DB European Pharmaceuticals 2019 Outlook_watermark

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Deutsche		Focus for 2019
		■	Entrance of US Advair generics and slowing HIV/Nucala growth will drag. Our forecasts assume a US generic Advair launches in late 2018 and
Bank			drags on adjusted EPS, by ~5%. With growth of ViiV slowing and Nucala under competitive pressure and reinvestment required in the pipeline, we
			expect a modest (30bp) contraction in Group margins and broadly flat adjusted EPS at CER. We expect the Tesaro acquisition to be a further ~5%
AG/London			from 18% of Group back in 2015. IQVIA data shows that dolutegravir franchise volumes has begun to modestly decline on a qoq basis and is heading
			dilutive to this, assuming completion at the end of 1Q.
		■	US HIV sales look likely to be flat to declining in 2019. We estimate that ViiV profits will contribute to >30% of Group profits in 2018 having grown
			towards going ex growth on a yoy basis in 2019. This reflects the launch of Gilead's competing drug Biktarvy, which we believe is likely to ultimately
			emerge as the preferred integrase inhibitor therapy in the United States. With uptake of Julaca and GSK's new dual agent representing a likely drag
			to price/mix, we believe US HIV sales are likely to be flat to declining in 2019. The extent to which launches of the dual and long acting therapy
			cabotegravir can reverse this trend is an uncertainty and our expert feedback has been cautious in this regard.
		■	Shingrix seems fairly reflected for now; too early for pipeline to move the needle. GSK has benefited from a very strong launch of Shingrix in 2018
			with ~9 million doses likely to be sold. Company guidance suggest capacity should increase to high teens millions over the next 2-3 years underpinning
			consensus forecasts and adding a further £700m to revenues. However, the speed with which capacity expansion comes on stream is uncertain and
			we note that, Shingrix aside, GSK's Vaccines division growth is lackluster at best. Thus, room for further upgrades to expectations look limited in
			2019. GSK's mid stage pipeline will mature further in 2019. At the time of its R&D update, new head of R&D Hal Barron highlighted proof-of-concept
			data from 12 trials covering 10 assets over late '19/2019. However, Dr Barron conceded that there is no certainty that all of these trials have been
			designed and su ciently resourced to give definitive answers that would enable crystallisation of future value and 3 programmes were terminated
			at the 3Q results. We continue to believe rebuilding GSK's pipeline will be a 3-5 year journey.
		Key news flow
		Figure 52 : Potential news flow
		Timing	Event	Description
		4Q18	Advair	Potential launch of substitutible generics
		1Q19	Corporate	Expected closure of Tesaro acquistion
		Apr-19	Dolutegravir/lamivudine	Estimated PDUFA for 2DR (filed 18/10/18 with PRV)
		1H19	Zejula	Completion of Phase I/II TOPACIO trial in combination with pembolizumab in TNBC/ovarian cancer
		1H19	GSK2982772	Data from Phase IIa trials of oral RIP kinase in RA and ulcerative colitis
		1H19	Fostemsavir	Planned filing of attachment inhibitor for resistant HIV infections
		1H19	Trelegy	Phase III data in Asthma
		1H19	GSK'294	POC for long acting IL-5 antagonist in asthma
		1H19	GSK'847	POC for IL-33R for severe asthma
		1H19	GSK'881	POC of ACE2 for PAH
		1H19	GSK'404	POC for antisense for Hepatitis B infection
		Jun-19	GSK2857916	Primary completion of BCMA ADC pivotal Phase II in 4L r/rMM
		2H19	Zejula	Data expected from PRIMA trial in all comers/HRD+ 1L in ovarian cancer
		2H19	GSK2857916	Planned filing of BCMA ADC in 4L MM
		2H19	Pipeline	POC data on multiple mid stage assets
		2H19	Trelegy	Planned US/EU filings in Asthma
Page		2H19	Dostarlimab (PD-1)	Planned regulatory filing in 2L endometrial cancer
		Dec-19	TSR-022 (TIM-3)	Primary completion of Phase I AMBER trial in advanced solid tumors
31		Source: Deutsche Bank, Company data

2018 December 10 Pharmaceuticals Pharmaceuticals European

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32 Page	Summary model
	Figure 53 : GSK summary P&L
	£m	2016A	2017E		2018E	2019E	2020E	2021E	2022E	2023E
	Sales	27,889	30,186	30,517		31,744	32,055	32,964	33,977	34,725
	Gross profit	19,538	21,415	21,519		22,385	22,773	23,471	24,291	24,891
	Gross margin	70%	71%	71%		71%	71%	71%	71%	72%
	Operating profit	7,671	8,568	8,580		8,345	8,526	9,002	9,649	10,030
	% of sales	28%	28%	28%		26%	27%	27%	28%	29%
	Profit before tax	7,024	7,924	7,895		7,588	7,640	8,201	8,877	9,294
	Tax expense	(1,498)	(1,667)	(1,540)		(1,480)	(1,490)	(1,599)	(1,731)	(1,812)
	Tax rate %	21%	21%	20%		20%	20%	20%	20%	20%
	Profit after tax	5,526	6,257	6,356		6,108	6,150	6,602	7,146	7,482
	…minority share	(637)	(793)	(678)		(572)	(570)	(596)	(629)	(673)
	…shareholders' share	4,889	5,464	5,678		5,536	5,581	6,006	6,518	6,808
	Adjusted EPS, basic (p)	100.60	111.83	115.49		111.70	112.15	120.22	129.94	135.19
	DB adjusted EPS (p)	93.54	99.45	101.48		96.50	96.57	104.27	113.67	118.63
	Source: Deutsche Bank, Company data
	Figure 54 : Rebased change in 2019E consensus earnings forecasts				Figure 55 : Sales and EPS growth 2016A-2023E

		1.10										40,000									160
	change
		1.00										35,000									140
	rebasedEPSconsensus										(GBPm)Revenue	30,000							21%	20%	120	(GBp)EPSCore
																		21%
																20%	21%
														17%	19%
		0.90										25,000	16%								100
																				25%
																		25%	25%
														26%		26%	25%
															25%
												20,000	26%								80
		0.80
												15,000									60
	2020E	0.70										10,000	58%	57%	56%	54%	54%	54%	54%	54%	40
												5,000									20
Deutsche		0.60										0									0
		Feb-15	Jul-15	Dec-15	May-16	Oct-16	Mar-17	Aug-17	Jan-18	Jun-18 Nov-18
													2016A	2017E	2018E	2019E	2020E	2021E	2022E	2023E
						GlaxoSmithKline							Pharma		Vaccines		Consumer Health			Core EPS
AG/London Bank	Source: Deutsche Bank, Bloomberg										Source: Deutsche Bank, Company data

2018 December 10 Pharmaceuticals Pharmaceuticals European

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Bank Deutsche	Novartis (Hold; PT CHF96)
	Buying growth and shedding drags
AG/London		were historically acquired at high multiples to add protection to earnings during periods of patent expiries and had little strategic fit. Acquisitions
	■	Solid but priced for this. Novartis earnings have turned a corner and the company is enjoying a period of solid growth driven by new products. New
		management is seeking to capitalise on this as it divests the slower growing (and historically poorly managed) non pharma units. In our view, these
		of AAA, AveXis and Endocyte point the direction of travel for the new Novartis as it attempts to become a leader of innovation in Cell, Genetic and
		Radioactive medicine - areas of high innovation and high competitive barriers. Focus in 2019 will remain on the performance of Cosentyx and Entresto,
		but also the approvals for AVXS-101, RTH258 and Mayzent. Proforma the split with Alcon, we forecast Novartis to grow earnings in high single digits
		through 2018-22e and believe the stock will be a favourite for many investors. However, at a ~5% premium to peers and with work still to do to deliver
		sustainable organically derived pipeline sales, we remain Hold.
	■	AVXS and Cosentyx likely to be the key swing factors. The spin out of Alcon (due end 1Q, we estimate) will reset Novartis' stand alone share price
		down c.10%. Aside from this, the key driver to the shares will be visibility of the earnings growth driven by Cosentyx, with key risks reflecting pricing
		and competitor data. We expect a rapid approval and subsequent launch of the acquired gene therapy AVXS-101 in SMA. This should be a bellwether
		for new management's leadership. These high internal expectations and a quick ramp are still to be fully reflected in consensus earnings forecasts
		in our view.

Figure 56 : Bull/Bear case valuation (CHF/share)

Figure 57 : PE Company vs. EU Pharma – 1 yr FWD PE

110

5

111

1.2x

4

1

Rel. PE

(CHF)

5

fwd

10yr Ave

100

+/- 1 s.d.

1

1

96

4

1.1x

price

(x),1yr

90

2

Share

87

tosector

1.0x

80

Bear

ofatumumabfails

delayed/notRTH258 approved

fevipiprantfails

AVXS101$1bn

Base

AVXS101$4bn

PhasefevipiprantIII (moderatesuccessdata)

SPMSclearBAF312label sales$4bn

$4bnRTH258peak

Bull

PE rel.

0.9x

0.8x

Jan 09

Aug 10

Apr 12

Dec 13

Aug 15

Apr 17

Dec 18

Source: Deutsche Bank estimates, * - current share price	Source: Deutsche Bank, Factset

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2018 December 10 Pharmaceuticals Pharmaceuticals European

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	34 Page	Focus for 2019
		■	Alcon spin: Owners of Novartis today should receive shares in both Novartis and Alcon post the announced split of the company (likely due soon after
			the AGM vote in March). This leaves today's shareholders with share in a historically high multiple med-tech business (Alcon) and a lower multiple
			Pharma business. While we commend the split (as the marriage never made sense in the first place), the future prospects of the remaining Novartis
			business very much depend on convincing investors on the sustainability of its currently strong earnings growth.
		■	AVXS-101 a brave new world for Novartis. We expect filing for the drug in SMA type 1 in 4Q18 and fast approval by mid-year. We believe investors
			are now convinced on the clinical profile of the drug but are concerned about the practicality of manufacturing and launching a genetic therapy and
			driving uptake at a likely $4m/treatment price. The disappointing launch of Kymriah is fresh in memories. As such, we see performance and launch
			feedback as critical to confidence in the company strategy and the c.$2bn of outer year sales expectation from consensus.
		■	Mayzent approval and breadth of label. Key to understanding Mayzent's potential success will be the uniqueness of the label granted by the FDA
			(due March 2019). While Novartis sees the drug as di erentiated by e cacy in secondary progressive MS, we are less convinced that this reflects any
			more than trial design and the continuum between relapsing and progressive MS forms. The FDA typically require two studies and Mayzent appeared
			to show the greatest benefits in young patients on the borderline of relapsing and secondary progressive MS. Although we expect approval, the drug's
			exact labeling will be key to both di erentiation vs potential Gilenya generics and to convincing investors that Novartis can grow its MS franchise
			(DBe $2.3bn Mayzent sales in 2025E). Should a generous FDA label be achieved with a distinct SPMS indication, this could, in theory, double the
			potential peak sales of the drug.
		■	2H gets interesting on pipeline readouts. We expect first data from fevipiprant Phase III trials in severe asthma) in 2H19. Should it live up to the
			hype (with a clean safety profile), then it o ers potential multibillion sales potential vs our risk adjusted forecast of $1bn. As important and largely
			overlooked by many investors, we expect details from ofatumumab's Phase III study in RRMS. If positive the drug has the potential to be a serious
			competitor to Roche's Ocrevus, o ering a sub-cut dosing regimen. We carry $1.4bn of 2025e sales for ofatumumab but highlight that consensus
			expectations for incumbent Ocrevus now top $5bn.

	Key news flow
	Figure 58 : Potential key news flow
	Timing	Event	Description
	4Q18	Cosentyx	Data from J&J's ECLIPSE trial of Tremfya vs Cosentyx (head to head) in psorasis
	4Q18	RTH258 (brolucizumab)	Filing in nAMD
	Mar-19	BAF312 (Mayzenf, siponimod)	Expected FDA approval (filed during 2Q18 with PRV)
	Mar-19	AVXS-101	FDA approval decision in Type 1 SMA
Deutsche	1H19	Corporate	Completion of Alcon spinoff
	2019	QAW039	Results of LUSTER-1 and -2 Phase III trials in severe asthma (CRTH2 antagnost)
	2H19	Ofatumumab subcut (OMB157)	Results of two Phase III in relapsed refractory multiple sclerosis
	2019	SEG101 (crizanlizumab)	Filing for approval in sickle cell pain crises
AG/London Bank	Source: Deutsche Bank, Company data

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Deutsche	Summary model
	Figure 59 : Novartis summary P&L
Bank	$m (EPS $)	2016A	2017A		2018E	2019E	2020E	2021E	2022E	2023E
AG/London	Net sales	48,518	49,109	52,072		46,897	48,920	52,017	53,747	55,235
	Core operating income	12,987	12,850	13,893		13,626	14,783	16,723	17,699	18,334
	Gross Profit	35,806	36,578	39,307		36,403	37,946	40,487	41,963	43,112
	Gross margin	74%	74%	75%		78%	78%	78%	78%	78%
	Core operating margin	27%	26%	27%		29%	30%	32%	33%	33%
	Adjusted Taxes	(2,001)	(2,056)	(2,242)		(2,202)	(2,396)	(2,713)	(2,866)	(2,971)
	Core net income	11,307	11,391	12,039		12,014	12,770	14,456	15,274	15,832
	Core EPS (Basic)	4.75	4.86	5.20		5.27	5.64	6.38	6.75	6.99
	% Change	-5%	2%	7%		1%	7%	13%	6%	4%
	Core EPS (Diluted)	4.71	4.80	5.14		5.22	5.58	6.31	6.66	6.91
	% Change	-5%	2%	7%		1%	7%	13%	6%	4%
	Source: Deutsche Bank, Company data
	Figure 60 : Rebased change in 2019E consensus earnings forecasts				Figure 61 : Sales and EPS growth 2016A-2023E

	1.10										60,000								7
change
	1.00										50,000							20%	6
													14%				19%
consensus EPS rebased																19%
											13%	14%
										REVENUE (USDM)					19%				5	CORE EPS (USD)
														20%
											40,000		19%
	0.90
											21%	20%
																			4
											30,000
	0.80																		3
											20,000				81%	81%	81%	80%
													67%	80%					2
	0.70										66%	66%
2020E
											10,000								1
	0.60										0								0
	Feb-15	Jul-15	Dec-15	May-16	Oct-16	Mar-17	Aug-17	Jan-18	Jun-18 Nov-18
											2016A	2017A	2018E	2019E	2020E	2021E	2022E	2023E
					Novartis							PHARMA	SANDOZ		ALCON		CORE EPS

Source: Deutsche Bank, Bloomberg Finance LP	Source: Deutsche Bank, Company data. Alcon expected to be spun-o in 1H19.

35 Page

2018 December 10 Pharmaceuticals Pharmaceuticals European

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Page	Novo Nordisk (Buy; PT DKK355)
36

Growth means Novo is now big pharma…. but without the bad 'core' accounting

■Increasing optimism as we head through the year, but 2019 earnings growth is still only moderate. The US price shock in insulins in 2016 has left a lasting scar on Novo Nordisk investors. Pressure is set to continue in to 2019. However, we expect growth from GLP-1 (Ozempic) to o set this and enable mid single digit earnings growth. Longer-term Novo's fortunes depend on the launch of oral semaglutide. As such, its filing and potential approval (in late 2019/2020 depending on use of a priority review voucher) are key way points. We expect investors to become increasingly enthused about Novo's shares as we get closer to semaglutide's launch and as we get closer to a period of stronger earnings growth for the shares. The shares trade at a small premium to peers, which we expect to expand as investors look forwards to Novo's longer-term growth prospects.

■The insulin segment remains under pressure. We envisage ongoing price pressure in 2019. However, with no new levers for payors from new entrants, Tresiba should continue to establish itself as the premium basal insulin. Risks of further basal entrants remain in the longer-term and there remain competitive threats in rapid acting insulins. However, the greatest impact has been absorbed and now the insulin outlook remains a balance between solid volume growth, o set by significant but slightly easing price pressure.

■Mix shift to GLP-1 underestimated, but offers a concentrated risk and reward. GLP-1 (semaglutide and oral semaglutide o set by cannibalisation of Victoza) contributes 73% to our forecast revenue growth for Novo Nordisk between 2018-25E. Ozempic's launch has been strong and is on track to become class leader in the injectable GLP-1 segment over time. Given data from Phase IIII trials of oral semaglutide, we feel confident its approvability and Novo's ability to position it as a higher priced oral therapy in the US. As such, the debate will move towards pricing, uptake potential and peak sales (views range from between low single digit billions to close to ten billion pa).

Figure 62 : Bull/Bear case valuation (DKK/share)

Figure 63 : PE Company vs. EU Pharma – 1 yr FWD PE

430

2.5x

49

404

Rel. PE

410

10yr Ave

price(DKK)

390

13

355

fwd1yr

+/- 1 s.d.

330

370

34

2.1x

350

Share

308

sector(x),

310

1.7x

290

270

to

250

Oral sema delayed2 years

Oralsemaglutide

struggles$2.5bn

Oralsemaglutide $10bnpeak sales

rel.

1.3x

BankDeutsche

Bear

peak

Base

Bull

PE

Jan 09

Aug 10

Apr 12

Dec 13

Aug 15

Apr 17

Dec 18

0.9x

AG/London

0.5x

Source: Deutsche Bank, * - current share price

Source: Deutsche Bank, Factset

2018 December 10 Pharmaceuticals Pharmaceuticals European

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	Deutsche	Focus for 2019 - oral semaglutide, oral semaglutide and oral semaglutide
		■	Battle of the GLP-1's a constant focus. Key focus in the near-term will be the market share trajectories of Novo's incumbent GLP-1 Victoza vs Lilly's
	Bank		Trulicity and Novo's newly launched Ozempic. Ozempic has launched well and with the recent Pioneer 6 data likely to be submitted to gain a CV
			label it will likely limit any advantage of Trulicity (which also gained positive CV data in 4Q18). Ultimately though, gaining a CV benefit indication in
	AG/London		the nearer term for both Ozempic and oral semaglutide are useful, but seemingly not essential for uptake (as evidenced in the SGLT2's and between
			Victoza and Trulicity in the past). We would expect both Trulicity's REWIND CV data and oral Sema's PIONEER 6 data to be presented at the ADA
			conference in June.
		■	Oral semaglutide the main event. Oral semaglutide o ers significant blockbuster potential. Filing is due in 1H19 and approval is most likely in 1H20.
			However, this could come earlier in 2019 if a priority review voucher is utilised and if the application is a supplement to Ozempic rather than as a NCE.
			Our forecasts assume oral semaglutide can generate >$5bn of peak sales, and the drug is critical to Novo's long term return to growth.
		Key news flow
		Figure 64 : Potential news flow
		Timing		Event	Description
		4Q18		Xultophy	Phase IIIb results from DUAL VIII (sustainability of glycemic control)
		4Q18		Tresiba	Result of Phase 3 trial vs Toujeo
		4Q18		concizumab	Data from Phase II explorer 4 PoC trial in inhibtior patients
		4Q18		NN7170 (SC N8-GP)	Primary completion of Alleviate 1 Phase 1/2 trial in hemophilia A
		2H18		Ozempic	EU and Japan launches
		2018		semaglutide	Intiation of Phase III STEP programme in obesity (4 trials)
		2018		LAI287	Initiate Phase II trial (once weekly insulin)
		1Q19		N8-GP (NN7088)	Expected US approval decision
		1H19		Competitor NASH	Data expected from Intercept's Phase III trial of Ocaliva in NASH
		1H19		AM833	Inititate Phase II in obesity
		1H19		Xultophy	FDA decision on inclusion of LEADER and DEVOTE data in label
		Jun-19		Competitor (Trulicity)	Presentation of REWIND data at ADA
		Jul-19		semaglutide	Primary completion of Phase II trial in NASH (initiated November 2016)
		mid-2019		Oral semaglutide	Planned regulatory filing
		mid-2019		Ozempic	Intitate CVOT trial (oral SOUL )
		Source: Deutsche Bank, Company data

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38 Page	Summary model
	Figure 65 : Novo Nordisk summary P&L
	DKKm	2016A	2017A		2018E	2019E	2020E	2021E	2022E	2023E
	Sales	111,780	111,696	111,730		119,250	126,020	136,263	149,522	158,566
	Gross profit	94,597	94,064	93,771		100,268	105,713	113,833	124,868	132,287
	Gross Margin %	85%	84%	84%		84%	84%	84%	84%	83%
	Operating profit	48,432	48,967	47,555		51,740	54,847	60,022	67,750	72,474
	Margin %	43%	44%	43%		43%	44%	44%	45%	46%
	PBT	47,798	48,680	48,041		49,941	54,799	59,978	67,705	72,430
	Net profit	37,925	38,130	38,673		39,453	43,291	47,382	53,487	57,220
	Average number of shares outstanding	2,530	2,473	2,422		2,369	2,316	2,264	2,211	2,158
	Basic EPS (DKK)	14.99	15.42	15.97		16.65	18.69	20.93	24.19	26.51
	% change	11%	3%	4%		4%	12%	12%	16%	10%
	Diluted number of shares outstanding	2,535	2,478	2,427		2,374	2,322	2,269	2,216	2,164
	Diluted EPS (DKK)	14.96	15.39	15.94		16.62	18.65	20.88	24.13	26.44
	% change	11%	3%	4%		4%	12%	12%	16%	10%
	Source: Deutsche Bank, Company data
	Figure 66 : Rebased change in 2019E consensus earnings forecasts				Figure 67 : Sales and EPS growth 2016A-2023E

		1.10									160,000									30
	change	1.00
																			11%	25
																		12%
	rebasedEPSconsensus									(DKKm)Revenue		80%	83%	85%			12%				(DKK)EPS
											120,000					13%
															14%					20
		0.90										20%	17%	15%
											80,000									15
		0.80																88%	89%
																	88%
																87%				10
															86%
	2020E	0.70									40,000
																				5
Deutsche		0.60									0									0
		Feb-15	Jul-15	Dec-15	May-16	Oct-16	Mar-17	Aug-17	Jan-18	Jun-18 Nov-18
												2016A	2017A	2018E	2019E	2020E	2021E	2022E	2023E
						Novo Nordisk							Diabetes care			Biopharma		EPS
AG/London Bank	Source: Deutsche Bank, Bloomberg Finance LP									Source: Deutsche Bank, Company data

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Bank Deutsche	Roche (Hold; PT CHF255)
	The conundrum: expecting erosion and new pipeline with the shares balanced for both
AG/London		contrarian o ering as they see consensus forecasts reflecting significant erosion to core franchises and only modest new pipeline upside. We too
	■	Roche is a conundrum: its not quite been cheap enough to be the contrarian move. Investors generally perceive Roche as a high quality company
		with a steady pipeline providing long-term growth above the sector average. Furthermore, we sense a number of investors looking at Roche for a
		see this and watch with interest. However, the shares are simply not cheap enough at 14x PE (in line with the sector but with essentially flat 5 year
		organic EPS growth). Furthermore, on DCF we feel consensus valuations flatter the company as they do not reflect the consistent (not one-time) large
		o -core P&L restructuring charges and the continued intangible asset purchases that enable the company's growth.
	■	Biosimilars an unshakable overhang. The bulk of Roche's profits are generated from three drugs (Herceptin, Avastin and Rituxan) each of which
		faces biosimilar competition in the coming 1-2 years. Near-term uncertainty on precise timing of biosimilar launches o ers upside to 2019E forecasts
		should these be delayed by patent litigation. However, longer-term consensus forecasts still retain multiple billions of CHF sales for these drugs and
		there represents a risk on both the up and down side in terms of pace and magnitude of erosion.
	■	Pipeline has the opportunity to surprise quickly. Recent experience shows that specialty drugs have the potential to rapidly move to pivotal trials
		ahead of expectations. In 2018, we saw drugs such as risdiplam come from virtually nowhere into o ering sizable mid term sales opportunities. We
		would expect similar situations, though hard to predict, to come in 2019, o ering outer year upside risk to consensus forecasts. However, the pace of
		innovation can be a double edged sword. In oncology, Tecentriq disappointed and Roche is facing pressures given its incumbent position elsewhere,
		whereas in MS we could see competition emerge for Roche's future number one product Ocrevus (see Novartis).

Figure 68 : Bull/Bear case valuation (CHF/share)

Figure 69 : PE Company vs. EU Pharma – 1 yr FWD PE

300

1.4x

286

Rel. PE

290

9

10

10yr Ave

280

1.3x

+/- 1 s.d.

(CHF)

270

10

fwd

260

4

255

15

priceShare

1yr(x),sector

1.2x

250

240

9

230

226

1.1x

220

to

210

rel.

1.0x

PE

200

Bear

sharesOfatumumab

marketCD20MS

erosionbiosimilarUS Europetosimilar

meansCompetition

peaksTecentriqat

$1.5bn

Base

biosimilarsUS 1delayedyear

launchrapidHemlibra

peak$5bn

Huntington's breakthrough$3bn

$1bnInitiatescost

programmesaving

Bull

sales

0.9x

0.8x

Jan 09

Aug 10

Apr 12

Dec 13

Aug 15

Apr 17

Dec 18

39Page	Source: Source: Deutsche Bank estimates; * - current share price		Source: Deutsche Bank, Factset

2018 December 10 Pharmaceuticals Pharmaceuticals European

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40 Page		Focus for 2019
		■	Biosimilars - a clearing event or a uncertain drag? We expect US biosimilar launches to Rituxan during 1H19 and Herceptin (and possibly Avastin)
			in 2H19. Given these are well flagged, they should come as no surprise. However, we do not expect them to become an immediate clearing event as
			there will likely remain uncertainty over the pace of erosion. As such, investors/analysts will likely follow payor statements as well as track prescription
			and sales trends throughout the year. We see short term upside if patent litigation delays launches further.
		■	Battle not over in immuno-oncology... yet. As we stand today, there appears only moderate room for surprise from Roche's onolcogy portfolio. The
			Immuno-oncology battle in kidney/lung and bladder cancer appears to have been ceded to Merck's Keytruda, with consensus Tecentriq forecasts
			adjusting downwards in '18. However, further forecast risk remains in 2019 should Keytruda demonstrate strong breast cancer data (KEYNOTE-355).
		■	New drugs to watch. We expect risdiplam to take greater focus in 2019 with competitor filings/approvals (Novartis) raising awareness of the
			opportunity in SMA. We expect Roche to fie for approval in type 1 SMA during 2019 and expect data and potential filing of the SUNFISH part 2 study
			later in the year. Assuming the drug meets expectations, it could add >$1bn to consensus forecasts. Other drugs to watch include Venclexta in relapsed
			refractory multiple myeloma 2H19, polatuzumab's potential approval in late line DLBCL and the increasing awareness of HTT-ASO's opportunity in
			Huntington's disease as the drug transitions to Phase III and as competitor Phase I/II data reads out in 2019.
		Key news flow
		Figure 70 : Potential news flow
		Timing		Event	Description
		4Q18		Herceptin (biosimilar)	Potential US approval of Celltrion's CT-P6 (resubmitted June-18), can't launch until mid-19
	2018			Rituxan	US patent expiry
		2H18/1H19		Competitor (IO)	OS data from Checkmate-227 in PD-L1+ 1L NSCLC
		Feb-19		Tecentriq	Primary completion of IMpassion131 (Tecentriq + paclitaxel) in TNBC
		20-Feb-19		Competitor (IO)	PDUFA date for Opdivo + Yervoy in 1L NSCLC in TMB>10 (Checkmate-227)
		18-Mar-19		Tecentriq	PDUFA in ES-SCLC
		Mar-19		Tecentriq	Primary completion of Phase III IMpassion031 (Tecentriq + nab-pac) in neoadjuvant TNBC
		4Q19		Idasanutlin	Primary completion of Phase III trial in r/rAML
	2019			Risdiplam	Potential filing in Type 1 SMA
	2019			Avastin	Expected US biosimilar launches
	2019			Herceptin	Expected US biosimilar launches
	2019			Kadcyla	Data from Phase III KAITLIN trial in operable HER2-positive early BC
	2019			Polatuzumab vedotin	Primary completion of PhIII POLARIX trial in 1L DLBCL
		Source: Deutsche Bank, Company data
AG/London Bank Deutsche

2018 December 10 Pharmaceuticals Pharmaceuticals European