Shire plc : 3rd Quarter Results
(Thomson Reuters ONE) -
Shire reports strong earnings growth in Q3 2017; reiterates full year guidance
Product sales increased 7%, mainly driven by rapid growth in Immunology
franchise
Generated $1.1 billion operating cash flow; remain on-track to achieve our year-
end debt target
On track to file a NDA for SHP555 in chronic constipation in Q4 2017 and a BLA
for SHP643 in hereditary angioedema by late 2017 or early 2018
Completed manufacturing review and identified more than $100 million in
projected additional annual savings beginning in 2019 and expected to increase
to $300 million annually by 2023
October 27, 2017 - Shire plc (Shire) (LSE: SHP, NASDAQ: SHPG) announces
unaudited results for the three months ended September 30, 2017.
Flemming Ornskov, M.D., M.P.H., Shire Chief Executive Officer, commented:
"We delivered strong growth this quarter with product sales up 7% to $3.5
billion despite a CINRYZE supply shortage and a LIALDA generic entry. The
Immunology franchise grew by 32%, and we saw significant contributions across
our broad and diverse portfolio, evidencing our continued focus on commercial
execution. We delivered strong Non GAAP EPS growth of 20%, and operating cash
flow more than doubled to $1.1 billion, which enabled us to further reduce our
debt.
"We experienced a product shortage of CINRYZE during the quarter due to a
manufacturing interruption at a third-party manufacturer. The issue has been
addressed and production of CINRYZE has resumed. Product was shipped to
customers in early October. To enhance reliability of supply, we plan to start
in-house production of CINRYZE by Q1 2018, subject to FDA approval, as
sustainable and unconstrained CINRYZE supply is a top priority.
"We are reiterating our 2017 full year guidance, and I look forward to updating
you on the Neuroscience strategic review by year end. I continue to be highly
confident in the strength and durability of our business."
Financial Highlights
+------------------------------+--------------+-----------+--------------------+
| | Q3 2017((1)) |Growth((1))|Non GAAP CER((1)(2))|
| | | | |
|Product sales |$3,534 million| +7% | +6% |
| | | | |
|Total revenues |$3,698 million| +7% | +6% |
| | | | |
| | | | |
| | | | |
|Operating income from | | | |
|continuing operations | $709 million | N/M | |
| | | | |
|Non GAAP operating income((2))|$1,498 million| +19% | +18% |
| | | | |
| | | | |
| | | | |
|Net income margin((3)(4)) | 15% | 26ppc | |
| | | | |
|Non GAAP EBITDA margin((2)(4))| 44% | 5ppc | |
| | | | |
| | | | |
| | | | |
|Net income | $551 million | N/M | |
| | | | |
|Non GAAP net income((2)) |$1,158 million| +20% | |
| | | | |
| | | | |
| | | | |
|Diluted earnings per ADS((5)) | $1.81 | N/M | |
| | | | |
|Non GAAP diluted earnings per | | | |
|ADS((2)(5)) | $3.81 | +20% | +19% |
| | | | |
| | | | |
| | | | |
|Net cash provided by operating| | | |
|activities |$1,055 million| +101% | |
| | | | |
|Non GAAP free cash flow((2)) | $901 million | +128% | |
+------------------------------+--------------+-----------+--------------------+
((1) )Results include Baxalta Inc. (Baxalta) (acquired on June 3, 2016), unless
otherwise noted. Percentages compare to equivalent 2016 period. ((2) )The Non
GAAP financial measures included within this release are explained on pages 27 -
28, and are reconciled to the most directly comparable financial measures
prepared in accordance with US GAAP on pages 21 - 23. ((3) )US GAAP net income
as a percentage of total revenues. ((4) )Percentage point change (ppc). ((5)
)Diluted weighted average number of ordinary shares of 912 million.
Product sales growth
· Delivered product sales growth of 7%, including robust demand for our
Immunology franchise, up 32%.
· Successful early trajectory of MYDAYIS since U.S. launch on August
28, 2017, with over 3,000 physicians prescribing to over 11,000 patients as of
October 17, 2017.
· Genetic Diseases was impacted by lower product sales for CINRYZE due to
a product shortage resulting from a manufacturing interruption. The
manufacturing issue has been addressed and production of CINRYZE resumed.
Approximately $100 million of product was shipped to customers in early October.
· Increasing demand for XIIDRA; 9% script growth since Q2 2017.
Earnings growth
* Generated Non GAAP earnings per ADS of $3.81, underscoring continued focus
on commercial excellence and operating efficiency.
* Reported Non GAAP EBITDA margin of 44% for the quarter; on-track to achieve
at least $700 million in synergies by Year 3 as we continued to progress the
Baxalta integration.
* Completed manufacturing network review; identified more than $100 million in
projected additional annual savings beginning in 2019. Expected to increase
to $300 million annually by 2023.
Strong cash flow
* Strong operating cash flow enabled $920 million reduction in Non GAAP net
debt since June 30, 2017; remain on-track to achieve our year-end debt
target.
Product and Pipeline Highlights
Regulatory updates
· Submitted an application to the U.S. Food and Drug Administration (FDA)
to enable a second source of CINRYZE production at an in-house manufacturing
facility to enhance reliability of supply.
· Submitted lifitegrast Marketing Authorization Application for treatment
of dry eye disease in Europe; Canadian approval anticipated by Q1 2018.
· Received FDA Fast Track Designation for SHP607 for the prevention of
chronic lung disease in extremely premature infants.
· Positive opinion from Committee for Medicinal Products for Human Use
(CHMP) of the European Medicines Agency (EMA) recommending the marketing
authorization for lyophilized ONCASPAR (pegaspargase), as a component of
antineoplastic combination therapy in acute lymphoblastic leukemia (ALL) in all
ages.
· Received FDA Orphan Drug Designation and Investigational New Drug (IND)
status for SHP654 for the treatment of hemophilia A.
· Granted a label extension for FIRAZYR in Europe by the European
Commission (EC), broadening its use to the treatment of acute attacks of HAE in
adolescents and children aged 2 years and older.
· On track to file a Biologics License Application (BLA) for SHP643 in late
2017 or early 2018.
· On track to file a New Drug Application (NDA) for SHP555 in late Q4 2017.
Clinical and business development updates
· Strategic review of Neuroscience franchise on track; update planned for
year end.
· Reported positive topline Phase 3 results for subcutaneous SHP616 Liquid
in patients 12 years of age or older with symptomatic Hereditary Angioedema
(HAE).
· Reported positive topline results for INTUNIV in Japan, evaluated in
Phase 3 clinical trial in adults with ADHD.
FINANCIAL SUMMARY - THIRD QUARTER 2017 COMPARED TO THIRD QUARTER 2016
Revenues
* Product sales increased 7% to $3,534 million (Q3 2016: $3,315 million),
primarily due to strong growth from our Immunology franchise, up 32%,
Neuroscience franchise, up 12% and our Hematology franchise, up 4%. Product
sales also benefited from a full quarter of Ophthalmics product sales.
Growth was held back by the launch of generic competition for LIALDA and a
supply constraint related to CINRYZE, which negatively impacted our Internal
Medicine and Genetic Diseases franchises, down 24% and 7%, respectively.
* Royalties and other revenues increased 20% to $164 million, primarily due to
an increase in royalty streams acquired with Dyax and SENSIPAR royalties.
Operating results
* Operating income was $709 million (Q3 2016: operating loss of $406 million).
The increase was primarily due to lower expense relating to the unwind of
inventory fair value adjustments and costs related to licensing
arrangements, combined with higher revenues, partially offset by higher
amortization of acquired intangible assets.
* Non GAAP operating income increased 19% to $1,498 million (Q3 2016: $1,254
million), primarily due to higher revenues and lower expenses as a
percentage of total revenues driven by operating efficiencies which were
impacted by the realization of Baxalta operating expense synergies.
* Non GAAP EBITDA margin as a percentage of total revenues increased to 44%
(Q3 2016: 39%), primarily due to higher revenues and lower expenses as a
percentage of total revenues, driven by operating efficiencies which were
impacted by the realization of Baxalta operating expense synergies.
Earnings per share (EPS)
* Diluted earnings per American Depositary Shares (ADS) were $1.81 (Q3 2016:
diluted losses per ADS of $1.29). The increase is primarily due to higher
operating income from lower expenses relating to the unwind of inventory
fair value adjustments and costs related to licensing arrangements, combined
with higher revenues.
* Non GAAP diluted earnings per ADS increased 20% to $3.81 (Q3 2016: $3.17),
due to higher Non GAAP operating income primarily related to higher revenues
and higher gross margin.
Cash flows
* Net cash provided by operating activities increased 101% to $1,055 million
(Q3 2016: $526 million), primarily due to strong cash receipts from higher
sales and operating profitability, and lower Baxalta acquisition and
integration payments. Also, Q3 2016 net cash provided by operating
activities was negatively impacted by a payment associated with the
termination of a biosimilar collaboration acquired with Baxalta.
* Non GAAP free cash flow increased 128% to $901 million (Q3 2016: $395
million), driven by the growth in net cash provided by operating activities
noted above, combined with a decrease in capital expenditures of $46
million.
Debt
* Non GAAP net debt at September 30, 2017 decreased $2,063 million since
December 31, 2016, to $20,376 million (December 31, 2016: $22,439 million).
The decrease was primarily due to a $2,403 million net cash repayment of
debt, partially offset by a lower cash balance. Non GAAP net debt represents
aggregate long and short term borrowings of $20,236 million, and capital
leases of $349 million, partially offset by cash and cash equivalents of
$209 million.
OUTLOOK
We are reiterating our guidance from Q2 2017.
The guidance incorporates accelerated synergy capture as well as the impact of
LIALDA generic competition. Our depreciation estimate for the year is $450 -
$500 million, and we anticipate capital expenditures of $800 - $900 million.
The diluted earnings per ADS forecast assumes a weighted average number of 914
million fully diluted ordinary shares outstanding for 2017.
+----------------------------------+---------------------+---------------------+
|Full Year 2017 | US GAAP Outlook |Non GAAP Outlook((1))|
+----------------------------------+---------------------+---------------------+
|Total product sales |$14.3 - $14.6 billion|$14.3 - $14.6 billion|
+----------------------------------+---------------------+---------------------+
|Royalties & other revenues | $600 - $700 million | $600 - $700 million |
+----------------------------------+---------------------+---------------------+
|Gross margin as a percentage of| | |
|total revenue((2)) | 67.5% - 69.5% | 74.5% - 76.5% |
+----------------------------------+---------------------+---------------------+
|Combined R&D and SG&A | $5.3 - $5.5 billion | $4.9 - $5.1 billion |
+----------------------------------+---------------------+---------------------+
|Net interest/other | $500 - $600 million | $500 - $600 million |
+----------------------------------+---------------------+---------------------+
|Effective tax rate | ~7% | 16% - 17% |
+----------------------------------+---------------------+---------------------+
|Diluted earnings per ADS((3)) | $5.65 - $6.05 | $14.80 - $15.20 |
+----------------------------------+---------------------+---------------------+
((1)) For a list of items excluded from Non GAAP Outlook, refer to pages 27 -
28 of this release.
((2)) Gross margin as a percentage of total revenues excludes amortization of
acquired intangible assets.
((3)) See page 23 for a reconciliation between US GAAP diluted earnings per ADS
and Non GAAP diluted earnings per ADS.
RECENT DEVELOPMENTS
Products
FIRAZYR for the treatment of HAE in Europe
· On October 26, 2017, Shire announced that the EC has approved a label
extension for FIRAZYR, broadening its use to the treatment of acute attacks of
HAE in adolescents and children aged 2 years and older.
INTUNIV for the treatment of attention deficit hyperactivity disorder (ADHD) in
Japan
* On September 20, 2017, Shire and its partner in Japan, Shionogi & Co., Ltd,
announced positive topline results for a Phase 3 study evaluating INTUNIV in
adult patients with ADHD in Japan.
MYDAYIS for the treatment of ADHD
* On August 28, 2017, Shire announced that MYDAYIS was available by
prescription in the United States. The FDA approved MYDAYIS on June
20, 2017 for patients 13 years and older with ADHD.
Lifitegrast for the treatment of dry eye disease (DED) in Europe
* On August 15, 2017, Shire announced that the Marketing Authorization
Application for lifitegrast, submitted on August 7, 2017, was validated by
the UK as the Reference Member State involved in the Decentralized
Procedure.
Pipeline
SHP654 for the treatment of hemophilia A
* On October 25, 2017, Shire announced that the FDA awarded Orphan Drug
Designation to SHP654 (also designated as BAX 888), an investigational
factor VIII (FVIII) gene therapy for the treatment of hemophilia A. The FDA
also granted Shire IND status for SHP654.
SHP674 (ONCASPAR) for the treatment of acute lymphoblastic leukemia
* On October 12, 2017, Shire received a positive opinion from the CHMP
recommending marketing authorization for Lyophilized ONCASPAR for use as a
component of antineoplastic combination therapy in acute lymphoblastic
leukemia (ALL) in all ages.
SHP607 for the treatment of complications of prematurity
* On September 12, 2017, Shire announced that the FDA has granted Fast Track
designation for SHP607 for the prevention of chronic lung disease in
extremely premature infants. SHP607 is currently in Phase 2 clinical
development.
SHP616 for the treatment of HAE
* On September 11, 2017, Shire announced positive topline Phase 3 results for
the SAHARA study that evaluated the efficacy and safety of subcutaneously
administered C1 esterase inhibitor [human] Liquid for Injection in patients
12 years of age or older with symptomatic HAE.
Board Changes
On August 21, 2017, Shire announced that Jeff Poulton, Chief Financial Officer,
will be leaving Shire. The Board has commenced a formal search for a successor
and Jeff will continue to serve in his current role as this search progresses.
During this transition period, Jeff will remain on the Executive Committee and
on the Board of Directors of Shire plc until the end of the year.
In addition, and following the announcement that Dominic Blakemore will be
appointed Group Chief Executive of Compass Group PLC on April 1, 2018, the Board
has approved the appointment of Sara Mathew as Chair of the Audit Compliance &
Risk Committee to take place with immediate effect. Dominic Blakemore will
remain a member of the Audit Compliance & Risk Committee.
ADDITIONAL INFORMATION
The following additional information is included in this press release:
Page
Overview of Third Quarter 2017 Financial Results 8
Financial Information 13
Non GAAP Reconciliations 21
Notes to Editors 24
Forward-Looking Statements 25
Non GAAP Measures 27
Trademarks 28
For further information please contact:
Investor Relations
Ian Karp ikarp(at)shire.com +1 781 482 9018
Robert Coates rcoates(at)shire.com +44 203 549 0874
Media
Lisa Adler lisa.adler(at)shire.com +1 617 588 8607
Katie Joyce kjoyce(at)shire.com +1 781 482 2779
Dial in details for the live conference call for investors at 14:00 BST / 9:00
EDT on October 27, 2017:
UK dial in: 0808 237 0030 or 020 3139 4830
US dial in: 1 866 928 7517 or 1 718 873 9077
International Access Numbers: Click here
Password/Conf ID: 31097524#
Live Webcast: Click here
The quarterly earnings presentation will be available today at 13:00 BST / 8:00
EDT on:
- Shire.com Investors section
- Shire's IR Briefcase in the iTunes Store
OVERVIEW OF THIRD QUARTER 2017 FINANCIAL RESULTS COMPARED TO THIRD QUARTER 2016
1. Product sales
Product sales increased 7% to $3,534 million (Q3 2016: $3,315 million).
+-----------------+---------------------------------------------+--------------+
|(in millions) | | Total Sales |
| | | Year on year |
| | | growth |
| | +--------------+
| | | Non |
|Product sales by | International | GAAP |
|franchise | U.S. Sales Sales Total Sales |Reported CER |
+-----------------+ ------------- --------------- ------------- +--------------+
| | | |
| | | |
|HEMOPHILIA | $ 357.5 $ 367.8 $ 725.3 | +3 % +3 %|
| | | |
|INHIBITOR | | |
|THERAPIES | 70.6 120.1 190.7 | +5 % +4 %|
| | ------------- --------------- ------------- | |
|Hematology | 428.1 487.9 916.0 | +4 % +3 %|
| | ------------- --------------- ------------- | |
| | | |
| | | |
|IMMUNOGLOBULIN | | |
|THERAPIES | 486.6 118.5 605.1 |+28 % +28 %|
| | | |
|BIO THERAPEUTICS | 86.3 110.3 196.6 |+47 % +45 %|
| | ------------- --------------- ------------- | |
|Immunology | 572.9 228.8 801.7 |+32 % +32 %|
| | ------------- --------------- ------------- | |
| | | |
| | | |
|VYVANSE | 476.8 61.6 538.4 | +5 % +5 %|
| | | |
|ADDERALL XR | 99.4 6.6 106.0 |+32 % +32 %|
| | | |
|MYDAYIS | 10.2 - 10.2 | N/A N/A|
| | | |
|Other | | |
|Neuroscience | 6.7 29.8 36.5 |+56 % +53 %|
| | ------------- --------------- ------------- | |
|Neuroscience | 593.1 98.0 691.1 |+12 % +12 %|
| | ------------- --------------- ------------- | |
| | | |
| | | |
|FIRAZYR | 173.6 21.9 195.5 |+34 % +33 %|
| | | |
|ELAPRASE | 41.4 111.5 152.9 | +4 % +1 %|
| | | |
|REPLAGAL | - 117.2 117.2 | -1 % -4 %|
| | | |
|VPRIV | 37.5 52.1 89.6 | +2 % +1 %|
| | | |
|CINRYZE | 46.2 10.7 56.9 |-66 % -66 %|
| | | |
|KALBITOR | 16.0 - 16.0 |+44 % +44 %|
| | ------------- --------------- ------------- | |
|Genetic Diseases | 314.7 313.4 628.1 | -7 % -8 %|
| | ------------- --------------- ------------- | |
| | | |
| | | |
|LIALDA/MEZAVANT | 61.4 25.3 86.7 |-58 % -59 %|
| | | |
|GATTEX/REVESTIVE | 72.6 12.3 84.9 |+46 % +45 %|
| | | |
|PENTASA | 72.1 - 72.1 |-16 % -16 %|
| | | |
|NATPARA | 39.1 - 39.1 |+68 % +68 %|
| | | |
|Other Internal | | |
|Medicine | 12.0 56.2 68.2 |-22 % -24 %|
| | ------------- --------------- ------------- | |
|Internal Medicine| 257.2 93.8 351.0 |-24 % -25 %|
| | ------------- --------------- ------------- | |
| | | |
| | | |
|Ophthalmics | 77.4 - 77.4 | N/M N/M|
| | | |
| | | |
| | | |
|Oncology | 47.2 21.3 68.5 |+24 % +22 %|
| | | |
| | | |
| | ------------- --------------- ------------- | |
|Total product | | |
|sales | $ 2,290.6 $ 1,243.2 $ 3,533.8 | +7 % +6 %|
| | ------------- --------------- ------------- | |
| | | |
+-----------------+---------------------------------------------+--------------+
Hematology
Hematology product sales increased 4%, with growth in both our hemophilia and
inhibitor therapies products.
Growth across the portfolio was driven by underlying demand in our international
markets, which also benefited from the timing of large orders. U.S. sales were
flat year over year, as increased demand, primarily related to our FVIII
products, was offset by the impact of destocking in Q3 2017 compared to stocking
in Q3 2016.
Immunology
Immunology product sales increased 32% with strong growth from both our
immunoglobulin therapies and bio therapeutics products.
The U.S. benefited from growth in demand and stocking for GAMMAGARD liquid, and
increasing demand for our subcutaneous portfolio. International growth was
primarily due to the timing of large orders and strong underlying performance in
all regions.
Neuroscience
Neuroscience product sales increased 12%, primarily driven by VYVANSE and
ADDERALL XR.
VYVANSE sales increased 5%, primarily due to the benefit of a price increase
taken since Q3 2016, increased demand resulting from U.S. ADHD market growth and
solid performance in our international markets. ADDERALL XR sales increased
32%, primarily due to stocking in Q3 2017 compared to destocking in the prior
year.
MYDAYIS, which was made available to patients on August 28, 2017, contributed
$10 million of product sales.
Genetic Diseases
Genetic Diseases product sales decreased 7%, primarily due to the impact of a
CINRYZE supply constraint, which was partially offset by FIRAZYR growth.
CINRYZE sales decreased 66% due to supply constraints caused by a manufacturing
interruption that was experienced during the quarter. The issue has been
addressed, and production has resumed. Approximately $100 million of product was
shipped to customers in early October. We continue to work to stabilize CINRYZE
manufacturing, however supply constraints may continue until we secure a second
source of production. Subject to FDA approval, we expect to add CINRYZE in-
house production capabilities in early Q1 2018.
FIRAZYR sales increased 34%, due to increased patient demand and stocking, in
part due to the CINRYZE supply constraints.
Internal Medicine
Internal Medicine product sales decreased 24%, as the impact of LIALDA generic
competition was partially offset by growth from GATTEX/REVESTIVE and NATPARA.
LIALDA/MEZAVANT sales decreased 58%, due to the impact of generic competition in
Q3 2017. An authorized generic was launched in the second half of Q3 2017.
GATTEX/REVESTIVE and NATPARA continued to perform well with sales increasing
46% and 68%, respectively, primarily due to an increase in the numbers of
patients on therapy.
Ophthalmics
Ophthalmics product sales relate to XIIDRA, which was made available to patients
starting on August 29, 2016. XIIDRA contributed $77 million of product sales
with 9% prescription growth since Q2 2017.
Oncology
Oncology product sales increased 24%. Growth was driven by sales of ONCASPAR and
ONIVYDE, the latter of which was approved in the EU on October 18, 2016.
2. Royalties and other revenues
+----------------------------------+-------------+-------------------+
|(in millions) | |Year on year growth|
| | | |
| | | Non GAAP |
| | Revenue |Reported CER |
+----------------------------------+ ----------- +-------------------+
|SENSIPAR royalties | $ 42.8 |+11 % +11 %|
| | | |
|3TC and ZEFFIX royalties | 16.1 | -1 % -1 %|
| | | |
|FOSRENOL royalties | 14.3 | +4 % +12 %|
| | | |
|ADDERALL XR royalties | 7.7 |+64 % +64 %|
| | | |
|Other royalties and revenues | 82.9 |+31 % +28 %|
| | ----------- | |
|Total royalties and other revenues| $ 163.8 |+20 % +19 %|
| | ----------- | |
| | | |
+----------------------------------+-------------+-------------------+
Royalties and other Revenues increased 20%, primarily due to an increase in
royalty streams acquired with Dyax and SENSIPAR royalties.
3. Financial details
Cost of sales
+------------------------------------------------------------------------------+
|(in millions) % of total % of total|
| Q3 2017 revenues Q3 2016 revenues|
| ------------- --------------- ------------- --------------+
|Cost of sales (US |
|GAAP) $ 1,001.4 27 % $ 1,736.2 50 %|
| |
|Expense related to |
|the unwind of |
|inventory fair |
|value adjustments (63.3 ) (803.8 ) |
| |
|Inventory write- |
|down relating to |
|the closure of a |
|facility - (11.6 ) |
| |
|Depreciation (70.1 ) (54.5 ) |
| ------------- ------------- |
|Non GAAP cost of |
|sales $ 868.0 23 % $ 866.3 25 %|
| ------------- ------------- |
| |
+------------------------------------------------------------------------------+
Cost of sales as a percentage of total revenues decreased to 27%, primarily due
to lower expense related to the unwind of inventory fair value adjustments.
Non GAAP cost of sales as a percentage of total revenues decreased to 23%,
primarily driven by operating efficiencies and the realization of synergies from
the acquisition of Baxalta.
R&D
+------------------------------------------------------------------------------+
|(in millions) % of total % of total|
| Q3 2017 revenues Q3 2016 revenues|
| ----------- ----------------- ----------- ---------------+
|R&D (US GAAP) $ 402.8 11 % $ 511.1 15 %|
| |
|Costs relating to |
|license |
|arrangements - (110.0 ) |
| |
|Depreciation (10.8 ) (9.0 ) |
| ----------- ----------- |
|Non GAAP R&D $ 392.0 11 % $ 392.1 11 %|
| ----------- ----------- |
| |
+------------------------------------------------------------------------------+
R&D expenditure decreased by $108 million, or 21%, primarily due to lower costs
relating to license arrangements.
Non GAAP R&D expenditure, and expense as a percentage of total revenues,
remained consistent with Q3 2016, as an increase in costs relating to our late
stage pipeline was offset by savings on discontinued programs.
SG&A
+------------------------------------------------------------------------------+
|(in millions) % of total % of total|
| Q3 2017 revenues Q3 2016 revenues|
| ----------- ----------------- ----------- ---------------+
|SG&A (US GAAP) $ 859.7 23 % $ 875.6 25 %|
| |
|Legal and |
|litigation costs (1.0 ) 0.5 |
| |
|Depreciation (39.0 ) (29.6 ) |
| ----------- ----------- |
|Non GAAP SG&A $ 819.7 22 % $ 846.5 25 %|
| ----------- ----------- |
| |
+------------------------------------------------------------------------------+
SG&A expenditure decreased by $16 million, or 2%, primarily due to the
realization of synergies from the acquisition of Baxalta and lower XIIDRA
marketing spend, which was partially offset by MYDAYIS launch costs and
increased depreciation expense.
Non GAAP SG&A expenditure decreased by $27 million, or 3%, primarily due to the
realization of synergies from the acquisition of Baxalta and lower XIIDRA
marketing spend, which was partially offset by MYDAYIS launch costs. Non GAAP
SG&A as a percentage of total revenues decreased 3 percentage points.
Amortization of acquired intangible assets
Shire recorded amortization of acquired intangible assets of $482 million (Q3
2016: $355 million), primarily related to intangible assets acquired with
Baxalta and the acceleration of CINRYZE amortization following positive SHP643
Phase 3 results.
Integration and acquisition costs
In Q3 2017, Shire recorded integration and acquisition costs of $237 million,
primarily relating to the Baxalta transaction. Costs included asset impairment
charges, employee severance, the acceleration of stock compensation, third-party
professional fees and expenses associated with facility consolidations.
In Q3 2016, Shire recorded integration and acquisition costs of $285 million,
primarily relating to the Baxalta and Dyax transactions. Costs included employee
severance, the acceleration of stock compensation, third-party professional
fees, contract terminations and other transaction-related fees.
Reorganization costs
In Q3 2017, Shire recorded reorganization costs of $5 million. In Q3 2016, Shire
recorded reorganization costs of $101 million, primarily related to the closure
of a facility at the Los Angeles manufacturing site.
Other expense, net
+------------------------------------------------------------------------------+
|(in millions) Q3 2017 Q3 2016 |
| ------------ ------------ |
|Other expense, net (US GAAP) $ (140.5 ) $ (191.3 ) |
| |
|Amortization of one-time upfront borrowing |
|costs for Baxalta and Dyax 1.9 47.4 |
| |
|Loss on sale of long term investments 4.3 - |
| ------------ ------------ |
|Non GAAP Other expense, net $ (134.3 ) $ (143.9 ) |
| ------------ ------------ |
| |
+------------------------------------------------------------------------------+
Other expense, net decreased by $51 million, primarily due to lower amortization
of one-time upfront borrowing costs for Baxalta and Dyax.
Non GAAP Other expense, net decreased by $10 million.
Taxation
+------------------------------------------------------------------------------+
|(in millions) |
| Effective Effective|
| Q3 2017 tax rate Q3 2016 tax rate|
| ------------ ----------- ------------ ----------+
|Income tax expense (US GAAP) $ (13.5 ) 2 % $ 229.6 (38 %) |
| |
|Non GAAP tax adjustments (189.0 ) (377.3 ) |
| ------------ ------------ |
|Non GAAP Income tax expense $ (202.5 ) 15 % $ (147.7 ) 13 % |
| ------------ ------------ |
| |
+------------------------------------------------------------------------------+
The effective tax rate on US GAAP income in Q3 2017 was 2% (Q3 2016: -38%) and
on a Non GAAP basis was 15% (Q3 2016: 13%).
The effective rate in Q3 2017 on US GAAP income from continuing operations is
low, primarily due to the combined impact of the relative quantum of profit
before tax for the period by jurisdiction as well as significant acquisition and
integration costs. Additionally, certain discrete events occurred during Q3
2017 which contributed to the low effective tax rate, including a tax benefit
associated with filing of the US tax returns and the reversal of prior period
income tax reserves.
Discontinued operations
The loss from discontinued operations in Q3 2017 was less than $1 million, net
of taxes. The loss in Q3 2016 was $18 million, net of taxes, primarily due to
the establishment of legal contingencies related to the divested DERMAGRAFT
business.
FINANCIAL INFORMATION
TABLE OF CONTENTS
Page
Unaudited US GAAP Consolidated Balance Sheets 14
Unaudited US GAAP Consolidated Statements of Operations 15
Unaudited US GAAP Consolidated Statements of Cash Flows 17
Selected Notes to the Unaudited US GAAP Financial Statements
(1) Earnings per share 19
(2) Analysis of revenues 20
Non GAAP reconciliations 21
Unaudited US GAAP Consolidated Balance Sheets
(in millions, except par value of shares)
September December
30, 2017 31, 2016
---------------- --------------
ASSETS
Current assets:
Cash and cash equivalents $ 209.3 $ 528.8
Restricted cash 34.3 25.6
Accounts receivable, net 2,840.7 2,616.5
Inventories 3,427.3 3,562.3
Prepaid expenses and other current assets 779.9 806.3
---------------- --------------
Total current assets 7,291.5 7,539.5
Non-current assets:
Investments 199.7 191.6
Property, plant and equipment (PP&E), net 6,579.5 6,469.6
Goodwill 19,718.4 17,888.2
Intangible assets, net 33,350.3 34,697.5
Deferred tax asset 94.6 96.7
Other non-current assets 242.5 152.3
---------------- --------------
Total assets $ 67,476.5 $ 67,035.4
---------------- --------------
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 3,870.5 $ 4,312.4
Short term borrowings and capital leases 2,629.2 3,068.0
Other current liabilities 961.4 362.9
---------------- --------------
Total current liabilities 7,461.1 7,743.3
Non-current liabilities:
Long term borrowings and capital leases 17,956.0 19,899.8
Deferred tax liability 7,681.7 8,322.7
Other non-current liabilities 1,723.1 2,121.6
---------------- --------------
Total liabilities 34,821.9 38,087.4
---------------- --------------
Equity:
Common stock of 5p par value; 1,500 shares
authorized; and 915.9 shares issued and
outstanding (2016: 1,500 shares authorized; and
912.2 shares issued and outstanding) 81.5 81.3
Additional paid-in capital 25,020.9 24,740.9
Treasury stock: 8.4 shares (2016: 9.1 shares) (283.0 ) (301.9 )
Accumulated other comprehensive income/(loss) 969.1 (1,497.6 )
Retained earnings 6,866.1 5,925.3
---------------- --------------
Total equity 32,654.6 28,948.0
---------------- --------------
Total liabilities and equity $ 67,476.5 $ 67,035.4
---------------- --------------
Unaudited US GAAP Consolidated Statements of Operations
(in millions)
3 months ended September 9 months ended September
30, 30,
--------------------------- ---------------------------
2017 2016 2017 2016
------------- ------------- -------------- ------------
Revenues:
Product sales $ 3,533.8 $ 3,315.4 $ 10,537.9 $ 7,264.8
Royalties & other
revenues 163.8 136.7 477.8 325.7
------------- ------------- -------------- ------------
Total revenues 3,697.6 3,452.1 11,015.7 7,590.5
------------- ------------- -------------- ------------
Costs and expenses:
Cost of sales 1,001.4 1,736.2 3,437.3 2,762.9
Research and
development 402.8 511.1 1,324.5 1,023.0
Selling, general and
administrative 859.7 875.6 2,647.7 2,025.8
Amortization of
acquired intangible
assets 482.4 354.9 1,280.5 702.5
Integration and
acquisition costs 237.0 284.5 696.7 738.6
Reorganization costs 5.4 101.4 24.5 115.7
Loss/(gain) on sale of
product rights 0.3 (5.7 ) (0.4 ) (12.2 )
------------- ------------- -------------- ------------
Total operating
expenses 2,989.0 3,858.0 9,410.8 7,356.3
------------- ------------- -------------- ------------
Operating income/(loss)
from continuing
operations 708.6 (405.9 ) 1,604.9 234.2
Interest income 1.5 9.3 5.7 11.9
Interest expense (141.8 ) (186.9 ) (425.4 ) (318.8 )
Other (expense)/income,
net (0.2 ) (13.7 ) 6.8 (16.2 )
------------- ------------- -------------- ------------
Total other expense,
net (140.5 ) (191.3 ) (412.9 ) (323.1 )
------------- ------------- -------------- ------------
Income/(loss) from
continuing operations
before income taxes and
equity in
(losses)/earnings of
equity method investees 568.1 (597.2 ) 1,192.0 (88.9 )
Income taxes (13.5 ) 229.6 (44.6 ) 218.4
Equity in
(losses)/earnings of
equity method
investees, net of taxes (3.4 ) (0.9 ) 0.1 (1.9 )
------------- ------------- -------------- ------------
Income/(loss) from
continuing operations,
net of taxes 551.2 (368.5 ) 1,147.5 127.6
(Loss)/gain from
discontinued
operations, net of
taxes (0.4 ) (18.3 ) 18.6 (257.5 )
------------- ------------- -------------- ------------
Net income/(loss) $ 550.8 $ (386.8 ) $ 1,166.1 $ (129.9 )
------------- ------------- -------------- ------------
Unaudited US GAAP Consolidated Statements of Operations (continued)
(in millions, except per share amounts)
3 months ended 9 months ended
September 30, September 30,
---------------------- ---------------------
2017 2016 2017 2016
---------- ----------- ---------- ----------
Earnings/(loss) per Ordinary Share
- basic
Earnings/(loss) from continuing
operations $ 0.61 $ (0.41 ) $ 1.27 $ 0.18
(Loss)/gain from discontinued
operations (0.00 ) (0.02 ) 0.02 (0.36 )
---------- ----------- ---------- ----------
Earnings/(loss) per Ordinary Share
- basic $ 0.61 $ (0.43 ) $ 1.29 $ (0.18 )
---------- ----------- ---------- ----------
Earnings/(loss) per ADS - basic $ 1.82 $ (1.29 ) $ 3.86 $ (0.54 )
---------- ----------- ---------- ----------
Earnings/(loss) per Ordinary Share
- diluted
Earnings/(loss) from continuing
operations $ 0.60 $ (0.41 ) $ 1.26 $ 0.18
(Loss)/earnings from discontinued
operations (0.00 ) (0.02 ) 0.02 (0.36 )
---------- ----------- ---------- ----------
Earnings/(loss) per Ordinary Share
- diluted $ 0.60 $ (0.43 ) $ 1.28 $ (0.18 )
---------- ----------- ---------- ----------
Earnings/(loss) per ADS - diluted $ 1.81 $ (1.29 ) $ 3.84 $ (0.54 )
---------- ----------- ---------- ----------
Weighted average number of shares:
---------- ----------- ---------- ----------
Basic 907.2 900.2 905.9 725.5
Diluted 911.6 900.2 912.1 725.5
---------- ----------- ---------- ----------
Unaudited US GAAP Consolidated Statements of Cash Flows
(in millions)
3 months ended 9 months ended September
September 30, 30,
------------------------ --------------------------
2017 2016 2017 2016
----------- ------------ ------------- ------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income/(loss) $ 550.8 $ (386.8 ) $ 1,166.1 $ (129.9 )
Adjustments to reconcile
net income/(loss) to net
cash provided by operating
activities:
Depreciation and
amortization 602.3 448.0 1,644.0 877.8
Share based compensation 53.3 74.8 159.7 269.6
Amortization of deferred
financing fees 4.1 71.6 10.9 121.7
Expense related to the
unwind of inventory fair
value adjustments 63.3 803.8 688.7 1,097.3
Change in deferred taxes (99.1 ) (217.7 ) (392.4 ) (546.9 )
Change in fair value of
contingent consideration (3.4 ) 10.2 144.3 (34.8 )
Impairment of PP&E and
intangible assets 114.0 89.2 167.6 98.1
Other, net 73.5 52.9 88.3 35.3
Changes in operating assets
and liabilities:
Increase in accounts
receivable (120.0 ) (230.2 ) (301.5 ) (411.2 )
Increase in sales deduction
accrual 36.9 41.8 94.0 108.2
Increase in inventory (73.6 ) (111.6 ) (245.2 ) (228.0 )
(Increase)/decrease in
prepayments and other
assets (34.2 ) (92.9 ) 70.4 (66.4 )
(Decrease)/increase in
accounts payable and other
liabilities (112.7 ) (27.5 ) (557.8 ) 315.2
----------- ------------ ------------- ------------
Net cash provided by
operating activities 1,055.2 525.6 2,737.1 1,506.0
----------- ------------ ------------- ------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of PP&E and long
term investments (174.4 ) (223.4 ) (565.5 ) (402.5 )
Purchases of businesses,
net of cash acquired - - - (17,476.2 )
Proceeds from sale of
investments 7.5 0.6 48.1 0.6
Movements in restricted
cash - 1.1 (8.6 ) 68.3
Other, net 31.6 (4.8 ) 34.8 (1.5 )
----------- ------------ ------------- ------------
Net cash used in investing
activities (135.3 ) (226.5 ) (491.2 ) (17,811.3 )
----------- ------------ ------------- ------------
Unaudited US GAAP Consolidated Statements of Cash Flows (continued)
(in millions)
3 months ended September 9 months ended September
30, 30,
-------------------------- -------------------------
2017 2016 2017 2016
------------ ------------- ------------ ------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from revolving
line of credit, long term
and short term borrowings 1,149.7 12,847.3 3,261.6 31,742.3
Repayment of revolving
line of credit, long term
and short term borrowings (2,136.6 ) (13,132.6 ) (5,664.5 ) (14,632.9 )
Payment of dividend - - (234.7 ) (130.2 )
Debt issuance costs - (58.7 ) - (171.0 )
Proceeds from exercise of
options 12.7 137.1 92.2 137.2
Other, net (2.2 ) (56.7 ) (26.2 ) (44.8 )
------------ ------------- ------------ ------------
Net cash (used
in)/provided by financing
activities (976.4 ) (263.6 ) (2,571.6 ) 16,900.6
------------ ------------- ------------ ------------
Effect of foreign exchange
rate changes on cash and
cash equivalents 2.1 (0.3 ) 6.2 (2.2 )
------------ ------------- ------------ ------------
Net (decrease)/increase in
cash and cash equivalents (54.4 ) 35.2 (319.5 ) 593.1
Cash and cash equivalents
at beginning of period 263.7 693.4 528.8 135.5
------------ ------------- ------------ ------------
Cash and cash equivalents
at end of period $ 209.3 $ 728.6 $ 209.3 $ 728.6
------------ ------------- ------------ ------------
Selected Notes to the Unaudited US GAAP Financial Statements
1. Earnings Per Share (EPS)
(in millions)
3 months ended 9 months ended September
September 30, 30,
------------------------ -------------------------
2017 2016 2017 2016
----------- ------------ ------------- -----------
Income/(loss) from
continuing operations $ 551.2 $ (368.5 ) $ 1,147.5 $ 127.6
(Loss)/gain from
discontinued operations (0.4 ) (18.3 ) 18.6 (257.5 )
----------- ------------ ------------- -----------
Numerator for EPS $ 550.8 $ (386.8 ) $ 1,166.1 $ (129.9 )
----------- ------------ ------------- -----------
Weighted average number of
shares:
Basic 907.2 900.2 905.9 725.5
Effect of dilutive shares:
Share based awards to
employees 4.4 - 6.2 -
----------- ------------ ------------- -----------
Diluted 911.6 900.2 912.1 725.5
----------- ------------ ------------- -----------
The share equivalents not included in the calculation of the diluted weighted
average number of shares are shown below:
Share based awards to employees 16.2 14.6 14.8 9.7
------
Datum: 27.10.2017 - 13:00 Uhr
Sprache: Deutsch
News-ID 565615
Anzahl Zeichen: 65540
contact information:
Town:
London
Kategorie:
Business News
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