瑞信-美股-医疗科技行业-医疗科技与渠道2019年展望-2019.1.4-62页.pdf

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES,ANALYST CERTIFICATIONS,LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS.US Disclosure:Credit Suisse 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.4 January 2019Americas/United StatesEquity ResearchHealthcare Technology&Distribution Healthcare Technology&Distribution SECTOR FORECASTResearch AnalystsErin Wilson Wright212 538 4080erin.wrightcredit-Charles Lederer,CPA212 538 1822charles.lederercredit-Katie Tryhane212 325 2713katie.tryhanecredit-George Engroff212 325 2289george.engroffcredit-Year Ahead Outlook 2019 Top HCT&D IdeasWhile variables remain across an evolving healthcare continuum,with a challenging drug utilization environment,compounded by uncertainty around potential initiatives out of Washington,we view opportunities across our Healthcare Technology&Distribution universe,particularly with meaningful recent valuation contraction across the group.Our focus is on company-specific drivers in ancillary business units and strategic positioning efforts for our traditional Pharmaceutical Supply Chain companies.We also continue to view less conventional healthcare names as attractive such as Animal Health where fundamentals remain strong,and for CROs we favor companies that can leverage global data assets in what we view as a robust backdrop.New strategic focus for Dental companies is inspiring in a glacially recovering demand environment.We also recognize opportunities with recent commercial contract shifts in a consolidating clinical lab landscape.Below we summarize our best ideas across our broad coverage universe heading into 2019:CVS Health(CVS,Outperform):The recently completed Aetna deal offers meaningful growth opportunities for CVS,particularly as it gains deeper access to the rapidly growing Medicare Advantage business,as well as an integrated medical-pharmacy-retail solution.We find its stated NT synergy opportunity($750M+by year two)and valuation are also compelling.Zoetis(ZTS,Outperform):The leader in Animal Health,ZTS is levered to strengthening fundamentals,and earnings growth should accelerate on consistent revenue growth over an improving cost structure with capital deployment,including recent investments in dognostics,supplementing growth,an underappreciated dynamic.IQVIA Holdings(IQV,Outperform):Bookings of$3 billion merger-to-date related to its Next Gen Solutions should contribute to more meaningful topline growth,ahead of the industry,as we exit 2019.We view it can leverage its unmatched data assets with its size and scale to capture greater share,while boasting a relatively diversified customer base.Align Technology(ALGN,Outperform):While ASP pressures will persist in 2019,and likely beyond,we view its strategy of targeting a broader market as a logical evolution,with the potential of unlocking a vastly greater addressable market over time.Moreover,there is room for several players in the highly underpenetrated clear aligner market.We are adjusting target prices across specific companies on various factors including a lackluster drug utilization environment,regulatory overhangs,and individual co-specific factors.LabCorp(LH,Outperform):We view multiple avenues for growth across 4 January 2019Healthcare Technology&Distribution2LHs more diversified platform despite continued headwinds in core LCD,with strong CF generation offering capital deployment flexibility,particularly relevant given its role as a leading consolidator of smaller lab operations in a post-PAMA world.PetMed Express(PETS,Underperform):We remain negatively biased on PETS on LT structural headwinds,particularly given a recent shift to offline advertising.While shares fell 47%in 2018,we view room for further downside as customer acquisition costs escalate,with risks to our call including industry consolidation,among other catalysts.4 January 2019Healthcare Technology&Distribution3Our Recommendations for 2019While variables remain across an evolving healthcare continuum,with a challenging drug utilization environment,compounded by uncertainty around potential initiatives out of Washington,we view there are opportunities across our Healthcare Technology&Distribution universe,particularly with meaningful recent valuation contraction across the group.Our focus is on company-specific drivers in ancillary business units and strategic positioning efforts for our traditional Pharmaceutical Supply Chain companies in 2019.We also continue to view less conventional healthcare names as attractive such as Animal Health where fundamentals remain strong,and for CROs,we favor companies that can leverage global data assets in what we view as a robust backdrop.New strategic focus for Dental companies is inspiring in a glacially recovering demand environment.We also recognize opportunities with recent commercial contract shifts in a consolidating clinical laboratory landscape.Below we provide a summary of our best ideas across our broad coverage universe heading into 2019.Figure 1:Healthcare Subsector Performances2011201220132014Managed Care34.6%Biotechnology57.6%Specialty Pharma91.7%Managed Care42.6%Biotechnology29.1%Hospitals37.3%Drug Retailers&PBMs81.2%Biotechnology38.8%Specialty Pharma27.9%Diagnostics32.8%Biotechnology71.4%Specialty Pharma37.3%Large Cap Pharma13.2%Drug Retailers&PBMs32.7%Drug Distributors63.8%Hospitals36.9%Drug Retailers&PBMs8.9%Contract Services37.2%Healthcare Technology46.1%Drug Retailers&PBMs29.1%Drug Distributors8.6%Animal Health27.7%Contract Services57.1%Medical Devices28.1%Healthcare Technology7.6%Life Science Tools26.5%Hospitals44.0%Animal Health19.7%Clinical Laboratories2.7%Medical Devices16.9%Medical Devices40.9%Diagnostics26.1%S&P 500 Index0.0%Drug Distributors14.0%Managed Care40.3%Drug Distributors25.9%Animal Health-2.4%S&P 500 Index13.4%Life Science Tools38.7%Contract Services22.1%Medical Devices-4.1%Healthcare Technology3.2%Dental*37.0%Dental*23.9%Dental*-8.9%Specialty Pharma9.0%S&P 500 Index29.6%Clinical Laboratories21.7%Contract Services-3.9%Large Cap Pharma7.5%Diagnostics28.5%Large Cap Pharma14.0%Diagnostics-12.3%Dental*6.7%Large Cap Pharma27.1%Life Science Tools11.5%Life Science Tools-14.6%Managed Care5.9%Animal Health24.0%S&P 500 Index11.4%Hospitals-21.8%Clinical Laboratories0.6%Clinical Laboratories-1.3%Healthcare Technology-6.6%2015201620172018Contract Services42.0%Animal Health24.6%Managed Care47.5%Diagnostics19.6%Managed Care19.8%Clinical Laboratories16.5%Life Science Tools40.5%Managed Care17.5%Animal Health11.4%Managed Care12.1%Diagnostics40.5%Healthcare Technology17.5%Diagnostics16.7%Medical Devices11.1%Contract Services28.7%Medical Devices17.3%Dental*14.3%S&P 500 Index9.5%Animal Health35.5%Large Cap Pharma9.7%Life Science Tools14.0%Healthcare Technology4.6%Medical Devices22.5%Animal Health2.6%Clinical Laboratories10.3%Contract Services10.0%Biotechnology22.3%Contract Services2.5%Drug Retailers&PBMs7.9%Life Science Tools4.3%Healthcare Technology30.6%Life Science Tools2.3%Medical Devices7.7%Dental*3.0%S&P 500 Index19.4%Hospitals-6.0%Biotechnology7.6%Large Cap Pharma-1.4%Dental*16.9%S&P 500 Index-6.2%Drug Distributors6.9%Drug Retailers&PBMs-9.6%Clinical Laboratories15.7%Biotechnology-8.6%Specialty Pharma3.8%Diagnostics-14.8%Large Cap Pharma10.9%Drug Retailers&PBMs-14.0%Large Cap Pharma2.2%Biotechnology-21.9%Drug Distributors4.5%Specialty Pharma-14.7%Healthcare Technology1.5%Drug Distributors-24.3%Hospitals-3.8%Clinical Laboratories-18.1%S&P 500 Index-0.7%Hospitals-29.9%Specialty Pharma-12.8%Dental*-21.7%Hospitals-17.9%Specialty Pharma-36.2%Drug Retailers&PBMs-22.0%Drug Distributors-25.1%Source:Company data,Credit Suisse estimates,Factset,*Dental excludes Align TechnologyPharmaceutical Supply ChainInvestor conversations have largely centered on respective strategic repositioning tactics with M&A and JVs/partnerships related to ancillary business or services,broader vertical integration,regulatory scrutiny,as well as underlying drug pricing and utilization dynamics,all of which will continue to be themes in 2019.We explore these topics further below.More specifically,as it relates to the drug distributors,despite a continuing lackluster utilization environment,we are incrementally optimistic as we head into 2019 on a stabilizing generic pricing environment,as well as an incrementally healthier branded price inflation landscape than previously expected(or at least better visibility thereon),potential sources of near term relief.That said,we continue to favor distributors with exposure to faster-growing,higher-margin ancillary services(e.g.,AmerisourceBergen,Outperform),4 January 2019Healthcare Technology&Distribution4which should provide diversification from drug utilization/pricing,while also providing higher growth potential longer term.Meanwhile,focus across the PBMs and pharmacies has been on strategic repositioning,including completed vertical transactions and JVs/partnerships across the healthcare services continuum,with focus also on the next potential larger scale transaction.While transformational efforts may have been perceived as a competitive response to Amazon headlines over the past year+,compounded by drug pricing and regulatory scrutiny,major vertical mergers such as CVS/Aetna uniquely address all-important dynamics around total cost of care.Key Theme#1:Political&Regulatory EnvironmentPolitical gridlock favorable for Supply Chain namesRelative to 2018,we view the 2019 regulatory landscape as somewhat more benign given a Congressional gridlock and lame-duck President scenario,albeit with potentially some headline risk associated with the recent ACA scrutiny,as well as policy proposals from relevant government organizations,particularly on drug pricing.Broader healthcare legislation was a key focus in 2018,where a Republican-led Congress,in conjunction with Republican President Trump,drove cautiousness related to a potential ACA repeal and replace,drug pricing,among other healthcare debates that weighed considerably on supply chain names.However,as we look forward to 2019,we downplay political risk and highlight the midterm elections,where a House/Senate majority split will likely drive political gridlock,preventing successful transformational healthcare reform.Moreover,we view a Democrat-led House will steadfastly avoid striking transformative deals with President Trump ahead of an election cycle,where the President could utilize any meaningful legislative victories as a selling point.All in all,we view this political gridlock as favorable to industry constituents across our universe,offering enhanced visibility(or at least minimizing volatility)and likely halting any meaningful changes over the medium-term.While legislative gridlock offers potential stability from larger scale healthcare reform,the recent ruling by U.S.District Court Judge Reed OConnor in Fort Worth,Texas,on the constitutionality of the Affordable Care Act(or lack thereof)will remain a headline risk into 2019.According to our legal expert,Neil Seigel,the most recent ACA challenge is the weakest yet and extraordinarily unlikely to stand given the lack of clear injury,erroneous focus on the 2010 Congress intent(vs.2017 Congress),and aggressive non-severance posture.Though Seigel views the challenge will be overturned and the ACA will remain status quo,the timing of the appeal process and ensuing decision are less clear,with potentially multiple hearings ahead of a final resolution(by 2020 timeframe,in our view).As a reminder,on December 14th,US District Court Judge Reed OConnor in Fort Worth,Texas,ruled that the ACAs individual mandate is unconstitutional once the mandates penalty drops to$0,given the ACAs constitutionality was once upheld under Congress taxing authority.While we are inclined to believe the ACA will remain standing,in line with Seigels view,we highlight relevant ACA-related commentary from industry constituents in light of potential headline risk into 2019.4 January 2019Healthcare Technology&Distribution5Figure 2:Relevant ACA-related Commentary from Pharmaceutical Supply Chain ConstituentsCompanyExpected ImpactReported ImpactOther DetailsWalgreens Boots AllianceLargely unquantified.F3Q10 included a negative$0.04 impact from the elimination of the tax benefit for the Medicare Part D subsidy for retiree benefits20-30 bps Rx growth benefit(F4Q14)Net benefit:New demand for scripts created by insurance plans,but likely with more pressure on reimbursement throughout the cycle.The ACA seeks to reduce federal spending by altering the Medicaid reimbursement formula(AMP)for multi-source drugs.CVS HealthNet positive in 2014-Expect less than 1%of covered lives to move into exchanges in 2014,may lead to some margin compressionModest benefit from Medicaid in 2014(2Q14).Benefit coming out of Medicaid expansion.In terms of the exchange population,CVS was still identifying how many of those are incremental to insurance coverage(2Q14).Aetna has 6%earnings exposure to Medicaid(likely 1%exposure to Medicaid Expansion).Diplomat PharmacyUnknownUnknownFocus on high-touch patient care and experience with high-risk populations makes DPLO well-positioned for the anticipated growth in managed lives under the ACA,particularly with respect to managed Medicaid coverage(S-1)AmerisourceBergenAnticipate modest benefit to top line in FY14,but ramping slower than anticipated.Likely a greater FY15 impact(F4Q13).ACA implementation probably added between one and two points to the co-industry growth rates(Mar 2015).Somewhat mild impact.Net positive:Filling the prescription doughnut hole and providing Rx coverage for uninsured will not have an immediate impact,but the longer term benefit is very positive-Health care reform has enhanced long-term prospects(F2Q10).With healthcare reform,more patients will come into the system,but more of them will have patient out-of-pocket issues that will impact access(2010 Investor Day).McKessonNet-net tailwind,but modest expectations for 2015(Jun 2014)Driver of volumes(Mar 2015),albeit difficult to quanitfyHC stimulus packages as well as reform will provide good fuel for long-term positive performance(Jan 2010).Optimistic ACA will provide incremental volume(Jan 2014).Difficult to quanitfy ACAs effect on demand,but MCK does believe there is a positive effect associated with people getting access to care(Mar 2015)Cardinal HealthMedical device tax attached to ACA has a$13-23 million estimated impact(2Q12).Increased utilization expected in 2013 from ACA(3Q12)Difficult to discern ACA impact(3Q14).Clearly some inidication in the Pharmaceutical segment of having more patients in the system.On the hospital side,its been harder to tease out because of shifts in channel behavior(1