Leading bank backs European pharma as the cleaner alternative to the AI trade

UBS has reiterated its overweight stance connected European pharmaceuticals, framing the assemblage arsenic a much resilient location for superior than artificial quality astatine a constituent erstwhile the wider marketplace is slowing.

The slope argued that the concern lawsuit present rests connected much than antiaircraft quality.

It pointed to improving net revisions, debased comparative valuations and lighter ownership aft the assemblage became a root of funds earlier this year.

European pharma has risen much than 5% since mid-June, making it the best-performing assemblage implicit that period.

UBS described the displacement arsenic the "what if not AI" commercialized with amended timing.

The slope said AI enablers remained charismatic but were becoming much two-sided, arsenic data-centre execution and carnal bottlenecks could dilatory the gait of further upgrades.

Weight-loss drugs are the strongest near-term catalyst, according to the note.

The GLP-1 theme, which covers treatments specified arsenic Novo Nordisk's (NYSE:NVO) Wegovy, present tops UBS's ranking of concern themes successful some the United States and Europe.

The slope flagged the commencement of Medicare sum connected 1 July arsenic the adjacent trial of demand, with patients paying $50 a period and the US authorities covering the balance.

It rated Novo Nordisk (NYSE:NVO) arsenic a tactical alternatively than structural opportunity, citing a 2027 US terms reset and the group's dense reliance connected semaglutide.

UBS said investors should organise banal enactment astir the industry's looming patent cliff, which it expects to deed US drugmakers hardest successful 2028 to 2030 and European groups successful 2030 to 2033.

The slope favours what it calls patent-light compounders, naming Merck KGaA, whose beingness sciences limb supplies cause manufacturing inputs, and Galderma, the injectable aesthetics group.

Among larger companies, it prefers AstraZeneca PLC (LSE:AZN, NASDAQ:AZN) and Roche, some of which person pipeline readouts owed earlier the extremity of the year.

UBS was much cautious connected Novartis, citing a astir $26 cardinal patent cliff from 2029, and connected Sanofi, which it said lacked a wide catalyst.

On AI, the slope said the astir investable usage cases were mundane, covering income targeting, proceedings recruitment and regulatory filings alternatively than cause discovery.