Jefferies has initiated coverage on two of Europe’s leading peptide contract development and manufacturing organizations (CDMOs), taking diverging views on their outlooks.
The brokerage started Bachem Holding AG with an “underperform” rating and a price target of CHF49.3, while initiating PolyPeptide Group AG at “buy” with a price target of CHF38.7.
The contrasting calls flagging what Jefferies sees as a split in strategic positioning and execution risk in the rapidly expanding peptide manufacturing market.
Bachem, the largest peptide CDMO in Europe, is viewed by Jefferies as overly reliant on large-scale reactors and blockbuster metabolic products, particularly GLP-1 therapies, which dominate demand in the sector.
The brokerage noted that while the peptide CDMO market is expanding at double-digit rates, Bachem’s dependence on a few market-dominant customers could cap long-term potential.
“The format of the next wave of expansion is the primary debate around the name,” Jefferies said.
Competition adds another layer of uncertainty. Jefferies flagged capacity expansion in Asia and continued in-house manufacturing by large customers as potential threats to Bachem’s revenue base once existing contracts expire, raising the risk of oversupply similar to past trends in biologics CDMOs. Financing also remains a challenge.
Building K, a critical project for meeting fiscal 2026 guidance, is funded through securities sales, debt and prepayments.
Meanwhile, Sisslerfeld, a CHF1 billion greenfield project, has yet to secure an anchor customer, and Jefferies said its internal rate of return falls below company targets.
In contrast, Jefferies views PolyPeptide as undervalued and well-positioned to benefit from industry shifts.
The company, which has faced share underperformance since its 2021 IPO due to lost COVID-related business and missed guidance, is described as having a flexible manufacturing model centered on smaller reactors.
This approach, Jefferies argued, supports diversification across clients and products, reducing reliance on a handful of large contracts.
The brokerage noted that PolyPeptide has invested in scaling its commercial capabilities and that its modular strategy offers resilience in meeting demand.
Jefferies’ analysis suggests the market is pricing in mid-term sales growth for PolyPeptide materially below company guidance.
The company has targeted a doubling of 2023 revenues by fiscal 2028, equating to a compound annual growth rate of about 17.4%.
Jefferies’ forecast of 18.1% is closely aligned, but the brokerage argued that investors remain skeptical despite 100% of projected revenues already contracted.
Source :
https://www.investing.com/news/stock-market-news/jefferies-bullish-on-polypeptide-bearish-on-bachem-amid-strategy-split-4255415
