Sentiment towards life sciences tools and diagnostics firms in North America is turning positive after an agreement between the Trump Administration and Pfizer Inc (NYSE:PFE, ETR:PFE) has significantly eased the uncertainty around Most Favored Nation (MFN) tariffs on pharmaceuticals and related products, Citi analysts have highlighted.
Under the deal announced late last month, Pfizer agreed to lower drug prices for Medicaid, sell discounted medicines directly to Americans, make significant investments in the US, and avoid tariffs for three years.
These measures reduce a major overhang for investors, supporting a more constructive outlook and strengthening the reshoring narrative for the sector over the next several years.
Within life sciences tools, Citi continues to favor routine laboratory instrumentation and bioprocessing names, citing stable demand and strong growth in production-related tools, with companies such as Agilent Technologies Inc (NYSE:A) and Danaher Corporation (NYSE:DHR) highlighted as beneficiaries.
The analysts remain more cautious on high-end academic instrumentation providers like Bruker and Illumina Inc (NASDAQ:ILMN, ETR:ILU), which are more sensitive to academic funding cycles and may face cyclical headwinds.
Citi sees a negative outlook for Contract Research Organizations (CROs) as near-term business-to-business demand is expected to remain pressured, and 2026 consensus estimates are considered high.
Specialty diagnostics remain an attractive space, with potential upside highlighted for Exact Sciences (NASDAQ:EXAS) and Guardant Health Inc (NASDAQ:GH), driven by innovation and growth in targeted testing.
Routine diagnostics are more uncertain, leading Citi to downgrade Quidel to ‘Neutral,’ partly because ongoing debate and overhang related to China continue to cloud the outlook.
“Going into this earnings cycle, we come in more constructive on the space as the Pfizer agreement legitimizes the reshoring bull case over the next few years,” Citi concluded.