醫(yī)療科技與分發(fā)：從舊金山我們了解到什 么

1、Healthcare Technology & DistributionWhat We Learned in San FranciscoNorth America Equity Research14 January 2019Last week, we hosted our 37th Annual J.P. Morgan Healthcare Conference. While there was not a significant amount news across our group, as always, we saw it as a great opportunity to inter

2、act management teams and hear about broader market conditions, as well as company-specific initiatives and expectations. the presentations and meetings reaffirmed the key themes that have driven our broader sector and company-specific views, including: consumerism, specialty, the shift to value-base

3、d care and capital deployment. While sentiment across the majority of our coverage universe remains somewhat weaker, covered companies were up 3.6% average, during the conference, vs. a 2.6% increase in the S&P 500, marking the third consecutive year outperformance. Beginning at 9am EST today, the J

4、.P. Morgan Healthcare team will host a series calls with takeaways from conference (please contact us or your J.P. Morgan sales representative fordetails).CVS remains our top pick for 2019, while we also highlight other OW- rated names (TDOC, LH, MCK, WBA and DPLO). We continue to these companies to

5、 be beneficiaries the themes identified 2019. CVS remains our top pick, and while the headwinds/tailwinds for 2019 weighed more heavily towards headwinds, (see our note published Friday with updated estimates) believe in the strategy and continue to believe the company is one the best positioned com

6、panies in our coverage universe over the term. TDOC provided bullish commentary around the selling and the United Healthcare relationship. LabCorp spoke to a challenging 2019 given managed care & PAMA headwinds, but sees these mitigating somewhat in 2020 and highlighted the growing importance of the

7、 consumer and remains very positive on opportunities Covance. Commentary on branded price increases was in line with expectations, easing an ongoing concern for MCK and the drug distributors. While there was nothing new from WBA, the company remains optimistic around partnerships and the cost-cuttin

8、g program. Finally, on while the preliminary FY19 guidance was disappointing, the issues the PBM side as fixable and believe valuation isattractive.We believe the two large retail pharmacy chains are taking important steps to position themselves for the longer term. Reimbursement pressure continues

9、to remain a headwind to margins, while the shift to preferred and narrow networks can drive script volume but also add to margin pressure. As have previously discussed, we believe that as healthcare continues to evolve to a more consumer-centric model, and as see a shift to new value-based contracti

10、ng models, believe the largest players are well-positioned based investments they have made on the healthcare side their business. CVS and Walgreens are taking different approaches vertical integration a partnership model), efforts to differentiate the offering, engagement and add services and capab

11、ilities to improve patients overall health will be important to driving market share gains going forward, in ourFor the pharma distributors, the main focus was on branded price inflation, as well as generic deflation and the opioid issue. While still early in the year, all three companies indicated

12、that branded price inflation appears to be in lineSee page 26 for analyst certification and important disclosures.Healthcare Technology & DistributionLisa C. GillAC(1-212)622-6466 HYPERLINK mailto:lisa.c.gill lisa.c.gill Bloomberg JPMA GILL Michael Minchak, CFA (1-212)622-6506 HYPERLINK mailto:micha

13、el.minchak michael.minchakAnne E. Samuel(1-212) 622-4163 HYPERLINK mailto:anne.e.samuel anne.e.samuelJ.P. Morgan Securities LLCJ.P.Morgandoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbe awarethatmay a of the of as a HYPERLINK / with prior expectations at t

14、his stage, and again reiterated that 95% brand fees are not contingent inflation. Generic deflation commentary remained consistent (while the market remains competitive, pricing appears to be stabilizing). Finally, with regard to opioids, given the ruling that the NY opioid tax is unconstitutional,

15、the companies pointed to a potential reversal of expenses related to this tax. The companies are evaluating options regarding the current litigation, but it remains too early to estimate the scope of a potentialsettlement.We continue to favor Lab Corp in the Clinical Lab space. We see as well positi

16、oned as the company increasingly focuses on the patient as a consumer, highlighting its expanded partnership with Walgreens and Pixel collection at the conference. We continue to LabCorps diversified revenue stream and while near-term pressures remain managed care contract shifts), believe the compa

17、ny is well positioned to capture the shift to consumerism going forward. On Covance, management remains confident in mid to high single digit growth, driven an improving regulatory environment, strong therapeutic growth, and significant innovation in the emerging biotechsegment.We continue to like T

18、DOC in the small/mid cap space. While the company did not provide initial 2019 guidance, we point to favorable commentary around a strong selling season and an expansion the relationship UnitedHealth Group. We continue to point to an impressive outlook over the near and longer term, based on the sig

19、nificant amount runway in the telehealth market, TDOCs strong competitive positioning as the only comprehensive virtual care delivery solution, opportunities around the Advance Medical acquisition, ramp the CVS relationship and potential to expand the addressable over time by adding newcapabilities.

20、Our views on the dental distributors (HSIC and PDCO) are unchanged. Growth in U.S. dental consumables continues to remain subdued but stable, and it remains unclear when could see a rebound. is positive outlook and highlighted a array value-added products and services, which it believes is a differe

21、ntiator. While there is more work to be done, PDCO laid out a broad 3-year strategy, which includes stabilizing the core (FY19), accelerating performance (FY20) and expanding products and services (FY21). That said, we continue to have concerns around margin pressure across the group going forward,

22、and believe both stocks are expensive, especially given near term concerns and relative to term projected EPS growthrates.Healthcare IT remains focused on cross sell to drive growth, VBC getting warmer. the core market slowing, companies were focused cross sell to drive growth in 3.5% global Healthc

23、are IT spend growth. Population health remains to catch on, but companies spoke to encouraged around focus on shifting to Value Based Care, and CMSs redesign the ACO program. RCM remains a point strength given tangible ability to drive ROI for providers. Allscripts highlighted the & life sciences ch

24、annel as a new avenue growth, laying out a target growth in this segment over the next 3 years. Finally, patient engagement highlighted as a way to capture the consumer trend. We expect continued M&A in the space, as all companies spoke to inorganic growth as a forwarddriver.Today, the J.P. Morgan H

25、ealthcare team will a conference call starting at 9:00am ET, with a team call providing broad takeaways from the conference. Following this, there will be three sub-sector calls, which will provide a deeper dive into individual names and sectors: Services (Gill, Taylor)2will be at 10:00am ET, MedTec

26、h & Life Sciences Tools (Marcus, Peterson) will be at 11:00am ET, and Pharma & Biotech (Schott, Kasimov, Rama, Joseph) at 12:00pm ET. For dial-in details, please reach out to us your J.P. Morgan salescontact1.1 On January 3, 2018, MiFID II came into effect. Therefore, you may only be eligible to par

27、ticipate in this event if you have the appropriate level of access to J.P. Morgan research. Please check your eligibility before participating/accessing.3Last week we hosted our 37th Annual Healthcare Conference in San Francisco. While there was not a significant amount of incremental news flow acro

28、ss our group, as always, we saw it as a great opportunity to interact with management teams and hear about broader market conditions, and company-specific initiatives and expectations across our coverage universe. All of the companies we follow presented at the conference, and we had CEO participati

29、on for all of the companies that presented. In our view, the presentations and meetings reaffirmed the key themes that have driven our broader sector and company-specific views, including: consumerism, specialty, the shift to value-based care and capitaldeployment.However, sentiment across the major

30、ity of our coverage universe remains somewhat weak, as we point to ongoing uncertainty around the regulatory environment and concerns over margin pressure. In the following note, we highlight some of the key themes and provide takeaways from each of the presentations.Today, the J.P. Morgan Healthcar

31、e team will host a conference call series starting at 9:00am ET, with a team call providing broad takeaways from the conference.Following this, there will be three sub-sector calls, which will provide a deeper dive into individual names and sectors: Services (Gill, Taylor) will be at 10:00am ET, Med

32、Tech & Life Sciences Tools (Marcus, Peterson) will be at 11:00am ET, and Pharma & Biotech (Schott, Kasimov, Rama, Fye, Joseph) at 12:00pm ET. For dial-in details, please reach out to us or your J.P. Morgan sales contact.SummaryUnlike some prior years, the 2019 conference was relatively quiet as it r

33、elates to incremental newsflow across our coverage universe. Among the new developments: CVS provided color on headwinds/tailwinds for 2019; Diplomat provided updated guidance for FY18 and a preliminary outlook for 2019; Teladoc provided color on the selling season and an expansion of the United agr

34、eement; Owens & Minor announced a new multi-year distribution agreement with Scripps Health; Allscripts announced a 3-year revenue plan and a partnership with Microsoft; and HealthEquity provided year end account metrics.Stock PerformanceThe companies within our coverage universe that presented at t

35、he conference were up 3.6%, on average, during the conference, which compared to a 2.6% increase in the S&P 500. This marked the third consecutive year that our coverage universe outperformed the S&P 500 during the conference (see HYPERLINK l _bookmark0 Figure 1 below).4Figure 1: Average Stock Price

36、 Performance of Healthcare Technology & Distribution Covered Companies during the Conference vs. the S&P 500 and the S&P 500 Health Care Index5.0%2.5%0.0%-2.5%-5.0%20152016201720182019Healthcare Technology & Distribution Coverage UniverseS&P500S&P 500 Health CareIndexSource: Bloomberg, J.P. Morgan.A

37、mong the various sub-sectors, the dental distributors and pharma distributors were the two best performing sub-sectors, up by an average of 5.9% and 5.0%, respectively, in 2019, while PBM/Specialty and Retail Pharmacy were the two worst performing subsectors in 2019 (see HYPERLINK l _bookmark1 Table

38、 1 below). Finally, in HYPERLINK l _bookmark2 Figure 2 below, we show the performance by individual company, with MDRX, TDOC and OMI delivering the best performance, and DPLO, EVH and HQY seeing the largest declines.Table 1: Performance by Sub-Sector during the 2018 and 2019 J.P. Morgan Healthcare C

39、onferences20182019Pharma Distribution5.2%5.0%Retail Pharmacy6.5%1.7%PBM/Specialty7.1%-6.4%Clinical Lab1.7%2.4%Dental Distribution-1.4%5.9%Healthcare IT2.2%3.8%Coverage Universe avg.3.4%3.6%S&P 5000.9%2.6%Source: Bloomberg, J.P. Morgan. Note: Pharma Distribution includes ABC, CAH and MCK; Retail Phar

40、macy includes CVS, RAD and WBA; PBM/Specialty includes DPLO in 2019 and ESRX and DPLO in 2018; Clinical Lab includes DGX and LH; Dental Distribution includes HSIC and PDCO; Healthcare IT includes CERN, PINC, TDOC, EVH, HQY, MDRX and NXGN in 2019 and CERN, PINC, TDOC, ATHN, COTV, EVH, HQY, MDRX and N

41、XGN in 2018.5Figure 2: Stock Price Performance during the 2019 J.P. Morgan Healthcare ConferenceMDRX, 12.6%TDOC, 12.4%OMI, 10.9%MCK, 6.7%HSIC, 6.7%CAH, 5.9%PDCO, 5.2%WBA, 4.2%NXGN, 3.9%CERN, 3.5%RAD,2.8%DGX, 2.4%ABC, 2.4%LH, 2.3%PINC, 1.8%CVS, -1.9%HQY, -3.4%EVH, -4.0%DPLO,-6.4%Source: Bloomberg, J.

42、P.Morgan.Key ThemesWe continue to believe the long term fundamental outlook across the Rx channel and our positive view on our broader coverage remains intact. The presentations and meetings at the conference reaffirmed the broader fundamental themes that have driven our continued overall positive v

43、iew on the broader sector, including: underlying utilization (while underpinned by an aging population, we expect consumerism to be a key driver going forward); expected growth in specialty (strong top line growth, coupled with payors need to better manage this component of spending); the ongoing sh

44、ift to value-based care (tying reimbursement to quality metrics and outcomes); and opportunities around capital deployment (accretive acquisitions or returning capital to shareholders via share repurchases or dividends). Below, we provide some commentary around key themes, our top picks, and highlig

45、hts across the various subsectors within our coverage universe. Finally, we recap the takeaways from the conference presentations and breakout sessions.Consumerism was a key theme discussed at the conference by a number of companies within our coverage universe. We continue to believe the consumer w

46、ill be the biggest disruptor in healthcare. With healthcare rising as a percentage of household expenditures, patients are becoming more involved in making decisions on how to allocate their healthcare dollars, and are becoming increasingly selective in the services they use with cost, quality, and

47、convenience being key deciding factors. Engaging the patient at their preferred point of service in a low cost way will likely differentiate those with a strong reputation and a trusted brand. Several companies spoke to this trend, including the retail pharmacies, the clinical labs andTeladoc.The co

48、mpanies across the Rx channel discussed specialty as an opportunity going forward. We highlight the strong growth of existing products, as well as a robust pipeline as key top-line drivers over the coming years. CVS highlighted its leading specialty pharmacy business, which it pointed to as a tailwi

49、ndfor62019, WBA pointed to the mail/specialty JV with Prime Therapeutics, and RAD cited its specialty pharmacy capabilities within the EnvisionRx PBM business. Diplomat pointed to its high touch model and strong positioning around limited distribution drugs. The drug distributors continue to point t

50、o opportunities around specialty distribution for physician-administered drugs. Biosimilars were viewed as a positive catalyst by all companies across the Rx channel over the longerterm.Positioning around value-based care represents an emerging theme. As have previously discussed, payors are gradual

51、ly shifting away from the traditional fee-for-service system to new value-based reimbursement models where reimbursement rates are tied to quality metrics. As it relates to the Rx channel, we believe PBMs with strong clinical capabilities, tools to manage utilization and ability to develop innovativ

52、e contracting structures with manufacturers will benefit, while retail pharmacies have potential opportunities around high performance or quality-based retailnetworks.Capital deployment is a key part of the investment thesis across our coverage universe. There has been significant M&A activity over

53、the past year in our coverage universe, including a mix of large deals, as well as a handful of tuck-ins at several other companies. On the retail pharmacy side, CVSs primary focus will be debt paydown, as share repurchases have been suspended and the dividend will remain flat until leverage returns

54、 to the low 3x range. While WBA has recently been pursuing partnerships, we believe the company has a high degree of financial flexibility and wouldnt rule out additional M&A (although we wouldnt expect anything transformational in the near term). Among the distributors, MCK has remained active on t

55、he M&A front with a number of smaller tuck-in deals, and while ABC closed the H.D. Smith acquisition in early 2018, we believe the company has the flexibility for additional M&A. Finally, we believe CAH will remain relatively quiet as it focuses on the Cordis turnaround and the Patient Recovery inte

56、gration. On the labs, LH spoke to spoke to a 2.5-3x leverage target with $843M in authorization at 3Q end left to deploy for share repurchase, with DGX outlining 2%+ revenue growth from acquisitions built into its long term outlook, with PAMA a consolidationcatalyst.Thoughts on Our Top PicksFollowin

57、g the presentations last week, CVS continues to be our top pick for 2019, while we also highlight other OW-rated names, including: TDOC, LH, MCK, WBA and DPLO.CVS remains our top pick, as we continue to believe it is one of the best positioned companies in our coverage universe over the longer term.

58、 While the companys commentary on 2019 headwind/tailwinds was somewhat disappointing as it weighed more heavily towards headwinds, we continue to believe in the longer term strategy. In our view, the integrated model and broad suite of services position CVS well in an evolving healthcare marketplace

59、, which we expect to be characterized by new reimbursement models (the ongoing shift to value-based care) and the retailization of healthcare (where the companys trusted name recognition and nationwide footprint are a benefit). Under the new integrated model, the combined entity should be able to dr

60、ive lower overall health costs through the use of integrated data/analytics, more effective patient engagement and the shift of care to lower costsites.7We continue to like TDOC in the small/mid cap space. While the company did not provide initial 2019 guidance, we point to favorable commentary arou