3rd Quarter Results
Shire Delivers Product Sales Growth of 6% and Continues to Execute Against Key Priorities in Q3 2018
Delivered product sales of $3.8 billion; growth driven by Immunology, recently-launched products, and international expansion
Received U.S. Food and Drug Administration and Health Canada approval for TAKHZYRO (lanadelumab-flyo) and launched in the U.S.
Accelerated debt pay-down through proceeds from the $2.4 billion sale of the Oncology franchise and strong net operating cash flow
November 1, 2018 – Shire plc (Shire) (LSE: SHP, NASDAQ: SHPG), the leading global biotech company focused on rare diseases, announces unaudited results for the three months ended September 30, 2018.
Flemming Ornskov, M.D., M.P.H., Shire Chief Executive Officer, commented:
“We continue to deliver solid growth and pay down our debt while advancing our late-stage pipeline. Our focus on commercial execution led to 6% growth in product sales to $3.8 billion in the third quarter overcoming foreign exchange headwinds. Our growth was once again driven by our Immunology franchise, recently-launched products, and expansion in international markets. Proceeds from the sale of our Oncology franchise coupled with strong free cash flow allowed us to reduce net debt by $3.9 billion year to date.
“We recently launched TAKHZYRO, the first monoclonal antibody to prevent hereditary angioedema (HAE) attacks, in the U.S. We also gained approval for this innovative treatment in Canada and received a positive opinion from the Committee for Medicinal Products for Human Use (CHMP) recommending marketing authorization in Europe.
“Takeda’s proposed acquisition of Shire remains on track to close in H1 2019, subject to shareholder approval of both companies and additional regulatory approvals. While integration planning is ongoing, our solid performance through the third quarter of 2018 demonstrates our continued focus on delivering for patients and executing against our key priorities.”
|Q3 2018(1)||Reported Growth(1)||Non GAAP CER(1)(2)|
|Product sales||$3,753 million||+6||%||+7||%|
|Total revenues||$3,872 million||+5||%||+6||%|
|Operating income from continuing operations||$956 million||+35||%|
|Non GAAP operating income(2)||$1,475 million||-2||%||-1||%|
|Net income margin(3)(4)||14||%||-1ppc|
|Non GAAP EBITDA margin(2)(3)(4)||42||%||-2ppc|
|Net income||$537 million||-2||%|
|Non GAAP net income(2)||$1,119 million||-3||%|
|Diluted earnings per ADS(5)||$||1.75||-3||%|
|Non GAAP diluted earnings per ADS(2)(5)||$||3.64||-4||%||-4||%|
|Net cash provided by operating activities||$858 million||-19||%|
|Non GAAP free cash flow(2)||$971 million||+8||%|
(1)Results include the Oncology franchise until the date of its sale on August 31, 2018.
(2) The Non GAAP financial measures included within this release are explained on pages 27 – 28, and are reconciled to the most directly comparable financial measures prepared in accordance with U.S. GAAP on pages 19 – 22.
(3) Percentage point change (ppc).
(4) Calculated as a percentage of total revenues.
(5) Diluted weighted average number of ordinary shares of 921.1 million.
Product sales growth
- All franchises demonstrated product sales growth on a Non GAAP constant exchange rate basis, excluding Oncology which was sold during the quarter.
- Encouraging early trajectory of TAKHZYRO since U.S. launch on August 23, 2018 with $51 million in initial launch stocking.
- Growth of recently-launched products of 45%, primarily due to TAKHZYRO, ADYNOVATE, CUVITRU, and XIIDRA.
- Generated Non GAAP diluted earnings per ADS of $3.64, a decrease of 4%, as product sales growth and operating expense discipline were offset by unfavorable foreign exchange, lower gross margins, and unrealized losses on equity investments.
- Reported Non GAAP EBITDA margin of 42%, a slight decline from Q3 2017, primarily due to lower gross margins, as Q3 2017 reflected favorability from the timing of changes in the costs to manufacture certain products, partially offset by ongoing cost discipline and operating expense synergies.
- Proceeds from the sale of our Oncology franchise and strong free cash flow during the year enabled a $3,915 million reduction in Non GAAP net debt since December 31, 2017.
FINANCIAL SUMMARY - THIRD QUARTER 2018 COMPARED TO THIRD QUARTER 2017
- Delivered total revenues of $3,872 million representing growth of 5%.
- Product sales increased 6% to $3,753 million (Q3 2017: $3,534 million), driven by Immunology, up 12%, Neuroscience, up 6%, Genetic Diseases, up 6%, Internal Medicine, up 10%, and Ophthalmics, up 21%.
- Royalties and other revenues decreased 27% to $119 million (Q3 2017: $164 million), primarily due to certain royalty expirations, the reclassification of ADDERALL XR from royalty revenue to product sales, and other changes as required under the new revenue accounting standard.
- Operating income increased 35% to $956 million (Q3 2017: $709 million), due to the gain on the sale of Shire's Oncology franchise and lower integration and acquisition costs, partially offset by increased reorganization costs.
- Non GAAP operating income decreased 2% to $1,475 million (Q3 2017: $1,498 million), primarily due to lower gross margins as Q3 2017 reflected favorability from the timing of changes in the costs to manufacture certain products.
- Non GAAP EBITDA margin was slightly down to 42% (Q3 2017: 44%), primarily due to lower gross margins partially offset by ongoing cost discipline and operating expense synergies.
Earnings per share (EPS)
- Diluted earnings per American Depository Share (ADS) decreased 3% to $1.75 (Q3 2017: $1.81), primarily due to increased reorganization costs and income taxes, offset by the gain on the sale of Shire's Oncology franchise.
- Non GAAP diluted earnings per ADS decreased 4% to $3.64 (Q3 2017: $3.81) as product sales growth and operating expense discipline were offset by unfavorable foreign exchange, lower gross margins, and unrealized losses on equity investments.
- Net cash provided by operating activities decreased 19% to $858 million (Q3 2017: $1,055 million), driven by a $251 million contingent consideration payment to former shareholders of Dyax Corp. due to the approval of TAKHZYRO.
- Non GAAP free cash flow increased 8% to $971 million (Q3 2017: $901 million). Non GAAP free cash flow includes capital expenditures of $203 million (Q3 2017: $174 million) and excludes payments relating to milestone and license arrangements of $316 million (Q3 2017: $20 million).
- Non GAAP net debt as of September 30, 2018 decreased $3,915 million since December 31, 2017, to $15,154 million (December 31, 2017: $19,069 million). A combination of proceeds from the sale of Shire's Oncology franchise, Non GAAP free cash flow, and existing cash balances were utilized to repay debt during the year. Non GAAP net debt represents aggregate long and short term borrowings of $14,980 million, and capital leases of $367 million, partially offset by cash and cash equivalents of $193 million.
Our 2018 guidance, presented in the table below, has been updated to adjust for the sale of our Oncology franchise, which closed on August 31, 2018. Similarly, our projected 2020 revenue target has been updated to $16.5 - $17.5 billion, reflecting the removal of $0.5 billion of Oncology sales in our original projection. We continue to expect to achieve mid-forties Non GAAP EBITDA margin by 2020, which remains unchanged after considering the impact of the sale of our Oncology franchise.
Our Non GAAP diluted earnings per ADS outlook assumes a weighted average number of 917 million fully diluted ordinary shares outstanding for 2018.
Our U.S. GAAP diluted earnings per ADS outlook reflects anticipated amortization, integration, acquisition, and reorganization costs, as well as the gain on sale of our Oncology franchise and the impact from debt repurchase.
Risks associated with this outlook include the potential uncertainty resulting from the announcement by Takeda Pharmaceutical Company Limited (Takeda) on May 8, 2018 of a recommended offer for Shire under the U.K. Takeover Code.
|Full Year 2018||U.S. GAAP Outlook||Non GAAP Outlook(1)|
|Total revenue(2)||$15.3 - $15.8 billion||$15.3 - $15.8 billion|
|Diluted earnings per ADS(3)||$7.17 - $7.77||$14.77 - $15.37|
(1) For a list of items excluded from Non GAAP Outlook, refer to pages 27 - 28 of this release.
(2) Management is providing guidance for total revenue. Total revenue is comprised of total product sales and royalties & other revenues. Pursuant to a change in U.S. GAAP related to accounting for revenue, certain revenue formerly classified as royalties are now recorded as product sales.
(3) See page 22 for a reconciliation between U.S. GAAP diluted earnings per ADS and Non GAAP diluted earnings per ADS.
- The acquisition of Shire by Takeda is expected to close in H1 2019, subject to receipt of additional regulatory clearances and approval by the shareholders of both companies. Takeda has already received clearances from regulatory agencies in the U.S., Japan, China, and other countries and is in discussions with the European Commission as part of its Phase 1 review of the proposed acquisition.
Sale of Oncology franchise
- On August 31, 2018, Shire announced it had completed the sale of its Oncology franchise to Servier S.A.S. (Servier) for $2.4 billion. The franchise included the global rights to ONCASPAR and ex-U.S. and ex-Taiwan rights to ONIVYDE, as well as Oncology pipeline assets.
Acquisition of sanaplasma AG
- On September 6, 2018, Shire announced the acquisition of sanaplasma AG, a source plasma collection company headquartered in Switzerland. Sanaplasma AG adds 14 new centers in the Czech Republic and Hungary to Shire’s European-based plasma collection network.
- On September 11, 2018, Shire completed a $2.3 billion cash tender offer to repurchase certain of its outstanding senior notes. The tender offer was funded from the proceeds of the sale of its Oncology franchise.
TAKHZYRO, a first-of-its-kind monoclonal antibody (mAb) preventive treatment for HAE
• On August 23, 2018, Shire announced that the U.S. Food and Drug Administration (FDA) had approved TAKHZYRO injection, for prophylaxis to prevent attacks of HAE in patients 12 years of age and older.
• On September 20, 2018, Shire announced that Health Canada had authorized TAKHZYRO for routine prevention of attacks of HAE in patients 12 years of age and older.
• On October 19, 2018, Shire announced that the CHMP of the European Medicines Agency (EMA) had issued a positive opinion recommending the granting of marketing authorization in the European Union (EU) for lanadelumab for the prevention of HAE attacks.
FIRAZYR for the treatment of HAE attacks in Japan
• On September 21, 2018, Shire announced that the Ministry of Health, Labour and Welfare in Japan had granted manufacturing and marketing authorization for FIRAZYR, for the acute treatment of HAE attacks in adult patients with HAE.
VEYVONDI, for adults with von Willebrand disease (VWD)
• On September 12, 2018, Shire announced that the European Commission had granted Marketing Authorization for VEYVONDI, for the treatment of bleeding events and treatment/prevention of surgical bleeding in adults (age 18 and older) with VWD when desmopressin treatment alone is ineffective or not indicated.
INTUNIV, for the treatment of attention deficit hyperactivity disorder (ADHD) in adults
• On August 13, 2018, Shire announced that its partner in Japan, Shionogi & Co., Ltd had submitted a New Drug Application (NDA) for the manufacture and marketing in Japan of INTUNIV.
Prucalopride (SHP555) for the treatment of chronic idiopathic constipation (CIC)
- On October 18, 2018, Shire announced that the FDA Gastrointestinal Drugs Advisory Committee voted unanimously that the risk-benefit profile of prucalopride supports the approval of this NDA, which has a Prescription Drug User Fee Act (PDUFA) date of December 21, 2018.
- On October 25, 2018, Shire announced it had filed a second submission to the FDA for approval to manufacture albumin therapy at its new plasma manufacturing facility near Covington, Georgia.
The following additional information is included in this press release:
|Overview of Third Quarter 2018 Financial Results||7|
|Non GAAP Reconciliations||19|
|Notes to Editors||23|
|Non GAAP Measures||27|
For further information please contact:
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Dial in details for the live conference call for investors at 14:00 GMT / 10:00 EDT on November 1, 2018:
|U.K. dial in:||0800 358 9473 or +44 333 300 0804|
|U.S. dial in:||1 855 857 0686 or 1 631 913 1422|
|International Access Numbers:||Click here|
|Password/Conf ID:||28705371 #|
|Live Webcast:||Click here|
The quarterly earnings presentation will be available today at 13:00 GMT / 9:00 EDT on:
OVERVIEW OF THIRD QUARTER 2018 FINANCIAL RESULTS COMPARED TO THIRD QUARTER 2017
- Product sales
Product sales increased 6% to $3,753 million (Q3 2017: $3,534 million), driven by Immunology, up 12%, Neuroscience, up 6%, Genetic Diseases, up 6%, Internal Medicine, up 10%, and Ophthalmics, up 21%. Product sales include TAKHZYRO, which was launched on August 23, 2018, and results for Oncology through August 31, 2018, the date the sale of the franchise was completed.
|(in millions)||Total Sales|
Year on year growth
|Product sales by franchise||U.S. Sales||International Sales||Total Sales||Reported||Non GAAP CER|
By: Nasdaq / GlobenewsWire - 21 Apr 2019Return to news
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