JPM18: Shire holds onto neuroscience unit, for now
- Following roughly six months of strategic review, Shire plc has decided to retain its neuroscience business — at least for now.
- The near-term plan, according to a Monday presentation at the J.P. Morgan Healthcare Conference, is to create two divisions. One will focus on neuroscience, while the other centers on rare disease. Shire is still assessing whether to keep the divisions under a single roof or make each a standalone entity, but will give updates about those ongoing discussions in the second half of 2018.
- Additionally, Shire lowered its 2020 revenue guidance to between $17 billion and $18 billion. When it acquired Baxalta a couple years back, the drugmaker pictured itself earning more than $20 billion annually by 2020.
Shire is using 2018 as a test period to see where its neuroscience drugs can be most beneficial. Executives expect that, in splitting the company into two overarching units, they will be able to better manage products and optimize dissimilar pipelines. And if the that strategy doesn't pan out, they can always pursue a spin out.
"We have changed Shire from an ADHD company to a biotech company ... but we still have an incredibly strong neuroscience business," Shire CEO Flemming Ornskov said at JPM. "So why not exercise that optionality?"
Shire's restructuring efforts come as the company faces several challenges with its portfolio.
Revenues from the company's internal medicine unit dropped over the course of 2017 as generic competition took a toll on sales of the ulcerative colitis treatment Lialda (mesalamine). Issues at the Sanquin Blood Supply Foundation have led to supply shortages of Cinryze (C1 esterase inhibitor [human]), resulting in a steep decline in sales during the third quarter. And the recent approval of Roche AG's hemophilia drug Hemlibra (emicizumab) stands to eventually steal a sizable amount of the market that Shire's Feiba (anti-inhibitor coagulation complex) targets in the U.S.
Yet even with those headwinds, Shire has achieved impressive growth over the last five years. Total product sales increased 45% to $10.5 billion over the first nine months of 2017. Of that sum, $655 million came from attention deficit hyperactivity disorder drugs Vyvanse (lisdexamfetamine dimesylate), Mydayis (mixed salts of single-entity amphetamine) and extended release Adderall (amphetamine and dextroamphetamine).
Rare disease products, meanwhile, were responsible for roughly 70% of Shire's revenue from October 2016 through the end of September. The drugmaker plans to start reporting the operational performance of each division separately in the first quarter.
Shire also announced that it's on schedule for repaying debts, predicting a non-GAAP net debt to EBITDA ratio of below 2.5x by the end of 2018, though that doesn't take into account bolt-on acquisitions or licensing deals.
- Shire plc Press release
Follow Jacob Bell on Twitter