巴克莱-美股-医疗保健行业-美国生命科学与诊断Jack工具包——第5卷第5期：2018年Q4生命科学与诊断工具观点-2019.1.31-28页.pdf

Equity Research 31 January 2019 CORE Barclays Capital Inc.and/or one of its affiliates does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.PLEASE SEE ANALYST CERTIFICATION(S)AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 20.U.S.Life Science Tools&Diagnostics Jacks Tool Kit Vol.5,Issue 5:Early 4Q18 Views for the Life Science Tools Jacks Tool Kit What are your early takeaways from the Life Science Tools companies that have reported 4Q18 earnings?Trivia Question:Relative to the companys initial guidance,how much upside did Thermo Fisher show on revenue and EPS in 2018?Recent Notes&Reports:1)Weekly Flu Clues:Influenza Activity Increases Modestly,2)Laterals from Danaher 4Q18 Earnings on Life Science Tools&Dx,3)Thermo Fisher Scientific,Inc.:Thoughts on Anatomic Pathology Sale&Model Update,4)Illumina:Solid NGS Fundamentals,Revenue Ramp in Focus To Start 2019 5)Thermo Fisher:Momentum Continues with More Potential Upside Ahead 6)Hologic:Solid FY1Q19 Consistent with Pre-Announcement Trends Barclays Geographic End Market Tracker:Agilent FY1Q19 PMI Tracker of 53.1(up 1.3 q/q),Mettler Toledo 4Q18 PMI Tracker of 53.5(down 1.6 q/q),PerkinElmer 4Q18 PMI Tracker of 53.6(down 1.8 q/q),Thermo Fisher 4Q18 PMI Tracker of 54.3(down 1.5 q/q),Waters 4Q18 PMI Tracker of 53.6(down 1.6 q/q).Barclays FX Tracker(01/30/2019):Euro strengthens 1.7%w/w,UK Pound strengthens 1.4%w/w,Chinese Yuan strengthens 0.6%w/w,Japanese Yen strengthens 0.7%w/w,and Swiss Franc strengthens 1.6%w/w.Hot Topics for the Week:1)Life Science Tools earnings remained strong to start 4Q18 reporting,with Thermo Fisher and Danaher posting organic growth of 8%and 5.5%,respectively.2)Additionally,Thermo Fisher announced an agreement to sell its Anatomic Pathology business to PHC Holdings Corporation for$1.14 billion.3)Hologic and Illumina also reported CY4Q18 results consistent with prior commentary at an industry conference to start the year.Our coverage universe finished the week up 3.5%since last Thursday(tools up 4.5%,diagnostics up 3.2%,and labs&CROs up 3.0%).In comparison,the S&P 500 was up 2.4%for the week,the Russell 2000 was up 2.3%,and the NASDAQ Composite was up 2.2%.Stat of the Week:Thermo Fisher posted double-digit organic growth in Analytical Instruments in 2018.INDUSTRY UPDATE U.S.Life Science Tools&Diagnostics NEUTRAL Unchanged U.S.Life Science Tools&Diagnostics Jack Meehan,CFA+1 212 526 3909 BCI,US Mitchell Petersen+1 212 526 3367 BCI,US Andrew Wald+1 212 526 9436 BCI,US 每日免费获取报告1、每日微信群内分享7+最新重磅报告；2、每日分享当日华尔街日报、金融时报；3、每周分享经济学人4、行研报告均为公开版，权利归原作者所有，起点财经仅分发做内部学习。扫一扫二维码关注公号回复：研究报告加入“起点财经”微信群。Barclays|U.S.Life Science Tools&Diagnostics 31 January 2019 2 Barclays Life Science Tools&Diagnostics Trivia We are pleased to present the Barclays Life Science Tools&Diagnostics trivia question of the week.Each week,we will ask a question about the Tools&Diagnostics industry.We would prefer you dont look up the answer,but we wont police it.Its that simple.Answer is in next weeks weekly.Trivia Question:Relative to the companys initial guidance,how much upside did Thermo Fisher show on revenue and EPS in 2018?Last Weeks Answer:CAMH,the employer of several GeneSight IMPACT study authors,owns a 15%stake in Assurex Canada.I.Jacks Tool Kit on Life Science Tools&Diagnostics Each week we answer a question we have received from a client.We try to pick the most topical responses.If we dont pick your question,keep trying and we will get to it!Question What are your early takeaways from the Life Science Tools companies that have reported 4Q18 earnings?Following initial 4Q18 earnings reports from the Life Science Tools group,we provide an update on results.Danaher,Illumina,Thermo Fisher,and Waters have all now posted 4Q18 results and issued 2019 guidance.Overall,it appears that the Tools companies continued to benefit from healthy trends through the end of 2018.Below,we review broad trends across the Tools group,2019 guidance,and company-specific results.Life Science Tools:Broad Trends across 4Q18 Earnings We believe there are a number of areas that investors are paying close attention to with 4Q18 earnings.These areas are outlined below:China:Despite recent concerns around China,the Life Science Tools companies have continued to realize strong growth in the region.Thermo Fisher posted organic growth of roughly 19%in 4Q18 in China,capping off a year of 20%growth.While there are no data points to suggest that slowing growth or tariffs are having an impact on demand for Life Science Tools technologies,companies are taking an appropriately cautious stance.Danaher posted double-digit growth in China,citing broad based growth in the region.Management said nothing to suggest that growth is slowing.For Illumina,revenue growth was 28%y/y in China when adjusting for the timing of stocking orders that got pulled into 2Q18 and 3Q18.Waters posted 15%growth in China,with particular strength in the biopharma end market.Biopharma End Market:It appears that the biopharma end market continued as a growth driver for the Life Science Tools in 4Q18.Danahers Pall business benefited from double-digit growth with biotech customers,powering overall growth in the high-single digits for the business.Thermo Fisher delivered low-teens biopharma growth in 4Q18,with solid growth across the portfolio.The company is modelling a continuation of strong trends in 2019,with growth in the high-single digits.At Waters,organic growth with biopharma customer reaccelerated to 7.3%in 4Q18.Industrial End Market:At Danaher,underlying trends in the companys industrial businesses(20%,total sequencing growth in the“mid-teens,”sequencing systems growth in the mid-single digits,and total array growth in the low-single digits.EPS is expected in the range of$6.50-$6.60,representing growth of 13.6-15.3%.Danaher(DHR,covered by Julian Mitchell)issued 2019 guidance that calls for organic growth of 4%.This is down from roughly 6%organic growth in 2018.While the company did not provide a significant level of detail regarding its assumptions in guidance,management noted that growth in China is anticipated to grow in the HSD to low DD.2019 guidance also calls for$4.75 to$4.85 in EPS,reflecting growth of 5.2-7.5%.Waters is guiding towards organic growth of 4-6%in 2019,which would represent an acceleration over 2018 growth(3.7%organic growth).Following weaker 2018 results in India and Europe,Waters expects improvements in these regions throughout 2019.We believe new product introductions will be additive to growth,improving our visibility into 2019 guidance.The recent BioAccord launch should open up new markets for Waters in the areas of late stage development and QA/QC for large molecule drugs.The company has also hinted at additional mass spec launches coming later in the year.Waters is forecasting$9.20-$9.45 of EPS,representing growth of 10.5-13.5%.4Q18 Takeaways for Life Science Tools&Diagnostics All four Life Science Tools companies that have reported 4Q18 earnings have beat organic growth expectations.In Life Science Tools,Thermo Fisher delivered the largest level of upside,with robust 8%organic growth exceeding our estimates by 400bps.We believe the companys peer-leading growth rate is a testament to the companys differentiated business mix and strategy.FIGURE 4 Life Science Tools:4Q18 Performance Relative to Expectations Source:Company Documents,Barclays Research Note:Danaher estimates from Barclays Analyst Julian Mitchell;Illumina estimates based on number prior to 1/7/19 industry conference Thermo Fishers results were stronger than expected in each of the companys 4 segments led by Analytical Instruments,which posted 12%organic growth(over an 11%comp)in the quarter.The company demonstrated its ability to compound organic RevenueOrganic GrowthAdj.EPSCompanyEstimateActualDeltaEstimateActualDeltaEstimateActualDeltaDanaher$5,309$5,3641.0%5.0%5.5%50bps$1.28$1.280.0%Illumina$855$8671.5%9.8%11.4%160bps$1.35$1.32-2.1%Thermo Fisher$6,250$6,5074.1%4.0%8.4%441bps$3.19$3.251.9%Waters$703$7151.7%3.5%4.9%140bps$2.59$2.8710.8%Average2.1%198bps2.7%Barclays|U.S.Life Science Tools&Diagnostics 31 January 2019 5 growth over more difficult comps,growing 8%organically(over an 8%comp).While 4Q18 EBIT margins fell short of our expectations(by 80bps),EPS came in$0.06 ahead of expectations given the strong revenue performance.Illumina delivered strong results including 11%total revenue growth,driven by NGS instrument growth of 21%and NGS consumables growth of 8%.Adjusting for the timing of stocking orders,NGS consumables growth would have been 16%.The company technically missed its NovaSeq placement target for 2018,with 315 placements coming in below the target of 330-350.That said,we continue to have confidence in the sustainability of the multi-year NovaSeq upgrade cycle.EPS of$1.32 fell short of our initial 4Q18 estimate of$1.35.Danaher posted organic growth of 5.5%,150bps above original 4Q18 guidance.The strong results included 7.5%organic growth in Life Sciences,driven by broad strength across the companys businesses.Notably,Pall posted high-single digit growth,which included double-digit growth with biotech companies.Diagnostics grew a healthy 6.0%,with broad based contributions.Beckman Coulters growth accelerated to MSD,up from recent trends in the LSDs.Cepheid posted double-digit growth over a difficult 4Q17 flu comp.Waters beat our revenue estimate by 1.7%,driven by organic growth of 4.9%that came in 140bps better than our model and 200bps above the midpoint of 4Q18 guidance.Importantly,the biopharma end market was an area of strength,posting 7.3%organic growth.Waters believes that recent weakness in its high resolution mass spec portfolio,which was driven by a missed innovation cycle,has begun to stabilize.From a geographic perspective,the Americas grew 6%organically,benefiting from a sequential improvement in the U.S.(5%growth).While Asia was strong(9%growth),Europe was a drag on results,declining-1%organically.EPS of$2.87 beat our estimate by 10.8%,driven by strong operations and below-the-line items.II.Barclays Life Science Tools&Diagnostics Summaries In this section we summarize our recent research publications.Please contact us at(212)526-3909 for copies.“Weekly Flu Clues:Influenza Activity Increases Modestly”(January 25,2019)Flu activity rose modestly in Week 16 and remains at heightened levels.As you can see in the“Outpatient Flu-Like Illness”chart below,it is not uncommon for flu activity to increase marginally(following significant declines)during this week of reporting.While trends remain more muted compared to last years flu season(which was very severe),we think its still too early to make a call on the severity of this years flu season.We continue to monitor the data closely.For the week ended January 19,2019,we highlight that 3.3%of patient physician visits were due to flu-like illness,up 20bps versus the previous week and down 330bps versus week 16(fiscal week 3)of the 2017-2018 flu season.“Thermo Fisher Scientific,Inc.:Thoughts on Anatomic Pathology Sale&Model Update”(January 29,2019)Last night after the close,Thermo Fisher announced it will sell its Anatomical Pathology business for$1.14 billion in cash to PHC Holdings Corporation.We believe the deal makes strategic sense on several fronts.The AP business is one of the few areas of Thermo Fishers portfolio where the company lacked scale,competing in the market with Roche(covered by Emmanuel Papadakis),Danahers Leica Bio(covered by Julian Mitchell)and Agilents Dako.Additionally,the business has been a relative laggard in the Specialty Diagnostics segment historically for Thermo Fisher,so divestiture should improve underlying segment growth.Barclays|U.S.Life Science Tools&Diagnostics 31 January 2019 6 Lastly,the deal price represents 3.3x revenues of$350mm,which we view as a good return for the asset.The sale follows rumblings around a potential sale in Bloomberg from 10/31/2018,Thermo Fisher Considers Sale of$1 Billion Pathology Unit.Thermo Fishers final sale price of$1.14bn is similar to the reports estimate of around$1bn at the time.Thermo Fisher has a strong track record of portfolio management,including disciplined divestitures(in addition to M&A prowess).Looking across the portfolio,there are no additional obvious targets which we think make sense to prune at this time.Conversely,we continue to see substantial opportunity for Thermo Fisher to consolidate assets across Life Science Tools,Dx and the CDMO industries.Finally,given recent commentary around strong end market conditions and potential for share gain in 2019,the divestiture appears to be coming from a position of strength.While the deal itself carries modest near-term dilution,we expect management to re-deploy proceeds strategically over time.“Laterals from Danaher 4Q18 Earnings on Life Science Tools&Dx”(January 29,2019)Following Danahers 4Q18 earnings conference call,we took a look at the companys life science and diagnostic segments to get an updated view on laterals for our coverage.Danaher(DHR,covered by Julian Mitchell)is a multi-industry company with businesses in Life Science Tools,Diagnostics,Environmental/Applied and Dental end markets.Danaher either competes with or is a supplier to our entire coverage,and we believe its important to track trends for any read-though into competitive dynamics and market conditions.“Illumina Inc.:Solid NGS Fundamentals,Revenue Ramp in Focus To Start 2019”(January 30,2019)Ultimately,we believe Illuminas business fundamentals appear solid looking into 2019,with guidance and messaging consistent with the companys preannouncement on 1/7/19.There was a focus with earnings on expectations for a revenue ramp throughout 2019,which rationally we think make sense-but could weigh on sentiment near term.The quarter in itself was consistent with the companys pre-announcement,with strength in the areas that matter for the thesis.Notably,the company posted record NGS instruments sales up 21%y/y,and NGS consumables+8%despite difficult comps and the impact of prior quarter stocking.The company continues to see a multi-year upgrade cycle ahead for NovaSeq,noting that only 25%of its 800 HiSeq customers have upgraded to the new platform so far.A weak point with earnings was that adjusted EPS(which was not reported on 1/7/19)of$1.32 came in below our model at$1.38.Weaker gross margins from higher instrument mix combined with greater than expected operating expense investment drove the difference.This was partially offset by a lower-than-anticipated tax rate.“Thermo Fisher Scientific,Inc.:Momentum Continues with More Potential Upside Ahead”(January 30,2019)Thermo Fisher closed 2018 with significant momentum,which we believe puts the company in a strong p