UBS downgraded Galenica to "sell" from "neutral" with a price target of CHF86, sending shares down over 5%. The Swiss healthcare company's valuation discounts growth and margin assumptions well above analysts' forecasts, with current share pricing implying optimistic scenarios that may not materialize.

The downgrade reflects concern about Switzerland's anticipated liberalization of OTC drug shipment rules by FY29. This change could introduce 20-25% discounts on OTC products, directly impacting approximately 15% of Galenica's stationary retail revenues. The company trades at a 29% premium to European healthcare distribution peers.

UBS projects group revenues rising to CHF4.66 billion in FY28 before falling 3.4% in FY29. The bank's upside case of CHF119 assumes limited OTC impact, while the downside case of CHF61 implies a 40% drop. Galenica reports FY25 results March 10, with UBS expecting no catalyst from the release.