HEALTHCARE
- Bayer had a very strong week with spreads 7bps tighter on average. Bayer had an upset in Crop Science in Q3 but otherwise 2025 is expected to be a year where it turns better. New product launches in Pharma and continued growth in Nubeqa and Kerendia combined with cost discipline are expected to bring leverage down by 0.5x. One note of caution for the Crop Science business is the recent success for Corteva in the US seeds market with JPM predicting market share gains for the Bayer’s competitor.
- Merck KgaA’s CEO was speaking at Davos and ruled out any transformational M&A. The company has a history of releveraging every few years so this should be taken as welcome news. Bolt-on $2-4bn deals are a possibility
- Novo Nordisk was upgraded on Wednesday to Aa3 and had further good news on Friday with a strong test result for Amycretin – a dual action weight-loss drug. NOVOB has limited room to rally but maintenance of market-leadership is key here.
- Johnson & Johnson had solid results though the equity initially sold off on lacklustre guidance. The company’s forward guidance contained a note of caution on the Talc settlement uncertainty but with $12bn in reserves we are unlikely to see any negative surprises. The Intra-Cellular $14.6bn acquisition is expected to close early in Q2 with the company explicitly saying that debt would be part of the financing package. Issuance should be expected soon.
- Viatris bonds have been following the equity lower since mid-Dec. The company has been focusing on reducing leverage and may see S&P stabilise the outlook soon which would take the name out of the Fallen Angel Watch. It may be worth examining the recent move wider for an entry point. Results are 28th Feb.
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