• My view is that it won’t have an impact near term to CVS, but longer term it could be disruptive. I think it will give them a bigger negotiating power over health insurance costs.
• This is not the first time large companies try to form an alliance to resolve this high healthcare cost issue: the Health Transformation Alliance, a group of 40+ large employers, covering 6 million lives, was formed to reduce costs (http://www.htahealth.com/). The group was looking to partner with CVS & Optum to reduce costs.
• Just a reminder that CVS has a higher share of the Medicare Part D scripts, representing 30% of CVS PBM scripts (according to Morgan Stanley), which is more profitable and not targeted by the AMZN/JPM/Berkshire JV. CVS’s Silverscript subsidiary is the #1 PDP insurance company by enrollment with 5.5 million lives as of January 1, 2017, accounting for 22% of total Part D lives. Continue reading “Healthcare comments related to Amazon/JP Morgan/Berkshire news”
Author: Julie Praline
Stryker 4Q2017 earnings results were good, guidance for 2018 disappoints the market but in line with our expectations
Stryker reported strong 4Q 2017 organic sales of +8.1% and EPS +10%, and full year 2017 organic sales of +7.1% (above its latest guidance) and EPS growth of +12%. The stock is consolidating after market on lower 2018 guidance vs consensus, but as a reminder the stock was up ~9% year-to-date, and the management team tends to guide conservatively. We think 2018 guidance to be very decent at +6-6.5% which is better than medtech peers. Overall Stryker continues to perform well and we raise our price target to $188. Continue reading “Stryker 4Q2017 earnings results were good, guidance for 2018 disappoints the market but in line with our expectations”
LMT 4Q17 earnings results are in line, 2018 initial guidance shows positive impact from tax reform
Lockheed Martin reported 4Q 2017 earnings today that were in line with expectations. The initial 2018 outlook lifted the stock as LMT is using a lower tax rate to fund growth initiatives as well as to contribute $5B to its pension plan (always a big cost item for defense primes), which is improving earnings longer-term. Our price target is increasing to $374 as the F-35 deliveries gets closer to its target of 160/year. Continue reading “LMT 4Q17 earnings results are in line, 2018 initial guidance shows positive impact from tax reform”
Sanofi announces another deal (Ablynx)
Sanofi announced this morning the acquisition of Ablynx:
• Ablynx is a Belgian antibody biotech company that has multiple compounds in the works:
o Compound targeting a rare blood disorder (aTTP) that has completed phase III testing and pending European & US regulatory approval for commercialization (fit with rare disease & Bioverativ)
o compound to treat RSV infections in phase II (fits with Sanofi’s vaccine portfolio)
o early stage antibody technology platform (adding to Sanofi’s R&D efforts)
• Close of the 3.9B euros ($4.8B) all cash acquisition of Ablynx expected fairly soon, in 2Q18
• The deal will be financed by bank credit and was approved by both boards
• Deal neutral to earnings in 2018 & 2019, then low-single-digits accretive thereafter
This is not changing our view of the stock, as any incremental future sales coming from those new drugs are offset by the cost of the deals near term. As a reminder, Sanofi was outbid by Pfizer on the Medivation deal, and by JNJ on Actelion. So far 2018 is starting to be a big M&A year for Sanofi
Colgate 4Q17 earnings results disappointing
Colgate-Palmolive (CL) Q4 2017 results were better sequentially with organic sales growth of 2.0%, but it was below expectations due to negative pricing of 1%, its worst price performance since 2004. Margin erosion from pricing deleveraging and higher advertising expenses did not help earnings growth. Management provided its initial 2018 outlook that is only slightly better than consensus, and with the new tax rate providing close to half of the growth. Colgate could be reassessing its growth strategy as it recently acquired 2 small skin care companies. We maintain our price target and position size. Continue reading “Colgate 4Q17 earnings results disappointing”
UNP 4Q17 earnings results impacted by implementation of new technology and lower pricing
UNP reported revenue growth of 5% and EPS growth of 10% y/y (mostly thanks to share repurchase and a lower tax rate). However, UNP consolidated today on network fluidity issues, lower pricing than expected and poor Intermodal growth. Just a reminder that prior to today, the stock had climbed 34% in the past 6 months. We are seeing no degradation to our long-term thesis of a management team focused on productivity and returns. We are increasing our price target to $145 after rolling over our model to 2018. Continue reading “UNP 4Q17 earnings results impacted by implementation of new technology and lower pricing”
McCormick 4Q17 earnings: MKC showed us it remains a core holding in consumer staples (and in our kitchen)
McCormick (MKC) delivered Q4 adjusted EPS of $1.54, a 21% increase y/y. Organic sales growth was driven by a good balance of volume and price increase, reflective in our eyes of the strength of McCormick’s portfolio. This led to a 220bps margin expansion, which is respectable in the food sector. We see 2018 guidance as achievable and thus maintain our view of MKC as a core holding in the consumer staples sector. Price target revised up to $117. Continue reading “McCormick 4Q17 earnings: MKC showed us it remains a core holding in consumer staples (and in our kitchen)”
JNJ 4Q17 earnings results good but 2018 revenue guidance disappoints
JNJ reported Q4 2017 results beating consensus expectations, however most of the beat came from non-operational items (currency and lower tax rate). 2018 revenue guidance came below expectations, and the US appeals court ruled JNJ patent on Remicade invalid, causing the stock to consolidate today. Our long-term thesis is intact and we raise our price target to $163. Continue reading “JNJ 4Q17 earnings results good but 2018 revenue guidance disappoints”
Resmed 2Q18 earnings results: strength continues for FY18
ResMed released strong Q2 2018 sales +11% y/y and adjusted EPS +37%. Our patience in Resmed early last year paid off, as the prior production issues have been resolved, lifting mask sales in the double digit range. The company will benefit from the US tax reform this year, lifting EPS by 13%. However this is a one-time event as FY19 will be impacted by the Australian taxation. We are raising our price target to $97 and maintaining our position in the stock. Continue reading “Resmed 2Q18 earnings results: strength continues for FY18”
Sanofi Bioverativ Deal
Sanofi / Bioverativ overview
Bioverativ (BIVV):
• Spun off Biogen in 2017. Only pure player in the hemophilia drug market
• Had sales of $847M + $41M in royalties in 2016, guided to grow 30% in 2017
• 39% EBITDA margin in 2016 (43.4% estimated EBITDA margin for 2017)
• Pipeline of drugs targets every modality in hemophilia and other blood diseases
• The drugs are currently sold in the US, Canada, Japan and Australia