Post-Baxalta Acquisition, JPMorgan Sees Shire's Upside Potential At 36%

Following the acquisition of Baxalta Inc BXLT, JPMorgan’s James D. Gordon believes Shire PLC (ADR) SHPG could have 36 percent upside.

Gordon maintains an Overweight rating on the company, while raising the price target from £53 to £56.

‘Shaxalta’s’ Hemophilia Potential

Adding Shire to JPMorgan’s Analyst Focus List, the analyst mentioned that a hemophilia deep dive suggested core EPS accretion of 4–6 percent during 2017–2020, with potential for double digit accretion beyond 2023.

“Within Baxalta, we believe the market has overly focused on the outlook for the hemophilia inhibitor franchise, and has overlooked the strong and sustainable outlook for Baxalta's non-hemophilia franchise,” Gordon stated.

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The analyst expects the market to take a more positive view over the next 12 months regarding the sustainability of the growth of the combined entity.

Overall, Gordon expects total hemophilia sales to remain almost flat during 2017-2020 and decline only in the single digits during 2020–2025.

The Non-Hemophilia Franchise

The analyst also believes that the robust outlook for Baxalta’s non-hemophilia franchise was being overlooked, especially the sustainability of revenue growth at 20 percent for the combined entity.

Gordon expects non-hemophilia products to grow at a CAGR of 10 percent during 2017–2020 and at 4 percent during 2020–2025.

“In particular, we see Baxalta’s HyQvia as the best in class IG, IG sales growing from $2.1 billion in 2017 to $2.8 billion by 2020,” the analyst pointed out.