Shire Plc raised its growth forecast for 2014 after reporting first-quarter earnings that beat analysts’ estimates as the pharmaceutical company reduced research and development costs.
Shire said earnings per American depositary share, excluding some items, will grow in the mid-to-high 20 percent range. It previously forecast “a similar level” of growth to 2013, when the figure was 23 percent. Shire is based in Dublin with management offices in Basingstoke, England.
The drugmaker cut costs as some clinical trials ended, and because of a reorganization instigated when Chief Executive Officer Flemming Ornskov took the helm last year. While sales of the best-selling Vyvanse pill for attention deficit hyperactivity disorder exceeded analyst estimates compiled by Bloomberg, revenue from the next five biggest-selling medicines and total product sales missed estimates.
Raising the forecast “looks nice, but when you look at the growth, it’s poor,” said Guillaume Van Renterghem, an analyst at UBS AG in London who has a neutral recommendation on Shire. “Clearly the fact that they beat is simply because they are cutting costs. One way of looking at it is that maybe they are trying to clean up everything so that they’re more appealing to someone willing to buy them.”
Shire rose 2.1 percent to a record 3,450 pence in London. The stock has climbed 71 percent in the past 12 months, making it the best performer in the Bloomberg Europe Pharmaceutical Index.
Ornskov declined to comment on whether Shire had been approached by Allergan Inc., after Reuters reported April 29 that Allergan was preparing a takeover offer to fight off an unsolicited bid from Valeant Pharmaceuticals International Inc.
First-quarter earnings excluding some items climbed 40 percent to $591 million, or $2.36 per American depositary share, beating the average analyst forecast for profit of $552.8 million or $2.21 per ADS.
Shire plans to introduce a new treatment for ADHD in adults in the first half of next year, helping sales in the company’s neuroscience division to double by the end of the decade, Ornskov said.
Shire has made at least four acquisitions since Ornskov’s appointment was announced in October 2012. The biggest of those was the $4.2 billion purchase of ViroPharma Inc., which added the treatment Cinryze for a rare swelling disease.
The company today said it agreed to pay at least $75 million for Australia’s Fibrotech Therapeutics, a closely-held developer of drugs to treat tissue scarring in patients with conditions such as kidney disease and heart failure.
Shire this week won shareholder approval to increase its borrowing limit to $12 billion, and Ornskov said today the company will look at adding assets in neuroscience and rare diseases.
“What I’m looking for in M&A is innovation and things that fulfill unmet patient need,” Ornskov said. “Size is really not something that comes into consideration as a main criteria.”