Integration on track; operating cost synergy expectations increased
Pipeline progression continues with FDA approval of XIIDRA for dry eye disease
August 2, 2016 – Shire plc (“Shire”) (LSE: SHP, NASDAQ: SHPG) announces unaudited results for the three months ended June 30, 2016, inclusive of the Baxalta transaction that closed on June 3, 2016.
|Financial Highlights ||Q2 2016(1)||Growth(1)||Non GAAP CER(1)(2)|
|Product sales||$2,322 million||+57%||+58%|
|Product sales excluding Baxalta products ||$1,763 million||+19%||+20%|
|Total revenues||$2,429 million||+56%||+57%|
|US GAAP operating income from continuing operations||$96 million||(27%)|| |
|Non GAAP operating income(2)||$972 million||+58%||+57%|
|US GAAP net income margin(3)||(7)%||(17pps)(4)|
|Non GAAP EBITDA margin(2)||40%||+1pps|| |
|US GAAP net loss||($162 million)||(202%)|
|Non GAAP net income(2)||$773 million||+48%|
|US GAAP diluted losses per ADS||($0.71)||(188%)|
|Non GAAP diluted earnings per ADS(2)||$3.38||+29%||+28%|
|US GAAP net cash provided by operating activities||$591 million||+31%|
|Non GAAP cash generation(2)||$853 million||+69%|
|Non GAAP free cash flow(2)||$464 million||+7%|
(1) Results include Baxalta Inc. (“Baxalta”) (acquired on June 3, 2016) and Dyax Corp. (“Dyax”) (acquired on January 22, 2016). Percentages compare to equivalent 2015 period.
(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 US GAAP on pages 22 – 23.
(3) US GAAP net income as a percentage of total revenues.
(4) Percentage point change (“pps”).
Q2 2016 and Recent Highlights:
- Strong topline growth delivered across the business; legacy Shire product sales increased 19% in Q2 2016, legacy Baxalta product sales increased 12% on a pro forma basis in Q2 2016.
- Achieved significant progress on the Baxalta integration with upgraded guidance; operating cost synergy expectations increased by 40% to at least $700 million in year three post close.
- Obtained FDA approval of Shire’s first medicine in ophthalmics, XIIDRA (lifitegrast ophthalmic solution) 5%; U.S. launch expected in Q3 2016.
- Strong pipeline progress across many late stage product candidates:
- Received a positive opinion from the Committee for Medicinal Products for Human Use (“CHMP”) recommending marketing authorization for ONIVYDE for treatment of adult patients with metastatic adenocarcinoma of the pancreas who have progressed following gemcitabine-based therapy.
- Completed decentralized procedure to support European approval of CUVITRU, expanding therapeutic options within our Immunology portfolio.
- Reported encouraging topline efficacy and safety data for SHP465 in adults with ADHD supporting an FDA resubmission planned by the end of 2016.
- Expanded our gastrointestinal portfolio with in-licensing from Pfizer of late-stage asset, SHP647 (formerly known as PF-00547659), for the potential treatment of moderate-to-severe Inflammatory Bowel Disease (“IBD”).
Flemming Ornskov, M.D., M.P.H., Chief Executive Officer, commented:
“The second quarter marked an important milestone in Shire’s history, as we completed the combination with Baxalta to create the leading global biotechnology company focused on serving people with rare diseases and other highly specialized conditions. While closing this transformative deal and making significant progress on integration, we have delivered strong double-digit revenue growth from our legacy Shire franchises, and for the first time our results reflect a significant contribution from the legacy Baxalta franchises – allowing us to upgrade our guidance for full year 2016.
“In addition, we have advanced key assets in development and have a robust, innovative clinical pipeline with approximately 40 programs focused on areas of significant unmet medical need. We were pleased to receive approval from the FDA for XIIDRA, the first FDA-approved treatment for the signs and symptoms of dry eye disease and the first product in our developing franchise in ophthalmics. We also received a positive CHMP opinion for ONIVYDE, and completed the decentralized procedure to support European approval of CUVITRU, expanding therapeutic options within our Immunology portfolio. Lastly, we are on track for an FDA resubmission for SHP465 later this year to strengthen our ADHD product offerings.
“Baxalta integration activities continue to progress very well and, with our new operating structure in place, we are raising our operating cost synergy expectations by 40% to at least $700 million in year three post close. This would not have been possible without the commitment of all our employees, who have worked tirelessly in recent months to help drive efficiencies across the business, so that we can continue to deliver best-in-class therapies to patients around the world. We remain resolutely focused on achieving our goals, and I am very confident that Shire will continue to deliver strong growth as we integrate Baxalta and advance our combined portfolio of products.”
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NOTES TO EDITORS
Stephen Williams, Deputy Company Secretary (responsible for arranging the release of this announcement).
This announcement contains inside information.
Shire is the leading global biotechnology company focused on serving people with rare diseases and other highly specialized conditions. We strive to develop best-in-class products, many of which are available in more than 100 countries, across core therapeutic areas including Hematology, Immunology, Neuroscience, Ophthalmics, Lysosomal Storage Disorders, Gastrointestinal / Internal Medicine / Endocrine and Hereditary Angioedema; and a growing franchise in Oncology.
Our employees come to work every day with a shared mission: to develop and deliver breakthrough therapies for the hundreds of millions of people in the world affected by rare diseases and other high-need conditions, and who lack effective therapies to live their lives to the fullest.
THE “SAFE HARBOR” STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Statements included herein that are not historical facts, including without limitation statements concerning future strategy, plans, objectives, expectations and intentions, the anticipated timing of clinical trials and approvals for, and the commercial potential of, inline or pipeline products are forward-looking statements. Such forward-looking statements involve a number of risks and uncertainties and are subject to change at any time. In the event such risks or uncertainties materialize, Shire’s results could be materially adversely affected. The risks and uncertainties include, but are not limited to, the following:
- Shire’s products may not be a commercial success;
- increased pricing pressures and limits on patient access as a result of governmental regulations and market developments may affect Shire’s future revenues, financial condition and results of operations;
- Shire conducts its own manufacturing operations for certain of its products and is reliant on third party contract manufacturers to manufacture other products and to provide goods and services. Some of Shire’s products or ingredients are only available from a single approved source for manufacture. Any disruption to the supply chain for any of Shire’s products may result in Shire being unable to continue marketing or developing a product or may result in Shire being unable to do so on a commercially viable basis for some period of time;
- the manufacture of Shire’s products is subject to extensive oversight by various regulatory agencies. Regulatory approvals or interventions associated with changes to manufacturing sites, ingredients or manufacturing processes could lead to significant delays, an increase in operating costs, lost product sales, an interruption of research activities or the delay of new product launches;
- certain of Shire’s therapies involve lengthy and complex processes, which may prevent Shire from timely responding to market forces and effectively managing its production capacity;
- Shire has a portfolio of products in various stages of research and development. The successful development of these products is highly uncertain and requires significant expenditures and time, and there is no guarantee that these products will receive regulatory approval;
- the actions of certain customers could affect Shire’s ability to sell or market products profitably. Fluctuations in buying or distribution patterns by such customers can adversely affect Shire’s revenues, financial conditions or results of operations;
- Shire’s products and product candidates face substantial competition in the product markets in which it operates, including competition from generics;
- adverse outcomes in legal matters, tax audits and other disputes, including Shire’s ability to enforce and defend patents and other intellectual property rights required for its business, could have a material adverse effect on the combined company’s revenues, financial condition or results of operations;
- inability to successfully compete for highly qualified personnel from other companies and organizations;
- failure to achieve the strategic objectives with respect to Shire’s acquisition of NPS, Dyax or Baxalta may adversely affect Shire’s financial condition and results of operations;
- Shire’s growth strategy depends in part upon its ability to expand its product portfolio through external collaborations, which, if unsuccessful, may adversely affect the development and sale of its products;
- a slowdown of global economic growth, or economic instability of countries in which Shire does business, as well as changes in foreign currency exchange rates and interest rates, that adversely impact the availability and cost of credit and customer purchasing and payment patterns, including the collectability of customer accounts receivable;
- failure of a marketed product to work effectively or if such a product is the cause of adverse side effects could result in damage to the Shire’s reputation, the withdrawal of the product and legal action against Shire;
- investigations or enforcement action by regulatory authorities or law enforcement agencies relating to Shire’s activities in the highly regulated markets in which it operates may result in significant legal costs and the payment of substantial compensation or fines;
- Shire is dependent on information technology and its systems and infrastructure face certain risks, including from service disruptions, the loss of sensitive or confidential information, cyber-attacks and other security breaches or data leakages that could have a material adverse effect on Shire’s revenues, financial condition or results of operations;
- Shire incurred substantial additional indebtedness to finance the Baxalta acquisition, which may decrease its business flexibility and increase borrowing costs;
- difficulties in integrating Dyax or Baxalta into Shire may lead to the combined company not being able to realize the expected operating efficiencies, cost savings, revenue enhancements, synergies or other benefits at the time anticipated or at all; and
other risks and uncertainties detailed from time to time in Shire’s filings with the Securities and Exchange Commission, including those risks outlined in “ITEM 1A: Risk Factors” in Shire’s Annual Report on Form 10-K for the year ended December 31, 2015.
All forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by this cautionary statement. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof. Except to the extent otherwise required by applicable law, we do not undertake any obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise.