We track Emerging Markets growth rates for our covered companies. It has accelerated consistently since mid-2016; in Q3 2018 it was 11.6% y/y. From Q1 2012 to Q3 2018, y/y growth has been: 6.4% (10.3% (9.1% (9.5% (6.4% (10.3% (9.1% (9.5% (7.4% (6.1% (3.9% (9.5% (6.4% (8.3% (10.9% (8.0% (7.5% (4.7% (3.6% (3.2% (4.4% (1.8% (3.6% (3.3% (5.8% (6.1% (7.4% (7.5% (9.1% (9.5% (11.6% (Exhibit 1).
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CELG used to be a darling but has fallen from grace for a couple of reasons. Of primary importance is the major financial burden CELG faces from 2022 onwards – if consensus is to be believed - due to Revlimid going off patent. But investors have also grown weary of current CELG management and the company’s inability to diversify away from Revlimid through successful pipeline delivery. This is why CELG has been trading at an approximate 6x P/E multiple on consensus 2020 EPS estimates, the lowest P/E multiple in the innovative biopharma space (even though consensus growth for CELG over the next 5y is compelling).
BMY announced it is acquiring CELG in a deal valued at roughly $70B. Below is our quick assessment following conclusion of the investor call.
For additional details on BMY and any of the other US/EU drug companies we cover, see our recent Monthly Controversies report: Global Pharmaceuticals - Outlook for 2019: January Issue of "Monthly Controversies" Report.
This report covers the bull/bear case, current controversies, relative growth prospects and more for our 10 US & EU global pharmaceutical companies.
The Medicare coverage gap, aka “donut hole”, has been a component of the Medicare Part D program since it was established in 2003. The presumed intent of the donut hole was to increase patients’ financial responsibility during some part of their care, with the hope that they would help contribute to making rational drug choice decisions. However, the enactment of the Patient Protection and Affordable Care Act (the “ACA”) in 2010 has sought to undo this – it encompassed legislation to lower beneficiaries’ financial exposure, with the goal of eliminating it completely by 2020.
We recently wrote a brief investor update on the investment case for BMY (BMY: Summarizing the Investment Case). In it, we said that it is time to move on from the idea that Opdivo+Yervoy in lung cancer is going to work. This is because the totality of the evidence thus far (from both BMY and AZN) has been that anti-CTLA4 therapies just don’t seem to do much in this particular tumor type. A bearish view on CTLA4 is not a thesis change for us, but for many of the former “bulls” on the stock it has been, and it is one of the reasons BMY shares have struggled.
On November 19th, we published a report (Global Pharmaceuticals - Removal of "Protected Drug Class" Status Coming?) claiming that the Administration may seek to change language related to the six “protected drug classes” in the near-term. Proposed changes have just been released (along with other proposals aimed at helping to manage healthcare spending; not addressed in this report). These proposals are not finalized, meaning it is not clear what ultimately survives the comment period that comes next; implementation would likely begin in 2020.
Presently, six classes of drugs are protected from aggressive formulary management in Medicare Part D plans. This “protected drug class” policy came into effect in 2003 when Medicare Part D was first established.
On Oct 22nd we re-initiated coverage on BMY with an Outperform rating, the first time we have been constructive in many years.
Since our recent re-initiation of coverage on BMY with an Outperform rating, some clients have raised concern about BMY’s future LOE (loss of exclusivity) burden, with one important product (arguably BMY’s most important product) being Opdivo.
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