Healthcare.ppt

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5 Δεκ 2012 (πριν από 4 χρόνια και 6 μήνες)

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Health Care Sector

Jocelyn Mayfield, Sam Vermillion, Wendy Wiemers,

Kevin Zakes, Chad Zipfel


BUS
-
FIN 724/824

May 8, 2007

Health Care Sector



S&P
500

is

currently

comprised

of

54

Health

Care

companies



The

S&P
500

Health

Care

sector

includes
:



-

Healthcare

Equipment

and

Services





-

Healthcare

Equipment

and

Supplies





-

Healthcare

Providers

and

Services




-

Healthcare

Technology



-

Biotechnology,

Pharmaceuticals,

and

Life

Sciences




-

Biotechnology





-

Pharmaceuticals




-

Life

Sciences

Tools

and

Sciences


Market & Sector Overview


Market Cap for total health care sector is
approximately $1.64 trillion


Health care as a percentage of S&P500


12.22%


Third largest weighting in S&P500 behind
Financials and Information Technology with
$2.9 and $2.0 trillion, respectively

Health Care Sector Breakdown

3.2%
0.2%
0.4%
0.5%
2.5%
13.7%
3.7%
11.2%
53.6%
11.2%
Biotechnology
Distributors
Equipment
Facilities
Services
Supplies
Technology
Life Sciences Tools and
Services
Managed Health Care
Pharmaceuticals
Health Care Leaders in S&P500

Ticker

Company

Market Cap ($B)

P/E

Company Type

PFE

Pfizer, Inc

194.04

10.60

Drug Manufacturer

JNJ

Johnson & Johnson

185.97

18.32

Medical Products/Supplies

MRK

Merck & Co.


112.72

24.62

Drug Manufacturer

ABT

Abbott Laboratories

90.96

58.66

Drug Manufacturer

WYE

Wyeth

77.15

18.06

Drug Manufacturer


AMGN

Amgen


73.90

24.58

Biotechnology

UNH

UnitedHealth Group

72.12

17.73

Health Maintenance Services

Health Care Sector Performance


2007 QTD


S&P 500: 5.97%


Health Care Sector: 8.77%


2007 YTD


S&P 500: 6.16%


Health Care Sector: 9.45%


Other top sectors YTD performance


Utilities 14.53% YTD


Materials 12.45% YTD


Telecom Services 10.07% YTD

Current SIM Holdings



SIM current holdings include the following industries:



Pharmaceuticals



HealthCare Equipment/Supplies



Biotechnology



Health Care Providers/Services



Healthcare Technology and Life Sciences and Tools and Sciences are
not currently represented in the SIM portfolio



The two industries represent less than 1% of the total health care
market cap so this is insignificant


Overall, well diversified within the sector


SIM Current Holdings

Ticker

Name

SIM Weight

Avg. Cost

Current
Price

(May 4, 2007)

Gain/Loss

(%)

DNA

Genentech Inc
*

2.47%

$82.54

$81.42

(1.36%)

JNJ

Johnson and Johnson

4.64%

$60.22

$64.48

7.07%

SYK

Stryker Corp

3.74%

$43.78

$65.86

50.43%

TEVA

Teva Pharmaceutical
*

3.53%

$32.11

$39.15

21.92%

WLP

Wellpoint

3.08%

$76.73

$81.43

6.12%




















*

Not a member of S&P 500, but a member of NASDAQ


Total SIM Weight

18.26%

S&P Weight

12.22%

SIM Overweight

6.04%

Business Analysis


Phase of the life cycle


Expansion


This is the stage between growth and mature.


There are high growth rates in yearly revenues
within the sector due to innovations in technology
but the power players have become apparent.


The success of the Healthcare industry is
largely independent of the success of
domestic or foreign economies due to the
nature of the products.

External Factors


Regulations


Food and Drug Administration


Center for Drug Evaluation and Research


Medicare Fair Prescription Drug Price Act of
2007


Patent Term Restoration


Treble Damages

External Factors


Research and Development


Biotechnology market value is expected to
grow by 79% from 2005 to 2010.


It has been found that a 10% increase in the
real price of drugs, increases R&D expenses
by 6%.


Largely linked to regulation by the government on
the increase in drug prices to the consumer price
index.


External Factors


Demographics


In many countries, fertility rates have declined because of
an interconnected set of reasons that include:


The availability of contraception which has allowed women to achieve
higher levels of education, enhanced opportunities for employment, and
greater individual financial independence.


The trend toward urbanization which makes it harder to support more
than one or two children.


Governmental initiatives to limit family size in countries like China and
Iran.


In the U.S., the over
-
85 population is expected to increase
from the present 5 million to over 18 million by 2050.


This sector is largely dependent upon the United States,
particularly biotechnology which currently accounts for
56.8% of revenues and global health services at 42.1%.



Five Force Analysis

Barriers to Entry (+)



Economies of scale


Patent and High R&D
Expense


Heavily Regulated

Supplier Power (
-
)



Substitutes


Low concentration

Buyer Power (N)



Price sensitivity


High switching cost

Substitute (+ or
-
)



Generic drugs

Industry Rivalry (+)


Large players and
small players


Low product
differentiation in
some industries

U.S. Demographics

U.S. Demographics

Financial Analysis

Financial Analysis

Free Cash Flow - Adjusted
-
1,000
2,000
3,000
4,000
5,000
2006
2005
2004
2003
2002
2001
2000
1999
Dividends Common (Per Shr)
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
2006
2005
2004
2003
2002
2001
2000
1999
Revenues ($ Mil)
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
EPS Adjusted
-
0.50
1.00
1.50
2.00
2.50
3.00
3.50
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
Financial Analysis

Margins
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
2006
2005
2004
2003
2002
2001
2000
1999
Gross Margin
Operating Margin
Net Margin
R & D as % of Sales
5.8%
6.0%
6.2%
6.4%
6.6%
6.8%
7.0%
7.2%
7.4%
2006
2005
2004
2003
2002
2001
2000
1999
Inventory Turnover
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
2006
2005
2004
2003
2002
2001
2000
1999
ROE - Adjusted
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
2006
2005
2004
2003
2002
2001
2000
1999
Financial Analysis

Days Sales Outstanding
-
10
20
30
40
50
60
2006
2005
2004
2003
2002
2001
2000
1999
Debt to Sales
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
2006
2005
2004
2003
2002
2001
2000
1999
HealthCare Sector Valuation


P/E: 17.2


10 yr mean:

22.0






5 yr mean:

17.2



P/S: 1.97


10 yr mean:


3.00






5 yr mean:


2.08



P/B: 4.2


10 yr mean:


6.6






5 yr mean:


4.2



P/CF: 15.4


10 yr mean:

21.1




5 yr mean:

15.9

HealthCare vs SP500 (10 yrs)

S
tock
V
al
®
S&P HEALTH CARE SECTOR COMP ADJ (SP-35) Price 47.44
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
PRICE / YR-FORWARD EPS ESTS RELATIVE TO S&P 500 COMPOSITE ADJUSTED (SP5A) M-Wtd
0.8
1.0
1.2
1.4
1.6
HI
1.46
LO
0.94
ME
1.17
CU
1.11
05-02-1997
05-04-2007
PRICE / SALES RELATIVE TO S&P 500 COMPOSITE ADJUSTED (SP5A) M-Wtd
1.2
1.5
1.8
2.1
2.4
HI
2.28
LO
1.22
ME
1.66
CU
1.28
05-02-1997
05-04-2007
PRICE / BOOK VALUE RELATIVE TO S&P 500 COMPOSITE ADJUSTED (SP5A) M-Wtd
1.2
1.6
2.0
2.4
2.8
HI
2.54
LO
1.26
ME
1.73
CU
1.36
05-02-1997
05-04-2007
PRICE / CASH FLOW ADJUSTED RELATIVE TO S&P 500 COMPOSITE ADJUSTED (SP5A) M-Wtd
0.8
1.2
1.6
2.0
2.4
HI
2.16
LO
1.20
ME
1.63
CU
1.32
05-02-1997
05-04-2007
HealthCare vs SP500 (5 yrs)

S
tock
V
al
®
S&P HEALTH CARE SECTOR COMP ADJ (SP-35) Price 47.44
2002
2003
2004
2005
2006
2007
PRICE / YR-FORWARD EPS ESTS RELATIVE TO S&P 500 COMPOSITE ADJUSTED (SP5A) M-Wtd
0.9
1.0
1.1
1.2
1.3
HI
1.23
LO
0.99
ME
1.13
CU
1.11
05-03-2002
05-04-2007
PRICE / SALES RELATIVE TO S&P 500 COMPOSITE ADJUSTED (SP5A) M-Wtd
1.2
1.4
1.6
1.8
HI
1.75
LO
1.22
ME
1.38
CU
1.28
05-03-2002
05-04-2007
PRICE / BOOK VALUE RELATIVE TO S&P 500 COMPOSITE ADJUSTED (SP5A) M-Wtd
1.2
1.5
1.8
2.1
2.4
HI
2.22
LO
1.26
ME
1.45
CU
1.36
05-03-2002
05-04-2007
PRICE / CASH FLOW ADJUSTED RELATIVE TO S&P 500 COMPOSITE ADJUSTED (SP5A) M-Wtd
1.0
1.2
1.4
1.6
1.8
HI
1.79
LO
1.20
ME
1.38
CU
1.32
05-03-2002
05-04-2007
HealthCare Equipment & Supplies vs. Sector

S
tock
V
al
®
S&P IND HEALTH CARE EQUIP & SUPP Price 46.89
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
PRICE / YR-FORWARD EPS ESTS RELATIVE TO SP35 M-Wtd
0
1
2
3
HI
2.36
LO
0.99
ME
1.42
CU
1.35
05-02-1997
05-04-2007
PRICE / SALES RELATIVE TO SP35 M-Wtd
4
6
8
10
HI
12.34
LO
4.91
ME
7.79
CU
7.77
05-02-1997
05-04-2007
PRICE / BOOK VALUE RELATIVE TO SP35 M-Wtd
1
2
3
4
5
HI
4.44
LO
1.11
ME
2.26
CU
1.23
05-02-1997
05-04-2007
PRICE / CASH FLOW ADJUSTED RELATIVE TO SP35 M-Wtd
0
1
2
3
HI
2.24
LO
0.92
ME
1.40
CU
1.22
05-02-1997
05-04-2007
HealthCare Providers & Services vs. Sector

S
tock
V
al
®
S&P IND HEALTH CARE PROV & SVCS Price 56.22
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
PRICE / YR-FORWARD EPS ESTS RELATIVE TO SP35 M-Wtd
0.9
1.0
1.1
1.2
HI
1.10
LO
0.97
ME
1.02
CU
0.99
05-02-1997
05-04-2007
PRICE / SALES RELATIVE TO SP35 M-Wtd
0.9
1.0
1.1
1.2
1.3
HI
1.24
LO
0.97
ME
1.10
CU
1.20
05-02-1997
05-04-2007
PRICE / BOOK VALUE RELATIVE TO SP35 M-Wtd
0.8
0.9
1.0
1.1
1.2
HI
1.13
LO
0.86
ME
1.00
CU
0.90
05-02-1997
05-04-2007
PRICE / CASH FLOW ADJUSTED RELATIVE TO SP35 M-Wtd
0.96
0.99
1.02
1.05
1.08
HI
1.08
LO
0.96
ME
1.01
CU
1.02
05-02-1997
05-04-2007
Biotechnology vs. Sector

S
tock
V
al
®
S&P IND BIOTECHNOLOGY M-Wtd (S352010A) Price 62.29
2002
2003
2004
2005
2006
2007
2002
2003
2004
2005
2006
2007
2008
PRICE / YR-FORWARD EPS ESTS RELATIVE TO SP35 M-Wtd
0.8
1.2
1.6
2.0
2.4
2.8
HI
2.75
LO
1.02
ME
1.61
CU
1.15
05-03-2002
05-04-2007
PRICE / BOOK VALUE RELATIVE TO SP35 M-Wtd
1.0
1.2
1.4
1.6
1.8
2.0
2.2
HI
2.18
LO
1.03
ME
1.40
CU
1.24
05-03-2002
05-04-2007
PRICE / CASH FLOW ADJUSTED RELATIVE TO SP35 M-Wtd
0.8
1.2
1.6
2.0
2.4
2.8
3.2
HI
3.12
LO
1.12
ME
1.80
CU
1.26
05-03-2002
05-04-2007
Pharmaceuticals vs. Sector

S
tock
V
al
®
S&P IND PHARMACEUTICALS M-Wtd (S352020A) Price 42.59
2002
2003
2004
2005
2006
2007
2002
2003
2004
2005
2006
2007
2008
PRICE / YR-FORWARD EPS ESTS RELATIVE TO SP35 M-Wtd
0.6
0.9
1.2
1.5
1.8
HI
1.56
LO
0.72
ME
1.06
CU
1.00
05-03-2002
05-04-2007
PRICE / SALES RELATIVE TO SP35 M-Wtd
4
6
8
10
HI
12.74
LO
5.16
ME
8.14
CU
7.75
05-03-2002
05-04-2007
PRICE / BOOK VALUE RELATIVE TO SP35 M-Wtd
0
1
2
3
HI
2.99
LO
0.91
ME
1.62
CU
1.39
05-03-2002
05-04-2007
PRICE / CASH FLOW ADJUSTED RELATIVE TO SP35 M-Wtd
0.4
0.8
1.2
1.6
2.0
HI
1.64
LO
0.59
ME
0.99
CU
0.96
05-03-2002
05-04-2007
Recommendations



Maintain current SIM position


(6.04% overweight)


Relative valuation analysis supports
rebalancing of SIM’s Health Care holdings.


Demographic data supports continued
growth in sector
-
wide spending.