DUBLIN, April 26, 2012 /PRNewswire/ --
Shire plc (LSE: SHP, NASDAQ: SHPGY), the global specialty biopharmaceutical company, announces results for the three months to March 31, 2012.
Financial Highlights Q1 2012(1) $1,107 Product sales million +24% $1,172 Total revenues million +21% Non GAAP operating income $362 million +18% US GAAP operating income $295 million +11% Non GAAP diluted earnings per ADS $1.48 +20% US GAAP diluted earnings per ADS $1.24 +12% Non GAAP cash generation $310 million +49% Non GAAP free cash flow $248 million +60% US GAAP net cash provided by operating activities $257 million +27%
(1) Percentages compare to equivalent 2011 period.
The Non GAAP financial measures included within this release are explained on page 21, and are reconciled to the most directly comparable financial measures prepared in accordance with US GAAP on pages 18 - 20.
Angus Russell, Chief Executive Officer, commented:
“Shire continues to perform strongly with first quarter results in line with our expectations. Product sales increased 24%, Non GAAP operating income was up 18% and Non GAAP diluted earnings per ADS increased 20% to $1.48. Our focus on demonstrating value to the healthcare system through meeting the needs of our patients is continuing to deliver.
In ADHD, our lead treatments VYVANSE and INTUNIV both increased share versus the prior year in a growing US market and we anticipate VYVANSE sales of over $1 billion for the full year.
Following its launch late last year, FIRAZYR has made a very good start in the US and has added further growth to the strong sales performance of our other rare disease treatments ELAPRASE, VPRIV and REPLAGAL.
Our new regenerative medicine product DERMAGRAFT also performed well, contributing to our overall growth in product sales.
Using our strong balance sheet, we’ve recently completed a number of acquisitions to add to the Phase 2 developments in our pipeline, including an exciting hematology asset and a novel cell-based platform for our regenerative medicine business. We’re very pleased with the progress of several other studies across our pipeline, particularly the positive Phase 2 clinical data for VYVANSE in the treatment of binge eating disorder released today.
We’ve made a strong start to the year and reiterate our expectation of good earnings growth in 2012.”
FINANCIAL SUMMARY
First Quarter 2012 Unaudited Results
Q1 2012 Q1 2011 Non Non US GAAP Adjustments GAAP US GAAP Adjustments GAAP $M $M $M $M $M $M Total revenues 1,172 - 1,172 972 - 972 Operating income 295 67 362 267 39 306 Diluted earnings per ADS $1.24 $0.24 $1.48 $1.11 $0.12 $1.23
Product sales were up 24% to $1,107 million (Q1 2011: $889 million). The growth in product sales was driven particularly by VYVANSE® (up 29% to $260 million), REPLAGAL® (up 28% to $134 million), ELAPRASE® (up 21% to $126 million), VPRIV® (up 22% to $72 million), FIRAZYR® (up 272% to $20 million) and INTUNIV® (up 63% to $69 million). On a constant exchange rate (“CER”) basis, which is a Non GAAP measure, product sales were up 26%.
Q1 2012 also included $49 million of DERMAGRAFT® sales (Q1 2011: $nil). Excluding sales of DERMAGRAFT, which was acquired with Advanced BioHealing Inc. (“ABH”) in Q2 2011, product sales were up 19%.
- Total revenues were up 21%, to $1,172 million (Q1 2011: $972 million), as the growth in product sales was partially offset, as expected, by a lower level of royalties and other revenues.
On a Non GAAP basis, operating income was up 18% to $362 million (Q1 2011: $306 million) as total operating expenses in Q1 2012 increased at a slightly higher rate than total revenues. Research and development (“R&D”) costs increased 10% and Selling, general and administrative (“SG&A”) costs increased by 25% compared to Q1 2011. The rate of increase in SG&A is significantly higher than we expect to see for the full year as Q1 2012 includes ABH’s SG&A ($31 million) which was not incurred in Q1 2011 and SG&A in Q1 2011 was lower than the level experienced across subsequent quarters in 2011.
On a US GAAP basis, operating income was up 11% to $295 million (Q1 2011: $267 million), a lower rate of growth than on a Non GAAP basis, due to up-front payments in respect of in-licensed and acquired products charged to R&D, and higher intangible asset amortization expense included in SG&A in Q1 2012.
Non GAAP diluted earnings per American Depository Share (“ADS”) were up 20% to $1.48 (Q1 2011: $1.23), due to higher Non GAAP operating income and a lower Non GAAP effective tax rate of 20% (Q1 2011: 22%).
US GAAP diluted earnings per ADS were up 12% to $1.24 (Q1 2011: $1.11) due to higher US GAAP operating income and a lower US GAAP effective tax rate of 17% (Q1 2011: 19%).
Cash generation, a Non GAAP measure, was up 49% to $310 million (Q1 2011: $208 million) as higher cash receipts from higher product sales more than offset increased operating expense payments. Cash generation in Q1 2011 was also negatively impacted by the timing and quantum of sales deduction payments.
Free cash flow, also a Non GAAP measure, was up 60% to $248 million (Q1 2011: $155 million), due to the higher cash generation together with lower capital expenditure, partially offset by higher cash tax payments in Q1 2012 compared to Q1 2011.
On a US GAAP basis, net cash provided by operating activities was up 27% to $257 million (Q1 2011: $202 million), a lower rate than the Non GAAP free cash flow measure, which does not include the up-front payments in respect of in-licensed and acquired products made in Q1 2012.
- Net debt at March 31, 2012 was $214 million (December 31, 2011: $468 million), a reduction of $254 million, principally due to the strong free cash flow generated in Q1 2012.
2012 OUTLOOK
Having made a strong start to the year, we reiterate our confidence in good earnings growth for 2012, while investing in our business to support sustained future growth.
For the full year we now expect product sales growth in the mid teens range. Combining this with lower royalties and other revenues, which are expected to be 15% to 25% lower year on year, we are forecasting revenue growth in the low teens range.
We anticipate the marginal dilution in gross margins seen this quarter will continue, reflecting the full year impact of our acquisition of ABH.
We will continue to advance our promising pipeline of early and late stage programs, and we will be investing in our recent pipeline acquisitions and in the treatment of binge eating disorder, following recent positive data. The rate of increase in operating costs seen in the first quarter will not continue through the full year, but as we invest in our pipeline, continue to expand our international commercial activities and absorb a full year of ABH’s operating costs, we now expect combined Non GAAP R&D and SG&A spending to increase by 12% to 14% compared to 2011.
We expect our tax rate for 2012 to be in the range of 20% to 22%.
FIRST QUARTER 2012 AND RECENT PRODUCT AND PIPELINE DEVELOPMENTS
Products
VPRIV manufacturing update
On February 22, 2012 Shire announced that the European Medicines Agency’s (“EMA”) Committee for Medicinal Products for Human Use had approved the production of VPRIV in its new biologics manufacturing facility in Lexington, Massachusetts and this decision was adopted by the European Commission on March 26, 2012. Shire now has two EMA approved facilities - Alewife in Cambridge, Massachusetts, as well as the new Lexington facility - in which to manufacture VPRIV drug substance.
Shire has received a Complete Response letter from the US Food and Drug Administration (“FDA”) regarding production of VPRIV drug substance at Lexington. Shire is working closely with the FDA to address their questions and resolve any outstanding issues to the satisfaction of the agency.
Notwithstanding the ongoing discussions with the FDA, Shire continues to supply VPRIV to US patients through its existing approved US manufacturing facility at Alewife and has the capacity to meet the anticipated demand for VPRIV from existing and new patients both in the US and globally, recognizing that US inventory levels will be below target levels until the Lexington facility is approved by the FDA.
VYVANSE - for the treatment of Attention Deficit Hyperactivity Disorder (“ADHD”)
- On March 6, 2012 Shire announced that it is initiating two Phase 4 clinical trials to compare VYVANSE Capsules to CONCERTA® Extended-Release Tablets. These prospectively designed head-to-head clinical trials will provide important information for physicians, patients, caregivers, and payors to make informed choices, and have been designed to explore differences in efficacy between VYVANSE and CONCERTA in adolescents aged 13 to 17 with ADHD. Together the two trials will enroll approximately 1,000 patients, and results are expected in the second half of 2013.
FOSRENOL® - for the treatment of Hyperphosphatemia in end stage renal disease
- On March 8, 2012 Shire announced that it has received approval through the European Decentralised Procedure for an oral powder formulation of FOSRENOL. The oral powder formulation was developed by Shire to give patients more choice in how they take their phosphate binder. Submissions for national marketing authorisations of FOSRENOL in oral powder form have been made to Sweden and the other 27 European markets, with the first national approvals anticipated in Q2 2012.
Pipeline
REPLAGAL - for the treatment of Fabry disease
- On March 14, 2012 Shire announced that it had withdrawn its Biologics License Application (“BLA”) for REPLAGAL with the FDA. In 2009, and again in 2011, the FDA encouraged Shire to submit an application for the approval of REPLAGAL in the US. These discussions led Shire to file a BLA in November 2011 in anticipation of a quick review process and eventual approval. Recent interactions with the FDA in Q1 2012 led Shire to believe that the FDA would require additional controlled trials for approval. No concerns over the product’s safety profile were raised by the FDA. Shire has concluded that the likely additional studies would cause a significant delay, and an approval of REPLAGAL for US patients would only be possible in the distant future. Shire therefore decided to withdraw its BLA. Patients currently treated with REPLAGAL in the US under treatment access programs will be transitioned off REPLAGAL therapy by June 30, 2012.
SPD476, MMX® mesalamine - for the treatment of diverticular disease
- On March 30, 2012 Shire announced top-line results of the PREVENT2 trial, a Phase 3 investigational study of once-daily SPD476, MMX mesalamine in patients with a history of diverticulitis. The study did not meet the primary endpoint in reducing the rate of recurrence of diverticulitis over a two year treatment period. Shire will continue to analyze these data and those of the second study, PREVENT1, which was similar in design to PREVENT2 and will report later in the year. Although the results of the second trial are pending, the current intention is not to pursue a regulatory filing for this indication for MMX mesalamine.
Lisdexamfetamine dimesylate (“LDX”) (currently marketed as VYVANSE in the US for the treatment of ADHD) for the treatment of Binge Eating Disorder (“BED”)
- Today, Shire announced Phase 2 results from an efficacy and safety clinical study of LDX for the treatment of BED. In this study, in which the pre-defined primary end point was met, treatment of adults with LDX resulted in a statistically significant reduction in binge eating behaviour and increased remission rates from binge eating compared to placebo. There is currently no approved pharmacologic treatment for patients struggling with BED, the most common eating disorder.
FIRST QUARTER AND RECENT BUSINESS DEVELOPMENT ACTIVITY
Since the beginning of the year we have added to our pipeline through the following transactions:
Acquisition of FerroKin Biosciences, Inc. (“FerroKin”)
- On April 2, 2012 Shire completed the acquisition of FerroKin and with it SPD 602 (formally referred to as FBS0701), FerroKin’s iron chelator treatment in Phase 2 development. SPD 602 serves a chronic patient need for treatment of iron overload following numerous blood transfusions. Together with our collaboration with Sangamo Biosciences Inc. (“Sangamo”), the acquisition of FerroKin represents a strategic step in building Shire’s hematology business, which already includes XAGRID® and a growing development pipeline, including SPD 535. Cash consideration paid on closing amounted to $94.5 million. Further contingent cash consideration of up to $225 million may be payable by Shire in future periods, dependent upon the achievement of certain clinical development, regulatory and net sales milestones.
Acquisition of certain assets of Pervasis Therapeutics, Inc. (“Pervasis”)
- On April 19, 2012 Shire acquired substantially all the assets and certain liabilities of Pervasis. This acquisition adds VASCUGEL® to Shire’s Regenerative Medicine business. VASCUGEL is currently in Phase 2 development for acute vascular repair, focused on improving hemodialysis access for patients with end-stage renal disease.
Acquisition of the US rights to prucalopride (marketed in certain countries in Europe as RESOLOR®) - for the symptomatic treatment of chronic constipation
- On January 10, 2012 Shire announced that it had acquired the rights to develop and market prucalopride (marketed in certain countries in Europe as RESOLOR) in the US in an agreement with Janssen Pharmaceutica N.V., part of the Johnson & Johnson Group.
In addition to the above acquisitions, we have entered into the following collaboration and in-license arrangements in the first quarter of 2012:
- On February 1, 2012 Shire announced it had entered a collaboration and license agreement with Sangamo to develop therapeutics for hemophilia and other monogenic diseases based on Sangamo’s zinc finger DNA-binding protein (“ZFP”) technology.
- On February 3, 2012 Shire exercised its option to acquire a worldwide exclusive license from Heptares Therapeutics Ltd (“Heptares”) to certain novel adenosine A2a antagonist compounds. These compounds are currently in preclinical development and being considered as candidates for central nervous system (“CNS”) disorders.
- On February 29, 2012 Shire entered into a collaboration agreement with arGEN-X B.V. to develop novel therapeutic antibody products for the treatment of rare diseases.
OTHER DEVELOPMENTS
$1,100 million 2.75% Convertible Bonds due 2014 (the “Bonds”)
On April 9, 2012 the deadline for bondholders to elect to exercise the option to redeem their Bonds in May 2012 passed. As no elections from bond holders were received by this date the Bonds will become repayable on their maturity in May 2014.
Legal Proceedings
Civil Investigative Demand for ADDERALL XR®, ADDERALL XR Authorized Generics and VYVANSE
- On April 5, 2012 Shire received a Civil Investigative Demand (CID) from the United States Federal Trade Commission (FTC) requesting that Shire provide it with certain information regarding the supply and reported shortages of ADDERALL XR and its authorized generics and the marketing and sale of ADDERALL XR, its authorized generics and VYVANSE. Shire believes the CID was triggered by reports of product shortages of ADDERALL XR and the authorized generic products in 2011. Shire is cooperating fully with the FTC. Separately, members of the US congress are reviewing industry wide drug shortages which have been well publicized in the US media and Shire has responded to a specific inquiry relating to ADDERALL XR.
Investigation into DERMAGRAFT
- Shire understands that the Department of Justice, including the US Attorney’s Office for the Middle District of Florida, Tampa Division and the US Attorney’s Office for Washington, DC, is conducting civil and criminal investigations into the sales and marketing practices of ABH relating to DERMAGRAFT. Shire is cooperating in these investigations.
ADDITIONAL INFORMATION
The following additional information is included in this press release:
Page Overview of First Quarter 2012 Financial Results 8 Financial Information 12 Non GAAP Reconciliations 18 Safe Harbor Statement 20 Explanation of Non GAAP Measures 21 Trademarks 21
Dial in details for the live conference call for investors 14:00 BST/9:00 EDT on April 26, 2012:
UK dial in: 0800 077 8492 or 0844 335 0351
US dial in: 1 866 8048688 or 1 718 3541175
International dial in: +44 844 335 0351
Password/Conf ID: 338270
Live Webcast: http://www.shire.com/shireplc/en/investors
