Global Pharma Essentials
An Essential Reference Pack For Healthcare Investors
We have revamped Pharma Essentials to make it truly global with inclusion of US Biotech, Japanese, Indian, Chinese and
Korean pharma. We hope you find it useful. We would love to hear feedback, both positive and negative.
* Citi's Top Picks — Citi global pharma/biotech analysts’ preferred names include AZN, NOVOB, PFE, BMY, HIK, TEVA,
CELG, BIIB, GILD, REGN, MDVN, Chugai, Ono, Lupin, Dr Reddy, CSPC Pharma and Seegene. A complete list of our top
global pharma picks can be found on pages 8 and 9.
* Sector Performance — US Spec and China pharma were the best performing sub-sectors in September, Japan Pharma
being the worst. Best performing stocks globally include: Merck KGaA (+10%), Novo (+9%), Allergan (+9%), Sysmex
(+10%), Aurobindo (+20%), CMS (+13%), and Osstem (+14%). Pages 14-23.
* Valuation — Pharma stocks globally, excluding those in China and Korea, continue to trade in the upper quartiles of their
historical PE bands. Citi-covered EU large-caps trade at 17x 2014e / 16x 2015e, while US large-caps trade at 18x / 17.5x,
respectively. Japan pharma trades at 30x 2015e; Indian pharma at 26x 2015e, China pharma at 26x 2015e, Korea
pharma at 23x 2015e. Current share prices imply largely flat terminal growth rates for most US/EU large-cap pharma, on
our estimates. Pages 26-48.
* Earnings Momentum — Consensus 2014E/15E EPS momentum is uniformly negative for most US large-caps and all
EU large-caps, with the downgrades being sharper in EU. US Spec pharma continues to see robust earnings upgrades as
the benefits of tax synergies start being fully reflected. US large-cap Biotech earnings momentum is largely explained by
the ‘Sovaldi’ factor for GILD and Eylea upgrades for REGN. Select Asian pharma stocks (Astellas, Aurobindo, Lupin, Lijun,
Sihuan) have positive earnings momentum. 3Q14 currency trends suggest slight Fx headwinds for most companies, with
impact greatest for Roche on sales (c.-3%) and AZN/ROG on EPS (c.-3%). Pages 50-84.
*Upcoming Catalysts — Companies report 3Q results towards the end of this month and early November. On the clinical
side, focus will be on the Opdivo lung data before the end of the year and possible readout from the MARIANNE trial for
Kadcyla/Perjeta in first line HER2+ breast cancer. On the regulatory