EUR 4351.14 For Business Accounts Only

US Tax Reform Primer

We analyse the potential EPS benefits for two of the
biggest beneficiaries from the US tax reforms. We
upgrade Roche and Sanofi to tactical BUY and show
that Roche’s 2018 EPS could benefit by 9% and
Sanofi’s by 6%. We explain why AZN & NOVN are
unlikely to materially benefit from the tax cuts due to
Transfer Pricing which may enable Novartis to pay
very little tax in the US but not Roche. We provide a
tax cut sensitivity analysis for all EU Pharma names.

Proprietary Models Allow Analysis – Our unique Contribution
Analysis allows us to calculate the profits from the US and
non-US regions. This allows us to then estimate the current
tax paid in the US for Roche and Sanofi and therefore analyse
the earnings impact from the significant fall in US tax rates.

Roche is the Biggest Beneficiary – Despite long-term
concerns on Roche, we upgrade it to a tactical Buy because
our analysis suggests that it stands to benefit the most from
US tax reform and we do not believe this is fully factored into
the shares as yet. PT increased to SFr.280 from SFr.265

Sanofi EPS Benefit Likely >5% - Sanofi has the 2nd highest
tax rate in the sector and c.40% of earnings come from the
US. As a result we believe that it will be able to materially
lower its tax rate and see significant EPS upside. Again, we
upgrade to a tactical buy on the basis of this one time boost.