UBS downgrades Shire on orphan drug concerns
UBS downgraded Shire to ‘neutral’ from ‘buy’ and cut the price target to 5,000p from 5,600p saying a tougher environment for expensive orphan drugs was likely to constrain performance.
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Shire Plc
4,690.00p
16:39 08/01/19
This, and other issues such as low return on invested capital and the 2023 Vyvanse patent expiry, offset around 11% non-GAAP earnings per share compound annual growth rate from 2016 to 2021, impressive rare disease research and development and the great launch of the dry eye drug, Xiidra.
In addition, the bank said Shire’s hemophilia business faces potential competition, which may have two effects.
The company’s established drugs may be slowly out-competed by news drugs, and the new drugs may destabilise the current oligopoly, prompting more price competition between established drugs.
“Shire looks cheap on a medium-term price-to-earnings growth basis, but, in our hands, expensive-to-fair on a discount cash flow basis even if we lower beta to bring weighted average cost of capital closer to the sector average.”
At 1450 GMT, Shire shares were down 3.2% to 4,416.50p.