) first quarter 2013 earnings (excluding special items) of 1.63
as per American Depositary Share (ADS) beats the Zacks Consensus
Estimate of $1.61. The reported quarter's adjusted earnings also
increased 10% from the year-ago period.
Quarterly revenues decreased 1% to $1.16 billion, missing the
Zacks Consensus Estimate of $1.21 billion. The quarterly revenue
declined as growth in product sales was more than offset by lower
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Quarter in Detail
Royalty revenue mainly comprises income earned from the sale of
the authorized generic version of Adderall XR, 3TC and
Zeffix. Royalties were down 32% to $38.5 million in the
first quarter primarily due to lower Adderall XR royalties
) as a result of lower volumes and a lower royalty rate payable
since the launch of a new generic product in the second quarter
In addition, royalty income from 3TC and ZEFFIX continued to
decline due to increased competition from other products and the
expiry of patents in certain territories.
Product sales went up 1% to $1.12 billion. The growth was driven
by attention deficit hyperactivity disorder (ADHD) drug Vyvanse
(up 15% to $298 million), ulcerative colitis drug Lialda (up 12%
to $101 million), ADHD drug Intuniv (up 13% to $78 million),
Gaucher disease Vpriv (up 14% to 82 million) and hereditary
angioedema drug Firazyr (up 112% to $42 million).
The growth was partially mitigated by diabetic foot ulcers drug
Dermagraft (down 62% to $19 million) primarily due to the ongoing
restructuring of the Regenerative Medicine sales and marketing
organization. Moreover, sales of Fabry disease drug Replagal
(down 15% to $114 million) were impacted by shipment timings and
increased competition while uneven ordering patterns in Latin
America affected Hunter Syndrome drug Elaprase (down 9% to $114.3
million). Adderall XR, indicated for ADHD, decreased 10% to $99.8
million, due to generic competition.
Adjusted research & development (R&D) costs climbed 15%
to $219.6 million in the reported quarter. Increased investments
in R&D programs contributed to the rise. Selling, general
& administrative (SG&A) expenses decreased 16% to $371.9
In the fourth quarter of 2012, Shire initiated a share repurchase
program of approximately $500 million. As of Apr 30, 2013, Shire
repurchased 7.3 million shares at a cost of $222.7 million, of
which $71 million was in the first quarter of 2013.
For 2013, Shire now expects product sales growth in the
mid-to-high single digits compared to the earlier projection of
growth in the low double digits due to declines in Dermagraft and
Replagal. Dermagraft is projected to resume growth in the second
half of 2013 although sales for the full year will still be lower
than 2012 levels. Elaprase is expected to post double digit
growth in 2013.
Royalties and other revenues are expected to decline 30%-40% in
2013 from 2012 levels due to a full year's impact of the lower
Adderall XR authorized generic royalty rate receivable from
Impax. In addition, generic competition and patent expiry on
other products will also impact royalties.
Gross margins are expected to be approximately flat with 2012
levels. Shire expects low single-digit growth in combined R&D
and SG&A costs, as compared to earlier projection of high
single digit growth.
Shire also stated that it is confident of delivering earnings
growth in line with current consensus earnings expectations of
$6.67. The Zacks Consensus Estimate currently stands at $6.71.
Shire currently carries a Zacks Rank #4 (Sell). Right now, stocks
which look well placed include
Onyx Pharmaceuticals, Inc.
). Both stocks carry a Zacks Rank #1 (Strong Buy).