Healthcare Sector Analysis: June 2023 Appraisal & Recommendations
Explore the detailed analysis of the healthcare sector presentation for June 2023, including sector overview, portfolio analysis, business analysis, and key recommendations. Discover insights on stock performance, company holdings, and growth opportunities within the healthcare industry.
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Presentation Transcript
Healthcare Sector Presentation Alex Wilson, Molly Wolf, Aaron Zajkowski
Agenda: 1. 2. 3. 4. Sector Overview Portfolio Analysis Business Analysis Recommendation 2
Sector Overview June 2023 Appraisal SIM Allocation Sector recommendation: to increase overweight rating from +1.76% to maximum allowable 3% above S&P Weighting 3
Sector Overview Healthcare (blue) vs Other Sector Growth Beyond the tech sector, healthcare is the best performing index on a 5 year time basis 5
June 2023 Appraisal Healthcare Companies SIM Portfolio Holdings Healthcare Sector Holdings (15.18% SIM) BRISTOL- MYERS SQUIBB CO, 3.15%, 21% MERCK & CO INC, 4.47%, 29% UNITEDHEALTH GROUP INC, 4.24%, 28% ELEVANCE HEALTH INC, 3.32%, 22% 7
Elevance Health Inc. Elevance Health (formerly Anthem, Inc.) is a health care company that offers a broad spectrum of network-based managed care health insurance products and services. The company's services include medical, pharmaceutical, dental, behavioral health, long-term care, and disability plans through affiliated companies such as Anthem Blue Cross and Blue Shield. Management targeting 10% YoY revenue growth. Focus on rolling out Carelon (preventative care) and improving profitability with this technology Stable returns, defensive stock in turbulent market Company Overview Key Drivers Elevance Health 5 Year Stock Price 11
Positives Stable, growing revenues & taking steps to increase profitability C-Suite targeting 10% YoY Revenue Growth Upwards potential with revenue growth and cost cutting Growth potential (Anthem) Negatives Low FCF & Metrics relative to peers High costs relative to peers 12 Anthem represents ~74% of Elevance s revenue
Elevance DCF 13
Overview Company Overview Bristol Myers Squibb (BMS, NYSE: BMY) is an international biopharmaceutical company committed to discovering, developing and delivering innovative medicines to patients with serious diseases. Bristol Myers Squibb Key Drivers Potential growth with new product portfolio Strong cash flow Bristol Myers Squibb 5 Year Stock Price 14
Growth Drivers and Potential risks Growth Drivers Potential for growth with new product portfolio Strong cash flow Potential risks Potential economic recession in the future New products patent issues 15
Merck & Co., Inc. Merck & Co., Inc. is a global health care company that delivers innovative health solutions through its prescription medicines, including biologic therapies, vaccines and animal health products. The Company s operations are principally managed on a product basis and include two operating segments, Pharmaceutical and Animal Health. First-mover advantage in Oncology with key growth driver Keytruda Widely diversified portfolio of drugs allows for steady growth in sales with high upside 20-25% R&D expense allows Merck to maintain a strong pipeline of prospective drugs (15 in Phase 3, 25+ in Phase 2) Acquisition of Biotech firm Prometheus aims to provide rapid growth in the Immunology segment High gross profit margins (70%) provides them much needed financial flexibility in the Health Care sector Company Overview Key Drivers Potential over-reliance on Oncology sector could prove harmful to sales in the event of patent loss in key products Previous risk may be offset by the fact that Merck's pipeline is primarily comprised of Oncology-related drugs to replace existing ones Litigation with US government over the constitutionality of Inflation Reduction Act may be costly in legal expense, hurting short-term EBIT Recent surge for new diabetes/weight-loss treatments could result in loss of market share for diabetes segment if Merck does not act Risk Factors 17 Source Google Finance
Recommendation BUY Current price 110.45 Target price 128.75 Upside 16.6% 18
Lookback Company Current Price (December 2022) Current Price (July 2023) Price Target (Q4 2022) Price Target (Q2 2023) Stock Recc. (Q4 2022) Stock Recc. (Q1 2023) Elevance Health Inc Bristol-Myers Squibb $523.60 $443.69 $606.62 $517.00 BUY SELL $81.13 $64.86 $102.29 $82.10 BUY BUY Merck & Co $110.04 110.45 $112.55 $128.75 HOLD BUY United Health $536.16 $508.68 $607.83 N/A HOLD HOLD 20
Stock Recommendations Recommendations Company Current Price Target Price Current Weighting Recommendation Weighting After Expected Return $475.93 $517.00 332 bps 284 bps 8.6% Elevance Health Inc (ELV) SELL $64.86 $82.10 315 bps 500 bps 25.4% Bristol-Myers Squibb (BMY) BUY $110.45 $128.75 447 bps 500 bps 16.6% Merck & Co (MRK) BUY $508.68 N/A 424 bps 424 bps N/A United Health (UNH) HOLD 21 Above allocation to reach 3% over the S&P 500 weighting. 1 Source: www.alphaspread.com
Questions? 22
