UBS has upgraded its rating on Japanese pharmaceutical company Shionogi & Co from 'neutral' to 'buy', pointing to an attractive valuation and a promising pipeline of new drugs. The Swiss bank's analysts noted that the stock's recent underperformance has created a buying opportunity, particularly as the company's research and development efforts gain momentum.
Shionogi, best known for its Covid-19 antiviral treatment Xocova, has seen its share price decline in recent months amid a broader market rotation away from pandemic-related plays. However, UBS believes the current valuation does not reflect the potential of its wider pipeline, which includes treatments for infectious diseases and pain management.
The upgrade comes at a time when global pharmaceutical stocks are under scrutiny from UK investors, many of whom hold healthcare exposure through pension funds and investment trusts. While Shionogi is not listed in London, its performance can influence the value of international equity funds popular among British savers.
Analysts at UBS wrote that Shionogi's pipeline offers 'multiple catalysts' over the next 12 to 18 months, including potential regulatory approvals and new clinical data. They also highlighted the company's strong cash position and dividend policy as additional factors supporting the upgrade.
For UK investors, the upgrade serves as a reminder of the importance of looking beyond headline stock indices. The FTSE 100 has been relatively flat this year, but global healthcare names like Shionogi can offer diversification and growth potential, particularly in the current environment of ageing populations and ongoing infectious disease challenges. Source: UBS research note.