Health Care Sector Review

aquaaniseBiotechnology

Dec 6, 2012 (4 years and 8 months ago)

253 views

Tripp Norton

Health Care Analyst

October 22
nd
, 2009


Healthcare system contributes $2.5 trillion, or
nearly 18%, to GDP


The highest percentage in the developed world


Governmental programs are almost half of all
health care spending.

Industry

1
-
Day
Price
Chg %

Market
Cap

P/E

ROE %

Div.
Yield %

Debt to
Equity

Price to
Book

Net Profit
Margin
(mrq)

Price To
Free Cash
Flow (mrq)

Biotechnology

-
2.443

227.60B

224.1

5.3

0.241

NA

8.04

7.1

149.4

Diagnostic Substances

-
1.544

12.47B

0

0

0.936

NA

6.24

-
5.6

-
347.3

Drug Delivery

-
2.229

16.03B

24.4

13.9

2.226

NA

38.64

8.9

0

Drug Manufacturers
-

Major

-
0.589

980.39B

14.4

19.3

3.583

NA

7.67

16.9

156.4

Drug Manufacturers
-

Other

-
0.98

158.53B

111.4

4.9

0.819

NA

9.21

5.1

77.9

Drug Related Products

-
0.385

13.63B

49

6.4

0.828

NA

8.61

2.7

68.1

Drugs
-

Generic

-
1.026

10.33B

22.4

10.2

0

NA

-
6.47

6.5

88.1

Health Care Plans

2.056

88.41B

9.6

13

0.123

NA

8.39

3.3

30.3

Home Health Care

0.979

6.44B

9.1

18.7

0.578

NA

-
10.49

8.9

19.4

Hospitals

-
0.459

15.07B

9.1

15.3

0.195

NA

-
3.85

3.1

21.8

Long
-
Term Care Facilities

-
1.084

6.75B

0

0

0.602

NA

1.62

-
3.8

66.5

Medical Appliances & Equipment

-
2.195

121.49B

246.2

1.6

1.591

NA

9.69

1.5

70.4

Medical Instruments & Supplies

-
1.89

208.90B

37.4

10

1.684

NA

8.85

8.8

83.4

Medical Laboratories & Research

-
0.276

31.11B

19.5

13.3

0.69

NA

-
9.51

8.1

67

Medical Practitioners

-
1.885

409.79M

0

0

0

NA

-
10.11

-
0.3

17.4

Specialized Health Services

-
0.94

15.93B

41

6.1

0.148

NA

-
4.63

2.6

67

Medicine

Medical Equipment

Healthcare
Services

Target Allocation %

2.0%

3.0%

2.0%

Target # of Stocks

1

1

1

% of Portfolio per Stock

2.00%

3.00%

2.00%

Current Holding

TEVA

JNJ

NEOG

Current %

1.98%

3.01%

2.23%

Buy in Date

12/10/2007

12/5/2007

2/27/02

Buy in Price

45.63

65.82

19.70

Current Price

50.62

60.94

32.05

%
Change

Buy to date

10.94%

-
7.41%

144.04%*


3
rd

Quarter


Worldwide Pharmaceutical sales decreased of 14.1%


Worldwide Consumer sales decreased of 2.7%


Worldwide Medical Devices and Diagnostics sales increased
of 2.3%


Had approximate 10 pharmaceutical’s approved
for distribution in US or EU


Beat earning predictions past 4 Quarters


Raised Dividend from $0.46 to $0.49 per Quarter


YTD Up 1.25%


Record
-
breaking financial results in 2Q (3Q
earnings announcement November 3
rd
)


Since start of year


In US: 198 product applications awaiting final FDA
approval, including 42 tentative approvals.


In EU: 464 generic approvals relating to 109 compounds
in 225 formulations, including 3 EMEA approvals valid in
all EU member states.


YTD up 19.29%


Past quarter marked the 66th consecutive
profitable quarter from operations and was the
70th of the past 75 quarters when reported revenue
increases as compared with the previous year.


Percentage of sales from international markets
exceeded 40% of total revenues for the first time


YTD up 28.16%


Acquired Product Line from DuPont Animal Health
Solutions


Formed both Mexican and Brazilian Subsidiaries


Obama’s Plan


Similar to Medicare but for everyone who doesn't already have health
insurance.


Public Option


Also Covers: mental health, maternal and child health.


Limits annual out
-
of
-
pocket costs paid by enrollees and provides direct drug
coverage.


Proposes to lower health cost by 1.5% per year, since the federal government
can bargain for lower prices and reduce inefficiencies.


All employers either provide health insurance or pay a 6% payroll tax, similar to
unemployment compensation.


The self
-
employed pay a similar tax.


Everyone else pays


$70 for an individual.


$140 for a couple.


$130 for a single
-
parent family.


$200 for all other families.


Basically a government health insurance open to
anyone.


Will compete on the open market against private
insures


If so many people chose the public option that
over time it evolved into a single
-
payer system


The Government will be the only one bidding of
goods/ services thus controlling prices because no one
else is in the game.

Good or Bad?


Senate Health Care Plan


$856 billion over 10 years.


Replaces $507 billion in existing government health
programs, so really only costs $349 billion to taxpayers.


Requires everyone to have health care insurance or pay a
fine.


Prohibits insurance companies from charging more to
people with serious illnesses.


Allows people to shop for insurance plans.


Expands Medicaid.


Limits patients' yearly health care costs.


It proposes a system of nonprofit cooperatives, instead of
Obama's government
-
run insurance plan to compete with
the private market.


Johnson & Johnson generates 40 percent of its
revenues from U.S.
-
based pharmaceutical and medical
device sales


The medical device tax being discussed on Capitol Hill
will stifle innovation, harm patient care and weaken
the position of the US as the global leader in medical
device innovation.


Medical device companies asked to contribute cuts to
help make up for the costs of expanding coverage to
make up for this they are having to cut expense. (Loss
of Innovation)


Proposed cuts in the areas of imaging, durable
medical equipment and clinical lab supplies are also
included in the bill.


C
hanging payer landscape will force companies to
serve the needs of the various decision
-
makers and
influencers instead of the patient.


Must modify their direct
-
selling strategies and
prepare to sell to an increasingly diverse group of
health insurance companies, government payers
like Medicare and Medicaid


G
overnment
-
led health care initiatives limit their
influence over physician prescription decisions





How will it affect NEOGEN? Anyone know?


A little
-
known provision of the American Recovery &
Reinvestment appropriated some $37 billion to encourage
healthcare organizations to switch over to electronic health
records.


The influx of newly insured people could have a positive impact
on pharmaceuticals, biotech firms and medical supply
companies.
Only if the government doesn't pressure
companies to reduce prices.


Beware of biotech companies because there performance will
depend on how much power the government wields in setting
the cost of drugs. Government meddling and declaring what they
pay for drugs could kill the innovation before it gets under way.


The increase in the number of insured will drive the demand for
facilities higher, therefore facilities owners/ providers could be a
good opportunity to invest in both future healthcare needs and
the depressed real estate market


The need to accommodate the aging baby boomer
population, where they go one should follow.