Investing.com – Bernstein analysts are optimistic about Europe’s pharmaceutical sector as it heads into 2025, despite concerns about policy changes and market resistance.
The firm identified three main reasons for the positive outlook in this week’s note
Solid growth prospects: Bernstein forecasts 8% EPS compound annual growth rate (CAGR) from 2025 to 2030, excluding Novo Nordisk ( NYSE 🙂 ).
This growth is said to be driven by “broad unmet needs, demographics and a proven ability to innovate pharmaceuticals” – factors that allow companies to effectively manage healthcare costs.
According to the firm, the sector’s ability to continue to deliver innovation alongside acute medical needs positions it for strong long-term growth.
Persuasive assessment: “We believe the sector’s strong fundamentals are being misvalued by the low 20s discount to the global market,” Bernstein said.
As the market begins to recognize the true value of European pharmaceutical companies, Bernstein anticipates a potential re-rating that could lead to future upside. Analysts also note that the sector’s defensive characteristics make it attractive in uncertain times, particularly the ongoing macroeconomic challenges.
Strong Money Generation: According to the firm, the EU pharmaceutical sector is known for its “well-proven capital allocation track record”.
Bernstein expects strong cash flows that will allow companies to fund productive R&D and maintain strong dividend growth.
They add that this financial strength gives companies the flexibility to pursue “disciplined/niche M&A” to improve further growth prospects.
Additionally, Bernstein highlights key factors that could support a sector re-rating, including stability in US drug prices, better pipeline performance and potential reform of US pharmacy benefit managers (PBMs).