Barclays reckons Shire and Glaxo are the best bets when it comes to investing in European drug firms this year.
In a mammoth piece of research this morning, analysts at the investment bank profiled over 70 of the world’s major pharmaceutical companies, citing key value drivers and catalysts for each.
Both London-listed Shire and Glaxo are in favour, while the outlook for AstraZeneca is less certain.
On Shire (LON:SHP), Barclays reiterated its ‘overweight’ stance with a share price target of 5,700p - a 20 per cent upside on current levels.
The bank noted CEO Fleming Ornskov’s focus on expanding Shire’s presence in rare diseases in order to be a top (and sustainable) biotech competitor in the long term.
“This vision becomes challenged by the 2023 patent cliff (40% of revenues), which means the company needs to focus on the right bolt-on acquisitions and pipeline purchases now,” said analyst Olivia Capra.
Her colleague, Mark Purcell, reckons Glaxo (LON:GSK) is also set to do well in 2016 and issued a target of 1,650p on the stock – again, 20 per cent above today’s price.
“Topline growth will be driven by consumer healthcare and vaccines,” said the analyst.
Overall, Purcell says GSK will set to return to growth in 2016 with management guiding for mid-to-high-single-digit EPS growth between 2015-20 and a flat 80p dividend up until 2017.
He was less keen on AstraZeneca(LON:AZN) though and kept an underweight rating on the oncology and respiratory specialist.
A share price target price of 4,400p is 5 per cent down on current levels.
“Having focused on rebuilding the pipeline and investing in growth drivers such as Brilinta and diabetes since 2012, AstraZeneca is now focused on delivering a return to growth.”
The key execution focus in oncology will be the launch of Tagrisso - a pill for lung cancer patients - ahead of front-line data in 2017.
Phase 3 data for Lynparza in breast cancer and ovarian cancer are also expected this year.
Outside oncology, an FDA approval decision for Astra of lesinurad - which treats gout - is expected before year-end.
Elsewhere, Deutsche Bank retail analysts upped their ratings on two of the ‘big four’ UK supermarkets this morning - ahead of next week’s Christmas trading previews.
The investment bank raised Tesco from ‘hold’ to ‘buy’, albeit trimming its target price from 210p to 200p on the grocery giant.
Morrison’s (LON:MRW) meanwhile was raised from ‘sell’ to ‘hold’, with analyst Niamh McSherry sticking with a target of 155p.
Kantar data for November suggested a grocery market sales decline of -0.4%, and no easing of deflation – meaning sales figures across the board are expected to be weak.
Yet gross margin gains and cost cutting are set to play a major role in Tesco’s margin improvement, Deutsche Bank reckons.
Meanwhile flooding in the north shouldn't end up dampening figures across the board, even at Morrisons, where higher trade at unaffected stores should offset lost sales.
McSherry’s rating for Sainsbury (LON:SBRY) stayed at ‘hold’, with clothing sales cited as a risk due to unseasonable warm weather.
Morrisons will report Christmas trading numbers on January 12, while Sainsbury and Tesco (LON:TSCO) will follow on the 13th and 14th.
Away from the supermarkets, brokers were reacting to Next’s (LON:NXT) trading statement this morning, which cited mild weather as the culprit for poor performance.
Shares in the high street fashion firm – at 6,814p – are down 14% in the past month and are unlikely to get a lift from today's reading, Cantor said, although the firm kept its ‘buy’ rating and target of 8,200p.
Shares in Marks & Spencer (LON:MKS) were also suffering from the negative read-across, continuing their break down below 438p ahead if the retailer’s own Christmas update on Thursday.
Prepare for a similar message and outlook? It's possible, says Mike van Dulken at Accendo Markets.
Broker VSA took a look at Carr’s Group (LON:CARR) - the agriculture, food and engineering firm - which today said one of its associate's three feed mills were flooded during the storms in the north.
“It’s a significant positive that the direct financial impact will be covered by insurance," VSA said.
“In our opinion, the rapid recovery times in the face of extreme conditions is commendable and an indication of the operational calibre of the business.”
Elsewhere, in the junior market, Northland noted a contract win for tech firm Corero Network Security (LON:CNS) and cited the momentum gradually building behind the company’s internet security system - SmartWall.