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Shire plc reported third-quarter 2016 earnings of $3.17 per American Depositary Share (ADS), missing the Zacks Consensus Estimate of $3.18 and down from the year-ago tally of $3.24.
Revenues, on the other hand, surged 109% to $3.45 billion but lagged the Zacks Consensus Estimate of $3.55 billion.
Quarter in Detail
Product sales soared 110% year over year to $3.3 billion primarily due to the inclusion of $1.6 billion of legacy Baxalta sales. Excluding Baxalta, product sales were up 12% driven by strong performance of Neuroscience (up 15%), Genetic Diseases (up 5%) and Internal Medicine (up 15%).
Royalties and other revenues were up 74.8% to $136.7 million primarily on the back of the inclusion of contract manufacturing revenues acquired as part of the Baxalta transaction.
The company’s Ophthalmology franchise contributed $14 million to total product sales, following the launch of Xiidra in Aug 2016. Xiidra, a twice-daily eye drop solution, is approved in the U.S. to for the treatment of signs and symptoms of dry eye.
Vyvanse sales increased 20% to $512.6 million, driven by prescription growth in the U.S. and benefit of price increases since the year-ago quarter. Sales of Lialda came in at $208.6 million, up 18% driven by robust demand. Lialda exited the quarter with a 40% market share.
While sales of Firazyr increased 19% to $146.3 million backed by a higher number of patients on therapy in both the U.S. and international markets, Cinryze sales dropped 12% to $165.4 million due to destocking and reduced utilization arising from a supply constraint in the U.S.
Adjusted research and development (R&D) costs were up 12% to $392.1 million, while selling, general & administrative (SG&A) expenses increased 26% to $846.5 million.
2016 Outlook
Shire reiterated its guidance for 2016 incorporating the legacy Baxalta business. The company continues to expect earnings per ADS in the range of $12.70–$13.10.
Product sales are projected to be $10.8–$11 billion. The company forecasts royalties and other revenues of around $490–$530 million, including contract manufacturing revenues from Baxalta.
Pipeline Update
Shire continues to progress with its pipeline candidates. The company expects to resubmit a New Drug Application (NDA) for SHP465 for the treatment of attention-deficit/hyperactivity disorder (ADHD) by end of 2016.
Meanwhile, Shire has completed enrolment in a phase III study on SHP643 for the treatment of in prophylaxis of hereditary angioedema. Results are expected in the first half of 2017.
Shire’s third-quarter results were disappointing with the company missing both top- and bottom-line estimates. Nevertheless, strong performance of Vyvanse, Lialda, and Firazyr should continue driving its top line in the upcoming quarters. In addition, the recent FDA approval for including the new longer-term maintenance of efficacy data in Vyvanse’s label for the treatment of adults with moderate-to-severe binge eating disorder (BED) should generate more sales.
Meanwhile, the adult ADHD space is one of the largest and fastest growing segments of the market, and a potential approval of SHP465 will further strengthen Shire’s franchise. Even though the supply constraint of Cinryze is expected to impact the drug’s contribution to product sales, management expects to return to normalized supply by early 2017.
Zacks Rank & Key Picks
Shire currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the healthcare sector include Infinity Pharmaceuticals, Inc. , Geron Corporation (GERN - Free Report) and Exelixis, Inc. (EXEL - Free Report) . Both Infinity and Geron sport a Zacks Rank #1 (Strong Buy), while Exelixis carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Infinity’s loss estimates narrowed from $3.84 to $3.79 for 2016 but remained unchanged for 2017 over the last 60 days. The company has posted a positive surprise in all of the four trailing quarters with an average beat of 67.62%.
Geron has posted a positive earnings surprise in all of the four trailing quarters with an average beat of 20.78%.
Exelixis’ loss estimates narrowed from 71 cents to 61 cents for 2016 and from 16 cents to earnings of 4 cents for 2017 over the last 60 days. The company has posted a positive surprise twice in the four trailing quarters with an average beat of 9.1%.
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Shire (SHPG) Misses Q3 Earnings & Revenue Estimates
Shire plc reported third-quarter 2016 earnings of $3.17 per American Depositary Share (ADS), missing the Zacks Consensus Estimate of $3.18 and down from the year-ago tally of $3.24.
Revenues, on the other hand, surged 109% to $3.45 billion but lagged the Zacks Consensus Estimate of $3.55 billion.
Quarter in Detail
Product sales soared 110% year over year to $3.3 billion primarily due to the inclusion of $1.6 billion of legacy Baxalta sales. Excluding Baxalta, product sales were up 12% driven by strong performance of Neuroscience (up 15%), Genetic Diseases (up 5%) and Internal Medicine (up 15%).
Royalties and other revenues were up 74.8% to $136.7 million primarily on the back of the inclusion of contract manufacturing revenues acquired as part of the Baxalta transaction.
The company’s Ophthalmology franchise contributed $14 million to total product sales, following the launch of Xiidra in Aug 2016. Xiidra, a twice-daily eye drop solution, is approved in the U.S. to for the treatment of signs and symptoms of dry eye.
Vyvanse sales increased 20% to $512.6 million, driven by prescription growth in the U.S. and benefit of price increases since the year-ago quarter. Sales of Lialda came in at $208.6 million, up 18% driven by robust demand. Lialda exited the quarter with a 40% market share.
While sales of Firazyr increased 19% to $146.3 million backed by a higher number of patients on therapy in both the U.S. and international markets, Cinryze sales dropped 12% to $165.4 million due to destocking and reduced utilization arising from a supply constraint in the U.S.
Adjusted research and development (R&D) costs were up 12% to $392.1 million, while selling, general & administrative (SG&A) expenses increased 26% to $846.5 million.
2016 Outlook
Shire reiterated its guidance for 2016 incorporating the legacy Baxalta business. The company continues to expect earnings per ADS in the range of $12.70–$13.10.
Product sales are projected to be $10.8–$11 billion. The company forecasts royalties and other revenues of around $490–$530 million, including contract manufacturing revenues from Baxalta.
Pipeline Update
Shire continues to progress with its pipeline candidates. The company expects to resubmit a New Drug Application (NDA) for SHP465 for the treatment of attention-deficit/hyperactivity disorder (ADHD) by end of 2016.
Meanwhile, Shire has completed enrolment in a phase III study on SHP643 for the treatment of in prophylaxis of hereditary angioedema. Results are expected in the first half of 2017.
SHIRE PLC-ADR Price, Consensus and EPS Surprise
SHIRE PLC-ADR Price, Consensus and EPS Surprise | SHIRE PLC-ADR Quote
Our Take
Shire’s third-quarter results were disappointing with the company missing both top- and bottom-line estimates. Nevertheless, strong performance of Vyvanse, Lialda, and Firazyr should continue driving its top line in the upcoming quarters. In addition, the recent FDA approval for including the new longer-term maintenance of efficacy data in Vyvanse’s label for the treatment of adults with moderate-to-severe binge eating disorder (BED) should generate more sales.
Meanwhile, the adult ADHD space is one of the largest and fastest growing segments of the market, and a potential approval of SHP465 will further strengthen Shire’s franchise. Even though the supply constraint of Cinryze is expected to impact the drug’s contribution to product sales, management expects to return to normalized supply by early 2017.
Zacks Rank & Key Picks
Shire currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the healthcare sector include Infinity Pharmaceuticals, Inc. , Geron Corporation (GERN - Free Report) and Exelixis, Inc. (EXEL - Free Report) . Both Infinity and Geron sport a Zacks Rank #1 (Strong Buy), while Exelixis carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Infinity’s loss estimates narrowed from $3.84 to $3.79 for 2016 but remained unchanged for 2017 over the last 60 days. The company has posted a positive surprise in all of the four trailing quarters with an average beat of 67.62%.
Geron has posted a positive earnings surprise in all of the four trailing quarters with an average beat of 20.78%.
Exelixis’ loss estimates narrowed from 71 cents to 61 cents for 2016 and from 16 cents to earnings of 4 cents for 2017 over the last 60 days. The company has posted a positive surprise twice in the four trailing quarters with an average beat of 9.1%.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>