Shire share price eases as HSBC flags risks from Baxalta deal

on Jan 27, 2016
Updated: Oct 21, 2019

Shares in Shire (LON:SHP) have fallen into the red in today’s session, underperforming the broader London market, after analysts at HSBC said that the London-listed group may be ‘over-playing’ the extent of the opportunity to combine its rare disease assets with those of Baxalta (NYSE:BXLT). The comments come after Shire inked a £22-billion deal to acquire the New York-listed group earlier this month, ending a near five-month long pursuit.

As of 13:09 GMT, Shire’s share price had shed 1.55 percent to 4,059.00p, underperforming the blue-chip FTSE 100 index which currently stands 0.06 percent lower at 5,907.68 points. The shares have lost 13.6 percent in the year-to-date, as compared with a 5.36-percent drop in the Footsie.
Analysts at HSBC reiterated their bullish stance on Shire today, while pointing out to a couple of details of the pharmco’s recent deal to buy US peer Baxalta. The Financial Times quoted the bank’s pharma analysts, Steve McGarry and Julie Mead, as noting that under the terms of the $18-billion loan which Shire has secured to finance the deal, the UK group will have to seek written permission from its lenders in case it wants to offload any assets.

“That may not be a big issue” but it might “limit” Shire’s ability to re-organise its businesses in the short-term, the analysts said. HSBC also believes that Shire may be “over-playing” the extent of the opportunity to combine Baxalta’s expertise in rare diseases with its own assets in the same area.
“Many of Baxalta’s plasma-derived products, unlike many of Shire’s existing Rare Disease assets, are lower-margin products for much more prevalent conditions,” the analysts said, as quoted by the FT. “We still view short-term operational risks as material during the merger integration process.”
Shire is due to update investors on its full-year performance on February 11.
As of 14:11 GMT, Wednesday, 27 January, Shire PLC share price is 4,059.00p.