LONDON (dpa-AFX) - In an initial assessment, British investment bank HSBC is mostly optimistic about companies in the global pharmaceuticals sector. Crucial to their profits, it said, are three things: Innovation, patent expirations and the regulatory environment. Under these aspects, analyst Rajesh Kumar gives 14 of 19 companies a buy recommendation in a sector study published on Friday.

Among them are the Darmstadt representative Merck, but also foreign industry giants such as Pfizer, Sanofi, Novo Nordisk, Astrazeneca, Novartis and Roche. In addition, there is also the industry shooting star Biontech, known for its Corona vaccine.

The industry faces numerous challenges, according to the expert. His thesis: The loss of exclusivity due to the market entry of generic drugs and the regulation of drug prices are likely to make takeovers or licensing agreements more interesting again as a use of capital. However, the pool of opportunities available for this is shrinking. Companies with strong balance sheets, limited generic competition and a strong research and development culture could perform comparatively better. In a high-yield environment, he says, success and low valuations are the foundation for value creation.

Kumar fans out his buy votes: Astrazeneca, Novo Nordisk, Eli Lilly and Genmab are four recommendations because of their quality - with products in strong end markets, proven potential through strong clinical trial data and diversified portfolios, he says. Pfizer is a group with value potential, he said, and in Sanofi and Novartis he praised the potential for self-optimization.

Roche, Merck KGaA and Lonza belong to the category of "fallen angels", i.e. former investor darlings. They were able to regain their former glory after short-term problems had recently weighed on investor sentiment. At Merck, for example, the waning Covid tailwind distracted investors from the Darmstadt-based company's fundamental growth story. However, with many biologically produced active ingredient candidates in its research pipeline, the DAX-listed company should be right on track, Kumar said.

There are only four negative assessments with "Reduce" from the expert, including in addition to Bristol-Myers Squibb, GSK and the Biontech competitor Moderna also for Bayer. In the Leverkusen-based group, many investors see a candidate for a positive turnaround due to low valuation and a cyclical recovery in the agricultural sector. However, the expert remains concerned about the ongoing glyphosate litigation, the financial situation and the "worn-out product portfolio."

HSBC rates such shares as "Buy" with a price target more than 20 percent above the current price. Conversely, shares whose price target is more than 20 percent below the current price are rated "Reduce." In the areas in between, the rating can also be "Hold," but with this vote, the U.S. group Merck & Co is alone./tih/tav/jha/

Analyzing institute HSBC.

Publication of the original study: 13.07.2023 / 16:24 / GMT First circulation of the original study: 14.07.2023 / 02:18 / GMT