瑞信美股医疗保健行业美国药品分销Q2预览季度内趋势剖析201872029页

DISCLOSUREAPPENDIXATTHEBACKOFTHISREPORTCONTAINSIMPORTANTDISCLOSURES,ANALYSTCERTIFICATIONS,LEGALENTITYDISCLOSUREANDTHESTATUSOFNON-USANALYSTS.USDisclosure:CreditSuissedoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethattheFirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.20July2018Americas/UnitedStatesEquityResearchHealthcareTechnology&DistributionDrugDistributorUpdateS[e-mail],[e-mail]@credit-suisse.com2QPreview:Dissectingintra-quartertrends■2QPreview&Themes:Sharesfordrugdistributors,includingAmerisourceBergen(ABC,Outperform),CardinalHealth(CAH,Outperform),andMcKesson(MCK,Underperform),arecurrentlytradingata7.9xFY+2EV/EBITDAonaverage,ameaningfuldiscounttotheir8.9xfive-yearhistoricalaverage,withongoingconcernsrelatedtodrugpricing,contractrenewals,andAmazonheadlinesreverberatingacrossthesupplychain,inadditiontocompany-specificheadwindsrangingfromcontinuedintegrationheadwinds,Medicalsegmentwoes(CAH),andmanufacturingsuspensions(ABC).Still,ourviewisthatsomestabilityinthegenericdrugpricingenvironment(assupportedbyouranalysisandindustrycommentary)shouldsetupthedistributorsforpotentiallylessvolatilereports,barringanymajorcontractshifts,andourfocusisincreasinglyoncontributionsfromfastergrowing,moreprofitable,andoftentimesmorecapitalefficientancillarybusinesses,relevanttoourthesesforoursupplychaincompanies,whereweviewABCasrelativelybetterpositioned.■LacklusterRxvolume,butmorestablegenericpricingdynamics:AccordingtoIQVIA,adj.prescriptionvolumedeclined1.0%inJune,adecelerationfromthe-0.5%trendexperiencedinbothMayandApril(2Qaveragevolumegrowthof-0.7%).BasedonouranalysisofthetotalgenericdrugsalesasreportedbyIQVIAonanunweightedbasis,thesell-sideASPforgenerictherapeuticsfell11.2%(-4.9%weightedbysales)onaverageinMay,followinga13.8%decline(-5.1%weightedbysales)inApril,excludingLTMnewgenericlaunches.Moreover,accordingtoAprilNADACdata,asurveyperformedbytheCMStogaugetheaveragenationalacquisitioncostsforretailpharmaciesacrosstheUS,73%ofallreportedgenericsexperiencedpricedeclinesinexcessof5%,onlyslightlyhigherthantheMarchexperience(68%).Forcontext,ongoinggenericpricedeflationoverthepastyear+,hasweighedondrugdistributors,aspricedeclineshaveledtolowergrossprofitdollars,andwhilewedonotexpectasignificantreversalNT,thesupplychaingrouphasnotedstabilizingtrendsQTD,seeminglyalignedwithouranalysis.■Fine-tuningestimates,TPs:Withalacklusterdrugutilizationenvironmentinmind,weareadjustingthequarterlyprogressionofourEPSestimatesandouteryearassumptionsforABC(FY19EPSto$7.15,from$7.18),CAH(FY19EPSto$5.02,from$5.72,alsoonMedical,Optumcontractheadwinds),andMCK(FY19EPS$13.38,from$13.40).OurTargetPricesmoveto$109/$68/$129(from$110/$75/$130)forABC,CAH,andMCK,respectively,onthelowerestimatesandlongertermoverhangsincontractpricingdynamics,Amazonheadlines,andasustainedonerousdrugpricingenvironmentthatwilllikelycontinuetoweighonsentimentacrossthesupplychain.DrugpricingandotherHCcostcontainmentchatterinD.C.willinevitablydriveheadlinerisk,alsoconstitutinganoverhang.20July2018DrugDistributorUpdate2SummaryWhileheadlinesofAmazon'sentranceintothepharmacyspacewithitspendingacquisitionofPillPackhavemorerecentlydominatedconversations(andwilllikelyremainaheadlineriskfortheforeseeablefuture),ourviewisthataseeminglystabilizinggenericdrugpricingenvironmentnearterm(discussionenclosed)setsupthedistributorsforlessvolatileearningsreportsinthecomingquarters,barringunforeseenmajorcontractshifts.AsitrelatestoPillPack,thedealclearlyjumpstartsAmazon’saccesstodrugdispensing.Thatbeingsaid,enteringthecomplexpharmaceuticalsupplychainisnoteasy,andwewoulddeemphasizethepotentialforamaterialimpactNT.Inourview,focusshouldincreasinglyturntodistributors'faster-growing,higher-marginancillaryofferings,morerelevanttoourinvestmentthesisonsupplychainstocks.WefavorAmerisourceBergen(ABC)despiterecentsetbackswithitsPharMEDiumbusiness,aswecontinuetolookfavorablyuponcontributionsfromitsnon-traditionalbusinesses.Similarly,CardinalHealthshouldbenefitfromafastergrowingspecialtypharmacybusinessaswellasstepped-upcontributionsfromitsMedicalsegmentfollowingitsrecentMedtronicPatientRecoveryacquisition,andwhileCordiscontinuestobeadisappointment,expectationsforitsMedicalunitmaybesufficientlylow,withpreliminaryFY19EPSguidancecallingforonlymodestgrowthyoy.WhilethequarterlyperformanceatCAHhastestedourpatience,wecontinuetobelieveitsdiversificationeffortswillbearfruit,albeitalongertermdynamicthanoriginallyanticipated,particularlyasitaddressesheadwindsatCordis,withtheimplementationoftechnologyinitiativesandmanagementchanges.FollowingtherecentnaviHealthdivestiture/JV,itiscleartousthatitisreviewingallaspectsofitsbusiness,withlikelymoretocome.WhilewestillremainlesspositiveonMcKesson,thequartershouldbelesseve