Leading shares are holding fairly steady after Thursday's sharp rise and ahead of the US non-farm payroll numbers.
But Shire has slipped 42p to £30.99 after overnight news that Vyvanse, its treatment for hyperactivity, failed in two late-stage trials for adult depression. The drug performed no better than placebos, and Shire said it would no longer continue the development programme for major depressive disorders.
But analysts were not surprised by the outcome. Savvas Neophytou at Panmure Gordon kept his buy recommendation. In a note entitled "Did anyone really think that possible?", he said:
Investors keen to own Shire should prime themselves for a good buying opportunity today. We view last night's pipeline failure of Vyvanse in the treatment of depression as a missed upgrading opportunity rather than anything more sinister. Indication roll-out is a sensible strategy for growing products, but the use of Vyvanse in the treatment of Major Depressive Disorder was very low probability in our view.
Given the expected share price weakness this morning, we believe investors will have a good opportunity to buy stock at an attractive new level not seen since the announced ViroPharma acquisition in November.
Brian White at Shore Capital said:
While this is clearly disappointing for the company, we had previously highlighted that MDD was a riskier endeavour (than the development of Vyvanse in binge eating disorder).
Despite this disappointment, we believe these remain exciting times for Shire with plenty of optionality remaining in the pipeline and several programmes set to change the growth outlook. We believe that the profile of Vyvanse should be enhanced following last year's positive Vyvanse binge eating data and subsequent FDA submission later this year. We have previously written extensively about binge eating disorder, highlighting its position as the most common adult eating disorder, affecting around 1%-3% of the US population and representing approximately 4m adults.
Elsewhere Shire's portfolio of treatments in rare diseases continues to grow, strengthened recently with the acquisition of ViroPharma and we have yet to factor into our forecasts any contribution from the nascent ophthalmology franchise but recognise the potential should recent (mixed) lifitegrast data prove sufficient following Shire's ongoing discussion with FDA. Finally we expect M&A to remain a feature in 2014 and beyond given the company's strong cash generation.
Overall the FTSE 100 has edged up 6.12 points to 6554.40 as investors await the US jobs data. Andy McLevey at Interactive Investor said:
European markets have opened positively this morning continuing on from yesterdays strong rally however gains are likely to be kept in check ahead of the US jobs figures release this afternoon. Following yesterday's decline in new unemployment claims investors will be hoping the US job figures can ease global growth concern. With earnings also in focus the potential for short term volatility remains as we hurtle towards the weekend break.
Among the risers, Tate and Lyle has climbed 15.5p to 776.5p after JP Morgan moved from underweight to overweight and raised its target price from 735p to 900p. It said:
Tate has a high-quality, health-focused specialty ingredients business, which we believe will drive faster earnings per share growth from 2015, triggering re-rating of the shares.
