JPM | US Healthcare: ELV & JNJ First Takes, TNGX Initiate at OW, HCA, Medicare PFS Rates, DNLI, SNDX: US Healthcare Sector Specialist Commentary

Research evidence excerpt

JPM | US Healthcare: ELV & JNJ First Takes, TNGX Initiate at OW, HCA, Medicare PFS Rates, DNLI, SNDX: US Healthcare Sector Specialist Commentary

G&A as a % of revenue was 11.0%, above JPMe/consensus of 10.9%/10.8%.

In the release, the company highlighted MLR as reflecting better than expected Medicare Advantage and ACA Exchange. By

segments, Health Benefits, adj. operating income was $896M, below $970M/$1.04B JPMe/consensus while Carelon adj.

operating gain was $948M, ahead of our expectations of $908M and consensus estimates of $888M. On the call, we will be

looking for commentary on Medicaid performance (an area of particular investor focus), assumptions around Medicare

Advantage improvement, and ACA Exchange margin improvement.

Lisa Gill’s first take here

JNJ Spec View

2Q small beat and raise – JNJ had been a well held/ crowded long – expectations had been for a relatively uneventful qtr and this

seems to be that, but investors seemed to be looking for a bit of a larger beat. Modest earnings upside and now that multiple has

rerated, stock reaction pre-mkt down -1.9% makes sense with positioning (we continue to be constructive on JNJ story big picture

though). JNJ 2Q overall sales came in $290m ahead of cons, beat driven very solidly by Tremfaya, Stelara, Xarelto on the

medicines side. On the medicines readacross, Tremfaya outperformance potential positive for ABBV as volumes are good and

there is no price issue. Small misses in Darzalex, Remicade, Erleada. MedTech overall missed by $77m – seems like miss was

driven by Cardio (Abiomed – with recall and EP share loss, also citing lower procedure volumes in the US), somewhat offset by a

decent beat in Ortho (however, ortho not central to the story). Raised guidance by $400m at the mid-point for operational sales,