Shire (SHPG) is Not a Compelling Growth Story - Piper Jaffray

Piper Jaffray analyst, David Amsellem, thinks Shire (NASDAQ: SHPG) does not represent a compelling growth story despite a number of regulatory catalysts in 2016. He reduced his PT to $175 from $219 and maintained his Neutral rating.

Shire reported 4Q15 non-GAAP EPS of $2.97 on revenues of $1.7B, versus the Street estimates of $2.87 and $1.7B, respectively. Vyvanse and Lialda were key bright spots, though these are also the products that likely have the shortest-lived durability in the combined SHPG/Baxalta portfolio (patent expiries in 2023 and 2020, respectively). Though contribution from newer products (e.g., Gattex, Natpara) along with new launches such as lifitegrast, should drive meaningful long-term (LT) EPS growth, it is difficult to envision a LT organic EPS CAGR beyond the 10% range. For that reason, despite the significant sell off, SHPG shares are not compelling at a current P/E of 11x pro forma 2017 EPS estimates.

Product sales grew 14%, excluding the impact of the erosion of Intuniv due to generics. Vyvanse sales grew by 21% in 4Q15 over 4Q14, with the product clearly benefiting from the label expansion in binge eating disorder (prescription (Rx) volumes were up 9% in 4Q15 over 4Q14, per IMS). Lialda sales grew by 10% over 4Q14, with Rx volumes also up 10%.

There's a busy lineup of clinical and regulatory milestones in 2016. FDA action on the NDA resubmission for lifitegrast in chronic dry eye is expected by 7/22/16. Given the positive (and essentially confirmatory) results from the OPUS-3 trial, an approval is likely. Phase II data for SHP607 in retinopathy of prematurity (ROP), and Phase II data for SHP610 in SanFilippo A should come by mid-year. Given the nature of the respective unmet medical needs, highly favorable data in these studies could form the basis of regulatory filings. Lastly, pediatric data for SHP465 in ADHD is expected which may lead SHPG to pursue a pediatric label.

No change to Neutral rating but cutting PT to $175 from $219 on 14x 2017 EPS of $14.02..

For an analyst ratings summary and ratings history on Shire click here. For more ratings news on Shire click here.

Shares of Shire closed at $151.00 yesterday.

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