EquityResearch18January2019COREBarclaysCapitalInc.and/oroneofitsaffiliatesdoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.PLEASESEEANALYSTCERTIFICATION(S)ANDIMPORTANTDISCLOSURESBEGINNINGONPAGE83.U.S.Biopharmaceuticals4Q18EarningsPreviewSentimentturningpositiveinUSBiopharmaasM&Aprovidessourceofoptimism:AfteradismalDecember,thesectorappearspoisedforcontinuedupwardmomentumafterareboundinbiotechtostarttheyear(NBI:+13.4%,DRG:0.0%,S&P:+5.1%),drivenlargelybyrecentlyannouncedlargescaledeals(CELGandLOXO).Withincreaseddealspeculationacrossthespace(bothlargeandSMidcap),weseeanopportunityforincreasedM&Ain2019,withtheongoingpaceofinnovation/clinicalprogresstoremainakeyfundamentaldriver.Givenmodest2019EBiopharmagrowthexpectations(+6%revenue,+7%EPS),weseestrongupsidepotentialfromaP&Lperspective—althoughnegativeFXimpactanddrugpricingcouldremainoverhangsoverthecourseoftheyear.Lookingtothequarter,wethinkthegroupisrelativelywellpositionedgoinginto4Qearnings,andwhileweexpectcompaniestocaveat2019withtheusualcautions(seasonality,donuthole),guidanceshouldmeetconsensusexpectationsataminimum.Overallwemaintainourpositiveviewonthesector,withnewproductcycleslikelytooutweighincreasedcompetitionandpoliticalriskstodrugpricing.Joinusforacalltodayat10:30amETwithslidestodiscuss4Q18and2019.Dial-in:800.706.8249(US);706.634.5881(OUS);Passcode:7092134.PositivepositioningforLillyandGilead:WeexpectastrongquarterfromLillyasvolumeshavecontinuedtoincreaseforkeyproductsover4Q18.GrowthintheGLP-1classandacceleratingsharegainsforTrulicityaredrivingour$6.4Brevenueforecast(>$100Maboveconsensus).GileadissetupforasolidquarterwithcontinuedvolumegrowthacrosstheHIVportfoliodrivenbytheBiktarvylaunchandincreasedadoptionofTruvadaasPrEP.GivenGilead’sexpectationforresumedgrowthin2019afterthe2018trough(weagree),...
