The biopharmaceutical sector is anticipating second-quarter earnings growth as the global pandemic recovery gathers momentum. At the same time, near-term profit gains appear slower than anticipated and a controversial Alzheimer's drug is raising eyebrows.

Estimated second-quarter EPS are expected to rise year over year for most of the largest pharmaceutical and biotechnology companies, according to analysts' consensus, with only Amgen Inc. and AstraZeneca PLC anticipated to fall and Merck & Co. Inc. showing no change from the same quarter a year ago.

In terms of overall revenue, analysts expect all the largest companies in the sector to outsell the year-ago quarter, except the U.K.'s GlaxoSmithKline PLC, which recently fended off demands from an activist investor.

Expectations for quarter-to-quarter estimates are more mixed. Cantor Fitzgerald pharmaceutical analyst Louise Chen said in an earnings preview call that the pandemic's effect on healthcare operations would likely drag earnings even as the recovery gains steam.

"For our current companies, it looks like we're still recovering from the impact of COVID-19 in oncology and [medical] devices, and a full recovery may take until the second half of 2021 and vary by geographies," Chen said. "The Street may not be fully attuned to this, and you might be somewhat surprised at some of the headwind that you're going to see in the second quarter."

Vaccines remain a dominant force in earnings potential. Companies such as Pfizer Inc. and Moderna Inc. are benefiting from realized profits on their authorized immunizations, while Johnson & Johnson — the largest healthcare company globally by market capitalization — awaits full regulatory approval for its vaccine before making any revenue from the shot.

For Pfizer, in particular, Chen noted that the COVID-19 vaccine program is underappreciated with high durability and the potential for booster shots in the future, as well as new contracts with government agencies.

"We could see tens of billions of dollars for COVID vaccines for the foreseeable future [at] Pfizer," Chen said. "They can make 2.5 million doses this year, 3 billion or more next year, and it would take them 100 days to create a booster for variants."

When it came to fellow COVID-19 vaccine manufacturer AstraZeneca, whose shot has been approved in Europe but not the U.S., Cowen analyst Steve Scala was more bullish than consensus, citing new products in the company's pipeline and durable revenue from the purchase of maker of rare-disease drugmaker Alexion Pharmaceuticals Inc.

Alzheimer's debate center stage

On the biotech side, Cantor Fitzgerald analyst Alethia Young pointed to Biogen Inc. as the most compelling second-quarter earnings readout, particularly after the controversial approval of its Alzheimer's disease drug Aduhelm in June. Due to questions about the drug's effectiveness and which patients are best suited to treatment, some of the largest U.S. healthcare providers, including Mount Sinai Health System and the Cleveland Clinic, have refused to carry Aduhelm, raising more questions about the drug's — and Biogen's — future.

"What matters for Biogen is going to be, especially after all this negative press, how are things going with the potential users of the drug and also the payers," Young said. "I would expect patient demand is high, but it's really going to come down, for Biogen, to what they say and how they position the argument."

Executives at Biogen will likely be measured in their comments on the company's July 22 earnings call, RBC Capital analyst Brian Abrahams told S&P Global Market Intelligence in an interview.

"I'm not sure there's much that they would be able to do to ease tensions, and I imagine they're going to say many of the same things they've said before: that they're going to be working closely with [the Centers for Medicare and Medicaid Services] on ensuring access and value, which can be translated as substantial price discounts there and elsewhere."

Following in the wake of Biogen's Alzheimer's approval are Lilly and Roche Holding AG, each with a similar treatment in development, although Abrahams pointed to the uncertainty surrounding Aduhelm as a reason for caution around those stocks. Like Biogen, both companies are depending on their drugs' ability to reduce beta-amyloid plaques in the brain, which are thought to worsen symptoms of memory loss associated with the disease.

"It seems like both Lilly and possibly Roche could file based on some of the beta-amyloid reductions they've observed, but whether or not they have a path to approval is, I think, still somewhat unclear," Abrahams said.