Credit Suisse slashes Shire target price, says discount to peers "unjustified"

Shire's current discount to its global sector peers is unjustified, even under a worst case scenario for haemophilia and hereditary angiodema, Credit Suisse argues.

In a research report published on Wednesday, the analysts said the shares were then trading at a roughly 40% discount in terms of the price-to-earnings multiple, amid suggestions that so-called 'sell-side forecasts are "unrealistic".

Yet even after revisiting its own estimates for Xidra, lowering its assumptions for the HAE franchise, assuming faster erosion from competition for Lialda and lowering its haemophilia numbers, it found that the shares should be trading 23% higher.

Specifically, the Swiss broker dropped its projections for the company's 2020 revenues and earnings per share by 8% and 15%, pushing their estimate of net asset value from 5590p to 5190p and the target price from 5350p to 4500p.

The theoretical upside in the share price as implied by its estimates held true even under worst case scenarios for haemophilia and HAE erosion.

Hence, Credit Suisse stuck by its 'outperform' recommendation on the stock.

"We conclude that, despite all the recent setbacks and uncertainty, the current valuation effectively eliminates haemophilia, Xiidra & HAE income."