New Chief Executive reports Q1 results and sets out strategy for growth
Shire delivers 10% increase in Non GAAP earnings; full year EPS guidance in line with consensus(1)
May 2, 2013 – Shire (LSE: SHP, NASDAQ: SHPG) announces results for the three months to March 31, 2013.
|Financial Highlights||Q1 2013||Reported Growth(2)|
|Product sales||$1,117 million||+1%(3)|
|Total revenues||$1,162 million||-1%(3)|
|Non GAAP operating income||$393 million||+9%|
|US GAAP operating income||$129 million||-56%(4)|
|Non GAAP diluted earnings per ADS||$1.63||+10%|
|US GAAP diluted earnings per ADS||$0.35||-72%|
|Non GAAP cash generation||$257 million||-17%|
|Non GAAP free cash flow||$113 million||-54%|
|US GAAP net cash provided by operating activities||$160 million||-38%|
(1) See page 4 of the full release for assumptions.
(2) Percentages compare to equivalent 2012 period.
(3) Percentage growth on a Constant Exchange Rate ("CER") basis is in line with the reported growth for the quarter.
(4) US GAAP operating income includes the impact of goodwill impairment, see page 11 of the full release for details.
The Non GAAP financial measures included within this release are explained on page 21 of the full release, and are reconciled to the most directly comparable financial measures prepared in accordance with US GAAP on pages 18 - 20 of the full release.
Flemming Ornskov, M.D., Chief Executive Officer, commented:
"In Q1 2013 we experienced continued strong performance from VYVANSE, INTUNIV, LIALDA, VPRIV and FIRAZYR offset by the challenge of lower sales of DERMAGRAFT and REPLAGAL which we are actively managing. We generated $257 million of cash during the quarter and delivered 10% Non GAAP earnings growth while investing in our R&D pipeline.
Shire has consistently delivered growth significantly above the industry levels of mid single digit and we intend that this will be the case in the future. As we look forward to the remainder of the year, we continue to expect to deliver earnings growth in line with current consensus earnings expectations for 2013(1).
On becoming Shire Chief Executive Officer, I am pleased to confirm the direction we will take, in order to continue to deliver significantly above industry average growth. We intend to continue to be a high-growth innovation business providing differentiated specialist medicines in areas of high unmet need for patients treated by specialist physicians. Shire's strategic priorities are to grow sales of our existing portfolio and to bring new innovative treatments to market through both R&D and Business Development.
To deliver this we are evolving the way the business works, introducing a flatter and more scalable structure of initially five commercially focused business units (Rare Diseases, Neuroscience, GI, Regenerative Medicine and Internal Medicine) and a single R&D organization supported by centralized corporate functions.
In the first quarter we added to our pipeline with three acquisitions: Lotus Tissue Repair, Premacure and SARcode BioSciences. The last two provide us with the foundation to build a potential new business unit in ophthalmology – a growing market with many unmet patient needs. We're reviewing our pipeline to prioritize investment in our innovative, late stage pipeline assets. We also aim to focus our business development on acquiring later stage assets and to grow our sales in Latin America and Asia.
As the new Chief Executive, I am excited by the potential opportunities for delivering even greater value to Shire's patients and shareholders and I look forward to updating you in the many quarters to come."
Flemming Ornskov, Chief Executive Officer ("CEO") today sets out his strategy for Shire's future and outlines a re-alignment of its business structure to drive future growth and innovation. Shire will continue to grow through focusing on its core strengths of developing and marketing innovative specialist medicines to meet significant unmet patient needs.
The growth strategy will be delivered through a sharpened focus on two key priorities:
- Commercial Excellence - driving optimum performance of currently marketed products
- Pipeline Innovation - building the pipeline of specialty medicines to deliver future value through both Research & Development ("R&D") and Business Development ("BD")
These priorities will be underpinned by a simplification of the business structure in order to drive commercial excellence and pipeline innovation. Shire will have an "In-Line" marketed product group and a "Pipeline" group, supported by a single technical operations group and simplified, centralized corporate functions.
Delivering the strategy
The newly established "In-Line" marketed products group will consist of five business units ("BU"s) focused exclusively on commercial delivery; Rare Diseases, Neuroscience (formerly Behavioral Health), Gastrointestinal ("GI"), Regenerative Medicine ("RM") and Internal Medicine. More BUs will be formed when significant assets are either acquired or reach the appropriate stage of development.
The Pipeline group, consisting of R&D and BD, will prioritize its activities towards late stage development programs. Pre-clinical development focus will be primarily in rare diseases. As part of the delivery of this strategy, Shire's R&D will be led by a single R&D organization. BD will continue to be a key activity for Shire, focused on identifying later stage development programs and in market products in target specialist areas.
In addition to chairing a newly formed Executive Committee, Flemming Ornskov will also chair the "In-Line" and "Pipeline" group teams, which will be the engines accountable for driving the profitable growth.
Shire will work to increase profitability of its existing international business while also investing in Asia and Latin America. Plans are underway for more focused growth in Japan where Shire recently announced the establishment of a new office, and in Brazil which is already the 5th largest country for Shire's rare disease business sales. China has also been identified as a priority and Shire is evaluating options for expanding more of the business into this dynamic market.