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 Chief Executive Flemming Ornskov said the recent approval of its
newest ADHD (attention deficit hyperactivity disorder) drug, and
strong demand for its blockbuster Vyvanse, meant the business could
thrive as a standalone company.
Analysts said the division, which markets amphetamine drugs to
children and increasingly to adults as well, could be worth as much
as $8.5 billion.
"The critical strategic decision before us is to determine how best
to manage and operate these two businesses in a way that ensures
that each has the appropriate level of management focus, investment
and strategic flexibility," Ornskov said.
The decision to review the business came as Shire upgraded its
full-year earnings forecasts after a strong second quarter.
Ornskov said a split was the natural evolution of the plan he laid
out when he joined in 2013 to make the company an undisputed leader
in rare diseases.
"I set out a clear strategy of refocusing the company overall on
rare diseases, through a series of acquisitions, in particular of
course Baxalta," he told reporters on Thursday.
Shire bought haemophilia specialist Baxalta for $32 billion last
year in its biggest deal, helping product sales rise 55 percent in
the second quarter to $3.59 billion.
That deal dwarfed the $186 million Shire paid 20 years ago for
Richwood Pharmaceutical, the owner of amphetamine-based ADHD drugs
Dextrostat and Adderall. A decade later it agreed to buy New River
Pharmaceuticals, just before Vyvanse was approved.
The drug remains an ADHD market leader and in 2015 it was approved
to treat binge eating disorder. It had sales of $518.2 million in
the last quarter. Shire's newest ADHD drug, Mydayis, received U.S.
approval in June.
"This approval, and its pending launch, further underscores our
success in creating a sustainable franchise and our continued
commitment to innovation in ADHD," Ornskov said.
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LOGICAL MOVE
Analysts at Berenberg said a spin-off would be welcome news and a
back-of-the-envelope calculation based on cash flow suggested a
valuation of $8.0 billion-8.5 billion, although it was not yet clear
if that level could be achieved.
"It would remove Shire's exposure to the patent cliff for Vyvanse in
2023, a major overhang for the stock, as well as inject cash into
the balance sheet to help drive deleveraging," they said.
Liberum analysts said they could see the logic of a listing for the
business, which accounts for 17 percent of Shire's revenue, rather
than a sale to a big rival because there was little scope for
further cost cuts and a question mark still hangs over the use drugs
to treat hyperactive children.
Shire, which is based in Ireland but generates most of its sales in
the United States, had second-quarter revenue of $3.75 billion and
non-GAAP earnings of $3.73 per ADS (American Depositary Share), up
11 percent and above the consensus $3.60.
It also upgraded the midpoint of its full-year earnings per share
forecast by 10 cents to $15, reflecting its first-half performance
and stronger than expected cost savings from the Baxalta deal.
But Shire nudged down estimates for full-year product sales to $14.3
billion-$14.6 billion, from $14.5 billion-14.8 billion, due to a new
generic rival to its gastrointestinal drug Lialda.
Shire's shares retreated from gains after the results were published
to trade down 1.9 percent at 4,116 pence by 1506 GMT.
(Editing by Susan Fenton and David Clarke)
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