Shire's (SHPG) Q2 Earnings Lag Estimates, 2015 View Raised - Analyst Blog
Shire plc SHPG reported second-quarter 2015 earnings (excluding special items and amortization) of $2.63 per American Depositary Share (ADS), up 3% year over year (at constant exchange rates) but missed the Zacks Consensus Estimate of $2.82.
Revenues increased 4% to $1.6 billion year over year and came in line with the Zacks Consensus Estimate.
All growth rates mentioned below are on a year-over-year basis.
Quarter in Detail
Product sales increased 7% excluding Intuniv (12% at constant exchange rates) to $1.5 billion driven by strong performance of Vyvanse (18% to $424.8 million), Firazyr (17% to $104 million) and Lialda/Mezavant (10% to 158 million).
Sales growth was affected by lower Intuniv sales (down 91% to $9.5 million) due to generic competition. Sales of Elaprase and Replagal decreased 4% and 10% to $146.5 million and $116.9 million, respectively.
Royalty income increased 171% to $79.1 million due to the inclusion of royalty income receivable from Amgen AMGN for Sensipar (following the acquisition of NPS Pharmaceuticals by Shire), and the royalties receivable from Allergan AGN on sales of its generic version of Intuniv.
Natpara, which received FDA approval in Jan 2015 as a hormone replacement therapy for use in the treatment of hyperparathyroidism, accounted for sales of $6 million during second-quarter 2015.
In the reported quarter, adjusted research & development costs increased 13.8% to $238 million. Selling, general & administrative expenses increased 16.8% to $458.7 million.
2015 Outlook Upped
Shire has revised its guidance for earnings per ADS to mid-to-high single-digits growth in 2015 (prior guidance: mid-single digits). The company now expects product sales to increase 4%–5% on a reported basis (prior guidance: low-to-mid single digits). However, currency fluctuation is expected to affect sales of Elaprase, Replagal and Vpriv.
Shire expects royalties and other revenues to increase by 45%–55% in 2015 (prior guidance: 30% – 40% higher).
Pipeline Update
Shire reached an agreement with the FDA on a clear regulatory path for SHP465. A phase III study is being conducted to evaluate the efficacy of the candidate for the treatment of patients aged 6 years–17 years who are suffering from attention deficit hyperactivity disorder.
Meanwhile, Shire held an end-of-phase II meeting on SHP620 with the FDA in Jun 2015 and is currently preparing to advance the candidate into phase III development in 2016 for the treatment of cytomegalovirus infection in transplant patients.
Additionally, Shire completed patient enrolment in a phase III safety and efficacy study on SHP606 for the treatment of dry eye disease in support of potential regulatory submissions.
Our Take
Shire’s second-quarter results were disappointing with the company missing our expectations. However we are pleased with the performance of Vyvanse, Firazyr and Lialda/Mezavant. Shire’s efforts to strengthening its pipeline are also commendable.
Shire currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the health care sector is Corcept Therapeutics Incorporated CORT, carrying a Zacks Rank #2 (Buy).
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