) fourth quarter 2012 earnings (excluding special items) of $1.58
per American Depositary Share (ADS) were in line with the Zacks
Consensus Estimate. However, the reported quarter's adjusted
earnings increased 4% from the year-ago period.
For 2012, earnings per ADS of $6.10 missed the Zacks Consensus
Estimate of $6.12. Nevertheless, earnings were up 14% from 2011
due to increased operating income. A lower tax rate also aided
Shire posted revenues of $4.7 billion in 2012, up 10% due to
growth in product sales, which was partially offset by lower
royalties and other revenues.
Quarter in Detail
Quarterly revenues increased 5% to $1,201 million driven by
higher product sales and royalties and beat the Zacks Consensus
Estimate of $1,195 million.
Product sales went up 5% to $1,098 million. Product sales,
excluding Adderall XR, grew 10% boosted by strong performances of
Vyvanse (up 18% to $257 million), Intuniv (up 24% to $81 million)
and Firazyr (up 132% to $35 million).
This growth was partially mitigated by Dermagraft (down 65% to
$19 million) primarily due to the ongoing restructuring of the
Regenerative Medicine sales and marketing organization.
Adderall XR performed disappointingly in the fourth quarter of
2012. Sales of the drug decreased 35% to $82 million, hurt by
We note that in Jun 2012, the US Food and Drug Administration
(FDA) approved the abbreviated new drug application (ANDA) filed
) for its generic version of Adderall XR. The litigation
Impax Laboratories, Inc
) also impacted sales.
Royalty revenue mainly comprises income earned from the sale of
the authorized generic version of Adderall XR, 3TC and Zeffix.
Royalties grew 4.2% to $87.2 million in the fourth quarter,
driven by a one-time royalty income of $38 million for 3TC and
Adjusted research & development (R&D) costs climbed 13.6%
to $233.5 million in the reported quarter. Increased investments
in R&D programs contributed to the rise. Selling, general
& administrative (SG&A) expenses increased 4.6% to $411.7
In the fourth quarter, Shire initiated a share repurchase program
of approximately $500 million. As of Feb 13, 2013, Shire
repurchased 4.8 million shares at a cost of $143 million.
In 2013, royalties and other revenues are expected to decline
30%-40% 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 high single-digit growth in combined
R&D and SG&A costs, with significant increase in R&D
expenses as the company continues to invest in its pipeline.
Management at Shire also stated that it is confident of
delivering impressive earnings growth in 2013.
Shire currently carries a Zacks Rank #2 (Buy).
) also looks attractive with a Zacks Rank #2 (Buy).
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