Shire plc: Continued Excellent Performance in Q3, Full Year Earnings Expectations Increased, New Value in Pipeline Emerging
By Shire Plc, PRNEThursday, October 28, 2010
DUBLIN, October 29, 2010 - Shire plc (LSE: SHP, NASDAQ: SHPGY) the global specialty
biopharmaceutical company, announces results for the three months to
September 30, 2010.
Financial Highlights Q3 2010(2)
Product sales(1) $794 million +32%
Total revenues $874 million +31%
Non GAAP operating income $298 million +123%
US GAAP operating income $156 million +70%
Non GAAP diluted earnings per ADS $1.16 +138%
US GAAP diluted earnings per ADS $0.52 +59%
(1) Product sales excluding ADDERALL XR ("Core Product Sales") were up
31% to $694 million. Core Product Sales at constant exchange rates ("CER"),
computed by restating 2010 results using average 2009 foreign exchange rates,
were up 34%.
(2) Percentages compare to equivalent 2009 period.
Angus Russell, Chief Executive Officer, commented:
"We delivered another outstanding set of results this quarter with strong
revenue growth and operating leverage driving increases in Non GAAP earnings.
This continued excellent performance demonstrates the overall strength of
Shire's business and the sustained execution of our strategy.
In ADHD, VYVANSE sales are up 17% and the number of new physicians
prescribing INTUNIV continues to increase.
Sales of REPLAGAL have increased by 91% as we respond to the great need
of our Fabry patients; we estimate that our global market share now exceeds
60%. Only seven months into the initial launch of our treatment for Gaucher
patients, around 1,000 patients are now on VPRIV, representing a 16% global
market share.
We've made progress in several significant programs in our research and
development pipeline, including investigative uses of VYVANSE for adjunctive
therapy in patients with Major Depressive Disorder ("MDD"). We've also
recently completed our acquisition of Movetis NV, bringing the approved
product RESOLOR to our gastro-intestinal ("GI") portfolio, and announced the
in-licence from Acceleron of a Phase 2 orphan drug for Duchenne Muscular
Dystrophy.
Alongside delivery of these outstanding quarterly results, we're building
our business for the future. We're investing to enhance the value of our
product pipeline, building our international structure to maximise the global
reach of our products and using our strong cash generation to complete value
enhancing acquisitions and in-licenses.
We now expect to see Non GAAP earnings of up to $4.20 per ADS for the
full year. This includes the financial effect of the Movetis acquisition and
the DAYTRANA disposal. Looking ahead, we re-iterate our aspirational target
of mid-teens sales growth on average between 2009 and 2015."
FINANCIAL SUMMARY
Third Quarter 2010 Unaudited Results
Q3 2010 Q3 2009
Non Non
US GAAP Adjustments GAAP US GAAP Adjustments GAAP
$M $M $M $M $M $M
Revenues 874 - 874 667 - 667
Operating
income 156 142 298 92 42 134
Diluted
earnings
per ADS $0.52 $0.64 $1.16 $0.33 $0.16 $0.49
The Non GAAP financial measures included within this release are
explained on page 26, and are reconciled to the most directly comparable
financial measures prepared in accordance with US GAAP on pages 21 - 24.
- Product sales were up 32% to $794 million (2009: $603 million) due to
growth from both Core Products Sales (up 31% to $694 million) and
ADDERALL XR(R), (up 41% to $100 million). On a CER basis, which is a
Non GAAP measure, Core Product Sales were up 34%.
- Core Products Sales growth was driven by both existing and new
products, particularly REPLAGAL(R) (up 91% to $92 million; CER: up
103%), VYVANSE(R) (up 17% to $151 million) and recently launched
VPRIV(R) ($50 million) and INTUNIV(R) ($37 million).
- Total revenues were up 31% (CER: up 34%) to $874 million (2009: $667
million), as a result of higher product sales and higher royalty income
on authorized generic sales of ADDERALL XR compared to Q3 2009.
- Non GAAP operating income increased by $164 million, or 123%, to $298
million (2009: $134 million) as the increased investments we are making
in our research and development ("R&D") programs and selling, general
and administrative ("SG&A") activities to support recent growth were
more than offset by higher revenues compared to 2009. On a US GAAP
basis, operating income increased by $64 million, or 70%, to $156
million (2009: $92 million). US GAAP operating income in Q3 2010 also
included an up-front payment of $45 million made to Acceleron Pharma
Inc. ("Acceleron") in relation to the collaboration for activin
receptor type IIB ("ActRIIB") molecules and impairment charges of $43
million following the decision to divest DAYTRANA(R) to Noven
Pharmaceuticals Inc. ("Noven").
- Cash generation, which is a Non GAAP measure, increased by $51 million
to $271 million (2009: $220 million). Higher cash receipts from product
sales and royalties were partially offset by higher cash payments on
the increased investment in R&D and SG&A, and the timing of sales
deduction payments in 2010.
- Net debt at September 30, 2010 was $309 million (December 31, 2009:
$615 million), a reduction of $306 million in the year to date. Strong
cash generation of $959 million in the nine months to September 30,
2010 has reduced net debt as well as funded the acquisition of and
construction at Lexington Technology Park, cash tax payments and the
upfront payment made to Acceleron. Excluding restricted cash of $584
million held to pay for the acquisition of Movetis NV ("Movetis") in
the fourth quarter, net debt at September 30, 2010 was $893 million.
2010 OUTLOOK
Following a stronger than expected third quarter, we have increased our
expectations for the full year 2010. We now expect to see Non GAAP earnings
per ADS of up to $4.20. This increase includes the financial effect of the
Movetis acquisition and the disposal of DAYTRANA on October 1, 2010; it also
includes the cumulative impact of US Healthcare Reform, mandated European
price cuts and adverse foreign exchange rates.
The strong growth of our core portfolio will continue to drive total
revenue growth; however, the rate of growth will reduce in the fourth quarter
as we will not benefit from the one off adjustment to ADDERALL XR Medicaid
rebates and high level of royalties experienced in the same period last year.
The consolidation of Movetis will also mean that combined R&D and SG&A spend
for 2010 is likely to grow at marginally above 10% year on year.
Shire has made significant progress in 2010. Growth across our core
portfolio, particularly the accelerated growth of our HGT business, has
enabled us to increase our expectations of earnings while also making
targeted investments in our pipeline and international structure. We expect
to see solid earnings growth in 2011, but at a rate that reflects the pull
ahead into 2010 of some of HGT's growth potential.
PRODUCT LAUNCHES
Subject to obtaining the relevant regulatory/governmental approvals,
future product launches in the next 12 months include:
- VYVANSE/VENVANSE for the treatment of Attention Deficit
Hyperactivity Disorder ("ADHD") in adolescents in the US and children
in Brazil;
- INTUNIV as adjunctive treatment to long acting oral stimulants for the
treatment of ADHD in children and adolescents in the US;
- EQUASYM(R) for the treatment of ADHD in certain European
Union ("EU") countries;
- RESOLOR(R) in certain EU countries, for the symptomatic
treatment of chronic constipation in women for whom laxatives fail to
provide adequate relief;
- LIALDA/MEZAVANT for the maintenance of remission of ulcerative colitis
in the US and for the treatment of ulcerative colitis in
certain countries;
- VPRIV for the treatment of type 1 Gaucher disease in certain
European and Latin American countries; and
- FIRAZYR(R) for the symptomatic treatment of acute attacks of hereditary
angioedema ("HAE") in the US and certain European and Latin American
countries.
PRODUCT AND PIPELINE DEVELOPMENTS
Products
PENTASA(R) - for the treatment of Ulcerative Colitis
- On August 24, 2010 Shire received a ruling from the US Food
and Drug Administration ("FDA") on its Citizen Petition relating to
PENTASA. The ruling granted Shire's request with regard to the
requirement that bioequivalence to PENTASA be shown by dissolution
testing and further imposed a requirement for rigorous pharmacokinetic
data. The ruling denied the request that studies with clinical outcomes
endpoints also be required because the FDA concluded that comparative
clinical endpoint studies would be less sensitive, accurate and
reproducible than pharmacokinetic studies.
RESOLOR - for the treatment of chronic constipation in women
- Through its acquisition of Movetis, Shire has expanded its
GI presence in Europe with the recently launched RESOLOR, a new
chemical entity. RESOLOR is approved in the 27 countries of the EU,
Switzerland, Iceland, Lichtenstein and Norway.
REPLAGAL - for the treatment of Fabry disease
- REPLAGAL is now the global market leader for the treatment
of Fabry disease. Shire's continuing priority is to ensure long term,
uninterrupted supply at the approved dose to patients treated with
REPLAGAL. There are over 2,300 patients on REPLAGAL worldwide and Shire
anticipates being able to continue to accommodate additional Fabry
patients in 2010 while carefully monitoring supply and demand. Shire
will be in a position to make REPLAGAL available to at least 300
additional patients in 2011, phased throughout the year, based on
current manufacturing capacity. Approval of the new Lexington
Manufacturing facility will allow treatment of several hundred more
Fabry patients with REPLAGAL, and Shire is working closely with the
authorities towards this goal.
VPRIV - for the treatment of Type 1 Gaucher disease
- On August 26, 2010 the European Commission granted Shire
marketing authorization for VPRIV, an ERT for the long-term treatment
of Type 1 Gaucher disease. VPRIV has been authorized as an orphan
medicine through the Centralized Procedure, making it available in 30
countries across Europe.
- Shire has seen rapid adoption of VPRIV worldwide. There are
currently over 1,000 Gaucher patients treated with VPRIV and initiation
of treatment continues. Based on its current manufacturing capacity,
Shire anticipates being able to accommodate approximately 200
additional Gaucher patients until the approval of the Lexington
Manufacturing facility provides substantial additional capacity. Shire
has an ongoing program to monitor demand and manage requests for VPRIV.
Shire's priority is ensuring long-term, uninterrupted treatment of
patients on therapy.
FIRAZYR - for the treatment of HAE
- In October 2010, Shire submitted data to support a change in
the label in the EU to include the potential for self-administered
subcutaneous injections of FIRAZYR in patients who are experiencing
acute attacks of HAE.
Pipeline
This quarter we have made significant developments in our pipeline,
including:
Collaboration with Acceleron for ActRIIB molecules
- On September 9, 2010 Shire announced the expansion of its HGT pipeline
through the exclusive licence, in markets outside of North America, for
the ActRIIB class of molecules being developed by Acceleron. The
collaboration will initially investigate ACE-031, Acceleron's lead
ActRIIB drug candidate, which is currently in a Phase 2a trial for the
treatment of patients with Duchenne Muscular Dystrophy. ACE-031 and
other ActRIIB molecules have the potential to be used in other muscular
and neuromuscular disorders with high unmet medical need.
Pipeline obtained through Movetis acquisition
- The acquisition of Movetis brings to Shire a promising GI pipeline,
offering additional opportunities that include two projects in early
clinical development and several pre-clinical leads as well as the
rights to a large library of qualified lead compounds with potential
for development in different GI indications.
VYVANSE for the adjunctive therapy in the treatment of inadequate
response in MDD
- Today Shire announced positive results from a Phase 2 clinical trial of
VYVANSE as adjunctive therapy for patients who have had an inadequate
response in their treatment of MDD. Given the encouraging results and
the promise to treat a large unmet medical need, Shire will initiate
Phase 3 trials of VYVANSE in patients with MDD mid 2011, following
health authority meetings to establish the development program
parameters. Phase 2 clinical trials in additional non-ADHD indications
(treatment of negative symptoms and cognitive impairment in
schizophrenia and for the treatment of cognitive impairment in
depression) remain ongoing.
SPD535 for the treatment of arteriovenous grafts in hemodialysis patients
- SPD535 is a novel platelet reducing agent. Phase 1 development was
initiated in the third quarter of 2009 and is ongoing. Data from Phase
1 clinical trials demonstrating positive proof-of-principle have been
completed. The initial Phase 2 proof-of-concept program will target
prevention of thrombotic complications associated with arteriovenous
grafts in hemodialysis patients. Additional Phase 2 proof-of-concept
clinical trials will also be initiated to assess opportunities in other
indications.
INTUNIV for ADHD in the EU
- A clinical program to support the filing of a Marketing
Authorization Approval for INTUNIV for the treatment of ADHD in
children aged 6 to 17 in the EU has been initiated. Shire anticipates
submission of the regulatory filing for INTUNIV in Europe will occur in
2013.
OTHER THIRD QUARTER AND RECENT DEVELOPMENTS
Acquisition of Movetis
- On September 6, 2010 Shire launched a voluntary public takeover offer
for all the shares in Movetis, a Belgium-based speciality GI company,
for a fully diluted equity purchase price of EUR428 million (or EUR19
per share) in cash, equivalent to $592 million at closing of the
transaction.
- On October 12, 2010 the Company's wholly owned subsidiary, Shire
Holdings Luxembourg S.a.r.l. acquired 99.21% of the shares of Movetis
as a result of the successful tender offer. Shire is proceeding with a
statutory squeeze-out of those shares and warrants not tendered to the
offer in accordance with applicable Belgian legislation. An additional
tender period opened, on the same terms, on October 12, 2010 and will
close on November 2, 2010. Shares and warrants not tendered to the
additional offer will transfer to Shire by operation of law on November
8, 2010. Movetis shares will be delisted from Euronext Brussels at
close of trading on November 2, 2010.
Divesture of DAYTRANA
- On August 10, 2010 Shire announced the divestiture of DAYTRANA to
Noven. The divesture became effective on October 1, 2010. Following the
decision to divest DAYTRANA, Shire recognised an impairment charge of
$43 million to write-down its DAYTRANA intangible asset to its fair
value less costs to sell.
Co-promotion for VYVANSE with Glaxo SmithKline ("GSK")
- In the third quarter, Shire terminated its co-promotion agreement for
VYVANSE with GSK. Under the terms of the agreement, no termination
payment or any other payments were made or are due to GSK since agreed
upon sales thresholds were not achieved. The Company does not believe
that the termination of the co-promotion agreement will impact the
future performance of VYVANSE in the United States.
- Following Shire's termination, GSK filed a lawsuit against Shire in the
Philadelphia Court of Common Pleas relating to the co-promotion
agreement. GSK is seeking compensation despite the failure to achieve
the required sales thresholds. Shire believes that the lawsuit is
frivolous and without merit and will vigorously defend itself.
Paragraph IV Notice Letter for INTUNIV
- On October 25, 2010 Shire received a Paragraph IV Notice Letter from
Watson Pharmaceuticals, Inc. ("Watson") advising of the filing of an
Abbreviated New Drug Application for a generic version of INTUNIV.
Shire is currently reviewing the details of Watson's Paragraph IV
Notice Letter which was directed to all three Orange Book listed
patents for INTUNIV.
ADDITIONAL INFORMATION
The following additional information is included in this press release:
Page
Overview of Q3 2010 Financial Results 8
Financial Information 12
Notes to Editors 25
Safe Harbor Statement 25
Explanation of Non GAAP Measures 26
Trademarks 27
Dial in details for the live conference call for investors 14:00 BST/9:00
EDT on October 29, 2010:
UK dial in: 0844-335-0351
US dial in: 1-866-8048688 or 1-718-3541175
International dial in: +44-844-335-0351
Password/Conf ID: 921510
Live Webcast: www.shire.com/shireplc/en/investors
OVERVIEW OF Q3 2010 FINANCIAL RESULTS
1. Product sales
For the three months to September 30, 2010 product sales increased by 32%
to $794.3 million (2009: $602.5 million) and represented 91% of total
revenues (2009: 90%).
Core Product Sales increased by 31% to $694.6 million (2009: $531.6
million), up 34% on a CER basis.
Product Highlights
Exit
Market
Growth Share(1)
Product Sales $M Sales CER US Rx(1)
VYVANSE 151.2 +17% 1 +17% +28% 15%
ELAPRASE 96.8 +7% 1 +11% n/a(2) n/a(2)
REPLAGAL 92.1 +91% 1 +103% n/a(3) n/a(3)
LIALDA / MEZAVANT 76.0 +16% 1 +17% +16% 19%
PENTASA 57.1 +11% +11% -5% 15%
VPRIV 49.5 n/a 1 n/a n/a(2) n/a(2)
FOSRENOL 45.2 -5% 1 -1% -17% 7%
INTUNIV 37.3 n/a 1 n/a n/a 3%
FIRAZYR 2.9 +61% 1 +73% n/a(3) n/a(3)
OTHER 86.5 -11% 1 -8% n/a n/a
Core product sales 694.6 +31% 1 +34%
ADDERALL XR 99.7 +41% 1 +40% +1% 7%
Total product sales 794.3 +32% 1 +35%
(1) Data provided by IMS Health National Prescription Audit
("IMS NPA"). Exit market share represents the average monthly US market share
in the month ended September 30, 2010.
(2) IMS NPA Data not available.
(3) Not sold in the US in Q3 2010.
VYVANSE - ADHD
The increase in VYVANSE product sales was principally due to a 28%
increase in US prescription demand, from both 13% growth in the US ADHD
market and increases to VYVANSE's share of that market. Price increases taken
since Q3 2009 also contributed to the product sales growth.
Product sales growth was lower than prescription growth due to higher
sales deductions, principally increased Medicaid rebates following US
Healthcare Reform, and decreases in wholesaler inventories, or "de-stocking",
at the end of Q3 2010 (de-stocking in Q3 2010 was equivalent to $12 million
of gross sales compared to stocking of $4 million in Q3 2009).
ELAPRASE - Hunter syndrome
The growth in sales of ELAPRASE was driven by increased
volumes across all regions in which ELAPRASE is sold. On a CER basis sales
grew by 11%.
REPLAGAL - Fabry disease
The growth in REPLAGAL product sales was driven by an
acceleration of patients switching to REPLAGAL in Europe, principally due to
the ongoing supply disruption affecting the only other approved ERT for Fabry
disease. Sales increased 103% on a CER basis (REPLAGAL is sold primarily in
Euros and Pounds sterling).
LIALDA/MEZAVANT - Ulcerative colitis
Product sales for LIALDA/MEZAVANT continued to grow in Q3 2010, driven by
increased US prescription demand as a result of higher US market share and
price increases taken since Q3 2009, which were partially offset by higher
sales deductions compared to the same period in 2009.
PENTASA - Ulcerative colitis
The growth in PENTASA product sales was due to price increases taken
since Q3 2009, which more than offset lower US prescription demand.
VPRIV - Gaucher disease
Following the grant of marketing authorization from the
European Commission on August 26, 2010, VPRIV is now being sold on an
approved basis in both the US and the EU.
FOSRENOL - Hyperphosphatemia
Product sales of FOSRENOL in the EU decreased primarily due to mandatory
price reductions taken in 2010. Product sales of FOSRENOL in the US decreased
due to lower US prescription demand and higher sales deductions in Q3 2010
compared to 2009, which more than offset the effect of price increases taken
since Q3 2009.
INTUNIV - ADHD
US prescription demand for INTUNIV increased by 29% in Q3 2010
compared to Q2 2010, leading to product sales of $37 million. Product sales
in Q2 2010 of $51 million included $16 million of net sales from initial
stocking shipments made in 2009 ("Launch Stocks") which had been deferred in
accordance with Shire's accounting policy. All revenue from Launch Stocks had
been recognized by June 30, 2010.
Excluding revenue from Launch Stocks, product sales increased
by 6% in Q3 compared to Q2 2010. This increase in product sales was lower
than the growth in US prescription demand due to higher sales deductions,
principally as a result of US Healthcare Reform.
FIRAZYR - HAE
Product sales grew in line with increased volumes across
markets in Europe. FIRAZYR is the first new product for HAE in Europe in 30
years and has orphan exclusivity for acute attacks of HAE in adults in the EU
until 2018.
ADDERALL XR - ADHD
ADDERALL XR product sales increased as a result of slightly higher US
prescription demand, lower sales deductions in Q3 2010 compared to the same
period in 2009 and the effect of stocking in Q3 2010.
Sales deductions represented 60% of branded ADDERALL XR gross sales in Q3
2010 (2009: 73%). Medicaid rebates were accrued at a higher level in Q3 2009
as sales deductions for that quarter did not reflect the benefit of the
change in estimate of the Medicaid rebate liability recorded in Q4 2009.
Additionally, sales deductions in Q3 2010 were reduced following refinements
to Medicaid rebate liability estimates made in earlier quarters.
ADDERALL XR product sales in Q3 2010 also benefited from a 1% increase in
US prescription demand, as US ADHD market growth of 13% more than offset the
decline in ADDERALL XR's market share (7% in Q3 2010 compared to 8% in Q3
2009).
2. Royalties
Year on year growth
Royalties to
Product Shire $M Royalties CER
3TC(R) and Zeffix(R) 1.00 40.6 -3% -4%
ADDERALL XR 1.00 18.0 718% 718%
Other 1.00 17.9 11% 16%
Total 1.00 76.5 27% 28%
Royalty income increased by 27% due to higher royalties
received on sales of authorized generic versions of ADDERALL XR (royalties in
Q3 2010 were received from Impax Laboratories Inc. and in Q3 2009 were
received, at a lower rate, from Teva Pharmaceuticals Industries Ltd).
Royalties received for 3TC and Zeffix from GSK were lower in 2010 compared to
2009 as 3TC royalties continue to be adversely impacted by increased
competition from other treatments.
3. Financial details
Cost of product sales
% of % of
product product
Q3 2010 sales Q3 2009 sales
$M $M
Cost of product sales (US 112.7 14% 104.9 17%
GAAP)
Transfer of manufacturing
from Owings Mills (7.3) (4.5)
Fair value adjustment for
acquired inventories - (0.6)
Depreciation (2.3) (0.8)
Cost of product sales (Non 103.1 13% 99.0 16%
GAAP)
Cost of product sales as a percentage of product sales decreased in Q3
2010 compared to the same period in 2009 due to higher margins from existing
Core Products and the positive effect on gross margins of newly launched,
higher margin products.
R&D
% of % of
product product
Q3 2010 sales Q3 2009 sales
$M $M
R&D (US GAAP) 197.9 25% 147.8 25%
Up-front payment to (45.0) -
Acceleron
Depreciation (4.4) (3.6)
R&D (Non GAAP) 148.5 19% 144.2 24%
R&D increased due to continued investment in a number of R&D programs,
principally VYVANSE international and investigative uses of VYVANSE for new
indications, Guanfacine Carrier Wave and other early stage development
programs.
On a US GAAP basis, R&D increased by $50.1 million over the same period
in 2009 primarily due to the up-front payment of $45.0 million made to
Acceleron on entering the licence and collaboration agreement for development
of the ActRIIB class of molecules.
SG&A
% of % of
product product
Q3 2010 sales Q3 2009 sales
$M $M
SG&A (US GAAP) 392.4 49% 320.6 53%
Intangible asset (31.2) (34.8)
amortization
Impairment of intangible (42.7) -
assets
Depreciation (16.1) (18.5)
SG&A (Non GAAP) 302.4 38% 267.3 44%
SG&A increased in part due to increased sales and marketing costs
incurred to support newly launched products (INTUNIV and VPRIV) and growth in
new markets.
On a US GAAP basis, SG&A included an impairment charge of $42.7 million
to write down the DAYTRANA intangible asset to its fair value less costs to
sell following agreement to divest the product to Noven.
Reorganization costs
For the three months to September 30, 2010 Shire recorded
reorganization costs of $9.7 million (2009: $2.0 million) relating to the
transfer of manufacturing from its Owings Mills facility and the
establishment of an international commercial hub in Switzerland.
Integration and acquisition costs
For the three months to September 30, 2010 Shire recorded integration and
acquisition costs of $5.8 million (2009: $6.2 million), which in 2010 related
to the acquisition of Movetis, and in 2009 to the integration of Jerini AG.
Interest expense
For the three months to September 30, 2010 the Company incurred interest
expense of $8.3 million (2009: $9.4 million). Interest expense principally
relates to the coupon and amortization of issue costs on Shire's $1,100
million 2.75% convertible bonds due 2014.
Taxation
The US GAAP effective rate of tax in Q3 2010 was 35% (2009: 34%), and the
effective tax rate on Non GAAP income was 24% (2009: 33%).
The Non GAAP effective tax rate in both Q3 2010 and 2009 benefited from
changes in estimate of the amount of certain tax liabilities following the
submission of various tax returns. The Non GAAP effective tax rate in 2010
was lower than 2009 as the Non GAAP rate in Q3 2009 was adversely impacted by
the initial recognition of valuation allowances against certain EU deferred
tax assets and increases to accrued interest on tax contingencies, which
resulted in charges not repeated in Q3 2010.
The US GAAP effective rate of tax in Q3 2010 was 11 percentage points
higher than the Non GAAP effective tax rate as certain items excluded from
Non GAAP income, such as the up-front payment to Acceleron and the write-down
of the DAYTRANA intangible asset, were either made from territories with tax
rates lower than Shire's effective rate or in territories where the
establishment of valuation allowances precluded the recognition of any tax
benefit.
FINANCIAL INFORMATION
TABLE OF CONTENTS
Page
Unaudited US GAAP Consolidated Balance Sheets 13
Unaudited US GAAP Consolidated Statements of Income 14
Unaudited US GAAP Consolidated Statements of Cash
Flows 16
Selected Notes to the Unaudited US GAAP Financial
Statements
(1) Earnings per share 18
(2) Analysis of revenues 19
Non GAAP reconciliation 21
Unaudited US GAAP results for the three months and nine months to
September 30, 2010 Consolidated Balance Sheets
September 30, December 31,
2010 2009
$M $M
ASSETS
Current assets:
Cash and cash equivalents 193.3 498.9
Restricted cash 605.1 33.1
Accounts receivable, net 722.1 597.5
Inventories 252.6 189.7
Assets held for sale 61.5 1.7
Deferred tax asset 145.8 135.8
Prepaid expenses and other current assets 179.6 113.5
Total current assets 2,160.0 1,570.2
Non-current assets:
Investments 89.1 105.7
Property, plant and equipment, net 818.6 676.8
Goodwill 375.0 384.7
Other intangible assets, net 1,567.2 1,790.7
Deferred tax asset 86.3 79.0
Other non-current assets 5.4 10.4
Total assets 5,101.6 4,617.5
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued expenses 1,098.1 929.1
Deferred tax liability 2.9 2.9
Other current liabilities 70.2 88.0
Total current liabilities 1,171.2 1,020.0
Non-current liabilities:
Convertible bonds 1,100.0 1,100.0
Other long-term debt 6.8 43.6
Deferred tax liability 356.1 294.3
Other non-current liabilities 169.7 247.1
Total liabilities 2,803.8 2,705.0
Equity:
Common stock of 5p par value; 1,000 million
shares authorized; and 562.2 million shares
issued and outstanding (2009: 1,000 million
shares authorized; and 561.5 million shares
issued and outstanding) 55.7 55.6
Additional paid-in capital 2,731.9 2,677.6
Treasury stock: 14.9 million shares (2009:
17.8 million) (299.0) (347.4)
Accumulated other comprehensive income 108.6 149.1
Accumulated deficit (299.4) (622.4)
Total equity 2,297.8 1,912.5
Total liabilities and equity 5,101.6 4,617.5
Unaudited US GAAP results for the three months and nine months to
September 30, 2010 Consolidated Statements of Income
9 months 9 months
3 months to 3 months to to to
September September
September 30, September 30, 30, 30,
2010 2009 2010 2009
$M $M $M $M
Revenues:
Product sales 794.3 602.5 2,276.8 1,916.8
Royalties 76.5 60.3 254.5 177.8
Other revenues 3.5 4.2 8.6 19.8
Total revenues 874.3 667.0 2,539.9 2,114.4
Costs and expenses:
Cost of product
sales(1) 112.7 104.9 333.7 284.9
Research and
development 197.9 147.8 475.9 492.5
Selling, general and
administrative(1) 392.4 320.6 1,106.7 973.8
Gain on sale of product
rights - (6.3) (4.1) (6.3)
Reorganization costs 9.7 2.0 23.3 7.1
Integration and
acquisition costs 5.8 6.2 6.4 10.0
Total operating
expenses 718.5 575.2 1,941.9 1,762.0
Operating income 155.8 91.8 598.0 352.4
Interest income 1.0 0.2 1.9 1.5
Interest expense (8.3) (9.4) (25.6) (30.6)
Other income, net 0.8 7.0 9.0 61.9
Total other
(expense)/income, net (6.5) (2.2) (14.7) 32.8
Income from continuing
operations before
income taxes and equity
in (losses)/earnings of
equity method investees 149.3 89.6 583.3 385.2
Income taxes (52.7) (30.6) (160.8) (56.7)
Equity in
(losses)/earnings of
equity method
investees, net of taxes (0.3) 0.6 0.2 1.0
Income from continuing
operations, net of tax 96.3 59.6 422.7 329.5
Loss from discontinued
operations (net of
income tax expense of
$nil in all periods) - - - (12.4)
Net income 96.3 59.6 422.7 317.1
Add: Net loss
attributable to
noncontrolling interest
in subsidiaries - - - 0.2
Net income attributable
to Shire plc 96.3 59.6 422.7 317.3
(1) Cost of product sales includes amortization of intangible assets
relating to favorable manufacturing contracts of $0.4 million for the three
months to September 30, 2010 (2009: $0.4 million) and $1.3 million for the
nine months to September 30, 2010 (2009: $1.3 million). Selling, general and
administrative costs include amortization and impairment charges of
intangible assets relating to intellectual property rights acquired of $73.9
million for the three months to September 30, 2010 (2009: $34.8 million) and
$142.3 million for the nine months to September 30, 2010 (2009: $101.6
million).
Unaudited US GAAP results for the three months and nine months to
September 30, 2010 Consolidated Statements of Income (continued)
9 months 9 months
3 months to 3 months to to to
September September
September 30, September 30, 30, 30,
2010 2009 2010 2009
Earnings per ordinary
share - basic
Earnings from
continuing operations 17.6c 11.0c 77.4c 61.1c
Loss from discontinued
operations - - - (2.3c)
Earnings per ordinary
share - basic 17.6c 11.0c 77.4c 58.8c
Earnings per ADS -
basic 52.8c 33.0c 232.2c 176.4c
Earnings per ordinary
share - diluted
Earnings from
continuing operations 17.3c 10.9c 76.0c 60.3c
Loss from discontinued
operations - - - (2.3c)
Earnings per ordinary
share - diluted 17.3c 10.9c 76.0c 58.0c
Earnings per ADS -
diluted 51.9c 32.7c 228.0c 174.0c
Weighted average number
of shares (millions):
Basic 547.0 540.6 546.1 540.0
Diluted 556.7 548.3 589.7 547.1
Unaudited US GAAP results for the three months and nine months to
September 30, 2010 Consolidated Statements of Cash Flows
3 months 3 months 9 months 9 months
to to to to
September September September September
30, 30, 30, 30,
2010 2009 2010 2009
$M $M $M $M
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income 96.3 59.6 422.7 317.1
Adjustments to reconcile net
income to net cash provided by
operating activities:
Loss from
discontinued
operations - - - 12.4
Depreciation and
amortization 60.0 59.7 189.2 177.4
Share based
compensation 17.5 16.9 44.2 50.1
Impairment of
intangible assets 42.7 - 42.7 -
Gain on sale of
non-current
investments - - (11.1) (55.2)
Gain on sale of
product rights - (6.3) (4.1) (6.3)
Other (5.7) 5.2 5.2 11.5
Movement in deferred taxes (10.0) (41.9) 48.7 (87.5)
Equity in losses/(earnings) of
equity method investees 0.3 (0.6) (0.2) (1.0)
Changes in operating assets
and liabilities:
Increase in accounts
receivable (94.1) (113.4) (138.0) (156.4)
Increase in sales
deduction accrual 14.8 94.7 169.0 212.2
Increase in inventory (4.1) (11.3) (54.1) (24.2)
Decrease/(increase)
in prepayments and
other current assets 14.7 25.7 (67.7) (8.1)
Decrease in other
assets 1.5 0.9 0.7 5.3
Increase/(decrease)
in accounts payable
and other liabilities 2.3 44.8 (41.0) (56.3)
Returns on investment from
joint venture 5.8 - 5.8 4.9
Cash flows used in
discontinued operations - - - (5.9)
Net cash provided by operating
activities(A) 142.0 134.0 612.0 390.0
Unaudited US GAAP results for the three months and nine months to
September 30, 2010 Consolidated Statements of Cash Flows (continued)
9 months 9 months
3 months to 3 months to to to
September September
September 30, September 30, 30, 30,
2010 2009 2010 2009
$M $M $M $M
CASH FLOWS FROM
INVESTING ACTIVITIES:
Movements in restricted
cash (553.0) (3.4) (547.0) (10.1)
Payments on foreign
exchange contracts
related to Movetis
acquisition (21.2) - (21.2) -
Purchases of subsidiary
undertakings and
businesses, net of cash
acquired - - - (75.5)
Purchases of
non-current investments (1.0) - (1.0) -
Purchases of property,
plant and equipment (53.5) (67.5) (261.7) (169.4)
Purchases of intangible
assets - (1.0) (2.7) (7.0)
Proceeds from disposal
of non-current
investments and
property plant and
equipment - - 2.1 19.7
Proceeds from disposal
of subsidiary
undertakings - - - 6.7
Returns of equity
investments - - - 0.2
Net cash used in
investing activities(B) (628.7) (71.9) (831.5) (235.4)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Payment under building
financing obligation (0.4) (0.9) (1.8) (3.9)
Extinguishment of
building finance
obligation - - (43.1) -
Tax benefit of stock
based compensation 5.2 - 9.6 -
Proceeds from exercise
of options 0.2 1.8 2.1 2.8
Payment of dividend - - (49.8) (43.0)
Payments to acquire
shares by Employee
Share Ownership Trust
("ESOT") - - (1.7) (1.0)
Net cash provided
by/(used in) financing
activities(C) 5.0 0.9 (84.7) (45.1)
Effect of foreign
exchange rate changes
on cash and cash
equivalents (D) (7.5) 6.4 (1.4) 5.0
Net (decrease)/increase
in cash and cash
equivalents(A) +(B)
+(C) +(D) (489.2) 69.4 (305.6) 114.5
Cash and cash
equivalents at
beginning of period 682.5 263.3 498.9 218.2
Cash and cash
equivalents at end of
period 193.3 332.7 193.3 332.7
Unaudited US GAAP results for the three months and nine months to
September 30, 2010
Selected Notes to the Financial Statements
(1) Earnings per share
9 months 9 months
3 months to 3 months to to to
September September
September 30, September 30, 30, 30,
2010 2009 2010 2009
$M $M $M $M
Income from continuing
operations 96.3 59.6 422.7 329.5
Loss from discontinued
operations - - - (12.4)
Noncontrolling interest
in subsidiaries - - - 0.2
Numerator for basic EPS 96.3 59.6 422.7 317.3
Interest on convertible
bonds, net of tax (1) - - 25.2 -
Numerator for diluted
EPS 96.3 59.6 447.9 317.3
Weighted average number
of shares:
Millions Millions Millions Millions
Basic(2) 547.0 540.6 546.1 540.0
Effect of dilutive
shares:
Stock options(3) 9.7 7.7 10.4 7.1
Convertible bonds 2.75%
due 2014(4) - - 33.2 -
Diluted 556.7 548.3 589.7 547.1
(1) For the three month period ended September 30, 2010 and for the three
and nine month periods ended September 30, 2009 interest on the convertible
bond has not been added back as the effect would be anti-dilutive.
(2) Excludes shares purchased by the ESOT and presented by Shire as
treasury stock.
(3) Calculated using the treasury stock method.
(4) Calculated using the "if converted" method.
The share equivalents not included in the calculation of the diluted
weighted average number of shares are shown below:
3 months to 3 months to 9 months to 9 months to
September September September September
30, 30, 30, 30,
2010 2009 2010 2009
Millions(1) Millions(1) Millions(1) Millions(1)
(2) (2) (2)
Stock options out of
the money 3.6 16.8 8.9 18.0
Convertible bonds
2.75% due 2014 33.2 33.2 - 33.1
(1) For the three and nine month periods ended September 30,
2010 and 2009, certain stock options have been excluded from the calculation
of diluted EPS because their exercise prices exceeded Shire plc's average
share price during the calculation period.
(2) For the three month period ended September 30, 2010 and
for the three and nine month periods ended September 30, 2009 the ordinary
shares underlying the convertible bonds have not been included in the
calculation of the diluted weighted average number of shares, as the effect
of their inclusion would be anti-dilutive.
Unaudited US GAAP results for the three months to September 30, 2010
Selected Notes to the Financial Statements
(2) Analysis of revenues
3 months to September 30, 2010 2009 2010 2010
% % of total
$M $M change revenue
Net product sales:
Specialty Pharmaceuticals
("Specialty")
ADHD
VYVANSE 151.2 129.0 17% 17%
ADDERALL XR 99.7 70.9 41% 11%
INTUNIV 37.3 1 - n/a 4%
DAYTRANA 14.7 17.4 -16% 2%
EQUASYM 5.7 1 9.2 -38% 1%
308.6 226.5 36% 35%
GI
LIALDA / MEZAVANT 76.0 65.4 16% 9%
PENTASA 57.1 51.3 11% 6%
133.1 116.7 14% 15%
General products
FOSRENOL 45.2 47.7 -5% 5%
XAGRID(R) 20.5 21.5 -5% 2%
CARBATROL(R) 20.3 20.8 -2% 2%
CALCICHEW(R) 9.9 12.4 -20% 1%
REMINYL/REMINYL XL(R) 9.1 10.5 -13% 1%
105.0 112.9 -7% 12%
Other product sales 6.3 5.4 17% 1%
Total Specialty product
sales 553.0 461.5 20% 63%
Human Genetic Therapies ("HGT")
ELAPRASE 96.8 90.9 7% 11%
REPLAGAL 92.1 48.3 91% 11%
VPRIV 49.5 1 - n/a 6%
FIRAZYR 2.9 1.8 61% <1%
Total HGT product sales 241.3 141.0 71% 28%
Total product sales 794.3 602.5 32% 91%
Royalties:
3TC and ZEFFIX 40.6 42.0 -3% 5%
ADDERALL XR 18.0 1 2.2 718% 2%
Other 17.9 16.1 11% 2%
Total royalties 76.5 60.3 27% 9%
Other revenues 3.5 4.2 -17% <1%
Total Revenues 874.3 667.0 31% 100%
Unaudited US GAAP results for the nine months to September 30, 2010
Selected Notes to the Financial Statements
(2) Analysis of revenues
9 months to September 30, 2010 2009 2010 2010
% % of total
$M $M change revenue
Net product sales:
Specialty Pharmaceuticals
("Specialty")
ADHD
VYVANSE 453.6 359.7 26% 18%
ADDERALL XR 271.9 434.2 -37% 11%
INTUNIV 123.0 - n/a 5%
DAYTRANA 49.4 52.2 -5% 2%
EQUASYM 16.3 14.1 16% 1%
914.2 860.2 6% 36%
GI
LIALDA / MEZAVANT 209.2 169.4 23% 8%
PENTASA 175.9 156.5 12% 7%
385.1 325.9 18% 15%
General products
FOSRENOL 137.4 137.2 0% 6%
XAGRID 65.4 62.3 5% 3%
CARBATROL 63.4 59.7 6% 2%
REMINYL/REMINYL XL 33.1 28.8 15% 1%
CALCICHEW 29.7 32.8 -9% 1%
329.0 320.8 3% 13%
Other product sales 17.4 14.3 22% <1%
Total Specialty product
sales 1,645.7 1,521.2 8% 65%
Human Genetic Therapies ("HGT")
ELAPRASE 297.4 258.9 15% 12%
REPLAGAL 242.0 132.9 82% 10%
VPRIV 84.0 - n/a 3%
FIRAZYR 7.7 3.8 103% <1%
Total HGT product sales 631.1 395.6 60% 25%
Total product sales 2,276.8 1,916.8 19% 90%
Royalties:
3TC and ZEFFIX 115.3 120.3 -4% 5%
ADDERALL XR 86.3 15.8 446% 3%
Other 52.9 41.7 27% 2%
Total royalties 254.5 177.8 43% 10%
Other revenues 8.6 19.8 -57% <1%
Total Revenues 2,539.9 2,114.4 20% 100%
Unaudited results for the three months to September 30, 2010
Non GAAP reconciliation
US GAAP Adjustments
Acquisitions Divestments,
Amortization & reorganizations
& asset integration & discontinued
3 months to, September 30, impairments activities operations
2010
(a) (b) (c)
$M $M $M $M
Total revenues 874.3 - - -
Costs and
expenses:
Cost of product
sales 112.7 - - (7.3)
Research and
development 197.9 - (45.0) -
Selling, general
and administrative 392.4 (73.9) - -
Reorganization
costs 9.7 - - (9.7)
Integration and
acquisition costs 5.8 - (5.8) -
Depreciation - - - -
Total operating
expenses 718.5 (73.9) (50.8) (17.0)
Operating income 155.8 73.9 50.8 17.0
Interest income 1.0 - - -
Interest expense (8.3) - - -
Other income, net 0.8 - - -
Total other
expense, net (6.5) - - -
Income from
continuing
operations before
income taxes and
equity in losses
of equity method
investees 149.3 73.9 50.8 17.0
Income taxes (52.7) (10.1) (3.5) (4.1)
Equity in losses
of equity method
investees, net of
tax (0.3) - - -
Net income
attributable to
Shire plc 96.3 63.8 47.3 12.9
Impact of
convertible debt,
net of tax (1) - 8.4 - -
Numerator for
diluted EPS 96.3 72.2 47.3 12.9
Weighted average
number of shares
(millions) -
diluted(1) 556.7 33.2 - -
Diluted earnings
per ADS 51.9c 33.8c 24.0c 6.6c
Table continued below
Non GAAP
Reclassify
3 months to, depreciation September 30,
2010
(d)
$M $M
Total revenues - 874.3
Costs and expenses:
Cost of product sales (2.3) 103.1
Research and
development (4.4) 148.5
Selling, general and
administrative (16.1) 302.4
Reorganization costs - -
Integration and
acquisition costs - -
Depreciation 22.8 22.8
Total operating
expenses - 576.8
Operating income - 297.5
Interest income - 1.0
Interest expense - (8.3)
Other income, net - 0.8
Total other expense,
net - (6.5)
Income from continuing
operations before
income taxes and equity
in losses of equity
method investees - 291.0
Income taxes - (70.4)
Equity in losses of
equity method
investees, net of tax - (0.3)
Net income attributable
to Shire plc - 220.3
Impact of convertible
debt, net of tax (1) - 8.4
Numerator for diluted
EPS - 228.7
Weighted average number
of shares (millions) -
diluted(1) - 589.9
Diluted earnings per
ADS - 116.3c
(1) The impact of convertible debt, net of tax has a dilutive effect on
Non GAAP basis.
The following items are included in Adjustments:
(a) Amortization and asset impairments: Amortization of intangible assets
relating to intellectual property rights acquired ($31.2 million), impairment
charges to record DAYTRANA assets at fair value less costs to sell ($42.7
million) and tax effect of adjustments;
(b) Acquisitions and integration activities: Upfront payment to Acceleron
($45.0 million), acquisition costs are principally costs associated with the
acquisition of Movetis ($5.8 million) and tax effect of adjustments;
(c) Divestments, reorganizations and discontinued operations: Accelerated
depreciation ($6.2 million) and dual running costs ($1.1 million) on the
transfer of manufacturing from Owings Mills and reorganization costs ($9.7
million) on the transfer of manufacturing from Owings Mills and establishment
of an international commercial hub in Switzerland, and tax effect of
adjustments; and
(d) Depreciation: Depreciation of $22.8 million included in Cost of
product sales, R&D costs and SG&A costs for US GAAP separately disclosed for
the presentation of Non GAAP earnings.
Unaudited results for the three months to September 30, 2009
Non GAAP reconciliation
US GAAP Adjustments
Acquisitions Divestments,
Amortization & reorganizations
& asset integration & discontinued
3 months to, September 30, impairments activities operations
2009
(a) (b) (c)
$M $M $M $M
Total revenues 667.0 - - -
Costs and
expenses:
Cost of product
sales 104.9 - (0.6) (4.5)
Research and
development 147.8 - - -
Selling, general
and administrative 320.6 (34.8) - -
Gain on sale of
product rights (6.3) - - 6.3
Reorganization
costs 2.0 - - (2.0)
Integration and
acquisition costs 6.2 - (6.2) -
Depreciation - - - -
Total operating
expenses 575.2 (34.8) (6.8) (0.2)
Operating income 91.8 34.8 6.8 0.2
Interest income 0.2 - - -
Interest expense (9.4) - - -
Other income, net 7.0 - - -
Total other
expense, net (2.2) - - -
Income from
continuing
operations before
income taxes and
equity in earnings
of equity method
investees 89.6 34.8 6.8 0.2
Income taxes (30.6) (9.9) (1.8) (0.5)
Equity in earnings
of equity method
investees, net of
tax 0.6 - - -
Net income
attributable to
Shire plc 59.6 24.9 5.0 (0.3)
Numerator for
diluted EPS 59.6 24.9 5.0 (0.3)
Weighted average
number of shares
(millions) -
diluted 548.3 - - -
Diluted earnings
per ADS 32.7c 13.5c 2.7c -
Table continued below
Non GAAP
Reclassify
3 months to, depreciation September 30,
2009
(d)
$M $M
Total revenues - 667.0
Costs and expenses:
Cost of product
sales (0.8) 99.0
Research and
development (3.6) 144.2
Selling, general and
administrative (18.5) 267.3
Gain on sale of
product rights - -
Reorganization costs - -
Integration and
acquisition costs - -
Depreciation 22.9 22.9
Total operating
expenses - 533.4
Operating income - 133.6
Interest income - 0.2
Interest expense - (9.4)
Other income, net - 7.0
Total other expense,
net - (2.2)
Income from
continuing
operations before
income taxes and
equity in earnings
of equity method
investees - 131.4
Income taxes - (42.8)
Equity in earnings
of equity method
investees, net of
tax - 0.6
Net income
attributable to
Shire plc - 89.2
Numerator for
diluted EPS - 89.2
Weighted average
number of shares
(millions) - diluted - 548.3
Diluted earnings per
ADS - 48.9c
The following items are included in Adjustments:
(a) Amortization and asset impairments: Amortization of intangible assets
relating to intellectual property rights acquired ($34.8 million), and tax
effect of adjustment;
(b) Acquisitions & integration activities: Inventory fair value
adjustment related to the acquisition of Jerini AG ($0.6 million); costs
associated with the integration and acquisition of Jerini AG and EQUASYM from
UCB ($6.2 million) and tax effect of adjustments;
(c) Divestments, reorganizations and discontinued operations: Accelerated
depreciation ($4.5 million) and reorganization costs ($2.0 million) for the
transition of manufacturing from Owings Mills; gains on disposal of non-core
product rights ($6.3 million) and tax effect of adjustments; and
(d) Depreciation: Depreciation of $22.9 million included in Cost of
Product Sales, R&D costs and SG&A costs for US GAAP separately disclosed for
the presentation of Non GAAP earnings.
Unaudited results for the nine months to September 30, 2010
Non GAAP reconciliation
US GAAP Adjustments
Acquisitions Divestments,
Amortization & reorganizations
& asset integration & discontinued
9 months to, September 30, impairments activities operations
2010
(a) (b) (c)
$M $M $M $M
Total revenues 2,539.9 - - -
Costs and
expenses:
Cost of product
sales 333.7 - - (21.9)
Research and
development 475.9 - (45.0) -
Selling, general
and administrative 1,106.7 (142.3) - -
Gain on sale of
product rights (4.1) - - 4.1
Reorganization
costs 23.3 - - (23.3)
Integration &
acquisition costs 6.4 - (6.4) -
Depreciation - - - -
Total operating
expenses 1,941.9 (142.3) (51.4) (41.1)
Operating income 598.0 142.3 51.4 41.1
Interest income 1.9 - - -
Interest expense (25.6) - - -
Other
income/(expense),
net 9.0 - - (11.1)
Total other
expense, net (14.7) - - (11.1)
Income from
continuing
operations before
income taxes and
equity in earnings
of equity method
investees 583.3 142.3 51.4 30.0
Income taxes (160.8) (29.4) (3.6) (9.1)
Equity in earnings
of equity method
investees, net of
tax 0.2 - - -
Net income
attributable to
Shire plc 422.7 112.9 47.8 20.9
Impact of
convertible debt,
net of tax 25.2 - - -
Numerator for
diluted EPS 447.9 112.9 47.8 20.9
Weighted average
number of shares
(millions) -
diluted 589.7 - - -
Diluted earnings
per ADS 228.0c 57.3c 24.3c 10.6c
Table continued below
Non GAAP
Reclassify
9 months to, depreciation September 30,
2010
(d)
$M $M
Total revenues - 2,539.9
Costs and expenses:
Cost of product
sales (8.6) 303.2
Research and
development (11.6) 419.3
Selling, general and
administrative (49.0) 915.4
Gain on sale of
product rights - -
Reorganization costs - -
Integration &
acquisition costs - -
Depreciation 69.2 69.2
Total operating
expenses - 1,707.1
Operating income - 832.8
Interest income - 1.9
Interest expense - (25.6)
Other
income/(expense),
net - (2.1)
Total other expense,
net - (25.8)
Income from
continuing
operations before
income taxes and
equity in earnings
of equity method
investees - 807.0
Income taxes - (202.9)
Equity in earnings
of equity method
investees, net of
tax - 0.2
Net income
attributable to
Shire plc - 604.3
Impact of
convertible debt,
net of tax - 25.2
Numerator for
diluted EPS - 629.5
Weighted average
number of shares
(millions) - diluted - 589.7
Diluted earnings per
ADS - 320.2c
The following items are included in Adjustments:
(a) Amortization and asset impairments: Amortization of intangible assets
relating to intellectual property rights acquired ($99.6 million), impairment
charges to record DAYTRANA assets at fair value less costs to sell ($42.7
million) and tax effect of adjustments;
(b) Acquisitions and integration activities: Up-front payment to
Acceleron ($45.0 million), acquisition costs are principally costs associated
with the acquisition of Movetis ($6.4 million) and tax effect of adjustments;
(c) Divestments, reorganizations and discontinued operations: Accelerated
depreciation ($18.3 million) and dual running costs ($3.6 million) on the
transfer of manufacturing from Owings Mills, gain on sale of product rights
relating to the disposal of non core products to Laboratorios Almirall S.A.
($4.1 million), reorganization costs ($23.3 million) on the transfer of
manufacturing from Owings Mills and the establishment of an international
commercial hub in Switzerland, gain on disposal of the investment in Virochem
($11.1 million) and tax effect of adjustments; and
(d) Depreciation: Depreciation of $69.2 million included in Cost of
product sales, R&D costs and SG&A costs for US GAAP separately disclosed for
the presentation of Non GAAP earnings.
Unaudited results for the nine months to September 30, 2009
Non GAAP reconciliation
US GAAP Adjustments
Acquisitions Divestments,
Amortization & reorganizations
& asset integration & discontinued
9 months to, September 30, impairments activities operations
2009 (a) (b) (c)
$M $M $M $M
Total revenues 2,114.4 - - -
Costs and
expenses:
Cost of product
sales 284.9 - (1.9) (7.5)
Research and
development 492.5 - (36.9) (65.0)
Selling, general
and administrative 973.8 (101.6) - -
Gain on sale of
product rights (6.3) - - 6.3
Reorganization
costs 7.1 - - (7.1)
Integration and
acquisition costs 10.0 - (10.0) -
Depreciation - - - -
Total operating
expenses 1,762.0 (101.6) (48.8) (73.3)
Operating income 352.4 101.6 48.8 73.3
Interest income 1.5 - - -
Interest expense (30.6) - - -
Other
income/(expense),
net 61.9 - - (55.2)
Total other
income/(expense),
net 32.8 - - (55.2)
Income from
continuing
operations before
income taxes and
equity in earnings
of equity method
investees 385.2 101.6 48.8 18.1
Income taxes (56.7) (29.0) (16.2) (17.8)
Equity in earnings
of equity method
investees, net of
tax 1.0 - - -
Income from
continuing
operations, net of
tax 329.5 72.6 32.6 0.3
Loss from
discontinued
operations (12.4) - - 12.4
Net income 317.1 72.6 32.6 12.7
Add: Net loss
attributable to
noncontrolling
interest in
subsidiaries 0.2 - - -
Net income
attributable to
Shire plc 317.3 72.6 32.6 12.7
Impact of
convertible debt,
net of tax (1) - 25.1 - -
Numerator for
diluted EPS 317.3 97.7 32.6 12.7
Weighted average
number of shares
(millions) -
diluted(1) 547.1 33.1 - -
Diluted earnings
per ADS 174.0c 40.5c 16.8c 6.6c
Table continued below
Non GAAP
Reclassify
9 months to, depreciation September 30,
2009
(d)
$M $M
Total revenues - 2,114.4
Costs and expenses:
Cost of product sales (9.4) 266.1
Research and
development (11.3) 379.3
Selling, general and
administrative (49.3) 822.9
Gain on sale of
product rights - -
Reorganization costs - -
Integration and
acquisition costs - -
Depreciation 70.0 70.0
Total operating
expenses - 1,538.3
Operating income - 576.1
Interest income - 1.5
Interest expense - (30.6)
Other
income/(expense), net - 6.7
Total other
income/(expense), net - (22.4)
Income from continuing
operations before
income taxes and
equity in earnings of
equity method
investees - 553.7
Income taxes - (119.7)
Equity in earnings of
equity method
investees, net of tax - 1.0
Income from continuing
operations, net of tax - 435.0
Loss from discontinued
operations - -
Net income - 435.0
Add: Net loss
attributable to
noncontrolling
interest in
subsidiaries - 0.2
Net income
attributable to Shire
plc - 435.2
Impact of convertible
debt, net of tax (1) - 25.1
Numerator for diluted
EPS - 460.3
Weighted average
number of shares
(millions) -
diluted(1) - 580.2
Diluted earnings per
ADS - 237.9c
(1) The impact of convertible debt, net of tax has a dilutive
effect on a Non GAAP basis.
The following items are included in Adjustments:
(a) Amortization and asset impairments: Amortization of intangible assets
relating to intellectual property rights acquired ($101.6 million) and tax
effect of adjustment;
(b) Acquisitions & integration activities: Inventory fair value
adjustment related to the acquisition of Jerini AG ($1.9 million); payment on
amendment of INTUNIV in-licence agreement ($36.9 million); costs associated
with the integration and acquisition of Jerini AG and EQUASYM from UCB ($10.0
million); and tax effect of adjustments;
(c) Divestments, reorganizations and discontinued operations: Accelerated
depreciation ($7.5 million) and reorganization costs ($7.1 million) for the
transition of manufacturing from Owings Mills; costs associated with the
agreement to terminate Women's Health products with Duramed ($65.0 million);
gain on disposal of non-core product rights ($6.3 million); gain on disposal
of the investment in Virochem ($55.2 million); discontinued operations in
respect of non core Jerini AG operations ($12.4 million); and tax effect of
adjustments;
(d) Depreciation: Depreciation of $70.0 million included in Cost of
product sales, R&D costs and SG&A costs for US GAAP separately disclosed for
the presentation of Non GAAP earnings.
Unaudited results for the three and nine months to September 30, 2010
Non GAAP reconciliation
The following table reconciles US GAAP net cash provided by
operating activities to Non GAAP cash generation:
3 months to September 9 months to September
30, 30,
2010 2009 2010 2009
$M $M $M $M
Net cash provided by
operating activities 142.0 134.0 612.0 390.0
Tax and interest
payments, net 83.6 86.0 301.6 220.6
Payments for acquired and
in-licenced products 45.0 - 45.0 36.9
Non GAAP cash generation 270.6 220.0 958.6 647.5
Net debt comprises:
September, 30 December, 31
2010 2009
$M $M
Cash and cash equivalents 193.3 498.9
Restricted cash 605.1 33.1
Convertible bonds (1,100.0) (1,100.0)
Building finance obligation (7.3) (46.7)
Net Debt (308.9) (614.7)
Notes to Editors
SHIRE PLC
Shire's strategic goal is to become the leading specialty
biopharmaceutical company that focuses on meeting the needs of the specialist
physician. Shire focuses its business on attention deficit and hyperactivity
disorder, human genetic therapies and gastrointestinal diseases as well as
opportunities in other therapeutic areas to the extent they arise through
acquisitions. Shire's in-licensing, merger and acquisition efforts are
focused on products in specialist markets with strong intellectual property
protection and global rights. Shire believes that a carefully selected and
balanced portfolio of products with strategically aligned and relatively
small-scale sales forces will deliver strong results.
THE "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995
Statements included herein that are not historical facts are
forward-looking statements. Such forward-looking statements involve a number
of risks and uncertainties and are subject to change at any time. In the
event such risks or uncertainties materialize, the Company's results could be
materially adversely affected. The risks and uncertainties include, but are
not limited to, risks associated with: the inherent uncertainty of research,
development, approval, reimbursement, manufacturing and commercialization of
the Company's Specialty Pharmaceutical and Human Genetic Therapies products,
as well as the ability to secure new products for commercialization and/or
development; government regulation of the Company's products; the Company's
ability to manufacture its products in sufficient quantities to meet demand;
the impact of competitive therapies on the Company's products; the Company's
ability to register, maintain and enforce patents and other intellectual
property rights relating to its products; the Company's ability to obtain and
maintain government and other third-party reimbursement for its products; and
other risks and uncertainties detailed from time to time in the Company's
filings with the Securities and Exchange Commission.
Non GAAP Measures
This press release contains financial measures not prepared in accordance
with US GAAP. These measures are referred to as "Non GAAP" measures and
include: Non GAAP operating income; Non GAAP net income; Non GAAP diluted
earnings per ADS; effective tax rate on Non GAAP income from continuing
operations before income taxes and earnings of equity method investees
("Effective tax rate on Non GAAP income"); Non GAAP cost of product sales;
Non GAAP research and development; Non GAAP selling, general and
administrative; Non GAAP other income; and Non GAAP cash generation and net
debt. These Non GAAP measures exclude the effect of certain cash and non-cash
items, both recurring and non-recurring, that Shire's management believes are
not related to the core performance of Shire's business.
These Non GAAP financial measures are used by Shire's management to make
operating decisions because they facilitate internal comparisons of Shire's
performance to historical results and to competitors' results. Shire's
Remuneration Committee uses certain key Non GAAP measures when assessing the
performance and compensation of employees, including Shire's executive
directors.
The Non GAAP measures are presented in this press release as Shire's
management believe that they will provide investors with a means of
evaluating, and an understanding of how Shire's management evaluates, Shire's
performance and results on a comparable basis that is not otherwise apparent
on a US GAAP basis, since many one-time, infrequent or non-cash items that
Shire's management believe are not indicative of the core performance of the
business may not be excluded when preparing financial measures under US GAAP.
These Non GAAP measures should not be considered in isolation from, as
substitutes for, or superior to financial measures prepared in accordance
with US GAAP.
The following items, including their tax effect, have been excluded from
both 2010 and 2009 Non GAAP earnings, and from our 2010 outlook:
Amortization and asset impairments:
- Intangible asset amortization and impairment charges; and
- Other than temporary impairment of investments.
Acquisitions and integration activities:
- Upfront payments and milestones in respect of in-licensed and acquired
products;
- Costs associated with acquisitions, including transaction costs, and
fair value adjustments on contingent consideration and acquired
inventory; and
- Costs associated with the integration of companies.
Divestments, re-organizations and discontinued operations
- Gains and losses on the sale of non-core assets;
- Costs associated with restructuring and re-organization activities;
- Termination costs; and
- Income / (losses) from discontinued operations.
Depreciation, which is included in Cost of product sales, Research and
development and Selling, general and administrative costs in our US GAAP
results, has been separately disclosed for the presentation of 2009 and 2010
Non GAAP earnings. A reconciliation of Non GAAP financial measures to the
most directly comparable measure under US GAAP is presented on pages 21 to
24.
Sales growth at CER, which is a Non GAAP measure, is computed by
restating 2010 results using average 2009 foreign exchange rates for the
relevant period.
Average exchange rates for the nine months to September 30, 2010 were
$1.54:GBP1.00 and $1.32:EUR1.00 (2009: $1.54:GBP1.00 and $1.37:EUR1.00).
Average exchange rates for Q3 2010 were $1.55:GBP1.00 and $1.29:EUR1.00
(2009: $1.64:GBP1.00 and $1.43:EUR1.00).
TRADEMARKS
All trademarks defined as (R) and (TM) used in this press release are
trademarks of Shire plc or companies within the Shire group except for 3TC(R)
and ZEFFIX(R) which are trademarks of GSK, PENTASA(R) which is a trademark of
Ferring A/S Corp, and REMINYL(R), REMINYL XL(TM), RAZADYNE(R) and RAZADYNE(R)
ER which are trademarks of J&J outside the UK and Republic of Ireland1.
Certain trademarks of Shire plc or companies within the Shire group are set
out in Shire's Annual Report on Form 10-K for the year ended December 31,
2009 and the Quarterly Report on Form 10-Q for the three months ended June
30, 2010.
[1] REMINYL(R) and REMINYL XL(TM) are both trademarks of Shire in the UK
and Republic of Ireland.
For further information please contact:
Investor Relations Eric Rojas (erojas@shire.com) +1-781-482-0999
Media Jessica Mann (jmann@shire.com) +44-1256-894-280
Matthew Cabrey (mcabrey@shire.com) +1-484-595-8248
Jessica Cotrone (jcotrone@shire.com) +1-781-482-9538
For further information please contact: Investor Relations, Eric Rojas, (erojas at shire.com) +1-781-482-0999. Media: Jessica Mann (jmann at shire.com), +44-1256-894-280; Matthew Cabrey (mcabrey at shire.com), +1-484-595-8248; Jessica Cotrone (jcotrone at shire.com), +1-781-482-9538.
Tags: Dublin, ireland, October 29, Shire Plc
