The Diagnosis
EU Large Cap Pharma - The 2009 Outlook
Pharmaceuticals
Alexandra HauberAC
(44-20) 7742-6655 / (1-312) 325-3694
alexandra.m.hauber@jpmorgan.com
Richard Vosser
(44-20) 7742-6652
richard.vosser@jpmorgan.com
David P Evans
(44-20) 7742-6659
david.p.evans@jpmorgan.com
James D Gordon
(44-20) 7742-6654
james.d.gordon@jpmorgan.com
J.P. Morgan Securities Ltd.
For Specialist Sales advice, please
contact:
Marjan Daeipour
(44 20) 7325-3281
marjan.daeipour@jpmorgan.com
See page 69 for analyst certification and important disclosures, including non-US analyst disclosures.
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Please also see our notes
published earlier today on Glaxo
SmithKline and Sanofi-Aventis
• Large-cap rankings revisited: We rate four mid-cap stocks as Overweight
(Novo Nordisk, Merck KGaA, Shire, Ipsen) due to our perception of greater
potential for re-rating from currently low valuations. However, Overweightrated
mid-cap stocks represent only 9% of our investable pharma universe.
Thus, the relative weighting of the pharma large caps remains important.
Rankings are based on a 12-month view.
• Valuation: limited downside with opportunities. All five pharma large
caps trade at or below our Embedded Value (EmV) estimates. In our view,
this suggests that after 9 years of multiple compression, the 2011-2013
patent cliff is now largely priced in. We believe a catalyst-rich 2009
should offer opportunities for significant re-ratings, particularly for
SASY and AZN.
• Roche (Overweight) remains our No. 1 pick as we believe that the
company’s under-appreciated long-term upside may return to focus once
uncertainty on the Genentech transaction is out of the way.
• Sanofi-Aventis: upgraded to Neutral and moved to No. 2 with a
multiples-based Dec ‘09 price target of