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Shire earnings jump but sales disappoint

Drug maker Shire lifted first-quarter earnings 10 per cent but revenues missed consensus estimates by 5.0 per cent.

Drug maker Shire lifted first-quarter earnings 10 per cent but revenues missed consensus estimates by 5.0 per cent.

Product sales in the three months to end-March 2013 were up 1.0% to $1.1bn against a strong set of comparatives from the equivalent period in 2012, but this was less than analysts were expecting.

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Sales of Replagal for sufferers of Fabry disease fell 15% due to issues with shipments and competition, while the restructuring of the sales and marketing model for Dermagraft foot ulcer treatment saw its sales fall 62%.

Compensating for these falls, Dublin-headquartered Shire enjoyed particularly strong performances from Vyvanse for children with attention-deficit disorder (ADHD), hyperactivity treatment Intuniv and Lialda for colitis, leading to group earnings advancing 10% to $1.63 per share on a non-GAAP basis and generating $257m of cash during the quarter.

As he set out his strategy for Shire's future, new Chief Executive Officer Flemming Ornskov said: "Shire has consistently delivered growth significantly above the industry levels of mid single digit and we intend that this will be the case in the future."

Ornskov's growth strategy is to sharpen the group's focus on "commercial excellence" of currently marketed products and "pipeline innovation" through research and development and business development.

Broker Jefferies notes that management are confident in meeting earnings forecasts of $6.67 earnings per ADS, but are now targeting lower sales growth due to weaker Replagal and Dermagraft.

The broker said: "As a growth story we believe lower top-line momentum [will] drive stock weakness, but longer-term valuation and pipeline drive our 'buy'."

Shares in Shire were down 6.4% at 1,890p at 15:20 on the day of the announcement.

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