Brokerage firm Goldman Sachs has downgraded shares of Gland Pharma to “sell” from its earlier rating of “buy”.

The brokerage has also cut its price target by 27% to ₹1,500 from ₹2,075 earlier. In fact, Goldman Sachs’ price target is exactly the IPO price of Gland Pharma when it made its street debut in 2020.

Goldman Sachs is anticipating Gland Pharma’s profitability to face headwinds. It has highlighted five factors as to why it believes so. Here are the five factors:

• Increasing dependence on lower-margin legacy products for growth
• Pricing pressure and rising competition in key products in the US market
• Potential delays to higher margin new launches
• Slower-than-expected turnaround at Cenexi and
• Higher investments needed for newer forays of the company.

As a result, Goldman Sachs has cut its Earnings Per Share (EPS) estimate for Gland Pharma by 17% to 20% over financial year 2025 to 2027 along with a cut of 300 basis points to the company’s core business margins.

At 28 times 12-months forward price-to-earnings multiple, Goldman Sachs finds Gland Pharma’s current valuation to be expensive, as compared to a 20 times multiple for Gland Pharma key injectable peers.

Goldman Sachs had initiated coverage on Gland Pharma with a “buy” rating and a price target of ₹2,830 in 2022 but has consistently cut its price target expectations on the stock.

Gland Pharma had seen a revival in its share price recently having declined to an all-time low of ₹893 in May 2023. The stock made a high of ₹2,220 in August this year but is currently down 17% from those levels as of Thursday’s closing.

The 17% correction from its peak has resulted in Gland Pharma’s shares giving up all the gains for the year and is currently down 5% on a year-to-date basis.