Shire Pharmaceuticals (SHP.L) — So far so good. Shares discounting significant hemophilia erosion
Western Europe | Pharmaceuticals, Biotechnology | Buy
What's new? We hosted Shire at our 2016 European Healthcare Reverse Roadshow. Key topics included Xiidra, hemophilia, R&D, and US pricing. Baxalta marks a big step for Shire becoming a leader in rare disease (>65% of 2020e sales) and we value the combination at £70/share (WACC 8%, g=0%) with a bullbear of £82-33. We continue to believe headline risks from ACE910 (Ph III inhibitor-segment data expected early 2017 with non-inhibitor data in 2018) are baked into the share price. On our estimate, to get to the current share price requires an assumption Baxalta's hemophilia franchise declines up to -10% into perpetuity due to rising competition. We view this as pessimistic given underlying volume growth for the hemophilia market, pricing stability and pipeline considerations. Shire trades on ‘17 PE of c.12x for a 20% 17-22 EPS CAGR, we are 5-35% ahead of consensus. Xiidra: so far so good — While early in...