Pharmaceutical group lifted by buy note on drug pipeline, cuts and possible acquisitions
Shire is among the risers in a down market, lifted by City hopes for its next range of products and cost saving announcements.
Analysts at JP Morgan Cazenove raised their recommendation on the pharmaceutical group from neutral to overweight and its price target from £22.70 to £30. They said:
Upcoming phase III newsflow could drive significant upgrades. In the first quarter of 2014 Shire will report headline data for three phase III studies, Vyvanse Depression ($1bn potential), Vyvanse Binge Eating ($0.3bn potential) and Lifitegrast for Dry Eye ($0.5bn potential). Together these three products could contribute around $2bn in annual sales, 40% of the current topline. We believe consensus reflects only around $1bn. Cost savings announcement could offer further upside, with an update likely at third quarter 2013 results. Based on our call with the chief executive, the third quarter could see Shire discuss the potential for further selling, general and administrative savings, driven by simplification of the business and highlight the slack within R&D for 2014 and beyond, as the late-stage pipeline completes development, giving fuel for in-licensing.Acquisitions likely to be a third driver of upgrades, funded by net cash position. Shire is already net cash, we forecast a $3bn or so net cash position by the end of 2014, giving significant firepower to expand the late stage pipeline. Shire's increased Vyvanse promotion hasn't yet led to acceleration in prescriptions, however on our chief executive call Shire expressed confidence they could beat our $285m third quarter Vyvanse forecast. Following recent share-price weakness, the lack of a rebound appears appreciated.Shire is currently up 20p at £24.87, while the FTSE 100 is down 45.63 points at 6467.03 on growing US, Italian and Greek political worries.
Among the other risers G4S - currently providing security for the Conservative party conference - has edged up 0.1p to 254p following weekend reports that an activist hedge fund, Cevian Capital, is pushing for the company to sell its cash solutions arm, which accounts for 25% of profits.
But Unilever is down 14p at £24.43 after ING said it could be affected by any negative comments about emerging markets from a Nestle investor presentation. The bank's analyst Marco Gulpers said:
In our view Nestle might update on volumes being impacted in emerging markets as consumers are being impacted by inflationary pressures (like in India where food inflation is up 18.8% since July) but also we could hear more about cost inflation spiralling related to weakening emerging market currencies trends. With Unilever seen as the emerging market play any negatives from Nestle will be seen as a negative read-across to Unilever at current valuation levels.Elsewhere Reckitt Benckiser has edged up 1p to £45.19 despite a sell not from Liberum. It said:
The debate on Reckitt shares is more on how to value Pharmaceuticals (21% of earnings in 2012) than on the core business. Taking reasonable 11 to 12 times EBITDA multiples for the core unit implies an enterprise value for Pharmaceuticals of £6bn to £8bn which could only be justified if Pharmaceuticals' earnings grew 50%-100% in 2014 – we find that unrealistic given current competitive dynamics and recent earnings trends.Liberum was more positive on ITV, down 1.4p at 174.4p:
Press reports out that ITV has sold the old Granada TV studios in Manchester for £26.5m subject to redevelopment planning permission. Probably not included within analyst forecasts for cashflow (it is not in ours; we have 2013 net cash of £194m) so gives ITV more flexibility if it wants to return cash. ShireG4SUnileverReckitt BenckiserITVNick Fletchertheguardian.com © 2013 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds |
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