Shire share price movement suggests pharmco is better off on its own
Analysts upbeat on the company’s standalone prospects
The recent share price performance of Shire Plc (LON:SHP), the London-listed drugmaker left at the altar by US pharma giant AbbVie (NYSE:ABBV) last year, suggests that the company will continue to thrive on its own, a view supported by recent analyst comments on the rare diseases specialist.
Shire, a frequent takeover target on account of its UK tax residence and lucrative rare diseases portfolio, suffered a blow last October when AbbVie pulled from a £32-billion merger with the London-listed group.
The decision came after the Obama administration moved to clamp down on tax inversion deals in September, eroding the benefits of the tie-up which would have seen the enlarged group take Shire’s more favourable UK tax residence.
The collapse of the merger sent Shire’s share price plunging, with AbbVie’s retreat fuelling concerns that the UK company’s pipeline was not lucrative enough for the US drugmaker to tie the knot. Once the dust settled, however, Shire’s share price started recovering. While the shares are currently hovering around £51, below AbbVie’s £55-per-share offer, they are trading well above the levels reached last year when news of the US drugmaker’s interest first emerged.
Analysts have also recently been upbeat on Shire’s prospects, with UBS raising its price target on the pharmco to from £54 to £66, noting that the company’s Natpara and Gattex drugs could be potential ‘blockbusters’. Shire acquired both drugs when it bought NPS Pharmaceuticals earlier this year, having landed a $1.64 billion (£1 billion) break fee when AbbVie walked away.
Barclays, however, has been less upbeat on Shire’s shares, saying in a note dated March 30 that the company’s stock was ‘fairly valued’. The analysts reiterated their ‘equal weight’ rating, saying that while Shire was strongly positioned in rare diseases and attention deficit hyperactivity disorder (ADHA) drugs, with solid free cash flow and scope for more deals, it was also facing risks due to recommencing patent litigations and high-risk pipeline read-outs.
In February, the blue-chip drugmaker reassured investors of its standalone prospects, posting record sales for 2014 and forecasting further growth this year. Whether the company is on track to keep its promise will become clearer on April 30 when Shire is expected to update investors on its first-quarter performance.
As of 14:10 BST, Monday, 13 April, Shire PLC share price is 5,627.50p.
