Sam Fazeli Bloomberg Intelligence SP 500 7 Stoxx
Sam Fazeli Bloomberg Intelligence
S&P 500 -7% Stoxx 600 -14. 2% Hilary Clinton Risk Aversion 2
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1 Q 02 10/07/2002 2 Q 03 1 Q 04 06/08/2004 2 Q 05 1 Q 06 21/07/2006 2 Q 07 1 Q 08 4 Q 08 2 Q 09 4 Q 09 3 Q 10 1 Q 11 3 Q 11 2 Q 12 15/11/2012 04/05/2013 4 Q 13 3 Q 14 2 Q 15 11/02/2016 3 Q 16 2 Q 17 1 Q 18 4 Q 18 07/03/2019 50% 40% 30% 20% 10% 0% 100 -200% >200% Source: Bloomberg Intelligence Neg EV >100% + Neg EV % of Companies Trading above or below cash 5
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Large Pharma is Buying: Tesaro, Loxo, Spark – Celgene? Some pipelines still need boost: Gilead, Novo, Pfizer, Abb. Vie The U. S. tax reform did not change companies’ capital allocation strategy Pricing debate is intensifying in 2019 - This makes ownership of the best innovative drugs a priority – should continue to drive licensing deals FDA Commissioner Uncertainty 8
Source: Bloomberg Intelligence 9
70 60 50 Biosimilars EU Large Pharma FDA Defined Innovatives U. S. Large Pharma JP Large Pharma 40 30 20 10 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: Bloomberg Intelligence 10
End of cheap money – will make endless flow of capital to high beta tougher Drug Pricing Debate in 2019: § Part B reform – the problem is the price peg § Democrats push for direct negotiating power § 340 B discounts being abused § Trump’s Blueprint: – Permit Part D to deal with sole-source generics – Require list prices on TV – CMS experiment with value-based purchasing – Cap out of pocket expenses for seniors 11
Despite headwinds, we are positive on the sector because of the underlying drivers: 1. Large pharma need innovative drugs – biotechs are a great source of products and technologies 2. Drug price pressure feeds the need for innovative drugs 3. But watch out for cash needs of biotechs 12
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