Shares in the FTSE 100 drug manufacturer have outperformed the market by 5% since a favourable court decision on generic Vascepa last week and the potential launches of Advair, which is expected in 2020, pending US regulatory approval, and Vascepa, expected in 2021, should “provide upside risk to consensus estimates”.
Analysis by the US investment bank shows that current consensus forecasts are underappreciating the bottom line contribution from these two launches, especially for Advair.
“Beyond upside risk to consensus estimates, we see optionality from the company’s complex generics portfolio, in the near to medium term,” the analysts said.
They raised their estimates for 2021/2022 core underlying profit (EBIT) by roughly 10% to incorporate generic Vascepa and revisiting profitability assumptions about generic Advair.
This, along with an increased valuation multiple for the generics division, drives the increase in a sum-of-the-parts 12-month price target to 3,115p from 2,600p and the upgrade from the former ‘neutral’ rating.