Top Picks Q2 Healthcare: From five names down to three

The least we can say about Q1 2018 is that it was another tough quarter for healthcare in general with
few exceptions across the sector, despite early activity on the M&A front with Sanofi announcing the
acquisitions of Bioverativ and Ablynx in January. This was not enough to prevent the sector from
underperforming the general indices by 1.4pp (-6% in absolute terms). We assume this is mainly the
reflection of shy 2018 guidance on average from most companies suggesting in the end another
transition year with very limited growth, most of which coming from the positive impact of the US tax
reform. This was somewhat disappointing and anticipates on a lacklustre first half of the year.
Looking into names which either deeply outperformed or underperformed during the period, we would
point our three companies posting at least 20% absolute performance in Q1 (i.e. Ipsen up 26.7%,
Genmab up 26.1% and our Top Pick Innate Pharma up 20.7%). Among large cap names, only GSK was in
positive territory with a gain of 5.4% as the quarter ended with the announced transaction with Novartis
to acquire full control of their joint-venture in CHC. In the other direction, several members declined in
double-digits including Bayer, Merck KGaA, Novo-Nordisk and Roche (all between 11% and 13% down).
Our other picks performed in a mixed way during the quarter with Qiagen globally flat, Novartis down
6.2% (but including the impact from the dividend pay-out) and only DBV Technologies was truly
disappointing with another decline by 8% despite the announcement of positive news both from a
regulatory standpoint (process to filing in the US) and from a clinical perspective (data in milk allergy).