Vectura and Hikma top picks for JPMorgan Cazenove in UK pharma sector
While some investors might think the UK pharmaceutical sector looks cheap after the 10% slide last year, JPMorgan Cazenove said fundamentals are unlikely to improve in 2017 and pricing pressure from the US will probably continue.
AstraZeneca
10,946.00p
17:08 19/04/24
BTG
840.00p
16:30 16/08/19
FTSE 100
7,895.85
16:59 19/04/24
FTSE 250
19,391.30
17:09 19/04/24
FTSE 350
4,341.08
17:09 19/04/24
FTSE All-Share
4,296.41
17:08 19/04/24
FTSE Small Cap
6,331.12
17:04 19/04/24
GSK
1,599.00p
17:08 19/04/24
Hikma Pharmaceuticals
1,799.00p
17:05 19/04/24
Niox Group
64.60p
11:49 19/04/24
Niox Group
n/a
n/a
Pharmaceuticals & Biotechnology
21,247.91
17:09 19/04/24
Shire Plc
4,690.00p
16:39 08/01/19
Vectura Group
164.80p
16:53 18/10/21
This means stock-picking will be key and JPM has identified stocks with low exposure to this US pressure or pipeline success to drive upgrades or valuations implying a weak outlook.
Shire was reiterated as JPM's top pick, trading only nine times 2018 expected earnings, a valuation that "remains compelling".
Among large cap stocks, GlaxoSmithKline is seen as "safe", but its shares are already trading at fair value and so is rated 'neutral' along with AstraZeneca, where some risk is perceived around the imminent MYSTIC trial read-out, balanced by the risk/reward on the rest of its pipeline now looking "more favourable".
For UK small and mid caps, the analysts' top pick is Vectura on the potential "significant upside" from generic Advair approval, and the base medical devices business alone justifying the current share price.
Vecutra is given an 'overweight' rating, as is Hikma also around generic Advair upside, "which could drive significant upgrades for 2018 and beyond".
BTG was held at 'neutral' as a strong topline performance for interventional medicine is offset by downside seen to consensus expectations for 2018 and beyond. #
Circassia was downgraded to 'neutral', as only modest upside is expected after its recent outperformance, combined with analysts taking a more conservative view on the generics business.