We expect currency to have a significant impact on 2009 earnings. The biggest effect, due to the British pound weakness, is likely at GlaxoSmithKline (GSK) and AstraZeneca (AZN).
We expect several major clinical trials to report. Results from the C’08 study will show whether Avastin (Roche/Genentech) works in adjuvant cancer. Data for AZD6140 marks the next major datapoint for AstraZeneca’s pipeline. Actelion has three major phase-III studies set to report in the second half.
Our top picks for 2009: Roche, Ipsen and Shire. Roche, in our view, offers the best long-term growth potential of the EU large caps (15.5 percent vs. 6.7 percent 2008-2013E CAGR), with potential positive catalysts from wild card Avastin adjuvant data in mid-2009 and removal of the Genentech acquisition overhang.
With no major patent expiries expected in the medium term and its strongly growing oncology product portfolio, we forecast that Roche has the best long-term EPS growth in the sector.
As for Sanofi Aventis, a difficult outlook has prompted change at the top. In late 2008, Chris Viehbacher took over as CEO, followed by the elevation of Laurence Debroux, CFO [and Chief Strategic Officer], as his direct report. The new CEO faces a huge challenge. However, he has a good track record of cost control and is running a company with a strong balance sheet – expect a focus on profitability as the new CEO takes control. We now expect adjusted EPS of 6.20 euros in 2009, growth of 14 percent reported terms and 7 percent at constant exchange rates.
Tycho W. Peterson