INO Health & Biotech Stock Guide

Issue #15

BIOTECH, HEALTH & PHARMA NEWS

Healthcare sector earnings are underway and thus far overall earnings have been robust overall with pockets of softness. From the health insurer side, UnitedHealth (UNH) beat on both EPS and revenue with revenue coming in at a 9.4% year-over-year growth. From the pharmaceutical supply chain, Cardinal Health (CAH) beat on EPS, missed on revenue and disappointed investors when they offered a softer outlook for fiscal 2017 and 2018. This set off a sell-off in the pharmaceutical supply chain stocks. In the biotech space, AbbVie (ABBV) beat on both EPS and revenue with revenue coming in at 9.7% year-over-year growth, Celgene (CELG) beat on EPS and missed on revenue, however revenue came in at a 17.9% increase year-over-year, Regeneron (REGN) missed on EPS, but beat on revenue with a 10% year-over-year growth, Amgen (AMGN) beat on EPS however missed on revenue with a year-over-year decline of 1.3%. In the pharmacy and PBM side, CVS Health (CVS) beat on both EPS and revenue with a 3.0% year-over-year increase and Walgreens (WBA) met EPS and missed on revenue with a year-over-year decline of 2.4%. As Q1 comes to a close, it appears the healthcare cohort has some softness in the pharmacy and pharmaceutical supply chain spaces however biotech and health insurers have posted robust revenue growth.

WHAT'S NEXT

A couple of major acquisitions have taken place recently with Cardinal Health acquiring Medtronic’s medical supplies business and Becton Dickinson acquiring C.R. Bard. Cardinal Health announced that it has agreed to acquire Medtronic’s medical supplies business for $6.1 billion in an all-cash transaction. This transaction provides Cardinal Health with Medtronic’s 23 product categories in the patient care, deep vein thrombosis and nutritional insufficiency business. Medical supply manufacturer Becton Dickinson reached terms to acquire C.R. Bard for $24 billion in a cash-and-stock deal. The purchase price was a 25% premium over the company’s share price at the time of the announcement. Becton Dickinson believes that this acquisition will improve its market position in medication management and infection prevention via enhancing and broadening its portfolio of products. Also, adding Bard’s devices to its portfolio in the high growth sectors of oncology and surgery. Brad shareholders will receive $222.93 in cash and 0.5077 shares of Becton Dickinson stock for each Bard share. Roughly two years ago Becton Dickinson acquired CareFusion for $12 billion and earlier this year Abbott Labs acquired St. Jude Medical for $25 billion. There’s been a long string of mergers and acquisition in the medical device sector in recent years in an effort to accelerate earnings amid a backdrop of slowed growth and pricing pressure from healthcare companies to contain costs.

INDUSTRY OUTLOOK

The International Liver Congress - EASL and The Liver Meeting - AASLD took place with a whole host of clinical abstracts covering Hepatitis B, Hepatitis C and NASH (non-alcoholic steatohepatitis). In particular, there’s been a lot of activity in the potentially lucrative NASH space. NASH is a progressive fatty liver disease poised to become the leading cause of liver transplants by 2020. Big pharma has identified this liver condition as the next frontier in the liver space. There are currently no approved treatments for those that are diagnosed with this disease. Many promising early stage compounds have shown proof of concept and indications of efficacy in smaller phase I and phase II. It will be exciting to see how the NASH space unfolds over the next two years.

Outside of these conferences, AbbVie recently announced two phase III trials evaluating its PARP inhibitor, veliparib in combination with chemotherapy. Both trials failed to reach their primary end points. One study assessed its effectiveness in lung cancer while the other study evaluated its effectiveness in breast cancer. Two additional phase III trials in breast and ovarian cancer are ongoing.

Overall, earnings have been robust with a few misses layered in throughout earnings season in the healthcare sector. As merger and acquisition activity continues, this could propel the sector higher as measured via sector ETFs such as iShares NASDAQ Biotechnology Index (IBB).

FEATURED STOCK / ETF - AbbVie (ABBV)

ABOUT THE EDITOR - Noah Kiedrowski

I am biotechnology professional with a diverse scientific background and detailed knowledge in many therapeutic areas such as monoclonal antibodies, immunotherapies and antivirals. I have a personal interest in finance, investing, trading and global markets. My analysis is focused on stocks and exchange traded funds (ETFs) while exploring niche opportunities such as derivative trading via options. This newsletter is intended to provide investors with the latest developments and trends regarding the overall healthcare sector with a biotechnology emphasis. I'll be highlighting sector trends, merger and acquisition activity, noteworthy current events, political developments and drug approvals. My focus will be centered on well-established mid-cap and large-cap companies as well as utilizing appropriate ETFs as proxies for sector trends. This is a bi-monthly newsletter service that reflects my own opinions and analyses. This newsletter is not intended to be a recommendation to buy or sell any stock or ETF mentioned. I am not a professional financial advisor or tax professional, rather an individual investor who analyzes investment strategies and disseminates my analyses. I encourage all investors to conduct their own research and due diligence prior to investing.

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This bi-monthly newsletter service reflects the opinions and analyses of INO Contributor, Noah Kiedrowski, founder of www.stockoptionsdad.com. This newsletter is not intended to be a recommendation to buy or sell any stock or ETF mentioned. Kiedrowski is not a professional financial advisor or tax professional, rather an individual investor who analyzes investment strategies and disseminates his own analyses. All traders and investors should conduct their own research and due diligence prior to investing.