Shire shares surge as drug group upgrades earnings guidance

Irish-domiciled business says cost savings in $32bn Baxalta deal 40% more than expected

Drugmaker Shire said the $32 billion takeover of US rival Baxalta will boost earnings and sales this year, sending its stock surging to the highest level in almost a year.

Earnings per American depositary share excluding some costs will grow to between $12.70 and $13.10 this year including results from Baxalta, the Dublin-based company said in a statement as it reported earnings on Tuesday. That’s more than the $12.77 average of analyst estimates.

The Baxalta deal will probably deliver cost-savings of $700 million over three years, about 40 per cent more than initially estimated, it said.

Shire is also introducing Xiidra, drops for dry-eye disease that chief executive Flemming Ornskov aims to turn into a "global blockbuster", even as the drugmaker works on integrating Baxalta, bought for its stable of hemophilia medicines.


The company aims to pare its dependence on Vyvanse, its top-selling treatment for attention-deficit and hyperactivity disorder.

Shares of Shire rose 2.3 per cent to 5,040 pence in London trading. They climbed as much as 4.1 per cent after the statement’s release to the highest level since August 18th last.

The full-year guidance published on Tuesday incorporates Baxalta as of June 3rd.

Shire is reviewing the allocation of research and development spending for the combined company Phil Vickers, head of R&D, said on a call with analysts. He said it had discontinued eight research programmes, including messenger RNA replacement therapies and SHP 625 in adults, and reinvested funds in higher priority programmes.

The company decided it will integrate Baxalta’s cancer research, and is reviewing its biosimilars business, Mr Ornskov said.

The CEO, speaking on a conference call, said the drugmaker is committed to cutting debt and would likely consider only licensing deals or small transactions in the near future.

“We don’t get easily distracted,” he said, when asked about the Brexit vote’s expected impact on the company’s business.

Shire also said earnings per American depositary shares rose to $3.38 in the second quarter on a non-GAAP basis. Sales surged to $2.43 billion.

On a GAAP basis, Shire swung to a loss of 71 US cents per American depositary share in the quarter, mainly because of costs tied to the Baxalta transaction.

The loss also reflected expenses tied to a preliminary legal settlement of $350 million plus interest that the drugmaker reached with the US Department of Justice and other authorities to end investigations into marketing practices at the Dermagraft business that Shire had sold in January 2014. The settlement accord is subject to further approvals, Shire said on Tuesday. – Bloomberg