Shire plc reported third-quarter 2018 earnings of $3.64, per American Depositary Share (“ADS”), which missed the Zacks Consensus Estimate of $3.65 by a penny and declined 4.5% from the year-ago quarter’s $3.81.
Revenues of $3.87 billion, up 5% year over year, missed the Zacks Consensus Estimate of $3.86 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 14.7% against the industry’s 3.8% decline.
Quarter in Detail
Product sales increased 6% year over year to $3.75 billion, driven by Immunology, Genetic Diseases, Internal Medicine and Opthalmics. Royalties and other revenues were down 27% to $119 million.
The company introduced a new product franchise called Established Brands to capture revenues 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 $1.19 billion, up 12% year over year. Genetic disease portfolio sales were up 6% to $381 million, driven by higher sales for Elaprase and Replagal, primarily in the international markets.
Sales of Hematology franchise was down 1% year over year to $905 million. As a result of the sale of Shire's Oncology franchise, completed on Aug 31, 2018, Oncology product sales decreased to $51 million from $69 million in the year-ago quarter.
Sales at Opthalmics franchise rallied 21% to $93 million due to strong Xiidra demand growth.
Sales from Internal Medicine franchise grew 10% to $177 million.
Neuroscience franchise sales came in at $732 million, up 6% year over year. Vyvanse sales increased 11%, owing to U.S. price increase and continued growth in the international markets.
Sales of Established Products increased 14% to $217 million due to impact from generic competition, offset by favorable sales deductions and some stocking for Lialda in the third quarter compared to the year-ago quarter.
Research and development (R&D) costs were up 0.3% to $393 million, while selling, general & administrative (SG&A) expenses decreased 4.9% to $779.5 million.
The company updated its 2018 guidance to adjust for the sale of its Oncology franchise. The company now expects earnings per ADS guidance of$14.77-$15.37 per share, updated from the previous range of $14.90-$15.50. Total revenues are expected to be $15.3-$15.8 billion, updated from the previous guidance of $15.4-$15.9 billion
On Aug 31, 2018, Shire completed the sale of its Oncology franchise to Servier S.A.S. (Servier) for $2.4 billion. The franchise included the global rights to Oncaspar, and ex-U.S. and ex-Taiwan rights to Onivyde along with Oncology pipeline assets. A combination of proceeds from the sale of Shire's Oncology franchise, non GAAP free cash flow and existing cash balances were utilized to repay debt during the year.
On Sep 6, 2018, Shire announced the acquisition of sanaplasma AG, a source plasma collection company headquartered in Switzerland. Sanaplasma AG adds 14 new centers in the Czech Republic and Hungary to Shire’s Europe-based plasma collection network.
The acquisition of Shire by Takeda is expected to close in the first half of 2019, which is subject to receipt of additional regulatory clearances and approval by the shareholders of both companies. Takeda has already received clearances from regulatory agencies in the United States, Japan, China and other countries, and is in discussions with the European Commission as part of its phase 1 review of the proposed acquisition.
Shire launched Takhzyro, the first monoclonal antibody to prevent hereditary angioedema (HAE) attacks, in the United States. It also received approval for this treatment in Canada and a positive opinion from the Committee for Medicinal Products for Human Use (CHMP), recommending marketing authorization in Europe.
On Oct 18, 2018, Shire announced that the FDA Gastrointestinal Drugs Advisory Committee voted unanimously that the risk-benefit profile of prucalopride supports the approval of this NDA, which has an action date of Dec 21, 2018.
Zacks Rank & Stocks to Consider
Shire carries a Zacks Rank #4 (Sell).
Some better-ranked stock worth considering are Bristol-Myers Squibb Co. (BMY - Free Report) , Eli Lilly and Co. (LLY - Free Report) and Merck & Co. Inc. (MRK - Free Report) . While Bristol-Myers sports a Zacks Rank #1 (Strong Buy), Lilly and Merck carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Bristol-Myers’ earnings per share estimates have increased from $3.59 to $3.81 for 2018 and from $3.83 to $4.03 for 2019 over the past 60 days. The company delivered a positive earnings surprise in all of the trailing four quarters with average beat of 11.99%.
Lilly’s earnings per share estimates have increased from $5.42 to $5.47 for 2018 and from $5.69 to $5.78 for 2019 over the past 60 days. The company delivered a positive earnings surprise in all of the trailing four quarters with an average beat of 10.15%. The stock has rallied 27.7% year to date.
Merck’s earnings per share estimates have increased from $4.26 to $4.34 for 2018 and from $4.58 to $4.71 for 2019 over the past 60 days. The company delivered a positive earnings surprise in all of the trailing four quarters with an average beat of 3.96%. The stock has rallied 29.9% year to date.
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