兽医行业调查显示：第兽医需求持续

1、17January2019 Americas/United EquityResearchHealthcare Technology &DistributionAnimal TracksResearchAnalystsErin WilsonWright212 5384080 HYPERLINK mailto:erin.wright erin.wrightCharles Lederer,CPA212 5381822 HYPERLINK mailto:charles.lederer charles.ledererKatieTryhane212 3252713 HYPERLINK mailto:kat

2、ie.tryhane katie.tryhaneGeorgeEngroff212 3252289 HYPERLINK mailto:george.engroff george.engroffCHANNEL CHECKSurvey says: 4Q vet demand sustains strength4Q Vet practice volume, revenue growth remain strong: According to our proprietary survey of 75 US companion animal veterinarians, 76% ofpractices e

3、xperienced positive revenue growth in 4Q (vs. 77% in 3Q), rising 2.3% on a weighted avg. basis, in line with the 3Q experience. New patient traffic (+1.9%) was the most meaningful driver of practice revenues, followed by diagnostics (+1.5%), acute care (+1.4%), and price (+1.3%). Vets continue to be

4、 optimistic on NTM trends, which bodes well for our Animal Health universe.Animal Pharm: Highlight Zoetis, Elanco: Over half (51%) of respondents selected Zoetis (ZTS, Outperform) as the best positioned Animal Healthcompany (vs. 27% for the next highest ranked co.), with commentary most frequently r

5、eferencing ZTSs innovation and comprehensive portfolio. Feedback on ZTSs atopic dermatitis portfolio (Apoquel, Cytopoint) was incrementally positive, with 20% of respondents ranking Cytopoint among the most impactful products (vs. 12% in 3Q). The survey enhances our conviction in ZTSs US Companion A

6、nimal business (29% of revenues) into its 2019 guidance and 4Q report, where we forecast +5% growth in 4Q (ex- ABAXIS). Of note, we are refining our 2019 EPS for ZTS to $3.40 (from$3.50) to reflect FX and tax dynamics with no changes to our organic growth assumptions. For Elanco (ELAN, Neutral) / Ar

7、atana (PETX, Outperform), the majority (73%) of vets prescribe Galliprant (consistent with 3Q), and 36% prefer Galliprant over existing therapies such as Rimadyl (ZTS). Awareness for ELANs Credelio (54% vs. 44% in 3Q) improved, though traction remains modest (15% vs. 12% in 3Q). In 4Q, we forecast E

8、LAN Companion Animal (32% of revenues) organic growth of 19% as it laps distributor destocking, and our focus is on its R&D pipeline and the progress of cost structure initiatives.Vet-Tech: Relevant Covetrus metrics into upcoming HSIC Spin:Ahead of the HSIC AH/Vets First Choice spin/merger (Covetrus

9、) in thecoming weeks (see HYPERLINK /s/V7ez7R4AF-ZGDB Covetrus S-1/S-4 Takeaways), we highlight relevant e- commerce utilization trends. The majority (63%) of respondents use either Vets First Choice (VFC, 36%) or Vetsource (27%) as their primary e- commerce/prescription management platform, rising

10、from 57% in 3Q and 39% a year ago. While pet owner utilization remains in fledgling stages (4% of practice revenues generated via online platforms), we view there is ample room for greater adoption. Nearly half (49% vs. 45% in 3Q) of veterinarians noted the online pharmacy offerings have helped lift

11、 practice revenues, including 56% of VFC users and 45% of Vetsource users. Ad hoc commentary (enclosed) was generally more positive for VFC (vs. Vetsource), and vets have seemingly warmed to new e-commerce platforms, underscoring their inherent value proposition in helping to drivepractice revenue a

12、nd profit growth.DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Creditto do in its As a be have a of of this as a in DognosticsIDXXmaintainsdominantpositioning:demand rem

13、ains broadly positive, with 81% of vets expecting testingvolume to rise over the NTM (vs. 76% in 3Q). Our survey enhances our conviction in growth prospects for IDEXX Laboratories (IDXX, Outperform), amidst lackluster traction for competitors new offerings (i.e, only two VetScan SA and five FLEX4 us

14、ers), with IDXX representing eight of the nine most popular instruments in our survey, helping underscore its dominant position. In 4Q, we forecast IDXX organic topline growth of +11%, driven by strong recurring revenue streams, consistent price realization (+2-3% annually), and robust customerreten

15、tion.Table of contents HYPERLINK l _bookmark0 Veterinarysurveytakeaways4 HYPERLINK l _bookmark1 4Q Snapshot: Relevant companysurveyhighlights4 HYPERLINK l _bookmark2 State of the Industry6 HYPERLINK l _bookmark3 Animal healthsupplychain11 HYPERLINK l _bookmark4 E-CommercePlatforms12 HYPERLINK l _boo

16、kmark5 Dognostics dynamics20 HYPERLINK l _bookmark6 Rapidtests update29 HYPERLINK l _bookmark7 Animal Pharm: A look at AnimalHealth therapeutics30 HYPERLINK l _bookmark8 Generics36 HYPERLINK l _bookmark9 PetHealthInsurance38 HYPERLINK l _bookmark10 Relevantdetailedcommentary39 HYPERLINK l _bookmark1

17、1 Zoetis(ZTS)45Veterinary survey takeawaysWe commissioned a survey of 75 practicing veterinarians dispersed across 24 states in the U.S., with the highest number of responses in Texas (11), Florida (7), California (6), Indiana (5), and Massachusetts (5). Respondents were exclusively small/companion

18、animal veterinarians with an average tenure of 17 years, consistent with previoussurveys.4Q Snapshot: Relevant company survey highlightsZoetis (ZTS, Outperform): Overall, the survey results bode well for Zoetiss US companion animal business (29% of sales), where we are forecasting 4Q18 segmentrevenu

19、es to rise 19%, with contributions from ABAXIS as well as continued drivers in leading atopic dermatitis products Apoquel andCytopoint.More specifically, our survey revealed continued broad-based enthusiasm for Cytopoint, with 20% of respondents ranking the monoclonal antibody as one of the most imp

20、actful products to practice revenues in 2018 (vs. 12% in 3Q). Simparica trends moderated, with 33% prescribing the chewable parasiticide, compared to 45% in 3Q. Simparica achieved blockbuster status in 2018 ($125 million in sales through 3Q YTD), and we remain optimistic regarding its growth prospec

21、ts in a sizeable, albeit competitive, $3-4 billion parasiticide category that features popular blockbusters such as Merial/Boehringer Ingelheims (private) Nexgard and Mercks Bravecto. We are also optimistic on the potential launch of Simparica Trio, its flea/tick/heartworm combination product, for w

22、hich management has submitted required filings in the US and Europe (see HYPERLINK /s/V7eUqF4AF-ZGDB Scoops from Scottsdale). Focus into the 4Q print will be on base growth trends, 2019 guidance, organic growth, ABAXIS integration, FX, and the R&D pipeline update (i.e. mAbs for feline pain, Simparic

23、aTrio).In dognostics, ZTS is in the process of onboarding ABAXIS onto its SAP platform, with completion expected in 2H19, at which point we view it will be better positioned to more seamlessly bundle ZTS therapeutics and pharmaceuticals with the legacy ABAXIS portfolio. Longer-term, we continue to v

24、iew there is room for more than one major diagnostics player, considering highly underpenetrated international geographies and species (i.e., livestock).Elanco Animal Health (ELAN, Neutral): 4Q18 represented ELANs first full quarter as a public company, and we view our survey provides meaningful ins

25、ightinto how USveterinarians perceive the company and its products. On average, our cohort views ELAN is the third best positioned Animal Health company (vs. fourth in 3Q), behind only ZTS and Merial/BoehringerIngelheim.Regarding its product offerings, respondents continued to offer positive feedbac

26、k on Galliprant as Aratana Therapeutics (PETX, Outperform) and ELAN continue to experience building demand for the osteoarthritis therapeutic. The majority (73%) of respondents reported prescribing Galliprant, consistent with our 3Q survey, and 36% noted they prefer it over alternatives (i.e., Rimad

27、ylZoetis).Regarding its flea/tick portfolio, respondents demonstrated greater awareness of Credelio (54%, vs. 44% in 3Q), with commentary emphasizing the value of having the ability to administer it to younger dogs, where ZTSs Simparica is inferior. Note, ELAN already provided 2019 guidance in Decem

28、ber, calling for +4-6% core organic growth, predicated on no competing triple combination parasiticide launch, partially offset by its delay of Imvixa (sea lice) in Norway. More notably, we forecast EBITDA margin improvement of 103 bps in 2019 as it continues to diligently optimize its cost structur

29、e as a standalone entity.IDEXX Laboratories (IDXX, Outperform): We remain encouraged by broader optimism in diagnostic utilization trends from our survey, helping to strengthen ourconviction in IDEXXs near term growth prospects as its direct sales effort matures and expands with compelling advantage

30、s in a comprehensive test/instrument/service portfolio, innovative product launches (i.e. SediVue and SDMA on the slide), cohesive IT systems, and an expanding global presence. In our survey, 83% of respondents expect diagnostic testing to rise over the NTM (vs. 89% in 3Q).In terms of equipment shar

31、e shifts, IDXX was a net gainer over ABAXIS. However, vets are largely indifferent when it comes to ZTSs acquisition of ABAXIS. Of note, only two respondents reported using VetScan SA, ABAXISs new urine sediment analyzer, and five respondents reported using ABAXISs new FLEX4 rapid test (vs. zero in

32、3Q), deemphasizing the NT impact to IDEXXs competitive positioning.In 4Q, we forecast IDXX organic topline growth of +11% (+13% CAG segment), driven by strong recurring revenue streams, consistent price realization (+2-3% annually), and robust customer retention. We forecast a 7.5% increase in Catal

33、yst placements against a difficult comp (+24.8% in 4Q17), and +14% growth in SediVue placements.DistributorsAmerisourceBergensMWI(ABC,Outperform),Companies (PDCO, Outperform), Henry Schein (HSIC, Neutral): We remainrelatively optimistic on the prospects of the respective Animal Health businesses of

34、AmerisourceBergen, Henry Schein (upcoming Covetrus), and Patterson Companies, based on the sustained strength in veterinary traffic and volume trends, as the largest US animal health distributors. However, we note changes in vendor contracts and associated rebate terms may impact topline growth and

35、profitability.Covetrus (CVET, pending HSIC spin): In our survey, 63% of veterinarians use either VFC (36%) or Vetsource (27%), up from 58% in 3Q18, and 39% in 4Q17, consistentwith Covetruss recent S-4 filing that highlighted a 47% increase in users during 2018, (to 7,500). Interestingly, 56% of VFC

36、users reported the platform has helped to boost practice revenues, versus 45% for Vetsource. While utilization thereon remains relatively low in its early days (representing 4% of practice revenue for VFC users), we are encouraged by the ramping onboarding of the relatively new solution. In our view

37、, veterinarians have warmed to e-commerce platforms like Vets First Choice, underscoring their inherent value proposition in helping veterinarians drive revenue growth and profitability. For details on the spin, see: HYPERLINK /s/V7ez7R4AF-ZGDB Covetrus S-1/S-4 Takeaways.PetMed Express (PETS, Underp

38、erform): Approximately 71% (vs. 73% in 3Q) of participants have experienced increased competition (as it relates to both prescriptionand OTC medications) from alternative retailers such as PetMed Express (PETS, or 1- 800-PETMEDS) or other big box/omni-channel retailers. Key drivers of the trend like

39、ly include cheaper options for the consumer, heightened awareness of online pharmacies, as well as convenience given the advent of online shopping. While the increased competition bodes well for PETS, 9% of respondents specifically noted the competitiveness of C (owned by PetSmart, private), which l

40、aunched an online pharmacy in July 2018, underscoring what we view as PETSs lack of meaningful differentiation from its retailcompetitors.PETS will release its F3Q earnings report on January 22nd, and we estimate sales growth of +7%, on an 8% rise in new order sales, with customer acquisition costs

41、increasing by 8% with its shifting advertising strategy. Focus will be on new customer growth, customer acquisition costs, and its advertising strategy.Aratana Therapeutics (PETX, Outperform): In addition to the aforementioned positive Galliprant feedback, Entyce (launched in October 2017) traction

42、continues tobuild, with 62% of respondents prescribing or planning to prescribe the inappetance therapy (vs. 55% in 3Q, 48% in 2Q, and 40% in 1Q). Of note, 9% and 3% of respondents ranked Entyce and Nocita, respectively, as among the most impactful products in veterinary medicine in 2018. More broad

43、ly for PETX, questions headinginto the quarter remain around traction for new products, pipeline updates, and the intentions of activist investors following their recent partial-liquidation.Bayer Animal Health (BAYGn.DE): Our survey also provides insight on traction for Bayers portfolio, which is ex

44、pected to be divested by its pharmaceutical parent in thenear future (see HYPERLINK /s/V7edpU4AF-ZGDB Bayer Unleashing Animals). Bayers portfolio is unique relative to other industry leaders in terms of its mix more skewed toward companion animal (60% vs. 40% livestock), and the concentration of its

45、 top products (62% of TTM revenue generated by its top four products). Surprisingly, Drontal, a dewormer, represented Bayers most popular product according to our survey, recommended by 23% of respondents. Of note, 5% of our cohort recommends Seresto (vs. 4% in 3Q), and Advantage/Advantix (vs. 6% in

46、 3Q), flea and tick preventatives.State of the IndustryWith the economic malaise, veterinary utilization trends in the U.S. were weaker over the 2008-2011 timeframe, with a sharp decline in veterinary clinic traffic on weakening pet ownership trends and lower patient adherence. Veterinary office vis

47、its declined 2% in 2010, on the heels of an estimated 3% decline in 2009, according to the American Veterinary Medical Association (AVMA), and patient visits/week dropped to 66 patients, on average, from 75 historically (89, according to our latest survey, +5.4% yoy). However, the declining trends b

48、egan to abate in 2011, and veterinary clinic traffic rebounded in2012.As a frame of reference, prior to the economic downturn, annual practice revenues historically increased 7-13% annually, on average, with 76% of treatment fee increases exceeding inflation1. However, lower patient volumes dispropo

49、rtionately weighed on practice revenues during a challenging economic backdrop in 2008-2011. With current trends approaching higher levels of late, we are heartened by the latest positive metrics in our survey work that suggest continuing strength in veterinary demand, despite difficult yoycompariso

50、ns.Figure 1: Hospital same store revenue & volume reported by IDEXX & VCA IDEXX Practice Revenues7%8%6%6%6%5% 5%5%4%2%4%2%0%0%-2%-2%WOOF Hospital SSS0%0%-4%-2% -2% -2% -2%-4%IDEXX Practice Volume3Q091Q103Q101Q113Q111Q123Q121Q133Q131Q143Q141Q153Q151Q16*3Q161Q173Q171Q183Q18-6% -5%3Q091Q103Q101Q113Q111

51、Q123Q121Q133Q131Q143Q141Q153Q151Q16*3Q161Q173Q171Q183Q18VCA samestoresalesIDEXX-measured practicevisitsIDEXX-measuredpracticerevenuesNote: 1Q16 includes an extra sellingdaySource: Company data, Credit Suisse estimatesFrom 2008-2011, lackluster routine veterinary visits were the industrys largest bat

52、tle, as reflected in declining quarterly same store volumes from VCA, the leading standalone animal hospital chain (816 hospitals). However, in 3Q11, VCA reported its first positive1 NCEVI: Update on Veterinary Demographics& Economic Trends, May 2011same store hospital sales trend in 11 consecutive

53、quarters, signaling an inflection point in veterinary demand. Overall, we expect sustained momentum in veterinary clinic volumes and practice revenues, helped by the proliferation of more advanced diagnostic testing capabilities, patient communications platforms, improving patient adherence, expandi

54、ng pet ownership, innovative clinical technologies, and sophisticated therapeutics.In terms of more recent national trends, Vetalytix, an aggregator of animal health market data, noted +4.8% growth in 3Q in its National Vet Consumption index (see Figure 2), a measure of clinic volume, led by the Sou

55、th Atlantic and New England regions. Interestingly, flea/tick doses declined notably (-13.6%) across each region and declined nationally in 1Q-3Q. The decline in flea/tick doses represents a disconnect from reported industry performance, with Zoetis and Merck both noting significant growth in their

56、respective leading Simparica (+69% YTD) and Bravecto (undisclosed) flea and tick product lines.Figure 2: National Veterinary Consumption Data:1Q-3Q1Q182Q183Q18NationalVet Consumption Index1.3%3.0%4.8%Canine Core Vacc Doses0.0%1.6%-0.2%Canine Flu Vacc Doses144.0%-18.6%-3.2%Feline Core Vacc Doses-2.5%

57、3.3%0.4%Advanced Procedural Volume-17.6%-14.7%0.4%Flea Tick Doses-6.4%-8.3%-13.6%Source: Todays Veterinary Business, Vetalytix, Credit SuissePatient volume & practice revenues strengthenTurning to our survey work, 84% of respondents experienced 0% to +5%+ growth in patient visits in 4Q18 (vs. 88% in

58、 3Q, 90% in 2Q, and 88% in 1Q18) with total traffic increasing 1.9% on a weighted average basis, a slight deceleration from the previous quarters growth of +2.1%. Nearly 1/4th of respondents reported +5% or more in patient volume growth over the past three months, slightly above our 2018 average of

59、21%. Of note, 16% of respondents reported declines in patient visits during 4Q, above our 2018 average of 13%. However, we highlight this is in line with 4Q17 (16%) and better than 4Q16 (22%) levels, as our cohorts have consistently reported modestly slower 4Q experiences, likely due to the holiday

60、season, an inherently low-volume timeframe. We therefore continue to view the trend asfavorable.Figure 3: Quarterly veterinary clinic visits (yoy growth) Respondentdistribution45%40%35%72% of respondents have experienced +1% to 5%+ in patient visits during 4Q18 (vs. 73% in 3Q18)39%33%30%28%27%27%3Q1