) reported third quarter 2013 earnings (excluding special items
and amortization) of $1.77 per American Depositary Share (ADS),
up from $1.36 per ADS in the year-ago quarter.
The Zacks Consensus Estimate was $1.64. Excluding special
items but including amortization expense, earnings were $1.61 per
Quarterly revenues increased 12% to $1.2 billion, in line with
the Zacks Consensus Estimate driven by a robust growth in product
Quarter in Detail
Product sales went up 13% to $1.2 billion. The growth was
driven by attention deficit hyperactivity disorder (ADHD) drugs
Vyvanse (up 21% to $299 million) and Intuniv (up 17% to $80.8
million), Hunter Syndrome drug Elaprase (up 17% to $129.1
million), ulcerative colitis drugs Lialda (up 36% to $141.9
million) and Pentasa (up 5% to $70.6 million), and hereditary
angioedema drug Firazyr (up 106% to $62.6 million).
However, Dermagraft (indicated for diabetic foot ulcers) sales
were down 29% to $23.9 million primarily due to the ongoing
restructuring of the Regenerative Medicine sales and marketing
organization. Moreover, sales of Fabry disease drug Replagal
(down 10% to $108.5 million) were impacted by increased
competition from the return of
) Fabrazyme. Adderall XR, indicated for ADHD, also decreased 20%
to $81.4 million, due to generic competition.
Royalties declined 10% to $37.6 million in the third quarter
primarily due to lower Adderall XR royalties.
Adjusted research & development (R&D) costs climbed 2%
to $222.8 million in the reported quarter. Increased investments
in R&D programs contributed to the rise. Selling, general
& administrative (SG&A) expenses increased 1% to $371.7
In the fourth quarter of 2012, Shire initiated a share
repurchase program of up to $500 million. As of Oct 22, 2013,
Shire had repurchased 9.8 million shares for $299 million.
Earnings Outlook Upgraded
Shire now expects to achieve mid-to-high teens earnings growth
in 2013 as compared to the earlier estimate of double-digits
earnings growth. Shire is currently focusing on simplifying its
business structure under one head which is driving cost benefits,
resulting in a second consecutive increase in guidance. The Zacks
Consensus Estimate currently stands at $6.87.
For 2013, Shire continues to expect product sales growth in
the mid-to-high single digits while sales growth in the fourth
quarter is expected to be at a similar level as in the third
quarter. Royalties and other revenues are expected to decline by
35% - 40% in 2013 from 2012 levels.
Shire now expects combined R&D and SG&A expenses to be
1%-3% lower than 2012 as compared to the previous expectation of
being marginally higher versus 2012.
Shire had discontinued the development of Dermagraft for the
additional indication of epidermolysis bullosa.
The acquisition of Premacure in Mar 2013 has added a potential
protein replacement therapy, SHP607, for the prevention of
retinopathy of prematurity (ROP) to Shire's pipeline. A phase II
multicenter trial is ongoing in Sweden and Shire expects headline
data from this trial in the first half of 2015.
We are impressed by strong third quarter results and
consecutive increase in earnings guidance. Shire is well placed
in the ADHD market driven by key drug Vyvanse, which is now being
developed for additional indications as well.
Meanwhile, Shire's efforts to realign its business structure
to drive growth and innovation are noteworthy. The realignment is
expected to drive improved operating leverage in 2014 and
Investors reacted positively to the results as shares gained
11.71% in regular trading.
Shire currently carries a Zacks Rank #3 (Hold). Right now,
) look attractive. While ViroPharma carries a Zacks Rank #1
(Strong Buy), Forest Labs is a Zacks Rank #2 (Buy) stock.
FOREST LABS A (FRX): Free Stock Analysis
SHIRE PLC-ADR (SHPG): Free Stock Analysis
SANOFI-AVENTIS (SNY): Free Stock Analysis
VIROPHARMA (VPHM): Free Stock Analysis Report
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