Global Insight Perspective | |
Significance | Shire has posted a 37% y/y increase in product sales to US$632 million, fuelled by the encouraging market uptake of new products and the steady revenues of older products. Although operating expenses grew across the board, the surge in revenues helped the company record a 14% increase in net income to US$128.6 million. |
Implications | New products brought in US$216 million in revenues, accounting for 34% of total first-quarter revenues. ADHD treatment Adderall still generates the lion's share of the company's revenues, while hopeful next-generation therapy Vyvanse continues its steady market penetration. |
Outlook | The focus remains more than ever on the ability of Vyvanse to fill the revenue gap when Adderall falls off-patent next year. After a slow start to the year for Vyvanse, sales should benefit from its recent approval for use in adults. In the meantime, products launched last year should start to have a significant impact on Shire's top line. |
U.K. pharmaceutical company Shire plc has started the year on a strong note, with revenues up by 33% year-on-year (y/y) to US$702 million in the first quarter. Pharmaceutical sales accounted for US$631.7 million of total revenues, a 37% y/y increase. Meanwhile, the cost of sales went up by 38% y/y to US$90.3 million and selling, general, and administrative (SG&A) expenses rose by 37% y/y to US$293 billion. SG&A costs were driven by an increase in advertising, recruitment of additional sales representatives, and a US$5.6-million charge associated with the setting up of a new holding company. Research and development (R&D) expenditure rose by 51% y/y to US$119.1 million, thanks to late-phase clinical trials and the acquisition of rights to scar treatment Juvista (human TGF-beta3), Fabry's Disease therapy Amigal (migalastat hydrochloride), and gaucher's disease treatment Plicera (isofagomine tartrate) (see United Kingdom: 20 June 2007: Shire Snaps Up Scarring Drug Juvista from Renovo in Deal Worth up to US$825 mil. and United Kingdom: 9 November 2007: Shire Announces In-Licensing Deal With Amicus Therapeutics, Secures Pipeline Expansion). Overall, the company's operating income, as calculated by Global Insight, rose by 17% y/y to US$200 million and the operating margin stood at 28.5%, a 3.8-percentage-point (pp) decrease from the previous year.
Shire plc: Q1 2008 Financial Results (US$ mil.) | ||
Q1 2008 | % Change, Y/Y* (Actual) | |
Net Sales | 702 | 33 |
Pharmaceutical Sales | 631.7 | 37 |
Other Revenues | 70.5 | 6 |
Cost of Sales | 90.3 | 38 |
Research and Development | 119.1 | 51 |
Selling, General and Administrative | 293.0 | 37 |
Other Expenses | 44.4 | 54 |
Group Operating Income** | 200 | 17 |
R&D Expenses as Percentage of Total sales | 17.0 | 2 pp higher |
Operating Margin*** | 28.5 | 3.8 pp lower |
Group Net Profit | 128.6 | 14 |
* Growth calculated on an as-reported basis. | ||
Pharmaceutical sales benefited from new product launches and from price increases in the United States. Pharmaceutical revenues were driven by attention deficit hyperactivity (ADHD) treatment Adderall XR (mixed salts of a single-entity amphetamine), with sales rising by 5% y/y to US$261.5 million. The rise in Adderall sales was due to a 6% expansion of the U.S. ADHD market and an increase in the price of the medicine as the number of U.S. prescriptions for the drug actually fell by 5% in the first quarter. Adderall's share of the U.S. ADHD market fell by 2.6 pp in the first quarter of 2008 to 23.7% following ADHD drug Vyvanse's (lisdexamfetamine dimesylate) U.S. market entry in July 2007. Vyvanse's sales reached US$54.5 million in the first quarter of the year and the drug now enjoys a 6.1% share of the U.S. ADHD market. The launch of Vyvanse also negatively affected the volume of U.S. prescriptions for ADHD drug Daytrana (methylphenidate transdermal system), which dropped by 5%. Nevertheless, Daytrana saw revenues increase by 71% y/y to US$20.3 million, helped by a price increase and lower sales deductions. Newly launched ulcerative colitis medicine Lialda (mesalamine) generated revenues of US$27.2 million, eroding ulcerative colitis treatment Pentasa's (mesalamine) market share. Hyperphosphatemia treatment Fosrenol (lanthanum carbonate) also enjoyed strong growth in the first quarter of the year with sales up 59% y/y to US$36.2 million, despite a 0.5 pp drop in the drug's U.S. market share to 8.2%. Hunter syndrome treatment Elaprase (idursulfase) saw strong market uptake with a 169% y/y rise in sales to US$71.5 million.
Shire plc: Q1 2008 Global Sales of Leading Products (US$ mil.) | |||
Sales (US$ mil.) | % Change, Y/Y | % Total Revenue | |
Speciality Pharmaceuticals | |||
Adderall XR | 261.5 | 5 | 37 |
Vyvanse | 54.4 | - | 8 |
Daytrana | 20.3 | 71 | 3 |
Pentasa | 44.2 | 1 | 6 |
Lialda | 27.2 | - | 4 |
Fosrenol | 36.2 | 59 | 5 |
Dynepo | 6.7 | - | 1 |
Calcichew | 13.6 | 12 | 2 |
Carbatrol | 17.9 | 15 | 3 |
Reminyl | 8.3 | 19 | 1 |
Xagrid | 18.7 | 29 | 3 |
Human Genetic Therapies | |||
Repragal | 42.5 | 31 | 6 |
Elaprase | 71.5 | 169 | 10 |
Source: Shire plc. | |||
Outlook and Implications
Shire plc: Guidance | |
2008 (US$ mil.) | |
Revenues | Mid-to-high teens growth on US$2.4 billion 2007 revenues |
Vyvanse Sales (US$ mil.) | Lower end of 350-400 |
R&D Spend | 465-490 |
SG&A Expenses | 1,125-1,165 |
Business Expansion Costs | 320-350 |
Source: Shire plc | |
Shire has reiterated its guidance for 2008 and still expects revenue growth to be in the mid-to-high teens. With 2007 revenues standing at US$2.436 billion, this roughly translates into estimated revenues of US$2.8-2.9 billion for 2008. The relatively modest performance of Vyvanse in the first quarter of the year has prompted the company to revise its sales guidance for the drug to the lower end of its previous estimation, namely around the US$350-million mark. On the other hand, Shire has revised R&D and SG&A spend upwards, which should reduce its bottom line in 2008. This could be counterbalanced by the company's recent decision to create a new holding company and to become a Republic of Ireland tax resident.
Shire remains upbeat despite the slight disappointment of Vyvanse's sales. Shire's blockbuster Adderall, which accounts for 37% of the company's revenues, falls off-patent at the beginning of 2009 and attention has been focused on Vyvanse's ability to fill the gap in revenues that will result from generic competition on Adderall. Sales of Vyvanse will need to pick up if the company is to meet its guidance. Nevertheless, the drug is carrying on its steady market penetration as Shire has revealed that it enjoyed a 6.9% market share by mid-April. This trend is likely to be boosted by the recent FDA approval for use of Vyvanse in adults (see United Kingdom: 24 April 2008: Shire Gets FDA Green Light for ADHD Drug Vyvanse in Adults, Acquires MLD Investigative Orphan Drug). Sales should also benefit from Shire's involvement in human genetic therapies, as well as from the increased promotion of Lialda in the United States and its expected market launch in Europe (see United States - Japan - United Kingdom: 27 March 2008:TAP Enters Lialda Co-Promotion Agreement with Shire).