1、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 awar
2、e 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.30 January 2019Americas/United StatesEquity ResearchHealthcare Technology&Distribution Drug Distributor U
3、pdate SECTOR REVIEWResearch AnalystsErin Wilson Wright212 538 4080erin.wrightcredit-Charles Lederer,CPA212 538 1822charles.lederercredit-Katie Tryhane212 325 2713katie.tryhanecredit-George Engroff212 325 2289george.engroffcredit-4Q Preview:Dissecting Intra-Quarter Trends;Generic Deflation Trend Stab
4、ilizes 4Q Preview&Themes:Shares for drug distributors,including AmerisourceBergen(ABC,Outperform),Cardinal Health(CAH,Outperform),and McKesson(MCK,Underperform),are currently trading at a 7.0 x FY+2 EV/EBITDA on average,a meaningful discount to their 8.8x five-year historical average,with ongoing co
5、ncerns related to drug pricing scrutiny,opioids,contract renewals,and Amazon headlines reverberating across the supply chain,in addition to company-specific headwinds ranging from continued integration headwinds,Medical segment woes(CAH),and manufacturing suspensions(ABC).Still,our view is that some
6、 stability in the generic drug pricing environment(as supported by our analysis and industry commentary)as well as healthier than previously expected branded price inflation should drive potentially less volatile 4Q reports,barring any major contract shifts,and our focus is increasingly on contribut
7、ions from faster growing,more profitable,and oftentimes more capital efficient ancillary businesses,relevant to our theses for our supply chain companies,where we view ABC as relatively better positioned.Lackluster Rx volume,but more stable generic pricing dynamics:According to IQVIA,adj.prescriptio
8、n volume declined 3.0%in December,a notable deterioration from the-0.1%trend in November(4Q average volume growth of-0.8%).Based on our analysis of the total generic drug sales as reported by IQVIA on an unweighted basis,the sell-side ASP for generic therapeutics fell 10.1%in December,an improvement
9、 from the 11.7%decline in November.On a sales-weighted basis,generic pricing declined 3.2%in December,consistent with the November and October trends.Moreover,according to November NADAC data,a survey performed by the CMS to gauge the average national acquisition costs for retail pharmacies across t
10、he US,55.2%of all reported generics experienced price declines in excess of 5%,an improvement from the October experience(52.3%).For context,ongoing generic price deflation over the past two years,has weighed on drug distributors,as price declines have led to lower gross profit dollars,and while we
11、do not expect a significant reversal NT,the supply chain group has noted stabilizing trends QTD,seemingly aligned with our analysis.每日免费获取报告1、每日微信群内分享7+最新重磅报告；2、每日分享当日华尔街日报、金融时报；3、每周分享经济学人4、行研报告均为公开版，权利归原作者所有，起点财经仅分发做内部学习。扫一扫二维码关注公号回复：研究报告加入“起点财经”微信群。30 January 2019Drug Distributor Update2SummaryDes
12、pite a continuing lackluster utilization environment,we are continuously optimistic as we head into 2019 on a stabilizing generic pricing landscape,as well as an incrementally healthier branded price inflation environment than previously expected(or at least better visibility thereon),potential sour
13、ces of near term relief.We view opioids and various adjusted accounting methodologies for associated legal and other expenses may likely be more of an area of conversation,albeit not entirely quantified.All in all,we continue to favor distributors with exposure to faster-growing,higher-margin ancill
14、ary services,which should provide diversification from drug utilization/pricing,among other supply chain dynamics,while also providing higher growth potential longer term.We favor AmerisourceBergen(ABC)despite persisting setbacks with its PharMEDium business,as we continue to look favorably upon con
15、tributions from its non-traditional businesses including MWI,among others.Similarly,Cardinal Health(CAH)should benefit from a faster growing specialty pharmacy business as well as gradual stepped-up contributions from its Medical segment following its recent Medtronic Patient Recovery acquisition.Wh
16、ile the quarterly performance at CAH has tested our patience,we continue to believe its diversification efforts will bear fruit,albeit a longer term dynamic than originally anticipated,particularly as it addresses headwinds at Cordis,with the implementation of technology initiatives and management c
17、hanges.Following the recent naviHealth divestiture/JV,it is clear to us that it is reviewing all aspects of its business,with likely more to come,per its commentary at our Healthcare Conference in November(see note).On the other hand,we remain less positive on McKesson,where its M&A strategy and rep
18、orting structure continue to obscure core business growth.Notably,focus will likely be on upcoming CEO Brain Tylers(effective March 31)strategic vision,and while the transition should not be all that surprising,we acknowledge this management change comes at a time with lingering uncertainties around
19、 the evolving underlying healthcare environment,opioids,drug pricing,among other dynamics.Below,we include our high-level thoughts on recent industry trends,as well as our expectations for each distributor heading into the quarter.30 January 2019Drug Distributor Update3Figure 1:CS Healthcare Subsect
20、or Performance2012201320142015Biotechnology57.6%Specialty Pharma91.7%Managed Care42.6%Contract Services42.0%Hospitals37.3%Drug Retailers&PBMs81.2%Biotechnology38.8%Managed Care19.8%Diagnostics32.8%Biotechnology71.4%Specialty Pharma37.3%Animal Health11.4%Drug Retailers&PBMs32.7%Drug Distributors63.8%
21、Hospitals36.9%Diagnostics16.7%Contract Services37.2%Healthcare Technology46.1%Drug Retailers&PBMs29.1%Dental*14.3%Animal Health27.7%Contract Services57.1%Medical Devices28.1%Life Science Tools14.0%Life Science Tools26.5%Hospitals44.0%Animal Health19.7%Clinical Laboratories10.3%Medical Devices16.9%Me
22、dical Devices40.9%Diagnostics26.1%Drug Retailers&PBMs7.9%Drug Distributors14.0%Managed Care40.3%Drug Distributors25.9%Medical Devices7.7%S&P 500 Index13.4%Life Science Tools38.7%Contract Services22.1%Biotechnology7.6%Healthcare Technology3.2%Dental*37.0%Dental*23.9%Drug Distributors6.9%Specialty Pha
23、rma9.0%S&P 500 Index29.6%Clinical Laboratories21.7%Specialty Pharma3.8%Large Cap Pharma7.5%Diagnostics28.5%Large Cap Pharma14.0%Large Cap Pharma2.2%Dental*6.7%Large Cap Pharma27.1%Life Science Tools11.5%Healthcare Technology1.5%Managed Care5.9%Animal Health24.0%S&P 500 Index11.4%S&P 500 Index-0.7%Cl
24、inical Laboratories0.6%Clinical Laboratories-1.3%Healthcare Technology-6.6%Hospitals-17.9%2016201720182019 YTD(as of 1/29/19)Animal Health24.6%Managed Care47.5%Diagnostics19.6%Hospitals17.2%Clinical Laboratories16.5%Life Science Tools40.5%Managed Care17.4%Specialty Pharma15.7%Managed Care12.1%Diagno
25、stics40.5%Medical Devices17.3%Biotechnology14.5%Medical Devices11.1%Contract Services28.7%Healthcare Technology16.0%Contract Services12.1%S&P 500 Index9.5%Animal Health35.5%Large Cap Pharma9.7%Life Science Tools10.4%Healthcare Technology4.6%Medical Devices22.5%Animal Health2.6%Drug Distributors10.3%
26、Contract Services10.0%Biotechnology22.3%Contract Services2.5%Dental*9.1%Life Science Tools4.3%Healthcare Technology34.0%Life Science Tools2.3%Managed Care9.0%Dental*3.0%S&P 500 Index19.4%Hospitals-6.0%Drug Retailers&PBMs6.5%Large Cap Pharma-1.4%Dental*16.9%S&P 500 Index-6.2%Clinical Laboratories5.8%
27、Drug Retailers&PBMs-9.6%Clinical Laboratories15.7%Biotechnology-8.6%S&P 500 Index5.3%Diagnostics-14.8%Large Cap Pharma10.9%Specialty Pharma-14.7%Healthcare Technology5.0%Biotechnology-21.9%Drug Distributors4.5%Drug Retailers&PBMs-14.0%Medical Devices4.5%Drug Distributors-24.3%Hospitals-3.8%Clinical
28、Laboratories-18.1%Diagnostics2.4%Hospitals-29.9%Specialty Pharma-12.8%Dental*-21.7%Animal Health1.0%Specialty Pharma-36.2%Drug Retailers&PBMs-22.0%Drug Distributors-25.1%Large Cap Pharma-4.2%Source:Thomson Reuters Datastream,Credit Suisse;Note:Dental peer group does not include Align Technologies(AL
29、GN)A quick cut of our previous quarter takeawaysIn the most recent quarterly report,MCKs shares were flat despite its F2Q beat on a guidance raise that did not fully encompass the EPS upside,driven by incremental headwinds in the UK/France,as well as the impact of US customer losses and opioid litig
30、ation expenses above internal expectations($100 million now expected in FY19).While the pricing environment appears to be stabilizing,with regulatory pressures also seemingly retreating,at least to some extent,where a split House-Senate scenario limits transformational changes across the healthcare
31、landscape,we still maintain our Underperform on MCK.All in,we require further clarity on MCKs LT growth expectations,margin opportunity,and strategic priorities in order to become more constructive on the stock.We are forecasting F3Q EPS of$3.19(-6.5%,vs.consensus$3.16),predicated on+2.7%revenue gro
32、wth,with+2.6%US Pharmaceutical and Specialty Solutions,+0.2%European Pharmaceutical Solutions,+11.9%Med-Surg,and+4.8%Other.We also forecasted slight EBITDA margin contraction(13 bps).ABCs shares fell 5%following its 4Q operational miss and preliminary 2019 EPS guidance unveiling of$6.65-$6.95(vs.pri
33、or consensus$7.11),owing in large part to continuing PharMEDium challenges.While ABC was the best performing distributor in 2018(-19.0%vs.distributor avg.25.1%),it largely underperformed the S&P(-6.2%)also on regulatory concerns,drug pricing,and competitive landscape(Amazon)headlines,which we view a
34、s overblown.Despite ongoing PharMEDium woes and risk factors in supply contracts,we maintain our constructive thesis on ABC,where we see revenue and profit drivers in a potentially stabilizing generic pricing environment,WBAs maturing pharmacy network relationships,RAD onboarding,ESRX relationship,a
35、nd contributions from its other diversified non-core units as positives.We are forecasting F1Q EPS of$1.53(-1.4%vs.consensus$1.51),predicated on+5.0%Pharmaceutical Distribution growth,tempered by ongoing headwinds at PharMEDium 30 January 2019Drug Distributor Update4and Lash,and+10.0%Specialty growt
36、h,as well as a 5 bps EBITDA margin deterioration.CAHs F1Q EPS was ahead on tax,and while profitability was clearly disappointing across each core segment,it maintained underlying guidance.Since its most recent earnings reports,investor concern has remained around the implied 2H ramp,and while we adm
37、it 2019 clearly continues to be a transition year for CAH,expectations appear low,with upside potential from healthier than expected branded pricing inflation,a stabilizing generic pricing environment,continuing strength in its Patient Recovery business,and cost saving opportunities.Though we note C
38、AHs quarterly missteps have challenged our patience,we continue to remain positively disposed toward the stock,given the aforementioned opportunities,and view a clearer path to profitability at Cordis can reestablish enthusiasm for shares.We are forecasting F2Q EPS of$1.04(-33.9%,vs.consensus$1.09),
39、predicated on-0.4%revenue growth(incl.-0.7%Pharmaceutical,+2.0%Medical),as well as EBITDA margin contraction(67 bps).Figure 2:Drug distributor FY+2 P/E ratioFigure 3:Drug distributor FY+2 EV/EBITDA ratio 5.0 x7.0 x9.0 x11.0 x13.0 x15.0 x17.0 x19.0 x21.0 x23.0 xJan-14May-14Sep-14Jan-15May-15Sep-15Jan
40、-16May-16Sep-16Jan-17May-17Sep-17Jan-18May-18Sep-18Jan-19Hist AvgABCCAHMCKHistorical AveragesABC:14.9xCAH:13.7xMCK:13.1x5.0 x6.0 x7.0 x8.0 x9.0 x10.0 x11.0 x12.0 x13.0 xJan-14May-14Sep-14Jan-15May-15Sep-15Jan-16May-16Sep-16Jan-17May-17Sep-17Jan-18May-18Sep-18Jan-19Hist AvgABCCAHMCKHistorical Average
41、sABC:9.1xCAH:8.5xMCK:8.9xSource:Credit Suisse estimates,FactsetSource:Credit Suisse estimates,FactsetKey Trends of Diverging Business ModelsWhile the drug distributors were traditionally seen as largely homogenous,their varying approaches to capital deployment and strategic positioning in a rapidly
42、evolving healthcare environment have contributed to greater differentiation between the business models of the big three drug distributors.Each company now earns a more substantial portion of its consolidated operating profit from businesses outside of traditional US pharmaceutical distribution.Belo
43、w we review both the core and ancillary business operations of each distributor,highlighting how the business models are diverging.AmerisourceBergen(ABC,Outperform)In a stabilizing drug pricing environment(as supported by our proprietary analysis and industry commentary),our thesis is predicated on
44、its best-in-class partnerships that will help drive incremental market share gains(i.e.,WBA,ESRX)over the near and longer term,contributions from its more diversified offering of non-distribution units,as well as capital deployment optionality.While investor commentary surrounding a potential WBA/AB
45、C deal heated up in early 2018,in the wake of consolidation across the healthcare continuum,the speculation has subsided,albeit not totally off the table(re:change in contractual provisions).Nonetheless,we continue to view ABC as best positioned amongst the drug distributors for organic 30 January 2
46、019Drug Distributor Update5revenue growth,though we continue to closely monitor ongoing headwinds,most notably its PharMEDium manufacturing facility closure and its customer migration and onboarding headwinds at Lash.We highlight key areas of interest/concerns into the F1Q print.PharMEDium headwinds
47、 persistPreviously expected to be resolved by the end of F2Q18,production at PharMEDiums Memphis outsourcing facility remains voluntarily suspended as it completes certain remediation measures.Currently,ABC is uncertain as to when the facility will be reopened,and it remains in discussion with the F
48、DA and with the Civil Division of the DOJ to talk about potential resolutions.Importantly,half of PharMEDiums manufacturing normalized production capacity resided within the Memphis facility.Given the uncertain timing of the Memphis facility reopening,ABCs FY19 guidance incorporates a range of three
49、 scenarios at PharMEDium.The first scenario assumes PharMEDium will be a tailwind for ABC,while the second assumes its contribution will be flat compared to FY18.The last scenario incorporates a more lengthy delay in the opening of the Memphis facility,causing a sizeable headwind for ABC in FY19.All
50、 in all,ABC expects PharMEDium to be a 2-3%impact on operating income growth in the Pharmaceutical Distribution segment.Despite ongoing setbacks,ABC remains committed to enhancing PharMEDiums quality assurance and control program,and it continues to view strong business fundamentals.While several in