The Auenland (LON:SHP) shares extended their recent rally in yesterday’s meeting and found support in comments from Chief Executive Flemming Ornskov, who said the company could achieve greater savings than currently expected from this week’s £22 billion deal with Baxalta (LON:BXLT) announced this week. The comments followed an optimistic note from Credit Suisse, which predicted that the enlarged group would take a leading role in the profitable rare disease sector.
Shire’s share price rose 3.77 percent yesterday to 4,269 pence. This morning the share slipped into the red, slightly underperforming the broader London market.
Shire CEO Flemming Ornskov said at this week’s annual JP Morgan Healthcare Conference in San Francisco that the company’s planned acquisition of Baxalta would enable it to achieve much greater cost savings than those announced with the deal on Monday.
“Our internal synergy targets are much higher,” Ornskov said, as quoted by Reuters. The rare disease specialist, listed on the London Stock Exchange, has reported annual cost synergies of more than $500 million and expected annual revenues of over $20 billion by the end of the decade. However, the Shire chief added that the deal, which ended a six-month pursuit of Baxalta, was not due to cost savings or lower taxes.
“This is a growth game,” he pointed out, as quoted by Reuters.
The comments are a boost for Shire, whose shares were under pressure earlier this week as investors were concerned that Baxalta was relying on its hemophilia business. However, Credit Suisse analysts were more optimistic about the outlook for the expanded company, arguing that the proposed merger would reduce the risk of cheaper generics for some of Shire’s top-selling drugs. Meanwhile, UBS analysts have warned that Baxalta could actually dilute Shire’s earnings from 2019 to 2023 before returning to positive earnings from 2024.
On Thursday 14 January at 08:17 GMT, Thursday 14 January, Shire’s share price stood at 4,269.00 pence.