Pharma Essentials: Chart Pack and Catalysts
US & EU Pharma: Performance; Valuation; Earnings; Catalysts
* Sector Performance — Both EU and US healthcare outperformed broader markets by c.3% and 5% respectively with US
Spec Pharma, Global Biotech and Global Generics the best performing sub-sectors. Absolute performance by subsector (in $): EU large-cap pharma (-2%), US large-cap pharma (-1%), EU specialty pharma (-2%); US specialty pharma (+7%). Best performing stocks: ACT (+12%), TEVA (+11%), FRX (+10%). Worst-performing stocks: MRCG (-11%), ZTS (-7%), BMY (-6%). Pages 11-14.
* Valuation — EU large-caps are on 15.0x and US large-caps on 17.1x 2014E PE (13.5x and 16.4x respectively for 2015E
PE), trading at 7% and 11% premium to broader market. Current share prices imply terminal declines post-‘20E for all
stocks except MRK, BMY, PFE & GSK. Given sector outperformance, the majority of stocks are trading near the top of
their average 5-year PE range. Pages 15-28.
* Earnings Momentum — Consensus ‘14E and ‘15E EPS momentum is positive at ACT, AGN, ENDO, FRX, HIK, MRCG,
SHP and MYL. Both EU and US large-cap pharma have seen modest EPS downgrades thus far in 1Q14. Pages 29-37
* Revenue and Earnings Growth —EM pharma sales growth for the global group declined from 7% in 1Q13 to 4.6% in
2Q13 and 3.6% in 3Q13 on an FX-adjusted basis. Excluding the impact of SASY’s issues in Brazil in 2Q and GSK’s China
issues in 3Q would raise this to c.5% for both quarters. EM growth rates remain above Europe (+1%), which continues to
be impacted by austerity measures, but in line with the US (+4%), which has seen a strong rebound after significant
patent expiries. Citi EU large-cap group weighted average revenue growth forecasts are 3% / 5% / 4% in ’14E / ’15E /
‘16E; the US group lags at -4% / 0% / +3%. EU earnings growth is 8% / 11% / 10% with the US group at -1% / +6% /+11%
in ’14E / ’15E / ‘16E. Pages 38-42.
* Summary Catalyst Calendar and Full Company Newsflow Tables — Full year results for majority of companies are
already behind (SHP and BAYG exceptions). CHMP opinions: MRK vintafolide ovarian cancer, LLY empagliflozin. Clinical:
BMY nivolumab Ph2 lung (1Q), LLY ramucirumab lung (1Q), NOVN LCZ696 hypertension (1Q), NOVN Potential Diovan
mono generics entry, NovoB/LLY AWARD-6 (early 2014), PFE Prevnar CAPITA (1Q), ROG gantenerumab and
crenezumab (1Q), SASY further Ph3 data readouts for alirocumab. Pages 43-60.