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Shire Pharmaceuticals boss steps down, as AstraZeneca rues loss of exclusivity

Category : Business

News of Angus Russell’s departure comes as Britain’s second-largest drugmaker reports a 19% slide in third-quarter sales

The boss of Shire Pharmaceuticals, Angus Russell, is stepping down next April after five years at the helm and will be replaced by a senior Bayer executive.

Russell, 56, will leave at the annual meeting after 13 years with the drugs manufacturer, during which he turned the company from a small specialist firm into a FTSE 100 company, focused on attention deficit hyperactivity disorder medicines, a lucrative market in the US. Having spent 32 years in the pharmaceutical industry, including at AstraZeneca and ICI, he said he now wanted to spend more time with his family, as well as pursue his charitable interests and non-executive directorships. He got married for the second time last year, leaving him with responsibility for four young children.

Russell will be replaced by Flemming Ornskov, chief marketing officer of Bayer’s speciality pharmaceuticals business with sales of more than €10bn in Europe, China and the US. “He has impressed investors in this role, where he was responsible for the rollout of [blood-thinning pill] Xarelto,” said analysts at JP Morgan Cazenove. Ornskov previously worked for Merck and Novartis, as well as biotech firms.

Analysts at Cowen were surprised by Russell’s departure, noting: “The explanation given is the business is expanding further and more aggressively into international markets in which Ornskov has significant experience. This appears to be sound rationale.”

The news came as Shire’s third-quarter sales growth disappointed due to a cut-price version of one of its top-selling ADHD drugs coming onto the market. Missing analysts’ expectations, sales at Shire grew by 4% to $1.1bn. Sales of Adderall XR dropped 32% to $102m, which partially offset the 24% rise in sales of Shire’s new lead product Vyvanse to $247m. The drug will be called Elvanse when it is launched in Europe.

Mick Cooper, analyst at Edison Investment Research, said: “Shire’s growth has slowed because of generic competition to Adderall XR showing that it does face some of the issues facing big pharma. However the underlying growth remains strong and Angus Russell will be leaving Shire in a very strong position.”

Patent expiry on best-selling medicines also continues to haunt AstraZeneca, Britain’s second-largest drugmaker, which reported a 19% slide in third-quarter sales.

The company said it was hurt by the loss of exclusivity for Seroquel IR, its blockbuster antipsychotic treatment, as well as high blood pressure drug Atacand, antibiotic Merrem, cholesterol drug Crestor in Canada and heartburn pill Nexium in Europe. Revenues fell to $6.7bn (£4.15bn) in the third quarter from $8.2bn a year ago.

New chief executive Pascal Soriot, who joined from Roche and suspended share buybacks on his first day in the job, said buying in new treatments would be an important way of rebuilding the pipeline. He added that the recently launched heart drug Brilinta had the potential to do “far better”, admitting that AstraZeneca had failed to make the most of it.

The Frenchman replaced David Brennan, who was ousted by shareholders in the spring amid growing concern about AstraZeneca’s thin pipeline of new drugs. Soriot said his priority was to “restore the company to growth and scientific leadership” and promised to unveil the results of a strategy review to investors at the end of January.

The decision to halt share buybacks is seen as a sign that AstraZeneca is on the prowl for mid-sized to larger acquisitions, with speculation circling around UK group Shire and US firm Forest Laboratories.

“AstraZeneca’s key issue remains its shrinking sales line … impacted heavily by generic losses and with little offset from new products,” said Mark Clark at Deutsche Bank.

“The results, in our view, appear to put the company on track only to meet the bottom end of its guidance for a low-to-mid teens sales decline for the year and to deliver core earnings per share in the lower half of its $6-6.30 guidance range. This is of little consequence, however, given the overriding importance of the strategy review which is expected to be unveiled in early 2013.

FTSE closes down as markets across Europe suffer

Category : Business

Italian and Spainsh markets down 4% and 3.7% with all eyes firmly on the continent for Thursday’s EU meeting

Markets across Europe closed down today as fears that Thursday and Friday’s EU summit will achieve the same outcomes as previous ones – very little.

Cyprus applied for an EU bailout, and the finance minister of Greece resigned due to ill health less than a week into the job.

Italian and Spanish bonds were both up 21bps and 28bps respectively, with Italy’s 10 year hitting 6%.

Italy had a particularly tough day, as its FTSE MIB closed down 549 points, 4%, at 13114.

Markets in Spain was down 3.7%, France down 2.2% and Germany down 2.1%.

The FTSE 100 performed best (or the least worst), closing down 63 points, 1.1%, at 5451.

So, little interest seems to have been paid to the equities and stock picking has fallen in favour to watching the eurozone self-implode.

Biggest faller on the main index was pharmaceutical company Shire after its second best-selling drug will now get a generic competitor – shares closed down 223p, 11.3%, at £17.40.

Oil companies also suffered in the heat today, but not because a barrel of Brent crude finest is now worth $90.23, down 0.8% on the day.

Valiant Petroleum (down 23.8p, 6.2%, at 356.5p), Premier Oil (down 16.2p, 4.8%, at 326.8p) and Ithaca (down 14.5p, 13.2%, at 110p) all reported problems out in the, er, field.

Valiant found no gas in its latest drilling location and will abandon it.

Premier Oil’s north sea oil drilling suffered a setback as its Coaster well turned out to be dry.

While Ithaca said only three of the four wells at its Athena field in the North Sea are flowing due to a blockage, stopping 5,000 barrels a day being released.

Bring on tomorrow.

Shire hit as rival drug approved

Category : Business, World News

Shares in pharmaceutical giant Shire fall in early trading after US regulators approve a rival’s version of its second-biggest selling drug Adderall XR.

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Shire chairman took home £8.5m

Category : Business

Matthew Emmens, chairman of Shire, took home £8.5m in 2011 after a series of share-related deals paid out

Matthew Emmens, chairman of Shire, took home £8.5m in 2011 after a series of share-related pay deals from the pharmaceutical company paid out.

The American businessman was chief executive of the group until 2008, when he was elevated to chairman after five years in the role. The long-term incentive plans paying out were awarded to him during his period as chief executive, some of them date back to 2006. He also exercised some options last year. He receives fees of £379,000 for chairing the international company best known for its treatments for Attention Deficit Hyperactivity Disorder (ADHD).

His replacement as chief executive, Angus Russell, was paid $2.8m (£1.7m) in salary, bonuses and benefits in 2011 when £3.7m of shares from performance related deals from previous years also paid out. He was also awarded a total of $3.5m in long-term incentive plans that are related to performance over three years.

The finance director, Graham Hetherington, was paid £972,000 in salary and bonuses in 2011 when £2.3m of share related deals from previous years also paid out. He was awarded £852,000 in the long-term incentive plans.

The payouts, detailed in the annual report published on Thursday, follow a period of strong share performance by the company, which was the best performing stock in the FTSE 100 in 2011, when Shire beat City expectations with revenues breaking through $4bn for the first time.

Based in Basingstoke, Shire is domiciled in Ireland for tax purposes and has major operations in the US – where Emmens is based – in Philadelphia and Boston. It is regarded as growing more quickly than its so-called big pharma rivals amid strong demand for its hyperactivity treatments.

Russell is to receive a 2.4% rise in his salary, taking it to $1.29m for 2012 and Hetherington a 2.2% rise to take his salary to £465,000 . The company intends to introduce a “claw back” provision in to its long-term incentive plans to enable bonuses to be reclaimed in the event of misconduct or misstatement of results in the future.

The chair of the remuneration committee, Anne Minto, said in the annual report that the pay deals should be “viewed in the context of the structure and international operations of the company”. Although a FTSE 100 company Shire generates more than 90% of its product sales outside the UK.

Wolseley climbs on US recovery and dividend hopes, as FTSE shakes off early Greek fears

Category : Business

Building materials group boosted by broker buy note, while markets recover some ground after US data

Another bout of positive US data, including rising housing starts, lifted markets off their worst levels, and also helped building materials group Wolseley.

The City is hoping that, with a US recovery underway and Wolseley having seemingly decided against a major deal, the company could instead return more cash to its shareholders. In a buy note Liberum Capital raised its price target form £22.50 to £26.80, partly on the prospect of rising dividend payments. Analyst Charlie Campbell said:

Wolseley’ shares have been strong as US recovery appears more likely. This is not without substance, but Wolseley remains a very interesting story as Ferguson [a US plumbing and heating subsidiary] is gaining market share as quickly as it did before the crisis ,and there is still much self-help in Europe. We also think that a big dividend surprise is coming sooner rather than later.

Wolseley’s new management has passed on a major acquisition (Ahsell, Scandinavian number two in plumbing and heating) and not let capital expenditure rise much. This leads us to believe that dividends will rise up the list of priorities quickly. So we raise our dividend per share estimates by 15%-29% (between 2012 and 2015) and note that these are now 7%-12% ahead of consensus.

In the market Wolseley shares closed 33p higher at £23.55.

The better than expected US figures – which also included producer price inflation numbers and weekly jobless claims – helped support a market which had initially been unsettled by the continuing problems in Greece and worries about Iranian oil supplies.

By the close the FTSE 100 was down just 6.78 points at 5885.38, having earlier fallen as low as 5829. Angus Campbell, head of sales at Capital Spreads, said:

The market started off on the back foot as concerns grew over whether Greece will actually get its bailout funds; however gradually the losses were eradicated as better than expected economic data from the US bolstered investors’ resolve and the markets recovered from their lows.

A decline is still a decline though, showing that markets remain nervous Greece won’t get its money. Europe is sceptical that following the Greek general election in April austerity measures will not be implemented by the new administration and the eurozone will simply be throwing good money after bad.

Investors were steering clear of the mining sector on concerns about slowing global demand. Russian companies came under pressure, with Evraz down 15.5p at 420.8p and Polymetal 37p lower at £10.75.

Finnish miner Talvivaara Mining Company fell 47.6p to 281.9p after it announced it would place around 25m new shares at 280p each to raise £70m. The cash will be used to boost its balance sheet and help ramp up production. It has run into a number of issues recently including frozen production lines and problems with some of its processes. Chief executive Pekka Pera will move to become executive chairman and is being replaced by mining veteran Harri Natunen.

African Barrick Gold lost 70.5p to 448p on disappointing growth forecasts, with power shortages expected to continue to hit its mines in Tanzania during the current year.

Elsewhere Randgold Resources dropped 175p to £69.80 while Anglo American fell 46p to £26.44. But Glencore added 4.6p to 426.6p. There was some gossip it could edge up its offer for Xstrata, down 2.5p to £11.77, from 2.8 new shares to 3.1.

Essar Energy dipped 2.3p to 123.6p. The company’s subsidiary Essar Oil has submitted an appeal against a judgement by the Indian Supreme Court which ruled the company could no longer defer repayments of sales tax.

Analysts at Morgan Stanley have moved from underweight to equal weight but cut their price target from 230p to 160p:

Essar shares price in tough outcomes for both oil and power. However, near-term newsflow could be negative for both, and coal supply concerns could still be the next big issue. We upgrade to equal weight but still see some downside to the shares near term.

Vague bid speculation surrounded pharmaceuticals group Shire, up 7p to £23, and J Sainsbury, 5.9p better at 296p.

Misys jumped 9p to 314p on talk of a possible 400p a share offer from private equity, which could disrupt the IT group’s proposed all share merger with Swiss rival Temenos.

Unilever added 15p to £20.70 after analysts at Liberum suggested the company should consider splitting its buoyant personal care business from its food division, whose performance looks underwhelming when compared to rivals such as Nestle or Danone:

Perhaps, Unilever should follow the Kraft and Sara Lee examples (which PepsiCo may also have to follow) and break the company into two divisions (and get full value for its robust home and personal care unit, which has around 70% of sales generated in emerging markets).

On a busy day for company results, publishing group Reed Elsevier rose 15.5p to 549.5p after reporting a 5% rise in annual operating profit and saying it expected another year of growth despite the tricky economic climate. Singer Capital Markets said:

Reed’s full year results are ahead of expectations at the profit level. In broad terms the outlook is supportive of our positive stance on the business to business sector with exhibitions and data markets in generally good shape with some noteworthy deviations. We note that legal markets still look very tough and European exhibitions outlook appears soft and Reed is clearly cautious. Academic publishing commentary appears to be solid and non-European exhibitions is encouraging.

The shares have lagged the market and only risen 2.9% year to date. The valuation looks modest and there is some scope for a re-rating.

But BAE Systems lost 7.8p to 325.3p on worries about the outlook, given the continuing cuts in defence spending in the UK and US.

Finally Alumasc, the building and engineering products group, slumped 31% to 90p after profits for the first six months halved and the company slashed its dividend. David Buxton at FinnCap said:

The interims are disappointing and the outlook statement signals the full year to be materially below previous expectations although it also points to the second half being stronger than the first.

The dividend has also been severely cut, which is particularly disappointing as it provided a strong yield backing to the shares and had been maintained through recession.

Robin Hardy at Peel Hunt cut his price target form 173p to 90p and his recommendation from buy to hold:

Cost over-runs and capacity restraints at Alumasc Precision Components have hit margins in the first half. Despite action to address these issues and the group’s natural seasonality, full-year results will be materially below expectations. We expect profits to bounce back strongly in 2013, underpinned by a strong pipeline for Building Products (including two major Levolux contracts); however, the dividend cut is prudent.