DUBLIN, October 25, 2012 /PRNewswire/ --
Advancing Late Stage Pipeline of new
Growth Opportunities
Shire (LSE: SHP, NASDAQ: SHPG) announces results for the three
months to September 30, 2012.
Reported CER
Financial Highlights Q3 2012 Growth (1) Growth(2)
Product sales $1,055 million +4% +6%
Product sales excluding ADDERALL XR $952 million +10% +13%
Total revenues $1,100 million +1% +4%
Non GAAP operating income $325 million -5%
US GAAP operating income $273 million +7%
Non GAAP diluted earnings per ADS $1.36 +6%
US GAAP diluted earnings per ADS $1.19 +17%
Non GAAP cash generation $355 million +20%
Non GAAP free cash flow $261 million +90%
US GAAP net cash provided by operating
activities $288 million +61%
(1) Percentages compare to equivalent 2011
period.
(2) Percentages compare to equivalent 2011 period
on a constant exchange rate ("CER") basis, which is a Non GAAP
measure.
The Non GAAP financial measures included within this release are
explained on page 25, and are reconciled to the most directly
comparable financial measures prepared in accordance with US GAAP
on pages 20 - 24.
Angus
Russell, Chief Executive Officer, commented:
"Shire's business is progressing well. This quarter we grew Non
GAAP earnings per ADS by 6% after increasing our investment in
R&D by over 20% to fund our increasingly late stage pipeline.
We continue to generate strong cash flows (up 20% to over
$350 million in the quarter), which
will support our future growth.
"The ADHD market is one of the fastest-growing major therapeutic
categories in the US and our lead product VYVANSE continues to gain
share and generated strong prescription growth in the US despite
the entry of additional generics in the ADHD market. We are
advancing our preparations for the potential approval and launch of
VYVANSE in Europe, where it will
be called ELVANSE. Our rare disease business also continues to
grow, with FIRAZYR performing strongly following its US launch.
DERMAGRAFT product sales were impacted by the re-engineering of key
areas of the Regenerative Medicine business, including an ongoing
restructuring of the sales and marketing organization and the
implementation of a new commercial model, all of which is expected
to position the product for future sales growth. We anticipate that
the run rate for DERMAGRAFT revenues will recover during 2013.
"In our advancing pipeline we have late stage studies for
Lisdexamfetamine dimesylate ("LDX" - the active ingredient in
VYVANSE) in major depressive disorder ongoing, we are planning to
initiate our Phase 3 program for binge eating disorder around the
turn of the year and following discussions with the FDA, we plan to
initiate Phase 3 studies in negative symptoms of schizophrenia in
the near future. We've also identified potential new indications
for FIRAZYR and DERMAGRAFT. Our intrathecal trials for Hunter CNS,
SanFilippo A and Metachromatic Leukodystrophy are also progressing
well.
"Shire remains on track to deliver double digit full year
earnings growth in 2012. We are increasingly confident in our
ability to meet our target of delivering sound earnings growth in
2013 and deliver increased growth beyond that."
FINANCIAL SUMMARY
Third Quarter 2012 Unaudited
Results
Q3 2012 Q3 2011
Non Non
US GAAP Adjustments GAAP US GAAP Adjustments GAAP
$M $M $M $M $M $M
Total
revenues 1,100 - 1,100 1,086 - 1,086
Operating
income 273 52 325 255 86 341
Diluted
earnings
per ADS $1.19 $0.17 $1.36 $1.02 $0.26 $1.28
- Product sales were up 4% to $1,055
million (Q3 2011: $1,018
million). On a CER basis product sales were up 6%. This
quarter, sales were affected by $28
million of unfavorable foreign exchange, primarily in our
Human Genetic Therapies ("HGT") business (up 9% on a reported
basis, up 16% on a CER basis), particularly due to weaker European
currencies.
Product sales excluding ADDERALL XR® were up 10% (13%
on a CER basis), as we saw strong growth from VYVANSE®
(up 24% to $247 million),
VPRIV® (up 16% to $75
million), INTUNIV® (up 23% to $69 million) and FIRAZYR® (up to
$30 million from $7 million in Q3 2011). Product sales growth was
held back by DERMAGRAFT® (down 33% to $34 million), due to the ongoing restructuring of
the Regenerative Medicine sales and marketing organization.
ADDERALL XR product sales were down 32% to $102 million due to lower prescription volumes
and higher sales deductions (Q3 2011 benefited from significantly
lower sales deductions following a lowering of the estimate of
inventory in the US retail pipeline). A generic version of ADDERALL
XR was approved late in Q2 2012.
- Total revenues were up 1% (up 4% on a CER basis) as the growth
in product sales was offset, as expected, by lower royalties,
particularly ADDERALL XR royalties received from Impax Laboratories
Inc. ("Impax") following the launch of Actavis Inc.'s ("Actavis")
generic product.
Operating income was down 5% to $325
million (Q3 2011: $341
million), as combined total operating costs increased at a
slightly higher rate (4%) than total revenues. Research and
development ("R&D") expenditure was up 22% due to our
investment in new uses for
LDX[(1)] and other early and late
stage pipeline programs. Selling, General and Administrative
("SG&A") expenditure decreased 5% in Q3 2012, reflecting our
continuing focus on effective cost management and some favorable
foreign exchange impact.
On a US GAAP basis:
Operating income was up 7% to $273
million (Q3 2011: $255
million), as Q3 2011 included certain in-process R&D
("IPR&D") impairment charges and higher costs related to
acquisition and integration activities.
- Non GAAP diluted earnings per American Depository Share ("ADS")
increased 6% to $1.36 (Q3 2011:
$1.28), as a lower Non GAAP effective
tax rate of 18% (Q3 2011: 25%) more than offset lower Non GAAP
operating income.
On a US GAAP basis diluted earnings per ADS increased 17% to
$1.19 (Q3 2011: $1.02), due to higher operating income and a
lower US GAAP effective tax rate of 15% (Q3 2011: 27%).
- Cash generation, a Non GAAP measure, grew strongly by 20% to
$355 million (Q3 2011: $296 million).
Free cash flow, also a Non GAAP measure, was up 90% to
$261 million (Q3 2011: $138 million) due to higher cash generation,
lower cash tax payments and lower capital expenditure in Q3 2012
compared to Q3 2011.
On a US GAAP basis, net cash provided by operating activities
was up 61% to $288 million (Q3 2011:
$179 million).
- Reflecting our strong cash generation, net cash at September 30, 2012 was $213 million (December 31,
2011: net debt of $488
million).
- LDX, currently marketed as VYVANSE in the US for the treatment
of Attention Deficit Hyperactivity Disorder ("ADHD").
- Shire has a strong balance sheet and continued robust cash
generation, and considers the efficient use of capital on behalf of
shareholders as an important objective.
- We are initiating a share buy-back program of up to
$500 million. This buy-back program
will not constrain the Company's ability to execute its strategy of
generating shareholder value through organic growth and
acquisitions which further enhance the quality and growth potential
of the business.
This buy-back program is within the terms of the authority granted
by shareholders at the 2012 AGM. The market will be notified in
accordance with the listing rules if and when purchases are
effected.
OUTLOOK
Shire has performed well in the year so far and is on track to
deliver double-digit full-year earnings growth in 2012. We now
expect product sales growth to be around 12% for the full year.
This reflects our expectation of continued lower sales in the
fourth quarter for DERMAGRAFT while we restructure our Regenerative
Medicine commercial operations, and also the foreign exchange
impact we have absorbed on some of our products this quarter.
We now expect an improved contribution from royalties and other
revenues, of approximately 15% to 20% lower than last year, a
change from our previous guidance of 25% to 35% lower. This
reflects the recent settlement reached with GSK which will result
in Shire recording additional, one-time royalty income of
$38 million in Q4 2012.
We continue to anticipate some marginal dilution of Non GAAP
gross margins in the full year.
We are continuing our investment in the long term prospects of
the business and now expect year on year growth of combined Non
GAAP R&D and SG&A expenditure to trend towards the lower
end of our previous guidance of 10-12%.
We expect our full year Non GAAP effective tax rate to be in the
range of 18%-20%, as previously guided.
Overall, we remain on track to deliver double digit full year
earnings growth in 2012.
In 2013, we expect revenues from ADDERALL XR (including its
associated royalty) to reduce as we absorb the full year impact of
the recent launch of a generic competitor. We will be investing in
several late stage clinical trials and with careful management of
our cost base and prioritization of other investments, we are
increasingly confident in our ability to meet our target of
delivering sound earnings growth in 2013 and deliver increased
growth beyond that.
THIRD QUARTER 2012 AND RECENT PRODUCT
AND PIPELINE DEVELOPMENTS
Products
VPRIV - for the treatment of Type 1 Gaucher disease
- In October 2012 Shire submitted
its response to the matters raised by the US Food and Drug
Administration ("FDA") in respect of production of VPRIV drug
substance at Lexington, and continues to work closely with the FDA
towards a satisfactory resolution.
Notwithstanding the ongoing discussions with the FDA, Shire
continues to supply VPRIV to US patients through its existing
approved US manufacturing facilities and has the capacity to meet
the anticipated demand for VPRIV from current and new patients both
in the US and globally.
DERMAGRAFT - for the treatment of Diabetic Foot Ulcers ("DFU")
in Canada
- On September 5, 2012 Shire
announced that DERMAGRAFT had received regulatory approval from
Health Canada as a class IV medical device for the treatment of
DFU. Shire intends to make DERMAGRAFT available in Canada in Q1 2013. This approval is an
important first step for Shire Regenerative Medicine as it
continues to develop its international expansion strategy.
VYVANSE - for the treatment of ADHD
- On September 12, 2012 Shire
announced that the FDA has accepted the filing for review of a
supplemental New Drug Application for VYVANSE. Shire is seeking
approval of VYVANSE as a maintenance treatment in children and
adolescents aged 6 to 17 years with ADHD. There are currently no
stimulants approved for maintenance treatment in children and
adolescents aged 6 to 17 years with ADHD. The FDA has issued a
Prescription Drug User Fee Act action date of April 29, 2013.
Pipeline
LDX - for the treatment of Major Depressive Disorder ("MDD")
- The Phase 3 program is ongoing with headline data expected in
the second half of 2013.
SPD602 - for the treatment of chronic iron overload requiring
chelation therapy
- A Phase 2 trial has been initiated to evaluate the safety and
efficacy of SPD602 in patients with tranfusional iron overload and
whose primary diagnosis is hereditary or congenital anemia.
HGT1110 for the treatment of Metachromatic Leukodystrophy
("MLD")
- In Q3 2012, Shire initiated a Phase 1/2 clinical trial for the
treatment of MLD with HGT1110, an enzyme replacement therapy which
is delivered intrathecally. This product has been granted orphan
designation in the US and the EU. There is no currently available
therapy for MLD.
FIRAZYR - for the treatment of ACE inhibitor-induced
angioedema
- An investigator sponsored trial into the use of FIRAZYR for the
treatment of ACE inhibitor-induced angioedema was recently
completed in the EU. The results of the investigator sponsored
trial were positive and the investigator is preparing an article
for publication. ACE inhibitor-induced angioedema is a rare
and potentially life-threatening side effect of ACE inhibitor
therapy, with approximately 130,000 cases per year in the US and
160,000 in the EU and no currently approved therapy. Shire is
reviewing the necessary steps likely to be required to extend
FIRAZYR's label to include this indication in each of the US and
EU.
DERMAGRAFT - for the treatment of Epidermolysis Bullosa
("EB")
- Shire expects Phase 3 clinical trials to commence towards the
end of 2012. EB is a rare genetic disorder for which there is no
approved therapy.
OTHER DEVELOPMENTS
Telethon Institute of Genetics and Medicine ("TIGEM")
collaboration
- On October 24, 2012 Shire
announced that it had entered into a long-term, broad based,
multi-indication research collaboration in rare diseases with
Fondazione Telethon, a major Italian biomedical charitable
foundation, for several research projects carried out at TIGEM that
collectively research 13 undisclosed rare disease indications that
have the potential to add multiple novel therapeutic candidates to
the early stage pipeline.
License agreement with IGAN Biosciences, Inc. ("IGAN")
- On October 24, 2012 Shire
acquired a worldwide exclusive license from IGAN to develop and
commercialize protease-based therapeutics for the treatment of IgA
nephropathy, a rare kidney disease. This pre-clinical opportunity
is an appealing strategic fit for Shire's rare disease
portfolio.
Legal Proceedings
INTUNIV patent litigation
- On September 6, 2012 Shire
announced that it had settled all pending litigation with Anchen
Pharmaceuticals, Inc. ("Anchen") and TWi Pharmaceuticals, Inc.
("TWi") in connection with TWi's Abbreviated New Drug Application
for a generic version of INTUNIV. As part of the settlement, Anchen
was given a license to make and sell its generic version of INTUNIV
from July 1, 2016, or earlier in
certain circumstances. Also, Shire may authorize Anchen to sell
authorized generic versions of INTUNIV supplied by Shire. This
settlement had no effect on the ongoing lawsuit against Actavis and
Teva Pharmaceuticals USA, Inc.
("Teva"), in connection with their attempts to market generic
versions of Shire's INTUNIV. A bench trial against Actavis and Teva
was held in the US District Court for the District of Delaware from September
17 to September 20, 2012. The post trial briefing of the
parties to the judge is scheduled to conclude by November 1, 2012 and no decision has yet been
given.
BOARD AND COMMITTEE CHANGES
- The Board of Directors announces today the retirement in 2013
of Chief Executive Angus Russell
after 13 years with the Company and 32 years in the pharmaceutical
industry. Flemming Ornskov MD, MBA, MPH has been appointed to
succeed Angus and will join the Shire Board as Chief Executive
Designate on January 2, 2013, from
Bayer. A handover period of several months after Flemming
joins the Board will see Angus and Flemming working together to
ensure a smooth transition before Flemming becomes CEO on
April 30, 2013, the date of the Shire
Annual General Meeting (see separate press release for more
detail).
- Dr. Steven Gillis, Ph.D. has
joined the Board of Directors on October 1,
2012. Dr. Gillis has also been appointed as a member of the
Science & Technology Committee and Remuneration Committee with
effect from October 1, 2012.
ADDITIONAL INFORMATION
The following additional information is included in this press
release:
Page
Overview of Third Quarter 2012 Financial Results 7
Financial Information 11
Non GAAP Reconciliations 20
Notes to Editors 25
Safe Harbor Statement 25
Explanation of Non GAAP Measures 25
Trademarks 26
Dial in details for the live conference
call for investors 13:00
BST/8:00 EDT on October 25, 2012:
UK dial in: +(0)808-237-0030
US dial in: +1-866-928-7517 or +1-718-873-9077
International dial in:
+44(0)203-139-4830
Password/Conf ID: 99054603#
Live Webcast:
http://www.shire.com/shireplc/en/investors
OVERVIEW OF THIRD QUARTER 2012
FINANCIAL RESULTS
1. Product sales
For the three months to September 30,
2012 product sales increased by 4% to $1,055 million (Q3 2011: $1,018 million) and represented 96% of total
revenues (Q3 2011: 94%).
US Exit
Year on year growth Market
Share[(1)]
Product sales Sales $M Sales CER US Rx(1)]
VYVANSE 247.1 +24% +24% +16% 17%
REPLAGAL(R) 121.7 -6% +2% n/a(3) n/a(3)
ELAPRASE(R) 110.5 +1% +8% n/a(2) n/a(2)
LIALDA/MEZAVANT(R) 104.4 +16% +17% +6% 22%
VPRIV 74.9 +16% +21% n/a(2) n/a(2)
INTUNIV 69.0 +23% +23% +27% 4%
PENTASA(R) 67.0 +20% +20% -4% 14%
FOSRENOL(R) 38.1 -6% -1% -19% 5%
DERMAGRAFT 33.7 -33% -33% n/a(2) n/a(2)
FIRAZYR 30.3 +321% +331% n/a(2) n/a(2)
OTHER 55.6 -16% -11% n/a n/a
Excluding ADDERALL XR 952.3 +10% +13%
ADDERALL XR 102.2 -32% -32% -17% 5%
Total 1,054.5 +4% +6%
(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, 2012.
(2) IMS NPA Data not available.
(3) Not sold in the US in Q3 2012.
VYVANSE - ADHD
VYVANSE product sales showed strong growth in Q3 2012, up 24%
compared to Q3 2011, as a result of higher prescription demand (up
16% compared to Q3 2011) and the effect of a price increase taken
since Q3 2011. These positive factors were partially offset by
destocking in Q3 2012.
REPLAGAL - Fabry disease
Reported REPLAGAL sales were impacted by unfavorable foreign
exchange (amounting to approximately $10
million), primarily due to weaker European currencies in Q3
2012 compared to Q3 2011 and Q2 2012. On a CER basis, sales
continued to grow through the treatment of both naïve patients and
those switching from FABRAZYME.
ELAPRASE- Hunter syndrome
Reported ELAPRASE sales in Q3 2012 were affected by weaker
European currencies (affecting reported product sales by
approximately $8 million) and the
timing of shipments to markets with large, infrequent
orders. This includes Brazil
where a large shipment was delayed in Q3 and will now occur in Q4.
On a CER basis, ELAPRASE product sales increased and patients on
therapy continue to grow across all regions in which ELAPRASE is
sold.
LIALDA/MEZAVANT - Ulcerative
colitis
Product sales for LIALDA/MEZAVANT increased in Q3 2012 as a
result of higher US prescription demand and the effect of a price
increase taken since Q3 2011. These positive factors were partially
offset by the effect of higher US sales deductions and the effect
of lower priced imports into certain European markets.
VPRIV - Gaucher disease
VPRIV product sales growth was driven by the treatment of new
patients, being both naïve patients and switches from CEREZYME.
Reported VPRIV sales were also impacted by unfavorable foreign
exchange (approximately $3
million).
INTUNIV - ADHD
INTUNIV product sales were up 23% in Q3 2012, primarily driven
by strong growth in US prescription demand (up 27% compared to Q3
2011), and the effect of price increases taken since Q3 2011. These
positive factors were partially offset by higher sales deductions
in Q3 2012 compared to Q3 2011.
PENTASA - Ulcerative colitis
PENTASA product sales benefited from price increases taken since
Q3 2011 and the effect of destocking in Q3 2011 which was not
repeated in Q3 2012. These positive factors were partially offset
by higher sales deductions in Q3 2012 as compared to Q3 2011.
FOSRENOL - Hyperphosphatemia
Product sales for FOSRENOL decreased by 6% as lower US
prescription demand and higher sales deductions in Q3 2012 offset
the effect of a price increase taken since Q3 2011. Product sales
of FOSRENOL outside the US were lower than Q3 2011 primarily due to
the effect of unfavorable foreign exchange.
DERMAGRAFT - DFU
DERMAGRAFT product sales were down 33% compared to Q3 2011,
reflecting the impact of an expected re-engineering of key areas of
the Regenerative Medicine business including an ongoing
restructuring of the sales and marketing organization and the
implementation of a new commercial model, all of which is expected
to position DERMAGRAFT for future sales growth.
FIRAZYR - Hereditary Angioedema ("HAE")
FIRAZYR sales continue to grow worldwide primarily driven by the
strong launch in the US market. We continue to see new patients
starting treatment and high levels of repeat usage by existing
patients. The number of new patients and the irregular nature of
HAE attacks affects the rate of reorder and explains the
variability in results quarter over quarter as seen between Q3 and
Q2 2012.
ADDERALL XR - ADHD
ADDERALL XR product sales decreased in Q3 2012 as a result of
lower US prescription demand following the introduction of a new
generic competitor, higher sales deductions and the effect of
higher destocking in Q3 2012 compared to Q3 2011. These negative
factors were partially offset by the benefit of a price increase
taken since Q3 2011.
Sales deductions in Q3 2012 (63% of gross product sales) were
significantly higher than Q3 2011 (47% of gross product sales) as
Q3 2011 benefited from a lowering of the estimate of inventory in
the US retail pipeline and the related sales deduction reserve.
2. Royalties
Year on year growth
Royalties to
Product Shire $M Royalties CER
FOSRENOL 1.00 14.0 +28% +28%
ADDERALL XR 1.00 11.2 -51% -51%
3TC(R) and ZEFFIX(R) 1.00 10.6 -39% -39%
Other 1.00 6.0 -49% -47%
Total 1.00 41.8 -33% -33%
Royalties from ADDERALL XR in Q3 2012 were significantly
impacted by a lower royalty rate payable on sales of authorized
generic ADDERALL XR by Impax, following the launch of Actavis'
generic version.
Royalty income from 3TC and ZEFFIX continues to be adversely
impacted by increased competition from other products and the
expiry of patents in certain territories. Also, since Q2 2011 Shire
has not recognised royalty income for 3TC and ZEFFIX for certain
territories due to a disagreement between GlaxoSmithKline ("GSK"),
ViiV Healthcare ("ViiV") and Shire about how the relevant royalty
rate should be applied given the expiry dates of certain patents.
In October 2012 Shire, GSK and ViiV
settled this disagreement and in Q4 2012 Shire will recognise
one-time royalty income in respect of prior periods of $38 million as a result.
3. Financial details
Cost of product sales
% of % of
product product
Q3 2012 sales Q3 2011 sales
$M $M
Cost of product sales (US
GAAP) 167.9 16% 166.5 16%
Unwind of DERMAGRAFT
inventory fair value
step-up on acquisition - (9.0)
Transfer of manufacturing
from Owings Mills - (3.4)
Depreciation (9.4) (8.6)
Cost of product sales (Non
GAAP) 158.5 15% 145.5 14%
Non GAAP cost of product sales as a percentage of product sales
increased slightly in Q3 2012 due to lower gross margins from
DERMAGRAFT and ADDERALL XR compared with the same period in
2011.
US GAAP cost of product sales as a percentage of product sales
remained constant as the impact of lower Non GAAP gross margins in
Q3 2012 was offset by the fair value adjustment for DERMAGRAFT
inventories and costs incurred on the transfer of manufacturing
from Owings Mills in Q3 2011 which were not repeated in Q3
2012.
R&D
% of % of
product product
Q3 2012 sales Q3 2011 sales
$M $M
R&D (US GAAP) 224.7 21% 201.5 20%
Impairment of intangible
assets - (16.0)
Depreciation (5.5) (5.6)
R&D (Non GAAP) 219.2 21% 179.9 18%
Non GAAP R&D increased by $39.3
million, or 22%, due to our continuing investment in a
number of targeted R&D programs including new uses for LDX and
our SPD602 program (acquired with FerroKin Biosciences, Inc.
("FerroKin")). On a CER basis Non GAAP R&D increased by
approximately 25%, a higher rate of increase than on a reported
basis as Q3 2012 benefited from favorable foreign exchange.
US GAAP R&D increased by $23.2
million, or 12%, a lower rate of increase than on a Non GAAP
basis as Q3 2011 included certain IPR&D impairment charges not
repeated in Q3 2012.
SG&A
% of % of
product product
Q3 2012 sales Q3 2011 sales
$M $M
SG&A (US GAAP) 437.4 41% 452.1 44%
Intangible asset
amortization (50.0) (46.4)
Legal and litigation
costs[(1)] (4.5) -
Depreciation (14.2) (16.7)
SG&A (Non GAAP) 368.7 35% 389.0 38%
- During 2012 Shire amended its Non GAAP policy to exclude costs
related to the settlement of litigation, government investigations
and other disputes, together with related external legal costs. Non
GAAP SG&A in Q3 2011 has not been restated as the amounts
incurred in that period were not significant.
Non GAAP SG&A decreased by $20.3
million, or 5%, reflecting our continuing focus on effective
cost management. Reported costs also benefited (by 3 percentage
points) from the stronger dollar in the quarter.
US GAAP SG&A decreased by $14.7
million, or 3%, a lower rate of decrease than on a Non GAAP
basis as a result of higher intangible asset amortization and legal
and litigation costs excluded from Non GAAP SG&A.
Interest expense
For the three months to September 30,
2012 Shire incurred interest expense of $9.2 million (Q3 2011: $9.7 million). Interest expense in Q3 2012
principally relates to the coupon on Shire's $1,100 million 2.75% convertible bonds due
2014.
Other income/(expense), net
Q3 2012 Q3 2011
$M $M
Other income, net (US GAAP) 3.5 15.6
Gain on sale of investments - (23.5)
Other income/(expense), net (Non GAAP) 3.5 (7.9)
Other income/(expense), net in Q3 2012 included foreign exchange
gains, compared to foreign exchange losses in Q3 2011, reflecting
volatility in a number of currencies to which Shire has
exposure.
Taxation
The effective rate of tax on Non GAAP income in Q3 2012 was 18%
(Q3 2011: 25%), and on a US GAAP basis the effective rate of tax
was 15% (Q3 2011: 27%). The effective rate of tax in Q3 2012 on
both a Non GAAP and US GAAP basis is lower than the same period in
2011 due primarily to favorable changes in profit mix.
FINANCIAL INFORMATION
- TABLE OF CONTENTS
Page
Unaudited US GAAP Consolidated Balance Sheets 12
Unaudited US GAAP Consolidated Statements of Income 13
Unaudited US GAAP Consolidated Statements of Cash
Flows 15
Selected Notes to the Unaudited US GAAP Financial
Statements
(1) Earnings per share 17
(2) Analysis of revenues 18
Non GAAP reconciliation 20
Unaudited US GAAP financial position as of September 30, 2012
Consolidated Balance Sheets
September 30, December 31,
2012 2011
$M $M
ASSETS
Current assets:
Cash and cash equivalents 1,321.9 620.0
Restricted cash 18.9 20.6
Accounts receivable, net 863.6 845.0
Inventories 427.5 340.1
Deferred tax asset 209.9 207.6
Prepaid expenses and other current assets 143.5 174.9
Total current assets 2,985.3 2,208.2
Non-current assets:
Investments 44.6 29.9
Property, plant and equipment ("PP&E"), net 931.9 932.1
Goodwill 639.2 592.6
Other intangible assets, net 2,593.6 2,493.0
Deferred tax asset 42.4 50.7
Other non-current assets 79.5 73.7
Total assets 7,316.5 6,380.2
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued expenses 1,446.9 1,370.5
Convertible bonds - 1,100.0
Other current liabilities 93.7 63.8
Total current liabilities 1,540.6 2,534.3
Non-current liabilities:
Convertible bonds 1,100.0 -
Deferred tax liability 526.4 516.6
Other non-current liabilities 271.5 144.3
Total liabilities 3,438.5 3,195.2
Equity:
Common stock of 5p par value; 1,000 million
shares authorized; and 562.5 million shares
issued and outstanding (2011: 1,000 million
shares authorized; and 562.5 million shares
issued and outstanding) 55.7 55.7
Additional paid-in capital 2,956.2 2,853.3
Treasury stock: 6.6 million shares (2011: 11.8
million) (188.2) (287.2)
Accumulated other comprehensive income 72.5 60.3
Retained earnings 981.8 502.9
Total equity 3,878.0 3,185.0
Total liabilities and equity 7,316.5 6,380.2
Unaudited US GAAP results for the three months and nine
months to September 30, 2012
Consolidated Statements of Income
9 months 9 months
3 months to 3 months to to to
September September
September 30, September 30, 30, 30,
2012 2011 2012 2011
$M $M $M $M
Revenues:
Product sales 1,054.5 1,018.4 3,309.1 2,901.0
Royalties 41.8 62.8 154.4 199.8
Other revenues 4.1 4.9 16.5 20.4
Total revenues 1,100.4 1,086.1 3,480.0 3,121.2
Costs and expenses:
Cost of product
sales[(1)] 167.9 166.5 478.8 434.7
R&D[(1)] 224.7 201.5 683.6 556.3
SG&A[(1)] 437.4 452.1 1,448.4 1,295.3
(Gain)/loss on sale of
product rights (5.7) 0.3 (16.5) 3.8
Reorganization costs - 5.0 - 18.0
Integration and
acquisition costs 2.7 5.3 15.1 7.9
Total operating
expenses 827.0 830.7 2,609.4 2,316.0
Operating income 273.4 255.4 870.6 805.2
Interest income 0.9 0.3 2.3 1.5
Interest expense (9.2) (9.7) (29.0) (28.8)
Other income, net 3.5 15.6 3.6 15.9
Total other
(expense)/income, net (4.8) 6.2 (23.1) (11.4)
Income before income
taxes and equity in
earnings of equity
method investees 268.6 261.6 847.5 793.8
Income taxes (41.6) (69.5) (144.6) (187.3)
Equity in earnings of
equity method
investees, net of taxes 0.2 0.8 0.5 3.2
Net income 227.2 192.9 703.4 609.7
- Cost of product sales includes amortization of intangible
assets relating to favorable manufacturing contracts of $nil for
the three months to September 30,
2012 (2011: $0.5 million) and
$0.7 million for the nine months to
September 30, 2012 (2011:
$1.4 million). R&D includes
intangible asset impairment charges of $nil (2011: $16.0 million) for the three months to
September 30, 2012 and $27.0 million (2011: $16.0
million) for the nine months to September 30, 2012. SG&A costs include
amortization of intangible assets relating to intellectual property
rights acquired of $50.0 million for
the three months to September 30,
2012 (2011: $46.4 million) and
$146.6 million for the nine months to
September 30, 2012 (2011:
$119.1 million).
Unaudited US GAAP results for the three months and nine
months to September 30, 2012
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,
2012 2011 2012 2011
Earnings per ordinary
share - basic 40.9c 35.0c 126.6c 110.6c
Earnings per ADS -
basic 122.7c 105.0c 379.8c 331.8c
Earnings per ordinary
share - diluted 39.6c 33.9c 122.4c 106.7c
Earnings per ADS -
diluted 118.8c 101.7c 367.2c 320.1c
Weighted average
number of shares:
Millions Millions Millions Millions
Basic 555.9 551.3 555.5 551.2
Diluted 593.1 593.8 594.0 595.0
Unaudited US GAAP results for the three months and nine
months to September 30, 2012
Consolidated Statements of Cash Flows
3 months to 9 months to
September 30, September 30,
2012 2011 2012 2011
$M $M $M $M
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income 227.2 192.9 703.4 609.7
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and
amortization 79.1 80.0 231.5 212.3
Share based compensation 21.6 19.8 65.0 54.7
Impairment of intangible
assets - 16.0 27.0 16.0
Gain on sale of
non-current investments - (23.5) - (23.5)
(Gain)/loss on sale of
product rights (5.7) 0.3 (16.5) 3.8
Other 0.5 11.7 5.1 5.9
Movement in deferred taxes (6.3) (30.9) (30.4) (13.2)
Equity in earnings of equity
method investees (0.2) (0.8) (0.5) (3.2)
Changes in operating assets and
liabilities:
Increase in accounts
receivable (45.4) (66.7) (23.0) (122.8)
Increase/(decrease) in
sales deduction accrual 8.5 (19.9) 36.1 46.2
Increase in inventory (14.9) (12.2) (81.9) (42.8)
(Increase)/decrease in
prepayments and other
assets (14.3) 31.1 17.8 17.3
Increase/(decrease) in
accounts payable and
other liabilities 38.3 (24.3) 72.7 (101.4)
Returns on investment from joint
venture - 5.2 4.9 5.2
Net cash provided by operating
activities(A) 288.4 178.7 1,011.2 664.2
CASH FLOWS FROM INVESTING
ACTIVITIES:
Movements in restricted cash (4.5) 0.9 1.7 5.7
Purchases of subsidiary
undertakings and businesses, net of
cash acquired - (3.8) (97.0) (723.5)
Purchases of non-current
investments (7.4) (3.8) (12.1) (8.3)
Purchases of PP&E (27.2) (40.9) (91.6) (135.9)
Purchases of intangible assets - (5.2) (43.5) (5.2)
Proceeds from disposal of
non-current investments and PP&E - 94.7 4.6 94.7
Proceeds from capital expenditure
grants - - 8.4 -
Proceeds received on sale of
product rights 3.3 1.9 13.7 8.8
Returns of equity investments and
proceeds from short term
investments 0.1 0.1 0.2 1.7
Net cash (used in)/provided by
investing activities[(B)] (35.7) 43.9 (215.6) (762.0)
Unaudited US GAAP results for the three months and nine
months to September 30, 2012
Consolidated Statements of Cash Flows (continued)
3 months to 9 months to
September 30, September 30,
2012 2011 2012 2011
$M $M $M $M
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from drawing of
revolving credit facility - - - 30.0
Repayment of revolving credit
facility - (30.0) - (30.0)
Repayment of debt acquired
through business combinations - - (3.0) (13.1)
Excess tax benefit associated
with exercise of stock options 3.5 4.9 38.6 23.7
Payment of dividend - - (70.7) (60.5)
Payments to acquire shares by
the Employee Benefit Trust
("EBT") (40.2) (62.9) (50.9) (126.8)
Other (3.3) (0.5) (2.6) (0.1)
Net cash used in financing
activities[(C)] (40.0) (88.5) (88.6) (176.8)
Effect of foreign exchange
rate changes on cash and cash
equivalents [(D)] (3.5) (2.3) (5.1) 0.4
Net increase/(decrease) in
cash and cash equivalents[(A)
+(B) +(C) +(D)] 209.2 131.8 701.9 (274.2)
Cash and cash equivalents at
beginning of period 1,112.7 144.6 620.0 550.6
Cash and cash equivalents at
end of period 1,321.9 276.4 1,321.9 276.4
Unaudited US GAAP results for the
three months and nine months to September
30, 2012
Selected Notes to the Financial
Statements
(1) Earnings Per Share ("EPS")
3 months to 3 months to 9 months to 9 months to
September 30, September 30, September 30, September 30,
2012 2011 2012 2011
$M $M $M $M
Numerator for basic
EPS 227.2 192.9 703.4 609.7
Interest on
convertible bonds,
net of tax 7.5 8.4 23.7 25.2
Numerator for
diluted EPS 234.7 201.3 727.1 634.9
Weighted average
number of shares:
Millions Millions Millions Millions
Basic(1) 555.9 551.3 555.5 551.2
Effect of dilutive
shares:
Share based awards
to employees(2) 3.7 9.0 5.0 10.4
Convertible bonds
2.75% due 2014(3) 33.5 33.5 33.5 33.4
Diluted 593.1 593.8 594.0 595.0
- Excludes shares purchased by the EBT and presented by Shire as
treasury stock.
- Calculated using the treasury stock method.
- 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 30, September 30, September 30, September 30,
2012 2011 2012 2011
Millions Millions Millions Millions
Share based awards
to employees[(1)] 6.6 3.2 4.9 3.9
- Certain stock options have been excluded from the calculation
of diluted EPS because (a) their exercise prices exceeded Shire's
average share price during the calculation period or (b) the
required performance conditions were not satisfied as at the
balance sheet date.
Unaudited US GAAP results for the
three months to September 30,
2012
Selected Notes to the Financial
Statements
(2) Analysis of revenues
3 months to September 30, 2012 2011 2012 2012
% % of total
$M $M change revenue
Net product sales:
Specialty Pharmaceuticals ("SP")
Behavioral Health ("BH")
VYVANSE 247.1 199.7 24% 23%
ADDERALL XR 102.2 149.9 -32% 9%
INTUNIV 69.0 56.1 23% 6%
EQUASYM(R) 5.5 5.1 8% <1%
423.8 410.8 3% 39%
Gastro Intestinal ("GI")
LIALDA/MEZAVANT 104.4 89.7 16% 9%
PENTASA 67.0 55.9 20% 6%
RESOLOR(R) 2.8 1.5 87% <1%
174.2 147.1 18% 16%
General products
FOSRENOL 38.1 40.5 -6% 3%
XAGRID(R) 22.0 23.3 -6% 2%
60.1 63.8 -6% 5%
Other product sales 25.3 36.3 -30% 2%
Total SP product sales 683.4 658.0 4% 62%
HGT
REPLAGAL 121.7 129.0 -6% 11%
ELAPRASE 110.5 109.6 1% 10%
VPRIV 74.9 64.6 16% 7%
FIRAZYR 30.3 7.2 321% 3%
Total HGT product sales 337.4 310.4 9% 31%
Regenerative Medicine ("RM")
DERMAGRAFT 33.7 50.0 -33% 3%
Total RM product sales 33.7 50.0 -33% 3%
Total product sales 1,054.5 1,018.4 4% 96%
Royalties:
FOSRENOL 14.0 10.9 28% 1%
ADDERALL XR 11.2 22.9 -51% 1%
3TC and ZEFFIX 10.6 17.3 -39% 1%
Other 6.0 11.7 -49% <1%
Total royalties 41.8 62.8 -33% 4%
Other revenues 4.1 4.9 -16% <1%
Total revenues 1,100.4 1,086.1 1% 100%
Unaudited US GAAP results for the nine
months to September 30, 2012
Selected Notes to the Financial
Statements
(2) Analysis of revenues
9 months to September 30, 2012 2011 2012 2012
% % of total
$M $M change revenue
Net product sales:
SP
BH
VYVANSE 773.3 587.9 32% 22%
ADDERALL XR 347.5 408.0 -15% 10%
INTUNIV 206.6 157.6 31% 6%
EQUASYM 21.3 15.6 37% <1%
1,348.7 1,169.1 15% 39%
GI
LIALDA/MEZAVANT 288.5 276.0 5% 8%
PENTASA 196.7 186.2 6% 6%
RESOLOR 8.3 4.0 108% <1%
493.5 466.2 6% 14%
General products
FOSRENOL 126.8 127.0 <-1% 4%
XAGRID 70.7 69.2 2% 2%
197.5 196.2 1% 6%
Other product sales 85.9 117.3 -27% 2%
Total SP product sales 2,125.6 1,948.8 9% 61%
HGT
REPLAGAL 379.3 354.3 7% 11%
ELAPRASE 358.3 340.9 5% 10%
VPRIV 229.3 186.9 23% 7%
FIRAZYR 81.7 18.1 351% 2%
Total HGT product sales 1,048.6 900.2 16% 30%
RM
DERMAGRAFT 134.9 52.0 159% 4%
Total RM product sales 134.9 52.0 159% 4%
Total product sales 3,309.1 2,901.0 14% 95%
Royalties:
ADDERALL XR 62.2 66.6 -7% 2%
FOSRENOL 37.0 31.4 18% 1%
3TC and ZEFFIX 34.8 64.1 -46% 1%
Other 20.4 37.7 -46% <1%
Total royalties 154.4 199.8 -23% 4%
Other revenues 16.5 20.4 -19% <1%
Total revenues 3,480.0 3,121.2 11% 100%
Unaudited results for the three months
to September 30, 2012
Non GAAP reconciliation
3 months to September Non
30, 2012 US GAAP Adjustments GAAP
(a) (b) (c) (d) (e)
$M $M $M $M $M $M $M
Total revenues 1,100.4 - - - - - 1,100.4
Costs and expenses:
Cost of product sales 167.9 - - - - (9.4) 158.5
R&D 224.7 - - - - (5.5) 219.2
SG&A 437.4 (50.0) - - (4.5) (14.2) 368.7
Gain on sale of product
rights (5.7) - - 5.7 - - -
Integration and
acquisition costs 2.7 - (2.7) - - - -
Depreciation - - - - - 29.1 29.1
Total operating
expenses 827.0 (50.0) (2.7) 5.7 (4.5) - 775.5
Operating income 273.4 50.0 2.7 (5.7) 4.5 - 324.9
Interest income 0.9 - - - - - 0.9
Interest expense (9.2) - - - - - (9.2)
Other income, net 3.5 - - - - - 3.5
Total other expense,
net (4.8) - - - - - (4.8)
Income before income
taxes and equity in
earnings of equity
method investees 268.6 50.0 2.7 (5.7) 4.5 - 320.1
Income taxes (41.6) (14.3) (1.1) - (1.5) - (58.5)
Equity in earnings of
equity method
investees, net of tax 0.2 - - - - - 0.2
Net income 227.2 35.7 1.6 (5.7) 3.0 - 261.8
Impact of convertible
debt, net of tax 7.5 - - - - - 7.5
Numerator for diluted
EPS 234.7 35.7 1.6 (5.7) 3.0 - 269.3
Weighted average number
of shares (millions) -
diluted 593.1 - - - - - 593.1
Diluted earnings per
ADS 118.8c 18.0c 0.9c (3.0c) 1.5c - 136.2c
The following items are included in Adjustments:
- Amortization and asset impairments: Amortization of intangible
assets relating to intellectual property rights acquired
($50.0 million), and tax effect of
adjustments;
- Acquisition and integration activities: Costs associated with
the acquisition of FerroKin and the integration of Advanced
BioHealing Inc. ("ABH") ($1.5
million), charges related to the change in fair value of
deferred contingent consideration ($1.2
million), and tax effect of adjustments;
- Divestments, reorganizations and discontinued operations:
Re-measurement of DAYTRANA contingent consideration to fair value
($5.7 million);
- Legal and litigation costs: Costs related to litigation,
government investigations, other disputes and external legal costs
($4.5 million), and tax effect of
adjustments; and
- Depreciation reclassification: Depreciation of $29.1 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, 2011
Non GAAP reconciliation
3 months to September 30,
2011 US GAAP Adjustments Non GAAP
(a) (b) (c) (d)
$M $M $M $M $M $M
Total revenues 1,086.1 - - - - 1,086.1
Costs and expenses:
Cost of product sales 166.5 - (9.0) (3.4) (8.6) 145.5
R&D 201.5 (16.0) - - (5.6) 179.9
SG&A 452.1 (46.4) - - (16.7) 389.0
Loss on sale of product
rights 0.3 - - (0.3) - -
Reorganization costs 5.0 - - (5.0) - -
Integration and acquisition
costs 5.3 - (5.3) - - -
Depreciation - - - - 30.9 30.9
Total operating expenses 830.7 (62.4) (14.3) (8.7) - 745.3
Operating income 255.4 62.4 14.3 8.7 - 340.8
Interest income 0.3 - - - - 0.3
Interest expense (9.7) - - - - (9.7)
Other income/(expense), net 15.6 - - (23.5) - (7.9)
Total other
income/(expense), net 6.2 - - (23.5) - (17.3)
Income before income taxes
and equity in earnings of
equity method investees 261.6 62.4 14.3 (14.8) - 323.5
Income taxes (69.5) (16.4) (2.9) 9.2 - (79.6)
Equity in earnings of
equity method investees,
net of tax 0.8 - - - - 0.8
Net income 192.9 46.0 11.4 (5.6) - 244.7
Impact of convertible debt,
net of tax 8.4 - - - - 8.4
Numerator for diluted EPS 201.3 46.0 11.4 (5.6) - 253.1
Weighted average number of
shares (millions) - diluted 593.8 - - - - 593.8
Diluted earnings per ADS 101.7c 23.2c 5.8c (2.8c) - 127.9c
The following items are included in Adjustments:
- Amortization and asset impairments: Impairment of intangible
assets ($16.0 million), amortization
of intangible assets relating to intellectual property rights
acquired ($46.4 million), and tax
effect of adjustments;
- Acquisition and integration activities: Unwind of ABH inventory
step-up ($9.0 million), costs
associated with the acquisition and integration of ABH
($3.6 million) and integration of
Movetis ($1.7 million), and tax
effect of adjustments;
- Divestments, reorganizations and discontinued operations:
Accelerated depreciation ($2.2
million) and dual running costs ($1.2
million) on the transfer of manufacturing from Owings Mills
to a third party, re-measurement of DAYTRANA contingent
consideration to fair value ($0.3
million), reorganization costs ($5.0
million) on the transfer of manufacturing from Owings Mills
to a third party and establishment of an international commercial
hub in Switzerland, gain on
disposal of investment in Vertex Pharmaceuticals Inc. ("Vertex")
($23.5 million), and tax effect of
adjustments; and
- Depreciation: Depreciation of $30.9
million included in Cost of product sales, R&D costs and
SG&A costs for US GAAP separately disclosed for the
presentation of Non GAAP earnings.
Unaudited results for the nine months
to September 30, 2012
Non GAAP reconciliation
9 months to Non
September 30, 2012 US GAAP Adjustments GAAP
(a) (b) (c) (d) (e)
$M $M $M $M $M $M $M
Total revenues 3,480.0 - - - - - 3,480.0
Costs and expenses:
Cost of product
sales 478.8 - - - - (23.6) 455.2
R&D 683.6 (27.0) (23.0) - - (18.3) 615.3
SG&A 1,448.4 (146.6) - - (40.4) (42.3) 1,219.1
Gain on sale of
product rights (16.5) - - 16.5 - - -
Integration and
acquisition costs 15.1 - (15.1) - - - -
Depreciation - - - - - 84.2 84.2
Total operating
expenses 2,609.4 (173.6) (38.1) 16.5 (40.4) - 2,373.8
Operating income 870.6 173.6 38.1 (16.5) 40.4 - 1,106.2
Interest income 2.3 - - - - - 2.3
Interest expense (29.0) - - - - - (29.0)
Other income, net 3.6 - - - - - 3.6
Total other expense,
net (23.1) - - - - - (23.1)
Income before income
taxes and equity in
earnings of equity
method investees 847.5 173.6 38.1 (16.5) 40.4 - 1,083.1
Income taxes (144.6) (42.0) (10.1) - (14.5) - (211.2)
Equity in earnings
of equity method
investees, net of
tax 0.5 - - - - - 0.5
Net income 703.4 131.6 28.0 (16.5) 25.9 - 872.4
Impact of
convertible debt,
net of tax 23.7 - - - - - 23.7
Numerator for
diluted EPS 727.1 131.6 28.0 (16.5) 25.9 - 896.1
Weighted average
number of shares
(millions) - diluted 594.0 - - - - - 594.0
Diluted earnings per
ADS 367.2c 66.6c 14.1c (8.4c) 13.2c - 452.7c
The following items are included in Adjustments:
- Amortization and asset impairments: Impairment of IPR&D
intangible assets for RESOLOR ($27.0
million), amortization of intangible assets relating to
intellectual property rights acquired ($146.6 million), and tax effect of
adjustments;
- Acquisitions and integration activities: Up-front payments made
to Sangamo Biosciences Inc. and for the acquisition of the US
rights to prucalopride (marketed in certain countries in
Europe as RESOLOR) ($23.0 million), costs associated with acquisition
of FerroKin and the integration of ABH ($11.8 million), charges related to the change in
fair value of deferred contingent consideration ($3.3 million), and tax effect of
adjustments;
- Divestments, reorganizations and discontinued operations:
Re-measurement of DAYTRANA contingent consideration to fair value
($16.5 million);
- Legal and litigation costs: Costs related to the litigation,
government investigations, other disputes and external legal costs
($40.4 million), and tax effect of
adjustments; and
- Depreciation reclassification: Depreciation of $84.2 million included in Cost of product sales,
R&D costs and SG&A costs for US GAAP separately disclosed
for the presentation of Non GAAP earnings.
Unaudited results for the nine months
to September 30, 2011
Non GAAP reconciliation
9 months to September 30,
2011 US GAAP Adjustments Non GAAP
(a) (b) (c) (d)
$M $M $M $M $M $M
Total revenues 3,121.2 - - - - 3,121.2
Costs and expenses:
Cost of product sales 434.7 - (9.0) (9.0) (22.4) 394.3
R&D 556.3 (16.0) - - (16.4) 523.9
SG&A 1,295.3 (119.1) - - (46.4) 1,129.8
Loss on sale of product
rights 3.8 - - (3.8) - -
Reorganization costs 18.0 - - (18.0) - -
Integration and
acquisition costs 7.9 - (7.9) - - -
Depreciation - - - - 85.2 85.2
Total operating expenses 2,316.0 (135.1) (16.9) (30.8) - 2,133.2
Operating income 805.2 135.1 16.9 30.8 - 988.0
Interest income 1.5 - - - - 1.5
Interest expense (28.8) - - - - (28.8)
Other income/(expense),
net 15.9 2.4 - (23.5) - (5.2)
Total other expense, net (11.4) 2.4 - (23.5) - (32.5)
Income before income taxes
and equity in earnings of
equity method investees 793.8 137.5 16.9 7.3 - 955.5
Income taxes (187.3) (35.6) (4.2) 4.5 - (222.6)
Equity in earnings of
equity method investees,
net of tax 3.2 - - - - 3.2
Net income 609.7 101.9 12.7 11.8 - 736.1
Impact of convertible
debt, net of tax 25.2 - - - - 25.2
Numerator for diluted EPS 634.9 101.9 12.7 11.8 - 761.3
Weighted average number of
shares (millions) -
diluted 595.0 - - - - 595.0
Diluted earnings per ADS 320.1c 51.4c 6.4c 5.9c - 383.8c
The following items are included in Adjustments:
- Amortization and asset impairments: Impairment of intangible
assets ($16.0 million), amortization
of intangible assets relating to intellectual property rights
acquired ($119.1 million), impairment
of available for sale securities ($2.4
million), and tax effect of adjustments;
- Acquisitions and integration activities: Unwind of ABH
inventory step-up ($9.0 million),
costs associated with acquisition and integration of ABH
($10.5 million) and integration of
Movetis ($5.6 million), less
adjustment to contingent consideration payable for EQUASYM
($8.2 million), and tax effect of
adjustments;
- Divestments, reorganizations and discontinued operations:
Accelerated depreciation ($6.6
million) and dual running costs ($2.4
million) on the transfer of manufacturing from Owings Mills
to a third party, re-measurement of DAYTRANA contingent
consideration to fair value ($3.8
million), reorganization costs ($18.0
million) on the transfer of manufacturing from Owings Mills
to a third party and the establishment of an international
commercial hub in Switzerland,
gain on disposal of investment in Vertex ($23.5 million), and tax effect of adjustments;
and
- Depreciation: Depreciation of $85.2
million included in Cost of product sales, R&D costs and
SG&A costs for US GAAP separately disclosed for the
presentation of Non GAAP earnings.
Unaudited results for the three months
and nine months to September 30,
2012
Non GAAP reconciliation
The following table reconciles US GAAP net cash provided by
operating activities to Non GAAP cash generation:
3 months to September 9 months to September
30, 30,
2012 2011 2012 2011
$M $M $M $M
Net cash provided by
operating activities 288.4 178.7 1,011.2 664.2
Tax and interest
payments, net 66.8 117.2 150.9 280.0
Up-front payments in
respect of in-licensed
and acquired products - - 23.0 -
Non GAAP cash
generation 355.2 295.9 1,185.1 944.2
The following table reconciles US GAAP net cash provided by
operating activities to Non GAAP free cash flow:
3 months to September 9 months to September
30, 30,
2012 2011 2012 2011
$M $M $M $M
Net cash provided by
operating activities 288.4 178.7 1,011.2 664.2
Up-front payments in
respect of in-licensed
and acquired products - - 23.0 -
Capital expenditure (27.2) (40.9) (91.6) (135.9)
Non GAAP free cash
flow 261.2 137.8 942.6 528.3
Non GAAP net cash/(debt) comprises:
September 30, December 31,
2012 2011
$M $M
Cash and cash equivalents 1,321.9 620.0
Convertible bonds (1,100.0) (1,100.0)
Other debt (9.4) (8.2)
Non GAAP net cash/(debt) 212.5 (488.2)
NOTES TO EDITORS
Shire enables people with
life-altering conditions to lead better lives.
Through our deep understanding of patients' needs, we develop
and provide healthcare in the areas of:
- Behavioral Health and Gastro Intestinal conditions
- Rare Diseases
- Regenerative Medicine
as well as other symptomatic conditions treated by specialist
physicians.
We aspire to imagine and lead the future of healthcare, creating
value for patients, physicians, policymakers, payors and our
shareholders.
http://www.shire.com
THE "SAFEHARBOR" STATEMENT UNDER
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Statements included herein that are not historical facts are
forward-looking statements. Such forward-looking statements involve
a number of risks and uncertainties and are subject to change at
any time. In the event such risks or uncertainties materialize,
Shire's results could be materially adversely affected. The risks
and uncertainties include, but are not limited to, risks associated
with: the inherent uncertainty of research, development, approval,
reimbursement, manufacturing and commercialization of Shire's
Specialty Pharmaceuticals, Human Genetic Therapies and Regenerative
Medicine products, as well as the ability to secure new products
for commercialization and/or development; government regulation of
Shire's products; Shire's ability to manufacture its products in
sufficient quantities to meet demand; the impact of competitive
therapies on Shire's products; Shire's ability to register,
maintain and enforce patents and other intellectual property rights
relating to its products; Shire's ability to obtain and maintain
government and other third-party reimbursement for its products;
and other risks and uncertainties detailed from time to time in
Shire's filings with the Securities and Exchange Commission.
Non GAAP Measures
This press release contains financial measures not prepared in
accordance with US GAAP. These measures are referred to as
"Non GAAP" measures and include: Non GAAP operating income; Non
GAAP net income; Non GAAP diluted earnings per ADS;
effectivetax rate on Non GAAP income before income taxes and
earnings of equity method investees ("Effective tax
rate on Non GAAP income"); Non GAAP cost of product
sales; Non GAAP research and development; Non GAAP selling, general
and administrative; Non GAAP other income/expense; Non GAAP cash
generation; Non GAAP free cash flow and Non GAAP net
cash/(debt). These Non GAAP measures exclude the effect of
certain cash and non-cash items, that Shire's management believes
are not related to the core performance of Shire's business.
These Non GAAP financial measures are used by Shire's management
to make operating decisions because they facilitate internal
comparisons of Shire's performance to historical results and to
competitors' results. Shire's Remuneration Committee uses
certain key Non GAAP measures when assessing the performance and
compensation of employees, including Shire's executive
directors.
The Non GAAP measures are presented in this press release as
Shire's management believe that they will provide investors with a
means of evaluating, and an understanding of how Shire's management
evaluates, Shire's performance and results on a comparable basis
that is not otherwise apparent on a US GAAP basis, since many
non-recurring, infrequent or non-cash items that Shire's management
believe are not indicative of the core performance of the business
may not be excluded when preparing financial measures under US
GAAP.
These Non GAAP measures should not be considered in isolation
from, as substitutes for, or superior to financial measures
prepared in accordance with US GAAP.
Where applicable the following items, including their tax
effect, have been excluded when calculating Non GAAP earnings for
both 2012 and 2011, and from our Outlook:
Amortization and asset
impairments:
- Intangible asset amortization and impairment charges; and
- Other than temporary impairment of investments.
Acquisitions and integration
activities:
- Up-front payments and milestones in respect of in-licensed and
acquired products;
- Costs associated with acquisitions, including transaction
costs, fair value adjustments on contingent consideration and
acquired inventory;
- Costs associated with the integration of companies; and
- Noncontrolling interests in consolidated variable interest
entities.
Divestments, re-organizations and
discontinued operations:
- Gains and losses on the sale of non-core assets;
- Costs associated with restructuring and re-organization
activities;
- Termination costs; and
- Income/(losses) from discontinued operations.
Legal and litigation costs:
- Net legal costs related to the settlement of litigation,
government investigations and other disputes (excluding internal
legal team costs).
Depreciation, which is included in Cost of product sales,
R&D and SG&A costs in our US GAAP results, has been
separately disclosed for the presentation of 2011 and 2012 Non GAAP
earnings.
Cash generation represents net cash provided by operating
activities, excluding up-front and milestone payments for
in-licensed and acquired products, tax and interest payments.
Free cash flow represents net cash provided by operating
activities, excluding up-front and milestone payments for
in-licensed and acquired products, but including capital
expenditure in the ordinary course of business.
A reconciliation of Non GAAP financial measures to the most
directly comparable measure under US GAAP is presented on pages 20
to 24.
Sales growth at CER, which is a Non GAAP measure, is computed by
restating 2012 results using average 2011 foreign exchange rates
for the relevant period.
Average exchange rates for the nine months to September 30, 2012 were $1.58:£1.00 and $1.29:€1.00 (2011: $1.61:£1.00 and $1.41:€1.00). Average exchange rates for Q3 2012
were $1.58:£1.00 and $1.25:€1.00 (2011: $1.61:£1.00 and $1.41:€1.00).
TRADEMARKS
All trademarks designated ® and ™ 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, PENTASA® which is a registered
trademark of FERRING B.V., FABRAZYME® and
CEREZYME® which are trademarks of Genzyme Corporation,
LIALDA® and MEZAVANT® which are trademarks of
Giuliani International Limited and DAYTRANA® which is a
trade mark of Noven Pharmaceuticals Inc. Certain trademarks of
Shire plc or companies within the Shire group are set out in
Shire's Annual Report on Form 10-K for the year ended December 31, 2011 and the Quarterly Report on
Form 10-Q for the three and six months ended June 30, 2012.
For further information please
contact:
Investor Relations
- Eric Rojas erojas@shire.com +1-781-482-0999
- Sarah Elton-Farr seltonfarr@shire.com +44-1256-894-157
Media
- Jessica Mann jmann@shire.com +44-1256-894-280
- Gwen Fisher gfisher@shire.com +1-484-595-9836
- Jessica Cotrone jcotrone@shire.com +1-781-482-9538
SOURCE Shire plc