Investing.com -- UBS downgraded Roche to "neutral" from "buy" on Monday after the Swiss drugmaker's shares rose more than 50% over the past 12 months, saying the stock's valuation now reflects the potential of its breast cancer drug giredestrant.
UBS raised its price target on Roche participation certificates to CHF420 from CHF376, and on bearer shares to CHF440 from CHF396.
The certificates were priced at CHF402.80 on Oct. 30, the top of their 52-week range of CHF258.90 to CHF402.80, and the bearer shares at CHF411.20. UBS said the bearer shares carry full voting rights but are less liquid than the certificates.
Roche trades at 18.8 times expected 2027 earnings, a 40% premium to the 13.4 times for large European drugmakers, UBS said.
It called the premium justified by Roche's more modest patent risk and giredestrant's potential to drive profitable growth, but said that after the share gain, higher premiums look more challenging.
UBS also said consensus forecasts have broadly caught up with its view of the drug.
UBS forecasts giredestrant peak sales of $8.4 billion on a probability-adjusted basis and $9.8 billion unadjusted. It sees upside to consensus 2028 sales because a $600 million exit rate in the second half of 2027 supports more than $2 billion in 2028 franchise sales.
Roche's 2027 launch will include about six months of sampling and patient bridge programs while U.S. insurance coverage builds, and the company has committed to disclosing patient numbers within free drug programs in 2027. PDUFA dates for giredestrant are Nov. 30 for lidERA and Dec. 18 for evERA.
UBS said recent competitor data could pressure Roche's core products. Genmab and AbbVie's Epkinly showed a 51% relative risk reduction in progression-free survival in a first-line DLBCL trial in October, which UBS said could gradually pressure Polivy and raise the bar for Roche's SKYGLO data due in 2027.
Novartis' remibrutinib in relapsing multiple sclerosis and Kodiak's Zenkuda+KS-501 in wet AMD could weigh on Ocrevus and Vabysmo. UBS called the risks moderate and cut its 2026-31 core EPS forecasts by an average 1.6%.
For 2026, UBS estimates core earnings per share of CHF20.6 versus consensus of CHF20.4, and group sales of CHF63.10 billion versus CHF62.66 billion. Company guidance is for mid-single-digit sales growth and high-single-digit core EPS growth.
UBS forecasts Roche will generate more than CHF32 billion of excess free cash flow over the next five years, with potential for more than CHF50 billion in balance sheet firepower for acquisitions.
UBS expects the company could look to add to immunology and potentially reinforce oncology.
UBS sees Alzheimer's drug trontinemab as the next major catalyst, due in the first half of 2028. Its top stock picks are AstraZeneca in European pharma and Galderma in Swiss pharma.
Original Article
UBS sees Roche giredestrant potential priced in after 50% share rally
European shares flat as markets weigh France's outlook cut; earnings in focus
