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Shire plc: Continued Excellent Performance in Q3, Full Year Earnings Expectations Increased, New Value in Pipeline Emerging

DUBLIN, October 29, 2010 /PRNewswire-FirstCall/ -- Shire plc (LSE: SHP, NASDAQ: SHPGY) the global specialty biopharmaceutical company, announces results for the three months to September 30, 2010.

    Financial Highlights                                 Q3 2010(2)

    Product sales(1)                                 $794 million    +32%
    Total revenues                                   $874 million    +31%
    Non GAAP operating income                        $298 million   +123%
    US GAAP operating income                         $156 million    +70%
    Non GAAP diluted earnings per ADS                $1.16          +138%
    US GAAP diluted earnings per ADS                 $0.52           +59%

(1) Product sales excluding ADDERALL XR ("Core Product Sales") were up 31% to $694 million. Core Product Sales at constant exchange rates ("CER"), computed by restating 2010 results using average 2009 foreign exchange rates, were up 34%.

(2) Percentages compare to equivalent 2009 period.

Angus Russell, Chief Executive Officer, commented:

"We delivered another outstanding set of results this quarter with strong revenue growth and operating leverage driving increases in Non GAAP earnings. This continued excellent performance demonstrates the overall strength of Shire's business and the sustained execution of our strategy.

In ADHD, VYVANSE sales are up 17% and the number of new physicians prescribing INTUNIV continues to increase.

Sales of REPLAGAL have increased by 91% as we respond to the great need of our Fabry patients; we estimate that our global market share now exceeds 60%. Only seven months into the initial launch of our treatment for Gaucher patients, around 1,000 patients are now on VPRIV, representing a 16% global market share.

We've made progress in several significant programs in our research and development pipeline, including investigative uses of VYVANSE for adjunctive therapy in patients with Major Depressive Disorder ("MDD"). We've also recently completed our acquisition of Movetis NV, bringing the approved product RESOLOR to our gastro-intestinal ("GI") portfolio, and announced the in-licence from Acceleron of a Phase 2 orphan drug for Duchenne Muscular Dystrophy.

Alongside delivery of these outstanding quarterly results, we're building our business for the future. We're investing to enhance the value of our product pipeline, building our international structure to maximise the global reach of our products and using our strong cash generation to complete value enhancing acquisitions and in-licenses.

We now expect to see Non GAAP earnings of up to $4.20 per ADS for the full year. This includes the financial effect of the Movetis acquisition and the DAYTRANA disposal. Looking ahead, we re-iterate our aspirational target of mid-teens sales growth on average between 2009 and 2015."

    FINANCIAL SUMMARY
    Third Quarter 2010 Unaudited Results

                            Q3 2010                         Q3 2009
                                        Non                            Non
                US GAAP  Adjustments   GAAP    US GAAP  Adjustments    GAAP
                     $M           $M     $M         $M           $M      $M

    Revenues        874            -    874        667            -     667
    Operating
    income          156          142    298         92           42     134

    Diluted
    earnings
    per ADS       $0.52        $0.64  $1.16      $0.33        $0.16   $0.49


The Non GAAP financial measures included within this release are explained on page 26, and are reconciled to the most directly comparable financial measures prepared in accordance with US GAAP on pages 21 - 24.

    - Product sales were up 32% to $794 million (2009: $603 million) due to
      growth from both Core Products Sales (up 31% to $694 million) and
      ADDERALL XR(R), (up 41% to $100 million). On a CER basis, which is a
      Non GAAP measure, Core Product Sales were up 34%.

    - Core Products Sales growth was driven by both existing and new
      products, particularly REPLAGAL(R) (up 91% to $92 million; CER: up
      103%), VYVANSE(R) (up 17% to $151 million) and recently launched
      VPRIV(R) ($50 million) and INTUNIV(R) ($37 million).

    - Total revenues were up 31% (CER: up 34%) to $874 million (2009: $667
      million), as a result of higher product sales and higher royalty income
      on authorized generic sales of ADDERALL XR compared to Q3 2009.

    - Non GAAP operating income increased by $164 million, or 123%, to $298
      million (2009: $134 million) as the increased investments we are making
      in our research and development ("R&D") programs and selling, general
      and administrative ("SG&A") activities to support recent growth were
      more than offset by higher revenues compared to 2009. On a US GAAP
      basis, operating income increased by $64 million, or 70%, to $156
      million (2009: $92 million). US GAAP operating income in Q3 2010 also
      included an up-front payment of $45 million made to Acceleron Pharma
      Inc. ("Acceleron") in relation to the collaboration for activin
      receptor type IIB ("ActRIIB") molecules and impairment charges of $43
      million following the decision to divest DAYTRANA(R) to Noven
      Pharmaceuticals Inc. ("Noven").

    - Cash generation, which is a Non GAAP measure, increased by $51 million
      to $271 million (2009: $220 million). Higher cash receipts from product
      sales and royalties were partially offset by higher cash payments on
      the increased investment in R&D and SG&A, and the timing of sales
      deduction payments in 2010.

    - Net debt at September 30, 2010 was $309 million (December 31, 2009:
      $615 million), a reduction of $306 million in the year to date. Strong
      cash generation of $959 million in the nine months to September 30,
      2010 has reduced net debt as well as funded the acquisition of and
      construction at Lexington Technology Park, cash tax payments and the
      upfront payment made to Acceleron. Excluding restricted cash of $584
      million held to pay for the acquisition of Movetis NV ("Movetis") in
      the fourth quarter, net debt at September 30, 2010 was $893 million.

2010 OUTLOOK

Following a stronger than expected third quarter, we have increased our expectations for the full year 2010. We now expect to see Non GAAP earnings per ADS of up to $4.20. This increase includes the financial effect of the Movetis acquisition and the disposal of DAYTRANA on October 1, 2010; it also includes the cumulative impact of US Healthcare Reform, mandated European price cuts and adverse foreign exchange rates.

The strong growth of our core portfolio will continue to drive total revenue growth; however, the rate of growth will reduce in the fourth quarter as we will not benefit from the one off adjustment to ADDERALL XR Medicaid rebates and high level of royalties experienced in the same period last year. The consolidation of Movetis will also mean that combined R&D and SG&A spend for 2010 is likely to grow at marginally above 10% year on year.

Shire has made significant progress in 2010. Growth across our core portfolio, particularly the accelerated growth of our HGT business, has enabled us to increase our expectations of earnings while also making targeted investments in our pipeline and international structure. We expect to see solid earnings growth in 2011, but at a rate that reflects the pull ahead into 2010 of some of HGT's growth potential.

PRODUCT LAUNCHES

Subject to obtaining the relevant regulatory/governmental approvals, future product launches in the next 12 months include:

    - VYVANSE/VENVANSE for the treatment of Attention Deficit
      Hyperactivity Disorder ("ADHD") in adolescents in the US and children
      in Brazil;

    - INTUNIV as adjunctive treatment to long acting oral stimulants for the
      treatment of ADHD in children and adolescents in the US;

    - EQUASYM(R) for the treatment of ADHD in certain European
      Union ("EU") countries;

    - RESOLOR(R) in certain EU countries, for the symptomatic
      treatment of chronic constipation in women for whom laxatives fail to
      provide adequate relief;

    - LIALDA/MEZAVANT for the maintenance of remission of ulcerative colitis
      in the US and for the treatment of ulcerative colitis in
      certain countries;

    - VPRIV for the treatment of type 1 Gaucher disease in certain
      European and Latin American countries; and

    - FIRAZYR(R) for the symptomatic treatment of acute attacks of hereditary
      angioedema ("HAE") in the US and certain European and Latin American
      countries.


    PRODUCT AND PIPELINE DEVELOPMENTS
    Products

    PENTASA(R) - for the treatment of Ulcerative Colitis

    - On August 24, 2010 Shire received a ruling from the US Food
      and Drug Administration ("FDA") on its Citizen Petition relating to
      PENTASA. The ruling granted Shire's request with regard to the
      requirement that bioequivalence to PENTASA be shown by dissolution
      testing and further imposed a requirement for rigorous pharmacokinetic
      data. The ruling denied the request that studies with clinical outcomes
      endpoints also be required because the FDA concluded that comparative
      clinical endpoint studies would be less sensitive, accurate and
      reproducible than pharmacokinetic studies.

    RESOLOR - for the treatment of chronic constipation in women

    - Through its acquisition of Movetis, Shire has expanded its
      GI presence in Europe with the recently launched RESOLOR, a new
      chemical entity. RESOLOR is approved in the 27 countries of the EU,
      Switzerland, Iceland, Lichtenstein and Norway.

    REPLAGAL - for the treatment of Fabry disease

    - REPLAGAL is now the global market leader for the treatment
      of Fabry disease. Shire's continuing priority is to ensure long term,
      uninterrupted supply at the approved dose to patients treated with
      REPLAGAL. There are over 2,300 patients on REPLAGAL worldwide and Shire
      anticipates being able to continue to accommodate additional Fabry
      patients in 2010 while carefully monitoring supply and demand. Shire
      will be in a position to make REPLAGAL available to at least 300
      additional patients in 2011, phased throughout the year, based on
      current manufacturing capacity. Approval of the new Lexington
      Manufacturing facility will allow treatment of several hundred more
      Fabry patients with REPLAGAL, and Shire is working closely with the
      authorities towards this goal.

    VPRIV - for the treatment of Type 1 Gaucher disease

    - On August 26, 2010 the European Commission granted Shire
      marketing authorization for VPRIV, an ERT for the long-term treatment
      of Type 1 Gaucher disease. VPRIV has been authorized as an orphan
      medicine through the Centralized Procedure, making it available in 30
      countries across Europe.

    - Shire has seen rapid adoption of VPRIV worldwide. There are
      currently over 1,000 Gaucher patients treated with VPRIV and initiation
      of treatment continues. Based on its current manufacturing capacity,
      Shire anticipates being able to accommodate approximately 200
      additional Gaucher patients until the approval of the Lexington
      Manufacturing facility provides substantial additional capacity. Shire
      has an ongoing program to monitor demand and manage requests for VPRIV.
      Shire's priority is ensuring long-term, uninterrupted treatment of
      patients on therapy.

    FIRAZYR - for the treatment of HAE

    - In October 2010, Shire submitted data to support a change in
      the label in the EU to include the potential for self-administered
      subcutaneous injections of FIRAZYR in patients who are experiencing
      acute attacks of HAE.

Pipeline

This quarter we have made significant developments in our pipeline, including:

    Collaboration with Acceleron for ActRIIB molecules

    - On September 9, 2010 Shire announced the expansion of its HGT pipeline
      through the exclusive licence, in markets outside of North America, for
      the ActRIIB class of molecules being developed by Acceleron. The
      collaboration will initially investigate ACE-031, Acceleron's lead
      ActRIIB drug candidate, which is currently in a Phase 2a trial for the
      treatment of patients with Duchenne Muscular Dystrophy. ACE-031 and
      other ActRIIB molecules have the potential to be used in other muscular
      and neuromuscular disorders with high unmet medical need.

    Pipeline obtained through Movetis acquisition

    - The acquisition of Movetis brings to Shire a promising GI pipeline,
      offering additional opportunities that include two projects in early
      clinical development and several pre-clinical leads as well as the
      rights to a large library of qualified lead compounds with potential
      for development in different GI indications.

    VYVANSE for the adjunctive therapy in the treatment of inadequate
    response in MDD

    - Today Shire announced positive results from a Phase 2 clinical trial of
      VYVANSE as adjunctive therapy for patients who have had an inadequate
      response in their treatment of MDD. Given the encouraging results and
      the promise to treat a large unmet medical need, Shire will initiate
      Phase 3 trials of VYVANSE in patients with MDD mid 2011, following
      health authority meetings to establish the development program
      parameters. Phase 2 clinical trials in additional non-ADHD indications
      (treatment of negative symptoms and cognitive impairment in
      schizophrenia and for the treatment of cognitive impairment in
      depression) remain ongoing.

    SPD535 for the treatment of arteriovenous grafts in hemodialysis patients

    - SPD535 is a novel platelet reducing agent. Phase 1 development was
      initiated in the third quarter of 2009 and is ongoing. Data from Phase
      1 clinical trials demonstrating positive proof-of-principle have been
      completed. The initial Phase 2 proof-of-concept program will target
      prevention of thrombotic complications associated with arteriovenous
      grafts in hemodialysis patients. Additional Phase 2 proof-of-concept
      clinical trials will also be initiated to assess opportunities in other
      indications.

    INTUNIV for ADHD in the EU

    - A clinical program to support the filing of a Marketing
      Authorization Approval for INTUNIV for the treatment of ADHD in
      children aged 6 to 17 in the EU has been initiated. Shire anticipates
      submission of the regulatory filing for INTUNIV in Europe will occur in
      2013.

    OTHER THIRD QUARTER AND RECENT DEVELOPMENTS

    Acquisition of Movetis

    - On September 6, 2010 Shire launched a voluntary public takeover offer
      for all the shares in Movetis, a Belgium-based speciality GI company,
      for a fully diluted equity purchase price of EUR428 million (or EUR19
      per share) in cash, equivalent to $592 million at closing of the
      transaction.

    - On October 12, 2010 the Company's wholly owned subsidiary, Shire
      Holdings Luxembourg S.a.r.l. acquired 99.21% of the shares of Movetis
      as a result of the successful tender offer. Shire is proceeding with a
      statutory squeeze-out of those shares and warrants not tendered to the
      offer in accordance with applicable Belgian legislation. An additional
      tender period opened, on the same terms, on October 12, 2010 and will
      close on November 2, 2010. Shares and warrants not tendered to the
      additional offer will transfer to Shire by operation of law on November
      8, 2010. Movetis shares will be delisted from Euronext Brussels at
      close of trading on November 2, 2010.

    Divesture of DAYTRANA

    - On August 10, 2010 Shire announced the divestiture of DAYTRANA to
      Noven. The divesture became effective on October 1, 2010. Following the
      decision to divest DAYTRANA, Shire recognised an impairment charge of
      $43 million to write-down its DAYTRANA intangible asset to its fair
      value less costs to sell.

    Co-promotion for VYVANSE with Glaxo SmithKline ("GSK")

    - In the third quarter, Shire terminated its co-promotion agreement for
      VYVANSE with GSK. Under the terms of the agreement, no termination
      payment or any other payments were made or are due to GSK since agreed
      upon sales thresholds were not achieved. The Company does not believe
      that the termination of the co-promotion agreement will impact the
      future performance of VYVANSE in the United States.

    - Following Shire's termination, GSK filed a lawsuit against Shire in the
      Philadelphia Court of Common Pleas relating to the co-promotion
      agreement. GSK is seeking compensation despite the failure to achieve
      the required sales thresholds. Shire believes that the lawsuit is
      frivolous and without merit and will vigorously defend itself.

    Paragraph IV Notice Letter for INTUNIV

    - On October 25, 2010 Shire received a Paragraph IV Notice Letter from
      Watson Pharmaceuticals, Inc. ("Watson") advising of the filing of an
      Abbreviated New Drug Application for a generic version of INTUNIV.
      Shire is currently reviewing the details of Watson's Paragraph IV
      Notice Letter which was directed to all three Orange Book listed
      patents for INTUNIV.


    ADDITIONAL INFORMATION
    The following additional information is included in this press release:

                                                     Page

    Overview of Q3 2010 Financial Results              8
    Financial Information                             12
    Notes to Editors                                  25
    Safe Harbor Statement                             25
    Explanation of Non GAAP Measures                  26
    Trademarks                                        27

Dial in details for the live conference call for investors 14:00 BST/9:00 EDT on October 29, 2010:

    UK dial in: 0844-335-0351
    US dial in: 1-866-8048688 or 1-718-3541175
    International dial in: +44-844-335-0351
    Password/Conf ID: 921510

    Live Webcast: http://www.shire.com/shireplc/en/investors


    OVERVIEW OF Q3 2010 FINANCIAL RESULTS
    1. Product sales

For the three months to September 30, 2010 product sales increased by 32% to $794.3 million (2009: $602.5 million) and represented 91% of total revenues (2009: 90%).

Core Product Sales increased by 31% to $694.6 million (2009: $531.6 million), up 34% on a CER basis. Product Highlights

                                                                    Exit
                                                                   Market
                                               Growth             Share(1)
    Product              Sales $M   Sales       CER     US Rx(1)

    VYVANSE                 151.2     +17% 1     +17%       +28%        15%
    ELAPRASE                 96.8      +7% 1     +11%       n/a(2)     n/a(2)
    REPLAGAL                 92.1     +91% 1    +103%       n/a(3)     n/a(3)
    LIALDA / MEZAVANT        76.0     +16% 1     +17%       +16%        19%
    PENTASA                  57.1     +11%       +11%        -5%        15%
    VPRIV                    49.5     n/a  1     n/a        n/a(2)     n/a(2)
    FOSRENOL                 45.2      -5% 1      -1%       -17%         7%
    INTUNIV                  37.3     n/a  1     n/a        n/a          3%
    FIRAZYR                   2.9     +61% 1     +73%       n/a(3)     n/a(3)
    OTHER                    86.5     -11% 1      -8%       n/a        n/a
    Core product sales      694.6     +31% 1     +34%
    ADDERALL XR              99.7     +41% 1     +40%        +1%         7%
    Total product sales     794.3     +32% 1     +35%

(1) Data provided by IMS Health National Prescription Audit ("IMS NPA"). Exit market share represents the average monthly US market share in the month ended September 30, 2010.

(2) IMS NPA Data not available.

(3) Not sold in the US in Q3 2010.

VYVANSE - ADHD

The increase in VYVANSE product sales was principally due to a 28% increase in US prescription demand, from both 13% growth in the US ADHD market and increases to VYVANSE's share of that market. Price increases taken since Q3 2009 also contributed to the product sales growth.

Product sales growth was lower than prescription growth due to higher sales deductions, principally increased Medicaid rebates following US Healthcare Reform, and decreases in wholesaler inventories, or "de-stocking", at the end of Q3 2010 (de-stocking in Q3 2010 was equivalent to $12 million of gross sales compared to stocking of $4 million in Q3 2009).

ELAPRASE - Hunter syndrome

The growth in sales of ELAPRASE was driven by increased volumes across all regions in which ELAPRASE is sold. On a CER basis sales grew by 11%.

REPLAGAL - Fabry disease

The growth in REPLAGAL product sales was driven by an acceleration of patients switching to REPLAGAL in Europe, principally due to the ongoing supply disruption affecting the only other approved ERT for Fabry disease. Sales increased 103% on a CER basis (REPLAGAL is sold primarily in Euros and Pounds sterling).

LIALDA/MEZAVANT - Ulcerative colitis

Product sales for LIALDA/MEZAVANT continued to grow in Q3 2010, driven by increased US prescription demand as a result of higher US market share and price increases taken since Q3 2009, which were partially offset by higher sales deductions compared to the same period in 2009.

PENTASA - Ulcerative colitis

The growth in PENTASA product sales was due to price increases taken since Q3 2009, which more than offset lower US prescription demand.

VPRIV - Gaucher disease

Following the grant of marketing authorization from the European Commission on August 26, 2010, VPRIV is now being sold on an approved basis in both the US and the EU.

FOSRENOL - Hyperphosphatemia

Product sales of FOSRENOL in the EU decreased primarily due to mandatory price reductions taken in 2010. Product sales of FOSRENOL in the US decreased due to lower US prescription demand and higher sales deductions in Q3 2010 compared to 2009, which more than offset the effect of price increases taken since Q3 2009.

INTUNIV - ADHD

US prescription demand for INTUNIV increased by 29% in Q3 2010 compared to Q2 2010, leading to product sales of $37 million. Product sales in Q2 2010 of $51 million included $16 million of net sales from initial stocking shipments made in 2009 ("Launch Stocks") which had been deferred in accordance with Shire's accounting policy. All revenue from Launch Stocks had been recognized by June 30, 2010.

Excluding revenue from Launch Stocks, product sales increased by 6% in Q3 compared to Q2 2010. This increase in product sales was lower than the growth in US prescription demand due to higher sales deductions, principally as a result of US Healthcare Reform.

FIRAZYR - HAE

Product sales grew in line with increased volumes across markets in Europe. FIRAZYR is the first new product for HAE in Europe in 30 years and has orphan exclusivity for acute attacks of HAE in adults in the EU until 2018.

ADDERALL XR - ADHD

ADDERALL XR product sales increased as a result of slightly higher US prescription demand, lower sales deductions in Q3 2010 compared to the same period in 2009 and the effect of stocking in Q3 2010.

Sales deductions represented 60% of branded ADDERALL XR gross sales in Q3 2010 (2009: 73%). Medicaid rebates were accrued at a higher level in Q3 2009 as sales deductions for that quarter did not reflect the benefit of the change in estimate of the Medicaid rebate liability recorded in Q4 2009. Additionally, sales deductions in Q3 2010 were reduced following refinements to Medicaid rebate liability estimates made in earlier quarters.

    ADDERALL XR product sales in Q3 2010 also benefited from a 1% increase in
US prescription demand, as US ADHD market growth of 13% more than offset the
decline in ADDERALL XR's market share (7% in Q3 2010 compared to 8% in Q3
2009).
    2. Royalties

                                                    Year on year growth
                                 Royalties to
    Product                        Shire $M      Royalties          CER

    3TC(R) and Zeffix(R)    1.00     40.6           -3%             -4%
    ADDERALL XR             1.00     18.0          718%            718%
    Other                   1.00     17.9           11%             16%
    Total                   1.00     76.5           27%             28%

Royalty income increased by 27% due to higher royalties received on sales of authorized generic versions of ADDERALL XR (royalties in Q3 2010 were received from Impax Laboratories Inc. and in Q3 2009 were received, at a lower rate, from Teva Pharmaceuticals Industries Ltd). Royalties received for 3TC and Zeffix from GSK were lower in 2010 compared to 2009 as 3TC royalties continue to be adversely impacted by increased competition from other treatments.

    3. Financial details Cost of product sales

                                                % of              % of
                                             product           product
                                Q3 2010        sales  Q3 2009    sales
                                     $M                    $M

    Cost of product sales (US     112.7          14%    104.9      17%
    GAAP)
    Transfer of manufacturing
    from Owings Mills              (7.3)                 (4.5)
    Fair value adjustment for
    acquired inventories              -                  (0.6)
    Depreciation                   (2.3)                 (0.8)
    Cost of product sales (Non    103.1          13%     99.0      16%
    GAAP)



    Cost of product sales as a percentage of product sales decreased in Q3
2010 compared to the same period in 2009 due to higher margins from existing
Core Products and the positive effect on gross margins of newly launched,
higher margin products.
    R&D

                                            % of              % of
                                         product           product
                                Q3 2010    sales  Q3 2009    sales
                                     $M                $M

    R&D (US GAAP)                 197.9      25%    147.8      25%
    Up-front payment to           (45.0)                -
    Acceleron
    Depreciation                   (4.4)             (3.6)
    R&D (Non GAAP)                148.5      19%    144.2      24%


R&D increased due to continued investment in a number of R&D programs, principally VYVANSE international and investigative uses of VYVANSE for new indications, Guanfacine Carrier Wave and other early stage development programs.

On a US GAAP basis, R&D increased by $50.1 million over the same period in 2009 primarily due to the up-front payment of $45.0 million made to Acceleron on entering the licence and collaboration agreement for development of the ActRIIB class of molecules.

    SG&A

                                            % of              % of
                                         product           product
                                Q3 2010    sales  Q3 2009    sales
                                     $M                $M

    SG&A (US GAAP)                392.4      49%    320.6      53%
    Intangible asset              (31.2)            (34.8)
    amortization
    Impairment of intangible      (42.7)                -
    assets
    Depreciation                  (16.1)            (18.5)
    SG&A (Non GAAP)               302.4      38%    267.3      44%

SG&A increased in part due to increased sales and marketing costs incurred to support newly launched products (INTUNIV and VPRIV) and growth in new markets.

On a US GAAP basis, SG&A included an impairment charge of $42.7 million to write down the DAYTRANA intangible asset to its fair value less costs to sell following agreement to divest the product to Noven.

Reorganization costs

For the three months to September 30, 2010 Shire recorded reorganization costs of $9.7 million (2009: $2.0 million) relating to the transfer of manufacturing from its Owings Mills facility and the establishment of an international commercial hub in Switzerland.

Integration and acquisition costs

For the three months to September 30, 2010 Shire recorded integration and acquisition costs of $5.8 million (2009: $6.2 million), which in 2010 related to the acquisition of Movetis, and in 2009 to the integration of Jerini AG.

Interest expense

For the three months to September 30, 2010 the Company incurred interest expense of $8.3 million (2009: $9.4 million). Interest expense principally relates to the coupon and amortization of issue costs on Shire's $1,100 million 2.75% convertible bonds due 2014.

Taxation

The US GAAP effective rate of tax in Q3 2010 was 35% (2009: 34%), and the effective tax rate on Non GAAP income was 24% (2009: 33%).

The Non GAAP effective tax rate in both Q3 2010 and 2009 benefited from changes in estimate of the amount of certain tax liabilities following the submission of various tax returns. The Non GAAP effective tax rate in 2010 was lower than 2009 as the Non GAAP rate in Q3 2009 was adversely impacted by the initial recognition of valuation allowances against certain EU deferred tax assets and increases to accrued interest on tax contingencies, which resulted in charges not repeated in Q3 2010.

The US GAAP effective rate of tax in Q3 2010 was 11 percentage points higher than the Non GAAP effective tax rate as certain items excluded from Non GAAP income, such as the up-front payment to Acceleron and the write-down of the DAYTRANA intangible asset, were either made from territories with tax rates lower than Shire's effective rate or in territories where the establishment of valuation allowances precluded the recognition of any tax benefit.

    FINANCIAL INFORMATION

    TABLE OF CONTENTS

                                                             Page

    Unaudited US GAAP Consolidated Balance Sheets              13
    Unaudited US GAAP Consolidated Statements of Income        14
    Unaudited US GAAP Consolidated Statements of Cash
     Flows                                                     16
    Selected Notes to the Unaudited US GAAP Financial
     Statements
       (1) Earnings per share                                  18
       (2) Analysis of revenues                                19
    Non GAAP reconciliation                                    21

Unaudited US GAAP results for the three months and nine months to September 30, 2010 Consolidated Balance Sheets

                                                 September 30,  December 31,
                                                         2010          2009
                                                           $M            $M
    ASSETS
    Current assets:
    Cash and cash equivalents                           193.3         498.9
    Restricted cash                                     605.1          33.1

    Accounts receivable, net                            722.1         597.5
    Inventories                                         252.6         189.7
    Assets held for sale                                 61.5           1.7
    Deferred tax asset                                  145.8         135.8
    Prepaid expenses and other current assets           179.6         113.5

    Total current assets                              2,160.0       1,570.2

    Non-current assets:
    Investments                                          89.1         105.7
    Property, plant and equipment, net                  818.6         676.8
    Goodwill                                            375.0         384.7
    Other intangible assets, net                      1,567.2       1,790.7
    Deferred tax asset                                   86.3          79.0
    Other non-current assets                              5.4          10.4

    Total assets                                      5,101.6       4,617.5

    LIABILITIES AND EQUITY
    Current liabilities:
    Accounts payable and accrued expenses             1,098.1         929.1
    Deferred tax liability                                2.9           2.9
    Other current liabilities                            70.2          88.0

    Total current liabilities                         1,171.2       1,020.0

    Non-current liabilities:
    Convertible bonds                                 1,100.0       1,100.0
    Other long-term debt                                  6.8          43.6
    Deferred tax liability                              356.1         294.3
    Other non-current liabilities                       169.7         247.1

    Total liabilities                                 2,803.8       2,705.0

    Equity:
    Common stock of 5p par value; 1,000 million
    shares authorized; and 562.2 million shares
    issued and outstanding (2009: 1,000 million
    shares authorized; and 561.5 million shares
    issued and outstanding)                              55.7          55.6
    Additional paid-in capital                        2,731.9       2,677.6
    Treasury stock: 14.9 million shares (2009:
    17.8 million)                                      (299.0)       (347.4)
    Accumulated other comprehensive income              108.6         149.1
    Accumulated deficit                                (299.4)       (622.4)

    Total equity                                      2,297.8       1,912.5

    Total liabilities and equity                      5,101.6       4,617.5

Unaudited US GAAP results for the three months and nine months to September 30, 2010 Consolidated Statements of Income

                                                         9 months   9 months
                            3 months to    3 months to         to         to
                                                        September  September
                          September 30,  September 30,        30,        30,
                                  2010           2009       2010       2009
                                    $M             $M         $M         $M
    Revenues:
    Product sales                794.3          602.5    2,276.8    1,916.8
    Royalties                     76.5           60.3      254.5      177.8
    Other revenues                 3.5            4.2        8.6       19.8
    Total revenues               874.3          667.0    2,539.9    2,114.4

    Costs and expenses:
    Cost of product
    sales(1)                     112.7          104.9      333.7      284.9
    Research and
    development                  197.9          147.8      475.9      492.5
    Selling, general and
    administrative(1)            392.4          320.6    1,106.7      973.8
    Gain on sale of product
    rights                           -           (6.3)      (4.1)      (6.3)
    Reorganization costs           9.7            2.0       23.3        7.1
    Integration and
    acquisition costs              5.8            6.2        6.4       10.0
    Total operating
    expenses                     718.5          575.2    1,941.9    1,762.0

    Operating income             155.8           91.8      598.0      352.4

    Interest income                1.0            0.2        1.9        1.5
    Interest expense              (8.3)          (9.4)     (25.6)     (30.6)
    Other income, net              0.8            7.0        9.0       61.9
    Total other
    (expense)/income, net         (6.5)          (2.2)     (14.7)      32.8

    Income from continuing
    operations before
    income taxes and equity
    in (losses)/earnings of
    equity method investees      149.3           89.6      583.3      385.2
    Income taxes                 (52.7)         (30.6)    (160.8)     (56.7)
    Equity in
    (losses)/earnings of
    equity method
    investees, net of taxes       (0.3)           0.6        0.2        1.0
    Income from continuing
    operations, net of tax        96.3           59.6      422.7      329.5

    Loss from discontinued
    operations (net of
    income tax expense of
    $nil in all periods)             -              -          -      (12.4)
    Net income                    96.3           59.6      422.7      317.1

    Add: Net loss
    attributable to
    noncontrolling interest
    in subsidiaries                  -              -          -        0.2
    Net income attributable
    to Shire plc                  96.3           59.6      422.7      317.3

(1) Cost of product sales includes amortization of intangible assets relating to favorable manufacturing contracts of $0.4 million for the three months to September 30, 2010 (2009: $0.4 million) and $1.3 million for the nine months to September 30, 2010 (2009: $1.3 million). Selling, general and administrative costs include amortization and impairment charges of intangible assets relating to intellectual property rights acquired of $73.9 million for the three months to September 30, 2010 (2009: $34.8 million) and $142.3 million for the nine months to September 30, 2010 (2009: $101.6 million).

Unaudited US GAAP results for the three months and nine months to September 30, 2010 Consolidated Statements of Income (continued)

                                                         9 months   9 months
                            3 months to    3 months to         to         to
                                                        September  September
                          September 30,  September 30,        30,        30,
                                  2010           2009       2010       2009
    Earnings per ordinary
    share - basic
    Earnings from
    continuing operations         17.6c          11.0c      77.4c      61.1c
    Loss from discontinued
    operations                       -              -          -       (2.3c)
    Earnings per ordinary
    share - basic                 17.6c          11.0c      77.4c      58.8c

    Earnings per ADS -
    basic                         52.8c          33.0c     232.2c     176.4c

    Earnings per ordinary
    share - diluted
    Earnings from
    continuing operations         17.3c          10.9c      76.0c      60.3c
    Loss from discontinued
    operations                       -              -          -       (2.3c)
    Earnings per ordinary
    share - diluted               17.3c          10.9c      76.0c      58.0c

    Earnings per ADS -
    diluted                       51.9c          32.7c     228.0c     174.0c

    Weighted average number
    of shares (millions):

    Basic                        547.0          540.6      546.1      540.0
    Diluted                      556.7          548.3      589.7      547.1

Unaudited US GAAP results for the three months and nine months to September 30, 2010 Consolidated Statements of Cash Flows

                                  3 months   3 months   9 months   9 months
                                        to         to         to         to
                                 September  September  September  September
                                       30,        30,        30,        30,
                                      2010       2009       2010       2009
                                        $M         $M         $M         $M
    CASH FLOWS FROM OPERATING
    ACTIVITIES:
    Net income                        96.3       59.6      422.7      317.1
    Adjustments to reconcile net
    income to net cash provided by
    operating activities:
              Loss from
              discontinued
              operations                 -          -          -       12.4
              Depreciation and
              amortization            60.0       59.7      189.2      177.4
              Share based
              compensation            17.5       16.9       44.2       50.1
              Impairment of
              intangible assets       42.7          -       42.7          -
              Gain on sale of
              non-current
              investments                -          -      (11.1)     (55.2)
              Gain on sale of
              product rights             -       (6.3)      (4.1)      (6.3)
              Other                   (5.7)       5.2        5.2       11.5
    Movement in deferred taxes       (10.0)     (41.9)      48.7      (87.5)
    Equity in losses/(earnings) of
    equity method investees            0.3       (0.6)      (0.2)      (1.0)
    Changes in operating assets
    and liabilities:
              Increase in accounts
              receivable             (94.1)    (113.4)    (138.0)    (156.4)
              Increase in sales
              deduction accrual       14.8       94.7      169.0      212.2
              Increase in inventory   (4.1)     (11.3)     (54.1)     (24.2)
              Decrease/(increase)
              in prepayments and
              other current assets    14.7       25.7      (67.7)      (8.1)
              Decrease in other
              assets                   1.5        0.9        0.7        5.3
              Increase/(decrease)
              in accounts payable
              and other liabilities    2.3       44.8      (41.0)     (56.3)
    Returns on investment from
    joint venture                      5.8          -        5.8        4.9
    Cash flows used in
    discontinued operations              -          -          -       (5.9)
    Net cash provided by operating
    activities(A)                    142.0      134.0      612.0      390.0

Unaudited US GAAP results for the three months and nine months to September 30, 2010 Consolidated Statements of Cash Flows (continued)

                                                        9 months   9 months
                           3 months to    3 months to         to         to
                                                       September  September
                         September 30,  September 30,        30,        30,
                                  2010           2009       2010       2009
                                    $M             $M         $M         $M

    CASH FLOWS FROM
    INVESTING ACTIVITIES:
    Movements in restricted
    cash                        (553.0)          (3.4)    (547.0)     (10.1)
    Payments on foreign
    exchange contracts
    related to Movetis
    acquisition                  (21.2)              -     (21.2)          -
    Purchases of subsidiary
    undertakings and
    businesses, net of cash
    acquired                         -               -         -      (75.5)
    Purchases of
    non-current investments       (1.0)              -      (1.0)          -
    Purchases of property,
    plant and equipment          (53.5)          (67.5)   (261.7)     (169.4)
    Purchases of intangible
    assets                           -            (1.0)     (2.7)       (7.0)
    Proceeds from disposal
    of non-current
    investments and
    property plant and
    equipment                        -               -       2.1        19.7
    Proceeds from disposal
    of subsidiary
    undertakings                     -               -         -         6.7
    Returns of equity
    investments                      -               -         -         0.2
    Net cash used in
    investing activities(B)     (628.7)          (71.9)   (831.5)     (235.4)
    CASH FLOWS FROM
    FINANCING ACTIVITIES:
    Payment under building
    financing obligation          (0.4)           (0.9)     (1.8)       (3.9)
    Extinguishment of
    building finance
    obligation                       -               -     (43.1)          -
    Tax benefit of stock
    based compensation             5.2               -       9.6           -
    Proceeds from exercise
    of options                     0.2             1.8       2.1         2.8
    Payment of dividend              -               -     (49.8)      (43.0)
    Payments to acquire
    shares by Employee
    Share Ownership Trust
    ("ESOT")                         -               -      (1.7)       (1.0)
    Net cash provided
    by/(used in) financing
    activities(C)                  5.0             0.9     (84.7)      (45.1)
    Effect of foreign
    exchange rate changes
    on cash and cash
    equivalents (D)               (7.5)            6.4      (1.4)        5.0
    Net (decrease)/increase
    in cash and cash
    equivalents(A) +(B)
    +(C) +(D)                   (489.2)           69.4    (305.6)      114.5
    Cash and cash
    equivalents at
    beginning of period          682.5           263.3     498.9       218.2
    Cash and cash
    equivalents at end of
    period                       193.3           332.7     193.3       332.7

Unaudited US GAAP results for the three months and nine months to September 30, 2010

    Selected Notes to the Financial Statements
    (1) Earnings per share

                                                        9 months   9 months
                           3 months to    3 months to         to         to
                                                       September  September
                         September 30,  September 30,        30,        30,
                                  2010           2009       2010       2009
                                    $M             $M         $M         $M

    Income from continuing
    operations                    96.3           59.6      422.7      329.5
    Loss from discontinued
    operations                       -              -          -      (12.4)
    Noncontrolling interest
    in subsidiaries                  -              -          -        0.2

    Numerator for basic EPS       96.3           59.6      422.7      317.3
    Interest on convertible
    bonds, net of tax (1)            -              -       25.2          -
    Numerator for diluted
    EPS                           96.3           59.6      447.9      317.3

    Weighted average number
    of shares:
                              Millions       Millions   Millions   Millions

    Basic(2)                     547.0          540.6      546.1      540.0
    Effect of dilutive
    shares:
    Stock options(3)               9.7            7.7       10.4        7.1
    Convertible bonds 2.75%
    due 2014(4)                      -              -       33.2          -

    Diluted                      556.7          548.3      589.7      547.1

(1) For the three month period ended September 30, 2010 and for the three and nine month periods ended September 30, 2009 interest on the convertible bond has not been added back as the effect would be anti-dilutive.

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

(3) Calculated using the treasury stock method.

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

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

                        3 months to  3 months to    9 months to  9 months to
                          September    September      September    September
                                30,          30,            30,          30,
                               2010         2009           2010         2009
                        Millions(1)  Millions(1)    Millions(1)  Millions(1)
                                (2)          (2)            (2)

    Stock options out of
    the money                  3.6         16.8            8.9         18.0
    Convertible bonds
    2.75% due 2014            33.2         33.2              -         33.1

(1) For the three and nine month periods ended September 30, 2010 and 2009, certain stock options have been excluded from the calculation of diluted EPS because their exercise prices exceeded Shire plc's average share price during the calculation period.

(2) For the three month period ended September 30, 2010 and for the three and nine month periods ended September 30, 2009 the ordinary shares underlying the convertible bonds have not been included in the calculation of the diluted weighted average number of shares, as the effect of their inclusion would be anti-dilutive.

    Unaudited US GAAP results for the three months to September 30, 2010
    Selected Notes to the Financial Statements
    (2) Analysis of revenues

    3 months to September 30,         2010       2009      2010        2010
                                                              %  % of total
                                        $M         $M    change     revenue
    Net product sales:
    Specialty Pharmaceuticals
    ("Specialty")
    ADHD
    VYVANSE                          151.2      129.0       17%         17%
    ADDERALL XR                       99.7       70.9       41%         11%
    INTUNIV                           37.3 1        -       n/a          4%
    DAYTRANA                          14.7       17.4      -16%          2%
    EQUASYM                            5.7 1      9.2      -38%          1%
                                     308.6      226.5       36%         35%
    GI
    LIALDA / MEZAVANT                 76.0       65.4       16%          9%
    PENTASA                           57.1       51.3       11%          6%
                                     133.1      116.7       14%         15%
    General products
    FOSRENOL                          45.2       47.7       -5%          5%
    XAGRID(R)                         20.5       21.5       -5%          2%
    CARBATROL(R)                      20.3       20.8       -2%          2%
    CALCICHEW(R)                       9.9       12.4      -20%          1%
    REMINYL/REMINYL XL(R)              9.1       10.5      -13%          1%
                                     105.0      112.9       -7%         12%

    Other product sales                6.3        5.4       17%          1%
    Total Specialty product
    sales                            553.0      461.5       20%         63%

    Human Genetic Therapies ("HGT")
    ELAPRASE                          96.8       90.9        7%         11%
    REPLAGAL                          92.1       48.3       91%         11%
    VPRIV                             49.5 1        -      n/a           6%
    FIRAZYR                            2.9        1.8       61%         <1%
    Total HGT product sales          241.3      141.0       71%         28%

    Total product sales              794.3      602.5       32%         91%

    Royalties:
    3TC and ZEFFIX                    40.6       42.0       -3%          5%
    ADDERALL XR                       18.0 1      2.2      718%          2%
    Other                             17.9       16.1       11%          2%
    Total royalties                   76.5       60.3       27%          9%

    Other revenues                     3.5        4.2      -17%         <1%

    Total Revenues                   874.3      667.0       31%        100%


    Unaudited US GAAP results for the nine months to September 30, 2010
    Selected Notes to the Financial Statements
    (2) Analysis of revenues

    9 months to September 30,         2010      2009      2010        2010
                                                             %  % of total
                                        $M        $M    change     revenue
    Net product sales:
    Specialty Pharmaceuticals
    ("Specialty")
    ADHD
    VYVANSE                          453.6     359.7       26%         18%
    ADDERALL XR                      271.9     434.2      -37%         11%
    INTUNIV                          123.0         -      n/a           5%
    DAYTRANA                          49.4      52.2       -5%          2%
    EQUASYM                           16.3      14.1       16%          1%
                                     914.2     860.2        6%         36%
    GI
    LIALDA / MEZAVANT                209.2     169.4       23%          8%
    PENTASA                          175.9     156.5       12%          7%
                                     385.1     325.9       18%         15%
    General products
    FOSRENOL                         137.4     137.2        0%          6%
    XAGRID                            65.4      62.3        5%          3%
    CARBATROL                         63.4      59.7        6%          2%
    REMINYL/REMINYL XL                33.1      28.8       15%          1%
    CALCICHEW                         29.7      32.8       -9%          1%
                                     329.0     320.8        3%         13%

    Other product sales               17.4      14.3       22%         <1%
    Total Specialty product
    sales                          1,645.7   1,521.2        8%         65%

    Human Genetic Therapies ("HGT")
    ELAPRASE                         297.4     258.9       15%         12%
    REPLAGAL                         242.0     132.9       82%         10%
    VPRIV                             84.0         -      n/a           3%
    FIRAZYR                            7.7       3.8      103%         <1%
    Total HGT product sales          631.1     395.6       60%         25%

    Total product sales            2,276.8   1,916.8       19%         90%

    Royalties:
    3TC and ZEFFIX                   115.3     120.3       -4%          5%
    ADDERALL XR                       86.3      15.8      446%          3%
    Other                             52.9      41.7       27%          2%
    Total royalties                  254.5     177.8       43%         10%

    Other revenues                     8.6      19.8      -57%         <1%

    Total Revenues                 2,539.9   2,114.4       20%        100%


    Unaudited results for the three months to September 30, 2010
    Non GAAP reconciliation

                           US GAAP                Adjustments

                                                Acquisitions    Divestments,
                                   Amortization            & reorganizations
                                        & asset  integration  & discontinued
    3 months to,     September 30,  impairments   activities      operations
                              2010
                                            (a)          (b)             (c)
                                $M           $M           $M              $M

    Total revenues           874.3            -            -               -

    Costs and
    expenses:
    Cost of product
    sales                    112.7           -            -            (7.3)
    Research and
    development              197.9           -        (45.0)              -
    Selling, general
    and administrative       392.4       (73.9)           -               -
    Reorganization
    costs                      9.7           -            -            (9.7)
    Integration and
    acquisition costs          5.8           -         (5.8)              -
    Depreciation                 -           -            -               -
    Total operating
    expenses                 718.5       (73.9)       (50.8)          (17.0)

    Operating income         155.8        73.9         50.8            17.0

    Interest income            1.0           -            -               -
    Interest expense          (8.3)          -            -               -
    Other income, net          0.8           -            -               -
    Total other
    expense, net              (6.5)          -            -               -
    Income from
    continuing
    operations before
    income taxes and
    equity in losses
    of equity method
    investees                149.3        73.9         50.8            17.0
    Income taxes             (52.7)      (10.1)        (3.5)           (4.1)
    Equity in losses
    of equity method
    investees, net of
    tax                       (0.3)          -            -               -
    Net income
    attributable to
    Shire plc                 96.3        63.8         47.3            12.9
    Impact of
    convertible debt,
    net of tax (1)               -         8.4            -               -
    Numerator for
    diluted EPS               96.3        72.2         47.3            12.9
    Weighted average
    number of shares
    (millions) -
    diluted(1)               556.7        33.2            -               -
    Diluted earnings
    per ADS                   51.9c       33.8c        24.0c            6.6c


    Table continued below


                                              Non GAAP
                               Reclassify
    3 months to,             depreciation September 30,
                                                   2010
                                      (d)
                                       $M            $M

    Total revenues                      -         874.3

    Costs and expenses:
    Cost of product sales            (2.3)        103.1
    Research and
    development                      (4.4)        148.5
    Selling, general and
    administrative                  (16.1)        302.4
    Reorganization costs                -             -
    Integration and
    acquisition costs                   -             -
    Depreciation                     22.8          22.8
    Total operating
    expenses                            -         576.8

    Operating income                    -         297.5

    Interest income                     -           1.0
    Interest expense                    -          (8.3)
    Other income, net                   -           0.8
    Total other expense,
    net                                 -          (6.5)
    Income from continuing
    operations before
    income taxes and equity
    in losses of equity
    method investees                    -         291.0
    Income taxes                        -         (70.4)
    Equity in losses of
    equity method
    investees, net of tax               -          (0.3)
    Net income attributable
    to Shire plc                        -         220.3
    Impact of convertible
    debt, net of tax (1)                -           8.4
    Numerator for diluted
    EPS                                 -         228.7
    Weighted average number
    of shares (millions) -
    diluted(1)                          -         589.9
    Diluted earnings per
    ADS                                 -         116.3c

(1) The impact of convertible debt, net of tax has a dilutive effect on Non GAAP basis.

The following items are included in Adjustments:

(a) Amortization and asset impairments: Amortization of intangible assets relating to intellectual property rights acquired ($31.2 million), impairment charges to record DAYTRANA assets at fair value less costs to sell ($42.7 million) and tax effect of adjustments;

(b) Acquisitions and integration activities: Upfront payment to Acceleron ($45.0 million), acquisition costs are principally costs associated with the acquisition of Movetis ($5.8 million) and tax effect of adjustments;

(c) Divestments, reorganizations and discontinued operations: Accelerated depreciation ($6.2 million) and dual running costs (

Posted: October 2010


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