Ipsen : Strong fundamentals, low visibility on Inspiration
Fair Value EUR28 (price EUR19.03) BUY
Following the H1 results, we held a roadshow in Paris with Ipsen’s CEO Marc de Garidel and CFO Susheel Surpal. Our sentiment on Ipsen’s fundamentals remains unchanged, i.e. double-digit growth in Specialty with a focus on key franchises and emerging markets, which we believe will help drive growth in the mid-term. Regarding primary care, we understand that the milking strategy is clearly better in terms of margins compared to the joint venture option. Management also made clear that 2012 margins should be seen as a floor and we see some upside on the profitability side. Finally, Inspiration remains the last crucial issue that Ipsen has to deal with and, given the multiple scenarios, it is hard to make any predictions on the future of the haemophilia franchise.
Reassuring on growth of franchises. The H1 results confirmed clearly the rationale of focusing on the three main franchises. Specialty grew 13.5% CER in H1 and we see this trend as being sustainable for Dysport and Somatuline, whereas growth in Decapeptyl should normalise.
Emerging markets a key asset. Between 2005 and 2012, ex-Europe G5 sales grew 15.5% CAGR to represent 56.7% of total sales with growth drivers such as China, Russia and Brazil.
US turnaround ongoing. Since the reorganisation of the US operations, the underlying business has been improving with commercial profitability being positive for the first time.
French Primary Care. In our view, such a milking strategy (40% of the sales force cut) makes sense and will help Ipsen mitigate the negative impact on margins from top-line decline.
Inspiration still in question. This remains the big question mark on Ipsen’s business with Inspiration’s future with Ipsen being a black box for now.