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Shire posts jump in FY sales but warns over 2018 earnings

By Michele Maatouk

Date: Wednesday 14 Feb 2018

LONDON (ShareCast) - (ShareCast News) - Specialty biopharmaceutical group Shire posted a 33% jump in full-year revenues on Wednesday but warned that earnings growth would be weaker than revenue growth this year.
In the year to the end of December 2017, total revenues rose to $15.2bn from the previous year, including a full year of legacy Baxalta sales, while diluted earnings per American depositary share surged to $14.05 from $1.27 in 2016 mostly due to a higher tax benefit last year driven by the US tax reform and higher operating income.

However, the company said that it expects non-GAAP diluted earnings per share growth to be lower than top line growth in 2018, mainly due to costs incurred from the start-up of its new US plasma manufacturing site, intensifying genericisation and lower royalties.

It also said that earnings growth could drop year-on-year in 2018, as it estimated adjusted earnings per share of $14.90 to $15.50 and reported EPS of $7.30 to $7.90.

Shire lifted its total dividend for the year to 34.88 cents from 30.33 cents in 2016.

Chief executive Flemming Ornskov said: "Shire delivered 8% pro forma product sales growth to $14.4bn in 2017, an increase of over $1bn. Of particular note are the strong performance of our Immunology franchise and the significant contribution from recently launched products, as well as growth in international markets. We increased Non GAAP diluted earnings per ADS by 16%, realizing cost synergies ahead of plan.

"2018 is a year of continued focus on commercial execution and targeted investment in our manufacturing infrastructure, new product launches, and pipeline to drive future growth. We expect to deliver mid-single digit product sales growth in 2018 after absorbing the anticipated impact of generics.

"The mid-term outlook for growth is positive driven by our Immunology franchise, multiple near-term launches, and international markets. We are committed to achieving our projected revenue target of $17 - $18bn in 2020."

Richard Hunter, head of markets at Interactive Investor, said: "While the integration of Baxalta is clearly giving Shire's prospects a shot in the arm, ingrained concerns around generic competition and the net debt figure remain."

He said there are a number of elements to the numbers which should provide some solace.

"Shire has 15 programmes in late-stage development, product sales are strong - whether including the Baxalta contribution or not - and there are multiple near-term launches planned. In addition, synergies which are being identified could lead to disposals which, in turn, may lead to benefits to shareholders. In the meantime, metrics such as earnings growth and the operating margin are advancing apace, whilst strategically the company's focus on and expertise in rare diseases could well lead to promising times ahead."

He noted that the shares have lost some 30% over the last year as concerns persist, as compared to a drop of 0.6% for the wider FTSE 100. "Despite this underperformance the shares are clearly well regarded as a potential growth story, with the market consensus of the company as a strong buy having been in place for some time."

At 1245 GMT, the shares were down 1.4% to 3,138p.