Shire reports strong Q2 2017 operating results and cash flow; updates
full year guidance
Q2 product sales growth of 7% on a combined pro forma basis; generated
$1.2 billion operating cash flow
Over-delivered Year 1 Baxalta integration cost synergies, recognizing
$400 million vs $300 million target
Exploring strategic review of Neuroscience franchise, including
potential of independent public listing
Significant pipeline progress with SHP643 (lanadelumab); Phase 3 topline
data demonstrates potential to change treatment paradigm for patients
with HAE; U.S. approval of MYDAYIS for patients with ADHD; September
August 3, 2017 - Shire plc (Shire) (LSE: SHP, NASDAQ: SHPG) announces
unaudited results for the three months ended June 30, 2017.
Flemming Ornskov, M.D., M.P.H., Shire Chief Executive Officer,
"During the second quarter, we delivered strong top-line growth of 7% on
a pro forma basis, generating product sales of $3.6 billion. Our
Immunology franchise grew by 18%, and we saw significant contributions
across our broad and diverse portfolio. Shire remains ahead of schedule
to deliver at least $700 million in cost synergies from the Baxalta
integration by Year 3. The Q2 performance resulted in strong operating
cash flow of $1.2 billion and enabled us to reduce Non GAAP net debt by
$880 million in the quarter.
"We also continue to drive the late-stage clinical pipeline. In Q2 we
announced positive topline data from our Phase 3 pivotal trial of SHP643
in HAE, and anticipate submission of the BLA in late 2017 or early 2018.
MYDAYIS, a once-daily treatment for patients with ADHD, received US FDA
approval and will be launched in September.
"We are at an exciting inflection point, with both our rare disease and
neuroscience businesses performing strongly and each having significant
growth potential over the coming years. The strength and scale of our
business provides us with the opportunity to further optimize our
franchise portfolio - one of our key priorities communicated earlier
this year. By year end, we expect to complete a formal evaluation of the
full range of strategic options for the neuroscience franchise,
including the potential for its independent public listing.
"As we enter the second half of 2017, we are focused on generating
strong organic growth while continuing to deliver on our key priorities
- launching more than 80 products globally by leveraging our expanded
commercial platform, progressing our late-stage pipeline, integrating
Baxalta, and paying down debt. We have updated our 2017 full year
guidance and remain very confident about Shire's long-term prospects."
Q2 2017(1) Growth(1) Non GAAP CER(1)(2)
Product sales $3,592 million +55% +56%
Product sales excluding legacy
Baxalta $1,882 million +7%
Total revenues $3,746 million +54% +56%
Operating income from
continuing operations $399 million +315%
Non GAAP operating income(2) $1,492 million +53% +54%
Net income margin(3)(4) 6% 13ppc
Non GAAP EBITDA margin(2)(4) 43% 1ppc
Net income $240 million N/M
Non GAAP net income(2) $1,135 million +47%
Diluted earnings per ADS(5) $0.79 N/M
Non GAAP diluted earnings per
ADS(2)(5) $3.73 +10% +11%
Net cash provided by operating
activities $1,223 million +107%
Non GAAP free cash flow(2) $1,064 million +130%
(1) Results include Baxalta Inc. (Baxalta) (acquired on June 3, 2016),
unless otherwise noted. Percentages compare to equivalent 2016 period.
(2) The Non GAAP financial measures included within this release are
explained on pages 28 - 29, and are reconciled to the most directly
comparable financial measures prepared in accordance with US GAAP on
pages 22 - 24. (3) US GAAP net income as a percentage of total revenues.
(4) Percentage point change (ppc). (5) Diluted weighted average number
of ordinary shares 913 million.
Product sales growth
-- Delivered product sales growth of 55% with the inclusion of legacy
-- Achieved combined pro forma product sales growth of 7%; legacy Shire
product sales growth of 7% and legacy Baxalta pro forma product sales
growth of 8%.
-- Strong demand for our immunology products delivered 18% pro forma sales
growth, with significant contributions from our subcutaneous
immunoglobulin portfolio as well as GAMMAGARD LIQUID and our albumin
-- Generated Non GAAP earnings per ADS of $3.73, underscoring
continued focus on commercial excellence and operating efficiency.
-- Continued to progress Baxalta integration, while delivering
$400 million in cost synergies in year 1 - exceeding our target of $300
million - which contributed to a Non GAAP EBITDA margin of 43% for the
quarter; on-track to achieve at least $700 million in synergies by year
Strong cash flow
-- Strong operating cash flow enabled $880 million reduction in
Non GAAP net debt since March 31, 2017; remain on-track to achieve our
year-end debt target.
Product and Pipeline Highlights
-- Received U.S. Food and Drug Administration (FDA) approval of
MYDAYIS, a new once-daily treatment option for symptom control in
Attention Deficit Hyperactivity Disorder (>> Alcobra Ltd) patients 13 years and
-- Granted European Union (EU) Conditional Marketing Authorization
for NATPAR (Parathyroid Hormone) for the treatment of patients with
-- Received European Medicines Agency (EMA) validation of VEYVONDI
[von Willebrand factor (Recombinant)] Marketing Authorization
Application for treatment of von Willebrand Disease (VWD).
-- Submitted Investigational New Drug (IND) application to FDA for
gene therapy candidate SHP654 for the treatment of hemophilia A.
Clinical and business development updates
-- Reported positive topline data for SHP643 (lanadelumab), which
was acquired with Dyax Corp. (Dyax), an investigational treatment that
reduced Hereditary Angioedema (>> Haemonetics Corporation) monthly attack rate by 87% versus
placebo in a Phase 3 26-week pivotal trial.
-- Entered into an agreement with Parion Sciences to develop and
commercialize SHP659 (formerly known as P-321), an investigational
epithelial sodium channel (ENaC) inhibitor for the potential treatment
of Dry Eye Disease in adults.
-- Expanded broad antibody research platform through license
agreement with Novimmune S.A. to develop and commercialize an innovative,
differentiated bi-specific antibody in pre-clinical development for the
treatment of hemophilia A and hemophilia A patients with inhibitors.
FINANCIAL SUMMARY - SECOND QUARTER 2017 COMPARED TO SECOND QUARTER 2016
-- Product sales increased 55% to $3,592 million (Q2 2016: $2,322 million),
primarily due to the inclusion of a full quarter of legacy Baxalta sales
of $1,710 million in Q2 2017.
-- Product sales excluding legacy Baxalta increased 7% primarily due to
growth from our Internal Medicine franchise, up 15%, as well as sales
from our Ophthalmology franchise of $57 million.
-- Royalties and other revenues increased 44% to $154 million, as Q2 2017
benefited from a full quarter of additional revenue acquired with Baxalta,
primarily related to contract manufacturing activities.
-- Operating income increased 315% to $399 million (Q2 2016: $96 million),
primarily due to the inclusion of a full quarter of Baxalta operating
income and higher revenue from our Internal Medicine franchise, partially
offset by higher amortization of acquired intangible assets and higher
costs relating to licensing arrangements.
-- Non GAAP operating income increased 53% to $1,492 million (Q2 2016: $972
million), primarily due to the inclusion of a full quarter of Baxalta
operating income and higher revenue from legacy Shire products.
-- Non GAAP EBITDA margin as a percentage of total revenues increased to 43%
(Q2 2016: 42%), primarily due to lower research and development (R&D) and
selling, general and administrative (SG&A) expenditures as a percentage
of revenues, partially offset by a lower Non GAAP gross margin, primarily
due to the inclusion of a full quarter of lower margin product franchises
acquired with Baxalta.
Earnings per share (EPS)
-- Diluted earnings per American Depositary Shares (>> Alliance Data Systems Corporation) increased to $0.79
(Q2 2016: diluted losses per ADS of $0.71), primarily due to higher
operating income due to the inclusion of a full quarter of Baxalta income
and the impact of lower losses from discontinued operations related to
the divested Dermagraft business.
-- Non GAAP diluted earnings per ADS increased 10% to $3.73 (Q2 2016: $3.38),
as higher Non GAAP operating income more than offset the impact of
additional shares issued as consideration for the Baxalta transaction.
-- Net cash provided by operating activities increased 107% to $1,223
million (Q2 2016: $591 million), primarily due to strong cash receipts
from higher sales and operating profitability, partially offset by the
timing of payments of accounts payable and other accruals.
-- Non GAAP free cash flow increased 130% to $1,064 million (Q2 2016: $463
million), driven by the growth in net cash provided by operating
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