Pharma’s ‘also-rans’ will struggle to stand out

Many European pharma executives have something in common with Olympic athletes. As this summer’s Paris games will prove, being an “also-ran” can be brutal. Sponsors love winners, even if other competitors have compelling stories. In the pharma sector, investors’ approach is no different.

The market’s obsession with weight loss treatments has reached such heights that pharmaceutical groups focused on other therapeutic areas — or which are late to the obesity game — are struggling for attention. There is a near 60 per cent valuation gap between Danish weight loss drugs group Novo Nordisk and the other main European pharmaceuticals companies, based on 2025 earnings estimates.

“We are in a bit of [an obesity drugs] fad at the moment,” said Stuart Harris, research director at Cavendish. The “also-rans” haven’t always helped themselves. Companies such as Sanofi and Roche need to impress with progress on their drug pipelines if they are to attract even a slither of attention.

There were encouraging signs from second-quarter results. Sanofi said last week it was no longer expecting a decline in earnings per share this year, following strong sales of its blockbuster asthma and eczema drug Dupixent. Crucially, though, the results were also promising for more recent launches including Altuviiio, a drug used to manage bleeding in haemophilia A patients.

Chief executive Paul Hudson has prepared the market for lower earnings as he boosts research and development to address concerns the group is too dependent on Dupixent. Investors are encouraged: Sanofi is expecting 12 phase late-stage data readouts in 2024-25. The shares have gained 6 per cent year to date but more positive trial results will be needed to drive further improvement.

Roche also raised its annual sales and earnings forecast after newer medicines such as eye treatment Vabysmo helped lift first-half group sales 5 per cent, excluding currency effects. But Roche has suffered high-profile, late-stage failures in recent years, notably in Alzheimer’s treatments. Boss Thomas Schinecker will showcase its wares in September. One easier win might be a focus on cost-cutting: Citi expects “significant” cost-efficiencies to be announced.

Schinecker is, though, pursuing obesity medicines after acquiring early-stage assets through a $3.1bn deal for California’s Carmot Therapeutics. The Swiss group’s market value rose more than $16.5bn in one day in July when it released encouraging top line results from a trial into its anti-obesity pill — even though it was only early stage. Still, Roche has only gained 5.5 per cent in the past 12 months.

The also-rans still have to sprint harder to be worthy of a podium place.

nathalie.thomas@ft.com