JPMorgan adds Shire to 'Analyst Focus List'

JPMorgan Cazenove lifted its price target on overweight-rated Shire to 5,600p from 5,300p and added the stock to its 'Analyst Focus List', saying the acquisition of US-based Baxalta builds a more sustainable company trading at a compelling valuation.

“Over the next 12 months we expect the market to take a more positive view on the sustainability of the Shaxalta growth outlook and anticipate a re-rating from 12x to 16x 2017e PE, equating to our 5,600p Dec-16 price target.”

JPM said its haemophilia model finds greater sustainability for Baxalta’s franchise than the market fears.

In addition, it argued the strong outlook for Baxalta’s non-haemophilia franchise is being overlooked. “We believe the market has overlooked the sustainability of the c.20% of NewCo revenues from products outside haemophilia, i.e. Immunoglobulins (IG), Albumin and A1PI.”

The bank now forecasts a 2017-20 core earnings per share compound annual growth rate of 13% versus 10% previously.

“Mid-single digit core EPS accretion by 2020 is solid, if unspectacular. But more important is the double-digit accretion post Vyvanse,” JPM said.

At 1245 BST, Shire shares were up 3% to 4,235p.