1、North America Equity Research09 January 2020Healthcare Technology&DistributionGills Guide to the 2020 J.P.Morgan Healthcare ConferenceHealth Care Services Distribution,Technology&PBMsLisa C.Gill AC(1-212)622-Bloomberg JPMA GILL Michael Minchak,CFA AC(1-212)622-Bloomberg JPMA MINCHAK Anne E.Samuel AC
2、(1-212)622-Bloomberg JPMA SAMUEL J.P.Morgan Securities LLCSee page 62 for analyst certification and important disclosures.J.P.Morgan 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 c
3、ould affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.Happy New Year!Ahead of the 2020 J.P.Morgan Healthcare Conference next week,we thought it might be helpful to highlight key themes across the various sub-secto
4、rs as well as key company-specific topics we expect to be discussed at the conference.This report is broken down by sector:Pharmaceutical and Medical/Surgical Distribution,Retail Pharmacy,Clinical Labs,Dental Distribution and HCIT.We also include a financial snapshot for each company.All of our cove
5、red companies are attending the conference,with the exception of DPLO,which is in the process of being acquired by United.We also have over 95%CEO participation among the presenting companies.We are hosting a keynote panel with CMS Administrator Seema Verma at 12:15PM on Wednesday.We expect the disc
6、ussion to highlight transparency in healthcare,CMSs initiatives for value based care,drug pricing,telehealth,and Healthcare IT initiatives such as interoperability and empowering patients with control of their healthcare data.We are not anticipating many major announcements from companies in our spa
7、ce.Within our coverage universe,all of the Rx channel names have provided FY20 guidance with the exception of CVS(which had provided a preliminary outlook last June and plans to provide initial 2019 guidance with 4Q earnings on February 12),and DPLO(which is in the process of being acquired by Unite
8、d and is not attending).For the clinical labs,we expect LH and DGX to wait to issue formal 2020 guidance on their Q4 earnings calls.While TDOC has provided preliminary results/guidance at our conference in prior years,the company did not do this in 2019,and while we may get an update on utilization,
9、members or other developments,we believe the company will wait until 4Q earnings or the Analyst Day on 3/5 to provide full FY20 guidance.In years past,MDRX has made announcements at the conference(2019 updated 3 year plan,previous years have announced acquisitions),and last year HQY updated their 20
10、19 guidance.That said,we expect most of the HCIT companies to provide 2020 guidance on their 4Q19 earnings calls.Finally,given the timing,we note that MCK could provide an update on the exit of the Change Healthcare stake(timing or how it will be done).We expect Specialty to remain a key focus for i
11、nvestors and we will be hosting a panel on the Specialty Pharma and Gene Therapy Supply Chain.Specialty drugs represent the fastest-growing component of pharmaceutical spend,as a robust pipeline has led to an increase in new drug approvals.We will host our 5th Annual KOL Panel Breakfast:Specialty Ph
12、arma and Gene Therapy Supply Chain 2020 on Tuesday morning.The supply chain continues to evolve,as ongoing M&A has consolidated specialty pharmacy share among the large vertically-integrated PBMs,which not only dispense specialty drugs and provide patient support services,but also can drive lower ov
13、erall costs for plan sponsors through the use of utilization management tools,adherence programs and value-based designs.2North America Equity Research09 January 2020Lisa C.Gill(1-212)622- We expect the consumer and the shift to value based care will continue to be key themes at the conference.Compa
14、nies in our coverage universe are increasingly positioning themselves to capture these disruptive trends,and we expect them to discuss initiatives around this at the conference.As we published in our 2020 outlook,we think CVS is best positioned to capitalize on the consumer theme,followed by LH,TDOC
15、,and PHR.We look for color on broader strategic views in an evolving marketplace.Given ongoing news flow,we look for insights across a range of topics,including:vertically integrated models,the retailization of healthcare,opportunities to better engage consumers and thoughts on the potential threat
16、from disruptive entrants.We will also look for incremental commentary on various other factors that could impact earnings growth across the sector.These include utilization trends on both the pharma and medical sides,branded price inflation/generic deflation,the outlook for new generic launches/gene
17、ric sourcing,the pharmacy reimbursement environment,and insight into capital deployment,given strong cash flow generation and financial flexibility across nearly all of the companies in our coverage universe3North America Equity Research09 January 2020Lisa C.Gill(1-212)622-Equity Ratings and Price T
18、argetsMkt CapRatingPrice TargetCompanyTicker($mn)Price($)CurPrevCurEnd DatePrevEnd DateAmerisourceBergenABC US17,917.1685.45Nn/c91.00Dec-20n/cn/cCardinal HealthCAH US14,867.8250.06Nn/c56.00Dec-20n/cn/cMcKesson CorporationMCK US25,834.93140.56OWn/c169.00Dec-20n/cn/cOwens&Minor,Inc.OMI US301.715.04UWn
19、/cn/cn/cCVS HealthCVS US94,821.3072.66OWn/c97.00Dec-20n/cn/cWalgreens Boots Alliance IncWBA US49,833.8655.83Nn/c62.00Dec-20n/cn/cRite AidRAD US704.6313.15Nn/c12.00Dec-20n/cn/cLabCorpLH US18,027.21173.84OWn/c204.00Dec-20n/cn/cQuest DiagnosticsDGX US14,686.00104.90Nn/c107.00Dec-20n/cn/cHenry Schein In
20、cHSIC US10,092.7067.93Nn/c66.00Dec-20n/cn/cPatterson CompaniesPDCO US2,046.5221.75UWn/c20.00Dec-20n/cn/cCernerCERN US24,881.7073.45Nn/c75.00Dec-20n/cn/cChange HealthcareCHNG US4,014.5515.86OWn/c18.00Dec-20n/cn/cPremier,Inc.PINC US5,052.2635.92Nn/c45.00Dec-20n/cn/cTeladoc Health IncTDOC US6,220.8786.
21、22OWn/c94.00Dec-20n/cn/cAllscriptsMDRX US1,768.169.62Nn/c12.00Dec-20n/cn/cEvolent HealthEVH US672.019.86Nn/c9.00Dec-20n/cn/cHealth CatalystHCAT US1,323.6736.27OWn/c50.00Dec-20n/cn/cHealthEquityHQY US4,529.2373.33OWn/c75.00Dec-20n/cn/cLivongoLVGO US2,464.0926.08OWn/c43.00Dec-20n/cn/cNextGen Healthcar
22、e,Inc.NXGN US967.6415.52UWn/c17.00Dec-20n/cn/cPhreesiaPHR US116.1727.11OWn/c33.00Dec-20n/cn/cProgynyPGNY US2,562.0629.39OWn/c30.00Dec-20n/cn/cSource:Company data,Bloomberg,J.P.Morgan estimates.n/c=no change.All prices as of 08 Jan 20.Table of ContentsIntroduction.5Potential News flow at the JPM Heal
23、thcare Conference.5Historical JPM Healthcare Conference Stock Performance.6Conference Schedule.7Valuation and Price Targets.8Pharmaceutical and Med/Surg Distribution.10(ABC/N,CAH/N,MCK/OW,OMI/UW).10AmerisourceBergen.11Cardinal Health.13McKesson Corporation.15Owens&Minor,Inc.17Retail Pharmacy.19(CVS/
24、OW,WBA/N,RAD/N).194North America Equity Research09 January 2020Lisa C.Gill(1-212)622-CVS Health.20Walgreens Boots Alliance Inc.22Rite Aid.24Clinical Labs.26(LH/OW,DGX/N).26LabCorp.27Quest Diagnostics.29Dental Distributors.31(HSIC/N,PDCO/UW).31Henry Schein Inc.32Patterson Companies.34Healthcare IT.36
25、(CERN/N,CHNG/OW,PINC/N,TDOC/OW,MDRX/N,EVH/N,HCAT/OW,HQY/OW,LVGO/OW,NXGN/UW,PHR/OW,PGNY/OW).36Cerner.37Change Healthcare.39Premier,Inc.41Teladoc Health Inc.43Allscripts.45Evolent Health.47Health Catalyst.49HealthEquity.51Livongo.53NextGen Healthcare,Inc.55Phreesia.57Progyny.595North America Equity Re
26、search09 January 2020Lisa C.Gill(1-212)622-IntroductionIn the note below we highlight key topics for each subsector and company within our coverage universe as we head into the 2020 J.P.Morgan Healthcare Conference.The topics highlighted represent the top issues for each company as we think about bo
27、th the year ahead and longer-term growth prospects.Potential News flow at the JPM Healthcare ConferenceWhile we appreciate the access to management and the color we get on broader market conditions and company specific initiatives,we typically dont get a significant amount of material incremental ne
28、ws flow(i.e.,guidance updates,M&A,etc.)within our space at the J.P.Morgan Healthcare Conference.We note that within our coverage universe,15 companies have not yet provided initial FY20 guidance:CVS,LH,DGX,CERN,CHNG,TDOC,DPLO,OMI,HCAT,HQY,LVGO,EVH,MDRX,PHR,and PGNY.TDOC has provided preliminary resu
29、lts and guidance at our conference in prior years,although the company did not do this in 2019,and while we may get an update on utilization,members,or other developments,we believe the company will wait until 4Q earnings or the Analyst Day on March 5 to provide full FY20 guidance.While CVS had prov
30、ided a preliminary 2020 outlook at the Investor Day last June,the company has indicated that it would provide full FY20 guidance with 4Q19 earnings(February 12).While managements commentary around headwinds/tailwinds for the upcoming year drove a sharp reaction at the conference last year,CVS has al
31、ready provided this color for FY20 in conjunction with the preliminary FY20 outlook.LH has indicated plans to provide FY20 guidance with 4Q19 earnings,while DGX and CERN both also historically provide guidance for the upcoming year with the 4Q earnings release.In terms of other material news flow,wh
32、ile we note that McKesson(MCK/OW)had lowered guidance and provided a preliminary outlook for the year ahead at the J.P.Morgan Healthcare Conference in January 2016,we view that as a one-off,and are not anticipating a guidance update this year.That said,given the timing,we look for any additional ins
33、ights into the potential exit of the Change Healthcare stake(the company had previously discussed potentially exiting this stake by 1Q).Similarly,AmerisourceBergen(ABC/N)had announced the acquisition of MWI Veterinary Supply at the conference in January 2015,although the company has historically has
34、 not announced other large M&A transactions at the conference.In Healthcare IT,last year we saw a long term guidance update from Allscripts,and initial guideposts from HQY,which provided preliminary guidance on year end assets and HSA accounts.We note that on the recent 3Q earnings calls LVGO blesse
35、d Street 2020 revenue numbers,and PGNY provided initial results of the selling season.6North America Equity Research09 January 2020Lisa C.Gill(1-212)622-Historical JPM Healthcare Conference Stock PerformanceWe looked at the performance during the conference for our covered companies that presented a
36、t the conference in each of the past five years.Overall,as shown in Table 1 and Figure 1 below,the companies within our coverage universe that presented at the conference,on average,outperformed the S&P 500 in three of the past five years,including the most recent three years,after underperforming i
37、n 2016.Table 1:Average Stock Price Performance for Healthcare Technology&Distribution Covered Companies during the Conference vs.the S&P 500 and the S&P 500 Health Care IndexHealthcare Technology&DistributionCoverage UniverseS&P 500RelativePerformance(bps)S&P 500 Health Care Index RelativePerformanc
38、e(bps)2015-2.6%-2.5%0-1.7%-842016-3.9%0.0%-387-0.3%-35320173.7%-0.3%403-0.2%39420183.4%0.9%2501.0%24120193.6%2.6%1021.9%165Source:Bloomberg,J.P.Morgan.Figure 1:Average Stock Price Performance of Healthcare Technology&Distribution Covered Companies during the Conference vs.the S&P 500 and the S&P 500
39、 Health Care IndexSource:Bloomberg,J.P.Morgan.In Figure 2 below,we show the 5 best and worst performers among the companies in our coverage universe that presented at the conference in each of the past five conferences.Figure 2:Performance of Healthcare Technology&Distribution Covered Companies vs.S
40、&P 500 and S&P 500 Health Care IndexSource:Bloomberg,J.P.Morgan.-5.0%-2.5%0.0%2.5%5.0%20152016201720182019Healthcare Technology&DistributionCoverage UniverseS&P 500S&P 500 Health Care Index20152016201720182019BestWorstBestWorstBestWorstBestWorstBestWorstIMPR6.0%DPLO-13.2%MDRX4.6%CNXR-26.4%HQY18.5%PD
41、CO-5.0%RAD15.3%TDOC-11.5%MDRX12.6%DPLO-6.4%HQY3.9%VCRA-8.8%CVS2.1%MCK-9.7%ABCO15.5%MCK-1.5%EVH12.7%PDCO-2.7%TDOC12.4%EVH-4.0%ESRX-0.7%CNXR-6.7%ABCO1.0%ESRX-9.6%EVH10.7%CAH-1.5%CAH9.3%ATHN-1.0%OMI10.9%HQY-3.4%CVS-0.8%RAD-6.3%WBA1.0%TDOC-7.5%MDRX9.1%ABC-1.1%DPLO8.9%HSIC0.0%MCK6.7%CVS-1.9%LH-0.9%MDAS-5
42、.7%HQY1.0%EVH-6.0%TDOC8.2%OMI-0.6%ESRX5.4%CVS0.7%HSIC6.7%PINC1.8%7North America Equity Research09 January 2020Lisa C.Gill(1-212)622-Conference ScheduleBelow,we include a list of the key events within the Healthcare Technology&Distribution space,including times for company presentation/breakout sessi
43、ons,as well as relevant panel discussions.Table 2:Healthcare Technology&Distribution-Conference ScheduleMonday January 13Room/Breakout9:00AMTeladoc HealthColonial/Georgian10:00AMCardinal HealthCalifornia East/Yorkshire11:00AMProgynyCalifornia East/Yorkshire12:00PMHealth CatalystCalifornia West/Olymp
44、ic2:00PMAmerisourceBergenColonial/Georgian4:30PMOption CareCalifornia East/YorkshireTuesday January 147:00AMSpecialty Pharma and Gene Therapy Supply Chain*St.Francis Suite East(12th Floor)7:30AM Change HealthcareElizabethan A/B/Sussex8:00AM Patterson CompaniesElizabethan A/B/Sussex8:30AM LivongoCali
45、fornia East/Yorkshire9:00AMMcKesson CorporationColonial/Georgian10:00AMCVS HealthColonial/Georgian10:30AMPhreesiaElizabethan A/B/Sussex11:00AMCernerColonial/Georgian1:30PMLabCorpColonial/Georgian2:30PMPremier IncCalifornia West/Olympic4:00PMNextGen HealthcareElizabethan A/B/Sussex4:30PMQuest Diagnos
46、ticsGrand Ballroom/BorgiaWednesday January 158:00AMR1 RCMElizabethan A/Sussex9:30AMHealth EquityGrand Ballroom/Borgia9:30AMCovetrusElizabethan B/Elizabethan C11:00AMHenry ScheinColonial/Georgian12:15PMKeynote:Dr.Seema Verma,with Lisa Gill&Gary Taylor*Grand Ballroom2:00PMWalgreens Boots AllianceGrand
47、 Ballroom3:00PMEvolent HealthColonial/Georgian4:00PMAllscriptsColonial/GeorgianThursday January 169:00AMOwens&MinorColonial/GeorgianSource:J.P.Morgan.*denotes panel discussion.8North America Equity Research09 January 2020Lisa C.Gill(1-212)622-Valuation and Price TargetsIn Table 3 below we provide a
48、summary valuation table of our coverage universe and on the following page in Table 4 we provide a summary of our December 2020 target prices for each company.Table 3:J.P.Morgan Healthcare Technology&Distribution Coverage Universe Summary Valuation TableTickerJPMPriceMkt CapEPSP/EEV/EBITDA2019 Stock
49、 Price PerfRating 1/8/20($B)CY20ECY21ECY20ECY21ECY20ECY21EAbsoluteRel to S&PDrug DistributorsAmerisourceBergenABC N$85.45$17.9$7.68$8.29 11.1 10.3 7.77.314.3%-14.6%Cardinal HealthCAH N$50.06$14.9$5.07$5.46 9.9 9.2 8.07.713.4%-15.5%McKessonMCK OW$140.56$25.8$14.94$16.50 9.4 8.5 8.17.825.2%-3.7%Averag
50、e10.19.37.97.617.6%-11.2%Retail PharmaciesCVS HealthCVS OW$72.66$94.8$7.12$7.61 10.2 9.5 8.78.413.4%-15.5%Rite AidRADN$13.15$0.7$0.57$0.7123.318.67.77.69.2%-19.7%Walgreens Boots AllianceWBAN$55.83$49.8$5.78$6.199.79.08.17.8-13.7%-42.6%Average9.99.38.27.93.0%-25.9%PBM/Spec PharmacyDiplomatDPLON$4.11$
