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Shire Plc. CEO Discusses Q3 2010 Results - Earnings Call Transcript

Shire Plc. CEO Discusses Q3 2010 Results - Earnings Call Transcript

Shire Plc. (

SHPGY

)

Q3 2010 Earnings Call

October 29, 2010 09:00 am ET

Executives

Eric Rojas - IR

Graham Hetherington - CFO

Angus Russell - CEO

Sylvie Gregoire - President, Human Genetic Therapies

Jeff Jonas - SVP, Specialty Pharmaceuticals R&D

Mike Cola - President, Specialty Pharmaceuticals

Analysts

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Presentation

Operator

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» Shire Plc. Q2 2010 Earnings Call Transcript
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Good day, ladies and gentlemen, and welcome to Shire’s 2010 third quarter results co-hosted by Eric Rojas. My name is Richard, and I’ll be your coordinator for today. (Operator Instructions). Mr. Eric, please go ahead.

Eric Rojas

Thanks Richard. Good morning and good afternoon everyone, thank you for joining us today for Shire’s third quarter 2010 financial results. By now you should have all received our press release and should be viewing our presentation via our IR website on shire.com. And for some reason you have not received the press release or are unable to access our website, please contact Souheil Salah in our UK Investor Relations Department on +44-1256-894-160, and he will be happy to assist you. Our speakers today are Angus Russell, Graham Hetherington, Sylvie Gregoire, Mike Cola and Jeff Jonas.

Before we begin, I would refer you to slide number 2 of our presentation, and remind you that any statements made during this call, which are not historical statements, will be forward-looking statements and as such will be subject to risks and uncertainties, which if they materialize could materially affect our results.

Today's agenda is on slide 3. Angus will begin with opening remarks of Shire's Q3 performance and highlights and Graham will continue with the financial review. Sylvie will update you on the latest developments in our HGT business. Mike Cola and Jeff Jonas will follow with a review of our Specialty Pharma pipeline and present results on our Phase 2 study of investigative use of VYVANSE as a adjunctive treatment in major depressed disorder. Angus will then summarize the key points for this presentation, who'll then open up for your questions.

As always we are requesting that you ask a maximum of two questions per person so that everyone gets a chance to ask their questions. I will be more than happy to follow-up offline for any subsequent questions or clarifications. I will now hand over the call over to Angus.

Angus Russell

Thanks Eric and hello everyone. So turning to slide number 5 in the deck, just few introductory remarks to say I believe these results again excellent. Driven principally by growth in product revenues and revenues in total were up 31% to $874 million. Non-GAAP diluted earnings rose to $1.16 in the quarter, that is up a 138% for this as the same quarter last year.

On top of that we've yet again produced very strong cash generation which is up 23% on last year to $271 million in the quarter. These strong results have enabled us to increase our guidance for earnings for the full year so previously remember the end of Q2, we said that we thought then that results were trending towards $4 for the year. Now I'm pleased that we’ve been able to lift that estimate to up to $420 per ADS for the year. Hitting that target will actually deliver growth in around 20% in earnings over last year and sets us obviously well on the way towards achieving our aspirational target which I’ll remind you is to hit mid teens sales growth on average between the end of 2009 and 2015.

So turning to the next slide, I was just going to quickly summarize some of the results. You’re going to hear a lot more of the detail behind these and the rest of my colleagues during this call. But let me just try and pull out some of the major features. Obviously we were delighted to receive the final full approval from VPRIV in the EU. And in regard to REPLAGAL, you see yet again another quarter of very strong growth with over 330 new patients added to treatment on REPLAGAL during the quarter. So we will update you a lot more about the future outlook for both our capacity and demand for these products.

In regard to VYVANSE, again, another very strong quarter’s growth. Underlying prescription growth in the US market was up 28% versus the same quarter last year, and in the quarter the total ADHD market in the US grew by 13% versus last year. We are now seeing the year-to-date number of 12% growth very, very strong.

At their exit, we've got Dr. Jeff Jonas with us today and he and Mike are going to review the first of what I hope will be a number of updates during subsequent quarters in regard to the earlier stages of development of some of our current assets and it will start today with VYVANSE looking at the use of VYVANSE in depressive disorder. It’s because of which although we've delivered very good strong results we've also been thinking about our growth beyond the horizon of 2015 and starting to invest. So whilst we were doing that through investing in our early stage pipeline on some of our current assets we've also added two new assets to the portfolio.

Not coming through the nature of bolt-on acquisitions. You can see those listed here, firstly Acceleron, very interesting company with a very interesting technology. As you know we announced that we negotiated the transaction to secure the exclusive ex-North American rights to a group of compounds known as ActRIIB. These are compounds which are aimed at building muscle and treating potentially many muscle wasting diseases. Proof of concept is being run in Duchenne Muscular Dystrophy, a very high unmet need. And again, so we will talk a little bit more about that. Movetis, Belgian company spin out from J&J contains many people use to work against them; a very interesting and experienced group of scientists who have real expertise in the area of these niche gastrointestinal disorders.

I'm pleased report that during the quarter we closed the tender offer and secured over 99% acceptance and now we will move to what's known as the squeeze out to the remaining 0.8% and that gives us great confidence under very legal process. We are unable to do that and therefore confident that we will close this transaction now and have a 100% ownership by the end of the year.

Movetis, as you know, has what is already a marketed drug launched in three countries, RESOLOR. It addresses the symptomatic condition of chronic constipation again a very high unmet medical need. But for me it is a very clear demonstration of the way to develop drugs in this world of ever increasing healthcare economic, but I think looking for health economic value and personalized medicine. And for me this is a very sensible program undertaken by these people and actually developing a drug which they recognize will have real benefit for patients who have this very severe symptomatic disease.

So with those highlights, let me now pass over to Graham who's I suppose is going to give you more detail behind these very strong financial results. Graham?

Graham Hetherington

Thank you and good afternoon everyone. This morning, I'm going to be talking about four key things. But first our excellent performance in the quarter and the product sales growth underpinning the performance; second, the operating leverage we've seen and how the strong sales growth delivered in the past nine months has accelerated margin enhancement; third, an update on our expectations for full year earnings in 2010; and finally, the dynamics we’re expecting to shape our performance beyond 2010. Angus has highlighted the financial performance in the quarter. So on slide eight, I'm going to focus on the revenue of growth driving this performance.

Our clinical program has continued to grow strongly even against tough comparatives. The 31% increase this quarter compares to the quarter in 2009, but was itself $0.20 up on the previous year. Stripping out the impact of foreign exchange, you can see our year-on-year growth was 3% higher at 34%.

Under our XR, product sales are up over 40% compared to last year and part of the results, the high level of Medicaid rebates charged in the third quarter last year. We also reported higher than expected sales in the third quarter this year as a result of some one-time rebate true ups that pushed sales deductions down to lower end of our expected 60% to 70% range.

We also saw some modest stocking in the quarter. These higher ADDERALL XR sales have, along with lower cost contributed to our third quarter numbers coming in ahead of expectations. In the fourth quarter, I expect the contribution from ADDERALL XR to reduce, and I will give more specifics a little later.

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