3 reasons why Bernstein strategists are optimistic about the pharmaceutical sector in the EU until 2025 By Investing.com
Investing.com — Bernstein analysts are optimistic about Europe’s pharmaceutical sector heading into 2025, despite concerns about policy changes and market headwinds.
The company outlined its three key reasons for the positive outlook in a note this week
Good prospects for growth: Bernstein forecasts 8% annualized EPS growth rate (CAGR) from 2025 to 2030, excluding Novo Nordisk (NYSE: ).
This growth is said to be driven by “broad unmet needs, demographics and pharma’s proven ability to innovate”—factors that enable companies to effectively manage healthcare spending.
The sector’s ability to continue to deliver innovation while addressing urgent medical needs positions it for strong long-term growth, according to the company
Convincing assessment: “We believe the sector’s solid fundamentals are mispriced at the current low 20s discount to the global market,” Bernstein said.
As the market begins to recognize the true value of European pharmaceutical companies, Bernstein foresees a potential re-rating that could push the future for the better. Analysts also note that the sector’s defensive characteristics make it attractive in uncertain times, particularly with ongoing macroeconomic challenges.
Powerful money making: The pharmaceutical sector in the EU is known for its “well-proven track record of capital deployment”, according to the company.
Bernstein expects strong cash flow generation to enable companies to fund productive R&D while maintaining strong dividend growth.
They add that this financial strength gives companies the flexibility to make “disciplined/niche M&A” to further improve their growth prospects.
Additionally, Bernstein highlights key drivers that could trigger a sector rating change, including US drug price stability, better process execution and potential US Pharmacy Benefit Managers (PBM) reform.
