2015 All-Japan Research Team: Health Care & Pharmaceuticals, No. 3: Atsushi Seki

Atsushi Seki

Barclays

First-place appearances: 0

Total appearances: 3

Team debut: 2013

In third place for a second consecutive year is Barclays researcherAtsushi Seki. His sector view is negative, owing to expensive valuations and what he calls a “lack of true innovation,” as well as the forthcoming revision of drug prices, which occurs every two years in Japan (the world’s second-largest pharmaceuticals market, after the U.S.). At a rate of usually 6 percent, the price cut shaves operating profits by 15 to 30 percent, depending on the company, he reports. Discussion of the reduction later this year, for implementation in April 2016, will be a drag on the group, as pharma shares have underperformed the Tokyo Stock Price Index for the past quarter century in odd-numbered years, when the changes are discussed, observes Seki, 32. Moreover, he warns, the government is likely to revise official prices for three straight years beginning in fiscal 2016 because the Ministry of Finance is looking for additional cuts in 2017, when a hike in the value-added tax is set to take effect. Against this backdrop the analyst’s top pick is Osaka-headquartered Shionogi & Co., a producer of antibacterial and antimicrobial treatments. The company’s royalties from its stake in ViiV Healthcare — a venture with U.S.-based Pfizer and England’s GlaxoSmithKline that develops HIV therapies — are expected to “grow briskly,” he says. Shionogi also is developing an infection-fighting drug for gram-negative bacteria that is “very promising and could address recent problems caused by multidrug-resistant viruses at hospitals,” Seki adds. Finally, he notes, the stock is not expensive: It was trading in early March at a 20 percent discount to its domestic peers, based on his 2016 cash earnings per share estimate.