On Monday, CFRA initiated coverage on Roche (OTC: RHHBY (OTC:RHHBY)) shares with a Hold rating and a price target of $40.00. The firm's decision reflects a valuation pegged to 14 times their projected 2025 earnings per ADS, aligning with Roche's historical averages.
The pharmaceutical giant is currently restructuring its R&D pipeline following a series of unsuccessful late-stage clinical trials, the most recent being the SKYSCRAPER-01 lung cancer study that did not meet its primary goal.
Roche's strategic shift focuses on eleven disease areas, including obesity, to stimulate future growth. This move into the obesity market represents a potential new growth avenue for Roche, albeit in a competitive landscape where several other companies are also making entries.
The firm's analysis suggests that in the face of stiff competition, Roche's growth will be supported by a combination of new pharmaceutical products, sustained performance in the Diagnostics segment, and cost management.
Despite challenges posed by competitors in the biosimilar space, CFRA expects that Roche's growth and margins will be maintained through a balance of new product introductions and a robust base business in Diagnostics.
The firm forecasts earnings per ADS of CHF2.31 for 2024, with an anticipated increase to CHF2.50 for 2025. These projections are set against the backdrop of Roche's efforts to mitigate the impact of biosimilar competition and leverage its pipeline developments to secure its market position.
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