瑞信美股医疗保健行业Q4美国药品分发预览季度趋势剖析201913022页

DISCLOSUREAPPENDIXATTHEBACKOFTHISREPORTCONTAINSIMPORTANTDISCLOSURES,ANALYSTCERTIFICATIONS,LEGALENTITYDISCLOSUREANDTHESTATUSOFNON-USANALYSTS.USDisclosure:CreditSuissedoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethattheFirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.30January2019Americas/UnitedStatesEquityResearchHealthcareTechnology&DistributionDrugDistributorUpdateS[e-mail],[e-mail]@[e-mail]4QPreview:DissectingIntra-QuarterTrends;GenericDeflationTrendStabilizes■4QPreview&Themes:Sharesfordrugdistributors,includingAmerisourceBergen(ABC,Outperform),CardinalHealth(CAH,Outperform),andMcKesson(MCK,Underperform),arecurrentlytradingata7.0xFY+2EV/EBITDAonaverage,ameaningfuldiscounttotheir8.8xfive-yearhistoricalaverage,withongoingconcernsrelatedtodrugpricingscrutiny,opioids,contractrenewals,andAmazonheadlinesreverberatingacrossthesupplychain,inadditiontocompany-specificheadwindsrangingfromcontinuedintegrationheadwinds,Medicalsegmentwoes(CAH),andmanufacturingsuspensions(ABC).Still,ourviewisthatsomestabilityinthegenericdrugpricingenvironment(assupportedbyouranalysisandindustrycommentary)aswellashealthierthanpreviouslyexpectedbrandedpriceinflationshoulddrivepotentiallylessvolatile4Qreports,barringanymajorcontractshifts,andourfocusisincreasinglyoncontributionsfromfastergrowing,moreprofitable,andoftentimesmorecapitalefficientancillarybusinesses,relevanttoourthesesforoursupplychaincompanies,whereweviewABCasrelativelybetterpositioned.■LacklusterRxvolume,butmorestablegenericpricingdynamics:AccordingtoIQVIA,adj.prescriptionvolumedeclined3.0%inDecember,anotabledeteriorationfromthe-0.1%trendinNovember(4Qaveragevolumegrowthof-0.8%).BasedonouranalysisofthetotalgenericdrugsalesasreportedbyIQVIAonanunweightedbasis,thesell-sideASPforgenerictherapeuticsfell10.1%inDecember,animprovementfromthe11.7%declineinNovember.Onasales-weightedbasis,genericpricingdeclined3.2%inDecember,consistentwiththeNovemberandOctobertrends.Moreover,accordingtoNovemberNADACdata,asurveyperformedbytheCMStogaugetheaveragenationalacquisitioncostsforretailpharmaciesacrosstheUS,55.2%ofallreportedgenericsexperiencedpricedeclinesinexcessof5%,animprovementfromtheOctoberexperience(52.3%).Forcontext,ongoinggenericpricedeflationoverthepasttwoyears,hasweighedondrugdistributors,aspricedeclineshaveledtolowergrossprofitdollars,andwhilewedonotexpectasignificantreversalNT,thesupplychaingrouphasnotedstabilizingtrendsQTD,seeminglyalignedwithouranalysis.30January2019DrugDistributorUpdate2SummaryDespiteacontinuinglacklusterutilizationenvironment,wearecontinuouslyoptimisticasweheadinto2019onastabilizinggenericpricinglandscape,aswellasanincrementallyhealthierbrandedpriceinflationenvironmentthanpreviouslyexpected(oratleastbettervisibilitythereon),potentialsourcesofneartermrelief.Weviewopioidsandvariousadjustedaccountingmethodologiesforassociatedlegalandotherexpensesmaylikelybemoreofanareaofconversation,albeitnotentirelyquantified.Allinall,wecontinuetofavordistributorswithexposuretofaster-growing,higher-marginancillaryservices,whichshouldprovidediversificationfromdrugutilization/pricing,amongothersupplychaindynamics,whilealsoprovidinghighergrowthpotentiallongerterm.WefavorAmerisourceBergen(ABC)despitepersistingsetbackswithitsPharMEDiumbusiness,aswecontinuetolookfavorablyuponcontributionsfromitsnon-traditionalbusinessesincludingMWI,amongothers.Similarly,CardinalHealth(CAH)shouldbenefitfromafastergrowingspecialtypharmacybusinessaswellasgradualstepped-upcontributionsfromitsMedicalsegmentfollowingitsrecentMedtronicPatientRecoveryacquisition.WhilethequarterlyperformanceatCAHhastestedourpatience,wecontinuetobelieveitsdiversificationeffortswillbearfruit,albeitalongertermdynamicthanoriginallyanticipated,particularlyasitaddressesheadwindsatCordis,withtheimplementationoftechnologyinitiativesandmanagementchanges.FollowingtherecentnaviHealthdivestiture/JV,itiscleartousthatitisreviewingallaspectsofitsbusiness,withlikelymoretocome,peritscommentaryatourHealthcareConferenceinNovember(seenote).Ontheotherhand,weremainlesspositiveonMcKesson,whereitsM&Astrategyandreportingstructurecontinuetoobscurecorebusinessgrowth.Notably,focuswilllikelybeonupcomingCEOBrainTyler’s(effectiveMarch31)strategicvision,andwhilethetransitionshouldnotbeallthatsurprising,weacknowledgethismanagementchangecomesatatimewithlingeringuncertaintiesaroundtheevolvingunderlyinghealthcareenvironment,opioids,drugpricing,amongotherdynamics.Below,weincludeourhigh-levelthoughtsonrecentindustrytrends,aswellasourexpectationsforeachdistributorheadingintothequarter.30January2019DrugDistributorUpdate3Figure1:CSHealthcareSubsectorPerformance2012201320142015Biotechnology57