Pharma Stocks Re-Rated at Credit Suisse – Roche, GSK Upgraded, Novartis Downgraded

By Sam Boughedda

Credit Suisse’s European Pharma team upgraded shares of Roche (OTC:) and GlaxoSmithKline (NYSE:) in a note on Thursday and downgraded Novartis (NYSE:) to Underperform.

On Roche, they upgraded the stock to Outperform from Neutral and increased the price target to CHF375 from CHF330, stating they believe the “key ‘hidden’ attraction of Roche is its 6.0% underlying sales growth and 9.5% underlying EBITA growth CAGR to 2027E.”

“Roche scores highest amongst EU Majors, driven by its strong position on portfolio uniqueness (pricing power) and its broad strength including NPV valuation and pipeline replacement power,” they added.

Credit Suisse downgraded Novartis to Underperform from Neutral and lowered the price target to CHF78 from CHF88. The analysts said that as Novartis enters a period of multiple LOEs and limited pipeline catalysts, they see a more significant opportunity for growth amongst other EU major peers.

“Novartis scores poorly in PharmaValues 2023 Strategic Conclusions, ranking second-last amongst EU Majors for branded pharma growth due to its high generic risk exposure and worst sales growth to 2025E versus its EU Major peers,” Credit Suisse explained.

They upgraded GSK to Neutral from Underperform and cut the price target to 1,430p from 1,630p.

“Our target price now includes an assumption of $5bn base case Zantac liability costs. GSK scores in the middle of the pack on PharmaValues 2023 which uses the Credit Suisse proprietary NPV database to analyse EU Major and Specialty Pharma across valuation and six strategic metrics which we believe underpin a company’s mid-term prospects. GSK scores well on Valuation and Generic Risk, which also benefits growth,” explained the Credit Suisse analyst.

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