AQR Capital and Shire
During the fourth quarter of 2014, AQR Capital closed its position in Shire plc (SHPG). The fund sold its entire stake of 816,116 shares in the company.
Overview of SHPG
Shire plc, a leading biopharmaceutical company, develops and markets innovative specialty medicines that address significant unmet patient needs. The company’s four commercial units focus exclusively on the following therapeutic areas:
- Rare Diseases
- Gastrointestinal Issues
- Internal Medicine
SHPG’s headquarters are in Dublin, but the company’s incorporation is on the island of Jersey for tax purposes.
SHPG makes up 1.97% of the iShares NASDAQ Biotechnology ETF (IBB).
SHPG and the US firm AbbVie (ABBV) terminated their $54-billion merger plans in October 2014. The move resulted from the US Department of the Treasury’s rule changes regarding so-called tax inversion deals.
These developments led to a sharp fall in SHPG’s stock. The abandoned deal also erased gains for hedge funds that had built up long positions in SHPG and that had been confident about the merger’s success.
In January 2015, Shire announced that it would be taking over NPS Pharmaceuticals for around $5.2 billion. The biopharmaceutical company focuses on rare diseases.
Shire expects to benefit from the growth of NPS’s short bowel syndrome medication Gattex and its hypothyroidism product Natpara. A statement said the deal “strengthens Shire’s focus on rare diseases while leveraging industry-leading GI or gastrointestinal commercial capabilities and global footprint.”
SHPG’s acquisition of the privately held company Meritage Pharma could boost ’s capacity in the area of gastrointestinal treatments. Meritage develops the “phase 3-ready compound, oral budesonide suspension (OBS), for the treatment of adolescents and adults with eosinophilic esophagitis (EoE), a rare, chronic inflammatory gastrointestinal disease.”
Loss of Salix to Valeant
4Q14 revenue growth
SHPG said that 97% of its total revenues for 2014 came from product sales, while the remaining 3% were from royalties. During the year, 40% of the company’s product sales were of Rare Diseases products, 31% were from Neuroscience products, and 29% came from Gastrointestinal and Internal Medicine products.
In 4Q14, total revenues grew 19% to $1.57 billion. The company noted that it gained from higher royalties and other revenues. Mainly, these gains came from royalties generated by the hyperactivity disorder drug Intuniv, which had a generic version launched in December. SHPG also surpassed the $13-million milestone related to the phosphate binder Fosrenol. Non-GAAP (or generally accepted accounting principles) diluted earnings per ADS (or American depository shares) rose 17% to $2.63, but missed on analyst estimates.
In the next part of this series, we’ll look at AQR Capital’s increased position in Apple (AAPL).