(Exane) Large Pharma : Discount Inferno : 2017 Re-mix

The price of drugs in the US remains one of the most controversial issues in the sector. For the third year, we present our discount analysis, which shows the wide gulf between US gross and net sales, exceeding 55% in some cases (AstraZeneca, Novo, Sanofi).

Discount risk is best offset by a differentiated portfolio sold through channels less susceptible to discounting. Roche
and Shire do particularly well here, supporting our Outperform ratings.

We also provide our views on the future direction of rebate levels based on our proprietary Exane 4D analysis.
Companies best positioned to resist incremental rebate pressure in future are Shire, AZN, GSK and PFE. Higher rebate and salesforce spend at Novartis, combined with a deteriorating 4D outlook, reinforces our Underperform.

See full note attached

>>> What to look at today -29th of March 2017

Dow +0.73% S&P +0.73% Nasdaq +0.60% Russell +0.73%
US Market closed higher bouncing from support tested yesterday on the 50d MA (2,333).  financial sector (+1.4%) took the reigns in today's session, recouping a sizable portion of last Tuesday's plunge. The group has come to symbolize the post-election rally after leading the charge with a 26.0% gain from November 8 to January 3. Financials' cyclical peers followed suit with the industrials (+1.1%) materials (+1.1%), and energy (+1.3%) sectors outpacing the broader market. Energy tracked WTI that closed higher by 1.4% @ $48.37. Utilities underperformed. US After Hours RH +16%, VRNT +7% higher following earnings, VRTX +18% surges on Ph 3 data... PLAY -4%, SONC -1% following earnings/guidance. Asian equity markets are modestly higher, tracking more pronounced bullish sentiment that followed a swift turnaround from the initial losses of the prior session. Investors continue to shrug the political stumbles of the Trump administration and focusing on improving US economic data - particularly the 16-year high in Consumer Confidence. Financials did particularly well as interest rates rose across the curve, while Gold came in back below 1,250 after a recent run. GBP/USD fell 80pips from the highs to 1.2380 as PM May signed the letter invoking Article 50. Economic calendar was once again light, limited to lower than expected growth in Japan retail sales for Feb. Recall Japan consumption was flat in Q4, and it remains to be seen whether Capex growth can sustain the economy.

Nikkei -0.02% Hang Seng +0.13% CSI +0.32% Shanghai +0.21%

Eur$ 1.0812 CNH 6.8732 CNY 6.8913 JPY 111.12 GBP 1.2404 CHF 0.9922 RUB$57.0370 WTI$ 48.61 (+0.50%)

S&P +0.12% EuroStoxx +0.27% Dax +0.12% FTSE +0.30% SMI +0.43%

Macro :
- EU Warns Trump Against Weakening Privacy Pact: Handelsblatt
- Risks Skewed to the Upside for Europe Banks, Goldman Says
- Italy Bank Ests. Raised at Exane on Euribor; UBI, BAMI Favored

Keep an eye on :
- AKZA NA : Akzo Investors Holding Total 24.6% Stake Call For PPG Talks: FT
- AR4 GY : Aurelius Says Gotham’s Allegations Unfounded, Steps Up Buybacks
- BACA AV : Bank Austria Turns to Loss After CEE Spin-Off, Pension Deal
- BCVN SW : Vaudoise FY Non-Life Premiums Up 5.6%, Life Premiums Down 23.4%
- CTEC LN : Convatec Holders To Sell 19.95% Stake to Novo, Place 300m Shares upsized to 375m, shoudl price @ 260p
- DBK GY : Deutsche Bank Raised by S&P on Retroactive Change in German Law
- DBK GY : Deutsche Bank Said to Consider New Home Lending for Settlement
- EDF FP : EDF Says EU4B Share Sale is Successful, Oversubscribed
- EKTAB SS : Elekta Repays Convertible Bond, Enters New Financing Agreements
- ERSC FP : Eurosic FY Net More Than Doubles; Co. Confident About 2017
- GENL LN : Genel Said to Consider Two Candidates to Replace Chair Hayward
- GBT FP : Guerbet Sees ‘Slight’ Growth in 2017 Excluding Currencies
- HEI GY : HeidelbergCement, Schwenk Deal May Be Blocked, Reuters Says
- ISAT LN : Mentionned as potential M&A candidate by RBC - Echostar/Dish mentionned as perfect strategic sens
- LXS GY : Lanxess CEO Says TTIP May Save EUR10m-20m/Year in Duties: NZZ
- MMB FP : Lagardere Denies It’s Seeking Partner For Relay Stores
- MOURY BB : Moury Construct Sees Decline in 2017 Rev., Plans Stable Dividend
- NOVN VX : Novartis’s Zortress Patent Ending in 2020 Is Invalid, Judge Says
- NOVOB DC : Convatec Holders To Sell 19.95% Stake to Novo, Place 300m Shares
- ORP FP : Orpea FY Net Income EU257.6m; Forecasts Higher 2017 Revenue
- PLT IM : Lactalis Could Adopt Sell-Out Mechanism in Parmalat Offer
- RIO LN : Rio Tinto Says Sees Further Volatility in Iron Ore Markets
- ROG VX : Roche Multiple Sclerosis Drug Wins FDA Approval
- SAN FP : Regeneron, Sanofi’s Dupilumab Wins FDA Approval
- SIE GY : Siemens Awarded Max. $4.13b Radiology Pact by U.S. Defense Dept.
- SIK VX : Burkard Family’s SWH Proposes Lower Sika Dividend Than Board
- SOLB BB : Wadia Group to Buy Solvay’s 25% Stake in National Peroxide: ET
- SAZ GY : Stada Says 4Q Adjusted Ebitda Climbed 2% to EU97.4m
- TIT IM : Telecom Italia Doesn’t See Reclassifying Vivendi Relationship
- UCG IM : UniCredit Ambitious Restructuring Delivery Is Key, Citi Says
- VIV FP : Telecom Italia Doesn’t See Reclassifying Vivendi Relationship
- VOW3 GY : Volkswagen Asks Shareholders to Ratify Board, Management Actions

>>> Europe : Brokers Upgrades & Downgrades - 29th of MArch 2017

>>> Up
*3i Raised to Overweight at Morgan Stanley, PT 823p
*Engie Raised to Overweight at JPMorgan
*Generali Raised to Neutral at Credit Suisse
*KPN Raised to Market Perform at Bernstein, PT EU2.85
*Nostrum Oil & Gas Raised to Outperform at Credit Suisse
*Tom Tailor Raised to Buy at Montega, PT EU10.50
*Valeo Raised to Outperform at Exane, PT EU70
*Wolseley Raised to Hold at Peel Hunt

>>> Down
*Akzo Nobel Cut to Equal-Weight at Morgan Stanley, PT EU77
*Bobst Cut to Hold at Mirabaud Securities, PT CHF86
*Helvetia Cut to Hold at Baader-Helvea, PT CHF560
*Leoni Cut to Neutral at MainFirst, PT EU50
*Merlin Cut to Hold at SocGen, PT EU11.60
*Metropole Television Cut to Neutral at MainFirst, PT EU22
*Plastic Omnium Cut to Neutral at Exane, PT EU34
*Scor Cut to Sell at Baader-Helvea, PT EU31
*TDC Cut to Neutral at Goldman, PT DKK41
*Uniper Cut to Neutral at Goldman
*Zurich Ins. Cut to Hold at Baader-Helvea, PT CHF290

>>> Price Target
*LVMH PT Raised from €200 to €210 at BArclays - reco unchanged

>>> Initiation
*Altria Reinstated Equal-Weight at Barclays, PT $74
*Hispania Activos Inmobiliarios SOCIMI Rated New Buy at SocGen
*Inmobiliaria Colonial Rated New Buy at SocGen, PT EU8.20
*Neste Re-initiated Buy at SEB Equities, PT EU44
*Stroeer Rated New Buy at HSBC, PT EU58
*Stroeer Rated New Overweight at Barclays, PT EU56

>>> Call

>>> Asian Update

Asia Mid-Session Market Update: Stocks build on overnight gains as US consumer confidence rises; China banks rally on earnings; Japan retail sales miss estimates

***US Session Highlights***
- (US) FEB ADVANCE GOODS TRADE BALANCE: -$64.8B V -$66.4BE (widest deficit in 22 months)
- (US) FEB PRELIMINARY WHOLESALE INVENTORIES M/M: 0.4% V 0.2%E; RETAIL INVENTORIES M/M: 0.4% V 0.8% PRIOR
- (US) JAN S&P / CASE-SHILLER 20-CITY M/M: 0.86% V 0.70%E; Y/Y: 5.73% V 5.60%E; HOUSE PRICE INDEX (HPI): 192.81 V 192.41 PRIOR
- (US) House Republican lawmakers reportedly seeking ways to force vote on full repeal of Obamacare through a discharge petition (would require 218 signatories)
- (US) MAR RICHMOND FED MANUFACTURING INDEX: 22 V 15E; Volume of new orders 26 v 24 prior
- (US) MAR CONSUMER CONFIDENCE: 125.6 V 114.0E (highest since Dec 2000)

***US markets on close: Dow +0.7%, S&P500 +0.7%, Nasdaq +0.6%***
- Best Sector in S&P500: Financials
- Worst Sector in S&P500: Healthcare
- Biggest gainers: DRI +9.3%, RHT +5.2%, CHK +4.5%, NBL +4.0%, MUR +3.9%
- Biggest losers: MCK -2.9%, NEM -2.7%, FTR -2.0%, EW -1.5%, EVHC -1.4%
- At the close: VIX 11.5 (-1.0 pts); Treasuries: 2-yr 1.30% (+3bps), 10-yr 2.41% (+4bps), 30-yr 3.01% (+3bps)

***US movers afterhours***
- VRTX: Two Phase 3 Studies of the Tezacaftor/Ivacaftor Combination Treatment Met Primary Endpoints with Statistically SignificantImprovements in Lung Function (FEV1) in People with Cystic Fibrosis; +18.2% afterhours
- RH: Reports Q4 $0.23 GAAP* v $0.05e, R$587M v $480Me; Guides Q1 $0.02-0.06 v +$0.56e, R$530-545M v $577Me; +15.8% afterhours
- RTTR: Announces Lactose Intolerance Treatment, RP-G28, Demonstrated Efficacy and Clinically Meaningful Benefit in Phase 2b/3 Clinical Trial; +15.4% afterhours
- VRNT: Reports Q4 $0.90 v $0.86e, R$299.5M v $294Me; Guides FY18: Rev $1.14B with a range of +/- 2%; +7.5% afterhours
- OLLI: Reports Q4 $0.39 v $0.35e, R$283.4M v $281Me; +1.1% afterhours
- SONC: Reports Q2 $0.15 v $0.15e, R$100.2M v $107Me; -1.8% afterhours
- DEPO: Announces cooperation agreement with Starboard Value; names Arthur Higgins as CEO; Guides Q1 Rev $95-100M v $113Me (2 est); -3.0% afterhours
- PLAY: Reports Q4 $0.63 v $0.58e, R$270.2M v $271Me; Q4 SSS 3.2% v 3.7%e; FY16 SSS 3.3% v 3.1-3.6% prior forecast; -4.4% afterhours

***Politics***
- (FR) Wife of French presidential candidate formally charged in fake jobs probe - French press

***Asia Key economic data:***
- (JP) JAPAN FEB RETAIL SALES M/M: 0.2% V 0.3%E; RETAIL TRADE Y/Y: 0.1% (4-month low) V 0.7%E
- (KR) South Korea Apr Business Manufacturing Survey: 82 v 81 prior; Non-Manufacturing Survey: 80 v 77 prior

***Asia Session Notable Observations, Speakers and Press***
- Asian equity markets are modestly higher, tracking more pronounced bullish sentiment that followed a swift turnaround from the initial losses of the prior session. Investors continue to shrug the political stumbles of the Trump administration and focusing on improving US economic data - particularly the 16-year high in Consumer Confidence. Financials did particularly well as interest rates rose across the curve, while Gold came in back below 1,250 after a recent run.
- In FX, USD majors were in more narrow ranges, particularly in Asian hours. The most notable pair was GBP/USD, which fell some 80pips from the highs to 1.2380 as PM May signed the letter invoking Article 50 that will start Brexit process. German press report indicated that German govt wants the talks to be completed within the 2-year time limit. Separately, USD/JPY pair remained supported above ¥111 and NZD/USD found buyers below $0.70.
- Economic calendar was once again light, limited to lower than expected growth in Japan retail sales for Feb. Recall Japan consumption was flat in Q4, and it remains to be seen whether Capex growth can sustain the economy.
- In China, AgBank and BoCom released their FY16 results overnight. BoCom profits topped consensus at CNY67.2B v CNY65.4Be and NPL raio was marginally higher at 1.52% v 1.51% y/y, sending shares up 1%. AgBank was up just under 1% as FY16 results saw Net rise CNY184B v CNY181By/y, Rev fall to CNY510B v CNY541B y/y, and NPLs improve to 2.37% v 2.39% y/y. Both S&P and Moody's reports on China also warned about the risks of potential property market adjustment following recent runup in prices as interest rates rise and PBoC manages liquidity.

China
- (CN) S&P: China debt overhand and property market adjustment, as well as US trade policies, among top Asia-Pacific risks
- (CN) Moody's: China economy faces heightened risks from potential future property downturn

Japan
- (JP) Japan LDP party panel proposes to develop long-range strike capability - press
- (JP) BOJ's Sato: Reforms needed to raise inflation expectations; central bank does not impact inflation expectations as much as traditionally expected - speaking at Yale

Korea
- (KR) South Korea Federation of Korean Industries (FKI): Business Survey Index (BSI) for Apr rises to 93.3 v 92.1 in Mar; 6-month high - Korean press
- (KR) South Korea Fin Min Yoo said to seek meeting with India - Korean press

***Asian Equity Indices/Futures (00:30ET)***
- Nikkei flat, Hang Seng +0.2%, Shanghai Composite +0.1%, ASX200 +0.9%, Kospi flat
- Equity Futures: S&P500 +0.1%; Nasdaq +0.2%; Dax +0.1%; FTSE100 +0.2%

***FX ranges/Commodities/Fixed Income (00:30ET)***
- EUR 1.0808-1.0826; JPY 111.03-111.33; AUD 0.7630-0.7660; NZD 0.6998-0.7018
- Apr Gold -0.6% at $1,248/oz; May Crude Oil +0.5% at $48.59/brl; May Copper -0.2% at $2.67/lb
- (US) Weekly API Oil Inventories: Crude: +1.9M v +4.5M prior (8th build in the past 10 weeks)
- SPDR Gold Trust ETF daily holdings fall 1.8 tonnes to 833.5 tonnes
- iShares Silver Trust ETF daily holdings fall to 10,377 tonnes from 10,342 tonnes prior
- (CN) PBoC skips open market operations for 4th straight session; Said to drain CNY70B v CNY70B prior
- (CN) PBOC SETS YUAN MID POINT AT 6.8915 V 6.8782 PRIOR; 2nd straight weaker setting; Weakest setting since Mar 21st
- (JP) BOJ lowers amount of 3-5-yr JGB in its daily operations to ¥380B from ¥400B
- (AU) Australia MoF (AOFM) sells A$800M in 2.75% 2027 Bonds; avg yield: 2.8096%; bid-to-cover: 3.55x

***Asia equities / Notables / movers by sector***
- Consumer discretionary: 305.HK Wuling Motors Holdings +1.4% (FY16 results); 210.HK Daphne International Holdings -3.7% (FY16 results); 489.HK Dongfeng Motor -1.5% (FY16 results); FXJ.AU Fairfax Media +0.9% (TPG may buy stake)
- Financials: 656.HK Fosun International +0.4% (FY16 results); 3333.HK Evergrande Real Estate Group +7.1% (FY16 results); 3328.HK BoCom +1.0%; 1288.HK AgBank +0.8% (FY16 results)
- Industrials: 1211.HK BYD Company -2.3%, 1133.HK Harbin Electric Co +1.7%, 285.HK BYD Electronic International -1.9%, 3898.HK Zhuzhou CSR Times Electric +1.0%, 1800.HK China Communications Construction -0.5% (FY16 results); 7012.JP Kawasaki Heavy Industries +2.9% (CLSA raises rating)
- Technology: 6502.JP Toshiba Corporation +0.7% (SK Hynix offers investment); 700.HK Tencent Holding +0.9% (investment in Tesla)
- Materials: 3983.HK China BlueChemical -0.4% (FY16 results); 347.HK Angang Steel +2.2%, 1618.HK Metallurgical Corporation of China +0.3% (FY16 results); EVN.AU Evolution -0.7%, RSG.AU Resolute Mining -1.1%, SBM.AU St Barbara -1.2% (Gold miners track North American peers lower)
- Energy: 1193.HK China Resources Gas Group -4.2% (FY16 results); 5019.JP Idemitsu Kosan Co +2.7% (founding family opposes merger)
- Healthcare: 2196.HK Shanghai Fosun Pharmaceutical Group -4.0% (FY16 results)
- Utilities: 1071.HK Huadian Power International Corp -0.9% (FY16 results)

>>> After Hours Summary: RH +16%, VRNT +7% higher following earning


After Hours Summary: RH +16%, VRNT +7% higher following earnings, VRTX +18% surges on Ph 3 data... PLAY -4%, SONC -1% following earnings/guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: RH +16.4%, VRNT +7.1%,

Companies trading higher in after hours in reaction to news: CERU +24.1% (pending merger partner Daré Bioscience discloses 20.7% active stake), ATHX +19.5% (initiated with Outperform at William Blair), VRTX +18.2% (confirms two Phase 3 Studies of the tezacaftor/ivacaftor combination treatment met primary endpoints with statistically significant improvements in lung function in people with cystic fibrosis), DRWI +14.8% (Harmony Enhanced MC backhaul solution was selected by Knoxville Utilities Board), IDXG +11.2% (sets earnings release date for March 29 after the stock market closes), DRYS +6% (continued strength), VIAV +5.7% and LITE +2.4% (AlphaOne Capital Partners' Daniel Niles mention on CNBC FastMoney), WSM +1% (RH sympathy)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: PTX -12.6%, CYCC -8.5%, OREX -7.1%, DEPO -4.4% (announces that Arthur J. Higgins has joined the Co as President and CEO following the resignation of James Schoeneck; guides Q1 net sales below consensus), PLAY -4.4%, SONC -1.2%

Companies trading lower in after hours in reaction to news: ALQA -15.2% (to offer and sell shares of common stock in an underwritten public offering),  AEZS -5.1% (commences new 'at-the-market' offering of up to 3 mln common shares), HPJ -5.1% (following today's notable move higher / close at HoD), CARB -3.8% (to offer $125 mln aggregate principal amount of Convertible Senior Notes due 2022 in a private offering), GRPN -2.8% (initiated with Underweight at Barclays)

>>> US Close Dow +0.73% S&P +0.73% Nasdaq +0.60% Russell +0.73%

Closing Market Summary: Bulls Dominate on Tuesday

Last Tuesday, the S&P 500 posted its worst day of 2017 in a performance that some believed to be the end of the stock market's post-election party. However, the cash market held its ground in the days that followed and the S&P 500 resisted yesterday's intraday dip below its 50-day moving average (2333), giving investors renewed confidence that there still may be some room to run. That hypothesis was validated today as the S&P 500 advanced 0.7%, benefiting from a steady rally throughout the day. The Dow and the Nasdaq also settled with solid gains, adding 0.7% and 0.6%, respectively.

The financial sector (+1.4%) took the reigns in today's session, recouping a sizable portion of last Tuesday's plunge. The group has come to symbolize the post-election rally after leading the charge with a 26.0% gain from November 8 to January 3. Financials' cyclical peers followed suit with the industrials (+1.1%) materials (+1.1%), and energy (+1.3%) sectors outpacing the broader market.

To be fair, the energy sector's performance was more of a response to crude oil's advance rather than the financial sector's leadership. The energy component settled 1.4% higher at $48.37/bbl after an armed group of individuals shut down pipelines in Libya due to a wage dispute.

On the countercyclical side, the health care sector (+0.1%) struggled after House Speaker Paul Ryan and Majority Leader Kevin McCarthy expressed the belief that it's still not too late to repeal and replace the Affordable Care Act. White House Press Secretary Sean Spicer followed up those comments by saying that discussions on health care reform are taking place, but there is no active planning at the present time.

Within the health care space, biotech stocks were hit the hardest as President Trump's promise to reduce drug prices resurfaced alongside health care reform. The iShares Nasdaq Biotechnology ETF (IBB 292.01, -1.13) settled lower by 0.4%.

The remaining defensive sectors also underperformed, with the rate-sensitive utilities group (+0.1%) showing relative weakness after selling pressure in the Treasury market left yields modestly higher; the benchmark 10-yr yield finished four basis points higher at 2.42%. 

In addition to Treasury yields, the U.S. Dollar Index (99.53, +0.50) also closed in the green, rising 0.5%, after Fed Vice Chair Stanley Fischer stated that he believes a forecast of two more rate hikes in 2017 is appropriate.

Investors received several economic reports on Tuesday, including March Consumer Confidence, February Advance International Trade in Goods, and January S&P Case-Shiller Home Price Index:

  • The consumer confidence reading for March rose to 125.6 from the prior month's revised reading of 116.1 (from 114.8). The consensus expected the survey to hit 113.3.
    • The key takeaway from this report is that consumers were emboldened by a positive view of current business and labor market conditions. There was an improvement in the short-term outlook for business, jobs, and personal income prospects, and more upside is expected on these fronts. Keep in mind that this survey was taken before the failure of health care reform.
  • The Advance report for International Trade in Goods for February showed a deficit of $64.8 billion (consensus -$66.1 billion), up from a revised deficit of $68.8 billion for January (from $69.2 billion). The Advance report for February Wholesale Inventories increased 0.4% (consensus 0.2%). The prior month's reading was revised to -0.2% from -0.1%.
  • The January Case-Shiller 20-city Index hit 5.7% to follow last month's revised 5.5% increase (from 5.6%). The consensus expected a reading of 5.6%.

On Wednesday, investors will receive the weekly MBA Mortgage Applications Index at 7:00 ET and February Pending Home Sales (consensus 2.4%) at 10:00 ET.

  • Nasdaq Composite +9.1% YTD
  • S&P 500 +5.4% YTD
  • Dow Jones Industrial Average +4.8% YTD
  • Russell 2000 +0.7% YTD

Reuters - SEC denies a second application to list bitcoin product

By Trevor Hunnicutt | NEW YORK
The U.S. Securities and Exchange Commission on Tuesday denied for the second time this month a request to bring to market a first-of-its-kind product tracking bitcoin, the digital currency.

The SEC announced in a filing its decision denying Intercontinental Exchange Inc's NYSE Arca exchange the ability to list and trade the SolidX Bitcoin Trust, an exchange-traded product (ETP) that would trade like a stock and track the digital asset's price. Previously, the regulatory agency said it had concerns with a similar proposal by investors Cameron Winklevoss and Tyler Winklevoss.

"The Commission believes that the significant markets for bitcoin are unregulated," the SEC said in its filing, echoing language from its decision earlier this month on the application by CBOE Holdings Inc's Bats exchange to list The Bitcoin ETF proposed by the Winklevoss brothers. On Friday, Bats asked the SEC to review its decision not to allow that fund to trade.

"We are reviewing the SEC's order and evaluating our next steps," said Daniel H. Gallancy, chief executive officer of SolidX Partners Inc, a U.S. technology company that provides blockchain services. NYSE did not immediately respond to a request for comment.

Bitcoin had scaled to a record of more than $1,300 this month, higher than the price of an ounce of gold, as investors speculated that an ETF holding the digital currency could woo more people into buying the asset.

But after denial of the Winklevoss-proposed ETF, the digital currency's price plunged as much as 18 percent. It has rebounded partially since then and was at $1,041 on Tuesday, roughly unchanged from the previous day.

Bitcoin is a virtual currency that can be used to move money around the world quickly and with relative anonymity, without the need for a central authority, such as a bank or government.

Yet bitcoin presents a new set of risks to investors given its limited adoption, a number of massive cybersecurity breaches affecting bitcoin owners and the lack of consistent treatment of the assets by governments.

There is one remaining bitcoin ETP proposal awaiting a verdict from the SEC. Grayscale Investments LLC's Bitcoin Investment Trust, backed by early bitcoin advocate Barry Silbert and his Digital Currency Group, filed an application last year.