Shares in Shire fall 1.1 percent in brisk trade after Vyvanse, atop-selling medicine for hyperactivity, fails in two late-stage clinical trialsto successfully treat adults with major depressive disorders.
Some traders see scope for a further near-term sell-off in Shire, up around9 percent in 2014 against a drop of about 3 percent on broader the FTSE 100, with the recent gains having been driven partly by speculation of atakeover attempt on the pharmaceuticals group.
"I think it should go down more; it's obviously a blow to the company... Ithink you'll see a quite negative pull-back to 28 quid ($45.71)," says JoeRundle, head of trading at ETX Capital.
"If there's a big sell-off in the stock (to 28 pounds) bid speculation willcome back... into play in a more serious manner," he says. Such a drop wouldtake the shares some 10 percent below the current 3,107.98 pence level.
Others are more sanguine on the company, highlighting its longer-term growthpotential.
"Significant news flow could still boost belief in Shire's longer-termorganic growth prospects, which together with EPS growth acceleratingpotentially (by more than) 15 percent can justify multiple expansion," sayanalysts at Jefferies in a note. They rate the shares as a "buy".
Jefferies' stance echoes that of the broader market, where the averagerecommendation on Shire going into today's news was a "buy", according toThomson Reuters Starmine data.
And, based on Starmine's Analysts Revision Model (ARM) - which measuresanalysts' revisions of key indicators such as earnings and revenue estimates andchanges to their ratings - Shire is ranked way above London-listed peersAstraZeneca and GlaxoSmithKline.
"I think the push lower this morning will likely have been an intra-dayoverreaction and technically the uptrend remains intact and it becomes anopportunity to position yourself 'long' ahead of figures (full-year results) onthe 13th of February," Jordan Hiscott, senior trader at Gekko Global Markets,says.
Trading volumes in Shire stand at a chunky 90 percent of the 90-day dailyaverage, against just 14 percent on the UK benchmark.
For more on Vyvanse trial failures:
Reuters messaging rm://tricia.wright1.thomsonreuters.com@reuters.net
($1 = 0.6125 British pounds)
Astrazeneca (AZN)
Glaxosmithkline (GSK)
