Shire Begins the Year with a Strong Performance

PHILADELPHIA and DUBLIN, April 30, 2009 /PRNewswire-FirstCall/ -- Shire plc the global specialty biopharmaceutical company, announces results for the three months to March 31, 2009.

 

    Financial Highlights

                                                            Q1 2009 (1)
    Product sales                                     $756 million    +20%
    Product sales (excluding ADDERALL XR)             $460 million    +24%
    Product sales growth (excluding ADDERALL XR) at
    constant exchange rates (2)                                       +32%
    Non GAAP operating income                         $327 million    +70%
    US GAAP operating income                          $226 million    +39%
    Non GAAP diluted earnings per ADS                        $1.28    +73%
    US GAAP diluted earnings per ADS                         $1.16    +70%
    Cash provided by operating activities             $184 million   +180%


    (1) Figures compare Q1 2009 results with the same period in 2008.

(2) Sales growth at constant exchange rates ("CER") is calculated after restating Q1 2009 results using Q1 2008 average foreign exchange rates.

Angus Russell, Chief Executive Officer, commented:

"This has been a solid first quarter with the delivery of strong earnings growth, reflecting the continuing development of our business and effective cost control. We have built strong, competitive products that provide cutting edge therapies for our patients, which together with our late stage pipeline, will act as the principal drivers of Shire's future growth.

We are putting the right level of resources behind our products as evidenced by the recently announced co-promotion agreement for VYVANSE in the US. We are continuing to progress our R&D pipeline and in the second half of the year we are anticipating the launch of INTUNIV and the completion of several Phase 2 and Phase 3 studies. We are committed to expanding our international business for both our Human Genetic Therapies and Specialty Pharmaceuticals products and have made progress during the quarter with the opening of a representative office in Japan and the acquisition of product rights for EQUASYM, providing a European entry point for our Attention Deficit Hyperactivity Disorder portfolio. We also have the flexibility to take advantage of opportunities for further expansion of our business.

We remain confident that our business is well positioned to deliver on our previously stated and unchanged 2009 guidance framework and looking ahead, we also reiterate our aspiration of growing sales in the mid teens range on average between 2009 and 2015."

 

    First Quarter 2009 Unaudited Results

                            Q1 2009                        Q1 2008
                                            Non                           Non
                 US GAAP   Adjustments  GAAP(1) US GAAP Adjustments   GAAP(1)
                      $M            $M       $M      $M          $M        $M
                 _______   _________ __________ _______  _________  _________
    Revenues         818           -        818     702          -        702
    Operating
    income           226         101        327     163          29       192
    Net income       214          23        237     129          11       140
    Diluted         116c         12c       128c     68c          6c       74c
    earnings per
    ADS

Note: Average exchange rates for Q1 2009 were: $1.44:GBP1.00 and $1.31:EUR1.00, (Q1 2008: $1.98:GBP1.00 and $1.49:EUR1.00)

(1) The Non GAAP financial measures included above are explained on pages 23 and 24, together with an explanation of why Shire's management believes that these measures are useful to investors. For a reconciliation of these Non GAAP financial measures to the most directly comparable financial measures prepared in accordance with US GAAP, see pages 21 and 22.

Financial Summary - First Quarter 2009 (see page 6 for Full Financial Results)

 

    - Product sales were up 20% (up 24% at CER) to $756 million, driven by
      strong growth in:

        - VYVANSE (up 114% to $117 million);
        - LIALDA/MEZAVANT (up 82% to $49 million); and
        - ELAPRASE (up 16% to $83 million).

    - Non GAAP operating income increased by 70% to $327 million
      (up 39% to $226 million on a US GAAP basis) with higher revenues
      supported by lower costs driving improved margins. The lower costs are
      a result of our increased focus on cost management and the benefit of
      foreign exchange movements on both R&D and selling, general and
      administrative costs. Non GAAP operating expenses decreased to 65% of
      product sales (81% of product sales in Q1 2008) and decreased to 78%
      of product sales on a US GAAP basis (85% of product sales in Q1 2008).

    - Strong earnings growth with Non GAAP diluted earnings per ADS
      up 73% to $1.28 and US GAAP diluted earnings per ADS up 70% to $1.16.

    - Cash generated by operating activities increased by 180% to
      $184 million, supporting our robust balance sheet. Cash and cash
      equivalents at March 31, 2009 totalled $291 million. Shire has no debt
      maturing within the next two years, and has a committed facility of
      $1.2 billion which is currently undrawn.


    FIRST QUARTER HIGHLIGHTS
    Products
    VYVANSE

    - On March 31, 2009 Shire announced a co-promotion agreement with
      GlaxoSmithKline plc ("GSK") for VYVANSE(R) (lisdexatetamine
      dimesylate) with the aim of improving recognition and treatment of
      Attention Deficit Hyperactivity Disorder ("ADHD") in adults. The
      three year agreement, which commences in May 2009, covers the US and
      will more than double the reach and frequency of the current sales
      effort for VYVANSE.
    - By April 17, 2009 VYVANSE had achieved a US ADHD market share of
      11.9% based on weekly prescription volumes.


    Acquisition of EQUASYM IR and XL

    - On March 31, 2009 the Company completed the acquisition from
      UCB S.A ("UCB") of the worldwide rights (excluding the US, Canada and
      Barbados) to the currently marketed products EQUASYM(R) IR and XL
      (methylphenidate hydrochloride) used for the treatment of ADHD. The
      Company made a payment of EUR55 million on completion of the
      acquisition and small milestone payments may become due in 2009 and
      2010 if certain targets are met. This acquisition will broaden the
      scope of Shire's ADHD portfolio and will facilitate immediate access
      to the European ADHD market as well as providing a platform to enter
      additional world markets.


    Launch of FOSRENOL in Japan

    - On March 11, 2009 FOSRENOL(R) (lanthanum carbonate) was launched in
      Japan through Shire's partner Bayer Yakuhin Limited ("Bayer"). Shire
      will receive a double digit royalty on Bayer's net sales of FOSRENOL,
      which will be recorded by Shire as royalty income within revenues.


    License agreement for LIALDA in Japan

    - On January 16, 2009 Shire announced that it had entered into a license
      agreement with Mochida Pharmaceutical Co., Ltd to develop and sell
      LIALDA(R) (mesalamine) in Japan.


    Termination of LIALDA co-promotion agreement

    - As of March 31, 2009, Shire terminated the agreement with Takeda
      Pharmaceuticals North America, Inc., successor to TAP Pharmaceutical
      Products Inc., for the co-promotion of LIALDA in the US.


    Pipeline
    DAYTRANA - for the treatment of ADHD in children in the EU

    - During March 2009 Shire withdrew the European marketing authorization
      application ("MAA") for DAYTRANA(R) (methylphenidate transdermal
      system) for the treatment of ADHD. The decision to withdraw the MAA
      does not impact Shire's commitment to DAYTRANA in the US where the
      product has been used as a pediatric treatment for ADHD since 2006.


    INTUNIV- for the treatment of ADHD in children and adolescents in the US

    - On January 27, 2009 Shire made a resubmission to the US Food and Drug
      Administration ("FDA") of the New Drug Application to support
      registration of INTUNIV(TM) (guanfacine extended release) for the
      treatment of ADHD in children. The Prescription Drug User Fee Act
      date for INTUNIV is July 26, 2009 and the launch of INTUNIV in the
      US is anticipated for the fourth quarter of 2009.


    SPD550 - for the treatment of celiac disease

    - In study 006, a Phase 2 study of larazotide acetate for treatment of
      celiac disease, the primary endpoint was not met. An exploratory,
      predefined analysis of secondary endpoints showed differences of
      nominal significance favoring larazotide acetate over placebo for
      anti-TTG antibodies at all three doses tested and for gastrointestinal
      symptom scales at the 1 mg dose only. The drug was well tolerated.
      Alba Therapeutics Corporation has a further Phase 2 study ongoing.


    HGT-3510 - for the treatment of Pompe Disease

    - In February 2009, the Phase 2 clinical trial for HGT-3510
      initiated by Amicus Therapeutics Inc. ("Amicus") was placed on
      clinical hold in response to reports of two serious adverse events that
      were probably related to treatment with HGT-3510. HGT-3510 is being
      jointly developed by Shire and Amicus, and Shire has rights to
      HGT-3510 in markets outside the US.


    Agreement to terminate development of Women's Health products

    - As previously disclosed in Shire's Annual Report on Form 10-K
      for the year ended December 31, 2008, on February 24, 2009 Shire and
      Duramed Pharmaceuticals ("Duramed"), a subsidiary of Teva
      Pharmaceutical Industries Ltd ("Teva"), amended the license and
      development agreement for the Women's Health products, following which
      Shire returned its rights under the agreement effective February 24,
      2009 and the agreement will terminate on December 31, 2009. Shire has
      recorded a charge of $65 million in Q1 2009 to reflect the cash
      payment made in Q1 2009 and other termination related costs. At
      December 31, 2008 Shire's maximum future reimbursement for Duramed
      incurred development expenses was $96 million.


    Business
    Disposal of investment in Virochem Pharma Inc. ("Virochem")

    - On March 12, 2009 the Company completed the disposal of its
      minority equity investment in Virochem to Vertex Pharmaceuticals Inc.,
      ("Vertex") in a cash and stock transaction. Shire received total
      consideration of $19 million in cash and two million Vertex shares
      from the disposal, recognizing a gain of $55 million in Q1 2009. A
      further gain of up to $8 million may be recognized in 2010 pending
      the release from escrow of cash and stock consideration held as
      collateral for warranties made on disposal.


    Owings Mills

    - After a comprehensive evaluation of its operations and strategic focus,
      Shire has decided to phase out operations at its Specialty
      Pharmaceuticals manufacturing facility at Owings Mills, Maryland. Over
      the next three years, all products currently manufactured by Shire at
      this site will transition to DSM Pharmaceutical Products, and
      operations and employee numbers at the site will wind down over this
      period. The cash costs that will be incurred as part of this
      re-organization are estimated to be $30 million, of which up to $15
      million will be accounted for in 2009.

2009 Outlook

On April 2, 2009 Teva announced that it had commenced commercial shipment of its generic version of ADDERALL XR(R)(mixed salts of single amphetamine). As anticipated and reflected in our 2009 guidance framework, sales of ADDERALL XR will decrease significantly due to generic competition.

We are reiterating our previously announced guidance framework for Non GAAP diluted earnings per ADS for 2009, which remains unchanged from that provided in our third quarter 2008 earnings release. At that time, and in our fourth quarter 2008 earnings release, we provided details of the effect of changes in foreign exchange rates on the earnings guidance. Specifically, our plans for 2009, supporting Non GAAP diluted earnings per ADS for 2009 in the range of $3.00 to $3.40, were based on average actual foreign exchange rates (EUR1:$1.52, GBP1:$1.95) for the ten months to October 2008.

We identified that each 10c movement in the EUR:$ and GBP:$ exchange rates impacts Shire's Non GAAP diluted earnings per ADS by $0.10 and $0.01 respectively. Based on the following exchange rate scenarios, which are not forecasts, the impact on our base guidance would be:

 

                                    Euro fx     GBP fx       Non GAAP diluted
                                       rate       rate       earnings per ADS
                                                                     range(1)

    Base guidance                     $1.52      $1.95         $3.00 to $3.40
    At average January 2009
    exchange rates                    $1.33      $1.45         $2.76 to $3.16
    At average March 2009 exchange
    rates                             $1.30      $1.42         $2.73 to $3.13

(1) Our guidance framework for Non GAAP diluted earnings per ADS is not prepared in accordance with US GAAP. Non GAAP diluted earnings per ADS excludes 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. A list of these items can be found on pages 23-24.

New Product Launches

Subject to obtaining the relevant regulatory/governmental approvals, product launches planned over the next two years include:

 

    - MEZAVANT(R) (mesalamine) for the treatment of ulcerative colitis in
      certain EU countries during 2009;

    - FIRAZYR(R) (icatibant) for the symptomatic treatment of acute attacks
      of herediatary angioedema ("HAE") in certain European and Latin
      American countries during 2009;

    - INTUNIV for the treatment of ADHD in children and adolescents in the
      US in the fourth quarter of 2009;

    - DAYTRANA for the treatment of ADHD in adolescents in the US in 2010;

    - Velaglucerase Alfa for the treatment of Gaucher disease in the US and
      the EU in 2010; and

    - VYVANSE for the treatment of ADHD, in ex-US and ex-EU regions starting
      in 2010, and in the EU in 2011.
OVERVIEW OF US GAAP FINANCIAL RESULTS 1. Introduction Summary of Q1 2009

Revenues from continuing operations for the three months to March 31, 2009 increased by 16% to $817.8 million (2008: $702.2 million).

Non GAAP operating income for the three months to March 31, 2009 increased by 70% to $326.9 million (2008: $191.8 million), with the increase of $135.1 million resulting from higher product sales and improved operating cost ratios in 2009 over the same period in 2008. Non GAAP operating expenses reduced by 16 percentage points to 65% of product sales during Q1 2009 (2008: 81% of product sales), due to the increased focus on cost management, and the benefit of foreign exchange movements on both R&D and SG&A costs.

US GAAP operating income from continuing operations for the three months to March 31, 2009 increased by 39% to $225.8 million (2008: $163.0 million). US GAAP operating income from continuing operations for Q1 2009 includes a charge of $65.0 million on reaching agreement with Duramed to terminate development of the Women's Health products. US GAAP operating expenses reduced by seven percentage points to 78% of product sales in Q1 2009 (85% of product sales in Q1 2008) due to the increased focus on cost management and the benefit of foreign exchange movements.

Cash inflow from operating activities for the three months to March 31, 2009 increased by 180% to $184.1 million (2008: $65.7 million) an increase of $118.4 million. The higher operating cash flow in 2009 compared to 2008 is due to increased revenues and the cash flow benefit of the focus on cost management in Q1 2009.

Cash, cash equivalents and restricted cash at March 31, 2009 totaled $327.2 million (December 31, 2008: $247.4 million), an increase of $79.8 million. Strong cash inflows from operating activities and cash received on the disposal of Shire's minority interest in Virochem have been partially offset by cash outflows from the acquisition of EQUASYM from UCB ($72.8 million) and investment in property, plant and equipment at the new HGT campus at Lexington, Massachusetts.

2. Product sales

 

    For the three months to March 31, 2009 product sales increased by 20% to
$756.0 million (2008: $631.7 million) and represented 92% of total revenues
(2008: 90%).
    Product Highlights

                                                 CER               US Average
                             Sales    Sales               US Rx      Market
    Product                   $M    Growth(2) Growth(3) Growth (1)  Share(1)
    Specialty
    Pharmaceuticals
    ADDERALL XR             295.8       13%       14%        -5%       20.9%
    VYVANSE                 116.6      114%      114%       102%       11.5%
    DAYTRANA                 19.9       -2%       -2%       -13%        1.6%
    LIALDA / MEZAVANT        49.4       82%       84%        66%       14.8%
    PENTASA                  51.2       16%       16%        -2%       16.3%
    FOSRENOL                 39.8       10%       20%        -2%        7.8%
    XAGRID                   20.1        7%       32%        n/a         n/a

    Human Genetic Therapies
    ELAPRASE                 82.8       16%       26%    n/a (4)     n/a (4)
    REPLAGAL                 40.2       -5%        6%    n/a (5)     n/a (5)
    FIRAZYR                   0.5         -         -    n/a (5)     n/a (5)

(1) Product specific prescription data is provided by IMS Health ("IMS") National Prescription Audit, a leading global provider of business intelligence for the pharmaceutical and healthcare industries. All other US market share data stated in the text below is also provided by IMS.

(2) Compared to Q1 2008.

(3) CER growth is calculated after restating Q1 2009 results using Q1 2008 average foreign exchange rates.

 

    (4) IMS Data not available.
    (5) Not sold in US.
    Specialty Pharmaceuticals
    US ADHD market share

The continued growth in market share of VYVANSE helped Shire grow its average share of the US ADHD market for the three months to March 31, 2009 to 34.0% compared to 31.8% in the same period in 2008. Shire has the leading portfolio of products in the US ADHD market.

ADDERALL XR - ADHD

Sales of ADDERALL XR for the three months to March 31, 2009 were $295.8 million, an increase of 13% compared to the same period in 2008 (2008: $261.5 million). Product sales grew due to price increases, which offset the negative impact of significantly higher sales deductions in Q1 2009, declining US prescriptions (down 5% compared to Q1 2008), and wholesaler de-stocking.

The increase in sales deductions in Q1 2009 to 37% of gross sales (2008: 24%) results from two factors: (i) a higher Medicaid rebate reserve on wholesale and retail pipeline inventory, as a consequence of shipment of authorized generic ADDERALL XR to Teva in April 2009 and the impact of including these shipments in the Medicaid rebate calculation pursuant to the Deficit Reduction Act of 2005; and (ii) a reserve on pipeline inventory for larger rebates offered to managed care organizations from April 1, 2009.

On April 2, 2009 Teva announced that it had commenced commercial shipment of its generic version of ADDERALL XR. As anticipated and reflected in our 2009 guidance framework, sales of ADDERALL XR will decrease significantly due to generic competition.

VYVANSE - ADHD

Sales of VYVANSE for the three months to March 31, 2009 increased by 114% to $116.6 million (2008: $54.4 million), with VYVANSE's average share of the US ADHD market for Q1 2009 increasing to 11.5% (2008: 6.1%). US prescriptions of VYVANSE increased by 102% in Q1 2009 over the same period in 2008, due to the increase in average share and 8% growth in the US ADHD market.

On February 24, 2009 Actavis Elizabeth LLC ("Actavis") brought a lawsuit against the FDA seeking to overturn the FDA's decision granting new chemical entity exclusivity to VYVANSE. Shire believes the FDA's decision was correct. VYVANSE has new chemical entity exclusivity through February 23, 2012 and patents listed in the Orange Book which expire on June 29, 2023. The suit brought by Actavis has been stayed and the FDA has opened a public docket to enable the public to register comments on the legal and regulatory issues raised by Actavis.

DAYTRANA - ADHD

Product sales of DAYTRANA for the three months to March 31, 2009 decreased by 2% to $19.9 million (2008: $20.3 million). Prescriptions reduced by 13% compared to 2008 due to a reduction in DAYTRANA's average share of the US ADHD market from 2.0% in Q1 2008 to 1.6% in Q1 2009. This decline in average share was partially offset by an 8% growth in the US ADHD market. Despite a 13% decrease in prescriptions sales of DAYTRANA only declined by 2% primarily due to price increases.

US oral mesalamine market share

Driven by the growth of LIALDA since its launch in March 2007, Shire's average market share of the US oral mesalamine market rose to 31.1% for the three months to March 31, 2009 (2008: 26.1%).

LIALDA/MEZAVANT - Ulcerative colitis

Product sales of LIALDA/MEZAVANT for the three months to March 31, 2009 increased by 82% to $49.4 million (2008: $27.2 million). US prescriptions increased by 66%, due to an increase in LIALDA's average share of the US oral mesalamine market to 14.8% (2008: 9.1%) and underlying growth in the US oral mesalamine market of 2%.

By March 31, 2009 MEZAVANT was available in six countries outside the US, and further launches are planned in other countries throughout 2009, subject to the successful conclusion of pricing and reimbursement negotiations.

PENTASA - Ulcerative colitis

Sales of PENTASA for the three months to March 31, 2009 were $51.2 million, an increase of 16% compared to the same period in 2008 (2008: $44.2 million). Sales grew despite a 2% decrease in prescriptions primarily due to the impact of price increases.

FOSRENOL - Hyperphosphatemia

Product sales of FOSRENOL for the three months to March 31, 2009 were up 10% to $39.8 million (2008: $36.2 million). On a CER basis sales were up 20%. In markets outside the US FOSRENOL sales increased as the product entered new countries, and continued to grow in countries entered in the last two years. FOSRENOL's average share of the US phosphate binder market decreased to 7.8% (2008: 8.2%) and despite a 2% decrease in prescriptions product sales increased, primarily due to price increases.

During March and April, 2009 Shire filed lawsuits in the US District Court of the Southern District of New York against Barr Laboratories, Inc. ("Barr"), Mylan Inc., Mylan Pharmaceuticals Inc. and Matrix Laboratories Inc. (collectively "Mylan") and Natco Pharma Limited ("Natco") for infringement of certain of Shire's FOSRENOL patents. The lawsuits were filed in response to Abbreviated New Drug Applications filed by Barr, Mylan and Natco seeking FDA approval to market and sell generic versions of Shire's 500 mg, 750 mg, and 1 g FOSRENOproducts.

XAGRID - Thrombocythemia

Sales for the three months to March 31, 2009 were $20.1 million, an increase of 7% compared to the same period in 2008 (2008: $18.7 million). On a CER basis sales increased by 32% (XAGRID(TM) (anagrelide hydrochloride) is primarily sold in Euros and Pounds Sterling).

Human Genetic Therapies

ELAPRASE - Hunter syndrome

Sales for the three months to March 31, 2009 were $82.8 million, an increase of 16% compared to the same period in 2008 (2008: $71.5 million). Expressed on a CER basis sales increased by 26% (ELAPRASE(R) (idursulfase) is primarily sold in US dollars and Euros). The sales growth was driven by increased unit sales in Europe, North America, and Latin America.

REPLAGAL - Fabry disease

Product sales for the three months to March 31, 2009 were $40.2 million, a decrease of 5% compared to the same period in 2008 (2008: $42.5 million). Expressed on a CER basis sales increased by 6% (REPLAGAL(R) (agalsidase alfa) is primarily sold in Euros and Pounds Sterling). The sales growth on a CER basis was primarily driven by increased unit sales in Europe and Asia.

FIRAZYR - HAE

Sales for the three months to March 31, 2009 were $0.5 million (2008: $ nil). The launch of FIRAZYR in Europe continued with Q1 launches in Spain, Greece, and Denmark and will continue across Europe through 2009, as reimbursement and formulary listings (often required at local hospital level) are concluded in each country. Feedback from physicians and patients has been very positive. FIRAZYR is the first new product for HAE in Europe in 30 years and has orphan exclusivity in the EU until 2018.

3. Royalties

Royalty revenue decreased by 22% to $50.6 million for the three months to March 31, 2009 (2008: $65.1 million). The following table provides an analysis of Shire's royalty income:

 

    Royalty Highlights

                              Royalties     Year on year
                              to Shire        change(1)
    Product                      $M               %
    3TC                         29.8            -20%
    ZEFFIX                       9.0            -13%
    Other                       11.8            -32%
    Total                       50.6            -22%

    (1) Compared with Q1 2008.
    3TC - HIV infection and AIDS

Royalties from sales of 3TC for the three months to March 31, 2009 were $29.8 million, a decrease of 20% compared to the same period in 2008 (2008: $37.3 million). Shire receives royalties from GSK on worldwide 3TC sales, and GSK's sales of 3TC inclusive products declined by 7% on a CER basis mainly due to competition from other HIV treatments. The balance of the decline in Shire's royalty revenue is predominantly due to unfavourable exchange rate movements.

ZEFFIX - Chronic hepatitis B infection

Royalties from sales of ZEFFIX for the three months to March 31, 2009 were $9.0 million, a decrease of 13% compared to the same period in 2008 (2008: $10.4 million). Shire receives royalties from GSK on worldwide ZEFFIX sales, and GSK's sales of Zeffix declined 13% on a CER basis, due to increased competition from other hepatitis B treatments.

OTHER

Other royalties were primarily received for REMINYL and REMINYL XL (known as RAZADYNE and RAZADYNE ER in the US), for the symptomatic treatment of mild to moderately severe dementia of the Alzheimer's type. The range of products is marketed worldwide (excluding the UK and the Republic of Ireland where Shire has exclusive marketing rights) by Janssen Pharmaceutical N.V., an affiliate of Johnson & Johnson ("J&J\").

Sales of the REMINYL/RAZADYNE range continue to grow in most countries, however the entry of generic versions of RAZADYNE and RAZADYNE ER into the US market in Q3 2008 has significantly decreased sales in that region.

 

    Information on the RAZADYNE and RAZADYNE ER patent litigation (which is
ongoing) can be found in our filings with the Securities and Exchange
Commission ("SEC") in our Annual Report on Form 10-K for the year to December
31, 2008.
    4. Financial details
    Cost of product sales

                                2009    % of product     2008    % of product
                                 $m        sales          $m         sales
                            ________     _________   _________     _________
    Cost of product sales
    (US GAAP)                  83.6          11%        90.3          14%
    Depreciation               (3.6)                    (2.6)
                            ________                 _________
    Cost of product sales
    (Non GAAP)                 80.0          11%        87.7          14%
                            ________                 _________



    Cost of product sales as a percentage of product sales has decreased by 3
percentage points (from 14% to 11%) compared to 2008 due to favorable product
mix and the impact of price increases on Shire's product sales. Research and
development ("R&D\")

                                   2009    % of product   2008   % of product
                                    $m        sales         $m        sales
                              _________     ________  ________      _________
    R&D (US GAAP)                 185.9          25%     111.8         18%
    Women's Health exit costs     (65.0)                     -
    Depreciation                   (4.0)                  (2.9)
                              _________              _________
    R&D (Non GAAP)                116.9          15%     108.9         17%
                              _________              _________

R&D costs in the three months to March 31, 2009 included a charge of $65.0 million (9% of product sales) following the agreement with Duramed to terminate development of Women's Health products. Non GAAP R&D as a percentage of product sales decreased by two percentage points in 2009 compared to 2008 (from 17% to 15%) with increased investment in R&D programs compared to last year offset by the benefits of foreign exchange movements.

 

    Selling, general and administrative ("SG&A\")

                                  2009    % of product    2008   % of product
                                   $m            sales     $m           sales

                                  _________    _________ _________ _________
    SG&A (US GAAP)                    318.9          42%     344.7       55%
    Intangible asset amortization    (32.5)                 (30.8)
    Depreciation                     (14.8)                 (10.7)
    New holding company costs             -                  (5.6)
                                  _________               ________
    SG&A (Non GAAP)                   271.6          36%     297.6       47%
                                  _________               ________

SG&A decreased in absolute terms and as a percentage of product sales with increased focus on cost management, favorable foreign exchange rates and higher product sales in 2009 over 2008 all benefitting SG&A ratios on both a US GAAP and Non GAAP basis.

Reorganization Costs

For the three months to March 31, 2009 Shire recorded reorganization costs of $2.2 million (2008: $nil) related to the impairment of property, plant and equipment following the decision to phase out manufacturing at Shire's Owings Mills facility.

Integration and acquisition costs

For the three months to March 31, 2009 Shire recorded integration and acquisition costs of $1.4 million relating to the integration of Jerini and professional fees incurred on the acquisition of EQUASYM (2008: $nil).

Interest income

For the three months to March 31, 2009 Shire received interest income of $0.6 million (2008: $12.7 million). Interest income primarily relates to interest received on cash and cash equivalents. Interest income for the three months to March 31, 2009 is lower than the same period in 2008 due to lower average cash and cash equivalent balances and significantly lower interest rates in 2009 compared to 2008.

Interest expense

For the three months to March 31, 2009 the Company incurred interest expense of $11.0 million (2008: $17.3 million). The higher expense in 2008 was primarily due to the accrual of interest in respect of the Transkaryotic Therapies, Inc. ("TKT") appraisal rights litigation. This litigation was settled in November in 2008.

 

    Other income, net

                                                 2009     2008
                                                   $m       $m
                                            _________ ________
    Other income, net (US GAAP)                  50.3     12.7
    Gains on sale of investments                (55.2)    (9.4)
                                            _________ ________
    Other (expense)/ income, net (Non GAAP)     (4.9)      3.3
                                            _________ ________

For the three months to March 31, 2009 other income, net includes a gain of $55.2 million arising on the disposal of Shire's cost investment in Virochem. In the three months to March 31, 2008 other income, net included a $9.4 million gain on the sale of a minority equity investment in Questor Pharmaceuticals, Inc.

Taxation

The effective rate of tax for the three months to March 31, 2009 was 19% (2008: 26%). Excluding the tax effect of items excluded from Non GAAP income as outlined on pages 21-22, the effective tax rate on Non GAAP income is 24% (2008: 28%).

The Non GAAP effective tax rate for the three months to March 31, 2009 is lower than the same period in 2008 due to favourable changes in profit mix, the inclusion of the US R&D tax credit that was extended on October 3, 2008 and a reduction in valuation allowances in relation to loss carry forward amounts.

Equity in (losses)/ earnings of equity method investees

Net losses of equity method investees of $0.1 million were recorded for the three months to March 31, 2009 (2008: $1.6 million profit). This comprised earnings of $1.0 million from the 50% share of the anti-viral commercialization partnership with GSK in Canada (2008: $1.3 million) and losses of $1.1 million, being the Company's share of losses in the GeneChem, AgeChem and EGS Funds (2008: $0.3 million).

Discontinued Operations

The loss from discontinued operations for the three months to March 31, 2009 of $2.6 million (2008: $nil) relate to those Jerini businesses that met the criteria for held-for-sale and discontinued operations, which Jerini announced in October 2008 that it intended to divest.

 

    FINANCIAL INFORMATION
    Unaudited US GAAP results for the three months to March 31, 2009
    Consolidated Balance Sheets


                                                     March 31, December 31,
                                                         2009         2008

                                                           $M           $M

                                                       _______      _______
    ASSETS
    Current assets:
    Cash and cash equivalents                            291.1        218.2
    Restricted cash                                       36.1         29.2
    Accounts receivable, net                             551.8        395.0
    Inventories, net                                     164.9        154.5
    Assets held-for-sale                                  15.9         16.6
    Deferred tax asset                                    86.9         89.5
    Prepaid expenses and other current assets            153.8        141.4
                                                       _______      _______
    Total current assets                               1,300.5      1,044.4

    Non-current assets:
    Investments                                           73.8         42.9
    Property, plant and equipment, net                   559.4        534.2
    Goodwill                                             355.7        350.8
    Other intangible assets, net                       1,852.5      1,824.9
    Deferred tax asset                                   131.5        118.1
    Other non-current assets                              14.2         18.4
                                                       _______      _______
    Total assets                                       4,287.6      3,933.7
                                                       _______      _______
    LIABILITIES AND EQUITY
    Current liabilities:
    Accounts payable and accrued expenses                829.7        708.6
    Deferred tax liability                                57.6         10.9
    Other current liabilities                             70.7        104.3
                                                       _______      _______
    Total current liabilities                            958.0        823.8

    Non-current liabilities:
    Convertible bonds                                  1,100.0      1,100.0
    Other long term debt                                  51.4         43.1
    Deferred tax liability                               371.9        377.0
    Other non-current liabilities                        263.8        291.3
                                                       _______      _______
    Total liabilities                                  2,745.1      2,635.2
                                                       _______      _______



    Unaudited US GAAP results for the three months to March 31, 2009
    Consolidated Balance Sheets (continued)

                                                      March 31, December 31,
                                                           2009        2008
                                                             $M          $M

                                                      _________    _________
    Shareholders' equity:
    Common stock of 5p par value; 1,000 million
    shares authorized; and 560.3 million shares
    issued and outstanding (2008: 1,000 million
    shares authorized; and 560.2 million shares
    issued and outstanding)                               55.5         55.5


    Treasury stock : 20.6 million shares (2008:
    20.7 million)                                       (396.4)      (397.2)
    Additional paid-in capital                         2,610.5      2,594.6
    Accumulated other comprehensive income               111.4         97.0
    Accumulated deficit                                 (838.9)    (1,051.7)
                                                      _________    _________
    Total Shire plc shareholders' equity               1,542.1      1,298.2
    Noncontrolling interest in subsidiaries                0.4          0.3
                                                      _________    _________
    Total equity                                       1,542.5      1,298.5
                                                      _________    _________
    Total liabilities and equity                       4,287.6      3,933.7
                                                      _________   __________


    Unaudited US GAAP results for the three months to March 31, 2009
    Consolidated Statements of Income

    3 months to March 31,                              2009            2008
                                                         $M              $M
                                               ____________    ____________
    Revenues:
    Product sales                                      56.0           631.7
    Royalties                                          50.6            65.1
    Other revenues                                     11.2             5.4
                                               ____________    ____________
    Total revenues                                    817.8           702.2
                                               ____________    ____________
    Costs and expenses:
    Cost of product sales (1)                          83.6            90.3
    Research and development(2)                       185.9           111.8
    Selling, general and administrative (1) (2)       318.9           344.7
    Gain on sale of product rights                        -            (7.6)
    Reorganization costs                                2.2               -
    Integration and acquisition costs                   1.4               -
                                               ____________     ____________
    Total operating expenses                          592.0           539.2
                                               ____________     ____________
    Operating income                                  225.8           163.0

    Interest income                                     0.6            12.7
    Interest expense                                  (11.0)          (17.3)
    Other income, net                                  50.3            12.7
                                               ____________     ____________

    Total other income, net                            39.9             8.1
                                               ____________     ____________

    Income from continuing operations before
    income taxes and equity in
    (losses)/earnings of equity method
    investees                                        265.7            171.1
    Income taxes                                     (49.5)           (44.1)

    Equity in (losses)/earnings of equity
    method investees, net of taxes                    (0.1)             1.6
                                              ____________     ____________
    Income from continuing operations,
    net of tax                                       216.1            128.6

    Loss from discontinued operations (net
    of income tax expense of $nil
    and $nil respectively)                            (2.6)               -
                                              ____________     ____________

    Net income                                       213.5            128.6


    Add: Net loss attributable to
    noncontrolling interest in subsidiaries            0.1               -
                                              ____________     ____________

    Net income attributable to Shire plc             213.6           128.6
                                              ____________     ____________

(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, 2009 (2008 $0.4 million). Selling, general and administrative costs include amortization of intangible assets relating to intellectual property rights acquired of $32.5 million for the three months to March 31, 2009 (2008: $30.8 million).

(2) Depreciation of $2.9 million has been reclassified from Selling, general and administrative to Research and development costs, and $10.2 million of promotional costs have been reclassified from Research and development to Selling, general and administrative costs for the three months to March 31, 2008.

 

    Unaudited US GAAP results for the three months to March 31, 2009
    Consolidated Statements of Income (continued)

    3 months to March 31,

                                                       2009         2008
                                                   ________     ________
    Earnings per ordinary share - basic

    Earnings from continuing operations              40.1c       23.6c
    Loss from discontinued operations                (0.5c)          -
                                                   ________     ________
    Earnings per ordinary share - basic              39.6c       23.6c
                                                   ________     ________

    Earnings per ADS - basic                        118.8c       70.8c
                                                   ________     ________
    Earnings per ordinary share - diluted
    Earnings from continuing operations              38.9c       22.7c
    Loss from discontinued operations                (0.4c)          -
                                                   ________     ________
    Earnings per ordinary share -  diluted           38.5c       22.7c
                                                   ________     ________

    Earnings per ADS - diluted                      115.5c       68.1c
                                                   ________     ________

    Weighted average number of
    shares:
    Basic                                            539.2       545.1
    Diluted                                          577.2       581.5
                                                  ________      ________


    Unaudited US GAAP results for the three months to March 31, 2009
    Consolidated Statements of Cash Flows

                                                   3 months to   3 months to
                                                     March 31,     March 31,
                                                         2009          2008
                                                         $'M            $'M
                                                 _____________ _____________
    CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income attributable to Shire plc                213.6         128.6
    Adjustments to reconcile net income
    attributable to Shire plc to net cash
    provided by operating activities:
    Loss from discontinued operations                     2.6             -
    Depreciation and amortization                        55.3          47.4
    Amortization of deferred financing charges            1.3           1.3
    Interest on building financing obligation             0.5           1.2
    Share-based compensation                             15.8          16.3
    Impairment of property, plant and equipment           2.2             -
    Gain on sale of long-term assets                     (0.7)            -
    Gain on sale of long-term investments               (55.2)         (9.4)
    Gain on sale of product rights                          -          (7.6)
    Movement in deferred taxes                           33.7          33.8
    Equity in losses/(earnings) of equity method
    investees                                             0.1          (1.6)
    Noncontrolling interest in subsidiaries              (0.1)            -
    Change in operating assets and liabilities
    Increase in accounts receivable                    (151.0)        (50.4)
    Increase in sales deduction accrual                 121.9           7.9
    Increase in inventory                                (9.5)         (9.1)
    (Increase)/decrease in prepayments and other
    current assets                                      (12.3)         20.5
    Decrease in other assets                              3.4           0.3
    Decrease in accounts and notes payable and
    other liabilities                                   (37.6)       (117.1)
    (Decrease)/increase in deferred revenue              (2.2)          3.6
    Returns on investment from joint venture              4.9             -
    Cash flow used in discontinued operations            (2.6)            -
                                                      ________      ________
    Net cash provided by operating activities (A)       184.1          65.7
                                                     _________      ________

    CASH FLOWS FROM INVESTING ACTIVITIES
    Movement in restricted cash                          (6.9)          5.0

    Purchases of subsidiary undertakings and
    businesses, net of cash acquired                    (74.1)            -
    Purchase of long-term investments                       -          (1.0)
    Purchase of property, plant and equipment           (42.0)        (27.8)
    Purchase of intangible assets                        (6.0)            -
    Proceeds from sale of long-term investments           19.2         10.3
    Proceeds from disposal of property, plant and
    equipment                                              0.4          0.1
    Proceeds/deposits received from sale of
    product rights                                           -          5.0
    Returns of equity investments                          0.2            -
                                                    ____________ ___________
    Net cash used in investing activities (B)           (109.2)        (8.4)
                                                    ____________ ___________


    Unaudited US GAAP results for the three months to March 31, 2009
    Consolidated Statements of Cash Flows (continued)

                                                     3 months to  3 months to
                                                         March 31,   March 31,
                                                              2009       2008
                                                               $'M        $'M
                                                      ___________  __________
    CASH FLOWS FROM FINANCING ACTIVITIES:
    Payment under building financing obligations             (0.7)      (0.2)
    Proceeds from exercise of options                         0.1        0.3
    Payments to acquire shares by Employee Share
    Ownership Trust ("ESOT")                                    -      (33.1)
                                                      ____________  _________
    Net cash used in financing activities (C)                (0.6)     (33.0)
                                                      ____________  _________
    Effect of foreign exchange rate changes on cash

    and cash equivalents (D)                                 (1.4)       3.8
                                                      ____________  _________
    Net increase in cash and cash equivalents
    (A+B+C+D)                                                72.9       28.1
    Cash and cash equivalents at beginning of period        218.2      762.5
                                                      ____________  _________
    Cash and cash equivalents at end of period              291.1      790.6
                                                      ____________  _________


    Unaudited US GAAP results for the three months to March 31, 2009
    Selected Notes to the US GAAP Financial Statements
    (1) Earnings per share

                                                        2009      2008
    3 months to March 31,                                 $M        $M
                                                    ________  ________
    Income from continuing operations                  216.1     128.6
    Loss from discontinued operations                  (2.6)         -
    Noncontrolling interest in subsidiaries             0.1          -
                                                    ________  ________
    Numerator for basic EPS                           213.6      128.6
    Interest on convertible bonds, net of tax(1)        8.4        3.4
                                                    ________  ________
    Numerator for diluted EPS                         222.0      132.0
                                                    ________  ________

    Weighted average number of shares:

                                                    Millions  Millions

    Basic (2)                                         539.2      545.1
    Effect of dilutive shares:
    Stock options(3)                                    5.3        3.7
    Convertible bonds 2.75% due 2014(4)                32.7       32.7
                                                     _______   _______
    Diluted                                           577.2      581.5
                                                    ________  ________

(1) Following substitution of the convertible bond to Shire plc in 2008, the Company no longer receives a tax deduction on its convertible bond interest, and the interest add back for 2009 represents gross interest expense. The Company expects the full year add back to be approximately $34 million.

(2) Excludes shares purchased by the ESOT and presented by the Company as treasury stock.

(3) Calculated using the treasury stock method.

(4) Calculated using the "if-converted" method.

The share equivalents not included in the above calculation of the diluted weighted average number of shares are shown below:

 

    3 months to March 31,                    2009                2008
                                        No. of shares        No. of shares
                                          Millions(1)         Millions(1)

    Stock options out of the money           16.6                 12.4

(1) For the three month periods ended March 31, 2009 and 2008, 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, 2009 Selected Notes to the US GAAP Financial Statements (continued)

 

    (2) Analysis of revenues

    3 months to March 31,                    2009    2008    2009        2009
                                                                %  % of total
                                               $M      $M  Change     Revenue
    Net product sales:
    Specialty Pharmaceuticals ("Specialty")
    ADHD
    ADDERALL XR                             295.8   261.5     13%         36%
    VYVANSE                                 116.6    54.4    114%         14%
    DAYTRANA                                 19.9    20.3     -2%          2%
                                            432.3   336.2     29%         52%
    GI
    PENTASA                                  51.2    44.2     16%          6%
    LIALDA / MEZAVANT                        49.4    27.2     82%          6%
                                            100.6    71.4     41%         12%
    General products
    FOSRENOL                                 39.8    36.2     10%          5%
    CALCICHEW                                 9.6    13.6    -29%          1%
    CARBATROL                                18.1    17.9      1%          2%
    REMINYL/REMINYL XL                        7.4     8.3    -11%          1%
    XAGRID                                   20.1    18.7      7%          2%
                                             95.0    94.7       -         11%

    Other product sales                       4.6    15.4    -70%          2%
    Total Specialty product                 632.5   517.7     22%         77%
    sales
    Human Genetic Therapies
    ("HGT")
    ELAPRASE                                 82.8    71.5     16%         10%
    REPLAGAL                                 40.2    42.5     -5%          5%
    FIRAZYR                                   0.5       -       -           -
    Total HGT product sales                 123.5   114.0      8%         15%
    Total product sales                     756.0   631.7     20%         92%

    Royalty income:
    3TC                                      29.8    37.3    -20%          4%
    ZEFFIX                                    9.0    10.4    -13%          1%
    Other                                    11.8    17.4    -32%          2%
    Total                                    50.6    65.1    -22%          7%
    Other income                             11.2     5.4    107%          1%
    Total Revenue                           817.8   702.2     16%        100%


    Unaudited results for the three months to March 31, 2009
    Non GAAP reconciliation

    3 months to,                US GAAP           Adjustments

                                         Amortization           Acquisitions
                           March 31,        & asset            & integration
                               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 /
    (expenses), net           50.3             -                      -

    Total other income/
    (expenses), 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)            -                      -

    operations, net of tax   216.1          22.6                    1.2
    Loss from discontinued
    operations                (2.6)            -                      -
    Net income               213.5          22.6                    1.2
    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                       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


    Unaudited results for the three months to March 31, 2009
    Non GAAP reconciliation (cont.)

    3 months to,                US GAAP           Adjustments       Non GAAP

                            Divestments,
                           re-organizations
                           & discontinued          Reclassify      March 31,
                            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 /
    (expenses), net         (55.2)                     -             (4.9)

    Total other income/
    (expenses), 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
    Net loss attributable
    to noncontrolling interest
    in subsidiaries             -                      -              0.1
    Net income attributable
    to Shire plc             (0.6)                     -            236.8

    Impact of convertible
    debt                        -                      -              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 and Integration activities Costs associated with the integration and acquisition of Jerini AG and EQUASYM from UCB ($1.4 million) and tax effect of adjustments;

c) Divestments,

Posted: April 2009


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