Healthcare has long been a favorite hiding place for investors when the broader market gets nervous. September's inflation report gave them another reason to look at the sector, with major pharmaceutical stocks outperforming as the S&P 500 fell. But behind the defensive appeal, the industry's biggest players have very different growth stories.
Why healthcare is back in focus
Consumer prices rose 0.6% in September, pushing annual inflation to 3.7% from 3.4% in August. The hotter reading raised the possibility of another Federal Reserve rate hike in October, sending investors toward businesses considered less sensitive to economic swings.
The shift wasn't entirely new. Investors had already begun moving away from artificial intelligence stocks and into healthcare, industrials, and financials in June.
The latest inflation report added to that rotation, although the appeal of individual drugmakers still comes down to their earnings.
Big Pharma Q2 2026 Scorecard
| Company | Ticker | Q2 Revenue | Revenue Growth | Main Growth Driver | Key Risk |
|---|---|---|---|---|---|
| Eli Lilly | LLY | $22.97B | 48% | Mounjaro and Zepbound at $14.87B | Average selling price down 13% |
| AbbVie | ABBV | $16.99B | 10.2% | Skyrizi and Rinvoq at $8.03B | Roughly $50B of sales exposed to generics in 2032 |
| Merck | MRK | $16.6B | 5% | Keytruda and Keytruda Qlex at $8.4B | Keytruda patent expiry in 2028 |
Where the growth is coming from
Eli Lilly has the strongest revenue growth of the three. Second-quarter sales surged 48%, with Mounjaro and Zepbound contributing nearly 65% of total revenue. Demand remains strong, with volume rising 60% despite a 13% decline in average selling prices.
Outside the US, prices fell 36%, largely because Mounjaro joined China's National Reimbursement Drug List. Lilly is selling considerably more treatments, but earning less per unit.
AbbVie, meanwhile, is making progress replacing revenue lost to Humira's patent expiration. Quarterly sales rose 10.2%, with Skyrizi and Rinvoq generating $8.03B combined, accounting for roughly 47% of revenue.
Humira sales fell 35.9%, but growth from its newer treatments helped cushion the decline. Full-year guidance stands at $13.87 to $14.07 following a slight reduction tied to the proposed Apogee Therapeutics deal.
Merck is growing at a slower pace. Worldwide sales increased 5% to $16.6B, with Keytruda and Keytruda Qlex contributing $8.4B. The newer injectable formulation brought in $463M, while original Keytruda sales were roughly flat at $7.9B.
Other products are helping, although they're still much smaller contributors. Winrevair revenue climbed 75% to $588M, while Gardasil sales rose 4% to $1.17B.
The $500B patent problem
Strong quarterly earnings are only part of the picture. More than $500B in global prescription drug sales face potential generic competition between 2026 and 2032, according to Evaluate data, with roughly $99B at risk in 2028 alone.
Merck faces the most immediate pressure. Keytruda's patent protection is expected to expire in 2028, threatening one of its biggest revenue sources. The company is developing its newer injectable formulation as part of its effort to protect the franchise.
AbbVie has more time, but its exposure is substantial. Skyrizi and Rinvoq face patent expirations in the early 2030s, with approximately $50B in annual sales potentially exposed in 2032.
Drugmakers are already spending heavily to prepare. Since early 2024, Merck has committed $30.9B across six deals, compared with $27.2B for Lilly and $22.3B for AbbVie. Acquisitions can help replace future revenue losses, although they come with significant costs of their own.
Which stock has the edge?
Lilly stands out for growth. Its existing diabetes and obesity treatments continue to attract strong demand, while experimental obesity drug retatrutide delivered average weight loss of up to 22.6% in the TRIUMPH-3 trial. A regulatory filing is planned for Q1 2027.
The concern is how long volume growth can offset falling prices. With Mounjaro and Zepbound accounting for nearly two-thirds of revenue, Lilly is also heavily dependent on the continued success of those treatments.
AbbVie offers a more balanced picture. Skyrizi and Rinvoq are each growing around 24%, helping offset Humira's decline. Its next major patent cliff is further away, giving management more time to develop or acquire additional treatments.
Merck has the more difficult near-term outlook. Its revenue growth trails both competitors, while 2026 non-GAAP earnings guidance was reduced to $2.66 to $2.76 from $5.04 to $5.16 because of acquisition-related charges.
Those charges include $3.62 per share for Cidara and $2.31 for Terns. Merck also raised and narrowed its annual revenue guidance to $66.3B to $67.3B, showing that the earnings reduction isn't entirely a reflection of weaker underlying sales.
Lilly has the fastest growth, AbbVie is making progress beyond Humira, and Merck still has work to do before Keytruda loses patent protection. All three have attracted investors looking beyond technology stocks, but their earnings and patent risks tell very different stories.
