Five Highlights From a Dramatic Year in European Health Stocks

(Bloomberg) -- There was no shortage of drama in European health care in 2018.

Broadly speaking, the sector outperformed as pharma’s low-risk qualities attracted investors seeking havens when volatility spiked. That was despite President Donald Trump waging war against rising drug prices in the U.S.

But most excitement came from individual stock stories, from giant takeovers to profit warnings. The following charts reflect what the companies went through.

Takeda-Shire

Japanese giant Takeda Pharmaceutical Co. Ltd.’s deal to buy Shire Plc was the year’s largest announced acquisition in any sector. The purchase of the attention deficit hyperactivity disorder drug-maker faced a backlash from dissident Takeda investors, but around 88 percent of votes cast at a shareholder meeting earlier this month secured it.

SOBI’s Surge

Europe’s best-performing health care stock wasn’t found among the blue chips. It was Swedish Orphan Biovitrum AB, a Swedish firm of 850 workers that’s holding its own in the treatment of blood disorders versus heavyweights Roche Holding AG and Novo Nordisk A/S. Takeover speculation which carried into 2018 could continue next year, according to ABG Sundal Collier analyst Christopher Uhde, who spoke by phone.

Healthineers Spin-Off

A technical glitch on the Frankfurt stock exchange delayed the keenly anticipated trading debut of MRI machine and CT scanner-maker Siemens Healthineers AG by a few hours in March, but the company itself showed no sign of stumbling. The stock’s performance outshone that of its parent, Siemens AG, as its earnings outlook impressed investors. The German industrial conglomerate is still reaping the rewards of Healthineers’s success, though, by retaining an 85 percent stake.

Indivior’s Drops

Indivior Plc, formerly a unit of consumer staples giant Reckitt Benckiser Group Plc, is headed to end the year as the FTSE 350 index’s second-worst performer, having been the biggest faller on the Stoxx 600 before its removal from that gauge on Dec. 24. The Slough, England-based company fell more than 10 percent on seven different days as it was struck by numerous unfavorable decisions from courts and regulators in its bid to keep a rival’s copycat of its key opioid-addiction treatment from flooding the market.

Fresenius’s Fall

Germany’s Fresenius SE & Co KGaA made headlines with its legal battle to back out of a $4.3 billion deal to buy niche U.S. drugmaker Akorn. Adding to distress in October were concerns raised by a Californian ballot initiative to cap profit margins on dialysis treatments, the main business of its subsidiary Fresenius Medical Care AG & Co. KGaA. To top things off, the company ended the year by issuing a second profit warning within the space of two months.

So what to expect from the sector in 2019? These are some of the things to keep an eye on:

• U.S. pricing has become an overarching worry for pharma investors and is likely to keep both companies and investors “on their toes for years to come,” analysts at Berenberg wrote in a Dec. 14 note. Some of the biggest companies may announce hikes early next year, just as Trump is seeking to lower prices.
• Some analysts are wondering whether European pharma valuations will catch up with the U.S. European majors are trading at a significant discount to American peers, according to Credit Suisse analysts including Trung Huynh, who said in a Dec. 17 note that the divergence is unwarranted, given that mid-term EPS and revenue growth rates are similar.
• Key product launches to watch, according to Huynh, include Merck KGaA’s Mavenclad multiple sclerosis treatment, Novartis AG and Amgen Inc.’s Aimovig migrane drug, and injectable eczema treatment Dupixent, for which Sanofi is one of the developers.
• A U.S. probe into generics pricing is potentially a risk for copycat makers like Teva Pharmaceutical Industries Ltd. and Hikma Pharmaceuticals Plc, Bloomberg Intelligence analysts Sophia Isani and Jennifer Rie wrote in a note Dec. 19.

To contact the reporters on this story: Joe Easton in London at jeaston7@bloomberg.net;Jade Cano in Zurich at jcano18@bloomberg.net

To contact the editors responsible for this story: Beth Mellor at bmellor@bloomberg.net, Paul Jarvis, Jon Menon

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