Shire’s (SHPGY) third quarter 2011 earnings (excluding special items) of $1.28 per American Depositary Share surpassed the year-ago earnings of $1.16 by 10%. Higher revenues boosted earnings. The Zacks Consensus Estimate was $1.30.
Quarter in Detail
Quarterly revenues of Shire increased 24% to $1,086 million, above the Zacks Consensus Estimate of $1,072 million. Increased product sales helped boost revenues. The rise in product sales more than offset the decline in royalties received during the third quarter of 2011.
Product sales went up 28% to $1,018 million, benefiting from strong performances of Adderall XR (up 50% to $149.9 million), Vyvanse (up 32% to $199.7 million), Replagal (up 40% to $129.0 million), Lialda/Mezavant (up 18% to $89.7 million), Elaprase (up 13% to $109.6 million), Intuniv (up 50% to $56.1 million) and Vpriv (up 31% to $64.6 million).
Firazyr recorded revenues of $7.2 million in the third quarter 2011, up 148% from the year ago period. Firazyr was approved in US on August 25, 2011 for treating adults suffering from acute attacks of hereditary angioedema, a rare genetic disease characterized by acute swelling of the hands, feet, face and larynx. The drug has orphan drug status in both the US and Europe.
Royalties declined 18% to $62.8 million. The decrease royalty revenue was primarily due to 57% fall in 3TC and Zeffix royalties ($17.3 million), partially offset by 27% and 56% rise in Adderall XR ($22.9 million) and Fosrenol ($10.9 million) royalties respectively. The decrease in 3TC and Zeffix royalty was attributed to disagreement between Shire and its partner GlaxoSmithKline (GSK) regarding the applicable royalty rate.
Adjusted research & development (R&D) costs climbed 21% to $179.9 million in the reported quarter. R&D spend increased due to investment in Sanfilippo A and other early stage development programs and new indications for Vyvanse. Shire’s selling, general & administrative (SG&A) expenses increased 29% to $389.0 million. The inclusion of operating expenses for Movetis and Advanced BioHealing Inc., led to the rise in SG&A expenses.
Outlook
For 2011, Shire is anticipating significant earnings growth. The total revenues are expected to show similar growth of 22% witnessed in first half 2011. The company expects the year-over-year increase in 2011 adjusted R&D and SG&A expenses (combined) to be 20%. Adjusted effective tax-rate is forecasted in the range of 22% -24% for 2011.
Our Recommendation
We currently have an Outperform recommendation on Shire. The company has a number of key products including Vyvanse, Replagal, Intuniv and Vpriv which should continue performing well.
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