Shire rated 'outperform' by Credit Suisse ahead of Baxalta tie-up

Credit Suisse has reiterated its 'outperform' rating on Shire Pharmaceuticals, along with a target of 5000p, ahead of its proposed $32 billion acquisition of Baxalta closing on 3 June.

Shire's shares closed up about 2.8% at 4380p on Wednesday.

Earlier this year, the pair announced a merger that would give Baxalta investors $18.00 in cash, and either 0.1482 Shire ADSs or 0.4446 Shire shares per Baxalta one.

"We see 5% earnings per share (EPS) accretion over our stand-alone Shire numbers by 2020," said Credit Suisse in a note and referring to the enlarged entity.

This assumed $500m of operational cost savings, $400m of incremental sales (adding $170m of operating earnings) and a combined group tax rate of 16.5% by 2020.

Credit Suisse said the Shire and Baxalta combination offered best-in-class EPS growth at an attractive valuation.

"Shire is well placed to use the ex-US infrastructure from Baxalta to accelerate the commercialization of the groups rare disease drugs and is broadening the portfolio away from ADHD," the brokerage said.

"Baxalta adds a number of new areas with attractive growth and high barriers to entry."

The companies hoped their tie-up would create the top rare-diseases platform in revenue and pipeline depth, which was predicted to generate annual sales of more than $20bn by 2020.