瑞信-美股-生物科技行业-2019年Q2美国生物科技行业业绩预览-2019.7.22-29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.22 July 2019Americas/United StatesEquity ResearchBiotechnology U.S.Biotechnology COMMENTResearch AnalystsEvan Seigerman212 325 4463evan.seigermancredit-Earnings Preview:2Q 2019 Sentiment in US Large Cap Biotech remains poor,as macro and company-specific overhangs remain a focus for investors:Year-to-date the IBB(-10.5%)and XBI(-0.7%)have underperformed the S&P500(+18.5%YTD).In our view,investors remain concerned over drug pricing,growth,and recent phase 3 failures.The recent decision by the Trump Administration to keep the status quo with Medicare Part D rebates does not fully resolve concerns over drug price reform,as the focus shift may shift to IPI for reimbursement in Part B.There are also key legal overhangs,particularly the ongoing lawsuit between Amgen v.Novartis/Sandoz over Enbrel and the IPR filed by Mylan regarding Tecfidera IP.The district court is expected any day,as company management had guided to a mid-2019 ruling.Alternatively,we could see a settlement between the companies.Against this backdrop of drug pricing,some legal overhangs regarding IP,we see continued negative sentiment in the sector:Still,with the recent Gilead/Galapagos deal and the AbbVie/Allergan deal,transactions continue,which could help reverse some sentiment trends into the remainder of 2019.Overall,we think that 2Q results across names should be fine(as results are typically better than in 1Q),although we highlight areas where names could be stronger(Vertex and Neurocrine)or weaker(Biogen and Regeneron).To discuss our view on the sector going into 2Q earnings,we are hosting a call with our Global Biopharma Colleagues:Today,Monday,July 22 10AM ET,Dial-in:US(866)591-6858,OUS(706)758-9648,ID:4981367Increase in M&A would most likely improve sentiment in Biotech(more reflective of Large Cap Pharma deals this year):The Gilead and Galapagos$5.1B deal helped recharge interest.Some investors may sit out this round for Gilead,but we believe the company is becoming a more interesting story.Overall,we continue to be positive on the sector,and look for evidence of increasing M&A focus,especially for Biogen and Gilead.Vertex and Neurocrine well poised ahead of the quarter:For Vertex,we project higher EPS($1.13)compared to FactSet consensus($1.07),and above average revenues(CS$916M vs.$886M).We continue to believe that 2019 guidance is conservative and beatable.Neurocrine could beat on Ingrezza revenues in 2Q given downbeat sentiment in 1Q.Biogen and Regeneron could face a more challenging quarter:We project lower 2Q revenues($3.34B)compared to consensus($3.47B)on MS and SMA headwinds(and no high-impact catalysts).Buy-backs could help with EPS,but this benefit will likely be short-lived.Beyond 2Q,it could be challenging for Biogen to achieve meaningful growth in 2019 without a large scale deal.Looking at Regeneron,we continue to believe that current consensus expectations for the Sanofi partnership are too high,which may contribute to another revenue miss in 2Q.We are changing TP for Regeneron and Amgen,as well as updating our EPS estimates for Amgen,Gilead,Regeneron,and Biogen.22 July 2019U.S.Biotechnology2Americas/United StatesBiotechnology Biogen,Inc.(BIIB)RatingUNDERPERFORMPrice(19-Jul-19,US$)231.27Target price(US$)198.0052-week price range(US$)383.83-216.71Market cap(US$m)44,842Enterprise value(US$m)47,304Target price is for 12 months.Research AnalystsEvan Seigerman212 325 4463evan.seigermancredit-Earnings Preview:2Q19Below on 2Q revenues and EPS;we continue to wait for transformative M&A:We project lower 2Q revenues($3.34B)compared to consensus($3.47B,FactSet).In our view,headwinds in the MS and SMA franchises could drive higher than expected erosion.While less of a focus near-term,Biogens MS franchise could face significant competition with the entry of oral generics and improved traction of Roches Ocrevus.We do not believe Vumerity(aka Tecfidera 1.2)is likely to reverse trends longer-term.On the SMA franchise,the recent FDA approval of Novartis Zolgensma(gene therapy)will take share in new incidence,Type I patients(in our view).We are modestly below consensus but do not expect to see significant impact until later into Zolgensmas launch(although commentary on the Novartis call seemed to be optimistic on the drugs launch).Looking to the pipeline,we see modest opportunity in ALS,Stroke,and Painall of which are unlikely to drive significant revenue upside.We believe that for Biogen to reverse its current course,the company needs to undergo transformative M&A in later stage assets.In our analysis,Biogen has sufficient capacity($20B through 2020)for a deal,but achieving something meaningful over the balance of 2019 will require a strategic shift from management(away from share buybacks).This quarters EPS results could benefit somewhat with a decrease in share count from the accelerated buy-backs.We think that this would be short-lived(unlikely to driver performance in 3Q/4Q and into 2020).Our DCF-based$198 TP is unchanged after minor model adjustments and we reiterate our Underperform rating.Focus points for the call:We expect commentary outlining(in greater detail)the companys capital allocation strategy(continued buy-backs or commitment to M&A).We expect the company to discuss dynamics in the MS and SMA markets.We also look for updates on the Eisai partnership in Alzheimers disease(AD),as the company had committed to revisiting the relationship post the aducanumab failure.Overall,We do not see any high impact catalysts that could support stock outperformance.Share price performanceBIIB.OQS&P 500 INDEXOct-18Jan-19Apr-19Jul-19200250300350400On 19-Jul-2019 the S&P 500 INDEX closed at 2976.61Daily Jul20,2018-Jul19,2019,07/20/18=US$358.71Quarterly EPSQ1Q2Q3Q42018A6.065.807.41 6.992019E6.987.037.65 7.602020E-Financial and valuation metricsYear12/18A12/19E12/20E12/21EEPS(CS adj.)(US$)25.5229.2529.9229.79Prev.EPS(US$)-27.7428.3528.16Revenue(US$m)13,453.013,720.013,277.512,641.7EBITDA(US$m)7,993.47,167.07,150.36,736.6P/OCF(x)10.06.86.46.4EV/EBITDA(current)5.96.66.67.0Net debt(US$m)2,3981,302-2,009-4,935ROIC(%)34.8834.1633.5231.20 Number of shares(m)193.89IC(current,US$m)15,430.10Dividend(current,US$)0.00EV/IC(x)3.07BV/share (12/18A,US$m)64.8Net debt(12/18A,US$m)2,398.5Net debt/tot eq(12/18A,%)18.4Source:Company data,Refinitiv,Credit Suisse estimates22 July 2019U.S.Biotechnology3Figure 1:Biogen Quarterly and Annual EPS(USD)Non-GAAP201820192020YoY ChangeVlookupFYActualOldNewConsOldNewCons20192020Q15.54 A6.98 A6.98 A7.37 E25.9%Q24.18 A6.74 E7.03 E7.47 E7.75 E68.2%Q37.15 A7.42 E7.65 E7.54 E7.69 E6.9%Q44.73 A6.61 E7.60 E7.71 E7.66 E60.7%Year21.58 A 27.74 E 29.25 E 29.66 E 28.35 E 29.92 E 30.79 E 35.6%2.3%Source:Company data,Credit Suisse estimates,FactSetFigure 2:Biogen 2Q19 Estimates Credit Suisse vs.ConsensusBiogen,Inc.(BIIB)2Q182Q192019E2020ETecfidera$1,087$1,023$1,099$4,298$4,300$4,222$4,263Avonex$502$396$434$1,586$1,670$1,363$1,522Plegridy$124$115$110$449$437$424$428Interferons$626$511$545$2,035$2,106$1,787$1,950Tysabri$467$465$458$1,770$1,811$1,673$1,740Vumerity(BIIB098)$0$0$0$47Total MS Product Sales$2,203$2,023$8,195$7,820Benepali(etanercept)$116$48$46$164$204$233$333Imraldi(adalimumab)$0$16$17$75$72$106$97Flixabi(infliximab)$11$191$186$765$764$874$904Total Biosimilar Sales$127$539$528$2,231$2,152$2,304$2,302Spinraza$423$126$130$526$521$535$535Rituxan/Gazyva$377$339$364$1,201$1,416$991$1,220Ocrevus Royalties$113$134$161$586$643$765$779Total Revenue(CS)$3,357$3,342$3,476$13,720$13,949$13,277$13,825COGS$421$504$478$2,096$2,047$1,983$1,929R&D$819$568$554$2,303$2,258$2,324$2,302SG&A$512$551$564$2,277$2,287$2,290$2,296Operating Income$1,609$1,670$1,764$6,474$6,859$6,440$6,860Profit before Tax$1,575$1,605$1,771$6,635$6,941$6,261$6,915Tax expense$324$301$337$1,199$1,347$1,252$1,353Net Income(CS)$1,202$1,304$1,456$5,407$5,721$5,009$5,698EPS-Diluted(CS)$5.80$7.03$7.47$29.25$29.66$29.92$30.79MarginsCOGS as%Revenue12.5%15.1%13.7%15.3%14.7%14.9%14.0%R&D as%Revenue24.4%17.0%15.9%16.8%16.2%17.5%16.7%SG&A as%Revenue15.3%16.5%16.2%16.6%16.4%17.3%16.6%Operating Margin47.9%50.0%50.8%47.2%49.2%48.5%49.6%Tax Rate20.6%18.7%19.0%18.1%19.4%20.0%19.6%Net Margin35.8%39.0%41.9%39.4%41.0%37.7%41.2%ConsActualConsCSConsCSCSNon-GAAPSource:Company data,Credit Suisse estimates,FactSet22 July 2019U.S.Biotechnology4Model Adjustments:We are reducing our Rituxan revenues(2Q$401M to$339M)to reflect recent erosion trends,while maintaining our full-year estimate.We are adjusting COGS downwards as inventory related gross margin compression in Q1 is not expected to continue.We also include an additional$1.25B in share buybacks in 2Q,per management commentary prioritizing repurchases during 1Q.We now forecast 2Q19 EPS of$7.03(from$6.74),2019E EPS of$29.25(from$27.74)and 2020 EPS of$29.92(from$28.35).Figure 3:Biogen Model ChangesBiogen,Inc.(BIIB)2Q19E2019E2020ECSCSCSNon-GAAPPriorCurrent ChangePriorCurrent ChangePriorCurrent ChangeTecfidera$1,023$1,023$4,298$4,298$4,222$4,222Avonex$396$396$1,586$1,586$1,363$1,363Plegridy$115$115$449$449$424$424Interferons$511$511$2,035$2,035$1,787$1,787Tysabri$465$465$1,770$1,770$1,673$1,673Vumerity(BIIB098)$0$0$0$0$47$47Total MS Product Sales$2,023$2,023$8,195$8,195$7,820$7,820Benepali(etanercept)$126$126$526$526$535$535Imraldi(adalimumab)$48$48$164$164$233$233Flixabi(infliximab)$16$16$75$75$106$106Total Biosimilar Sales$191$191$765$765$874$874Spinraza$539$539$2,231$2,231$2,304$2,304Rituxan/Gazyva$401$339($62)$1,201$1,201$991$991Ocrevus Royalties$134$134$586$586$765$765Total Revenue(CS)$3,404$3,342($62)$13,720$13,720$13,277$13,277COGS$578$504($74)$2,337$2,096($242)$2,297$1,983($314)R&D$579$568($11)$2,303$2,303$2,324$2,324SG&A$562$551($10)$2,276$2,277$1$2,290$2,290Operating Income$1,637$1,670$33$6,233$6,474$241$6,126$6,440$314Profit before Tax$1,572$1,605$33$6,394$6,635$241$5,943$6,261$318Tax expense$285$301$16$1,152$1,199$47$1,189$1,252$64Net Income(CS)$1,286$1,304$17$5,213$5,407$194$4,754$5,009$254EPS-Diluted(CS)$6.74$7.03$0.29$27.74$29.25$1.51$28.35$29.92$1.57MarginsCOGS as%Revenue17.0%15.1%17.0%15.3%17.3%14.9%R&D as%Revenue17.0%17.0%16.8%16.8%17.5%17.5%SG&A as%Revenue16.5%16.5%16.6%16.6%17.3%17.3%Operating Margin48.1%50.0%45.4%47.2%46.1%48.5%Tax Rate18.1%18.7%18.0%18.1%20.0%20.0%Net Margin37.8%39.0%38.0%39.4%35.8%37.7%Source:Company data,Credit Suisse estimates22 July 2019U.S.Biotechnology5Americas/United StatesBiotechnology Incyte Corporation(INCY)RatingNEUTRALPrice(19-Jul-19,US$)80.54Target price(US$)75.0052-week price range(US$)88.70-58.50Market cap(US$m)17,271Enterprise value(US$m)14,929Target price is for 12 months.Research AnalystsEvan Seigerman212 325 4463evan.seigermancredit-Earnings Preview:2Q19Generally in-line on 2Q revenues,with Jakafi growth priced into stock:We continue to believe that long-term upside for Jakafi is well appreciated(CS$2.6B vs.$2.8B FactSet consensus by 2024).We view Jakafi as a best-in-class treatment that is likely to remain the market leader in myelofibrosis and polycythemia vera.Our 2Q Jakafi expectations are in line with consensus at$415M(Figure 4),which are ahead of 1Q which typically records lower sales on seasonality factors.We do not anticipate any major 2Q surprises on Iclusig,Jakavi(ex-US Jakafi),or Olumiant revenues(we are in-line with consensus).While we are concerned with Incytes reliance on Jakafi revenues,we like the progress made in pipeline assets capmatinib and topical ruxolitinib.We also saw an expanded indication for Jakafi in Graft-versus-host disease for steroid-refractory(acute)patients.On an individual level,these pipeline assets are unlikely to significantly take pressure off Jakafi.However,the cumulative value of these pipeline assets(including pemigatinib)could provide material diversification(if successful).Incyte is showing us they might have found a path forward(after epacadostat failure)to building out a diversified pipeline.However,we await greater clinical progress before ascribing more value to these assets.We reiterate our$75 TP and Neutral rating.Focus points for the call:Beyond Jakafi revenues,we look for updates on data release for pemigatinib in cholangiocarcinoma(FIGHT-202),along with regulatory submissions to FDA and EMA.We also await updates for data release timing for itacitinib(GRAVITAS-301,-309).Incyte may provide details over the commercial plans for topical ruxolitinib,whether as an out-licensed asset,spin-off/sale,or internal commercialization.Share price performanceINCY.OQS&P 500 INDEXSep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-195060708090On 19-Jul-2019 the S&P 500 INDEX closed at 2976.61Daily Jul20,2018-Jul19,2019,07/20/18=US$69.2Quarterly EPSQ1Q2Q3Q42018A-0.010.260.38 0.402019E0.620.420.47 0.412020E-Financial and valuation metricsYear12/18A12/19E12/20E12/21EEPS(CS adj.)(US$)1.041.922.843.86Prev.EPS(US$)-Revenue(US$m)1,701.92,058.62,391.52,828.0EBITDA(US$m)252.5517.5785.11,073.9P/OCF(x)40.837.529.021.3EV/EBITDA(current)59.128.819.013.9Net debt(US$m)-1,421-1,831-2,379-3,148ROIC(%)38.2978.80106.00127.83 Number of shares(m)214.44IC(current,US$m)505.08Dividend(current,US$)0.00EV/IC(x)29.56BV/share (12/18A,US$m).0Net debt(12/18A,US$m)-1,420.9Net debt/tot eq(12/18A,%)-73.8Source:Company data,Refinitiv,Credit Suisse estimates22 July 2019U.S.Biotechnology6Figure 4:Incyte 2Q19 Estimates Credit Suisse vs.ConsensusIncyte Corporation(INCY)2Q182Q192019E2020EJakafi(ruxolitinib)Sales(US)$346$415$400$1,627$1,623$1,580-$1,650M$1,882$1,852Topical Ruxolitinib:AD,Vitiligo$0$0$0$0$0$28$14Iclusig(EU)$20$24$22$91$91$90-100M$99$102Jakavi(ruxolitinib)royalties$47$54$55$232$226$265$256Olumiant Royalties(WW)$9$10$18$71$76$110$113Total Revenue(CS)$422$503$496$2,062$2,068$2,397$2,389COGS$19$26$26$95$104$90-95M$120$121R&D$253$266$282$1,064$1,130$1,030-$1,100M$1,012$1,166SG&A$96$106$117$443$481$420-$470M$539$541Operating Income$53$105$69$459$352$725$645Profit(Loss)before Tax$58$109$91$482$439$757$694Tax expense$1$17$3$59$19$119$70Net Income(CS-Non-GAAP)$57$92$107$424$470$637$629EPS-Diluted(CS-Non-GAAP)$0.26$0.42$0.47$1.93$2.10$2.85$2.75MarginsCOGS as%Revenue4.6%5.1%5.3%4.6%5.0%5.0%5.1%R&D as%Revenue60.1%53.0%56.7%51.6%54.7%42.2%48.8%SG&A as%Revenue22.8%21.0%23.5%21.5%23.3%22.5%22.7%Operating Margin12.5%20.9%13.8%22.3%17.0%30.3%27.0%Tax Rate2.4%15.7%3.1%12.2%4.2%15.8%10.1%Net Margin13.5%18.3%21.5%20.6%22.8%26.6%26.3%ActualNon-GAAP($millions)CSConsCSConsCSConsGuidanceSource:Company data,Credit Suisse estimates,FactSet22 July 2019U.S.Biotechnology7Americas/United StatesBiotechnology Regeneron Pharmaceuticals,Inc.(REGN)R