巴克莱-美股-制药业-美国专业制药行业深度研究-6-714页.pdf
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Equity Research
10 June 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 346.
Restricted - Internal
U.S. Specialty Pharmaceuticals
O Fortuna velut Luna: Initiating on U.S. Specialty
We launch coverage of U.S. Specialty Pharmaceuticals with a Neutral industry view,
covering 20 companies (11 OWs) including Specialty, Generics and Animal Health.
After a somewhat remarkable rise, the US Specialty Generics sector has had a torrid
time in the last four years, with fundamentals deteriorating, legal risks expanding
and weak market sentiment. From our coverage, 10 companies have lost a total of
$300B+ in market cap (~80%+ from mid-2015 levels). So, relying on value as a
strong investment argument is tempting at current valuations, with a few other
stocks at 5- to 20-year lows. We say resist the temptation. We place importance
upon cash flows and companies’ ability to manage leverage and improve balance
sheets. Hence, our valuation methodologies give priority to innovation, cash
generation, sustainability, and return metrics.
In our U.S. Specialty subset of 17 companies, we highlight JAZZ, BHC, CHRS: We are
unlikely to see the return of pricing as a lever for both Specialty and Generics in the near
term. That said, we do see a strong growth outlook for differentiated and innovative
Specialty products and in Biosimilars, where we expect a 15-fold rise in the next 7 years.
Thus, we are OW on mix of developmental and commercial stage companies with
unique products & segments: JAZZ, BHC, CHRS, RVNC, FOMX, PCRX, AMAG and OSMT
(with this report, we transfer coverage of BHC and OSMT). We are EW on LGND, UW on
AGN and EOLS. In Generics, despite deceleration in Gx deflation and compelling
valuations, we are highly selective, preferring growth visibility; balanced global exposure
and limited regulatory risk. Hence, we are OW on MYL, EW on AMRX, ENDP, RDY &
MNK, and UW on TEVA. Though managements have commented on Gx stabilization,
we believe a difficult payer landscape and potential legal risks will delay future cash
flow generation and recovery.
We are OW on ZTS and KIN in the US Animal Health sector on solid megatrends: The
sector offers revenue and earnings growth led primarily by positive megatrends in pet
care. Our positive outlook is based on a continuously improving basket of products,
including highly profitable Biologics that address unmet pet needs, regulations and capex
that are less demanding, and global exposure. We are OW on ZTS and KIN, and UW on
PAHC due to issues affecting the livestock industry and weak margin outlook.
Risks to Thesis and Valuation: With stocks at 1-2 standard deviations below mean,
valuations look undemanding. We believe there is still potential for significant downside
and multiple risks that may pose a challenge to projected cash flows, including specialty
competitive dynamics, worsening pricing outlook. competition in Generics, rigid payer
landscape, and legal risks around Opioids and Generics price fixing charges. What
would make us more constructive? Resolution of legal and regulatory risks. Upside
risks to our views come from improvement in business quality in Specialty and
Generics, normalized pricing environment for Generics, pipeline progress in Specialty,
and rapid economic growth for animal health.
INITIATING COVERAGE
U.S. Specialty Pharmaceuticals
NEUTRAL
from N/A
For a full list of our ratings, price target and
earnings changes in this report, please see
table on page 2.
U.S. Specialty Pharmaceuticals
Balaji Prasad, MD
+1 212 526 4160
balaji.prasad@barclays.com
BCI, US
Stephen Ragard, CFA
+1 212 526 5080
stephen.ragard@barclays.com
BCI, US
Ann-Hunter Van Kirk
+1 212 526 2279
Ann-Hunter.VanKi[email protected]m
BCI, US
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