Shire (SHPG)

Q2 2012 Earnings Call

August 01, 2012 9:00 am ET

Executives

Eric Rojas - Director of Investor Relations - North America

Angus C. Russell - Chief Executive Officer, Interim President of Specialty Pharma and Executive Director

Graham Hetherington - Chief Financial Officer, Principal Accounting Officer and Director

Sylvie L. Gregoire - President of Human Genetic Therapies Business and Member of Management Committee

Kevin L. Rakin - Chief Executive Officer of Advanced Biohealing and President of Regenerative Medicine

Analysts

Ken Cacciatore - Cowen and Company, LLC, Research Division

Peter Verdult - Morgan Stanley, Research Division

William Tanner - Lazard Capital Markets LLC, Research Division

Brian Bourdot - Barclays Capital, Research Division

Jo Walton - Crédit Suisse AG, Research Division

Frank H. Pinkerton - SunTrust Robinson Humphrey, Inc., Research Division

David G. Buck - The Buckingham Research Group Incorporated

David Amsellem - Piper Jaffray Companies, Research Division

Presentation

Operator

Hello, and welcome to Shire's 2012 Second Quarter Results Call. [Operator Instructions] Just to remind you, this conference call is being recorded. Today, I'm pleased to present, Eric Rojas. Please begin your call.

Eric Rojas

Good morning and good afternoon, everyone. Thank you for joining us today for Shire's Second Quarter 2012 Financial Results. By now, you should have all received our press release and should be viewing our presentation via our website on shire.com. If for some reason you have not received the press release or are unable to access our website, please contact Souheil Salah in our U.K. Investor Relations department on +44-1256-894-160, and she will be happy to assist you.

Our speakers today are Angus Russell and Graham Hetherington. Sylvie Gregoire and Kevin Rakin will be available for Q&A as well.

Before we begin, I would refer you to Slide 2 of our presentation and remind you that any statements made during this call, which are not historical statements, will be forward-looking statements and as such will be subject to risks and uncertainties which, if they materialize, can materially affect our results.

Today's agenda is on Slide 3. Angus will talk about Shire's recent business highlights and future growth drivers. Graham will continue with the financial overview and update Shire's full year outlook. And finally, Angus will make some concluding remarks and open up the call for your questions. [Operator Instructions] Sarah Elton-Farr and I are happy to follow up offline for any subsequent questions.

I'll now hand the call over to Angus.

Angus C. Russell

Thanks very much, Eric, and good morning, good afternoon, everyone. So let me turn to Slide 5, and this just summarizes the revenue results that you've seen today. Really speaks again to the balanced nature of our product portfolio. I'll review some of the product highlights during the quarter, but it's fair to say that our 9 core products continue to drive growth in the business on an international basis. And you can see that here with total revenues up 14% to up to $1.2 billion in the quarter. And moving that again, the strong product performance of growth of 16%.

Turning over to Slide 6. GAAP has not only gone down through the income statement but has been added to with other elements around costs that Graham will no doubt go through in more detail later. But that leaves us in a position where non-GAAP operating income is up 23% to $420 million this quarter, and non-GAAP diluted earnings per ADS are up 26% to $1.68.

Turning to Slide 7 and just really giving a snapshot here in pictorial form of what I said a moment ago. To the right-hand side in the blue bubbles, you can see those 9 core products that are driving growth on a global basis. As you can see from the bullets on this slide, we expect them to be multiple drivers of growth, but the first one is the continued growth in existing markets. On top of that, many of these products have recently entered new geographies and, therefore, we believe there is potential for strong growth in those new territories. And that will also answer the growth in existing markets.

Behind that, you see an emerging strong late-stage pipeline. The lead program really being VYVANSE in ex U.S. markets, particularly the European filing, but we're seeing ongoing growth in market share in both Canada and Brazil where we've already launched. And I'll review the state of the ADHD market globally in a little few moment's time.

Behind that, the new uses of VYVANSE programs. VYVANSE in major depressive disorder is already underway. And then we are in the midst of discussing what we hope will be further late-stage trials in both binge eating disorder and negative symptoms of schizophrenia.

And behind that, one of our newest assets that we added to the portfolio with the FerroKin Biosciences acquisition earlier this year, SPD 602 now is a product circulating agent for iron overload. And behind that, you can see we're still working on a number of programs in the earlier stage pipeline.

In Specialty Pharma, we have carry-away projects, hematology projects and the Movetis assets. In HGT, the intrathecal programs, which I'll touch on again in the little while. And behind that, Regenerative Medicine, another new asset we brought in, VASCUGEL, adding to our platform in DERMAGRAFT .

So with that, let me turn over to Slide 8, really introduces to you for the first time our renamed business unit, what used to be just ADHD. And really, this is a point into the future that recognizes the expansion of our interest beyond ADHD into other psychiatric disorders. And so we've renamed the business unit now Behavioral Health, with the slogan, as you can see, that we unleash potential in patients who to date have struggled in life because of their psychiatric disorders.

So turning on and starting to review in more detail that particular business unit and looking at the global ADHD market on Slide 9. The worldwide market today is now growing to be an excessive $8 billion this year. It continues to be one of the fastest-growing therapeutic areas in the industry.

In the U.S., in the year to date, we've seen just over 9% volume growth. But in the rest of the world, in Europe, Canada and Brazil, we're also seeing double-digit growth, which is very encouraging, given our aspirations to grow our franchise internationally. Most importantly, Shire's key brands, with diminishing branded competition and no new competitive entrants on the horizon, continue to grow faster than the market as they gain market share.

So the diagram here just gives you a little bit more detail of the dynamics in the U.S. market in the first half of this year. What you see with VYVANSE is that we grew 21% overall in volumes, and you can see in the split here between pediatric and the adult market. Adult growth, still exceptionally strong period-on-period here in the year to date, 34% growth. But in pediatrics, also, a very respectable growth of 14%. You can see total market now nudging up to close to 5 million prescriptions in volume terms.

INTUNIV equally doing well. You can see exceptionally strong growth again, 46% overall growth this year and nudging up to now well in excess of 1 million prescriptions in 2012.

Turning over and just looking a little bit more in detail of the split in the market. And we believe that VYVANSE is poised for continued success in both adults and adolescent markets, really backed by maintenance of effect data, which we published another Phase III study in regard to LDX, is one of the pivotal filing studies in regard to our EU filing this year that showed very good outcomes again in the pediatric and adolescent areas of the market in terms of maintenance of effect.

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