RBC Downgrades Sandoz#

RBC Capital Markets has downgraded Sandoz Group AG from "outperform" to "sector perform." This change comes after the Swiss drugmaker's shares increased by 60% over the past year, bringing the stock close to what analysts consider its fair value.

Analyst Insights#

Analyst Natalia Webster has adjusted her price target for Sandoz from CHF 53 to CHF 65. However, this new target suggests only a 7% increase from the current stock price of CHF 60.80. Sandoz is currently trading at 19 times the estimated earnings for 2026, which is 11% higher than the average for its peers in the generics market.

Webster noted, "With a quieter period of biosimilar loss-of-exclusivity (LOEs) expected in 2026 and 2027, we see limited upside to near-term consensus forecasts."

Sales and Earnings Projections#

RBC forecasts that Sandoz's sales will grow from $11.09 billion in 2025 to $12.06 billion in 2026. The core earnings before interest, taxes, depreciation, and amortization (EBITDA) margin is expected to rise from 21.7% to 22.8%. Additionally, core earnings per share (EPS) is projected to increase to $4.07 in 2026 and reach $5.06 by 2028.

Biosimilars and Generics Outlook#

Biosimilars, which generated $3.29 billion in net sales in 2025, account for 30% of Sandoz's total revenue. This segment is expected to grow by 20.5% in 2026 but will slow down significantly to 7.4% in 2027. RBC anticipates that biosimilars will return to double-digit growth only in 2029, following the loss of exclusivity for Merck’s Keytruda in 2028.

On the other hand, generics, which make up 70% of net sales, may face challenges in early 2026, potentially impacting revenue growth for the year.

Financial Health#

Free cash flow is expected to decline to $472.8 million in 2026 from $810 million in 2025 due to significant investments in new biologics manufacturing facilities. However, it is projected to rebound to $1.76 billion in 2027. At the end of 2025, Sandoz's net debt was $3.96 billion, and it is expected to decrease to 0.5 times EBITDA by 2028 as cash flow improves.

Sandoz, which became an independent company after being spun out of Novartis in 2023, is developing 32 biosimilar medicines targeting over $200 billion in sales from reference medicines.