Jefferies' 2017 Global Pharma Outlook

Expressing concern related to the weakening pharma sector fundamentals and adverse macro environment, Jefferies' Jeffrey Holford mentioned in a report that the sector already reflects these concerns to some extent following the recent derating.

Some of the most anticipated studies had failed in 2016, Holford noted, adding that 2017 still offered a few important R&D catalysts. He added that a political overhang (the “most significant risk” being the potential dual eligible rebate reform), increased pressure from PBMs (pharmacy benefit manager) on U.S. pricing and forex headwinds could exert pressure on stocks, especially if the U.S. dollar continued to strengthen.

“Whilst the sector looks relatively cheap vs. major markets, near term growth remains poor for many companies,” Holford wrote.

Top Picks

The analyst named AbbVie Inc ABBV, AstraZeneca plc AZN, Novartis AG (ADR) NVS and Eli Lilly and Co LLY as the top picks in the Pharma sector, terming them as “the cheaper growth names.” He further stated AbbVie and Eli Lilly and were most preferred in the United States, while AstraZeneca and Novartis were most preferred in Europe.

Rating Changes

Holford upgraded the ratings on Bayer AG (ADR) BAYRY and Bristol-Myers Squibb Co BMY from Hold to Buy. The price target were raised to €115 and $69, respectively.

The analyst downgraded the rating on Merck & Co., Inc. MRK from Hold to Underperform, while reducing the price target to $48.

Price Target Changes

The other price target changes at Jefferies were:

• Abbott Laboratories ABT: Rated Buy, PT down to $46.
• AstraZeneca plc: Rated Buy, PT reduced to 5,400p.
• GlaxoSmithKline plc (ADR) GSK: Rated Buy, PT cut to 1,700p.
• Johnson & Johnson JNJ: Rated Hold, PT reduced to $107.
• Novo Nordisk A/S (ADR) NVO: Rated Hold, PT raised to DKK240.
• Pfizer Inc. PFE: Rated Hold, PT lowered to $30.
• Zoetis Inc ZTS:Rated Buy, PT down to $62.