RBC Capital Markets has reclassified Sandoz Group AG from an "outperform" rating to "sector perform," arguing that the Swiss drugmaker's recent share surge has left limited room for further gains. The stock has climbed roughly 60% over the past 12 months and is now trading near what RBC describes as fair value.
Analyst Natalia Webster raised her price target on Sandoz to CHF 65, up from CHF 53. However, Webster noted that the revised target provides only modest upside - about 7% - relative to the stock's current trading level of CHF 60.80. RBC highlights that Sandoz's 2026 estimated earnings multiple stands at 19x, which represents an 11% premium to the generics peer weighted average.
Near-term growth outlook
Webster flagged a near-term lull in biosimilar loss-of-exclusivity (LOE) events over 2026 and 2027 as a reason for constrained upside to consensus forecasts. "With a quieter period of biosimilar LOEs over 2026/27, we see limited upside to near-term consensus forecasts," Webster said.
RBC's projections forecast group sales expanding to $12.06 billion in 2026 from $11.09 billion in 2025, with core EBITDA margin rising to 22.8% from 21.7%. The firm models core earnings per share of $4.07 in 2026, increasing to $5.06 by 2028.
Segment dynamics - biosimilars and generics
Biosimilars were a key growth driver in 2025, generating $3.29 billion in net sales and representing roughly 30% of group revenues, achievement that RBC notes arrived three years ahead of schedule. The bank forecasts the biosimilars segment to expand by 20.5% in 2026 but to slow materially to 7.4% in 2027. RBC expects biosimilar sales to return to double-digit growth only in 2029, after the anticipated U.S. loss of exclusivity for Merck's Keytruda in 2028.
Generics remain the larger portion of the business, accounting for about 70% of net sales. RBC cautions that Sandoz's penicillin business-to-business operations could face headwinds in early 2026, estimating that this may subtract up to three percentage points from first-quarter generics performance and push full-year 2026 growth to be weighted toward the back half of the year.
Cash flow, capital spending and leverage
RBC projects free cash flow to decline to $472.8 million in 2026 from $810 million in 2025, driven by elevated capital expenditure of $1.04 billion tied to new biologics manufacturing facilities. The firm expects free cash flow to recover to $1.76 billion in 2027 as investments normalize and cash generation improves.
On net debt, Sandoz ended 2025 with $3.96 billion, equivalent to 1.6x EBITDA. RBC's forecasts show leverage falling to 0.5x by 2028 as cash generation is projected to strengthen.
Valuation framework and scenarios
RBC's discounted cash flow analysis, which applies an 8% cost of equity and a 2.5% terminal growth rate, underpins the CHF 65 price target. The research note outlines a downside scenario in which weak biosimilar growth and deterioration in U.S. generics pricing would reduce the fair value to CHF 50. Conversely, an upside scenario that assumes a 19% compound annual growth rate in biosimilars through 2028 produces a valuation of CHF 80.
Corporate background
Sandoz, which was spun out of Novartis in 2023, currently has 32 biosimilar medicines in development that target more than $200 billion in reference medicine sales.
RBC's downgrade reflects a view that recent share gains have captured much of Sandoz's near-term fundamentals, leaving a relatively narrow margin for upside absent renewed momentum in biosimilars or improvements in U.S. generics pricing.