Shire slips on third-quarter earnings report

Third-quarter revenues and earnings from Shire were just shy of forecasts, while the drug developer did not raise guidance as some had hoped, due to higher than expected costs from June's acquisition of Baxalta.

Costs related to the licensing of its SHP647 drug for ulcerative colitis and Crohn's disease are also expected to be higher, together with increased costs from the closure of a Los Angeles manufacturing facility.

For the full year Shire said diluted earnings per American depositary share would be $12.70-$13.10 on a non-GAAP basis, from combined costs of $4.1-4.4bn and gross margins of 77-79%.

For the three months to 30 September, the FTSE 100 group reported earnings per ADS down 2% to $3.17, or down 3% at constant exchange rates on a non-GAAP basis, which was in line with one reading of the consensus but fell short of another at $3.28.

Revenues for the first full quarter following the acquisition of Baxalta, were more than doubled to $3.45bn, which was just shy of the consensus estimate of $3.57bn despite what was described as a "very strong" launch for its Xiidra dry-eye treatment, formerly known as lifitegrast.

Excluding Baxalta, product sales increased 12%, with all legacy Shire franchises growing during the quarter, led by neuroscience and internal medicine, both up 15%. Following the launch of Xiidra in August, the ophthalmology franchise contributed sales of $14m.

“During the third quarter, we made rapid progress integrating our new company while delivering record quarterly product sales growth and remaining on track to meet our full year Non GAAP guidance," said chief executive Flemming Ornskov.

"The launch of Xiidra is off to a very strong start, and we are using this momentum to build a leadership position in pharmaceutical ophthalmics."

He said the "robust" drug pipeline was continuing to advance, with the resubmission of SHP465 for the treatment of ADHD on track to be made in the fourth quarter and a Phase 3 study for SHP643 in prophylaxis of hereditary angioedema fully enrolled with results expected in the first half of 2017.

Vyvanse for treatment of moderate to severe binge eating disorder in adults in on track for launch in Canada in Q4, with a supplementary new drug application accepted with the US regulator earlier this month.

"The changes we are applying to the legacy Baxalta business are similar to the One Shire initiative we undertook in 2013-2014, which set off a period of strong growth and profitability. I am highly confident about Shire’s future growth prospects.”

Analysts at RBC Capital Markets said Shire's legacy franchises were in line to better, while Baxalta revenues came up short largely due to Hematology weakness, which Shire noted was impacted due to the timing of large orders.