Shire warns copycat drugs will eat into profits this year

FTSE 100 drug company Shire has warned investors to expect lower profits this year as sales come under pressure from a growing number of copycat medicines.
Shire posted a 13-fold leap in net profits to $4.3bn (?3.1bn) for 2017, up from $327m the previous year, while sales jumped a third to $14.5bn.
But investors took fright at Shire’s warning that competition from generic drugs, along with investment in a new factory, would eat into profit margins this year.
Shares in Shire fell more than 2pc to ?31.16 in early afternoon trading following the midday announcement.
Flemming OErnskov, chief executive at Shire, said that “greater genericisation” of its drugs would be a “drag on overall growth”.
Shire warns copycat drugs will eat into profits this year

Growing competition in the drugs market is lowering prices
But he said rising competition had been “anticipated”. He said this expectation was partly behind the decision to bulk up by acquiring major US rival Baxalta in 2016, almost doubling its revenues and helping with “mitigating” the impact of generic rivals.
Mr OErnskov said Shire will continue to assess whether to carve the company into two stock exchange-listed parts by spinning out its ADHD drugs business.
Shire will provide an update on the review - which would allow it to focus on its main business of developing medicines for rare diseases - in its half-year results.
The company said it would prepare for a possible break-up by starting to publish separate financial metrics for each division from the first quarter of this financial year.
Shire attracted rumours at the end of last year that it could be a takeover target, with US giant Pfizer reportedly sizing up a bid.
Mr OErnskov declined to comment on the rumour. He said: “We continue to drive strong performance, to drive the R&D pipeline and we are achieving on all of that.”
Growth last year was driven by strong trading in its immunology drugs division and strong sales outside the US. Shire expects sales growth to be in the “mid-single digits” in 2018.
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