Shire Mulls Spinning-off or Selling Neuroscience Unit--Update

By Denise Roland Features Dow Jones Newswires

Shire PLC (SHPG) lowered its full-year sales expectations Thursday as it braced for a new low-cost competitor to its ulcerative colitis drug Lialda.

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However, the Dublin-based biopharmaceutical company brightened its profit outlook, due to better-than-expected cost savings from its $32 billion acquisition of Baxalta in 2016.

Shire said it now expected full-year revenue to come in at $14.3 billion to $14.6 billion, compared with earlier expectations of $14.5 billion to $14.8 billion.

It forecast non-GAAP (Generally Accepted Accounting Principles) diluted earnings per American Depository Receipt of $14.80 to $15.20 for the full year, versus its previous guidance of $14.60 to $15.20.

Shire posted net income of $240 million for the three months to June 30, compared with a $162 million loss a year earlier, when earnings were hit by costs related to its Baxalta purchase.

Revenue climbed 54% to $3.75 billion, largely reflecting a bigger contribution from products that were previously sold by Baxalta.

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Analysts had expected net income of $768 million and revenue of $3.67 billion.

The year-earlier period only included around one month's sales from Baxalta, which Shire formally acquired on June 3 in 2016.

-Write to Denise Roland at denise.roland@wsj.com

Shire PLC (SHP.LN) is considering spinning off or selling its attention-deficit hyperactivity disorder drugs business in a move that would sharpen its focus on rare diseases.

Dublin-based Shire said it would carry out a strategic review of its neuroscience unit, which mostly sells drugs for the childhood hyperactivity disorder, and will make a decision by the end of the year.

Chief Executive Flemming Ornskov, who joined Shire in 2013, has spent his tenure bulking up the company's presence in rare diseases, through a mix of small deals and, last year, a hard-won $32 billion acquisition of hemophilia specialist Baxalta.

Dr. Ornskov's focus on rare diseases has long raised questions about the future of Shire's once-dominant ADHD franchise. Dr. Ornskov said the timing of the review was driven by a belief that both businesses were now large enough to stand on their own.

Shire's neuroscience unit, which generates around 17% of total product sales, is already managed separately from the rest of the business because of its distinctive sales model.

The rest of Shire's drugs--which span conditions such as hemophilia, genetic diseases, cancer, and gastrointestinal conditions like ulcerative colitis--all involve highly specialized doctors and small patient groups.

Analysts at Liberum said they believe a public listing was more likely than a sale because of the limited potential for cost-savings by a potential buyer. Citi analyst Peter Verdult estimated the unit would fetch a valuation of at least $14 billion as a standalone business.

The announcement came as Shire announced its second-quarter results.

It posted net income of $240 million for the three months to June 30, compared with a $162 million loss a year earlier, when earnings were hit by costs related to its Baxalta purchase.

Revenue climbed 54% to $3.75 billion, largely reflecting a bigger contribution from products that were previously sold by Baxalta. The year-earlier period only included around one month's sales from Baxalta, which Shire formally acquired on June 3, 2016.

At the same time, Shire lowered its full-year sales expectations as it braced for a new low-cost competitor to its ulcerative colitis drug Lialda. However, it brightened its profit outlook due to better-than-expected cost savings from the integration of the Baxalta business.

Shire said it now expected full-year revenue of $14.3 billion to $14.6 billion, compared with earlier expectations of $14.5 billion to $14.8 billion.

It forecast non-GAAP (Generally Accepted Accounting Principles) diluted earnings per American Depository Receipt of $14.80 to $15.20 for the full year, compared with its previous guidance of $14.60 to $15.20.

-Write to Denise Roland at denise.roland@wsj.com

(END) Dow Jones Newswires

August 03, 2017 09:33 ET (13:33 GMT)