Shire Plc. Q2 2010 Earnings Call Transcript

Shire Plc. Q2 2010 Earnings Call Transcript
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Shire Plc. (SHPGY)

Q2 2010 Earnings Call

August 04, 2010 9:00 am ET

Executives

Angus Russell - CEO

Graham Hetherington - CFO

Sylvie Gregoire - President, Human Genetic Therapies

Mike Cola - President, Specialty Pharmaceuticals

Analysts

David Amsellem

Brian White

Bill Tanner

Florent Cespedes - Exane BNP Paribas

Ken Cacciatore

Peter Welford

John Newman

Kevin Wilson

Jon Stephenson

Martin Wales

Presentation

Operator

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» Shire plc Q2 2009 Earnings Call Transcript

Good morning and good afternoon everyone, thank you for joining us today for Shire’s second quarter 2010 financial results. By now you should have all received our press release, and should be viewing our presentation via our website on shire.com. If for some reason you have not received the press release or are unable to access our web site, please contact Souheil Salah in the UK Investor Relations department on +44-125-689-4160, as he will be happy to assist you.

Our speakers today are Angus Russell, Graham Hetherington, Sylvie Gregoire, and Mike Cola.

Before we begin, I would refer you to slide two 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 as follows on slide 3. We begin with opening remarks of Shire’s performance and highlights from Angus. Then Graham will continue with the financial review. Mike will follow with a review of our Specialty Pharma business performance, and Sylvie Gregoire will update you on the latest developments in our HGT business. Angus will then summarize the key points for this presentation, and we’ll then open up for your Questions.

As always, we are requesting that you 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. Thank you much for your understanding, and now I’ll pass it on to, Angus.

Angus Russell

Okay thanks Eric, and hello everyone, lets turn to the opening slide which is number five. As you can see from the title, I believe these results and what you’ll hear throughout this conference call will demonstrate that Shire is performing really well on all fronts. These financial results I believe are truly excellent, and you can see that with the revenues up 35% to $849 million in the quarter. As you can see from the sample I point here, revenues are now ahead of pre-ADDERALL XR authorized generic levels just after 15 months.

That’s a remarkable achievement and one that I don’t think I have ever seen in this industry, if you remember ADDERALL XR was almost 50% still of our revenues just over two year ago. So to be back so quickly to sales in excess of that level and with a tremendous growth platform ahead for many years to come, truly a remarkable performance.

Core product sales and those are the ones excluding ADDERALL XR were up 39% to $684 million. Non-GAAP diluted earnings per ADS were $1.03, well ahead, I believe of market expectations and that’s up 71%, versus the same quarter last year, and the strong cash generation has also been very strong this quarter at $416 million. And on the basis of all of these results I’m happy to say the board has authorized an increase in the first interim dividend of 5% in US dollar terms.

Let me turn to the next slide now and talk a little bit broader about the strategy, which again I believe from these results, is showing clear evidence of delivering. We have now eight global products driving growth, and they’re all very much focused on specialist prescribers meeting customers’ very high unmet medical needs. We continue to extend our geographic reach, and the proposed acquisition of Movetis NV adds to our core GI business in this respect, and hopefully will soon allow us to say that we have nine global products driving growth well into the future.

We’ve got a lot of pipeline progress on key development programs, and both Mike and Sylvia make some comments on that in their presentation. I believe we are very well placed to absorb industry macro challenges, and these have been quiet numerous in the year-to-date. We’ve had US healthcare reform proposals; we’ve had some adverse pricing impact in Europe, not to mention other macro economic effects moving against us, such as exchange rates. And despite all of that we’ve not only been able to just maintain the guidance you’ve seen from these results, so we’ve actually upgraded our guidance while taking onboard all those adverse changes.

Full year earnings, therefore, we believe and are trending towards $4.00 per ADS. If we had hit that $4.00 mark, it will indeed represent a 15% increase on our 2009 earnings. And I believe that gives us a

great platform to achieve our inspirational target which remains the midteen’s sales growth on average between 2009, and 2015.

So having made those opening remarks, let me now handover to Graham who will take you through these financial results in a little bit more detail.

Graham Hetherington

Thank you Angus, good morning, good afternoon. I’ll be covering three things today, the first, the drivers of another very strong earnings performance that Angus has just described. Second, reinforcing how these results represent a real breakthrough in Shire’s journey as the growth of core portfolio is now fully visibly in our total results. Third I reinforce what Angus has just been saying, but despite some external headwinds why we are able to increase our expectations for earnings in 2010.

But first on slide 8, an overview of our reported performance. In the first clean quarter since losing exclusivity of ADDERALL XR, it’s an outstanding result. Total revenues are up 35%, EBITDA up over 100% demonstrating value enhancing operating leverage, and EPS increasing by over 70% despite an unusually low tax charge last year. Significantly, we’ve doubled cash generation compared to the last year.

The next chart nine breaks out our revenue growth in more detail. The big story is the growth of our core portfolio generating nearly $200 million more sales compared to last year, with growth at 39%. You can see that the impact of foreign exchange on our revenues has started to move into negative territory in the second quarter, this is a trend we are seeing continue into the second half.

ADDERALL XR has benefited from its sustained market share. Sales deductions were high, at 74%, offset by some stocking compared to last year when we saw significant fee stocking following the launch of the authorize generics. I expect the contribution from ADDERALL XR to reduce in the second half, and we’ll give you more specifics later in the presentation.

We benefited from another healthy contribution from royalties. The Royalty we now receive from Impax is higher than the receipts from Teva last year. Again, I’ll touch more on the dynamics for the balance of 2010 later.

So moving to chart 10, where you can see the sources of our growth. It’s broadly based both by product and geography. We now have six products with annualized sales of over $200 million. From the ADHD franchise, which Mike will expand on, we saw further market share gains from VYVANSE.

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