Shire posts 54-percent rise in Q2 sales; exploring options for neuroscience franchise

Shire announced Thursday that second-quarter sales surged 54 percent year-over-year to $3.7 billion, in line with analyst expectations, boosted by last year's purchase of Baxalta. Net income in the three-month period reached $240 million, versus a loss of $162 million a year earlier. However, the figure missed analyst forecasts of $768 million. 

The company also indicated that it is undertaking a "strategic review" of its neuroscience franchise, which includes the possibility of an independent public listing. CEO Flemming Ornskov said "we are at an exciting inflection point, with both our rare disease and neuroscience businesses performing strongly and each having significant growth potential over the coming years." Ornskov added "the strength and scale of our business provides us with the opportunity to further optimise our franchise portfolio… By year end, we expect to complete a formal evaluation of the full range of strategic options for the neuroscience franchise." 

The strategic review follows a report, which claimed that large drugmakers in the US and EU had hired advisers regarding a potential takeover of Shire. Earlier this year, Ornskov suggested that the drugmaker was being undervalued by investors. For further analysis, read ViewPoints: Shire moots bold move out of neuroscience.

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Regarding quarterly results, Shire reported that product sales increased by 55 percent year-over-year to $3.6 billion, primarily due to the inclusion of $1.7 billion in revenue from legacy Baxalta products, while experiencing a 7-percent growth in product sales excluding legacy Baxalta products, as boosted by a 15-percent increase in its internal medicine franchise and revenue in ophthalmology totaling $57 million. The company also noted that it generated $144 million in royalties and other revenue, up 44 percent from the year-ago period. 

Shire indicated that its cost synergies achieved in the first year from the integration of Baxalta reached $400 million, ahead of its internal target of $300 million. The drugmaker added that this figure puts it ahead of schedule to generate "at least" $700 million in annual savings associated with the transaction by the end of its third year of ownership. 

"As we enter the second half of 2017, we are focused on generating strong organic growth while continuing to deliver on our key priorities - launching more than 80 products globally by leveraging our expanded commercial platform, progressing our late-stage pipeline, integrating Baxalta, and paying down debt," stated Ornskov. 

Shire added that for the full year, it now expects sales of between $14.3 billion and $14.6 billion, down from an earlier estimate of $14.5 billion to $14.8 billion. Meanwhile, earnings per share are predicted to be in the range of $14.80 to $15.20, with the lower end of the guidance lifted from $14.60 per share. 

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