Pharmaceuticals/Major
`
`GlaxoSmithKline plc (ADR)
`
`Estimate Changes
`
`Model Updated; SUMMIT Feedback
`Mixed
`
`The Cowen Insight
`As we near the end of Q3 and in the wake of Breo's SUMMIT data, we took another
`look at our GSK model. Physician feedback on SUMMIT has been mixed.
`
`EPS Estimates Lowered In Most Years
`Our EPS estimate has been lowered by 1.5 pence to 75.5p (-21%) in 2015, which
`reflects in part GSK guidance for a "decline at a high teens percentage at CER." We
`reduced our estimate by 1 pence to 84.0p (+11%) in 2016 and by 6 pence to 84.0p
`(flat) in 2017. Our 2020 EPS estimate is intact at 118.0p. The 2015-20 EPS CAGR is 9%,
`which is on par with the industry average.
`Turnover Estimates Raised
`Our 2015 and 2016 turnover estimates have been raised by £95MM to £23,940MM
`(+4%) and £600MM to £25,255MM (+5%), respectively. Our estimate was raised
`by £260MM to £25,720MM (+2%) in 2017 and by £1.04B to £31,925MM in 2020.
`Increased turnover largely reflects higher sales forecasts for Triumeq (HIV) and
`Shingrix zoster vaccine. The 2015-20 turnover CAGR is 6%.
`Physician Feedback on SUMMIT Is Mixed
`On September 8, GSK announced that the SUMMIT data of Breo missed its primary
`endpoint. Our physician expert’s reaction to SUMMIT has been mixed. One expert
`viewed the data as worse than expected. The primary endpoint’s 12% reduction in
`risk was not close to statistically significant, although a 12% change in mortality
`was respectable in absolute terms. The only secondary endpoint to hit (reduced rate
`of lung function decline) did so to a smaller degree than TORCH at 8mL per year
`compared to placebo, while TORCH saw 16mL. Having no strong pneumonia signal
`is positive, but these patients were low risk to start. The notion of improving mortality
`in this population is farther away than ever. Many publications likely will emerge
`from this 16,000-patient study, giving it significant academic and scientific exposure.
`However, our physician believes that Breo use will not change. Another physician
`noted that everything trended in the right direction. There was a trend on mortality.
`Nonetheless, the push to use LAMA/LABA may strengthen at the expense of LABA/
`ICS. SUMMIT was a landmark study based upon a hypothesis and was not a good use
`of resources. Ellipta is a very good device, but insurance coverage is problematic.
`
`Our Breo forecast is £1.05B in 2020, representing a £450MM decline from our last
`published forecast.
`
`Equity Research
`
`September 14, 2015
`
`Price: $40.26 (09/11/2015)
`Price Target: $49.00
`
`MARKET PERFORM (2)
`
`Steve Scala, R.Ph., CFA
`617.946.3923
`steve.scala@cowen.com
`
`Kathleen Miner, R.Ph., CFA
`617.946.3857
`kathy.miner@cowen.com
`
`Jean Perreault
`617.946.3967
`jean.perreault@cowen.com
`
`Key Data
`NYSE: GSK
`Symbol
`$49.08 - 39.27
`52-Week Range:
`$97,965.4
`Market Cap (MM):
`$14,377.0
`Net Debt (MM):
`NA
`Cash/Share:
`2,433.3
`Dil. Shares Out (MM):
`Enterprise Value (MM): NA
`ROIC:
`NA
`ROE (LTM):
`NA
`BV/Share:
`NA
`Dividend:
`$2.37
`Yield:
`5.89%
`
`2014A
`FY (Dec)
`Earnings Per Share
`Q1
`Prior Q1
`Q2
`Prior Q2
`Q3
`Prior Q3
`Q4
`Prior Q4
`Year
`Prior Year
`Core EPS
`
`p21.00
`-
`p19.10
`-
`p27.90
`-
`p27.30
`-
`p95.30
`-
`
`2015E
`
`2016E
`
`p17.30A
`-
`p17.30A
`-
`p21.60
`p22.80
`p19.30
`p19.60
`p75.50
`p77.00
`
`p19.70
`p18.70
`p18.40
`p18.20
`p24.40
`p26.20
`p21.50
`p21.90
`p84.00
`p85.00
`
`Revenue (MM)
`Year
`Prior Year
`
`£23,006.0
`-
`
`£23,940.0
`£23,845.0
`
`£25,255.0
`£24,655.0
`
`www.cowen.com
`
`Please see addendum of this report for important disclosures.
`
`WATSON LABORATORIES, INC. , IPR2017-01621, Ex. 1081, p. 1 of 2
`
`
`
`GlaxoSmithKline plc (ADR)
`
`Estimate Changes
`
`Model Updated; SUMMIT Feedback
`Mixed
`
`The Cowen Insight
`As we near the end of Q3 and in the wake of Breo's SUMMIT data, we took another
`look at our GSK model. Physician feedback on SUMMIT has been mixed.
`
`EPS Estimates Lowered In Most Years
`Our EPS estimate has been lowered by 1.5 pence to 75.5p (-21%) in 2015, which
`reflects in part GSK guidance for a "decline at a high teens percentage at CER." We
`reduced our estimate by 1 pence to 84.0p (+11%) in 2016 and by 6 pence to 84.0p
`(flat) in 2017. Our 2020 EPS estimate is intact at 118.0p. The 2015-20 EPS CAGR is 9%,
`which is on par with the industry average.
`Turnover Estimates Raised
`Our 2015 and 2016 turnover estimates have been raised by £95MM to £23,940MM
`(+4%) and £600MM to £25,255MM (+5%), respectively. Our estimate was raised
`by £260MM to £25,720MM (+2%) in 2017 and by £1.04B to £31,925MM in 2020.
`Increased turnover largely reflects higher sales forecasts for Triumeq (HIV) and
`Shingrix zoster vaccine. The 2015-20 turnover CAGR is 6%.
`Physician Feedback on SUMMIT Is Mixed
`On September 8, GSK announced that the SUMMIT data of Breo missed its primary
`endpoint. Our physician expert’s reaction to SUMMIT has been mixed. One expert
`viewed the data as worse than expected. The primary endpoint’s 12% reduction in
`risk was not close to statistically significant, although a 12% change in mortality
`was respectable in absolute terms. The only secondary endpoint to hit (reduced rate
`of lung function decline) did so to a smaller degree than TORCH at 8mL per year
`compared to placebo, while TORCH saw 16mL. Having no strong pneumonia signal
`is positive, but these patients were low risk to start. The notion of improving mortality
`in this population is farther away than ever. Many publications likely will emerge
`from this 16,000-patient study, giving it significant academic and scientific exposure.
`However, our physician believes that Breo use will not change. Another physician
`noted that everything trended in the right direction. There was a trend on mortality.
`Nonetheless, the push to use LAMA/LABA may strengthen at the expense of LABA/
`ICS. SUMMIT was a landmark study based upon a hypothesis and was not a good use
`of resources. Ellipta is a very good device, but insurance coverage is problematic.
`
`Our Breo forecast is £1.05B in 2020, representing a £450MM decline from our last
`published forecast.
`
`Equity Research
`
`September 14, 2015
`
`Price: $40.26 (09/11/2015)
`Price Target: $49.00
`
`MARKET PERFORM (2)
`
`Steve Scala, R.Ph., CFA
`617.946.3923
`steve.scala@cowen.com
`
`Kathleen Miner, R.Ph., CFA
`617.946.3857
`kathy.miner@cowen.com
`
`Jean Perreault
`617.946.3967
`jean.perreault@cowen.com
`
`Key Data
`NYSE: GSK
`Symbol
`$49.08 - 39.27
`52-Week Range:
`$97,965.4
`Market Cap (MM):
`$14,377.0
`Net Debt (MM):
`NA
`Cash/Share:
`2,433.3
`Dil. Shares Out (MM):
`Enterprise Value (MM): NA
`ROIC:
`NA
`ROE (LTM):
`NA
`BV/Share:
`NA
`Dividend:
`$2.37
`Yield:
`5.89%
`
`2014A
`FY (Dec)
`Earnings Per Share
`Q1
`Prior Q1
`Q2
`Prior Q2
`Q3
`Prior Q3
`Q4
`Prior Q4
`Year
`Prior Year
`Core EPS
`
`p21.00
`-
`p19.10
`-
`p27.90
`-
`p27.30
`-
`p95.30
`-
`
`2015E
`
`2016E
`
`p17.30A
`-
`p17.30A
`-
`p21.60
`p22.80
`p19.30
`p19.60
`p75.50
`p77.00
`
`p19.70
`p18.70
`p18.40
`p18.20
`p24.40
`p26.20
`p21.50
`p21.90
`p84.00
`p85.00
`
`Revenue (MM)
`Year
`Prior Year
`
`£23,006.0
`-
`
`£23,940.0
`£23,845.0
`
`£25,255.0
`£24,655.0
`
`www.cowen.com
`
`Please see addendum of this report for important disclosures.
`
`WATSON LABORATORIES, INC. , IPR2017-01621, Ex. 1081, p. 1 of 2
`
`
`
`Cowen and Company
`Equity Research
`
`GlaxoSmithKline plc (ADR)
`September 14, 2015
`
`GlaxoSmithKline Annual Product Sales Buildup (£MM) (continued)
`
`
`
`Source: Cowen and Company
`
`
`
`
`
`28
`
`www.cowen.com
`
`
`
`3377794
`
`Tarextumab
`
`MAGE-A3
`
`Other Oncology/emesis
`
`Oncology
`
`% Change
`
`Flolan - U.S. (lc, ex fx)
`
`Flolan - U.S.
`
`Flolan - EU (lc, ex fx)
`
`2014
`
`2015E
`
`2016E
`
`2017P
`
`2018P
`
`2019P
`
`2020P
`
`25
`
`25
`
`50
`
`50
`
`75
`
`75
`
`10
`
`2014-20
`
`2015-20
`
`CGR
`
`NM
`
`NM
`
`CGR
`
`Comment
`
`NM NY-ESO-1 T cell receptor; cancer; Phase II
`
`NM Anti-notch 2/3 mAB; cancer; Phase II
`
`Melanoma; Phase III
`
`110
`
`1,202
`
`24%
`
`15
`
`215
`
`-82%
`
`50
`
`100
`
`160
`
`Sold to Novartis for $16B, $1.5B of which was keyed to COMBI-d trial; closed 3/2/15
`
`22
`
`25
`
`30
`
`35
`
`40
`
`45
`
`50
`
`35
`
`15%
`
`15%
`
`19%
`
`28%
`
`Flolan - EU
`
`Flolan - EM
`
`Flolan - ROW
`
`Flolan
`
`Volibris - U.S. (lc, ex fx)
`
`Volibris - U.S.
`
`Volibris - EU (lc, ex fx)
`
`Volibris - EU
`
`Volibris - EM
`
`Volibris - ROW
`
`12
`
`0
`
`37
`
`72
`
`102
`
`13
`
`43
`
`10
`
`40
`
`75
`
`100
`
`60
`
`15
`
`60
`
`105
`
`120
`
`80
`
`20
`
`80
`
`135
`
`140
`
`100
`
`25
`
`100
`
`165
`
`160
`
`120
`
`30
`
`120
`
`195
`
`180
`
`140
`
`140
`
`225
`
`25%
`
`21%
`
`28%
`
`25% Pulmonary arterial hypertension
`
`200
`
`12%
`
`15%
`
`160
`
`25%
`
`22%
`
`Volibris
`
`2696273
`
`2696274
`
`2696275
`
`2398852 + 23156898
`
`Other
`
`Rare Diseases
`
`157
`
`160
`
`200
`
`240
`
`280
`
`320
`
`360
`
`15%
`
`18% Pulmonary arterial hypertension
`
`188
`
`417
`
`175
`
`410
`
`185
`
`490
`
`195
`
`570
`
`25
`
`25
`
`25
`
`25
`
`205
`
`750
`
`50
`
`50
`
`50
`
`50
`
`215
`
`930
`
`75
`
`75
`
`75
`
`75
`
`225
`
`1,110
`
`NM
`
`NM
`
`NM
`
`NM
`
`3%
`
`18%
`
`NM Ex-vivo stem cell gene therapy; ADA-SCID; EU filed 5/15; U.S. Phase II/III
`
`NM Ex-vivo stem cell gene therapy; metachromatic leukodystrophy; Phase II
`
`NM Ex-vivo stem cell gene therapy; Wiscott-Aldrich syndrome; Phase II
`
`NM SAP mAB + SAP depleter; amyloidosis; Phase II
`
`5%
`
`22%
`
`% Change
`
`-16%
`
`-2%
`
`20%
`
`16%
`
`32%
`
`24%
`
`19%
`
`Avodart - U.S. (lc, ex fx)
`
`Avodart - U.S.
`
`Avodart - EU (lc, ex fx)
`
`Avodart - EU
`
`Avodart - EM
`
`Avodart - Japan
`
`Avodart - ROW
`
`Avodart
`
`258
`
`280
`
`113
`
`114
`
`40
`
`805
`
`235
`
`260
`
`245
`
`740
`
`50
`
`240
`
`230
`
`520
`
`25
`
`75
`
`215
`
`315
`
`5
`
`50
`
`200
`
`255
`
`5
`
`25
`
`185
`
`215
`
`5
`
`-48%
`
`-54% Patent expires 2015; Teva can launch via settlement in Q4:15
`
`10
`
`-43%
`
`-48% Patent expires 2017
`
`170
`
`185
`
`27%
`
`-22%
`
`-7%
`
`-24% BPH; good growth despite finasteride generics; prostate cancer filing withdrawn
`
`WATSON LABORATORIES, INC. , IPR2017-01621, Ex. 1081, p. 2 of 2
`
`
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