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Shire plc Message Board

  • biotecher73 biotecher73 Sep 15, 2011 10:10 AM Flag

    Dark Days Ahead?

    Generic competition from Teva for Vyvanse. Dermagraft setbacks. P/E ratio of 26 much higher than most of the sector. Firazyr can't make up the difference. Wondering what the long thesis to support this valuation?

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    • Suit yourself, but to justify a 27 P/E ratio these days you have to have huge growth prospects. Liking the management team is just not enough. Facing increased competition across the board it is a near certainty that they will lose market share, and they have very little in the pipeline to replace it with patent protected products. They have a weak track record on internal innovation. They have a fairly strong record on acquisitions, for which they will pay a premium. However, if they license in some promising therapies that could be the answer to maintain this valuation. Hard to imagine it rocketing up any time soon though. Both the economy and their pipeline would argue against it.

    • Pharma is not really an area I know all that well. I do however recognize good management and this company definitely has it.

    • >Generic competition from Teva for Vyvanse.<

      SHPGY's been fighting off ADHD competitive challenges successfully for many years now.

      >Dermagraft setbacks.<

      Yes but not entirely unexpected. The approved product target (diabetic foot ulcers) is a growing market with excellent potential.

      >P/E ratio of 26 much higher than most of the sector.<

      Justified IMO. SHPGY management has consistently grown earnings over the years, both organically and accretively through strategic acquisitions. They are very well positioned in specialty drug markets.

      I suggest you read through annual reports and presentations to better appreciate the strengths of this company. This one has been a long-term winner for me and I don't see any signs they are deviating from their well-established record of success.