What Is Shire’s Outlook for 2016?

Shire (SHPG) expects to generate 13%-17% higher product sales on a constant exchange rate (or CER) basis in fiscal 2016. The product sales in fiscal 2015 amounted to $6.1 billion. The contribution from Vyvanse, its lead product, stood at $1.7 billion. The non-GAAP (generally accepted accounting principles) gross margins are expected to remain at similar levels to the 85.5% reported in 2015. Non-GAAP diluted earnings per share are expected to be 7%–10% higher than 2015 levels.

Shire’s 2016 outlook includes the Dyax acquisition, whereas it excludes the Baxalta integration. SHPG’s portfolio has leading products spanning the neuroscience, immunology, genetic diseases, internal medicine, ophthalmology, and hematology spaces. Its entry to ophthalmology is conditional based on regulatory approval to Lifitegrast and SHP640.

Shire anticipates non-GAAP R&D (research and development) and SG&A (selling, general, and administrative) expenses to increase by 12% to 14% in fiscal 2016. The increase in the two expenses is a result of the absorption of the Dyax transaction operating costs.

The higher SG&A will support the anticipated launch of Lifitegrast in the second half of the year. With the advancement of pipeline candidates, Shire expects higher R&D expense in 2016. Its non-GAAP R&D and SG&A have been ~13% and 27%, respectively, of the product sales during the first quarter of 2016. To get exposure to Shire, you can invest in the iShares Nasdaq Biotechnology ETF (IBB). The fund invests 1.1% of its total holdings in Shire. Other major holdings in the ETF include Amgen (AMGN), Celgene (CELG), Gilead Sciences (GILD), and Biogen (BIIB).

We’ll discuss Shire’s flagship products and its pipeline in the next parts of the series.