Jefferies has reduced its rating on Gerresheimer to Hold and lowered the target price to c26.80 from c34.10, saying the revision reflects "delayed results and persistent market overhangs." The same broker maintained a Hold rating on Schott Pharma, leaving both leading European primary packaging companies on the cautious side amid weak end-market conditions and limited visibility.
The downgrade is driven in large part by concern over execution risk associated with Gerresheimers acquisition of Bormioli Pharma. While the transaction was presented as strategically and financially accretive, Jefferies analysts point to operational setbacks in scaling capacity across the combined portfolio that have cast doubt on the companys ability to meet previously stated targets.
Christopher Richardson and his team warned that expected synergies could take longer and cost more to realize than originally anticipated. The analysts said this could make the deal dilutive to Gerresheimers valuation multiple - particularly in a scenario where end-market demand remains subdued.
In addition to execution concerns, Jefferies highlighted repeated delays in publishing financial results as a separate headwind. Those timing issues have weighed on investor sentiment at a time when management uncertainty is already placing pressure on the shares.
To account for the deteriorating outlook, Jefferies increased the discount applied to its sum-of-the-parts valuation to 45%, saying this level "justifies a discount to peers and the market as a whole."
Despite the near-term challenges, the analysts still view the longer-term structural thesis for injectable packaging as intact. Jefferies noted that roughly 75% to 80% of drug approvals are biologics and that the industry continues to migrate from vials toward pre-filled syringes and cartridges.
However, the firm also observed that volumes have normalized after a surge of approvals in 2023. As a result, the focus for investors has shifted away from approval-driven volume growth to factors such as product mix, format migration and the companies operational execution.
Within that context, Jefferies assessed Schott as being better positioned to benefit from a shift toward higher-value solutions. Gerresheimer, by contrast, was seen as more exposed to weakness in bulk primary packaging, with IQVIA data indicating market growth of only around 1% to 2% in fiscal 2025.
Implications
- Jefferies downgrade and lower target on Gerresheimer reflect heightened execution and reporting risks.
- Both Gerresheimer and Schott remain on Hold amid more cautious expectations for primary packaging demand and visibility.
- The longer-term structural trend toward biologics and pre-filled formats remains, but near-term performance hinges on mix and operational delivery.