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Specialty Pharmaceuticals Brexit Risk 'Minimal' - Guggenheim (AGN) (ENDP) (MYL) (VRX) (more...)

June 24, 2016 10:17 AM EDT
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Guggenheim analyst Louise Chen notes the Brexit impact on Specialty Pharmaceuticals names is minimal:

Allergan (NYSE: AGN) - Approximately 1% of Allergan's total revenue (including Anda) comes from the UK following the divestiture of the Actavis generics business to Teva. Additionally, there is no impact to the Teva divestiture process as a result of today’s news.

Endo Int'l (NASDAQ: ENDP) - There is not a material exposure to the British Pound for Endo. ENDP only sells a very small amount of Tramadol and XIAFLEX in the UK, which is denominated in the GBP.

Mylan (NASDAQ: MYL) - Brexit could take two years to sort through the macro issues. MYL has very little UK exposure. MYL is well hedged there. MYL does have Euro exposure but this is hedged too. MYL does not anticipate anything that could become of Brexit would change MYL's decision to do business in the EU.

Perrigo (NYSE: PRGO) - PRGO's UK business is ~$300M (we estimate PRGO '16 sales of $5,714MM), but since PRGO's sales are mainly OTC (over the counter), the company does not see any real impact from Brexit. PRGO discusses operational performance without impact from FX, so PRGOs numbers will remain clean of any potential impact.

Shire plc (NASDAQ: SHPG) - Shire has very little revenue exposure in the UK.

Teva Pharma (NYSE: TEVA) - Before the Allergan Gx deal, TEVA had 2015 sales of $400MM-500MM in the UK (we estimate '16 sales of $23B for TEVA) with operating margin of about 20% and net margin (this is the important one) of about 15% (corporate net margin in '16 of 23%, by our estimate). TEVA has a large plant in Runcorn that produces mostly for the U.S. market. TEVA has not disclosed the cost but it will offset most of the margin erosion, which is not large anyhow. TEVA also actively hedges.

Valeant Pharma (NYSE: VRX) - Per our diligence, only 1% of VRX's total revenue is from the UK. There is a currency impact though. A lot of Asian currencies are pegged to the pound.

Zoetis (NYSE: ZTS) - ZTS does not really see any impact at this point. It is our understanding that sales for ZTS in the UK were about $170MM last year (ZTS's 4th largest market). We estimate '16 sales for ZTS of $4,781MM. Also, Animal Health tends to be very resilient in that market over the long term.



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Louise Chen, Guggenheim