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巴克莱-美股-医疗保健行业-美国生命科学与诊断:巴克莱医疗大会的5大工具与诊断要点-318-35页.pdf
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巴克莱-美股-医疗保健行业-美国生命科学与诊断:巴克莱医疗大会的5大工具与诊断要点-318-35页.pdf
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Equity Research
18 March 2019
CORE
Barclays Capital Inc. and/or one of its affiliates does and seeks to do business with
companies covered in its research reports. As a result, investors should be aware that the
firm may have a conflict of interest that could affect the objectivity of this report. Investors
should consider this report as only a single factor in making their investment decision.
PLEASE SEE ANALYST CERTIFICATION(S) AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 30.
Restricted
- Internal
U.S. Life Science Tools & Diagnostics
Top 5 Tools & Dx Takeaways from
the Barclays Healthcare Conference
We think there were several important takeaways for our Life Science Tools &
Diagnostics coverage from the Barclays Global Healthcare Conference:
1) Biopharma end market commentary remains robust, and we came away bullish
on read-throughs for Thermo Fisher and the CROs. We believe commentary from
across the Life Science Tools, CRO & CDMO sub-sectors all aligns around the health of
the biopharma market environment. Looking at audience sentiment, investors are
expecting M-HSD growth for the CROs over the next 3 years. We view this as realistic,
and potentially conservative, given the funding environment and maturing backlogs.
2) Geographic commentary was positive on China for Life Science Tools investment,
though more cautious around the outlook in Europe. Management teams believe
market fundamentals in China are durable even as GDP growth slows. We believe the
Life Science Tools have benefitted from China’s national ambitions in the country’s
5-Year Plan, which includes a focus on life science research, expanded access to
healthcare for the country’s population, and resolving long-term societal issues.
Commentary screened as more bullish than audience response sentiment, with 55% of
respondents across companies expressing uncertainty. Compared to China, Life
Sciences Tools commentary regarding Europe was more tempered. As background,
PMIs across a number of countries in Europe have moderated to <50 in recent months,
which would represent a contractionary signal. Relative to strong market conditions in
the Americas and in China, management teams were broadly cautious on Europe.
3) LabCorp and Quest were debating several topics which were in focus for
investors: A) the status of national payor network shifts, B) the potential for a broader
PAMA impact to Medicaid rates, and C) the status of any opt-out clause with Florida
Blue. Ultimately, we view these as relatively discrete outcomes – and one of the labs will
be proven right on each topic. In addition to a challenging operating environment,
we think the labs are being penalized for not having consistent answers on these
topics. The national labs now trade at 13.5x NTM EPS, a 2.6x discount to the S&P 500.
4) Investors continue to view internal investment as the best use of capital –
representing 45% of overall weighted average responses. Beyond that, there was a
strong preference for M&A (35%) – especially amongst Life Science Tools (43%).
5) New product commentary confirms our view that there is a significant level of
innovation taking place across our coverage, supporting the durability of growth.
Jack’s Job Board: Quidel (QDEL) has recently posted openings for 8 Triage Field
Specialists – which we view as a bullish sign ahead of the upcoming toxicology launch.
The company expects FDA approval within the next 30 days for a 2Q19 launch.
Actions: We raise price targets on presenting companies with biopharma services
exposure – TMO ($300, up from $295) and the CROs: CRL ($145, from $135), ICLR
($148, up from $140), IQV ($167, up from $160) and LH ($173, up from $165).
Additionally, we raise our PT on Quidel given optimism around the upcoming
toxicology launch ($77, up from $74).
INDUSTRY UPDATE
U.S. Life Science Tools & Diagnostics
NEUTRAL
Unchanged
For a full list of our ratings, price target and
earnings changes in this report, please see
table on page 2.
U.S. Life Science Tools & Diagnostics
Jack Meehan, CFA
+1 212 526 3909
jack.meehan@barclays.com
BCI, US
Mitchell Petersen
+1 212 526 3367
mitchell.petersen@barclays.com
BCI, US
Andrew Wald
+1 212 526 9436
andrew.wald@barclays.com
BCI, US
Barclays | U.S. Life Science Tools & Diagnostics
18 March 2019 2
Summary of our Ratings, Price Targets and Earnings Changes in this Report (all changes are shown in bold)
Company
Rating
Price
Price Target
EPS FY1 (E)
EPS FY2 (E)
Old
New
14-Mar-19
Old
New
%Chg
Old
New
%Chg
Old
New
%Chg
U.S. Life Science Tools & Diagnostics
Neu
Neu
Charles River Laboratories (CRL)
EW
EW
140.99
135.00
145.00
7
6.35
6.35
-
7.00
7.00
-
ICON plc (ICLR)
EW
EW
132.23
140.00
148.00
6
6.80
6.80
-
7.65
7.65
-
IQVIA (IQV)
OW
OW
140.98
160.00
167.00
4
6.30
6.30
-
7.25
7.25
-
Laboratory Corp. of America Hldgs. (LH)
OW
OW
152.82
165.00
173.00
5
11.20
11.20
-
11.80
11.80
-
Quidel Corp. (QDEL)
OW
OW
67.34
74.00
77.00
4
2.90
2.90
-
3.45
3.45
-
Thermo Fisher Scientific, Inc. (TMO)
OW
OW
261.43
295.00
300.00
2
12.15
12.15
-
13.75
13.75
-
Source: Barclays Research. Share prices and target prices are shown in the primary listing currency and EPS estimates are shown in the reporting currency.
FY1(E): Current fiscal year estimates by Barclays Research. FY2(E): Next fiscal year estimates by Barclays Research.
Stock Rating: OW: Overweight; EW: Equal Weight; UW: Underweight; RS: Rating Suspended
Industry View: Pos: Positive; Neu: Neutral; Neg: Negative
Barclays | U.S. Life Science Tools & Diagnostics
18 March 2019 3
TABLE OF CONTENTS
INTRODUCTION ................................................................................................. 4
Links to Conference Recaps ........................................................................................................................ 4
Actions: Raise PTs on CRL, ICLR, IQV, LH, QDEL & TMO .................................................................... 4
1) BIOPHARMA END MARKET ROBUST AS FUNDING FUELING
GROWTH ............................................................................................................. 6
Audience Response: Looking for CRO Revenue Acceleration from M-HSD Growth .................. 7
2) GEOGRAPHIC COMMENTARY POSITIVE ON CHINA, CAUTIOUS
ON EUROPE ......................................................................................................... 9
Audience Response: China Commentary More Bullish than Sentiment ...................................... 13
3) LAB DEBATES BREW ON PAYOR SHIFTS, PAMA AND FLORIDA
BLUE .................................................................................................................... 14
A) National Payor Share Shifts: Quick Move, or Longer Tail? ......................................................... 15
B) PAMA: Will Medicaid Follow-on to Medicare Cuts? ..................................................................... 16
C) Florida Blue: Is There an Opt-Out Clause or Not? ......................................................................... 16
4) CAPITAL DEPLOYMENT: BEYOND INTERNAL INVESTMENT, M&A
A FOCUS FOR THE AUDIENCE ..................................................................... 18
5) INTERNAL INVESTMENT YIELDING STEADY CADENCE OF NEW
INNOVATION .................................................................................................... 19
Jack’s Job Board: Quidel (QDEL) - Investing Ahead of the Triage Toxicology Launch ............. 20
Barclays | U.S. Life Science Tools & Diagnostics
18 March 2019 4
INTRODUCTION
Thank you to all of the investors and companies which participated in the conference,
including Life Science Tools: BRKR, ILMN, MTD, PKI, RGEN, TECH, & TMO; Diagnostics:
EXAS, HOLX, LMNX, OXFD, QDEL, & QGEN; and Labs/CROs/CDMOs: CTLT, CRL, DGX,
ICLR, IQV, & LH.
Links to Conference Recaps
3/11/2019, Conference Feedback: LabCorp (LH) Dinner
3/12/2019, Conference Feedback: IQVIA (IQV) Breakfast
3/12/2019, Conference Feedback: LabCorp (LH)
3/12/2019, Conference Feedback: ICON (ICLR)
3/12/2019, Conference Feedback: IQVIA (IQV)
3/12/2019, Conference Feedback: Quest Diagnostics (DGX)
3/12/2019, Conference Feedback: PerkinElmer (PKI)
3/13/2019, Conference Feedback: Thermo Fisher (TMO)
3/13/2019, Conference Feedback: Charles River Laboratories (CRL)
3/13/2019, Conference Feedback: Thermo Fisher (TMO) Lunch,
3/13/2019, Conference Feedback: Illumina (ILMN)
3/13/2019, Conference Feedback: Mettler Toledo (MTD),
3/13/2019, Conference Feedback: Hologic (HOLX),
3/14/2019, Conference Feedback: Quidel (QDEL),
3/14/2019, Conference Feedback: Bruker (BRKR)
Actions: Raise PTs on CRL, ICLR, IQV, LH, QDEL & TMO
We raise price targets on presenting companies with biopharma services exposure –
Thermo Fisher and the CROs: CRL, ICLR, IQV and LH. As discussed in our first takeaway,
biopharma end market commentary was very strong, and improves our conviction in the
durability of end market growth. For the CROs, we raise our target multiples for CRL, ICLR
and IQV by 1x given full exposure to the end market, and LH by 0.5x given relative mix of
CRO business. For Thermo Fisher, the biopharma end market represents 40% of revenue –
of which roughly half is exposed to biopharma services and bioproduction. Given the ability
to leverage unused capacity with healthy incremental margins, we raise our target multiple
for Thermo Fisher by 0.5x as well.
Charles River (CRL): We raise our PT to $145 (from $135). This represents 13.5x our
2020 EBITDA estimate of $647mm. Our prior $135 PT represented a 12.5x multiple.
ICON (ICLR): We raise our PT to $148 (from $140). This represents 14.5x our 2020
EBITDA estimate of $549mm. Our prior $140 PT represented a 13.5x multiple.
IQVIA (IQV): We raise our PT to $167 (from $160). This represents 23x our 2020 cash
EPS estimate of $7.25. Our prior $160 PT represented a 22x multiple.
Please see our report from
3/5/19, “Top 10 Tools & Dx
Debates for the Barclays
Healthcare Conference.”
Barclays | U.S. Life Science Tools & Diagnostics
18 March 2019 5
LabCorp (LH): We raise our PT to $173 (from $165). This represents 14.5x our 2020 EPS
forecast of $11.80. Our prior $165 PT represented a 14x multiple.
Thermo Fisher (TMO): We raise our PT to $300 (from $295). This represents 22x our
2020 EPS estimate of $13.75. Our prior $295 PT represented a 21.5x multiple.
We also raise our PT on Quidel given optimism around the upcoming toxicology launch.
Additionally, we have increased comfort around our 1Q19 estimates given the late flu
season. We raise our PT to $77 (from $74). This represents 22.5x our 2020 cash EPS
estimate of $3.45. Our prior $74 PT represented a 21.5x multiple.
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