Barclays announced on Thursday it has lowered its recommendation on Sandoz to Equal Weight from Overweight, saying recent share-price strength has diminished the potential for further multiple expansion in the near term despite a favorable medium- to long-term outlook for the Swiss drugmaker.
The bank pointed to a steep rally in Sandoz shares, which have risen roughly 25% year to date and about 80% over the past 12 months, while noting that reported earnings momentum has been only modest. Barclays observes the stock now changes hands at approximately 20 times projected 2027 earnings, a valuation the analysts say already embeds much of the company’s medium-term growth trajectory.
James Gordon and his team reiterated their positive view on the underlying market opportunity for biosimilars, describing the structural case as attractive. Barclays expects high-single-digit EPS growth stretching into the 2030s and noted an absence of an imminent patent cliff for the business.
Despite those fundamentals, the firm concluded there is "little room for further re-rating near term," driving the shift to an Equal Weight rating. At the same time, Barclays increased its 12-month price objective to 75 Swiss francs from 70, but emphasized that the implied upside of less than 5% no longer supports an Overweight recommendation.
On the forecast side, Barclays maintained a constructive medium-term view. The bank projects a 6% compound annual growth rate in sales from 2027 to 2031, attributing this to accelerating biosimilar uptake and steady performance in EU generics. It also models roughly 8% annual growth in EBITDA over that period, supported by product mix improvement and operating leverage.
Nearer term, however, Barclays trimmed its EPS estimates slightly and signaled slower-than-previously-expected margin expansion. The analysts also said Sandoz’s fiscal 2026 guidance appears broadly in line with consensus expectations. The bank is not building in any significant contribution from a potential generics semaglutide opportunity before 2027.
Barclays said the recent multiple expansion can be traced to several market dynamics: growing investor recognition of Sandoz’s long-term growth profile, increased disclosure around a next wave of biosimilar launches beginning in 2028, and improving sentiment toward U.S. biosimilars. The bank noted that a return to a more bullish rating would likely require clearer long-term upgrades, further pipeline transparency, or meaningful deal-making that accelerates growth beyond current forecasts.
Context for investors
- Valuation: Stock trading around 20x 2027 earnings, seen as pricing in medium-term growth.
- Outlook: Barclays still models HSD EPS growth into the 2030s and forecasts 6% sales CAGR for 2027-2031.
- Near-term drivers: Slight EPS downgrades and slower margin gains limit upside in the immediate term.