UBS downgrades Galderma to “neutral” on valuation concerns, softer aesthetics

Investing.com -- UBS has downgraded Galderma Group AG (SIX:GALD) to “neutral” from “buy,” citing limited upside following strong share price performance, in a note dated Monday. 

The decision reflects a more cautious stance on the injectable aesthetics segment and concerns over a demanding valuation. 

The 12-month price target was cut to CHF120 from CHF128, primarily due to foreign exchange effects.

The UBS 2Q25 U.S. Aesthetics Survey, which polled 61 practitioners, showed ongoing strength in neuromodulators but flagged a downturn in other categories. 

Neuromodulator growth is projected at 7.1% over the next six months, slightly down from 7.7% in December 2024. 

Fillers are expected to contract by -0.5%, compared to prior expectations of 6.2% growth, while biostimulators are forecast to grow 3.6%, down from 6.9%. 

The survey also found a rise in promotional activity, with 25% of respondents reporting increased discounting and marketing efforts.

UBS expects Galderma’s second quarter results to reflect these trends, with a slowdown in neuromodulators and a partial recovery in fillers. 

The company’s 1Q25 injectable aesthetics growth of 9.9% constant exchange rate (CER) was driven by a 21.4% rise in neuromodulators, while fillers and biostimulators declined 2.3%. A normalization is anticipated in 2Q25 as U.S. neuromodulator stocking effects reverse.

Despite strong early results for Nemluvio, UBS maintained its peak sales forecast at $3 billion. 

U.S. prescriptions grew over 110% sequentially in 2Q, but UBS models only 70% sales growth due to declining units per prescription and increased rebates, particularly in atopic dermatitis. UBS estimates 2Q25 Nemluvio sales 18% above consensus and FY25 sales 25% ahead.

Galderma’s valuation was flagged as a concern. The company trades at 25.6x 2026E EV/EBITDA and 20.6x excluding Nemluvio, representing a 73% and 36% premium, respectively, over Swiss therapeutic peers Straumann and Alcon (NYSE:ALC). 

UBS continues to use a sum-of-the-parts methodology, valuing the base business at 20x 2026E EV/EBITDA and assigning Nemluvio a standalone net present value.

In financial terms, Galderma is forecast to report revenues of $4.91 billion in 2025, rising to $5.66 billion in 2026. UBS projects core EBITDA of $1.10 billion for 2025, with a margin of 22.6%, and net earnings of $615 million. 

EPS is expected to reach $2.59 in 2025 and $3.88 in 2026. Net debt is projected to fall from $2.31 billion in 2024 to $1.99 billion in 2025.