Nomura bearish on European pharmaceuticals

With rich valuations driven by cyclical rotation towards all defensives, Nomura pharmaceutical analyst Amit Roy has reinforced his 12-month bearish outlook for European Union pharma as the industry continues to struggle with a lack of alternatives to replace lost revenues with growth drivers like emerging markets (EM) slowing down post M&A, new products failing to penetrate their respective markets and ongoing pipeline failures.

Pipeline cracks need a long-term fix, says the analyst, telling investors “don’t buy now at the top.”

He says that, as recently highlighted by the Nomura strategy team, he sees the possibility of a reversal rotation back to cyclicals from defensives, given the high level of uncertainty around the actual impact on 2012 net income from major patent expiries this year as well as 2012E sector earnings growth of only 0.9%