EquityResearch26February2020COREBarclaysCapitalInc.and/oroneofitsaffiliatesdoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.PLEASESEEANALYSTCERTIFICATION(S)ANDIMPORTANTDISCLOSURESBEGINNINGONPAGE239.Restricted-InternalU.S.BiopharmaceuticalsInitiatingCoverageWearelaunchingcoverageoftheU.S.BiopharmaceuticalsindustrywithaPositiveviewandauniverseof16large-andsmid-capstocks.OurPositiveviewisdrivenbywaningnear-termconcernsondrugpricingreform,P&Lupside,evidenceofstronginnovation,anaccommodatingregulatorylandscape,andmodestlyattractivevaluationsrelativetothebroadermarket.Wearehostingaconferencecallat11amETonFeb27(dial-in800-493-6965(US);706-679-5836(OUS);passcode9970835).OurOverweight-ratednamesaretiltedtoward(1)higher-qualitylarge-capgrowthnarrativeswithdominantcommercialfranchises,improvingmargins,andrelativelylowerlossofexclusivity(LOE)risk,and(2)smid-capnameswithnear-launchnarrativesandpipelineoptionality.ThenegativeturninsentimentonMerck(MRK,$93PT)seemsoverdonetous;wedon’tseeKeytrudabeingthreatenedinlungcancerfromBristol’sCM-227orCM-9LAdatasets,andoperatingmarginexpansionissignificantover2021-25.ForEliLilly(LLY,$160PT),wearebullishontirzepatidephase3dataextendingthediabetesfranchiseintothe2030s,whileP&Lleverageisstartingtokickin.AtRegeneronPharmaceuticals(REGN,$530PT),EyleaandDupixentarebothsetuptoexceed2020estimates,whileLibtayoNSCLCdataprovidesattractiveoptionality.ForBiogen(BIIB,$389PT),wethinkaducanumabforAlzheimer'sdiseasegetsapproved.ForAcceleronPharma(XLRN,$107PT),sotaterceptdatainpulmonaryarterialhypertension(PAH)opensupa$2bn+opportunity,andwemodelReblozylwith$3bn+peakpotential.OnAppliedTherapeutics(APLT,$64PT),welikethecombinationofa2021launchingalactosemia,apivotaldiabeticcardiomyopathyread-outin2021,andsignificantoptionalityaroundOUSrightstobothpr...
