Shire Cuts 2013 Sales Forecast as Revenue Misses EstimatesSimeon Bennett
Shire Plc, the world’s largest seller of attention-deficit drugs, cut its full-year sales forecast after first-quarter revenue missed analysts’ estimates, partly because of increased competition from Sanofi.
Shire said it expects sales to grow by a percentage in the mid-to-high single digits, compared with an earlier forecast of low double-digits. Sales in the quarter were $1.16 billion, Dublin-based Shire said in a statement today. That missed the average analyst estimate of $1.21 billion.
Revenue from Replagal, for the rare genetic disorder Fabry disease, fell as Sanofi re-entered the market in Europe after a manufacturing glitch. Revenue from the skin substitute Dermagraft plunged as the company took an impairment charge and replaced more than 90 percent of the product’s sales force after an investigation into U.S. sales practices.
“Several core brands were well below consensus forecasts and the troubled Dermagraft skin-replacement therapy undershot already bearish expectations,” Mark Clark, an analyst at Deutsche Bank AG in London, wrote in a note to clients. “There will be concern about the weak top-line momentum.”
Shire’s shares sank 6.7 percent to 1,885 pence in London, the lowest since Dec. 6. The stock has lost 6.5 percent in the past year, including reinvested dividends, compared with a 32 percent advance in the Bloomberg Europe Pharmaceuticals Index of 18 companies.
Flemming Ornskov, who took over yesterday as chief executive officer from Angus Russell after a four-month transition period, said he plans to pursue long-term growth that is above the industry average by acquiring new drugs that are in late-stage development or already on the market.
“We have significant financial firepower to do meaningful deals,” Ornskov said on a call with analysts today. “Size is not something we look at as a criteria. We look at return on investment, shareholder value and strategic fit.”
Ornskov also introduced a new structure in which the company’s products will be housed in five divisions instead of three. Shire may consider adding other divisions for eye and blood diseases, he said. The company has made three acquisitions this year, including two for ophthalmology assets. Ornskov oversaw eye-care businesses at Bausch & Lomb Inc. and Novartis AG.
First-quarter earnings excluding some items rose to $1.63 per American depositary share from $1.48 a year earlier, Shire said in today’s statement. Analysts predicted profit of $1.57 per ADS, the average of 10 estimates compiled by Bloomberg. Shire repeated its forecast for earnings this year to be in line with analysts’ estimates of $6.67 per ADS, compared with $6.10 last year.
Sales of Vyvanse, the company’s top-selling drug, climbed 15 percent to $298 million. Shire said yesterday the product won U.S. regulatory approval as a treatment for children age 6 and older who have attention deficit hyperactivity disorder. Vyvanse was previously approved for adults.
Sales of Dermagraft, used to treat foot ulcers, fell 62 percent to $19 million in the quarter. Shire said a year ago that the U.S. Justice Department was conducting civil and criminal investigations into the sales and marketing practices of the product.
Shire said today it took an impairment charge of $199 million related to Dermagraft, and said it expects sales to be lower than anticipated when it got the product with its $750 million acquisition of Advanced BioHealing Inc. in 2011. It didn’t forecast sales of the therapy.
“There has been a loss initially of customers, there have been times where we’ve had to focus on resetting the clock in terms of promotional practices,” Ornskov said on a call with reporters. “We feel now that we have a compliant sales force that is focused on generating sales the way that sales should be generated.”