19 Feb 2010
Excellent results in a transformational year for Shire; core product sales up 25%
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February 19, 2010 – Shire plc (LSE: SHP, NASDAQ: SHPGY) the global specialty biopharmaceutical company, announces results for the year to December 31, 2009.
|Full Year 2009(1)||Q4 2009(1)|
Product sales from core products(2)
Non GAAP operating income
US GAAP operating income
Non GAAP diluted earnings per ADS
US GAAP diluted earnings per ADS
These results include the effect of a change in best estimate of the Medicaid rebate liability for ADDERALL XR, which increased fourth quarter product sales by $98 million, and fourth quarter Non GAAP diluted earnings per American Depositary Share (“ADS”) by 32 cents. Product sales excluding this change in best estimate would have been $2,596 million for the year to December 31, 2009 and $679 million for the fourth quarter. Non GAAP diluted earnings per ADS excluding this change in best estimate would have been $3.17 for the year to December 31, 2009 and 79 cents for the fourth quarter. For further details see pages 9 to 10 and 26.
(1) Percentages compare to equivalent 2008 periods.
(2) Core products represent Shire’s products excluding ADDERALL XR.
Angus Russell, Chief Executive Officer, commented:
“In this challenging and transformational year for Shire, I believe these excellent results reflect the success of our focused strategy and business model.
Strong fourth quarter sales growth of 36% from our core product portfolio, supported by our increasing international reach, has contributed significantly to our full year Non GAAP diluted earnings per ADS of $3.49. Our recent decision to lower our best estimate of the Medicaid sales rebates for ADDERALL XR contributed 32 cents to these earnings, which was not previously anticipated in our guidance framework.
Our growth prospects remain excellent and our core product portfolio currently has robust exclusivity protection. We have launched INTUNIV successfully in the US, we plan to launch velaglucerase alfa (VPRIV) imminently, and there is also an opportunity for REPLAGAL to enter the US market. We have already seen encouraging signs for the future success of these three products. REPLAGAL has increased its share in ex-US markets and we expect this momentum to increase.
VYVANSE, our leading ADHD treatment with a current monthly US ADHD market share of 13.6%, continues to grow and build strong brand recognition in the US and has recently been launched in Canada. ADDERALL XR continues to generate value from both product sales and a considerable royalty stream.
We have also demonstrated a pro-active approach to cost management in 2009 as promised, and have the opportunity to leverage our existing infrastructure to deliver expanding margins in the future. We enter 2010 with a strong balance sheet and excellent cash generation. This will allow us to continue to expand our international presence and consider potential acquisitions and in-licensing opportunities that fit our strategy.
We look forward to growing revenues and earnings in 2010 and re-iterate our aspirational target of mid-teen revenue growth on average between 2009 and 2015.”
Full Year 2009 Unaudited Results
Diluted earnings per ADS
These results include the effect of a change in best estimate of the Medicaid rebate liability for ADDERALL XR, which increased product sales by $98 million, and Non GAAP diluted earnings per ADS by 32 cents. Revenues and Non GAAP diluted earnings per ADS excluding this change in best estimate for the year to December 31, 2009 would have been $2,910 million and $3.17 respectively. For further details see pages 9-10 and 26.
The Non GAAP financial measures included in the tables above are explained on pages 27 and 28, and are reconciled to the most directly comparable financial measures prepared in accordance with US GAAP on pages 22 to 23 and 26 (full year) and pages 24 to 26 (Q4).
Product sales from core products were up 25% to $2,067 million (2008: $1,653 million). On a constant exchange rate (“CER”) basis, which is a Non GAAP measure, core product sales were up 28% driven by continued strong growth from:
VYVANSE® (up 58% to $505 million, CER: up 58%);
LIALDA® / MEZAVANT® (up 68% to $236 million, CER: up 69%);
ELAPRASE® (up 16% to $353 million, CER: up 20%); and
REPLAGAL® (up 10% to $194 million, CER: up 16%).
Product sales including ADDERALL XR® were down 2% to $2,694 million (CER: 0%), due to the expected decline in ADDERALL XR product sales ($627 million, down 43% on 2008) following the launch of authorized generic versions by Teva Pharmaceuticals USA Inc. (“Teva”) in April 2009 and Impax Laboratories Inc. (“Impax”) in October 2009, with the strong performance from Shire’s core products (up 25%) offsetting the decrease in ADDERALL XR product sales.
Revenues for the year to December 31, 2009 decreased marginally to $3,008 million (2008: $3,022 million), as the 25% increase in core product sales and royalty income received on Teva and Impax’s sales of authorized generic ADDERALL XR offset the decline in ADDERALL XR product sales.
Non GAAP operating income decreased by 7%, or $69 million, to $889 million as a result of the marginally lower revenues and Shire’s increased investment in research and development in 2009, which were partially offset by lower selling, general and administrative costs from Shire’s continued focus on cost management. On a US GAAP basis, operating income in 2009 was $620 million, compared to $412 million in 2008, an increase of 51% (2008 included in-process R&D (“IPR&D”) charges of $263 million related to the acquisitions of Jerini AG (“Jerini”) and METAZYM).
Non GAAP diluted earnings per ADS were down 10% to $3.49 (2008: $3.86). On a US GAAP basis diluted earnings per ADS increased to $2.69 compared to $0.86 in 2008, up 214% (earnings in 2008 were impacted by interest charges on the Transkaryotic Therapies Inc. (“TKT”) appraisal rights settlement, IPR&D and other impairment charges, all of which reduced US GAAP diluted earnings per ADS in 2008).
Cash generation, which is a Non GAAP measure, in 2009 was $921 million (2008: $1,231 million), a decrease of $310 million. Cash generation was lower in 2009 due to lower net sales receipts following the genericization of ADDERALL XR. Cash generation in 2008 also included cash inflows from forward exchange contracts which were not repeated in 2009.
We enter 2010 with good momentum driven by the growth of our core product portfolio. 2010 will also benefit from the change in best estimate for ADDERALL XR rebates implemented in the fourth quarter of 2009 against a background of further erosion of the brand and the impact of adverse business mix trends.
In the first quarter of 2010 we expect our total revenues and Non GAAP diluted earnings per ADS to be lower than the same period in 2009, which was the last quarter before ADDERALL XR faced generic competition. For the balance of the year Shire expects to generate both total revenue growth and Non GAAP diluted earnings per ADS growth compared to 2009.
During 2010 we expect to see gross margins as a percentage of product sales at a similar level to 2009. We will further increase our focused investment in R&D and targeted investment will increase SG&A year on year. We expect a Non GAAP effective tax rate in 2010 at a similar level to 2009.
We look forward to growing both total revenues and reported Non GAAP diluted earnings per ADS in the full year 2010 compared to the excellent 2009 Non GAAP results and re-iterate our aspirational target of mid-teen revenue growth on average between 2009 and 2015.
Subject to obtaining the relevant regulatory/governmental approvals, product launches in 2010 will include:
VPRIV™ for the treatment of Gaucher disease in the US and EU;
REPLAGAL for the treatment of Fabry disease in the US;
MEZAVANT for the treatment of ulcerative colitis in certain EU and RoW countries;
FIRAZYR® for the symptomatic treatment of acute attacks of hereditary angiodema in certain European and Latin American countries;
EQUASYM® for the treatment of ADHD in certain EU countries; and
VYVANSE for the treatment of ADHD in Canada.
For the full press release, please download and view the file below.