Stocks’ Details
 

Pfizer Inc.

 
Update on Mylan & Pfizer Proposed Combination: Pfizer Inc. (NASDAQ: PFE) is involved in the manufacturing and development of healthcare products, incorporating innovative medicines and vaccines. On March 26, 2020, Mylan N.V. and Pfizer Inc. stated that due to the impact of COVID-19 pandemic, which includes related delays in the regulatory review process, the proposed transaction involving Mylan and Upjohn, a division of Pfizer, is now expected to close in the 2HFY20.
 
Pfizer Provides Data on its Phase III Studies 20vPnC Vaccine: On March 18, 2020, the company announced positive top-line data from one of its phase III studies on its 20-valent pneumococcal conjugate vaccine (20vPnC) candidate in adults 18 years of age or older. The company assessed its 20vPnC candidate in a phase III study in patients who have not obtained any vaccination against pneumococcal infection.
 
Pfizer to Co-Develop Potential Coronavirus Vaccine: Pfizer has recently agreed to a letter of intent to co-develop Germany-based biotech mRNA-based vaccine candidate BNT162 to prevent COVID-19. Pfizer will also co-deliver (excluding China) the mRNA-based COVID-19 vaccine if it gets to the market.
 
Q4FY19 Operational Highlights for the Period ended 31 December 2019: PFE declared its quarterly results, wherein the company reported revenue of $12,688 million as compared to $13,976 million in pcp. The company reported adjusted net income of $3,108 million, down 17% year over year. Diluted EPS for the quarter came in at 55 cent per share.
 

Q4FY19 Financial Highlights (Source: Company Reports)
 
Outlook: For FY20, the company expects revenue to be in the range of $48.5 billion to $50.5 billion and adjusted diluted EPS within the range of $2.82to $2.92. Adjusted cost of sales as a percentage of revenue, is expected within the range of 19.9% to 20.9%.
 
Valuation Methodology: Price to Earnings Multiple Based Relative Valuation

Price to Earnings Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months
 
Stock Recommendation: The stock of PFE is quoting at $30.90 with a market capitalization of ~$171.4 billion.The stock is currently quoting at the lower band of its 52-week trading range of $27.88 to $44.56.The stock has corrected by ~21.41% and ~26.46% in the last three months and in a year’s time, respectively.  The company remains positive about the progress with the product pipeline, in terms of both the breadth of opportunities and depth of the science. Considering the aforesaid facts, we have valued the stock using price to earnings based relative valuation method. We have taken the peer group - Bristol-Myers Squibb Co (NASDAQ: BMY), Abbvie Inc (NASDAQ: ABBV), Johnson & Johnson (NASDAQ: JNJ), etc. and arrived at a target price of single-digit upside (in% terms). Hence, we recommend a “Hold” rating on the stock at the closed price of $30.90, down 2.68% as on 27 March 2020.
 

Intuitive Surgical, Inc.

 
Revenues up ~22% Year Over Year in 4QFY19: Intuitive Surgical, Inc. (NASDAQ: ISRG) is engaged in designing, manufacturing and marketing the da Vinci surgical system and related instruments and accessories, which is an advanced robot-assisted surgical system.
 
4QFY19 Financial Highlights for the period ending 31 December 2019: During the quarter, the company reported adjusted earnings per share (EPS) of $3.48 as compared to $2.96 per share. Revenues for the period stood at $1.28 billion, soaring ~22% on a year over year basis. Revenues outside the United States came in at $422 million, up 37% on pcp, owing to higher instruments and accessory revenues, driven by process growth and favorable buying patterns of customer. In 4QFY19, adjusted gross profit stood at $922.6 million, as compared to $751.2 million reported in the year-ago period. Gross margin expanded 40 basis points (bps) and came in at 72.2%. Adjusted operating income totaled $505.6 million, as compared to $411.8 million reported in the year-ago period. 
 

Q4FY19 Financial Highlights (Source: Company Reports)
 
Outlook: For FY20, the company predicts procedure growth within 13% to 16%, driven by U.S. general surgery and procedures outside the US.
 
Stock Recommendation: The stock of ISRG is quoting at 490.41 with a market capitalization of $57.3 billion. The stock is currently quoting at the upper band of its 52-week trading range of $360.5 to $619. The stock has corrected by ~17.98% and ~12.16% in the last three months and in a year’s time, respectively. The company reported robust fourth-quarter results. Going forward, the company remains on track to gain from the overall international expansion. However, the da Vinci system is in the early stages of implementation in few markets outside the US which is expected to hamper placements. Stiff rivalry in the worldwide MedTech space remains a potential concern. On the TTM basis, the stock is trading at an P/BV multiple of 7x, higher than the industry median (Health care) of 2x. Considering the aforesaid facts and current trading levels, we have a watch stance on the stock at the closing price of $490.41, down 2.21% as on 27 March 2020.
 

Johnson & Johnson

 
J&J Inks Deal With BIDMC to Develop COVID-19 Vaccine: Johnson & Johnson (NYSE: JNJ) is a world class healthcare company, which is involved in the research and development, manufacturing and sale of multiple range of personal care hygienic products, pharmaceuticals and surgical equipment. On March 13, 2020, A subsidiary of Johnson & Johnson, Janssen, entered into a collaborative agreement with the Beth Israel Deaconess Medical Center ("BIDMC") to aid in the making of a vaccine candidate for coronavirus outbreak.
 
4QFY19 Financial Highlights for the period ending 31 December 2019: During the quarter, the company reported adjusted earnings of $1.88 per share, down 4.6% on a year over year basis. Sales of the drug and consumer products giant stood at $20,747 million, which increased 1.7% from the year-ago quarter, reflecting an operational increase of 2.6%. In the domestic market, sales increased 1.4% year over year and came in at $10,774 million. International sales increased 2.1% year over year. Pharmaceutical segment sales stood at $10,548 million, an increase of 3.5% year over year.
 

Q4FY19 Financial Highlights (Source: Company Reports)
 
Outlook for FY20: The company expects FY20 adjusted earnings to be in the range of $8.95 - $9.10, representing a growth of 3.1%-4.8%. On an operational, adjusted earnings per share are expected to grow in the scale of 3.7%-5.4%, on a constant currency basis.  Revenues for FY20 is likely to be in the range of $85.4-$86.2 billion, suggesting a rise of 4%-5% year over year. Operational constant currency sales growth is likely to be in the ambit of 4.5%-5.5%. Adjusted operational sales growth is likely to be in the range of 5% to 6%.
 
Valuation Methodology: Price to Cash Flow Multiple Based Relative Valuation

Price to Cash Flow Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months
 
Stock Recommendation: The stock of JNJ is quoting at $123.16 with a market capitalization of $324.7 billion.The stock is currently quoting at the lower band of its 52-week trading range of $109.16 to $154.5. The stock has corrected by ~15.5% and ~11.2% in the last three months and in a year’s time, respectively. The company has posted mixed fourth quarter earnings and has a modest projection for full year sales growth for 2020. The company is confident that its business will grow on the back of its strong portfolio of products. Considering the aforesaid facts, we have valued the stock using price to cash flow based relative valuation method. We have taken the peer group - Bristol-Myers Squibb Co (NASDAQ: BMY), Abbvie Inc (NASDAQ: ABBV), Allergan plc (NASDAQ: AGN), to name few. and arrived at a target price of single-digit upside (in% terms). Hence, we recommend a “Hold” rating on the stock at the closed price of $123.16, down 2.69% as on 27 March 2020.
 
 
 
Comparative Price Chart (Source: Thomson Reuters)

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