) reported second quarter 2013 earnings (excluding special items
and amortization) of $1.79 per American Depositary Share (ADS),
up from $1.68 per ADS in the year-ago quarter.
The Zacks Consensus Estimate was $1.66.
Excluding special items but including amortization expense,
earnings were $1.53 per ADS.
Quarterly revenues increased 6% to $1.3 billion, in line with
the Zacks Consensus Estimate, driven by a robust growth in
Quarter in Detail
Product sales went up 7% to $1.2 billion. The growth was
driven by attention deficit hyperactivity disorder (ADHD) drugs
Vyvanse (up 13% to $300 million) and Intuniv (up 31% to $90
million), Hunter Syndrome drug Elaprase (up 22% to $149 million),
ulcerative colitis drugs Lialda (up 46% to $137.5 million) and
Pentasa (up 15% to $74 million), and hereditary angioedema drug
Firazyr (up 56% to $50 million).
However, Dermagraft (indicated for diabetic foot ulcers) was
down 57% to $22 million primarily due to the ongoing
restructuring of the Regenerative Medicine sales and marketing
Moreover, sales of Fabry disease drug Replagal (down 7% to
$114 million) were impacted by increased competition from the
Adderall XR, indicated for ADHD, also decreased 16% to $112.3
million, due to generic competition.
Royalties decreased 36% to $36.3 million primarily due to
lower Adderall XR royalties received from
) as a result of lower volumes and a lower royalty rate payable
since the launch of a new generic product in 2012.
Adjusted research & development (R&D) costs increased
15% to $235.9 million in the reported quarter. Selling, general
& administrative (SG&A) expenses decreased 5% to $390.4
In the fourth quarter of 2012, Shire initiated a share
repurchase program of up to $500 million. As of Jul 24, 2013,
Shire repurchased 9.6 million shares at a cost of $289.9
Shire now expects to achieve double digit growth in earnings
in 2013. The Zacks Consensus Estimate currently stands at
For 2013, Shire expects product sales growth in the
mid-to-high single digits on the back of improved performance in
the second half of 2013.
Royalties and other revenues are now expected to decline by
35% - 40% in 2013 from 2012 levels, compared to the previous
guidance of a decline of 30%-40%.
Shire now projects combined R&D and SG&A expenses to
be marginally higher in 2013 versus 2012 as compared to the
previous estimate of a low single digit growth.
Shire's acquisition of SARcode added a phase III candidate,
lifitegrast, to its pipeline, which is being developed for the
signs and symptoms of dry eye disease. The phase III studies are
fully enrolled and Shire expects data from the same in the first
quarter of 2014.
Meanwhile, Shire continues to evaluate Vyvanse for binge
eating and major depressive disorders. Phase III studies on binge
eating disorders are fully enrolled and data is expected in
We are impressed by strong second quarter results and pipeline
progress. Shire is well placed in the ADHD market driven by key
drug Vyvanse which is now being developed for additional
indications as well. We are also encouraged by Shire's recent
acquisitions with an aim to develop a new business unit in
Shire currently carries a Zacks Rank #3 (Hold). Right now,
) looks attractive with a Zacks Rank #1 (Strong Buy).
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