JP Morgan lowers its price target on Novartis NVS to Neutral from Overweight as it believes the value of the company will be challenging to unlock without a break-up.
JP Morgan says, "Novartis shares have underperformed both the sector and the market in 2011 and YTD. This can be partly attributed to uncertainty about the post-Diovan
profitability and recent negative newsflow, though those factors do not explain the almost 40% discount of its SFr49 share price to Novartis' DCF-derived EmV of SFr78. The real culprit seems the corporate structure: Sum-of-the parts analysis shows that non-Pharma assets are worth more than Novartis' Pharma business, but their value remains buried within a group whose entire CF is valued at a Pharma multiple."
NVS closed at $54.39 a share yesterday.
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