TIDMSHP
Shire continues to deliver excellent growth from core products
October 30, 2009 - Shire plc (LSE: SHP, NASDAQ: SHPGY) the global specialty
biopharmaceutical company, announces results for the three months to September
30, 2009.
Q3 2009 Financial Highlights
Q3 2009(1)
Product sales $603 million -15%
Product sales from core products(2) $532 million +20%
Product sales growth from core products at constant
exchange rates(2) (3) +23%
Total revenues $667 million -14%
Non GAAP operating income $134 million -52%
US GAAP operating income $92 million -25%
Non GAAP diluted earnings per ADS $0.49 -58%
US GAAP diluted earnings per ADS $0.33 +$0.52
(1) Figures compare Q3 2009 results with the same period in 2008.
(2) Core products represent Shire's products excluding ADDERALL XR.
(3) Sales growth at constant exchange rates ("CER"), which is a Non
GAAP measure, is calculated after restating Q3 2009 results using Q3 2008
average foreign exchange rates.
Angus Russell, Chief Executive Officer, commented:
"Shire continues to deliver excellent growth from its core products, which
were up 20% over an exceptionally strong Q3 2008. This performance reflects
our transformation in the past few years into a global biopharmaceutical
company with a proven differentiated strategy and a balanced portfolio of new
products which is protected by strong exclusivity and patent protection.
The growth of our core products and continued pro-active cost management are
positioning us well to deliver on our unchanged guidance framework for 2009
and our aspiration of growing sales in the mid-teens range on average between
2009 and 2015.
Following US approval of INTUNIV, our new ADHD treatment, we are preparing for
the US launch next week. INTUNIV adds a new choice of treatment for physicians
and patients within our market-leading branded portfolio of ADHD products. We
have also continued to grow VYVANSE's market share which is now 13.4%,
benefiting from both the `back to school' season and strong 10% ADHD market
growth. These results reinforce our confidence that VYVANSE will grow to
become a leading product in this market.
Our HGT business continues to deliver; a New Drug Application for
velaglucerase alfa, for Gaucher disease, was filed with the FDA at the end of
August. Velaglucerase alfa is available ahead of its commercial launch in the
US via a treatment protocol and elsewhere on a pre-approval access basis. We
are supporting the Fabry disease community with a stronger uptake of REPLAGAL
in Europe. In the US a treatment protocol has been approved, enabling
immediate access to the drug. In addition we plan to file a Biologics License
Application with the FDA for REPLAGAL by the end of the year.
We continue to invest in our R&D pipeline. This quarter we announced a
research collaboration with Santaris Pharma A/S, a leading player in RNA-based
therapeutics, to develop its proprietary Locked Nucleic Acid technology in a
range of rare diseases, thereby enabling us to build on our already strong
competitive position in this area."
Third Quarter 2009 Unaudited Results
Q3 2009 Q3 2008
Non Non
US GAAP Adjustments GAAP(1) US GAAP Adjustments GAAP(1)
$M $M $M $M $M $M
Revenues 667 - 667 779 - 779
Operating income 92 42 134 123 156 279
Net income/(loss) 60 29 89 (35) 251 216
Diluted earnings/(loss)
per ADS 33c 16c 49c (20c) 137c 117c
Note: Average exchange rates for Q3 2009 were $1.64:GBP1.00 and $1.43:EUR1.00, (Q3
2008: $1.89:GBP1.00 and $1.52:EUR1.00).
(1) The Non GAAP financial measures included above are explained on pages 26
and 27, 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 22 to 25.
FINANCIAL SUMMARY
Third Quarter 2009 (see page 7 for full Financial Results)
- Product sales from core products were up 20% (up 23% at CER) to $532
million, driven by continued strong growth from:
- VYVANSE® (up 34% to $129 million);
- LIALDA® /MEZAVANT® (up 62% to $65 million);
- ELAPRASE® (up 16% to $91 million, up 20% at CER); and
- REPLAGAL® (up 8% to $48 million, up 15% at CER).
- Product sales including ADDERALL® XR, were down 15% to $603 million, as
ADDERALL XR product sales declined by 74%, or $198 million to $71 million.
- Non GAAP operating income decreased by 52%, or $145 million, to $134 million
due to the lower ADDERALL XR revenues in Q3 2009 and increased investment in
research and development, which were partially offset by higher revenues from
core products and lower selling, general and administrative costs. On a US
GAAP basis operating income in Q3 2009 was $92 million, compared to $123
million in 2008 (2008 included the impact of a $121 million in-process R&D
charge relating to the acquisition of Jerini AG ("Jerini")).
- Non GAAP diluted earnings per ADS were down 58% to $0.49 (Q3 2008: $1.17),
and on a US GAAP basis diluted earnings per ADS were $0.33 (Q3 2008: $(0.20)).
- During the first three quarters of 2009 Shire has generated Non GAAP diluted
earnings per ADS of $2.38 ($1.74 on a US GAAP basis).
THIRD QUARTER HIGHLIGHTS AND RECENT DEVELOPMENTS
Products
VYVANSE - for the treatment of Attention Deficit and Hyperactivity
Disorder ("ADHD")
- Following a review of governing statutory and regulatory
standards and public comments, the US Food and Drug Administration ("FDA") has
affirmed its prior decision to grant five-year New Chemical Entity ("NCE")
exclusivity to lisdexamfetamine dimesylate. The five-year exclusivity period
for VYVANSE expires on February 23, 2012. As a consequence of this decision,
the FDA appropriately refused to file the Abbreviated New Drug Application
submitted by Actavis Elizabeth, LLC ("Actavis") for generic lisdexamfetamine
dimesylate in January 2009. VYVANSE is covered by US patents which remain in
effect until June 29, 2023.
INTUNIVtm - for the treatment of ADHD in children and adolescents in
the US
- On September 3, 2009 Shire announced that it received approval
from the FDA for INTUNIV Extended Release Tablets for the treatment of ADHD in
children and adolescents aged 6 to 17 years. INTUNIV, a once-daily
non-scheduled formulation of guanfacine, is the first selective alpha-2A
adrenergic receptor agonist approved for the treatment of ADHD.
- Once-daily INTUNIV is expected to be widely available in US
pharmacies in November 2009 and will come in four dosage strengths (1 mg, 2
mg, 3 mg, and 4 mg). INTUNIV will be marketed in the US by the existing Shire
ADHD sales team of nearly 600 representatives.
FOSRENOL® - for the treatment of pre-dialysis chronic kidney
disease ("CKD") in the EU
- Shire has received approval through the European Mutual
Recognition Procedure for an extension to the current indication for FOSRENOL
as a treatment to control hyperphosphataemia in CKD patients who are not on
dialysis and with a serum phosphorus level â%¥1.78mmol/L (5.5mg/dL).
Pipeline
Velaglucerase alfa - for the treatment of Gaucher disease
- On July 30, 2009 Shire began the rolling submission with the FDA under Fast
Track designation of a New Drug Application ("NDA") for velaglucerase alfa,
its enzyme replacement therapy in development for the treatment of Type 1
Gaucher disease. On September 1, 2009 Shire reported that it had completed its
NDA submission. Velaglucerase alfa is available ahead of its commercial
launch, in the US via a treatment protocol and elsewhere on a pre-approval
basis, to 300-600 patients in 2009 and will be available to several hundred
more in 2010.
REPLAGAL - for the treatment of Fabry disease
- On October 21, 2009 Shire announced plans to file a Biologics License
Application with the FDA for REPLAGAL (agalsidase alfa), its enzyme
replacement therapy for Fabry disease, by the end of the year. The Company
also announced that a treatment protocol for REPLAGAL, filed at the request of
the FDA, has been approved, and that Shire will support emergency
Investigational New Drug requests, in view of the announced supply restriction
of the only currently marketed treatment for Fabry disease in the US.
FIRAZYR® - for the treatment of hereditary angioedema ("HAE")
- In September 2009 Shire initiated a clinical trial to investigate the safety
of self-administration of FIRAZYR.
Amicus collaboration for the development of pharmacological chaperones
- On November 7, 2007 Shire licensed from Amicus Therapeutics Inc. ("Amicus")
the rights to three pharmacological chaperone compounds in markets outside of
the US: AMIGAL (HGT-3310) for Fabry disease, PLICERA (HGT-3410) for Gaucher
Disease and HGT-3510 (formerly referred to as AT2220) for Pompe disease which
were in clinical development. The parties have mutually agreed to terminate
the collaboration and to return all rights for the three products to Amicus.
Alba collaboration for the development of SPD 550
- On October 16, 2009 and following review of Phase 2 data, Shire informed
Alba Therapeutics Corporation ("Alba") of its intent to terminate the
collaboration. Effective November 15, 2009 Shire will return to Alba all
rights to SPD 550 (larazotide cetate for celiac disease), also known as
AT-1001. In December 2007 Shire had acquired rights to SPD550 in markets
outside of the US and Japan.
Business
Research Collaboration with Santaris Pharma A/S ("Santaris") on Locked Nucleic
Acid ("LNA") Drug Platform
- On August 24, 2009 Shire announced that it had entered into a research
collaboration with Santaris, to develop its proprietary LNA technology in a
range of rare diseases. LNA technology has the benefit of shortened target
validation and proof of concept, potentially increasing the speed and lowering
the cost of development. As part of the joint research project Santaris will
design, develop and deliver pre-clinical LNA oligonucleotides for
Shire-selected orphan disease targets, and Shire will have the exclusive right
to further develop and commercialize these candidate compounds on a worldwide
basis.
Legal proceedings
- On September 23, 2009 the Company received a subpoena from the US Department
of Health and Human Services Office of Inspector General in coordination with
the US Attorney for the Eastern District of Pennsylvania, seeking production
of documents related to the sales and marketing of ADDERALL XR, DAYTRANA® and
VYVANSE. Shire is cooperating and responding to this subpoena.
- On October 19, 2009 Teva Pharmaceuticals USA, Inc. ("Teva") filed suit
against Shire claiming that Shire is in breach of its supply contract for the
authorized generic version of ADDERALL XR. Shire has been supplying Teva with
authorized generic ADDERALL XR since April 1, 2009. Shire's ability to supply
this product, however, is limited by quota restrictions that the US Drug
Enforcement Administration places on amphetamine, which is the product's
active ingredient.
2009 OUTLOOK
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 Q3 2008 earnings release. At that time, and in subsequent earnings
releases, 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. During the first three quarters of 2009 we
have already achieved Non GAAP diluted earnings per ADS of $2.38.
We identified that each 10c movement in the EUR:$ 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
As advised at Q2 2009 $1.37 $1.56 $2.80 to $3.20
At average rate for nine months
to September 2009 & September $1.39 $1.56 $2.83 to $3.23
average rate for Q4 2009
(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
26-27.
PRODUCT LAUNCHES
Subject to obtaining the relevant regulatory/governmental approvals, product
launches planned over the next two years include:
- INTUNIV for the treatment of ADHD in children and adolescents in
the US in November 2009 (already approved);
- Velaglucerase alfa for the treatment of Gaucher disease in the US
and the EU in 2010;
- REPLAGAL for the treatment of Fabry disease in the US in 2010;
- MEZAVANT for the treatment of ulcerative colitis; launches will
continue in certain EU and RoW countries in 2009 and 2010;
- FIRAZYR for the symptomatic treatment of acute attacks of HAE; launches will
continue in certain European and Latin American countries during 2009 and
2010;
- DAYTRANA for the treatment of ADHD in adolescents in the US in
2010;
- EQUASYM® for the treatment of ADHD; launches will continue in
certain EU countries during 2009 and 2010; and
- VYVANSE for the treatment of ADHD, in ex-US and ex-EU regions
starting in 2010, and in the EU in 2011.
BOARD CHANGES
The Shire Board announces that Mr David Stout will be joining the
Board as a non executive director with effect from October 31, 2009. Mr Stout
brings significant pharmaceutical industry experience to the Shire Board,
having spent many years at both GSK and prior to that Schering-Plough. Most
recently, he was President of Pharmaceutical Operations at GSK. In this role
he had responsibility for GSK's pharmaceutical operations in the United
States, Europe, Japan and all other International Markets. Mr Stout was also
responsible for global manufacturing and global Biologics (vaccines) at GSK.
The Shire Board also announces that Mr David Mott will be stepping
down from the Shire Board on the expiry of his term of office on October 30,
2009.
Matt Emmens, Chairman of Shire commented;
"We are delighted to welcome David Stout to the Shire Board. He
brings with him extensive international experience in the pharmaceutical
industry, which we believe will be of great value to Shire as it continues its
growth trajectory and becomes a more global company.
We would also like to thank David Mott for his valuable
contribution to the Shire Board over the last few years."
ADDITIONAL INFORMATION
The following additional information is included in this press release:
Page
Overview of Financial Results 7
Financial Information 13
Notes to Editors 26
Safe Harbor Statement 26
Explanation of Non GAAP Measures 26
Trademarks 28
For further information please contact:
Investor Relations Cléa Rosenfeld (Rest of the World) +44 1256 894 160
Eric Rojas (North America) +1 617 551 9715
Media Jessica Mann (Rest of the World) +44 1256 894 280
Jessica Cotrone (North America) +1 617 613 4640
Matt Cabrey (North America) +1 484 595 8248
Dial in details for the live conference call for investors 14:00 GMT/10:00 ET
on October 30, 2009:
UK dial in: 0800 077 8492 or 01296 311 600
US dial in: 1 866 8048688 or 1 718 3541175
International dial +44 (0) 1296 311 600
in:
Password/Conf ID: 891 799#
Live Webcast: http://www.shire.com/shire/InvestorRelations/index.jsp?tn=2
OVERVIEW OF FINANCIAL RESULTS
1. Introduction
Summary of Q3 2009
Revenues from continuing operations for the three months to September 30, 2009
decreased by 14% to $667.0 million (2008: $778.6 million), due to the decline
in branded ADDERALL XR product sales in Q3 2009 following the launch of an
authorized generic version by Teva in April 2009. However, core product sales
increased by 20% to $531.6 million (2008: $443.8 million).
Non GAAP operating income for the three months to September 30, 2009 decreased
by 52% to $133.6 million (2008: $278.6 million). Increased revenues from core
products, combined with lower selling, general and administrative expenses
achieved through the Company's continued focus on cost management partially
offset the impact of lower revenues from ADDERALL XR and increased investment
in research and development, in part reflecting the Santaris collaboration
up-front costs and the acceleration of the velaglucerase program.
US GAAP operating income from continuing operations for the three months to
September 30, 2009 decreased by 25% to $91.8 million (2008: $122.9 million).
US GAAP operating income in Q3 2008 included an in-process R&D ("IPR&D")
charge of $120.5 million on the acquisition of Jerini in 2008. Excluding this
charge the decline in US GAAP operating income in the third quarter of 2009
principally resulted from lower ADDERALL XR revenues following genericization
in the second quarter of 2009.
Net cash provided by operating activities decreased by 52% to $134.0 million
for the three months to September 30, 2009 (2008: $279.4 million). The cash
provided by operating activities was lower in Q3 2009 than the same period in
2008 due to lower sales receipts following the genericization of ADDERALL XR
and cash inflows from forward exchange contracts in Q3 2008, which more than
offset lower payments on operating costs.
Cash, cash equivalents and restricted cash at September 30, 2009 totaled
$372.0 million (December 31, 2008: $247.4 million), an increase of $124.6
million. Cash provided by operating activities of $390.0 million in the nine
months to September 30, 2009 have been partially offset by investments in
property, plant and equipment at the HGT campus in Lexington, the acquisition
of EQUASYM from UCB S.A. and the dividend payment.
2. Product sales
For the three months to September 30, 2009 product sales decreased by 15% to
$602.5 million (2008: $712.5 million) and represented 91% of total revenues
(2008: 92%). Excluding ADDERALL XR, product sales from core products increased
by 20% to $531.6 million (2008: $443.8 million).
Product Highlights
US Average
CER US Rx Quarterly
Sales Sales Growth(2) Growth(1) Market
Product $M Growth(2) (3) (2) Share(1)
Specialty
Pharmaceuticals
VYVANSE 129.0 34% 34% 57% 13%
DAYTRANA 17.4 -4% -4% -12% 1%
EQUASYM 9.2 n/a n/a n/a(5) n/a(5)
LIALDA / MEZAVANT 65.4 62% 63% 34% 17%
PENTASA 51.3 4% 4% -3% 16%
FOSRENOL 47.7 11% 14% -3% 8%
XAGRID® 21.5 11% 18% n/a(5) n/a(5)
ADDERALL XR 70.9 -74% -74% -59% 8%
Human Genetic Therapies
ELAPRASE 90.9 16% 20% n/a(4) n/a(4)
REPLAGAL 48.3 8% 15% n/a(5) n/a(5)
FIRAZYR 1.8 - - 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 Q3 2008.
(3) CER growth, which is a Non GAAP measure, is calculated after
restating Q3 2009 results using Q3 2008 average foreign exchange rates.
(4) IMS Data not available.
(5) Not sold in the US.
Specialty Pharmaceuticals
US ADHD market share
Shire's share of the total US ADHD market for the three months to September
30, 2009 was 22%. Shire continues to have the leading portfolio of branded
products in the US ADHD market.
VYVANSE - ADHD
Product sales of VYVANSE for the three months to September 30, 2009 increased
by 34% to $129.0 million (2008: $96.0 million), with VYVANSE's average share
of the US ADHD market for Q3 2009 increasing to 13% (2008: 9%). Product sales
growth was driven by a 57% increase in US prescription demand in Q3 2009 over
the same period in 2008, as a result of increased average market share and 10%
growth in the US ADHD market. Product sales growth was less than prescription
growth due to the stocking benefits from new dosage strengths of VYVANSE in Q3
2008.
ADDERALL XR - ADHD
Product sales of ADDERALL XR for the three months to September 30, 2009 were
$70.9 million (2008: $268.7 million), a decrease of 74%, following the launch
by Teva in April 2009 of its authorized generic version of ADDERALL XR. The
launch of the authorized generic version led to a 59% decline in ADDERALL XR
US prescription demand and higher US sales deductions in Q3 2009 than the same
period last year.
Sales deductions represented 73% of branded ADDERALL XR gross sales in Q3
2009, compared to 26% in the same period in 2008 following higher Medicaid and
Managed Care rebates subsequent to generic launch. These factors more than
offset the positive impacts of price increases taken since Q3 2008, and the
inclusion in product sales of shipments of authorized generic ADDERALL XR to
Teva and Impax Laboratories, Inc. ("Impax") in Q3 2009.
US oral mesalamine market share
Shire's average market share of the US oral mesalamine market was 33% for the
three months to September 30, 2009.
LIALDA/MEZAVANT - Ulcerative colitis
Product sales of LIALDA/MEZAVANT for the three months to September 30, 2009
increased by 62% to $65.4 million (2008: $40.4 million). US prescriptions
increased by 34%, due to an increase in LIALDA's average share of the US oral
mesalamine market to 17% (2008: 13%), underlying growth in the US oral
mesalamine market and price increases.
By September 30, 2009 MEZAVANT was available in eight countries outside the
US, and further launches are planned in other countries throughout 2009 and
2010, subject to the successful conclusion of pricing and reimbursement
negotiations.
PENTASA - Ulcerative colitis
Product sales of PENTASA® for the three months to September 30, 2009 were
$51.3 million, an increase of 4% compared to the same period in 2008 (2008:
$49.2 million). Sales grew despite a 3% decrease in prescriptions primarily
due to the impact of price increases.
FOSRENOL - Hyperphosphatemia
Product sales of FOSRENOL for the three months to September 30, 2009 were up
11% to $47.7 million (2008: $43.0 million). On a CER basis sales were up 14%.
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.
In the US, FOSRENOL's average share of the phosphate binder market in Q3 2009
remained constant at 8% (2008: 8%).
Human Genetic Therapies
ELAPRASE - Hunter syndrome
Product sales for the three months to September 30, 2009 were $90.9
million, an increase of 16% (2008: $78.2 million). Expressed on a CER basis,
sales increased by 20% (ELAPRASE is primarily sold in US dollars and Euros).
The sales growth was driven by increased volumes across all regions where
ELAPRASE is sold.
REPLAGAL - Fabry disease
Product sales for the three months to September 30, 2009 were $48.3
million, an increase of 8% (2008: $44.6 million). Expressed on a CER basis
product sales increased by 15% (REPLAGAL is primarily sold in Euros and Pounds
Sterling). The product sales growth was driven by increased volumes in Europe
and Asia Pacific.
FIRAZYR - HAE
Product sales for the three months to September 30, 2009 were $1.8
million (2008: $0.2 million). With a Q3 launch in Italy, FIRAZYR is now
marketed in the five largest European countries. 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 1% to $60.3 million for the three months to
September 30, 2009 (2008: $60.8 million). The following table provides an
analysis of Shire's royalty revenue:
Royalties to Year on year
Product Shire $M change(1) CER(2)
3TC® and ZEFFIX® 42.0 -6% 0%
ADDERALL XR 2.2 n/a n/a
Other 16.1 -1% n/a
Total 60.3 -1% 0%
(1) Compared with Q3 2008
(2) CER growth, which is a Non GAAP measure, is calculated after
restating Q3 2009 results using Q3 2008 average foreign exchange rates.
Royalties from Teva's sales of authorized generic ADDERALL XR for
the three months to September 30, 2009 were $2.2 million (2008: $nil). Receipt
of this royalty began with Teva's sales of an authorized generic version of
ADDERALL XR in April 2009 and ceased in September 2009. From Q4 2009, Shire
will receive royalties on Impax's sales of its authorized generic version of
ADDERALL XR.
4. Financial details
Cost of product sales
2009 % of 2008 % of
product product
$M sales $M sales
Cost of product sales 104.9 17% 84.2 12%
(US GAAP)
Fair value adjustment for
acquired inventories (0.6) -
Accelerated depreciation on
transfer of manufacturing
from Owings Mills (4.5) -
Depreciation (0.8) (3.2)
Cost of product sales 99.0 16% 81.0 11%
(Non GAAP)
Non GAAP cost of product sales as a percentage of product sales increased by 5
percentage points compared to 2008. This increase primarily results from
changes to the product mix following the launch by Teva of an authorized
generic version of ADDERALL XR in April 2009. Higher sales deductions on
Shire's sales of branded ADDERALL XR, together with lower margin sales of the
authorized generic version of ADDERALL XR to Teva and Impax have both
depressed gross margin for that product.
Research and development ("R&D")
2009 % of 2008 % of
product product
$M sales $M sales
R&D (US GAAP) 147.8 25% 120.2 17%
Depreciation (3.6) (3.4)
R&D (Non GAAP) 144.2 24% 116.8 16%
Non GAAP R&D increased 23% to $144.2 million (2008: $116.8 million) as the
Company has continued to increase investment in R&D programs, including an
up-front payment of $6.5 million to Santaris for technology access and R&D
funding in August 2009. Non GAAP R&D as a percentage of product sales
increased due to lower product sales in Q3 2009 following the genericization
of ADDERALL XR.
Selling, general and administrative ("SG&A")
2009 % of 2008 % of
product product
$M sales $M sales
SG&A (US GAAP) 320.6 53% 327.3 46%
Intangible asset (34.8) (29.7)
amortization
New holding company costs - (2.0)
Depreciation (18.5) (12.0)
SG&A (Non GAAP) 267.3 44% 283.6 40%
Non GAAP SG&A declined in absolute terms by 6% due to the Company's continued
focus on cost management. Non GAAP SG&A increased as a percentage of product
sales due to lower product sales following the genericization of ADDERALL XR.
Gain on sale of product rights
For the three months to September 30, 2009 Shire recorded gains of
$6.3 million (2008: $4.0 million) from the sale of non-core products to
Laboratorios Almirall S.A. in 2007. These gains had been deferred since 2007
pending transfer of the relevant consents.
Reorganization costs
For the three months to September 30, 2009 Shire recorded
reorganization costs of $2.0 million (2008: $nil) relating to the transfer of
manufacturing from its Owings Mills facility.
Integration and acquisition costs
For the three months to September 30, 2009 Shire recorded integration and
acquisition costs of $6.2 million (2008: $7.5 million), primarily relating to
the integration of Jerini.
Interest income
For the three months to September 30, 2009 Shire received interest income of
$0.2 million (2008: $3.8 million), primarily earned on cash and cash
equivalents. Interest income for the three months to September 30, 2009 is
lower than the same period in 2008 due to significantly lower interest rates
in 2009 compared to 2008, and lower average cash and cash equivalent balances.
Interest expense
2009 2008
$M $M
Interest expense (US GAAP) 9.4 92.9
Additional interest on settlement of appraisal - (73.0)
rights litigation
Interest expense (Non GAAP) 9.4 19.9
For the three months to September 30, 2009 the Company incurred interest
expense of $9.4 million (2008: $92.9 million). Interest expense in 2008 was
higher than 2009 due to accrued interest expense of $77.0 million recorded in
respect of the Transkaryotic Therapies, Inc. ("TKT") appraisal rights
litigation; of the $77.0 million, $73.0 million was additional interest
arising from the settlement of the litigation in November 2008.
Other income/(expense), net
2009 2008
$M $M
Other income/(expense), net (US GAAP) 7.0 (52.0)
Other than temporary impairment of available - 54.1
for sale securities
Other income, net (Non GAAP) 7.0 2.1
Non GAAP other income, net in 2009 was higher than the same period in 2008 due
to a gain recognized following the substantial modification of a property
lease.
Taxation
The effective rate of tax for the three months to September 30, 2009 was 34%
(2008: -103%), and the effective tax rate on Non GAAP income is 33% (2008:
19%).
The Non GAAP effective tax rate was higher in Q3 2009 compared to the same
period in 2008 principally as a result of the recognition of valuation
allowances against certain EU deferred tax assets and increases to accrued
interest on tax contingencies in the third quarter of 2009. The adverse rate
impact of these items was partially offset by foreign exchange gains on the
retranslation of certain deferred tax assets, together with the benefit of tax
return to provision adjustments following the submission of various tax
returns in Q3 2009.
Equity in earnings of equity method investees
Equity in earnings of equity method investees of $0.6 million were recorded
for the three months to September 30, 2009 (2008: $1.6 million). This
comprised earnings of $1.4 million from the 50% share of the anti-viral
commercialization partnership with GSK in Canada (2008: $1.6 million earnings)
and losses of $0.8 million, being the Company's share of losses in the
GeneChem, AgeChem and EGS Funds (2008: $nil).
FINANCIAL INFORMATION
TABLE OF CONTENTS
Page
Unaudited US GAAP Consolidated Balance Sheets 14
Unaudited US GAAP Consolidated Statements of Operations 15
Unaudited US GAAP Consolidated Statements of Cash Flows 17
Selected Notes to the Unaudited US GAAP Financial Statements
(1) Earnings per share 19
(2) Analysis of revenues 20
Non GAAP reconciliation 22
Unaudited US GAAP results for the three months and nine months to September
30, 2009 Consolidated Balance Sheets
September 30, December 31,
2009 2008
$M $M
ASSETS
Current assets:
Cash and cash equivalents 332.7 218.2
Restricted cash 39.3 29.2
Accounts receivable, net 539.2 395.0
Inventories 173.3 154.5
Assets held for sale 1.7 16.6
Deferred tax asset 99.8 89.5
Prepaid expenses and other
current assets 149.2 141.4
Total current assets 1,335.2 1,044.4
Non-current assets:
Investments 95.2 42.9
Property, plant and equipment, net 630.0 534.2
Goodwill 385.9 350.8
Other intangible assets, net 1,832.9 1,824.9
Deferred tax asset 136.7 118.1
Other non-current assets 11.6 18.4
Total assets 4,427.5 3,933.7
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued
expenses 938.9 708.6
Deferred tax liability 10.9 10.9
Other current liabilities 124.6 104.3
Total current liabilities 1,074.4 823.8
Non-current liabilities:
Convertible bonds 1,100.0 1,100.0
Other long-term debt 43.7 43.1
Deferred tax liability 315.5 377.0
Other non-current liabilities 219.5 291.3
Total liabilities 2,753.1 2,635.2
Shareholders' equity:
Common stock of 5p par value; 1,000
million shares authorized; and 561.0 million
shares issued and outstanding (2008: 1,000
million shares authorized; and 560.2 million
shares issued and outstanding) 55.6 55.5
Additional paid-in capital 2,645.0 2,594.6
Treasury stock: 19.2 million shares
(2008: 20.7 million) (375.5) (397.2)
Accumulated other comprehensive income 146.6 97.0
Accumulated deficit (797.7) (1,051.7)
Total Shire plc shareholders' equity 1,674.0 1,298.2
Noncontrolling interest in subsidiaries 0.4 0.3
Total equity 1,674.4 1,298.5
Total liabilities and equity 4,427.5 3,933.7
Unaudited US GAAP results for the three months and nine months to September
30, 2009 Consolidated Statements of Operations
3 months to 3 months to 9 months to 9 months to
September 30, September 30, September 30, September 30,
2009 2008 2009 2008
$M $M $M $M
Revenues:
Product sales 602.5 712.5 1,916.8 2,049.9
Royalties 60.3 60.8 177.8 190.7
Other revenues 4.2 5.3 19.8 15.8
Total revenues 667.0 778.6 2,114.4 2,256.4
Costs and expenses:
Cost of product sales(1) 104.9 84.2 284.9 317.4
Research and development(2) 147.8 120.2 492.5 368.4
Selling, general and
administrative(1) (2) 320.6 327.3 973.8 1,109.7
Gain on sale of product
rights (6.3) (4.0) (6.3) (20.7)
In-process R&D charge - 120.5 - 255.5
Reorganization costs 2.0 - 7.1 -
Integration and acquisition
costs 6.2 7.5 10.0 7.5
Total operating expenses 575.2 655.7 1,762.0 2,037.8
Operating income 91.8 122.9 352.4 218.6
Interest income 0.2 3.8 1.5 23.0
Interest expense (9.4) (92.9) (30.6) (127.0)
Other income/(expenses), net 7.0 (52.0) 61.9 (38.6)
Total other (expense)/income,
net (2.2) (141.1) 32.8 (142.6)
Income/(loss) from continuing
operations before income
taxes
and equity in earnings of
equity
method investees 89.6 (18.2) 385.2 76.0
Income taxes (30.6) (18.7) (56.7) (63.0)
Equity in earnings of equity
method investees, net of
taxes 0.6 1.6 1.0 1.3
Income/(loss) from continuing
operations, net of tax 59.6 (35.3) 329.5 14.3
Loss from discontinued
operations
(net of income tax expense of
$nil
in all periods) - (0.9) (12.4) (0.9)
Net income/(loss) 59.6 (36.2) 317.1 13.4
Add: Net loss attributable to
noncontrolling interest in
subsidiaries - 1.3 0.2 1.3
Net income/(loss)
attributable
to Shire plc 59.6 (34.9) 317.3 14.7
(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, 2009 (2008: $0.4 million) and $1.3 million for the nine months
to September 30, 2009 (2008: $1.3 million). Selling, general and
administrative costs include amortization and impairment charges of intangible
assets relating to intellectual property rights acquired of $34.8 million for
the three months to September 30, 2009 (2008: $29.7 million) and $101.6
million for the nine months to September 30, 2009 (2008: $181.9 million).
(2) Promotional costs totaling $6.9 million and $26.0 million have been
reclassified from Research and development to Selling, general and
administrative costs for the three and nine months to September 30, 2008
respectively.
Unaudited US GAAP results for the three months and nine months to September
30, 2009 Consolidated Statements of Operations (continued)
3 months to 3 months to 9 months to 9 months to
September 30, September 30, September 30, September 30,
2009 2008 2009 2008
Earnings/(loss) per ordinary
share - basic
Earnings/(loss) from
continuing
operations 11.0c (6.3c) 61.1c 2.9c
Loss from discontinued
operations - (0.2c) (2.3c) (0.2c)
Earnings/(loss) per ordinary
share - basic 11.0c (6.5c) 58.8c 2.7c
Earnings/(loss) per ADS -
basic 33.0c (19.5c) 176.4c 8.1c
Earnings/(loss) per ordinary
share - diluted
Earnings/(loss) from
continuing
operations 10.9c (6.3c) 60.3c 2.9c
Loss from discontinued
operations - (0.2c) (2.3c) (0.2c)
Earnings/(loss) per ordinary
share - diluted 10.9c (6.5c) 58.0c 2.7c
Earnings/(loss) per ADS -
diluted 32.7c (19.5c) 174.0c 8.1c
Weighted average number of
shares (millions):
Basic 540.6 540.3 540.0 542.6
Diluted 548.3 540.3 547.1 545.3
Unaudited US GAAP results for the three months and nine months to September
30, 2009 Consolidated Statements of Cash Flows
3 months to 3 months to 9 months to 9 months to
September 30, September 30, September 30, September 30,
2009 2008 2009 2008
$M $M $M $M
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income/(loss) 59.6 (36.2) 317.1 13.4
Adjustments to reconcile net
income/(loss) to net cash provided
by operating activities:
Loss from discontinued
operations - 0.9 12.4 0.9
Depreciation and
amortization 59.7 49.1 177.4 145.4
Share based compensation 16.9 16.2 50.1 52.0
In-process R&D charge - 120.5 - 120.5
Impairment of intangible
assets - - - 90.4
Impairment of available for
sale
securities 0.8 54.1 0.8 54.1
Loss/(gain) on sale of
non-current
investments - 0.4 (55.2) (9.4)
Gain on sale of product
rights (6.3) (4.0) (6.3) (20.7)
Other 4.4 2.0 10.7 6.4
Movement in deferred taxes (41.9) (3.7) (87.5) 13.9
Equity in earnings of equity method
investees (0.6) (1.6) (1.0) (1.3)
Changes in operating assets and
liabilities:
Increase in accounts
receivable (113.4) (12.3) (156.4) (40.7)
Increase in sales deduction
accrual 94.7 1.4 212.2 36.9
(Increase)/decrease in
inventory (11.3) 29.2 (24.2) 39.6
Decrease/(increase) in
prepayments and other
current
assets 25.7 (24.5) (8.1) (0.2)
Decrease/(increase) in
other
assets 0.9 (51.1) 5.3 (53.5)
Increase/(decrease) in
accounts
and notes payable and other
liabilities 44.8 131.9 (56.3) 70.7
Returns on investment from joint
venture - 7.1 4.9 7.1
Cash flows used in discontinued
operations - - (5.9) -
Net cash provided by operating
activities(A) 134.0 279.4 390.0 525.5
Unaudited US GAAP results for the three months and nine months to September
30, 2009 Consolidated Statements of Cash Flows (continued)
3 months to 3 months to 9 months to 9 months to
September 30, September 30, September 30, September 30,
2009 2008 2009 2008
$M $M $M $M
CASH FLOWS FROM INVESTING
ACTIVITIES:
Movements in restricted cash (3.4) 2.5 (10.1) 7.7
Purchases of subsidiary
undertakings
and businesses, net of cash
acquired - (462.5) (75.5) (462.5)
Purchases of non-current
investments - (0.2) - (1.3)
Purchases of property, plant
and
equipment (67.5) (77.1) (169.4) (166.5)
Purchases of intangible
assets (1.0) (25.0) (7.0) (25.0)
Proceeds from disposal of
non-
current investments - - 19.2 10.3
Proceeds from disposal of
property,
plant and equipment - 1.0 0.5 1.8
Proceeds/deposits received on
sales
of product rights - - - 5.0
Proceeds from disposal of
subsidiary
undertakings - - 6.7 -
Returns from equity
investments - - 0.2 0.4
Net cash used in investing
activities(B) (71.9) (561.3) (235.4) (630.1)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Payment under building
financing
obligation (0.9) (0.9) (3.9) (1.3)
Costs of issue of common
stock - (0.1) - (2.9)
Proceeds from exercise of
options 1.8 0.7 2.8 1.7
Payment of dividend - - (43.0) (36.4)
Payments to acquire shares by
Employee Share Ownership
Trust
("ESOT") - (36.2) (1.0) (140.2)
Net cash provided by/(used
in)
financing activities(C) 0.9 (36.5) (45.1) (179.1)
Effect of foreign exchange
rate
changes on cash and cash
equivalents (D) 6.4 (9.5) 5.0 (5.5)
Net increase/(decrease) in
cash and
cash equivalents(A) +(B) +(C)
+(D) 69.4 (327.9) 114.5 (289.2)
Cash and cash equivalents at
beginning of period 263.3 801.2 218.2 762.5
Cash and cash equivalents at
end of period 332.7 473.3 332.7 473.3
Unaudited US GAAP results for the three months and nine months to September
30, 2009
Selected Notes to the Financial Statements
(1) Earnings per share
9 months 9 months
to to
3 months to 3 months to September September
September 30, September 30, 30, 30,
2009 2008 2009 2008
$M $M $M $M
Income/(loss) from continuing
operations 59.6 (35.3) 329.5 14.3
Loss from discontinued
operations - (0.9) (12.4) (0.9)
Noncontrolling interest in
subsidiaries - 1.3 0.2 1.3
Numerator for basic and
diluted
EPS(1) 59.6 (34.9) 317.3 14.7
Weighted average number of
shares:
Millions Millions Millions Millions
Basic(2) 540.6 540.3 540.0 542.6
Effect of dilutive shares:
Stock options(3) 7.7 - 7.1 2.7
Diluted 548.3 540.3 547.1 545.3
(1) For the three and nine month periods ended September 30, 2009 and 2008
interest on the convertible bonds has not been added back as the effect would
be anti-dilutive for all periods presented.
(2) Excludes shares purchased by the ESOT and presented by the Company as
treasury stock.
(3) Calculated using the treasury stock method.
The share equivalents not included in the calculation of the diluted weighted
average number of shares are shown below:
3 months to 3 months to 9 months to 9 months to
September 30, September 30, September 30, September 30,
2009 2008 2009 2008
Millions(1)(2) Millions(3) Millions(1)(2) Millions(1)(2)
Stock options in the money - 1.2 - -
Stock options out of the
money 16.8 17.0 18.0 17.0
Convertible bonds 2.75% due
2014 33.2 32.7 33.1 32.7
(1) For the three and nine month periods ended September 30, 2009
and the nine month period ended September 30, 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.
(2) For the three and nine month periods ended September 30, 2009
and the nine month period ended September 30, 2008 the ordinary shares
underlying the convertible bonds have not been included in the calculation of
the diluted weighted average number of shares, because the effect of their
inclusion would be anti-dilutive.
(3) For the three month period ended September 30, 2008 no share
options or ordinary shares underlying the convertible bonds have been included
in the calculation of the diluted weighted average number of shares because
the Company made a net loss during the calculation period and the inclusion of
these items would be anti-dilutive.
Unaudited US GAAP results for the three months to September 30, 2009
Selected Notes to the Financial Statements
(2) Analysis of revenues
3 months to September 30, 2009 2008 2009 2009
% % of total
$M $M change revenue
Net product sales:
Specialty Pharmaceuticals
("Specialty")
ADHD
ADDERALL XR 70.9 268.7 -74% 11%
VYVANSE 129.0 96.0 34% 19%
DAYTRANA 17.4 18.1 -4% 3%
EQUASYM 9.2 - n/a 1%
226.5 382.8 -41% 34%
GI
PENTASA 51.3 49.2 4% 8%
LIALDA / MEZAVANT 65.4 40.4 62% 10%
116.7 89.6 30% 18%
General products
FOSRENOL 47.7 43.0 11% 7%
CALCICHEW® 12.4 13.3 -7% 2%
CARBATROL® 20.8 21.6 -4% 3%
REMINYL®/REMINYL XLtm 10.5 9.6 9% 2%
XAGRID 21.5 19.4 11% 3%
112.9 106.9 6% 17%
Other product sales 5.4 10.2 -47% 1%
Total Specialty product
sales 461.5 589.5 -22% 70%
Human Genetic Therapies
("HGT")
ELAPRASE 90.9 78.2 16% 14%
REPLAGAL 48.3 44.6 8% 7%
FIRAZYR 1.8 0.2 n/a 0%
Total HGT product sales 141.0 123.0 15% 21%
Total product sales 602.5 712.5 -15% 91%
Royalties:
3TC and ZEFFIX 42.0 44.5 -6% 6%
ADDERALL XR 2.2 - n/a 0%
Other 16.1 16.3 -1% 2%
Total royalties 60.3 60.8 -1% 8%
Other revenues 4.2 5.3 -21% 1%
Total Revenues 667.0 778.6 -14% 100%
Unaudited US GAAP results for the nine months to September 30, 2009
Selected Notes to the Financial Statements
(2) Analysis of revenues
9 months to September 30, 2009 2008 2009 2009
% % of total
$M $M change revenue
Net product sales:
Specialty Pharmaceuticals
("Specialty")
ADHD
ADDERALL XR 434.2 826.6 -47% 21%
VYVANSE 359.7 215.6 67% 17%
DAYTRANA 52.2 61.0 -14% 2%
EQUASYM 14.1 - n/a 1%
860.2 1,103.2 -22% 41%
GI
PENTASA 156.5 138.2 13% 7%
LIALDA / MEZAVANT 169.4 99.6 70% 8%
325.9 237.8 37% 15%
General products
FOSRENOL 137.2 121.6 13% 6%
CALCICHEW 32.8 40.8 -20% 2%
CARBATROL 59.7 55.7 7% 3%
REMINYL/REMINYL XL 28.8 26.6 8% 1%
XAGRID 62.3 58.7 6% 3%
320.8 303.4 6% 15%
Other product sales 14.3 43.0 -67% 1%
Total Specialty product
sales 1,521.2 1,687.4 -10% 72%
Human Genetic Therapies
("HGT")
ELAPRASE 258.9 230.5 12% 12%
REPLAGAL 132.9 131.8 1% 6%
FIRAZYR 3.8 0.2 n/a 1%
Total HGT product sales 395.6 362.5 9% 19%
Total product sales 1,916.8 2,049.9 -6% 91%
Royalties:
3TC and ZEFFIX 120.3 138.6 -13% 5%
ADDERALL XR 15.8 - n/a 1%
Other 41.7 52.1 -20% 2%
Total royalties 177.8 190.7 -7% 8%
Other revenues 19.8 15.8 25% 1%
Total Revenues 2,114.4 2,256.4 -6% 100%
Unaudited results for the three months to September 30, 2009
Non GAAP reconciliation
US GAAP Adjustments Non GAAP
Acquisitions Divestments,
Amortization & reorganizations
September & asset integration & discontinued Reclassify September
3 months to, 30, 2009 impairments activities operations depreciation 30, 2009
(a) (b) (c) (d)
$M $M $M $M $M $M
Total revenues 667.0 - - - - 667.0
Costs and expenses:
Cost of product sales 104.9 - (0.6) (4.5) (0.8) 99.0
Research and
development 147.8 - - - (3.6) 144.2
Selling, general and
administrative 320.6 (34.8) - - (18.5) 267.3
Gain on sale of product
rights (6.3) - - 6.3 - -
Reorganization costs 2.0 - - (2.0) - -
Integration and
acquisition
costs 6.2 - (6.2) - - -
Depreciation - - - - 22.9 22.9
Total operating
expenses 575.2 (34.8) (6.8) (0.2) - 533.4
Operating income 91.8 34.8 6.8 0.2 - 133.6
Interest income 0.2 - - - - 0.2
Interest expense (9.4) - - - - (9.4)
Other income, net 7.0 - - - - 7.0
Total other expense,
net (2.2) - - - - (2.2)
Income from continuing
operations before
income
taxes and equity in
earnings
of equity method
investees 89.6 34.8 6.8 0.2 - 131.4
Income taxes (30.6) (9.9) (1.8) (0.5) - (42.8)
Equity in earnings of
equity
method investees, net
of tax 0.6 - - - - 0.6
Net income attributable
to
Shire plc 59.6 24.9 5.0 (0.3) - 89.2
Numerator for diluted
EPS 59.6 24.9 5.0 (0.3) - 89.2
Weighted average number
of
shares (millions) -
diluted 548.3 - - - - 548.3
Diluted earnings per
ADS 32.7c 13.5c 2.7c - - 48.9c
The following items are included in Adjustments:
(a) Amortization and asset impairments: Amortization of intangible assets
relating to intellectual property rights acquired ($34.8 million) and tax
effect of adjustment;
(b) Acquisitions and integration activities Inventory fair value adjustment
related to the acquisition of Jerini ($0.6 million); costs associated with the
integration and acquisition of Jerini and EQUASYM from UCB ($6.2 million) and
tax effect of adjustments;
(c) Divestments, reorganizations and discontinued operations: Accelerated
depreciation ($4.5 million) and reorganization costs ($2.0 million) for the
transition of manufacturing from Owings Mills, gains on the disposal of
non-core product rights ($6.3 million) and tax effect of adjustments; and
(d) Depreciation: Depreciation of $22.9 million included in Cost of product
sales, R&D costs and SG&A costs for US GAAP separately disclosed for the
presentation of Non GAAP earnings.
Unaudited results for the three months to September 30, 2008
Non GAAP reconciliation
US GAAP Adjustments Non GAAP
Acquisitions Divestments,
Amortization & reorganizations
September & asset integration & discontinued Reclassify September
3 months to, 30, 2008 impairments activities operations depreciation 30, 2008
(a) (b) (c) (d)
$M $M $M $M $M $M
Total revenues 778.6 - - - - 778.6
Costs and expenses:
Cost of product sales 84.2 - - - (3.2) 81.0
Research and
development(1) 120.2 - - - (3.4) 116.8
Selling, general and
administrative(1) 327.3 (29.7) - (2.0) (12.0) 283.6
In-process R&D charge 120.5 - (120.5) - - -
Integration and
acquisition costs 7.5 - (7.5) - - -
Gain on sale of product
rights (4.0) - - 4.0 - -
Depreciation - - - - 18.6 18.6
Total operating expenses 655.7 (29.7) (128.0) 2.0 - 500.0
Operating income 122.9 29.7 128.0 (2.0) - 278.6
Interest income 3.8 - - - - 3.8
Interest expense (92.9) - 73.0 - - (19.9)
Other (expense)/income,
net (52.0) 54.1 - - - 2.1
Total other expense, net (141.1) 54.1 73.0 - - (14.0)
(Loss)/income from
continuing
operations before income
taxes
and equity in earnings
of equity
method investees (18.2) 83.8 201.0 (2.0) - 264.6
Income taxes (18.7) (9.7) (23.3) 0.2 - (51.5)
Equity in earnings of
equity
method investees, net of
tax 1.6 - - - - 1.6
(Loss)/income from
continuing
operations, net of tax (35.3) 74.1 177.7 (1.8) - 214.7
Loss from discontinued
operations (0.9) - - 0.9 - -
Net (loss)/income (36.2) 74.1 177.7 (0.9) - 214.7
Add: Net loss
attributable to
noncontrolling interest
in
subsidiaries 1.3 - - - - 1.3
Net (loss)/income
attributable
to Shire plc (34.9) 74.1 177.7 (0.9) - 216.0
Impact of convertible
debt, net
of tax (2) - 8.6 - - - 8.6
Numerator for diluted
EPS (34.9) 82.7 177.7 (0.9) - 224.6
Weighted average number
of
shares (millions) -
diluted(2) 540.3 33.9 - - - 574.2
Diluted earnings per ADS (19.5c) 44.7c 92.7c (0.6c) - 117.3c
(1) $6.9m of promotional costs have been reclassified from Research and
development to Selling, general and administrative costs for the three months
to September 30, 2008.
(2) After the above adjustments, the Company made Non GAAP net income during
the calculation period. As a result (i) the after tax impact of the
convertible bonds has been added back to the numerator and (ii) in the money
share options and convertible bonds are now included in the calculation of the
diluted weighted average number of shares as they have a dilutive effect.
The following items are included in Adjustments:
(a) Amortization and asset impairments: Amortization of intangible assets
relating to intellectual property rights acquired ($29.7 million), other than
temporary impairment of available for sale securities ($54.1 million) and tax
effect of adjustments;
(b) Acquisitions & integration activities: In-process R&D in respect of the
acquisition of Jerini ($120.5 million), Integration and transaction related
costs in respect of the acquisition of Jerini ($7.5 million), additional
interest expense incurred on the settlement of the TKT appraisal rights
litigation ($73.0 million) and tax effect of adjustments;
(c) Divestments, reorganizations and discontinued operations: Costs associated
with the introduction of a new holding company ($2.0 million), gains on the
disposal of non-core product rights ($4.0 million), discontinued operations in
respect of non-core Jerini operations ($0.9 million) and tax effect of
adjustments; and
(d) Depreciation: Depreciation of $18.6 million included in Cost of product
sales, R&D costs and SG&A costs for US GAAP separately disclosed for the
presentation of Non GAAP earnings.
Unaudited results for the nine months to September 30, 2009
Non GAAP reconciliation
US GAAP Adjustments Non GAAP
Acquisitions Divestments,
Amortization & reorganizations
September & asset integration & discontinued Reclassify September
9 months to, 30, 2009 impairments activities operations depreciation 30, 2009
(a) (b) (c) (d)
$M $M $M $M $M $M
Total revenues 2,114.4 - - - - 2,114.4
Costs and expenses:
Cost of product sales 284.9 - (1.9) (7.5) (9.4) 266.1
Research and
development 492.5 - (36.9) (65.0) (11.3) 379.3
Selling, general and
administrative 973.8 (101.6) - - (49.3) 822.9
Gain on sale of product
rights (6.3) - - 6.3 - -
Reorganization costs 7.1 - - (7.1) - -
Integration &
acquisition
costs 10.0 - (10.0) - - -
Depreciation - - - - 70.0 70.0
Total operating
expenses 1,762.0 (101.6) (48.8) (73.3) - 1,538.3
Operating income 352.4 101.6 48.8 73.3 - 576.1
Interest income 1.5 - - - - 1.5
Interest expense (30.6) - - - - (30.6)
Other income, net 61.9 - - (55.2) - 6.7
Total other income/
(expense), net 32.8 - - (55.2) - (22.4)
Income from continuing
operations before
income
taxes and equity in
earnings
of equity method
investees 385.2 101.6 48.8 18.1 - 553.7
Income taxes (56.7) (29.0) (16.2) (17.8) - (119.7)
Equity in earnings of
equity
method investees, net
of tax 1.0 - - - - 1.0
Income from continuing
operations, net of tax 329.5 72.6 32.6 0.3 - 435.0
Loss from discontinued
operations (12.4) - - 12.4 - -
Net income 317.1 72.6 32.6 12.7 - 435.0
Add: Net loss
attributable
to noncontrolling
interest in
subsidiaries 0.2 - - - - 0.2
Net income attributable
to
Shire plc 317.3 72.6 32.6 12.7 - 435.2
Impact of convertible
debt,
net of tax (1) - 25.1 - - - 25.1
Numerator for diluted
EPS 317.3 97.7 32.6 12.7 - 460.3
Weighted average number
of shares (millions) -
diluted(1) 547.1 33.1 - - - 580.2
Diluted earnings per
ADS 174.0c 40.5c 16.8c 6.6c - 237.9c
(1) The impact of convertible debt, net of tax has a dilutive effect on a Non
GAAP basis.
The following items are included in Adjustments:
(a) Amortization and asset impairments: Amortization of intangible assets
relating to intellectual property rights acquired ($101.6 million) and tax
effect of adjustment;
(b) Acquisitions and Integration activities Inventory fair value adjustment
related to the acquisition of Jerini ($1.9 million), payment on amendment of
INTUNIV in-licence agreement ($36.9 million), costs associated with the
integration and acquisition of Jerini and EQUASYM from UCB ($10.0 million) and
tax effect of adjustments;
(c) Divestments, reorganizations and discontinued operations: Accelerated
depreciation ($7.5 million) and reorganization costs ($7.1 million) for the
transition of manufacturing from Owings Mills, costs associated with agreement
to terminate Women's Health products with Duramed ($65.0 million), gain on the
disposal of non-core product rights ($6.3 million), gain on disposal of the
investment in Virochem ($55.2 million), discontinued operations in respect of
non-core Jerini operations ($12.4 million) and tax effect of adjustments; and
(d) Depreciation: Depreciation of $70.0 million included in Cost of product
sales, R&D costs and SG&A costs for US GAAP separately disclosed for the
presentation of Non GAAP earnings.
Unaudited results for the nine months to September 30, 2008
Non GAAP reconciliation
US GAAP Adjustments Non GAAP
Divestments,
Acquisitions reorganizations
Amortization & &
September & asset integration discontinued Reclassify September
9 months to, 30, 2008 impairments activities operations depreciation 30, 2008
(a) (b) (c) (d)
$M $M $M $M $M $M
Total revenues 2,256.4 - - - - 2,256.4
Costs and expenses:
Cost of product sales 317.4 - - (53.4) (8.8) 255.2
Research and
development(1) 368.4 - - (6.5) (9.4) 352.5
Selling, general and
administrative(1) 1,109.7 (181.9) - (14.2) (34.0) 879.6
Integration and
acquisition costs 7.5 - (7.5) - - -
Gain on sale of product
rights (20.7) - - 20.7 - -
In-process R&D charge 255.5 - (255.5) - - -
Depreciation - - - - 52.2 52.2
Total operating expenses 2,037.8 (181.9) (263.0) (53.4) - 1,539.5
Operating income 218.6 181.9 263.0 53.4 - 716.9
Interest income 23.0 - - - - 23.0
Interest expense (127.0) - 73.0 - - (54.0)
Other (expense)/income,
net (38.6) 54.1 - (9.4) - 6.1
Total other expense, net (142.6) 54.1 73.0 (9.4) - (24.9)
Income from continuing
operations
before income taxes and
equity in
earnings of equity
method investees 76.0 236.0 336.0 44.0 - 692.0
Income taxes (63.0) (33.7) (48.0) (6.2) - (150.9)
Equity in earnings of
equity method
investees, net of tax 1.3 - - - - 1.3
Income from continuing
operations,
net of tax 14.3 202.3 288.0 37.8 - 542.4
Loss from discontinued
operations (0.9) - - 0.9 - -
Net income 13.4 202.3 288.0 38.7 - 542.4
Add: Net loss
attributable to
noncontrolling interest
in
subsidiaries 1.3 - - - - 1.3
Net income attributable
to
Shire plc 14.7 202.3 288.0 38.7 - 543.7
Impact of convertible
debt, net
of tax (2) - 6.2 - - - 6.2
Numerator for diluted
EPS 14.7 208.5 288.0 38.7 - 549.9
Weighted average number
of
shares (millions) -
diluted(2) 545.3 32.7 - - - 578.0
Diluted earnings per ADS 8.1c 107.7c 149.4c 20.1c - 285.3c
(1) Promotional costs totaling $26.0 million have been reclassified from
Research and development to Selling, general and administrative costs for the
nine months to September 30, 2008.
(2) Under US GAAP the convertible bonds were not included in the calculation
of the diluted weighted average number of shares nor was the after tax income
statement effect of the bonds added to the numerator as the impact was
anti-dilutive. On a Non GAAP basis the after tax impact of the convertible
bond has been added to the numerator and the number of shares underlying the
convertible bond are now included in the calculation of the diluted weighted
average number of shares as they have a dilutive effect.
The following items are included in Adjustments:
(a) Amortization and asset impairments: Amortization of intangible assets
relating to intellectual property rights acquired ($91.5 million), impairment
charge in respect of DYNEPO intangible asset ($90.4 million), other than
temporary impairment of available for sale securities ($54.1 million), and tax
effect of adjustments;
(b) Acquisitions & integration activities: In-process R&D in respect of
METAZYM acquired from Zymenex A/S ($135.0 million), In-process R&D in respect
of the acquisition of Jerini ($120.5 million), integration and transaction
related costs in respect of the acquisition of Jerini ($7.5 million),
additional interest expense incurred on settlement of the TKT appraisal rights
litigation ($73.0 million), and tax effect of adjustments;
(c) Divestments, reorganizations and discontinued operations: Costs associated
with inventory write down and other exit costs in respect of DYNEPO ($53.4
million), R&D commitment in respect of DYNEPO ($6.5 million), costs associated
with the introduction of a new holding company ($14.2 million), gains on the
disposal of non-core assets ($20.7 million), gain on disposal of minority
equity investment ($9.4 million), discontinued operations in respect of
non-core Jerini operations ($0.9 million) and tax effect of adjustments; and
(d) Depreciation: Depreciation of $52.2 million included in Cost of product
sales, R&D costs and SG&A costs for US GAAP separately disclosed for the
presentation of Non GAAP earnings.
Notes to Editors
SHIRE PLC
Shire's strategic goal is to become the leading specialty biopharmaceutical
company that focuses on meeting the needs of the specialist physician. Shire
focuses its business on attention deficit and hyperactivity disorder, human
genetic therapies and gastrointestinal diseases as well as opportunities in
other therapeutic areas to the extent they arise through acquisitions. Shire's
in-licensing, merger and acquisition efforts are focused on products in
specialist markets with strong intellectual property protection and global
rights. Shire believes that a carefully selected and balanced portfolio of
products with strategically aligned and relatively small-scale sales forces
will deliver strong results.
For further information on Shire, please visit the Company's website:
www.shire.com
THE "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995
Statements included herein that are not historical facts are forward-looking
statements. Such forward-looking statements involve a number of risks and
uncertainties and are subject to change at any time. In the event such risks
or uncertainties materialize, the Company's results could be materially
adversely affected. The risks and uncertainties include, but are not limited
to, risks associated with: the inherent uncertainty of research, development,
approval, reimbursement, manufacturing and commercialization of the Company's
Specialty Pharmaceutical and Human Genetic Therapies products, as well as the
ability to secure and integrate new products for commercialization and/or
development; government regulation of the Company's products; the Company's
ability to manufacture its products in sufficient quantities to meet demand;
the impact of competitive therapies on the Company's products; the Company's
ability to register, maintain and enforce patents and other intellectual
property rights relating to its products; the Company's ability to obtain and
maintain government and other third-party reimbursement for its products; and
other risks and uncertainties detailed from time to time in the Company's
filings with the Securities and Exchange Commission.
Non GAAP Measures
This press release contains financial measures not prepared in accordance with
US GAAP. These measures are referred to as "Non GAAP" measures and include:
Non GAAP operating income; Non GAAP net income; Non GAAP diluted earnings per
ADS; effective tax rate on Non GAAP income from continuing operations before
income taxes and earnings of equity method investees ("Effective tax rate on
Non GAAP income"); Non GAAP Cost of product sales; Non GAAP Research and
development; Non GAAP Selling, general and administrative; Non GAAP operating
expenses; Non GAAP interest expense; and Non GAAP other income. These Non GAAP
measures exclude the effect of certain cash and non-cash items, both recurring
and non-recurring, that Shire's management believes are not related to the
core performance of Shire's business. In the case of product sales, growth at
constant exchange rates is calculated after restating current period product
sales using the comparative periods' average foreign exchange rates.
These Non GAAP financial measures are used by Shire's management to make
operating decisions because they facilitate internal comparisons of the
Company's performance to historical results and to competitors' results. These
measures are also considered by Shire's Remuneration Committee in assessing
the performance and compensation of employees, including the Company's
executive directors.
The Non GAAP measures are presented in this press release as the Company's
management believe that they will provide investors with a means of
evaluating, and an understanding of how Shire's management evaluates, the
Company's performance and results on a comparable basis that is not otherwise
apparent on a US GAAP basis, since many one-time, infrequent or non-cash items
that the Company's management believe are not indicative of the core
performance of the business may not be excluded when preparing financial
measures under US GAAP.
These Non GAAP measures should not be considered in isolation from, as
substitutes for, or superior to financial measures prepared in accordance with
US GAAP.
The following items, including their tax effect, have been excluded from both
2008 and 2009 Non GAAP earnings, and from our 2009 guidance for Non GAAP
diluted earnings per ADS:
Amortization and asset impairments:
- Intangible asset amortization and impairment charges; and
- Other than temporary impairment of investments.
Acquisitions and integration activities:
- Upfront payments and milestones in respect of in-licensed and acquired
products;
- Costs associated with acquisitions, including transaction costs, and fair
value adjustments on contingent consideration and acquired inventory;
- Costs associated with the integration of companies; and
- Incremental interest charges arising on the settlement of litigation with
the former dissenting shareholders of TKT.
Divestments, re-organizations and discontinued operations
- Gains and losses on the sale of non-core assets;
- Costs associated with restructuring and re-organization activities;
- Termination costs;
- Costs associated with the introduction of the new holding company; and
- Income / (losses) from discontinued operations.
Depreciation, which is included in Cost of product sales, Research and
development costs and Selling, general and administrative costs in our US GAAP
results, has been separately disclosed for the presentation of 2008 and 2009
Non GAAP earnings. A reconciliation of Non GAAP financial measures to the most
directly comparable measure under US GAAP is presented on pages 22-25.
2008 Comparative Financial Information
Subsequent to the announcement of Shire's Q3 2008 results but prior
to the filing with the SEC of the Company's Form 10-Q for the third quarter of
2008, the Company settled the TKT appraisal rights litigation. On settlement,
the Company amended the method of determining its interest provision for this
litigation, and as a result recorded additional interest expense of $73.0
million and related tax effects. This interest expense and related tax effects
were included in the third quarter Form 10-Q, but not in the Q3 2008 results
announcement as settlement of the litigation occurred after its publication.
However, the comparative US GAAP financial information in this Q3 2009
earnings release has been restated to reflect the settlement of this
litigation.
A reconciliation between the US GAAP financial information included
in the original Q3 2008 results announcement and the comparative US GAAP
financial information included herein is as follows:
Interest Income Net income/
expense taxes (loss)
$M $M $M
3 months to September 30, 2008
US GAAP information in Q3 2008
announcement (19.9) (45.0) 11.8
Recognition of additional interest (73.0) 26.3 (46.7)
US GAAP comparative information
included herein (92.9) (18.7) (34.9)
9 months to September 30, 2008
US GAAP information in Q3 2008
announcement (54.0) (89.3) 61.4
Recognition of additional interest (73.0) 26.3 (46.7)
US GAAP comparative information
included herein (127.0) (63.0) 14.7
This additional interest expense, and related tax effect, has been excluded
from Non GAAP earnings, therefore Non GAAP earnings are unaffected by this
restatement.
TRADEMARKS
All trademarks defined as ® and tm used in this press release are trademarks of
Shire plc or companies within the Shire group except for:
3TC® and ZEFFIX® which are trademarks of GSK, DYNEPOtm which is a trademark of
Sanofi Aventis, EQUASYM® which is a trademark of UCB S.A., PENTASA® which is a
trademark of Ferring A/S Corp, and REMINYL® and REMINYL XLtm which are
trademarks of J&J (except in the UK and Republic of Ireland)1.
A full list of the trademarks of Shire plc or companies within the Shire group
is set out in the Company's Quarterly Report on Form 10-Q for the six months
ended June 30, 2009.
1 REMINYL® and REMINYL XLtm are both trademarks of Shire in the UK and Republic
of Ireland.
END
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