* Adding Roche — We believe Roche (ROG.VX; SFr255.60; 1) will be one of the
key beneficiaries in the developing immunotherapy opportunity. Roche pipeline
provides sufficient optionality to offset concerns about 1) future competitive risks to
Avastin, 2) pricing risk from biosimilars, 3) competition for Rituxan in from several
new agents under development. We continue to think that Roche will utilise its
strong balance sheet to diversify away from oncology. Moreover, we believe the
market is attributing minimal value to Roche's multiple high probability novel
immunotherapies in clinical development. Roche management have historically
underplayed the potential for immunotherapy, but simultaneously extensive
business development over the past 6-12 months means that Roche now have
arguably the most extensive portfolio of novel multi-modality immunotherapy assets
in the industry. We anticipate that Roche will present very positive data for their anti-
PDL1 in bladder cancer at ASCO (June 2014), which is a $4bn potential opportunity.
Please click here for full details: Roche Holding AG (ROG.VX).
* Removing Shire — Still positive but removing Shire (SHP.L; £31.59; 1) from Focus
List: We update forecasts to reflect the disposal of Dermagraft, resulting in 2014-
2019E EPS upgrades of 2-6% and a CAGR of 11% (sector on 13x 2015 PE offering
10%). Our new PT of £36 is based on the mid-point of a 2015 PE valuation of 15x,
and DCF valuation of £39 (WACC 7.5%, g=0%). Shire has outperformed
significantly over the past six months. With deal flow now a more important driver of
further outperformance, and competitive/patent/execution risks to consider, we
remove Shire and add Roche to Citi’s Focus List. Other preferred names include,
Novo Nordisk, Novartis, and BMS/PFE in the US. Please click here for full details: