瑞信美股医疗科技行业兽医追踪三季度兽医产业EPS驱动2018103121页

DISCLOSUREAPPENDIXATTHEBACKOFTHISREPORTCONTAINSIMPORTANTDISCLOSURES,ANALYSTCERTIFICATIONS,LEGALENTITYDISCLOSUREANDTHESTATUSOFNON-USANALYSTS.USDisclosure:CreditSuissedoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethattheFirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.31October2018Americas/UnitedStatesEquityResearchHealthcareTechnology&DistributionAnimalTracksC[e-mail],[e-mail]@[e-mail]3QEPSDriversinAnimalHealthPositiveonZoetis(ZTS)andElanco(ELAN)intotheprint:Onbalance,3QQTDresultsfromleadinganimalhealth(AH)pharmaceuticalcompaniesofferapositiveread-throughforZoetis(ZTS,Outperform)andElanco(ELAN,Neutral)intotheirupcoming3QEPSreportsonNov.1stand6th,respectively.Asinpreviousquarters,morediversifiedcompaniesbygeography,species,andtherapeuticclassfaredbetterthanotherswithmoreconcentratedportfolios.Whiletherewerecompany-specificcaveatsacrossreports,strengthinCompanionAnimal(consistentwithourvetsurvey:‘3Qvetdemandhasbite’)andLivestocktrendsreaffirmourconvictionheadingintoupcoming3Qreports.Ofnote,forZoetis,weareforecastingsalesgrowthof+7%(+5%ex-FXandABAXIS),onrisesof14%inCompanionAnimaland4%inLivestock.ForElanco,weestimatetoplinegrowthof+5%(+16%ex-FXandStrategicExits),drivenby+29%inCompanionasitlaps2H17distributordestocking.■Merck(#3AHcompany):MerckAnimalHealth’s3Qrevenuesrose6%(excl.FX),onstrengthintheUS(+6%)andinternational(+5%,ex-FX).Whilethetrendslowedsequentially,weviewtheresultsasrespectable,withahealthylivestockexperience(+5%excl.FX)drivenbyruminantandpoultryproducts,andstrongCompanionAnimal(+7%ex-FX)helpedbyitschewableflea/tickproductBravecto,partiallyoffsetbydistributordestocking,followingabolusin2Qassociatedwiththeonsetofalaterfleaandtickseason.MerckisoneofthemostdiverseAHcompaniesbytherapeuticclass,andasthethirdlargestplayerintheindustry,itsresultsareinherentlymorerelevanttoZoetisandElanco.■Virbac(#7AHcompany):Virbacposted3Qconstantcurrencyrevenuegrowthof+9%,representingasequentialacceleration,withYTDincreasesof8%and3%inCompanionAnimalandFoodAnimal,respectively.InCompanionAnimal,USsalesofheartwormproductSentinelclimbed7%(normalizedfordistributorshifts)in3Q,whilebovineexpanded8%.However,itnoteddeclinesof4%and15%inswine/poultryandaquaculture,respectively.Whilelessdiversified,weviewVirbac’sacceleratinggrowthasencouraging.■Vetoquinol(#10AHcompany):Whilealsolessdiversified,Vetoquinolrevenuegrowthslowedin3Q,increasing2%ex-FX.Consistentwithotherindustryconstituents,VetoquinolexperiencedstrongerYTDgrowthinCompanionAnimal(+5%)thaninLivestock(+3%).ItsEssentialscategory,whichincludesveterinaryproductsmarketedtobothsmallandlargeanimalveterinarians,posted+7%organicgrowthYTD,adecelerationvs.1H18(+10%).GivenVetoquinol’slessdiversifiedproductmixandinherentlysmallersize/scale,theresultsarelikelylessrelevanttoZoetisandElanco.■Industrycommentaryenclosed:Read-throughtoIDEXX’sNov.1EPSReport,plusupdatesonBayerandDechra.31October2018AnimalTracks23QAnimalHealthReportCardQuarter-to-dateearningsreportsfromanimalhealthindustryconstituentsgenerallypointedtocontinuinghealthydynamicsacrossthecompanionanimalandlivestockmarkets.Onbalance,thetrendswereencouraging,excludingfactorssuchascompany-specificregional/productexposures,aswellastimingofdistributor/customerpurchases.Figure1:LeadingAnimalHealthPharmaceuticalCompanies–2017RevenueFigure2:AnimalHealthPharmaceuticalRevenue—SpeciesMix(basedon2017revenue)$5.3$4.4$3.9$2.9$1.8$1.2$1.0$0.5$0.5$0.4$0.0$1.0$2.0$3.0$4.0$5.0$6.0ZoetisBoehringerIngelheimMerckElancoBayerCevaVirbacPhibroDechraVetoquinol42%59%40%33%60%29%56%0%79%55%57%41%60%67%40%71%44%100%13%45%8%ZoetisBIVIMerckElancoBayerCevaVirbacPhibroDechraVetoquinolCompanionAnimalProductionAnimalOtherSource:Companydata,CreditSuisseestimates.DollarsinBillions.Source:Companydata,CreditSuisseestimates.BIVI=BoehringerIngelheimVetmedica.Figure3:AnimalHealthComparableCompanyAnalysisCSPriceUpside/10/30/18MarketAvgVolRevenue(CY)Avg(5yr)EPS(CY)Avg(5yr)Avg(5yr)P/Sales(CY)P/E(CY)EV/EBITDA(CY)DividendTickerRatingTargetDownsidePriceCap(000's)20192020Growth20192020GrowthGrowth201920202019202020192020YieldProductsZoetisZTSOutperform$955%$90.18$43,4512,225$6,327$6,6994%$3.50$3.8814%12%6.9x6.5x25.8x23.2x18.6x17.1x0%IDEXXLaboratoriesIDXXOutperform$25923%$210.22$18,203528$2,491$2,7509%$4.92$5.5118%11%7.3x6.6x42.7x38.2x28.9x26.3x-ElancoAnimalHealthELANNeutral$3617%$30.85$11,2803,427$3,131$3,2270%$1.06$1.3017%15%3.6x3.5x29.1x23.7x19.5x17.4x-PhibroAnimalHealthPAHCNeutral$42-2%$43.00$869120$885$9334%$1.83$2.1034%10%1.0x0.9x23.4x20.5x8.3x7.3x0%GenusplcGNS-GB$22.16$1,373129$505$5397%$0.79$0.8729%15%2.7x2.5x28.0x25.4x18.5x16.9x0%NeogenNEOG$62.97$3,274409$452$49214%$1.29$1.4417%14%7.2x6.7x48.9x43