Baxalta boosts Shire's top line, but makes for ugly profit numbers this term

The rare disease specialist's products provided a $559m (£423m) boost to group revenue in the period. This, on top of the 19 per cent increase in sales from existing Shire products in the second quarter, has prompted management to upgrade full-year revenue forecasts to between $10.8bn and $11bn. Cost synergy expectations have also been upgraded and $700m of savings are now expected within three years, 40 per cent up on previous estimates.

However, the deal has played havoc with this half's numbers. In order to satisfy the hefty cash element of the acquisition, Shire relied on further help from its banks, meaning net debt has stretched to $23.7bn. The sixfold increase in interest paid on that debt hit the bottom line, along with integration and acquisition costs of $454m. Stripping out these impacts, adjusted operating income increased 36 per cent year on year to $1.8bn for the first half, thanks to Baxalta sales and higher revenue from legacy Shire products.

As expected, research and development has rather taken a back seat in the past few months, with costs almost halving to $512m, but that doesn't mean that the group's pipeline isn't full. There are 40 products in clinical development, "potentially the biggest of any pharmaceutical company", according to perpetual optimist, chief executive Flemming Ornskov.

The priority in the next few months will be in getting dry eye treatment Xiidra on to the market. The treatment, which has recently been approved by the US Food and Drug Administration, will be the first prescription eyedrop available stateside. Other imminent launches include Onivyde for pancreatic cancer, while Baxalta has brought with it three new divisions; haematology, oncology and immunology.

Net earnings were further suppressed by a legal settlement regarding the disposed Dermagraft business. Prior to these results, broker Liberum expected pre-tax profit of $4bn for the year to December 2016, giving adjusted EPS of 428ȼ, up from $2.7bn and 389ȼ in 2015.