3 reasons Bernstein strategists are bullish on the EU pharma sector into 2025 By Investing.com

Investing.com – Bernstein analysts are bullish on the European pharmaceutical sector as it heads into 2025, despite concerns about policy changes and market headwinds.

The company outlined its three main reasons for the positive outlook in a note this week

Stable growth prospects. Bernstein forecasts an 8% EPS compound annual growth rate (CAGR) from 2025 to 2030, excluding Novo Nordisk (NYSE: ).

This growth is said to be driven by “overall unmet need, demographics and a proven ability to innovate in pharmaceuticals” that allow companies to effectively manage healthcare costs.

The industry’s ability to continue to deliver innovation while addressing urgent medical needs positions it for strong long-term growth, according to the company.

Mandatory evaluation. “We believe the industry’s robust fundamentals are being misjudged at current low-20s discounts in the global market,” Bernstein said.

As the market begins to recognize the true value of European pharmaceutical companies, Bernstein expects a potential revaluation that could turn around in the future. Analysts also note that defensive characteristics make the sector attractive in uncertain times, especially amid ongoing macroeconomic challenges.

Strong cash generation. The EU pharmaceutical sector is known for its “well-proven track record of capital allocation”, according to the company.

Bernstein expects strong cash flow that will enable companies to fund efficient research and development while maintaining strong dividend growth.

They add that this financial strength gives companies the flexibility to pursue “disciplined/marked M&A” to further increase their growth prospects.

In addition, Bernstein highlights key drivers that could fuel the industry’s revaluation, including stability in US drug pricing, better pipeline performance and potential reform of US Pharmacy Benefit Managers (PBMs).