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AstraZeneca, GSK and more weathered Q2’s economic headwinds, but Roche’s stock took a hit: analysts

Blaming the “supply chain” has almost become a punch line—the go-to excuse for explaining any negative performance.

But these days it’s among a legitimate set of interrelated economic headwinds that include the Ukraine War, COVID lockdowns in China, inflation and the resulting rise in operational costs. Some companies—especially in Europe—are warning investors of these effects.

With second quarter earnings reports due in the coming weeks, AstraZeneca and GSK appear to have survived the outside challenges more successfully than most, according to a European Big Pharma report from ODDO BHF analysts. But not so much for Roche.

Measuring companies by their change in market value, AZ and GSK each closed the second quarter 7% up from where they started, while Roche fell by 13%, the team pointed out.

Overall in Europe, the pharma sector was less susceptible to the headwinds than other industries, ODDO said. While companies in the Stoxx Europe 600 were down 10.5% overall, those in Stoxx HealthCare were down by 5%.

Further, the analysts also see positive effects for Sanofi and Novo Nordisk through the foreign exchange market.

Over the last few months, numerous companies have warned of the headwinds facing the industry. In March, executives from Bayer, GSK and other companies focused on the effects inflation were having on their profit margins.

In May, Merck KGaA warned investors that “increased volatility and uncertainty” could lead it to alter its projections for the 2022 fiscal year.

Then two weeks ago, when UCB said that headwinds had forced the company to reduce its profit margin guidance for the year from 26-27% to 21-22%, it sent a rumble through markets.

But in its discussions with pharma executives overall, ODDO said that it isn’t hearing similar doom and gloom.

“While UCB sounded the alert on the deterioration in the macroeconomic context, we have not detected an alarmist tone from companies ahead of the Q2 results,” ODDO wrote.

As for the immediate future, ODDO said it is looking at GSK’s reorganization, expecting an IPO for its consumer business Haleon on July 18, allowing the “new GSK” to focus on specialty pharma. Then it will be Novartis’ turn to deal with its generics unit Sandoz—with either a sale, spinoff or decision to retain the group.

“We think that the European pharma universe should therefore continue to play its defensive role in a complicated macroeconomic environment, still favoring AstraZeneca and Sanofi,” the analysts wrote.