Shire's Replenished Portfolio Drives Excellent Quarterly Performance
By Shire Plc, PRNEWednesday, April 28, 2010
DUBLIN, April 29, 2010 - Shire plc (LSE: SHP, NASDAQ: SHPGY) the global specialty
biopharmaceutical company, announces results for the three months to March
31, 2010.
Financial Highlights
Q1 2010(1)
Product sales $718 million -5%
Product sales from core products(2) $626 million +36%
Total revenues $816 million -
Non GAAP operating income $265 million -19%
US GAAP operating income $218 million -4%
Non GAAP diluted earnings per ADS $1.01 -21%
US GAAP diluted earnings per ADS $0.89 -23%
(1) Percentages compare to equivalent 2009 period.
(2) Core products represent Shire's products excluding ADDERALL
XR.
Angus Russell, Chief Executive Officer, commented:
"This was an excellent first quarter performance with our core product
sales up 36% and cash generation increasing 19% to $278 million. Despite the
impact of authorised generic ADDERALL XR, total reported revenues in the
quarter were at 2009 levels, reflecting our success in replenishing our
portfolio with products providing strong growth and robust intellectual
property. Across the business we saw significant developments: VYVANSE now
has approximately a 14% share of the US ADHD market, our two recently
launched products VPRIV and INTUNIV are performing well and in the EU
REPLAGAL is now the leading Fabry treatment, with an estimated 60% market
share.
We are investing in our growing international presence and building on
our recent product launches. We are also progressing our pipeline and we
expect to deliver further newsflow on our early projects later this year.
Our core products are leveraging our existing infrastructure and we will
continue to expand our operating margins.
Our performance in the first quarter reinforces our confidence in growing
both revenue and earnings in the full year 2010 compared to 2009, and we
re-iterate our aspirational target of mid-teens revenue growth on average
between 2009 and 2015."
FINANCIAL SUMMARY
First Quarter 2010 Unaudited Results
Q1 2010 Q1 2009
Non Non
US GAAP Adjustments GAAP US GAAP Adjustments GAAP
$M $M $M $M $M $M
Revenues 816 - 816 818 - 818
Operating
income 218 47 265 226 101 327
Diluted
earnings
per ADS $0.89 $0.12 $1.01 $1.16 $0.12 $1.28
The Non GAAP financial measures included within this release are
explained on pages 19 and 20, and are reconciled to the most directly
comparable financial measures prepared in accordance with US GAAP on pages 17
and 18.
- Product sales from core products were up 36% to $626 million (2009:
$460 million). On a constant exchange rate ("CER") basis, which is a
Non GAAP measure, core product sales were up 33%. Growth in core
product sales was achieved by strong performance throughout the
portfolio including:
- VYVANSE(R) (up 32% to $154 million, CER: up 32%);
- ELAPRASE(R) (up 22% to $101 million, CER: up 17%);
- REPLAGAL(R) (up 69% to $68 million, CER: up 60%);
- LIALDA/MEZAVANT(R) (up 29% to $64 million, CER: up 28%); and
- Recently launched INTUNIV(R) ($35 million) and VPRIV(R) ($6 million).
- Product sales including ADDERALL XR(R) were down 5% to $718 million
(CER: down 7%), as the decline in ADDERALL XR sales compared to Q1 2009
(down 69% to $92 million) offset the strong core product sales growth.
The decline in ADDERALL XR product sales was expected, as Q1 2009 was
the last quarter of ADDERALL XR exclusivity prior to the launch of
authorized generic versions by Teva Pharmaceuticals USA Inc. ("Teva")
in April 2009 and Impax Laboratories Inc. ("Impax") in October 2009.
- Total revenues of $816 million remained at 2009 levels (CER: down 2%;
2009: $818 million) as higher royalty income (primarily received on
Impax's sales of authorized generic ADDERALL XR) offset lower product
sales.
- Non GAAP operating income decreased by 19% to $265 million (2009: $327
million) as a result of increased investment in research and
development ("R&D") and higher selling, general and administrative
("SG&A") costs in support of recent product launches. On a US GAAP
basis, operating income decreased by 4% to $218 million
(2009: $226 million). US GAAP operating income in Q1 2009 included
costs of $65 million on termination of the Women's Health development
agreement with Duramed Pharmaceuticals Inc. ("Duramed").
- Cash generation, which is a Non GAAP measure, continues to be strong
and increased by 19% to $278 million in Q1 2010 (2009: $234 million).
The increase in cash generation in 2010 resulted from higher cash
receipts from gross product sales and royalties, partially offset by
higher cash payments on the increased investment in R&D and SG&A.
Cash balances (including cash equivalents and restricted cash) at
March 31, 2010 were $684 million (December 31, 2009: $532 million).
2010 OUTLOOK
The first quarter's performance has increased our confidence in growing
both revenues and earnings for the full year 2010 compared to 2009, including
the effect of US Healthcare Reform.
Whilst our core portfolio will continue to deliver strong year on year
growth, revenues from ADDERALL XR product sales and from total royalties are
anticipated to be lower in the last three quarters of 2010 compared to their
very strong performance in the first quarter. Given our confidence in our
outlook, we have decided to make some targeted increases in investment in our
international infrastructure, our recent product launches and in progressing
our pipeline to support longer-term growth. As a result, we anticipate that
R&D and SG&A spending in 2010 will be at the top end of our previously stated
guidance of 5-10% growth year on year.
With the expected growth in 2010 we reiterate our aspirational target of
mid-teens revenue growth on average between 2009 and 2015.
PRODUCT LAUNCHES
Subject to obtaining the relevant regulatory/governmental approvals,
future product launches in the next 12 months will include:
- VPRIV(TM) for the treatment of Type 1 Gaucher disease in the
EU;
- REPLAGAL for the treatment of Fabry disease in the US;
- MEZAVANT for the treatment of ulcerative colitis in certain
EU and RoW countries;
- FIRAZYR(R) for the symptomatic treatment of acute attacks of hereditary
angiodema ("HAE") in certain European and Latin American countries; and
- EQUASYM(R) for the treatment of ADHD in certain EU
countries.
FIRST QUARTER 2010 AND RECENT PRODUCT AND PIPELINE DEVELOPMENTS
Products
VPRIV - for the treatment of Type 1 Gaucher disease in the US
- On February 26, 2010 the U.S. Food and Drug Administration
("FDA") granted marketing approval for VPRIV, a human cell line derived
enzyme replacement therapy ("ERT") for the long-term treatment of Type
1 Gaucher disease in pediatric and adult patients. The FDA designated
VPRIV for Priority Review and granted marketing approval in just six
months. VPRIV offers patients and their physicians a new treatment
option at a critical time, as the supply of a previously approved ERT
for Gaucher disease is uncertain and remains disrupted.
VYVANSE - for the treatment of ADHD
- On February 1, 2010 Shire announced the Canadian
availability of VYVANSE, the first and only prodrug therapy approved
for ADHD treatment in Canada. This is the first launch of VYVANSE
outside the US.
- On March 4, 2010 the United States District Court for the
District of Columbia (the "District Court") upheld the FDA's decision
that VYVANSE is entitled to five year market exclusivity in the US.
The five-year exclusivity period for VYVANSE expires on February 23,
2012 and precludes generic manufacturers from submitting an Abbreviated
New Drug Application ("ANDA") to the FDA until that time, or until
February 23, 2011 should a generic applicant challenge the US patents
covering VYVANSE, which remain in effect until June 29, 2023. Actavis
Elizabeth LLC ("Actavis") has appealed the District Court's ruling to
the US Court of Appeals for the DC Circuit. No hearing date has been
set.
INTUNIV - for the treatment of ADHD
- On March 16, April 5, and April 26, 2010 Shire received
Paragraph IV Notice Letters from Teva, Actavis and Anchen
Pharmaceuticals, Inc. ("Anchen") respectively, advising of the filing
of ANDAs for generic versions of 1mg, 2mg, 3mg, and 4mg guanfacine
hydrochloride extended release tablets, INTUNIV. INTUNIV is protected
by three FDA Orange Book listed patents. The three patents expire in
2015, 2020 and 2022, respectively. Teva's Paragraph IV Notice Letter
was only directed to the patents expiring in 2020 and 2022. On April
22, Shire filed a lawsuit against Teva in the US District Court for the
District of Delaware for the infringement of these patents. Actavis's
and Anchen's Paragraph IV Notice Letters were directed to all three
Orange Book listed patents. Shire is currently reviewing the details
of Actavis's and Anchen's Paragraph IV Notice Letters.
REPLAGAL - for the treatment of Fabry disease
- On April 14, 2010 Mt. Sinai School of Medicine of New York
University sought to initiate lawsuits in Sweden and Germany alleging
that REPLAGAL infringes Mt. Sinai's European Patent No. 1 942 189,
granted April 14, 2010. Mt. Sinai is seeking an injunction against the
use of REPLAGAL in these jurisdictions until expiration of the patent
on November 30, 2013. Shire will defend its right to commercialize
REPLAGAL in these countries and will vigorously oppose the validity of
this patent.
Pipeline
REPLAGAL - for the treatment of Fabry disease in the US
- On February 24, 2010 Shire announced its receipt of Fast Track
designation from the FDA for REPLAGAL, an ERT for Fabry disease.
Shire filed a Biologics License Application ("BLA") for REPLAGAL in
December 2009, and in Q1 2010 the FDA requested additional
pharmacokinetic comparability data. As a result of this request,
Shire withdrew its December BLA filing, and, at the suggestion of the
FDA, requested and received Fast Track designation. Shire immediately
initiated the rolling submission of the REPLAGAL BLA, and expects to
submit the requested pharmacokinetic data around mid-year. REPLAGAL is
currently approved for the treatment of Fabry disease in 45 countries
and has been available to US patients since December 2009 under an
FDA-approved treatment protocol filed at the request of FDA. The
Company is also supporting emergency Investigational New Drug requests
in the US. The REPLAGAL early access program was put in place as a
result of the supply disruption of the only currently marketed
treatment for Fabry disease in the US.
HGT-2310 - for the treatment of Hunter syndrome with central nervous
system symptoms, idursulfase-IT (intrathecal delivery)
- HGT 2310 is in development as an ERT delivered intrathecally for Hunter
syndrome patients with central nervous system symptoms. The Company
initiated a Phase I/II clinical trial in the first quarter of 2010.
This product has been granted orphan designation in the US.
LIALDA/MEZAVANT - for the treatment of diverticulitis
- LIALDA/MEZAVANT is being investigated as a treatment to prevent
recurrent attacks of diverticulitis. Phase 3 worldwide clinical trials
investigating the use of the product for the treatment of
diverticulitis were initiated in 2007 and are ongoing. Enrollment in
these trials has completed and data is estimated to be available in
2012.
OTHER FIRST QUARTER AND RECENT DEVELOPMENTS
US Healthcare Reform
- During the quarter, President Obama signed into law Healthcare Reform,
with the goal of expanding healthcare access to millions of Americans
currently without health insurance and lowering the overall costs of
healthcare. Healthcare Reform will affect Shire in a number of
ways, including a limited impact coming from the changes to the
calculation of Medicaid rebates effective from this quarter, and from
Shire's share of the industry wide excise tax starting in 2011.
We are pleased with the expansion of healthcare coverage to previously
uninsured patients and believe this should provide a positive benefit
for Shire. Furthermore, we are also pleased with Healthcare
Reform providing certainty regarding regulatory exclusivity for
biologics. Healthcare Reform did not materially impact Shire's results
in the first quarter of 2010, and we believe Shire is well placed to
manage the changes Healthcare Reform will bring in future periods.
BOARD CHANGES
- On March 15, 2010 Bill Burns was appointed to the Board as a
Non Executive Director with immediate effect. Mr Burns has also been
appointed a member of Shire's Remuneration Committee.
Dial in details for the live conference call for investors 14:30
BST/9:30 EDT on April 29, 2010:
UK dial in: 0844-800-3850 or 01296-311-600
US dial in: 1-866-8048688 or 1-718-3541175
International dial in: +44(0)1296-311-600
Password/Conf ID: 327562
Live Webcast: www.shire.com/shireplc/en/investors
ADDITIONAL INFORMATION
The following additional information is included in this press release:
Page
Overview of Q1 2010 Financial 6
Results
Financial Information 10
Notes to Editors 19
Safe Harbor Statement 19
Explanation of Non GAAP Measures 19
Trademarks 20
OVERVIEW OF Q1 2010 FINANCIAL RESULTS
1. Product sales
For the three months to March 31, 2010 product sales decreased by 5% to
$718.2 million (2009: $756.0 million) and represented 88% of total revenues
(2009: 92%). On a CER basis product sales decreased 7% compared to 2009.
Sales of core products increased by 36% to $626.4 million (2009: $460.2
million), up 33% on a CER basis.
Product Highlights
Exit
Market
Growth Share(1)
Product Sales $M Sales CER US Rx(1)
VYVANSE 154.4 +32% 1 +32% +32% 14%
ELAPRASE 100.8 +22% 1 +17% n/a(2) n/a(2)
REPLAGAL 68.0 +69% 1 +60% n/a(3) n/a(3)
LIALDA / MEZAVANT 63.6 +29% 1 +28% +23% 19%
PENTASA(R) 58.2 +14% +14% -6% 15%
FOSRENOL(R) 47.1 +18% 1 +14% -12% 7%
INTUNIV 34.5 n/a 1 n/a n/a 2%
VPRIV 5.8 n/a 1 n/a n/a n/a
FIRAZYR 2.2 +340% 1 +313% n/a(3) n/a(3)
OTHER 91.8 +15% 1 +11% n/a n/a
Core product sales 626.4 36% 1 33%
ADDERALL XR 91.8 -69% 1 -70% -60% 8%
Total product sales 718.2 -5% 1 -7%
(1) Data provided by IMS Health National Prescription Audit
("IMS NPA"). Exit market share represents the US market share in the week
ending March 26, 2010.
(2) IMS NPA Data not available.
(3) Not sold in the US in Q1 2010, or awaiting approval in the
US.
VYVANSE - ADHD
The increase in VYVANSE product sales was driven by increased US
prescription demand compared to Q1 2009, 10% growth in the US ADHD market and
price increases.
ELAPRASE - Hunter syndrome
The growth in sales of ELAPRASE was driven by increased
volumes across all regions where ELAPRASE is sold. On a CER basis sales grew
by 17% (79% of ELAPRASE sales are made outside of the US).
REPLAGAL - Fabry disease
The growth in REPLAGAL product sales in Q1 2010 over 2009 was
driven by an increase in demand due to significant switching of patients to
REPLAGAL in the EU, attributable in part to supply shortages of a competitor
product. Sales increased 60% on a CER basis (REPLAGAL is sold primarily in
Euros and Pounds sterling).
LIALDA/MEZAVANT - Ulcerative colitis
Strong product sales of LIALDA/MEZAVANT continued in Q1 2010 driven by
increased US prescription demand compared to Q1 2009 and price increases. The
US oral mesalamine market was flat year on year.
PENTASA - Ulcerative colitis
Product sales of PENTASA increased in Q1 2010 compared to Q1 2009
primarily due to price increases.
FOSRENOL - Hyperphosphatemia
Product sales increased as FOSRENOL grew its share of existing markets
outside the US. Product sales also grew in the US due to price increases and
growth in non-retail demand which offset the decline in US retail
prescription demand.
INTUNIV - ADHD
In line with Shire's revenue recognition policy for launch
shipments, initial stocking shipments in November 2009 were deferred and are
being recognised into revenue in line with end-user prescription demand. At
March 31, 2010 deferred revenues on the balance sheet represented gross sales
of $18.8 million.
VPRIV - Gaucher disease
Product sales were primarily generated on a pre-approval basis
via patient early access programs in the EU throughout Q1 2010 and in the US
after February 26, 2010 when approval was received from the FDA.
FIRAZYR - HAE
Product sales of FIRAZYR increased as volumes grew across
European markets. 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 decreased in 2010 compared to 2009 as Q1 2009
represented the final quarter of exclusivity prior to the launch of
authorized generic versions by Teva and Impax in April and October 2009,
respectively. The launch of authorized generic versions resulted in a lower
prescription demand in 2010 compared to 2009 resulting in a corresponding
reduction in ADDERALL XR's share of the US ADHD market (8% for Q1 2010
compared to 21% in Q1 2009).
Despite price increases taken since Q1 2009, product sales in 2010
declined at a faster rate than US prescription demand due to increased sales
deductions as a percentage of branded ADDERALL XR gross sales, representing
61% of gross revenues in Q1 2010 (2009: 37%). Sales deductions in Q1 2010
included the effect of a change in estimate of inventory in the wholesaler
pipeline, which decreased sales deductions as a percentage of gross sales by
8 percentage points.
2. Royalties
Year on year growth
Royalties to
Product Shire $M Royalties CER
3TC(R) and Zeffix(R) 1.00 36.6 -6% -7%
ADDERALL XR 1.00 40.8 n/a n/a
Other 1.00 17.9 52% 47%
Total 1.00 95.3 88% 86%
Royalty income increased by 88% in Q1 2010 compared to 2009
due to royalties received on sales of Impax's authorized generic version of
ADDERALL XR, which commenced in October 2009. This increase more than offset
the decline in royalties received from GlaxoSmithKline ("GSK") on 3TC, down
9%, due to competition from other treatments. Royalties received from GSK on
ZEFFIX were slightly increased over 2009. Other royalties increased by 52%,
principally due to higher royalties on sales of FOSRENOL in Japan.
3. Financial details
Cost of product sales
% of % of
product product
Q1 2010 sales Q1 2009 sales
$M $M
Cost of product sales (US 101.9 14% 83.6 11%
GAAP)
Costs associated with the
transfer of manufacturing
from Owings Mills (7.2) -
Depreciation (2.5) (3.6)
Cost of product sales (Non 92.2 13% 80.0 11%
GAAP)
Non GAAP cost of product sales as a percentage of product sales increased
in Q1 2010 compared to the same period in 2009 due to changes to the product
mix following the launch of authorized generic versions of ADDERALL XR by
Teva and Impax in April and October 2009, and the inclusion of lower margin
sales of the authorized generic to Teva and Impax which depressed gross
margins for ADDERALL XR.
Research and development ("R&D")
% of % of
product product
Q1 2010 sales Q1 2009 sales
$M $M
R&D (US GAAP) 131.0 18% 185.9 25%
Women's Health exit costs - (65.0)
Depreciation (3.7) (4.0)
R&D (Non GAAP) 127.3 18% 116.9 15%
Non GAAP R&D increased in absolute terms by $10.4 million in 2010 over
2009 due to continued increased investment in R&D programs, in part as a
result of acceleration of the REPLAGAL and VPRIV programs. As a percentage of
core product sales, Non GAAP R&D decreased by 5 percentage points to 20%
(2009: 25%).
Selling, general and administrative ("SG&A")
% of % of
product product
Q1 2010 sales Q1 2009 sales
$M $M
SG&A (US GAAP) 359.9 50% 318.9 42%
Intangible asset (34.6) (32.5)
amortization
Depreciation (16.3) (14.8)
SG&A (Non GAAP) 309.0 43% 271.6 36%
Non GAAP SG&A increased in 2010 compared to 2009 due in part to increased
selling and marketing costs incurred in support of recently launched
products. As a percentage of core product sales, Non GAAP SG&A decreased by
10 percentage points to 49% (2009: 59%).
Reorganization costs
For the three months to March 31, 2010 Shire recorded
reorganization costs of $5.0 million (2009: $2.2 million) principally
relating to the transfer of manufacturing from its Owings Mills facility.
Interest expense
For the three months to March 31, 2010 the Company incurred interest
expense of $9.0 million (2009: $11.0 million). Interest expense principally
relates to the coupon and deferred issue costs on Shire's $1,100 million
2.75% convertible bonds due 2014.
Other income/(expense), net
Q1 2010 Q1 2009
$M $M
Other income, net (US GAAP) 10.8 50.3
Gain on sale of investments (11.1) (55.2)
Other expense, net (Non GAAP) (0.3) (4.9)
Non GAAP other expense, net in 2010 was lower than the same period in
2009 due to foreign exchange losses in 2009 that were not repeated in 2010.
In the first quarter of 2010 Shire recognised a gain of $11.1 million
(2009: $55.2 million) relating to the disposal of its investment in Virochem
Pharma Inc. ("Virochem") in March 2009. At the time of the disposal, an
element of the consideration was held in escrow for twelve months pending any
warranty claims and breaches of representations made by Virochem and by all
selling shareholders, including Shire. The remaining consideration was
released from escrow in March 2010, resulting in a gain of $11.1 million
being recognized in Q1 2010.
Taxation
The effective rate of tax for the three months to March 31, 2010 was 24%
(2009: 19%), and the effective tax rate on Non GAAP income was 26% (2009:
24%).
The Non-GAAP effective tax rate in 2010 is higher than the same period in
2009 due to unfavourable changes in profit mix and the recording of valuation
allowances in 2010 in relation to loss carry forward amounts which were not
recorded in Q1 2009.
FINANCIAL INFORMATION
TABLE OF CONTENTS
Page
Unaudited US GAAP Statement of Financial Position 11
Unaudited US GAAP Consolidated Statements of
Operations 12
Unaudited US GAAP Consolidated Statements of Cash
Flows 14
Selected Notes to the Unaudited US GAAP Financial
Statements
(1) Earnings per share 15
(2) Analysis of revenues 16
Non GAAP reconciliation 17
Unaudited US GAAP results for the three months to March 31, 2010
Consolidated Balance Sheets
March 31, December 31,
2010 2009
$M $M
ASSETS
Current assets:
Cash and cash equivalents 657.5 498.9
Restricted cash 26.8 33.1
Accounts receivable, net 620.7 597.5
Inventories 215.6 189.7
Deferred tax asset 114.1 135.8
Prepaid expenses and other current assets 131.0 115.2
Total current assets 1,765.7 1,570.2
Non-current assets:
Investments 109.6 105.7
Property, plant and equipment, net 668.5 676.8
Goodwill 373.2 384.7
Other intangible assets, net 1,729.6 1,790.7
Deferred tax asset 80.9 79.0
Other non-current assets 11.2 10.4
Total assets 4,738.7 4,617.5
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued expenses 929.2 929.1
Deferred tax liability 3.3 2.9
Other current liabilities 36.5 88.0
Total current liabilities 969.0 1,020.0
Non-current liabilities:
Convertible bonds 1,100.0 1,100.0
Other long-term debt 43.7 43.6
Deferred tax liability 321.3 294.3
Other non-current liabilities 247.7 247.1
Total liabilities 2,681.7 2,705.0
Shareholders' equity:
Common stock of 5p par value; 1,000 million
shares authorized; and 562.1 million shares
issued and outstanding (2009: 1,000 million
shares authorized; and 561.5 million shares
issued and outstanding) 55.6 55.6
Additional paid-in capital 2,697.9 2,677.6
Treasury stock: 15.7 million shares (2009: 17.8
million) (311.8) (347.4)
Accumulated other comprehensive income 107.3 149.1
Accumulated deficit (492.0) (622.4)
Total shareholders' equity 2,057.0 1,912.5
Total liabilities and equity 4,738.7 4,617.5
Unaudited US GAAP results for the three months to March 31, 2010
Consolidated Statements of Operations
3 months to March 31, 2010 2009
$M $M
Revenues:
Product sales 718.2 756.0
Royalties 95.3 50.6
Other revenues 2.7 11.2
Total revenues 816.2 817.8
Costs and expenses:
Cost of product sales(1) 101.9 83.6
Research and development 131.0 185.9
Selling, general and administrative(1) 359.9 318.9
Reorganization costs 5.0 2.2
Integration and acquisition costs 0.6 1.4
Total operating expenses 598.4 592.0
Operating income 217.8 225.8
Interest income 0.4 0.6
Interest expense (9.0) (11.0)
Other income, net 10.8 50.3
Total other income, net 2.2 39.9
Income from continuing operations before income
taxes and equity in losses of equity method
investees 220.0 265.7
Income taxes (53.6) (49.5)
Equity in losses of equity method investees, net
of taxes (0.5) (0.1)
Income from continuing operations, net of tax 165.9 216.1
Loss from discontinued operations (net of income
tax expense of $nil and $nil respectively) - (2.6)
Net income 165.9 213.5
Add: Net loss attributable to noncontrolling
interest in subsidiaries - 0.1
Net income attributable to Shire plc 165.9 213.6
(1) Cost of product sales includes amortization of intangible assets
relating to favorable manufacturing contracts of $0.4 million for the three
months to March 31, 2010 (2009: $0.4 million). Selling, general and
administrative costs include amortization of intangible assets relating to
intellectual property rights acquired of $34.6 million for the three months
to March 31, 2010 (2009: $32.5 million).
Unaudited US GAAP results for the three months to March 31, 2010
Consolidated Statements of Operations (continued)
3 months to March 31, 2010 2009
Earnings per ordinary share - basic
Earnings from continuing operations 30.5c 40.1c
Loss from discontinued operations - (0.5c)
Earnings per ordinary share - basic 30.5c 39.6c
Earnings per ADS - basic 91.5c 118.8c
Earnings per ordinary share -
diluted
Earnings from continuing operations 29.7c 38.9c
Loss from discontinued operations - (0.4c)
Earnings per ordinary share - 29.7c 38.5c
diluted
Earnings per ADS - diluted 89.1c 115.5c
Weighted average number of shares:
Millions Millions
Basic 543.9 539.2
Diluted 586.1 577.2
Unaudited US GAAP results for the three months to March 31, 2010
Consolidated Statements of Cash Flows
3 months to March 31, 2010 2009
$M $M
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 165.9 213.5
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss from discontinued operations - 2.6
Depreciation and amortization 64.3 55.3
Share based compensation 14.1 15.8
Gain on sale of non-current investments (11.1) (55.2)
Other 5.2 3.3
Movement in deferred taxes 52.2 33.7
Equity in losses of equity method investees 0.5 0.1
Changes in operating assets and liabilities:
Increase in accounts receivable (10.8) (151.0)
Increase in sales deduction accrual 64.9 121.9
Increase in inventory (24.2) (9.5)
Increase in prepayments and other current
assets (18.1) (12.3)
(Increase)/decrease in other assets (0.6) 3.4
Decrease in accounts and notes payable and
other liabilities (116.1) (39.8)
Returns on investment from joint venture - 4.9
Cash flows used in discontinued operations - (2.6)
Net cash provided by operating activities(A) 186.2 184.1
CASH FLOWS FROM INVESTING ACTIVITIES:
Movements in restricted cash 6.3 (6.9)
Purchases of subsidiary undertakings and
businesses, net of cash acquired - (74.1)
Purchases of property, plant and equipment (43.6) (42.0)
Purchases of intangible assets - (6.0)
Proceeds from disposal of long-term
investments 2.0 19.2
Proceeds from disposal of property, plant
and equipment 0.1 0.4
Returns from equity investments - 0.2
Net cash used in investing activities(B) (35.2) (109.2)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment under building financing obligation (0.7) (0.7)
Proceeds from exercise of options 1.5 0.1
Tax benefit of stock based compensation 4.8 -
Net cash provided by/(used in) financing
activities(C) 5.6 (0.6)
Effect of foreign exchange rate changes on
cash and cash equivalents(D) 2.0 (1.4)
Net increase in cash and cash equivalents(A)
+(B) +(C) +(D) 158.6 72.9
Cash and cash equivalents at beginning of
period 498.9 218.2
Cash and cash equivalents at end of period 657.5 291.1
Unaudited US GAAP results for the three months to March 31, 2010
Selected Notes to the Financial Statements
(1) Earnings per share
3 months to March 31, 2010 2009
$M $M
Income from continuing operations 165.9 216.1
Loss from discontinued operations - (2.6)
Noncontrolling interest in
subsidiaries - 0.1
Numerator for basic EPS 165.9 213.6
Interest on convertible bonds,
net of tax(1) 8.4 8.4
Numerator for diluted EPS 174.3 222.0
Weighted average number of
shares:
Millions Millions
Basic(2) 543.9 539.2
Effect of dilutive shares:
Stock options(3) 9.0 5.3
Convertible bonds 2.75% due
2014(1) 33.2 32.7
Diluted 586.1 577.2
(1) Calculated using the "if-converted" method.
(2) Excludes shares purchased by the Employee Share Ownership Trust
("ESOT") and presented by Shire as treasury stock.
(3) Calculated using the treasury stock method.
The share equivalents not included in the calculation of the diluted
weighted average number of shares are shown below:
3 months to March 31, 2010 2009
No. of shares No. of shares
Millions(1) Millions(1)
Stock options out of the money 16.1 16.6
(1) For the three month periods ended March 31, 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.
Unaudited US GAAP results for the three months to March 31, 2010
Selected Notes to the Financial Statements
(2) Analysis of revenues
3 months to March 31, 2010 2009 2010 2010
% % of total
$M $M change revenue
Net product sales:
Specialty Pharmaceuticals
("Speciality")
ADHD
ADDERALL XR 91.8 295.8 -69% 11%
VYVANSE 154.4 116.6 32% 19%
DAYTRANA 18.4 19.9 -7% 2%
EQUASYM 2.4 1 - n/a <1%
INTUNIV 34.5 1 - n/a 4%
301.5 432.3 -30% 37%
GI
PENTASA 58.2 51.2 14% 7%
LIALDA / MEZAVANT 63.6 49.4 29% 8%
121.8 100.6 21% 15%
General products
FOSRENOL 47.1 39.8 18% 6%
CALCICHEW 9.4 9.6 -2% 1%
CARBATROL 20.1 18.1 11% 2%
REMINYL/REMINYL XL 12.5 7.4 69% 2%
XAGRID 23.3 20.1 16% 3%
112.4 95.0 18% 14%
Other product sales 5.7 4.6 24% 1%
Total Specialty product
sales 541.4 632.5 -14% 66%
Human Genetic Therapies ("HGT")
ELAPRASE 100.8 82.8 22% 12%
REPLAGAL 68.0 40.2 69% 8%
VPRIV 5.8 1 - n/a 1%
FIRAZYR 2.2 0.5 340% <1%
Total HGT product sales 176.8 123.5 43% 22%
Total product sales 718.2 756.0 -5% 88%
Royalties:
3TC and ZEFFIX 36.6 38.8 -6% 4%
ADDERALL XR 40.8 1 - n/a 5%
Other 17.9 11.8 52% 2%
Total royalties 95.3 50.6 88% 11%
Other revenues 2.7 11.2 -76% <1%
Total Revenues 816.2 817.8 0% 100%
Unaudited results for the three months to March 31, 2010
Non GAAP reconciliation
US GAAP Adjustments
Acquisitions
Amortization &
March & asset integration
3 months to, 31, 2010 impairments activities
(a) (b)
$M $M $M
Total revenues 816.2 - -
Costs and
expenses:
Cost of product
sales 101.9 - -
Research and
development 131.0 - -
Selling, general
and administrative 359.9 (34.6) -
Reorganization
costs 5.0 - -
Integration and
acquisition costs 0.6 - (0.6)
Depreciation - - -
Total operating
expenses 598.4 (34.6) (0.6)
Operating income 217.8 34.6 0.6
Interest income 0.4 - -
Interest expense (9.0) - -
Other
income/(expenses),
net 10.8 - -
Total other
income/(expense),
net 2.2 - -
Income from
continuing
operations before
income taxes and
equity in losses
of equity method
investees 220.0 34.6 0.6
Income taxes (53.6) (9.7) (0.1)
Equity in losses
of equity method
investees, net of
tax (0.5) - -
Net income
attributable to
Shire plc 165.9 24.9 0.5
Impact of
convertible debt,
net of tax 8.4 - -
Numerator for
diluted EPS 174.3 24.9 0.5
Weighted average
number of shares
(millions) -
diluted 586.1 - -
Diluted earnings
per ADS 89.1c 12.8c 0.3c
Table Continued
Divestments, Non GAAP
reorganizations
& discontinued Reclassify March 31,
3 months to, operations depreciation 2010
(c) (d)
$M $M $M
Total revenues - - 816.2
Costs and expenses:
Cost of product sales (7.2) (2.5) 92.2
Research and
development - (3.7) 127.3
Selling, general and
administrative - (16.3) 309.0
Reorganization costs (5.0) - -
Integration and
acquisition costs - - -
Depreciation - 22.5 22.5
Total operating
expenses (12.2) - 551.0
Operating income 12.2 - 265.2
Interest income - - 0.4
Interest expense - - (9.0)
Other
income/(expenses), net (11.1) - (0.3)
Total other
income/(expense), net (11.1) - (8.9)
Income from continuing
operations before
income taxes and equity
in losses of equity
method investees 1.1 - 256.3
Income taxes (3.1) - (66.5)
Equity in losses of
equity method
investees, net of tax - - (0.5)
Net income attributable
to Shire plc (2.0) - 189.3
Impact of convertible
debt, net of tax - - 8.4
Numerator for diluted
EPS (2.0) - 197.7
Weighted average number
of shares (millions) -
diluted - - 586.1
Diluted earnings per
ADS (1.0c) - 101.2c
The following items are included in Adjustments:
(a) Amortization and asset impairments: Amortization of intangible assets
relating to intellectual property rights acquired ($34.6 million) and tax
effect of adjustment;
(b) Acquisitions and integration activities Costs associated with the
acquisition of EQUASYM ($0.6 million) and tax effect of adjustments;
(c) Divestments, reorganizations and discontinued operations: Accelerated
depreciation ($6.1 million), dual running costs ($1.1 million) and
reorganization costs ($5.0 million) primarily for the transfer of
manufacturing from Owings Mills; gain on disposal of investment in Virochem
($11.1 million); and tax effect of adjustments; and
(d) Depreciation: Depreciation of $22.5 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 March 31, 2009
Non GAAP reconciliation
US GAAP Adjustments
Acquisitions
Amortization &
March & asset integration
3 months to, 31, 2009 impairments activities
(a) (b)
$M $M $M
Total revenues 817.8 - -
Costs and
expenses:
Cost of product
sales 83.6 - -
Research and
development 185.9 - -
Selling, general
and administrative 318.9 (32.5) -
Reorganization
costs 2.2 - -
Integration and
acquisition costs 1.4 - (1.4)
Depreciation - - -
Total operating
expenses 592.0 (32.5) (1.4)
Operating income 225.8 32.5 1.4
Interest income 0.6 - -
Interest expense (11.0) - -
Other income, net 50.3 - -
Total other
expense, net 39.9 - -
Income from
continuing
operations before
income taxes and
equity in losses
of equity method
investees 265.7 32.5 1.4
Income taxes (49.5) (9.9) (0.2)
Equity in losses
of equity method
investees, net of
tax (0.1) - -
Income from
continuing
operations, net of
tax 216.1 22.6 1.2
Loss from
discontinued
operations (2.6) - -
Net income 213.5 22.6 1.2
Add: Net loss
attributable to
noncontrolling
interest in
subsidiaries 0.1 - -
Net income
attributable to
Shire plc 213.6 22.6 1.2
Impact of
convertible debt,
net of tax 8.4 - -
Numerator for
diluted EPS 222.0 22.6 1.2
Weighted average
number of shares
(millions) -
diluted 577.2 - -
Diluted earnings
per ADS 115.5c 11.7c 0.6c
Table Continued
Non GAAP
Divestments,
reorganizations
& discontinued Reclassify March 31,
3 months to, operations depreciation 2009
(c) (d)
$M $M $M
Total revenues - - 817.8
Costs and expenses:
Cost of product
sales - (3.6) 80.0
Research and
development (65.0) (4.0) 116.9
Selling, general and
administrative - (14.8) 271.6
Reorganization costs (2.2) - -
Integration and
acquisition costs - - -
Depreciation - 22.4 22.4
Total operating
expenses (67.2) - 490.9
Operating income 67.2 - 326.9
Interest income - - 0.6
Interest expense - - (11.0)
Other income, net (55.2) - (4.9)
Total other expense,
net (55.2) - (15.3)
Income from
continuing
operations before
income taxes and
equity in losses of
equity method
investees 12.0 - 311.6
Income taxes (15.2) - (74.8)
Equity in losses of
equity method
investees, net of
tax - - (0.1)
Income from
continuing
operations, net of
tax (3.2) - 236.7
Loss from
discontinued
operations 2.6 - -
Net income (0.6) - 236.7
Add: Net loss
attributable to
noncontrolling
interest in
subsidiaries - - 0.1
Net income
attributable to
Shire plc (0.6) - 236.8
Impact of
convertible debt,
net of tax - - 8.4
Numerator for
diluted EPS (0.6) - 245.2
Weighted average
number of shares
(millions) - diluted - - 577.2
Diluted earnings per
ADS (0.3c) - 127.5c
The following items are included in Adjustments:
(a) Amortization and asset impairments: Amortization of intangible assets
relating to intellectual property rights acquired ($32.5 million), and tax
effect of adjustment;
(b) Acquisitions & integration activities: Integration and transaction
related costs in respect of the acquisition of Jerini and EQUASYM ($1.4
million) and tax effect of adjustments;
(c) Divestments, reorganizations and discontinued operations: Costs
associated with agreement to terminate development of Women's Health products
with Duramed ($65.0 million); reorganization costs for the transition of
manufacturing from Owings Mills ($2.2 million); gain on disposal of the
investment in Virochem ($55.2 million); discontinued operations in respect of
Jerini businesses held for sale ($2.6 million); and tax effect of
adjustments; and
(d) Depreciation: Depreciation of $22.4 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 March 31, 2010
Non GAAP reconciliation
The following table reconciles US GAAP net cash provided by
operating activities to Non GAAP cash generation:
3 months to March 31, 2010 2009
$M $M
Net cash provided by operating activities 186.2 184.1
Tax and interest payments, net 90.1 51.2
Foreign exchange on cash 2.0 (1.4)
Non GAAP cash generation 278.3 233.9
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, Shire'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
Shire'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 Shire's products; Shire's ability to
manufacture its products in sufficient quantities to meet demand; the impact
of competitive therapies on Shire's products; Shire's ability to register,
maintain and enforce patents and other intellectual property rights relating
to its products; Shire'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 Shire'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. 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 Q1 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;
- Costs associated with the introduction of the new holding company; 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 17 and
18.
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 Q1 2010 were $1.56:GBP1.00 and $1.38:EUR1.00
(2009: $1.44:GBP1.00 and $1.31: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.
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 Clea Rosenfeld (Rest of the World) +44-1256-894-160
Eric Rojas (North America) +1-781-482-0999
Media Jessica Mann (Rest of the World) +44-1256-894-280
Jessica Cotrone (North America) +1-781-482-9538
Matt Cabrey (North America) +1-484-595-8248
Investor Relations, Clea Rosenfeld (Rest of the World), +44-1256-894-160, Eric Rojas (North America), +1-781-482-0999; Media: Jessica Mann (Rest of the World), +44-1256-894-280, Jessica Cotrone (North America), +1-781-482-9538, Matt Cabrey (North America), +1-484-595-8248
Tags: April 29, Dublin, ireland, Shire Plc
