Shire confirms strong product growth in first half

Just a week after it unveiled a sparkling set of second-quarter results, Shire posted interim numbers that showed total reported product sales up 36% to $3.9bn in the six months to 30 June, thanks to robust sales across all legacy businesses and $559m of product sales from almost one month from the newly acquired Baxalta.

Product sales improved at double-digit rates across all of Shire’s legacy business, with genetic diseases up 14% to $1.3bn, neuroscience up 19% to $1.3bn, and internal medicine up 18% to $0.8bn.

Earnings before interest, tax, depreciation and amortisation rose 35% on the previous year to $1.9bn.

Chief executive Flemming Ornskov said the closing of the Baxalta acquisition at the start of June was the "capstone" of the first half of the year, but it would be remiss to overlook the acquisition of Dyax in January, which brought on board some exciting pre-revenue drugs.

Ornskov highlighted Dyax's Phase-III monoclonal antibody, dubbed SHP643, which has shown a strong reduction in Hereditary Angioedema (HAE) attacks compared to placebo and that, if it gains global marketing approval for the prevention of Type 1 and Type 2 HAE, Shire estimates could generate annual global sales of up to $2bn.

“With the remarkable achievements of the first half of 2016, Shire is well positioned to finish the entire year strong," Ornskov said.

"Baxalta integration activities continue to progress very well and, with our new operating structure in place, we have raised our operating synergy expectation by 40% to at least $700m in year three post close.”

Broker Liberum forecast Shire will hit the top of its full-year earnings per share guidance with just $60m of synergies to the bottom line in the second half, out of the $300m expected for the first 12 months post the 3 June deal, also noting that every additional $50m implies another 1% to EPS. "Pharma companies often beat on earnings through synergy/cost savings programmes and we don't think Shire will be an exception."

Noting that some investors are likely to worried about the potential for negative newsflow from the Lialda litigation that is due to be resolved in the third or fourth quarter, Liberum said: "We have reviewed the relevant cases in some detail and come to the conclusion that (i) Shire is the most likely winner in the near term judgement (vs Cadila) based principally on a
comparison of the issues with a prior case in which Shire prevailed, (ii) even if it loses, Shire is unlikely to face a Cadila generic due to potential issues with the latter's filing."

Shares in Shire moved lower on Monday, however, with some speculation that the sector was being hit by a failure to a key immuno-oncology trial for US-based Bristol-Myers on Friday.