Sell AstraZeneca, says UBS, which upgrades European rivals including GSK

By Steve Goldstein

UBS analysts shook up their ratings of European drugmakers, including making a double-downgrade of AstraZeneca and a double-upgrade of U.K. rival GSK.

UBS took its ratings on AstraZeneca (UK:AZN) (AZN) to sell from buy, while it upgraded GSK (UK:GSK) (GSK)to buy from sell. It also upped Novartis (CH:NOVN) (NVS) and Sanofi (FR:SAN) (SNY) to buy from neutral, and Novo Nordisk (DK:NOVO.B) (NVS) to neutral from sell.

Analysts led by Matthew Weston say sector valuations are not demanding excluding weight-loss drug maker Novo Nordisk, trading at 13.8 times projected 2024 earnings ex the Danish drugmaker.

On GSK, it forecasts Shingrix sales significantly ahead of consensus, buoyed by a recent China deal. UBS also is more positive on Novartis cancer, chronic spontaneous urticaria and MS drugs than consensus. It is worried about AstraZeneca's exposure to Medicare Part D reform, particularly its oral oncology portfolio.

On Novo Nordisk, "while we can justify current levels based on growth and earnings momentum, we struggle to stretch the valuation further to justify a more positive stance," the analysts said.

AstraZeneca shares slumped 3% in London, while the other pharma stocks saw limited moves.

-Steve Goldstein

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01-16-24 0534ET

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