Monday, January 25, 2010

North America Investment Daily 1.25.10

Top Calls
Drugs — The Pharmaceutical Valuation Weekly & Catalyst Calendar Relative Multiple of U.S. Drug Composite — The U.S. Major Pharmaceutical group is trading at 8.6x 2011E EPS, representing a 30% discount to the S&P 500 on consensus EPS and 38% discount on CIRA earnings. This compares to
the EU Drug multiple of 11.3x and the U.S. Large Cap Biotech multiple of 13.2x (see Figure 1). The mean 10-year and 20-year premiums are 8% and
9%, respectively. p4 John Boris

Pharmacy Benefit Management (PBMs) — Key Takeaways from Our Lunch with Mercer PBM Consultant PBM Outlook — We co-hosted a lunch with Citi’s Retail Drugstore Analyst Deborah Weinswig where David Dross, National Practice Leader of Mercer Health & Benefits’ Managed Pharmacy Practice, spoke on the PBM landscape.
He expects an active 2010 sales season, but 20% to 25% below 2009 levels; price should remain extremely competitive but rational. We reiterate our Buy ratings on Express Scripts (ESRX.O; US$85.20; 1H) and Medco Health
(MHS.N; US$61.55; 1M) . p5

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