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Shire's (SHPG) Earnings and Revenues Beat Estimates in Q2

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Shire plc (SHPG - Free Report) reported second-quarter 2018 earnings of $3.88 per American Depositary Share (“ADS”), which beat the Zacks Consensus Estimate of $3.67 and were up 4% from the year-ago quarter figure of $3.73.

Revenues of $3.92 billion, up 4.6% year over year, surpassed the Zacks Consensus Estimate of $3.83 billion. The year-over-year increase was aided by growth in Immunology, recently launched products and international expansion.

Shire’s shares have outperformed the industry so far this year, rising 10% against the industry’s 1.2% decline.

Quarter in Detail

Product sales increased 6% year over year to $3.81 billion, driven by Immunology, Internal Medicine, and Ophthalmics. Royalties and other revenues were down 28% to $111 million.

The company introduced a new product franchise called Established Brands to capture revenue for its non-promoted products that are facing or could face generic competition, such as Lialda and Pentasa.

The Immunology franchise, which includes sales of hereditary angioedema (“HAE”) drugs, registered sales of $1.15 billion, up 13.1% year over year. Genetic disease portfolio sales were up 5.6% to $391.7 million, driven by favorable foreign exchange rates and higher sales for Elaprase, primarily in the international markets.

Sales of Hematology franchise was down 1.4% year over year to $951 million, while Oncology segment grew 13.6% to $71 million due to increased demand for Onivyde in international markets.Sales at Opthalmics franchise surged 75% to $100 million due to strong Xiidra demand growth.

Sales from Internal Medicine franchise grew 60.5% to $232.9 million.

Neuroscience franchise sales came in at $693.7 million, up 9.2% year over year. Vyvanse sales increased 7% to $556 million due to new competition, while sales of the hemophilia therapies were flat. Adderall XR sales increased 11.8% to $79.8 million.

Sales of Established Products declined 35.6% to $218.5 million due to generic competition for Lialda/Mezavant, which began in the second half of 2017. Lialda/Mezavant sales were down 49% to $105.9 million.

Research and development (R&D) costs were up 5.7% to $407.9 million, while selling, general & administrative (SG&A) expenses decreased 0.3% to $848.5 million.

2018 Outlook Maintained

Shire reiterated its earnings per ADS guidance at the range of $14.90-$15.50. Total revenues are expected in the range of $15.4 billion to $15.9 billion. Gross margin is estimated between 73.5% and 75.5%. However, the guidance excludes the impact of divestment of the oncology franchise to Servier S.A.S. (Servier).

Other Activities

In May, the boards of Takeda and Shire reached an agreement pursuant to which the former will acquire the entire issued and to-be-issued ordinary share capital of the latter. The acquisition is expected to close in the first half of 2019, subject to the receipt of regulatory clearances and approval by the shareholders of both companies.

On Apr 16, 2018, Shire entered into a definitive agreement with Servier to sell its Oncology franchise for $2.4 billion. The transaction is expected to close in the third quarter of 2018.

In July, the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) issued a positive opinion recommending the granting of a marketing authorization in the European Union (EU) for Veyvondi, for the treatment of bleeding events and treatment/ prevention of surgical bleeding in adults (age 18 and older) with von Willebrand disease (VWD).

In June 2018, the FDA approved the label expansion for Cinryze to help prevent angioedema attacks in children aged 6 years and older with hereditary angioedema (“HAE”).

Shire withdrew from the decentralized procedure for Xiidra’s European Marketing Authorization Application in June 2018 and is targeting for resubmission through a centralized procedure in the fourth quarter of 2018.

Shire discontinued the phase II study for SHP626 in June 2018 and is evaluating other options for the program.

Shire plc Price, Consensus and EPS Surprise


Shire plc Price, Consensus and EPS Surprise | Shire plc Quote

Zacks Rank & Stocks to Consider

Shire carries a Zacks Rank #4 (Sell).

Some better-ranked stocks worth considering are Gilead Sciences Inc. (GILD - Free Report) , Utlragenyx Pharmaceutical Inc. (RARE - Free Report) and Vanda Pharmaceuticals Inc. (VNDA - Free Report) . All of them carry a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Gilead’s earnings per share estimates have increased from $6.11 to $6.57 for 2018 and from $6.36 to $6.48 for 2019 over the past 30 days. The company delivered a positive earnings surprise in three of the trailing four quarters with an average beat of 6.43%. The stock has rallied 8.7% so far this year.

Utlragenyx’s loss per share estimates have narrowed from $5.32 to $5.30 for 2018 and from $6.88 to $6.80 for 2019 over the past 30 days. The company delivered a positive earnings surprise in three of the trailing four quarters with an average beat of 47.6%. The stock has rallied 70.6% so far this year.

Vanda’s earnings per share estimates have increased from 18 cents to 20 cents for 2018 and from 77 cents to 80 cents for 2019 over the past 30 days. The company delivered a positive earnings surprise in all of the trailing four quarters with an average beat of 133.1%. The stock has rallied 37.2% so far this year.

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