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Baxalta (BXLT) Beats on Q4 Earnings, Set to Merge with Shire

Zacks Equity Research

Baxalta Incorporated BXLT, which started trading on the NYSE from Jul 1, 2015, reported its third earnings results post spin-off from Baxter International Inc. BAX. Baxalta generated fourth-quarter 2015 earnings of 57 cents per share, a penny above the Zacks Consensus Estimate.

Full year earnings were $2.08 per share, down 14% while revenues increased 3.3% to $6.15 billion.

Worldwide pro forma sales came in at $1.76 billion, up 3% year over year including the impact of foreign currency. Excluding the impact of foreign currency, sales increased 10% year over year. Revenues surpassed the Zacks Consensus Estimate of $1.69 billion.

While U.S. revenues grew 13% to $944 million, international sales declined 7% to $819 million including the impact of foreign currency. Meanwhile, international sales increased 8% year over year excluding the impact of foreign currency.

The Quarter in Detail

The Hematology segment recorded sales of $1.03 billion, up 6% year over year excluding the impact of foreign currency driven by hemophilia products. Growth was fueled by the launch of Adynovate (hemophilia A), which gained FDA approval in Nov 2015 as well as strong global demand for Advate and Feiba. Rixubis and Obizur also contributed to growth.

Immunology sales grew 8% year over year excluding the impact of foreign currency to $680 million, reflecting strong demand for immunoglobulin therapies including HyQvia and sales of specialty biotherapeutics.

The Oncology segment recorded sales of $53 million in the reported quarter, reflecting the acquisition (Jul 2015) of Oncaspar (pegaspargase), a marketed biologic treatment of acute lymphoblastic leukemia. We note that Baxalta started reporting revenues under the Oncology segment beginning from the third quarter of 2015.

Gives 1Q16 Outlook

Baxalta also provided guidance for the first quarter of 2016. The company expects pro forma sales growth (excluding the impact of foreign currency) of 8–9%. Including the impact of foreign currency, the company expects pro forma sales to increase 4–5%. Baxalta also expects earnings in the range of 44–46 cents per share. The Zacks Consensus Estimate for earnings is currently at 49 cents per share.

The company did not provide any updated guidance for 2016 considering that it is set to merge with Shire plc SHPG in a deal worth approximately $32 billion. The transaction is expected to close in mid-2016.

Our Take

Baxalta’s fourth-quarter 2015 results were better than expected with the company beating on both top- and bottom-line estimates. Meanwhile, Baxalta continues to progress with its pipeline. Going forward, we believe that investor focus will remain on updates from the Shire transaction.

Baxalta is a Zacks Rank #3 (Hold) stock. Anika Therapeutics Inc. ANIK is a better-ranked stock in the health care sector carrying a Zacks Rank #1 (Strong Buy).

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