Genzyme's Rebound Will Weigh on Shire's Growth

Shire's genetic therapies contribute to strong 3Q, but we think the company will have a difficult time sustaining current growth rates in 2011 and beyond

Karen Andersen, CFA 1 November, 2010 | 12:12PM
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Shire (SHP) reported third-quarter results and an improved 2010 outlook that slightly exceeded our estimates. However, we think Shire will have a difficult time sustaining current growth rates in 2011 and beyond, and we're not making any changes to our fair value estimate of 1,303p.

Shire's total revenue grew 31% to $874 million, as the firm continued to benefit from both a growing ADHD market and Genzyme's (GENZ) supply shortage for its genetic therapies. Intuniv sales grew 6% from the second quarter (excluding sales relating to launch stocking booked in the second quarter), and Adderall XR sales actually grew 41% from the same quarter last year, as generic competition remains limited. Both drugs benefited from the 13% US ADHD market growth in the quarter.

The biggest contributors to Shire's growth were genetic disease treatments Replagal and Vpriv. Replagal sales increased 91% from the previous year as Genzyme failed to supply enough Fabrazyme to retain its leading market share (international market share for the products have flipped since early 2009, and Genzyme's 70% share has become Shire's). However, Genzyme is doubling its Fabrazyme supply internationally in the fourth quarter, and the firm expects to be at full supply by mid-2011. As a result, we think Replagal sales will peak in 2011 as patients begin to return to Genzyme's product. Vpriv sales reached almost $50 million after less than a year on the market, but given Genzyme's progress toward reaching full global supply of Cerezyme by the end of 2010, we don't expect to see consecutive quarterly growth for Vpriv going forward.

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About Author

Karen Andersen, CFA  Karen Andersen, CFA, is a senior stock analyst with Morningstar.

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