations, risk tolerance, and potentially under consultation with a licensed financial advisor.