Goldman Sachs maintained a Conviction Buy on Baxter International (NYSE: BAX) with a price target of $86.00. Analyst David H. Roman thinks fears about competition are exaggerated.
"Since September 1, BAX shares have underperformed the S&P 500 by 1,360bp as fears over new competition to Baxter's rFVIII franchise (Advate, Recombinate) have intensified. At current levels, BAX shares seem to be pricing in close to a worst case scenario, which we peg at $62 (5% downside potential)," said Roman.
"Hemophilia is a highly nuanced condition in terms of patient-specific therapeutic regimens and requires intensive self-management. We have undertaken a behavioral analysis to assess the dynamics around switching and the logistics involved. To our knowledge, this is not a view point that has been considered in consensus thinking . . . Based on a review of physician office visits and a detailed patient demographic build, we think a reasonable rate of switching would approximate 10%-20% (of US Prophy patients) and could potentially reduce Baxter's 2015E EPS by 1-2%. This is reflected in our published numbers and there is likely room for some upward revision," he added.