Shire on fire
Specialist biopharmaceutical company Shire has been on a good run lately, its share price rising 24% in the last three months. That's no flash in the pan -- it's up 70% over three years, and 137% over five years. But that's history as far as the stock market is concerned. It has just released its full-year results. So what does the future hold?
Shire is a highly specialist business, focusing on attention deficit and hyperactivity disorder, gastrointestinal diseases, human genetic therapies, and regenerative medicine. It's a different beast than pharma giants Glaxo and AstraZeneca, and offers investors a very different return. While the big two are prized for their 5% yields, Shire delivers a sickly 0.5%. This stock is built for growth rather than income and, as the figures show, growth is what investors have received.
Profits in the pipeline
Its full-year results, just published, herald "another strong year for Shire," said chief executive officer Angus Russell, with 12% growth in product sales, and 14% growth in non-GAAP (generally accepted accounting principles) earnings. Russell also hailed its strong late-stage research and development pipeline, which could deliver future growth from LDX, the active ingredient in Vyvanse, used to treat major depressive disorder, binge eating disorder, and negative symptoms of schizophrenia. Its ADHD portfolio is performing well in a growing global market, while ADHD blockbuster Elvanse is set to launch in some of the largest markets in Europe. Other rare disease treatments have also enjoyed strong growth. Its strong pipeline should fuel further growth in line with current consensus earnings expectations for 2013, he said.
It was all very bullish, with Russell, who is stepping down at the end of April after five years, boasting that "Shire is in great shape." But the market wasn't as pleased with Shire as Shire was pleased with itself, and its share price dropped 3.5% on a 14% drop in U.S. GAAP operating income for 2012. This followed a 19% drop in U.S. sales of its Adderall XR product, to $429m million, after the approval of a generic rival in the second quarter, and a $58 million charge Shire had agreed to resolve litigation with Impax Laboratories, over Shire's supply of an authorised generic version of Adderall XR.
Should I buy the pharm?
Despite this hiccup, Shire's prospects look good, with a forecast 62% earnings-per-share growth in 2013, followed by 15% in 2014. The company has strong operating margins, at around 20%, and generates plenty of cash, but it isn't cheap, trading at nearly 24 times earnings. I wouldn't rush out to buy it, when there are more exciting growth opportunities out there, including this current Motley Fool favourite. Our share analysts believe they have found the single best U.K. growth stock of this year. They are so impressed, they have named it "Motley Fool's Top Growth Share For 2013." If you want to know its name, simply download our free report. It won't cost you a penny, so click here now.
Harvey Jones owns shares of Glaxo, but no other companies mentioned in this article. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.