Shire PLC Lags GlaxoSmithKline plc, AstraZeneca plc, Pfizer Inc. And Johnson & Johnson After Update

Shire PLC (LON: SHP) is still behind GlaxoSmithKline plc (LON: GSK), AstraZeneca plc (LON: AZN), Pfizer Inc. (NYSE: PFE) and Johnson & Johnson (NYSE: JNJ) over the last year

Shire PLC
Shire PLC

Pharmaceutical company Shire PLC (LON: SHP) (LSE: SHP.L) has fallen by 0.9% today following the release of its six-month results to the end of June 2016. The period was one of major change for Shire and the biggest change was its deal to merge with Baxalta. Today’s update states that Shire has made significant progress on integration, while also reporting strong revenue and profit growth.

Product sales in H1 2016 increased by 36% to $3.9 billion and EBITDA hit $1.9 billion, which equates to growth of 35% versus H1 2015. This includes $559 million of product sales acquired with Baxalta, but Shire’s legacy businesses all delivered double digit product sales. For instance, Genetic Diseases’ revenue increased by 14% to $1.3 billion, Neuroscience’s revenue was up by 19% to $1.3 billion and Internal Medicine’s revenue reached $804 million following an 18% rise versus H1 2015.

Shire has increased its operating synergy expectation from the deal with Baxalta by 40% to at least $700 million in year three post close. It also has an advanced number of key treatments in development and a resilient clinical pipeline with around 40 programmes for areas where there is currently a substantial unmet medical need.

In the last year Shire has risen by 0.5%. This is less than the gains made by global sector peers such as GlaxoSmithKline plc (LON: GSK), AstraZeneca plc (LON: AZN), Pfizer Inc. (NYSE: PFE) and Johnson & Johnson (NYSE: JNJ). For instance, GlaxoSmithKline is up by 22%, AstraZeneca by 25%, Pfizer by 2.5% and Johnson & Johnson is 26% higher.

Shire has a P/E of 16. Its EPS is forecast to rise by 18% in FY2017. Although it yields just 0.4% in FY2016, in my view its potential synergies and growth prospects mean that it has appeal for the long term.

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The author owns shares in GlaxoSmithKline and AstraZeneca, but not in Shire, Pfizer or Johnson & Johnson at the time of writing.

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