) third quarter 2012 earnings (excluding special items) of $1.36
per American Depositary Share (ADS) fell short of the Zacks
Consensus Estimate of $1.44 per ADS. The earnings miss was
primarily attributable to lower-than-expected revenues. However,
the reported quarter's adjusted earnings increased 6% from the
year-ago period due to higher product sales.
Quarter in Detail
Quarterly revenues increased 1.3% to $1,100 million. The Zacks
Consensus Estimate came in at $1,163 million.
Product sales went up 4% to $1,055 million. Product sales were
boosted by strong performances of Vyvanse (up 24% to $247.1
million), Lialda (up 16% to $104.4 million), Vpriv (up 16% to
$74.9 million) and Intuniv (up 23% to $69 million). Foreign
exchange movements impacted product sales negatively by $28
million during the third quarter of 2012.
Adderall XR performed disappointingly in the third quarter of
2012. Sales of the drug decreased 32% to $133.9 million, hurt by
generic competition. We note that in June 2012, the US Food and
Drug Administration (FDA) approved the abbreviated new drug
application (ANDA) filed by Actavis for its generic version of
Adderall XR. Actavis is in the process of being acquired by
Watson Pharmaceuticals Inc.
Royalties declined 33% to $41.8 million. Royalty revenue
mainly comprises income earned from the sale of the authorized
generic version of Adderall XR, 3TC and Zeffix. During third
quarter 2012, royalties from
Impax Laboratories Inc.
) for Adderall XR declined 51% to $11.2 million, due to generic
competition. Royalties on 3TC and Zeffix declined 39% to $10.6
Adjusted research & development (R&D) costs climbed
22% to $219.2 million in the reported quarter. Increased
investments in R&D programs contributed to the rise. Selling,
general & administrative (SG&A) expenses decreased 5% to
$368.7 million. The decline was primarily attributable to the
cost-cutting measures at Shire.
For 2012, Shire expects earnings to exhibit double-digit
growth. Product sales are expected to grow by 12% in 2012.
Royalty income, along with other revenue, is expected to decline
15% - 20% (previous guidance: decline of 25% - 35%).
Gross margins are expected to be slightly lower than 2011.
Shire expects year-over-year growth in 2012 combined R&D and
SG&A expenses (adjusted), at the lower end of the previously
forecasted range of 10% - 12%. Management at Shire also stated
that it was confident of delivering impressive earnings growth in
2013 as well.
We currently have a Neutral recommendation on Shire. The stock
carries a Zacks #3 Rank (Hold rating) in the short run.
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