Galderma: L’Oreal Doubling Down, Risk-Reward Looks Skewed To The Downside (OTCMKTS:GALDY)

Galderma: L'Oreal Is Doubling Down, But The Risk-Reward Looks Skewed To The Downside Summary L’Oréal (OR) is doubling its stake in Galderma to 20%, capitalizing on a strong market cap increase since its initial investment. A large portion of future earnings expectations is tied to Nemluvio, a drug with limited observed efficacy, versus placebo, and clearly stated safety risks. Reverse valuation shows that today’s price implies long-term growth rates that leave little margin for clinical, or regulatory disappointment. Despite a wide moat in aesthetics and prescription dermatology, reputational and credit risks are being underestimated by the market. The overall balance of valuation, growth assumptions, and product risk points to a downside-skewed risk-reward profile. We initiate with Sell. Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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