Still positive but removing from Focus List — We update our forecasts to reflect
the disposal of Dermagraft, resulting in 2014-19E EPS upgrades of 2-6% and a
CAGR of 11% (sector on 13x 2015E PE offering 10%). Our new PT of £36 is based
on the mid-point of our 2015E PE valuation of 15x and our DCF valuation of £39
(WACC 7.5%, g=0%). Shire has outperformed significantly over the last 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. Our other preferred names include Novo Nordisk, Novartis, and
BMS/PFE in the US. With this note we transfer coverage to Peter Verdult.