DISCLOSUREAPPENDIXATTHEBACKOFTHISREPORTCONTAINSIMPORTANTDISCLOSURES,ANALYSTCERTIFICATIONS,LEGALENTITYDISCLOSUREANDTHESTATUSOFNON-USANALYSTS.USDisclosure:CreditSuissedoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethattheFirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.26April2019GlobalEquityResearchInvestmentStrategyGlobalEquityStrategySTRATEGYResearchAnalystsAndrewGarthwaite442078836477andrew.garthwaite@credit-suisse.comRobertGriffiths442078838885robert.griffiths@credit-suisse.comNicolasWylenzek442078836480nicolas.wylenzek@credit-suisse.comMengyuanYuan442078880368mengyuan.yuan@credit-suisse.comKartikeyaUpadhyay442078882339kartikeya.upadhyay@credit-suisse.comAsimAli442078832480asim.ali@credit-suisse.comDowngradingEuropeanPharmatobenchmarkWetakeEuropeanPharmadowntobenchmark,reversingourmovetooverweightinMay2018.Wereducedweightingstwicewhenweaddedtocyclicals(inDecember2018andinMarch2019),andthesectorhasoutperformedby9%overthepast12months,butwenowfullyreducetobenchmark.Ourconcernsare:■Macro:PharmatendstobetheworstperformingsectorwhenPMInewordersriseinEurope,andweseeevidencethatPMIsareturning.ThesectorappearstobediscountingPMInewordersconsistentwithvirtuallyzeroGDPgrowth.Pharmaisalsooneofthelargestdollarearnersandthusoneoftheworstperformingwhenthedollarweakens.Fromhere,wethinktheeuroappreciatesagainstthedollar.■Anuncertainpipelineoutlook:Probability-adjustednewdrugapprovalsareatathree-yearlow.Weviewthesharpfallinassetturnsversusthemarketasasignofadisruptedbusinessmodel.■Pricing:IntheUS,drugPPIanddrugCPIrelativetocoreinflationareat18-yearlows.TheUSaccountsforoverhalfofglobalpharmarevenues.■Politics:BothPresidentTrumpandhischallengershavesteppeduptheirrhetoriconPharma.MostDemocraticcandidatesappeartowantasingle-payersystemaswellaspricecapsandcheapoverseasdrugimports(toavoidsuchmeasures,wenotethatdrugcompaniesagr...
