Shire share price dips JPMorgan trims stance on pharmco

Analysts point to few 2018 or 2019 catalysts

Shire share price dips JPMorgan trims stance on pharmco

Shares in Shire (LON:SHP) have declined in London in today’s session as analysts at JPMorgan Cazenove trimmed their rating on the rare disease specialist, pointing to few catalysts in 2018 or 2019. The comments came after the London-listed company updated investors on its performance last week, revealing that it was expecting slower earnings growth this year. 

As of 14:13 GMT, Shire’s share price had lost 1.99 percent to 3,048.50p, underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.20 percent lower at 7,233.07 points. The group’s shares have lost more than 36 percent of their value over the past year, as compared with a near one-percent dip in the Footsie.

JPMorgan trims rating on Shire

JPMorgan Cazenove lowered its stance on Shire from ‘overweight’ to ‘neutral’ today, trimming its price target on the shares from 5,000p to 3,600p.

“Valuation remains undemanding, but with few 2018 or 2019 catalysts beyond a potential NeuroScience spin, which we do not see creating fundamental value, we struggle to see outperformance this year,” the analysts explained in a note, as quoted by Proactive Investors. Shire is currently planning to create two separate divisions within the group, namely a Rare Disease and a NeuroScience unit.

NeuroScience estimates

The analysts further noted that following Shire’s full-year results, they had remodelled the split company and believe that the NeuroScience division has a 60-percent EBITDA margin, implying a 37-percent EBITDA margin for the pharmco’s Rare Disease division, with expansion potential.

“Modelling NeuroScience standalone highlights the disproportionate earnings contribution from fairly short-lived Vyvanse cashflows,” the broker commented, as quoted by Proactive Investors. “With the key possible 2018 catalyst being a potential NeuroScience spin-off that we do not see creating fundamental value and with the Haemophilia overhang likely to still weigh on the Rare Disease business in 2018/19”. 

As of 15:03 GMT, Tuesday, 20 February, Shire PLC share price is 3,060.00p.

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