DUBLIN, April 29, 2016 /PRNewswire/ -- Shire plc (“Shire”) (LSE: SHP, NASDAQ: SHPG) announces unaudited results for the three months ended March 31, 2016.
Financial Highlights | Q1 2016 | Growth(1) | Non |
Product sales | $1,627 million | +14% | +16% |
Total revenues | $1,709 million | +15% | +17% |
Non GAAP operating income | $797 million | +17% | +16% |
US GAAP operating income from continuing operations | $544 million | +15% | |
Non GAAP EBITDA margin (excluding royalties & other revenues)(3) | 46% | 0pps(4) | |
US GAAP net income margin(5) | 25% | -3pps | |
Non GAAP net income | $632 million | +13% | |
US GAAP net income | $419 million | +2% | |
Non GAAP diluted earnings per ADS | $3.19 | +12% | +12% |
US GAAP diluted earnings per ADS | $2.12 | +2% | |
Non GAAP cash generation | $492 million | -5% | |
Non GAAP free cash flow | $338 million | -38% | |
US GAAP net cash provided by operating activities | $390 million | -31% | |
(1) Percentages compare to equivalent 2015 period.
(2) On a Constant Exchange Rate (“CER”) basis, which is a Non GAAP measure.
(3) Non GAAP earnings before interest, tax, depreciation and amortization (“EBITDA”) as a percentage of product sales, excluding royalties and other revenues.
(4) Percentage point change (“pps”).
(5) US GAAP net income as a percentage of total revenues.
The Non GAAP financial measures included within this release are explained on pages 25 - 26, and are reconciled to the most directly comparable financial measures prepared in accordance with US GAAP on pages 19 - 22.
First Quarter & Recent Highlights:
- Product sales growth of 14% (16% on a Non GAAP CER basis) to $1.6 billion, driven by VYVANSE®, LIALDA®/MEZAVANT®, CINRYZE®, FIRAZYR®, GATTEX®/REVESTIVE® and NATPARA®.
- Rare disease products acquired from NPS Pharmaceuticals, Inc. (“NPS”) continued to perform well with GATTEX/REVESTIVE sales up 247% (up 97% on a pro-forma basis(1)) to $52 million, and NATPARA sales of $16 million.
- Free cash flow remained strong, impacted primarily by net payments and receipts of taxes between Q1 2015 and Q1 2016.
- Lifitegrast New Drug Application (“NDA”) accepted by the US Food and Drug Administration (“FDA”), with Prescription Drug User Fee Act (“PDUFA”) date set for July 22, 2016.
- Pipeline progression with positive topline results from SHP465 safety and efficacy study in children and adolescents with Attention Deficit Hyperactivity Disorder (“ADHD”).
- Completed acquisition of Dyax Corp. (“Dyax”) and enrollment on track for SHP643 (formerly DX2930) Phase 3 studies for the treatment of Hereditary Angioedema (“HAE”).
- Patent upheld for LIALDA (mesalamine) delayed release tablets by U.S. District Court for the Southern District of Florida; the case has been appealed.
- Baxalta Incorporated (“Baxalta”) acquisition on track with integration progressing well; shareholder votes set for May 27 and closing anticipated in early June.
(1) Sales prior to February 21, 2015 were recorded by NPS.
Flemming Ornskov, M.D. Chief Executive Officer, commented:
“Shire is off to a strong start in 2016, delivering double-digit product sales and Non GAAP earnings per ADS growth, and advancing our innovative pipeline. We were pleased to report positive Phase 3 topline results for SHP465 in children and adolescents with ADHD, a therapeutic area with significant need for additional treatment options. We are also looking forward to hearing from the FDA by late July regarding lifitegrast, a potential new treatment for dry eye disease.
“While we maintain our sharp focus on Shire’s business, we closed the acquisition of Dyax during the quarter and we are making excellent progress with the Baxalta integration planning. Our shareholder vote is scheduled for May 27 and the closing is anticipated to follow in early June. We look forward to officially welcoming our Baxalta colleagues to Shire, and creating a global biotechnology leader focused on rare diseases and other highly specialized conditions.”
FINANCIAL SUMMARY
First Quarter 2016 Unaudited Results
- Total product sales were up 14% on Q1 2015 (up 16% on a Non GAAP CER basis) at $1,627 million (Q1 2015: $1,423 million), with strong revenue growth from VYVANSE (up 22% to $509 million), LIALDA/MEZAVANT (up 13% to $168 million), CINRYZE (up 11% to $164 million), FIRAZYR (up 39% to $128 million) and GATTEX/REVESTIVE (up 97% on a pro-forma basis(1) to $52 million).
- Royalties and other revenues were up 26% to $82 million, as Q1 2016 benefited from a full quarter of SENSIPAR® royalties acquired with NPS.
On a Non GAAP basis:
Operating income increased 17% to $797 million (Q1 2015: $683 million) as combined Research & Development expenditure (“R&D”) and Selling, General and Administrative expenditure (“SG&A”) (up 14%) grew at a slower rate than total revenues. R&D increased by 14% compared to Q1 2015 due to the inclusion of Dyax operating costs and continued investment in the existing pipeline. SG&A increased by 14%, primarily due to the inclusion of Dyax operating costs and increased marketing spend for the anticipated lifitegrast launch (which remains subject to regulatory approval).
Non GAAP EBITDA margin (excluding royalties and other revenues) was 46%, consistent with the margin achieved in Q1 2015.
On a US GAAP basis (from continuing operations):
Operating income was up 15% to $544 million (Q1 2015: $475 million). US GAAP operating income growth in Q1 2016 was lower than Non GAAP operating income due to the inclusion of higher amortization expense related to the intangible assets acquired with Dyax and NPS, and higher acquisition costs, primarily related to the announced combination with Baxalta.
Non GAAP diluted earnings per American Depositary Share (“ADS”) increased 12% to $3.19 (Q1 2015: $2.84), primarily due to higher Non GAAP operating income, partially offset by higher interest expense.
On a US GAAP basis diluted earnings per ADS increased 2% to $2.12 (Q1 2015: $2.08), primarily due to higher US GAAP operating income, partially offset by an increase in interest expense and higher effective tax rate on US GAAP income.
Cash generation, a Non GAAP measure, was down 5% to $492 million compared to $516 million in Q1 2015, primarily due to higher integration and acquisition costs for Dyax and Baxalta and the timing of payments of accounts payable, offset by strong cash receipts from higher sales.
Free cash flow, a Non GAAP measure, was down 38% to $338 million (Q1 2015: $542 million), primarily due to lower cash generation and higher payments for taxes in Q1 2016 compared to the benefit of a tax repayment in Q1 2015, an increase in capital expenditures, and higher interest payments.
On a US GAAP basis, net cash provided by operating activities was down 31% to $390 million (Q1 2015: $562 million), primarily due to lower cash generation and higher payments for taxes in Q1 2016 compared to the benefit of a tax repayment in Q1 2015, and higher interest payments.
Net debt, a Non GAAP measure, at March 31, 2016 was $6,809 million (December 31, 2015: $1,459 million) reflecting the use of cash and cash equivalents and borrowings incurred to fund the acquisition of Dyax.
(1) Sales prior to February 21, 2015 were recorded by NPS.
OUTLOOK
We are off to a strong start in 2016 and reiterate our previously announced 2016 guidance. The guidance provided excludes the effect of the anticipated combination with Baxalta which is expected to close in June.
We continue to expect product sales to increase by 11% to 14% on a reported basis in 2016, and increase approximately 13% to 17% on a Non GAAP CER basis.
Royalties and other revenues are expected to increase by 5% to 10% in 2016, primarily from the benefit of a full year of the SENSIPAR royalty stream acquired as part of the NPS transaction and royalties acquired as part of the Dyax transaction.
Our Non GAAP gross margin is expected to be in line with 2015 (2015: 85.5%).
We expect our combined Non GAAP R&D and SG&A costs to increase in the 12% to 14% range as we absorb the operating costs associated with the Dyax transaction, make commercial investments to support our anticipated launch of lifitegrast in the second half of this year and progress our pipeline, particularly the programs in late-stage clinical development.
As a result of funding the Dyax transaction with a $5.6 billion term loan bank facility, we expect our Non GAAP net interest and other expense to increase by approximately 1.5 to 2 times 2015 levels (2015: $49 million).
For 2016, we expect our effective tax rate on Non GAAP income to be in the range of 16% to 18%.
For Non GAAP diluted earnings per ADS, we expect 2016 growth in the 7% to 10% range (9% to 13% on a Non GAAP CER basis).
FIRST QUARTER 2016 AND RECENT PRODUCT AND PIPELINE DEVELOPMENTS
Products
BUCCOLAM® for the treatment of prolonged, acute, and convulsive seizures in infants, toddlers, children and adolescents
- On February 18, 2016, the FDA granted orphan designation to BUCCOLAM for the treatment of status epilepticus. Further, the FDA advised that they consider status epilepticus a unique indication compared to repetitive seizures.
VYVANSE for the treatment of ADHD and Binge Eating Disorder (“BED”) in adults
- An NDA has been submitted to the FDA for VYVANSE (lisdexamfetamine dimesylate) as a chewable tablet formulation.
- A marketing application for VYVANSE BED in adults has been filed in Australia.
CINRYZE for the prophylactic treatment of HAE
- CINRYZE was launched in Canada in February 2016.
Pipeline
SHP465 for the treatment of ADHD
- On April 4, 2016, Shire announced positive topline results of SHP465 (triple-bead mixed amphetamine salts), an investigational oral stimulant medication being evaluated as a potential treatment for ADHD. In a safety and efficacy study in children and adolescents aged 6 to 17 years with ADHD, the primary efficacy analysis demonstrated that SHP465 was superior to placebo on the change from baseline in ADHD-RS-IV (“ADHD rating scale”). SHP465 was also superior to placebo in the key secondary efficacy analysis on the clinical global impression improvement scale (“CGI-I”). Adverse events were generally mild-to-moderate in severity and similar to those observed in previous SHP465 studies and with other amphetamine compounds. The completion of this study addresses an FDA requirement to evaluate the safety and efficacy of SHP465 in children and adolescents prior to filing a Class 2 resubmission for FDA approval.
- In April 2016, Shire successfully completed a required pharmacokinetics (“PK”) study of SHP465. The PK properties of SHP465 were well characterized in children and adolescents aged 6 to 17 years with ADHD and confirmed the exposure necessary for once-daily oral dosing.
FIRAZYR for the treatment of HAE in Japan
- In April 2016, Shire received preliminary results from a Phase 3 trial to evaluate the efficacy and safety of FIRAZYR for the acute treatment of angioedema attacks in Japanese patients with HAE. The data demonstrated that the efficacy and safety profile was similar between Japanese patients and those patients who participated in Shire’s previously-conducted Phase 3 program.
SHP625 for the treatment of cholestatic liver disease
- In April 2016, Shire received preliminary results from CAMEO, a Phase 2, open-label, non-comparative, 14 week study of SHP625 in adult patients with primary sclerosing cholangitis. The primary objective of the study was to evaluate the safety and tolerability of SHP625 and these safety and tolerability results were consistent with previous SHP625 studies. There were also significant reductions from baseline in serum bile acids and pruritus by ItchRO score, the magnitude of the effect being consistent with what has been observed in SHP625 studies of other patient populations. However, there was no significant reduction from baseline in serum alkaline phosphatase or other liver parameters. Shire continues to analyze the totality of the SHP625 data to determine an appropriate path forward.
OTHER FIRST QUARTER 2016 DEVELOPMENTS
Proposed Combination with Baxalta
- On April 18, 2016 Shire announced that the UK Listing Authority has approved a Class 1 circular and a prospectus in relation to the proposed combination with Baxalta dated April 18, 2016. The Shire and Baxalta shareholder meetings are scheduled for May 27, 2016, with the closing to occur on or around June 3, 2016, subject to regulatory and Shire and Baxalta shareholder approvals and other customary closing conditions.
- Shire has initiated integration planning with Baxalta. Shire and Baxalta have hosted joint integration summits, and had a series of collaborative and productive interactions. The executive leadership has been selected and Shire has defined the organizational structure of the combined company. Integration planning is on track and is ahead of other deals of this size, according to a 2016 McKinsey analysis from Deal Logic for transactions of over $5 billion in value (January 2009 to April 2015).
Acquisition of Dyax
On January 22, 2016 Shire completed its acquisition of Dyax for upfront cash consideration of $5.9 billion. With the acquisition, Shire received the global rights to SHP643 (formerly known as DX2930), a Phase 3, fully humanized monoclonal antibody targeting plasma kallikrein with proof-of-concept Phase 1B efficacy data. These data demonstrate a greater than 90% reduction in HAE attacks compared to placebo in the 300mg/400mg arms in patients with more than 2 attacks in the 3 months prior to study entry. SHP643 has received Fast Track, Breakthrough Therapy, and Orphan Drug designations by the FDA and has also received Orphan Drug status in the EU.
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