Investing.com – Bernstein analysts are optimistic about the European pharmaceutical sector heading into 2025, despite concerns about policy changes and market headwinds.
The company outlined the three main reasons for the positive outlook in a note this week
Strong growth prospects: Bernstein expects a compound annual growth rate of earnings per share (CAGR) of 8% from 2025 to 2030, excluding Novo Nordisk (NYSE:).
This growth is said to be driven by “broad unmet needs, demographics, and the proven ability of medicines to innovate” – factors that allow companies to effectively manage healthcare spending.
The sector's ability to continue delivering innovation while meeting pressing medical needs positions it for strong long-term growth, according to the company
Persuasive evaluation: “We believe the sector's strong fundamentals are mispriced at the current low 20-point discount to the global market,” Bernstein said.
As the market begins to realize the true value of European pharmaceutical companies, Bernstein expects a potential rerating that could drive future upside. Analysts also point out that the sector's defensive characteristics make it attractive in turbulent times, especially with persistent macroeconomic challenges.
Strong cash generation: The EU pharmaceutical sector is known for its “proven track record in capital allocation,” according to the company.
Bernstein expects to generate strong cash flows that will enable companies to fund production research and development while maintaining strong earnings growth.
This financial strength gives companies the flexibility to pursue “disciplined/specialized M&A” to further enhance their growth prospects, they add.
Additionally, Bernstein highlights key drivers that could catalyze a re-rating of the sector, including stabilization in US drug prices, improved pipeline execution, and potential reform of US pharmacy benefit managers (PBMs).
