UBS Analysts Shake Up European Drugmaker Ratings

UBS analysts have made significant changes to their ratings of European drugmakers, including a double-downgrade of AstraZeneca and a double-upgrade of its UK rival, GSK.

AstraZeneca Downgraded to Sell, GSK Upgraded to Buy

In a surprising move, UBS downgraded its ratings on AstraZeneca (AZN) to sell from buy. Meanwhile, it upgraded GSK (GSK) to buy from sell. This shift reflects the analysts' changing perspectives on the two companies.

Upgrades and Downgrades Across the Board

UBS also made other changes to its ratings. It upgraded Novartis (NOVN) and Sanofi (SAN) to buy from neutral, as well as Novo Nordisk (NOVO.B) to neutral from sell. These adjustments are part of the analysts' effort to reassess the European drugmaker landscape.

Sector Valuations and Concerns

According to UBS analysts led by Matthew Weston, most sector valuations are reasonable, except for Novo Nordisk. The Danish drugmaker is trading at 13.8 times projected 2024 earnings, which is viewed as demanding.

When it comes to GSK, UBS forecasts strong sales of Shingrix, particularly boosted by a recent China deal. The analyst team is also more optimistic about Novartis' cancer, chronic spontaneous urticaria, and multiple sclerosis drugs compared to consensus. However, they express concerns about AstraZeneca's exposure to Medicare Part D reform, particularly in regards to its oral oncology portfolio.

Evaluating Novo Nordisk

While analysts can justify the current levels of Novo Nordisk based on growth and earnings momentum, they struggle to extend the valuation further to justify a more positive stance.

Market Reaction

Following these rating changes, AstraZeneca shares slumped by 3% in London. Other pharmaceutical stocks experienced more limited movements.