Shire's share price has been hugely volatile over the past few month as the company grapples with the fallout from unexpectedly early generic competition to its Adderall XR attention deficit drug. That - combined with unfavourable exchange rates, lower product sales and reduced royalty rates - has led management to downgrade forecasts. Percentage growth of sales should still be in double digits this year, but missing guidance is not Shire's style and it has clearly affected rattled investors.
The danger for Shire is that erosion of Adderall XR's sales next year (the original expectation was that competition would arrive in 2014), along with a pending court case for Intuniv, will blow a hole in the company's attention deficit disorder franchise before sister product Vyvanse can decisively plug the gap. Vyvanse is growing fast, with product sales 36 per cent higher in the half to $526m (£337m), but not fast enough to replace the $245m of revenue that Adderall XR generated during the same period. That means making cost savings in the short term; combined research and development and administration costs, which were $749m in the period, will now grow by 10 per cent and 12 per cent this year, a full two percentage points lower than previously forecast.
Analysts' estimates are under review but, prior to these results, Deutsche Bank forecast EPS for 2012 of 127p.
SHIRE (SHP) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,948p | MARKET VALUE: | £11bn | |
| TOUCH: | 1,947-1,949p | 12-MONTH HIGH: | 2,316p | LOW: 1,706p |
| DIVIDEND YIELD: | 0.5% | PE RATIO: | 18 | |
| NET ASSET VALUE: | 410p* | NET CASH: | $18m | |
| Half-year to 30 Jun | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2011 | 1.88 | 532 | 75.7 | 2.48 |
| 2012 | 2.25 | 579 | 85.8 | 2.73 |
| % change | +20 | +9 | +13 | +10 |
Ex-div: 5 Sep Payment: 04 Oct *Includes intangible assets of $3.26bn, or 370p a share; £1=$1.569 | ||||
