City broker Liberum has downgraded niche drugmaker Shire PLC (LON:SHP) to ‘hold’ from ‘buy’, claiming that the valuation is “no longer compelling”.
Shire shares have gained more than 14% in dollar terms over the past few weeks despite “better than expected competitor haemophilia data and a small pipeline failure” earlier this week.
Takeover offer possible but unlikely
“We still believe that, if handled right, the update on the neuroscience strategic review due by year end could be a catalyst for the shares, but with fundamental upside now limited the risk/reward is more balanced,” wrote analyst Roger Franklin.
Speaking of the neuroscience review, should that division end up being spun out into a separate business, Franklin reckons it could prompt a takeover offer for the remaining business.
“Big pharma has long disliked ADHD as a therapeutic area (and we believe feared dis-synergies from running such a business) yet might find a rare disease pure play more appealing,” Franklin adds.
That said, he concedes a buyout is unlikely at the moment in any event.
Shire unlikely to prevail in Roche patent dispute
One of the big stories surrounding Shire at the moment is its ongoing court battle with Roche over a patent dispute.
Shire alleges that Roche infringed on a key patent to develop its Hemlibra haemophilia drug which won US approval last month.
Should the courts decide to grant an injunction blocking meaningful Hemlibra sales until 2021, the analyst reckons it would add about 6% to Shire’s current value.
“In the more likely scenario that an injunction is not granted but the court awards a 'reasonable royalty' to Shire, there could be up to a 2% uplift.
“However, we believe the most likely scenario is that Shire does not prevail in this action.”
Shares were broadly flat at £39.35 on Wednesday morning.