Ipsen : 2017 looks promising, after a record year in 2016

We have a stable credit opinion on the issuer. Ipsen had a record year in 2016, marked by strong sales growth in its specialty care division, driven by: 1. Somatuline’s commercial success, particularly in the US, and 2. gradual recovery in Primary care through its shift towards an OTx model. Despite investments to support the launch of Cabometyx®, profitability also improved in 2016. Ipsen is adopting a resolutely optimistic tone for the current year, expecting robust growth on the back of numerous ongoing developments. In addition, Ipsen has enriched its pipeline in Oncology and Neurosciences which bode well for its medium-term growth. - We are adopting a Buy recommendation on the 1.875% 2023 IPNFP bonds. Ipsen has a particularly solid financial profile with a positive net cash position at the end of 2016, featuring a strong and recurring FCF generation that will at least partially finance future acquisitions and partnerships. Since our issuance focus of June 8, 2016 bonds tightened by 50bps, outperforming the JPM 'BBB' 5-7year index by around 40bp. In addition, the bonds have been trading at a wider spread of around 20bp compared with the average ASW spread in our non-rated issuers’ sample for which we assess credit quality at investment grade, which is why we are maintaining our recommendation. - - >Support Factors - - Growing market, driven by ageing population and associated increase in long-term chronic diseases, including cancer.- Strong market shares on its most important specialty products (Somatuline®, Décapeptyl® and Dysport®). -  Broad geographical spread with a presence in 115 countries and a balanced exposure to developed and developing markets. - Ability to manage major partnerships. - Limited risk of patent expiry. - Conservative financial policy, with a family shareholder driven by a long-term vision.Points to watch - - A significant proportion of sales (~20%) is generated by the Primary Care division which faces fierce competition and deflationary pricing policies. - Concentrated product portfolio. At end-December 2016, the top three products accounted for almost 3/4 of net drug sales.