Morgan Stanley positive about pharmaceutical group's prospects after meeting with senior directors
Shire's best known drug Vyvanse could prove a multi-million dollar winner in new areas away from its main use as a treatment for hyperactivity, the City believes.
Following a lunch with company directors, analysts at Shire's house broker Morgan Stanley said the attention deficit hyperactivity disorder drug could also be used to treat depression, schizophrenia and binge eating. Analyst Peter Verdult forecast potential sales of $500m to $2bn from these new areas, which could add between 110p and 400p a share to the company's value. He said:
While the market remains sceptical about the potential of Vyvanse ex-ADHD we note phase 3 depression data in the third quarter of 2013 and potentially phase 3 schizophrenia and binge eating disorder by the end of 2013. Vyvanse in ADHD currently does $1.1bn in sales and is protected until 2024. We forecast peak sales of $3.5bn with $0.5bn coming from new uses.
We argue the current share price gives investors a free option to play this upside opportunity.
Verdult also suggested Shire could be on the takeover trail:
We forecast $1bn-$2bn free cash flow per annum until 2015, and note a net cash balance sheet. While acknowledging a mixed track record with respect to M&A - write downs on Movetis are expected - [it] continues to be pursued to "both diversify growth and sustain current platforms"; we expect a focus on the orphan drugs and regenerative medicine businesses.
Shire closed 4p lower at £18.20.
Overall, investors remained cautious as Spain, Greece and Portugal continued to dominate the eurozone crisis. Tensions between Turkey and Syria added to the nervous mood. With the Bank of England and European Central Bank both leaving interest rates and asset purchases as they were, the focus now will be on Friday's US non-farm payroll figures, especially in the light of the current American election campaign. So the FTSE 100 finished virtually unchanged, up 1.97 points at 5827.78.
Tesco was the leading faller in the FTSE 100, down another 9.8p to 318.15p after Wednesday's news of its first fall in profits for 20 years. In a sell note Dave McCarthy at Investec said:
Tesco disappointed with its interims, missing trading profit expectations by around 3%, leading to further downgrades to forecasts (we cut earnings per share by around 7%). This is on top of other recent downgrades. Tesco pointed to an improvement in UK sales, but this still represents a significant like for like volume loss. Meanwhile problems in Asia and Europe are mounting and the US continues to lose money, while the bank is standing still on an underlying basis. We remain concerned and believe that Tesco strategy needs a major overhaul.
Russian steelmaker Evraz slipped 2.2p to 245.1p after it paid $800m in cash and shares to raise its stake in coal miner Raspadskaya from 41% to 82%. A recent decline in the oil price left BP 4.85p lower at 434.2p.
But Tate and Lyle added 12.5p to 687p after a couple of broker upgrades.
Martin Deboo at Investec raised his price target on the sweeteners and starches maker from 650p to 700p after its recent trading update, although he kept his hold recommendation. He said:
The second quarter commentary was better than our expectations, with volume growth in speciality food ingredients (against a tough comp) key. Meanwhile, the hurdle represented by the pricing rounds looks to be lowering. So the outlook is getting brighter and we upgrade our 2013 estimate by 2%. But corn prices remain volatile and Mexico remains a fickle mistress.
With the first half well-guided, we see the investor seminar in Chicago in December, the first for 4 years, as key to sentiment. As it is for us. We understand the bull case on this stock, but need to check its horns.
Meanwhile Credit Suisse raised its rating from neutral to outperform and its price target from 700p to 750p:
There is no easy way to value Tate & Lyle, but it does seem to us to be a better business for all the changes we have seen and that this is not reflected in the share price (which is down 8% year to date versus a staples sector up 18%)
Intercontinental Hotels climbed 30p to £16.69 after better than expected third quarter earnings from US peer Marriott International.
Good results from Ted Baker pushed its shares 7.5p higher to 921p and helped lift Next 93p to £35.92 and Marks & Spencer 3.7p to 365.5p.
A few days after cherry picking the stores it wanted from stricken rival JJB, Mike Ashley's Sports Direct International hosted an analyst visit to its Shirebrook headquarters, and it seems to have gone well. The company's shares climbed 22.8p to an all time high of 382.8p and Seymour Pierce said:
We were a buyer and supporter of the stock all the way up from 35p to the 300p level when we moved to hold in April 2012 as we were concerned about the valuation. Following the analyst visit yesterday, we are upgrading our recommendation to buy and raising our price target to 420p. We came back reassured that in particular the internet strategy is taking shape, is picking up momentum and is a major focus of management. We are also coming to believe that the company could be a major force in the sporting goods category on the internet not only in the UK but also overseas.
Mitchells & Butlers added 8.6p to 301p after horseracing tycoons JP McManus and John Magnier bought 7m shares in the pubs group through their Elpida vehicle, taking their stake to 22.47%. Joe Lewis, the billionaire currency trader, owns 26.3% and saw two bids for the business rejected last year. Shareholders have been unhappy about the dominance of the major shareholders, with no independent directors on the board.
Lower down the market Promethean World plunged 26% to 17.5p after the maker of interactive whiteboards issued another profit warning.
 |
| READ THE ORIGINAL POST AT www.guardian.co.uk |
