Earnings Call: Shionogi Reports Revenue Decline, Remains Optimistic About Growth Targets

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Earnings Call: Shionogi Reports Revenue Decline, Remains Optimistic About Growth Targets

In its latest earnings call, Shionogi & Co. discussed its financial performance for the second quarter of the 2024 fiscal year, acknowledging a 7.2% decline in revenue and a 22.2% decrease in operating profit year-over-year. Despite these challenges, the company remains focused on achieving record revenues and profits for the third consecutive year, targeting ¥4.6 trillion in revenue and ¥1.65 trillion in operating profit.

The company's strategy revolves around growth in HIV royalty revenues, international expansion, and domestic infectious disease management. Shionogi also highlighted significant growth in royalty revenues, particularly from its HIV franchise, as well as strong growth in its over-the-counter (OTC) segment.

Key Points

  • Shionogi & Co. reported a 7.2% decrease in revenue and a 22.2% decline in operating profit for the second quarter of the 2024 fiscal year.
  • The company aims for record revenue and profits for the third consecutive year, setting targets of ¥4.6 trillion in revenue and ¥1.65 trillion in operating profit.
  • Key growth factors include HIV royalty revenues, international expansion, and domestic infectious disease management.
  • A 26.6% increase in earnings from the HIV franchise and expansion in the OTC segment were observed.
  • Shionogi plans to increase its market share in COVID-19 treatments and aims to raise treatment rates.
  • The company is also focusing on expanding its portfolio in quality of life (QOL) diseases such as insomnia and has raised its dividend per share to ¥87.

Company Outlook

Shionogi is optimistic about meeting its targets in the second half and maintaining momentum across various product segments. The company aims for a revenue goal of ¥460 billion by 2025 and is considering strategic investments of between ¥400 billion to ¥500 billion for future growth initiatives.

Negative Highlights

The company acknowledged its weaknesses in bridging pharmacology from animal models to human applications and recognized the need for enhanced pharmacology capabilities.

Positive Highlights

Despite the absence of flu cases, Shionogi reported stable sales of ¥25 billion in infectious diseases during the first half of the year. The company’s dual approach in infectious and QOL diseases is expected to empower sales teams for growth and enhance digital engagement.

Underperformance

Sales of the new product Xocova fell short of the ¥5 billion target due to low infection rates.

Q&A Highlights

Executives discussed the projected quarterly growth of 13% to 14% and emphasized ongoing developments in the product line. The company upwardly revised its medium-term forecast for 2030 and expressed confidence in long-acting injectable (LAI) therapies.

Despite experiencing a challenging quarter, Shionogi & Co. continues to adhere to its growth strategy. The company's commitment to expanding its HIV franchise, strengthening the OTC segment, and improving treatment rates for COVID-19 and other infectious diseases underscores its proactive approach to overcoming challenges. With planned strategic investments and a focus on enhancing its QOL disease portfolio, Shionogi is positioning itself for sustainable growth in the coming years. The company’s R&D efforts and the rollout of new products such as Xocova and Xofluza, even though some have not met sales expectations, demonstrate its commitment to innovation and market expansion. The increase in dividend payments reflects Shionogi's confidence in its financial health and commitment to shareholder value creation. As the company continues to develop multiple products and vaccines, including a universal vaccine for Sarbecoviruses, it maintains its engagement with stakeholders and analysts to drive future forecasts and market dynamics.