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Shire knocked after Express Scripts pricing speculation

The market has been spooked by rising integration costs and pricing pressures
November 1, 2016

In recent days Shire's (SHP) shares have taken a battering. On Monday they closed down 3 per cent amid speculation that haemophilia medicines (which contribute around 20 per cent of Shire's overall revenue) would cease to be covered by US pharmacy benefits manager Express Scripts, due to recent price inflation. Then on Tuesday the shares fell as much as 7 per cent after third-quarter results missed revenue and core earnings guidance.

IC TIP: Buy at 4540p

On a media call, chief executive Flemming Ornskov sought to reassure that Shire had only increased the price of haemophilia drugs by 2 per cent in the last year, significantly below the average level of price inflation in the US. He thinks it unlikely that Express Scripts, which negotiates with pharma companies on behalf of insurers and employers, will halt coverage. Secondly, the major sales misses in the haematology and bio-therapeutics divisions were attributed to the sales timing of non-US drugs orders which are traditionally very lumpy in nature.

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