RBC Initiates European Pharma Coverage, Names Roche and AstraZeneca Top Picks

RBC Capital Markets has initiated coverage on five of Europe's largest pharmaceutical companies, designating Roche and AstraZeneca as its preferred stocks with 'Outperform' ratings. The bank started Novartis, GSK, and Sanofi with more cautious 'Sector Perform' ratings, according to a new report from analysts led by Trung Huynh.

Outperform Ratings for Roche and AstraZeneca

RBC assigned Roche a price target of 400 Swiss francs, citing momentum in its base business and a drug pipeline with "deeper potential than Street models." Analysts highlighted the breast cancer drug giredestrant, projecting a $14 billion peak-sales opportunity, significantly above the consensus estimate of $9.3 billion. They described Roche as a "quality compounder" with growth visibility beyond 2030 and limited pressure from loss of exclusivity (LOE).

AstraZeneca was given a price target of 14,500 pence, with RBC calling it "the most compelling risk/reward" in its European pharma coverage. The analysts believe the stock has been "overly punished" by recent clinical trial setbacks, pushing its price-to-earnings multiple to a 10-year low of 14 times. RBC anticipates a "swift re-rating" once uncertainty around late-stage trial results is resolved, allowing the market to refocus on its strong growth outlook.

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Cautious Stance on Peers

RBC began coverage of three other sector giants with a 'Sector Perform' rating, signaling a more neutral view.

• Novartis: With a 120 Swiss franc price target, analysts noted that recent pipeline failures have "dampened momentum and highlight clinical execution risk." RBC forecasts sales growth of 4.8%, below the company's 5-6% guidance, and estimates a $13 billion drag from patent expiries by 2030.
• GSK: The firm set a 1,975 pence target, acknowledging improved fundamentals but stating that the stock's current price already reflects these gains. RBC sees competition in the HIV market and an approaching patent cliff as factors limiting near-term upside.
• Sanofi: Assigned an 80 euro target, RBC views the stock as a "'show-me' story requiring tangible progress before re-rating." The bank pointed to recent pipeline failures and a lack of near-term catalysts as reasons for its caution.