2010 Annual Report â€" DTR 6.3.5 Disclosure

24th Mar 2011 12:00

2010 Annual Report - DTR 6.3.5 Disclosure

March 24, 2011 - Shire plc , the global specialty biopharmaceutical company, announces that the following documents have today been posted or otherwise made available to shareholders:

2010 Annual Report

Notice of the 2011 Annual General Meeting

Form of Proxy

In accordance with Listing Rule 9.6.1, a copy of each of these documents has been uploaded to the National Storage Mechanism and will be available for viewing shortly.

The 2010 Annual Report and Accounts and Notice of the 2011 Annual General Meeting are also available on Shire's website at www.shire.com.

Disclosure & Transparency Rule (DTR) 6.3.5 requires the Company to disclose to the media certain information from its Annual Report, if that information is of a type that would be required to be disseminated in a half-yearly report. Accordingly, the Appendix to this announcement contains a management report and the directors' responsibility statement. It should be read in conjunction with the Company's unaudited full year results for the year ended December 31, 2010, issued on February 10, 2011 which comprises the Company's consolidated financial statements prepared under U.S. GAAP ('Group financial statements'). The Appendix together with the unaudited full year results constitute the material required by DTR 6.3.5 to be communicated to the media in unedited full text through a Regulated Information Service. This material is not a substitute for reading the full 2010 Annual Report.

The information included in the Appendix is extracted from the 2010 Annual Report which was approved by the Directors on February 23, 2011.

Tony GuthrieDeputy Company Secretary

For further information please contact:

Investor Relations Eric Rojas [email protected] +1 781 482 0999

Notes to editors Strategy

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 hyperactivity disorder, human genetic therapies and gastrointestinal diseases as well as opportunities in other specialty 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 about Shire, please visit our 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, 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 and Human Genetic Therapies products, as well as the ability to secure new products for commercialization and/or development; government regulation of Shire's products; Shire's ability to manufacture its products in sufficient quantities to meet demand; the impact of competitive therapies on Shire's products; Shire's ability to register, maintain and enforce patents and other intellectual property rights relating to its products; Shire's ability to obtain and maintain government and other third-party reimbursement for its products; and other risks and uncertainties detailed from time to time in Shire's filings with the Securities and Exchange Commission.

APPENDIX Contents Page 1. Business review - Chairman's review 4 - Chief Executive Officer's review 5 - Overview 7 - Currently marketed products 7 - Manufacturing and distribution 10 - Intellectual property 11 - Competition 11 - Strategy 14 - Products under development 15 - Business development 20

- Results of operations for the year to December 31, 2010 20

- Financial condition at December 31, 2010 26 - Liquidity and capital resources 26 - Treasury policies and organization 31 2. Principal risks and uncertainties - Risk factors related to Shire's business 34

- Risk factors related to the pharmaceutical industry in general 38

3. Directors' responsibility statement - Directors' responsibility statement 41 1. Business review Chairman's review

2010 will not go down as the easiest year for the pharmaceutical industry. The world is ageing, health care costs are soaring, a recessionary global economy put enormous strains on public and personal budgets, and payors turned increasingly to low-cost generics and to those branded products with proven societal and medical value. What emerging trends has Shire been closely monitoring, and why?

Shire is paying careful attention to the rising pressure on global health care budgets, the higher standards set by regulatory authorities, and the fact that pharmaceutical discovery itself grows increasingly more challenging-trends that are not new, but that certainly are accelerating. Shire is looking at how smaller companies like itself can continue to take the right risks and to operate with the efficiencies that the environment demands. Shire continues to recognize that blockbuster products are growing harder and harder to come by and that ever increasing promotional spending cannot be the future. For Shire, the key to success continues to be smaller niche markets and targeted therapeutics.

Shire has embarked on an aggressive internationalization campaign-opening new offices around the world, acquiring European companies such as Movetis, and laying the foundation for the launch of products for diseases not well known or not well treated. What is behind these developments?

The pharmaceutical industry is a global industry, and it is the responsibility of companies like Shire to respond effectively to physicians, patients, and payors all around the world. Shire is taking an approach to growth that is appropriate to its size and mission-leveraging the international presence it has already gained through its work with patients with rare orphan diseases such as Gaucher disease, Hunter syndrome and Fabry disease and scaling up as appropriate to serve patients with conditions ranging from attention deficit hyperactivity disorder ('ADHD') to ulcerative colitis.

Shire has proven its ability to internationalize effectively-to take advantage of internal capabilities and recently hired new talent to make the most of its pipeline, know-how, and existing portfolio.

For the past several years, pharmaceutical companies have worked hard to define the word 'value'-putting increasing emphasis on health economics and health technology assessments and broadening the range of products/solutions offered to patients and physicians. In 2010, the emphasis on value grew even stronger. Why?

Value is ultimately defined by the markets-by 'customers'. It's not about a price but rather about the relative value that a patient, a government, or an insurance company sees in a product or service. The tough environment that we find ourselves in demands value. This either means 'low price' or 'high value' (meaning the product is worth the price). As a proprietary company, Shire must, therefore, commit to continuing to provide best-in-class products that provide high value.

Shire has always been smart about this value question-smart about producing best-in-class products, smart about making sure that it is developing products people need and payors can finance. Companies that are unable to produce value will continue to be marginalized in the coming years.

What talents/resources/strategies does Shire bring to this new era? Why are we confident in the company's future?

Shire continues to be both intuitive in its ability to visualize and adapt to a changing world and scientific in its ability to discover and support the right opportunities. It is rare to find a pharmaceutical company that is flexible, innovative, and opportunistic all at the same time-a company that can achieve 28% growth, in operating income, in an era like this, a company whose people think like entrepreneurs, a company that continually evolves its business model. Shire is fortunate to have the leadership of a strong, committed management team and a Board of Directors whose members ask thoughtful questions and seek meaningful answers. The culture of openness facilitates these effective Board dynamics.

Shire visualized a tough future several years ago; it planned for it and continues to execute effectively. The results achieved this year once again demonstrate the wisdom of Shire's business model.

Matthew EmmensChairman

Chief Executive Officer's review

At Shire we spent much of 2010 in the company of physicians, patients, and payors-asking them questions about the challenges they face, listening to the needs that concern them, and working to deliver sustainable value. It is, I think, our willingness to listen and our desire to make an actual difference that enabled us to achieve, and in many ways surpass, the goals we set for ourselves.

We had numerous challenges facing us as the year began. To begin with, there were the global macroeconomic forces-healthcare reform, payor pressures, recessionary conditions-that faced all pharmaceutical organizations. Beyond that, we at Shire were facing our first full year where ADDERALL XR faced generic competition, the ADHD product that had been so key to our growth in recent years.

We more than met those challenges.

Throughout the year we continued to build our global presence-opening a new international hub in Nyon, just outside Geneva, Switzerland as well as new offices in Sydney, Australia; S£o Paulo, Brazil; Berlin, Germany; Warsaw, Poland; and Istanbul, Turkey. Concurrently, we promoted existing products in new territories-launching VYVANSE, our ADHD product, in Canada and LIALDA/ MEZAVANT, our ulcerative colitis product, in eight new countries. And when manufacturing problems at a competitor precipitated a global shortfall of medicines for patients with Type 1 Gaucher disease and Fabry disease, Shire responded with herculean efforts-accelerating the approval and launch of VPRIV for the former, and meeting increased demand for REPLAGAL so that Fabry patients would have uninterrupted supply of their medications.

Our global expansion was mirrored by gains achieved through lifecycle management, organic growth, and acquisition. We gained agreements to broaden the label for VYVANSE, making VYVANSE the first oral, long-acting stimulant for ADHD proven to enhance attention at 14 hours post dose in adults. VYVANSE was also approved, over the course of the year, for use in the US in adolescents, and for use in pediatrics in Brazil; we'll be launching both indications in 2011 and we'll be continuing to broaden understanding of the disease through new education and disease awareness programs.

By acquiring Belgium-based Movetis, we were able to add RESOLOR to our portfolio, a new chemical entity with significant composition of matter patent protection indicated for symptomatic treatment of chronic constipation in women in whom laxatives fail to provide adequate relief. RESOLOR is in early launch phase in the United Kingdom and Germany and our newly expanded gastrointestinal ('GI') team is preparing further rollouts across Europe. This drug is specifically targeted to deliver benefit to patients who have no other treatment option. A licensing deal with Acceleron, meanwhile, granted us ex-North American rights to Act RIIB molecules, which could become an exciting new platform technology; these molecules include ACE-031, which is in development for the treatment of Duchenne muscular dystrophy, a severe form of muscular dystrophy in males that ultimately leads to muscle failure and, sadly, to death.

Internally, work continued on intrathecal delivery mechanisms designed to deliver proteins across the blood/brain barrier for patients with central nervous system-manifested rare orphan diseases; key opinion leaders have expressed great optimism based on the trials we've undertaken thus far. At the same time, we explored the possible application of VYVANSE in both major depressive disorder and excessive daytime sleepiness and are pleased with the promising results of early clinical trials. Work continued, also, on expanding the label of and applications for INTUNIV, our non-stimulant ADHD product that works particularly well in combination with other stimulant ADHD products.

The year also saw us completing our $500 million investment in manufacturing facilities-facilities that will enable us to enhance the production of medicines for rare orphan diseases. We built new internal systems throughout the year, developed more efficient ways to manage promotional materials and product supplies, broadened our compliance programs, and made responsible business thinking and practices an integral part of everyday operations. And Shire itself became a stronger company as we hired talented new people all around the world, supported existing employees with training, performance management, and leadership development programs, and acknowledged some of the best of our best through the annual CEO Awards program. Our Brave culture continues to inspire broad thinking and extraordinary action. It remains our firm foundation.

We emerged from the year in a particularly favorable position from which to look around, to ask hard questions, and to imagine our future ten years on. Our world, of course, is changing. People are living longer. Government budgets are under pressure. Pension deficits are ballooning. Chronic illnesses beset greater numbers of individuals. Those tasked with paying for healthcare in this new environment have reached a tipping point. They are asking for help. They are demanding that new products demonstrate actual medical and societal value. They are making it clear that they will no longer be paying for 'me-too' products, no longer supporting medicines that are not adding real value.

You have to be brave in this new environment; you have to be innovative. You have to develop products that meet genuine needs and be willing to test them against every conceivable measure. You have to want to be-and work to be-the company that physicians, patients, policymakers, payors, and investors all trust to responsibly deliver value. You have to keep patients at the heart of all you do.

When I travel the world, I am eager to listen-to find out how the pricing authorities in Australia and Brazil, for example, are managing complex demands, or how policymakers in the United States and Europe are responding to healthcare needs and pressures. I am committed to taking what I hear and learn and, together with my great leadership team and the more than 4,000 people of Shire, developing the right set of solutions.

We are well on our way to meeting the aspirational goals that we defined for ourselves back in 2008. We're now looking ahead with optimism-guided by our belief that whenever we are meeting the needs of patients and families with innovative, truly valued products, we are also delivering value for our stakeholders, and improving the world in which we live.

Angus RussellChief Executive OfficerOverview

Shire plc (the 'Company') and its subsidiaries (collectively 'Shire' or the 'Group') has the strategic goal to be the leading specialty biopharmaceutical company in the world that focuses on meeting the needs of the specialist physician. Shire focuses its business on ADHD, Human Genetic Therapies ('HGT') and GI diseases, as well as opportunities in other specialty 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.

Substantially all of the Group's revenues, expenditures and net assets are attributable to the research and development ('R&D'), manufacture, sale and distribution of pharmaceutical products within two reportable segments: Specialty Pharmaceuticals ('SP') and HGT. The Group also earns royalties (where Shire has out-licensed products to third-parties) which are recorded as revenues.

Revenues are derived primarily from two sources - sales of the Group's own products and royalties:

90% (2009: 90%) of total revenues are derived from product sales, of which 71% (2009: 79%) are within SP and 29% (2009: 21%) are within HGT; and

9% of total revenues are derived from royalties (2009: 9%).

Currently marketed products

The table below lists the Group's material marketed products at December 31, 2010 indicating the owner/licensor, disease area and the key territories in which Shire markets the product.

SP Products Disease area Owner/ Key territories licensor Treatments for ADHD VYVANSE (lisdexamfetamine dimesylate) ADHD Shire US and Canada (1) INTUNIV (extended release guanfacine) ADHD Shire US

EQUASYM (methylphenidate hydrochloride) ADHD Shire Europe and immediate release (IR) and modified release

Latin America (XL) (2)

Adderall XR (mixed salts of a single-entity ADHD Shire US and Canada amphetamine)

Treatments for GI diseases

LIALDA (mesalamine)/ MEZAVANT(mesalazine) Ulcerative Giuliani US and Europe

colitis SpA (3) Pentasa (mesalamine) Ulcerative Shire US colitis Resolor (prucalopride) Chronic Shire Europe constipation in women Products Disease area Owner/licensor Key territories Treatments for diseases in other therapeutic areas Fosrenol (lanthanum carbonate) Hyperphosphatemia Shire US, Europe and in Japan(2, 4) end stage renal disease CALCICHEW (calcium carbonate Adjunct in Nycomed Pharma AS UK and Republic ofrange) osteoporosis ('Nycomed') Ireland Carbatrol (carbamazepine Epilepsy Shire US extended-release capsules) REMINYL/REMINYL XL Alzheimer's Synaptech, Inc. UK and Republic of(galantamine hydrobromide) disease ('Synaptech') Ireland (5) XAGRID (anagrelide Elevated platelet Shire Europe (2) hydrochloride) counts in at risk essential thrombocythemia patients HGT Products Disease area Owner/ Key territories licensor

REPLAGAL Fabry disease Shire Europe, Latin America and (agalsidase alfa)

Asia Pacific(6)

ELAPRASE Hunter syndrome Shire US, Europe, Latin America (idursulfase) (Mucopolysaccharidosis

and Asia Pacific(7) Type II, MPS II) FIRAZYR Hereditary angioedema Shire Europe and Latin America (icatibant) ('HAE') VPRIV Gaucher disease, type Shire US, Europe, Latin America (velaglucerase 1 alfa)

(1) Approval in Brazil was granted in July 2010; the product will be marketed as VENVANSE in Brazil.

(2) Marketed by distributors in certain markets.

(3) Marketed in US as LIALDA and Europe as MEZAVANT XL or MEZAVANT.

(4) Marketed in Japan under license by Bayer Yakuhin Limited ('Bayer').

(5) Marketed in rest of world ('RoW') under license from Shire by Janssen Pharmaceutica N.V. ('Janssen') (part of the J&J group of companies).

(6) Marketed in Japan under license from Shire by Dainippon Sumitomo Pharma Co., Ltd. ('DSP').

(7) Marketed in Asia Pacific by Genzyme under license from Shire.

Royalties received from other products

Antiviral products Products Principal Relevant territory/marketed indications by 3TC/EPIVIR (lamivudine) Human Canada / Shire & ViiV(1); Immunodeficiency RoW / ViiV Virus ('HIV') COMBIVIR (lamivudine and HIV Canada / Shire & ViiV; RoW zidovudine) / ViiV TRIZIVIR (lamivudine, zidovudine HIV Canada / Shire & ViiV; RoW and abacavir) / ViiV EPZICOM/KIVEXA (lamivudine and HIV Canada / Shire & ViiV; RoW abacavir) / ViiV ZEFFIX/EPIVIR-HBV/ HEPTOVIR(2) Hepatitis B Canada / Shire & GSK; RoW /(lamivudine) infection GSK

(1) In 1996 Shire formed a commercialization partnership with GSK to market 3TC and Zeffix in Canada. In 2009, GSK established a partnership with Pfizer called ViiV Healthcare ("ViiV") that brought together the HIV portfolios of GSK and Pfizer. In 2009 GSK assigned its interest in the partnership to ViiV.

(2) This is not a comprehensive list of trademarks for this product. The product is also marketed under other trademarks in some markets.

Other productsADDERALL XR

Shire receives royalties from Impax Laboratories, Inc. ('Impax') sales of authorized generic ADDERALL XR.

REMINYL and REMINYL XL

Shire receives royalties, outside the UK and Republic of Ireland, on Janssen's sales of REMINYL and REMINYL XL (under the name RAZADYNE and RAZADYNE ER in the US).

FOSRENOL

Shire licensed the rights to FOSRENOL in Japan to Bayer in December 2003. Bayer launched FOSRENOL in Japan in March 2009. Shire receives royalties from Bayer's sales of FOSRENOL in Japan.

Manufacturing and distribution

Active pharmaceutical ingredient ('API') sourcing

The Group sources API from third-party suppliers for its SP products and its HGT product FIRAZYR. Shire has manufacturing capability for agalsidase alfa, idursulfase and velaglucerase alfa at its protein manufacturing plant in Cambridge, Massachusetts, US for its HGT products, REPLAGAL, ELAPRASE and VPRIV.

The Group currently has a dual source of API for VYVANSE, ADDERALL XR and PENTASA and is developing dual sources for LIALDA and INTUNIV. The Group manages the risks associated with reliance on single sources of API by carrying additional inventories or developing second sources of supply.

In order to support the rapid growth of VPRIV and REPLAGAL, as well as to support clinical development, additional manufacturing capacity has been added in Lexington, Massachusetts, US. Validation runs for REPLAGAL have been completed and submissions to support approval of the new facility will occur in the first half of 2011. VPRIV validation runs will be completed in 2011 with submission in late 2011.

Finished Product Manufacturing

The Group sources most of its SP products from third-party contract manufacturers. HGT finished products are manufactured by contract manufacturers specializing in aseptic fill-finish operations.

The Group currently has dual sources for VYVANSE, ELAPRASE and REPLAGAL and is developing a second source for the manufacturing of LIALDA. The Group sources ADDERALL XR, FOSRENOL, FIRAZYR, INTUNIV, CARBATROL, PENTASA, VPRIV, RESOLOR and XAGRID from a single contract manufacturer for each product. The Group manages the risks associated with reliance on single sources of production by carrying additional inventories.

During 2009, following a comprehensive evaluation of its operations and strategic focus, Shire decided to phase out operations at its SP manufacturing facility at Owings Mills, Maryland. Over 2011, all products currently manufactured by Shire at this site will transition to a contract manufacturer and operations and employee numbers will wind down over this period.

Distribution

The Group's US distribution center for SP products, which includes a large vault to house US Drug Enforcement Administration ('DEA') regulated Schedule II products, is located in Kentucky. From there, the Group primarily distributes its products through the three major wholesalers who have hub or distribution centers that stock Schedule II drugs in the US, providing access to nearly all pharmacies in the US.

The distribution and warehousing of HGT products for the US market is contracted out to specialist third-party contractors.

Outside of the US, physical distribution of SP and HGT products is either contracted out to third-parties (where the Group has local operations) or facilitated via distribution agreements (where the Group does not have local operations).

Material customers

The Group's two largest trade customers are Cardinal Health, Inc. and McKesson Corp., both of which are in the US. In 2010, these wholesale customers accounted for approximately 25% and 19% of product sales, respectively.

Intellectual Property

An important part of the Group's business strategy is to protect its products and technologies through the use of patents and trademarks, to the extent available. The Group also relies on trade secrets, unpatented know-how, technological innovations and contractual arrangements with third-parties to maintain and enhance its competitive position where it is unable to obtain patent protection or where marketed products are not covered by specific patents. The Group's commercial success will depend, in part, upon its ability to obtain and enforce strong patents, to maintain trade secret protection, to operate without infringing the proprietary rights of others and to comply with the terms of licenses granted to it. The Group's policy is to seek patent protection for proprietary technology whenever possible in the US, Canada, major European countries and Japan. Where practicable, the Group seeks patent protection in other countries on a selective basis. In all cases the Group endeavors to either obtain patent protection itself or support patent applications by its licensors. The markets for some of the potential products for rare genetic diseases caused by protein deficiencies are small, and, where possible, the Group has sought orphan drug designation for products directed to these markets.

In the regular course of business, the Group's patents may be challenged by third-parties. The Group is a party to litigation or other proceedings relating to intellectual property rights.

The degree of patent protection afforded to pharmaceutical inventions around the world is uncertain. If patents are granted to other parties that contain claims having a scope that is interpreted by the relevant authorities to cover any of the Group's products or technologies, there can be no guarantee that the Group will be able to obtain licenses to such patents or make other arrangements at reasonable cost, if at all.

The existence, scope and duration of patent protection varies among the Group's products and among the different countries where the Group's products may be sold. They may also change over the course of time as patents are granted or expire, or become extended, modified or revoked.

The loss of patent protection following a legal challenge may result in third-parties commencing commercial sales of their own versions of the Group's products before the expiry of the patents. The Group's sales of such product(s) may decrease in consequence. In many cases, however, the Group's products have more than one patent pertaining to them. In such cases, or where the Group enjoys trade secrets, manufacturing expertise, patient preference or regulatory exclusivity, the Group may continue to market its own products without its commercial sales of those products being adversely affected by the loss of any given patent.

Competition

Shire believes that competition in its markets is based on, among other things, product safety, efficacy, convenience of dosing, reliability, availability and price. Companies with more resources and larger R&D expenditures than Shire have a greater ability to fund the research and clinical trials necessary for regulatory applications, and consequently may have a better chance of obtaining approval of drugs that would then compete with Shire's products. Other products now in use or being developed by others may be more effective or have fewer side-effects than the Group's current or future products. The market share data provided below is sourced from IMS Health.

ADHD market

Competition in the US ADHD market has increased with the launch of competing products in recent years, including the launch of authorized generic versions of ADDERALL XR by Teva Pharmaceutical Industries, Ltd. ('Teva') and Impax Laboratories, Inc. ('Impax') in 2009. This genericization has resulted in a decline in sales of ADDERALL XR and in December 2010 authorized generic versions of ADDERALL XR had a 12.4% share of the US ADHD market. In late 2010, KAPVAY (clonidine extended release) was approved by the US Food and Drug Administration ('FDA') for the treatment of ADHD and is being launched in the US by Shionogi & Co., Ltd in early 2011. Shire's share of the US ADHD market in December 2010 was 24.6% (compared to 22% in December 2009, excluding DAYTRANA which the Group divested to Noven in October 2010).

Shire's key ADHD market is the US with three products for the treatment of ADHD. Shire also has ADHD products in Canadian and selected European Union ('EU') markets and further geographic expansion plans are underway.

VYVANSE, a long-acting pro-drug stimulant designed to provide once-daily dosing, approved for the treatment of ADHD in children, adolescents, and adults, and launched in 2007 in the US and for children in Canada in 2010. Launches in Brazil and selected EU markets are planned for 2011 and beginning in 2012, respectively, subject to receiving the requisite governmental or regulatory approvals;

INTUNIV, a long-acting non-stimulant, non-scheduled treatment for ADHD in children and adolescents, launched in November 2009 and planned for selected EU markets beginning in 2014, subject to receiving the requisite governmental or regulatory approvals;

ADDERALL XR, an extended release stimulant, launched in the US and Canada in 2001 and 2004, respectively; and

EQUASYM XL, a long-acting stimulant, methylphenidate capsules acquired from UCB in 2009 and launched in selected EU markets.

Many products which compete with the Group's ADHD products in the US contain methylphenidate, including the following once-daily formulations: CONCERTA, launched in 2000 by J&J (in conjunction with Alza); METADATE CD, launched in 2001 by UCB; RITALIN LA, launched by Novartis in 2002; DAYTRANA launched in 2006 by Shire (and subsequently divested to Noven in October 2010), and FOCALIN XR, launched by Novartis (in conjunction with Celgene Corporation) in 2005. In December, 2010, CONCERTA, METADATE CD, RITALIN LA, DAYTRANA, and FOCALIN XR had a 16.4%, 1.6%, 1.1%, 1.0% and 5.8% share of the US ADHD market, respectively. In 2003, Eli Lilly launched STRATTERA, a non-stimulant, non-scheduled treatment for ADHD. In December 2010, STRATTERA had a 5.3% share of the US ADHD market.

Key competitors in the European ADHD market are CONCERTA (Janssen-Cilag), RITALIN LA (Novartis), MEDIKINET (Medice) and STRATTERA (Eli Lilly), depending upon the country.

The Group is also aware of clinical development efforts by AstraZeneca plc (in collaboration with Targacept, Inc.), Eli Lilly and Company Limited, J&J, Merck & Co., Inc., Otsuka Pharmaceutical Co., Ltd., NextWave Pharmaceuticals, Inc., PsychoGenics, Inc., and Supernus to develop additional treatment options for ADHD.

GIUlcerative Colitis market

Ulcerative colitis is a type of Inflammatory Bowel Disease. The primary treatments for patients with ulcerative colitis are formulations containing mesalamine (also known as 5-ASA). More than 88% of all ulcerative colitis patients receive treatment with 5-ASA. In 2009, Salix launched APRISO and Proctor and Gamble launched ASACOL HD. Proctor and Gamble subsequently sold the ASACOL franchise to Warner Chilcott. At December 31, 2010 APRISO and ASACOL HD had 5.7% and 9.1% market share, respectively. Shire defines the 5-ASA competitive set as the non-sulfasalazine, oral mesalamine and mesalamine pro-drug products. In December 2010, Shire's share of the US ulcerative colitis market was 34.3% (compared to 32% in December 2009).

The US oral 5-ASA market is led by Warner-Chilcott's ASACOL. In December 2010, ASACOL had a 42.4% share of the oral 5-ASA market, declining from 52.3% in December 2009. In December 2010 Salix's COLAZAL had a 0.9% market share, while Alaven Pharmaceutical LLC's DIPENTUM had a 0.6% market share.

The EU oral 5-ASA market is somewhat more fragmented. All market shares stated in this paragraph are as at November 2010. Major competitors in the UK include Warner Chilcott's ASACOL which had a 56% share of the UK oral 5-ASA market and Ferring's PENTASA, which had a 25% share of the same market. The German oral 5-ASA market is led by Dr Falk's SALOFALK, with 56% market share, followed by Shire's MEZAVANT with 17% share. Merkle Recordati GmbH's CLAVERSAL has 15% share. CLAVERSAL and Ferring's PENTASA are the leaders in the oral 5-ASA market in Spain with 41% and 46% market shares respectively. Ferring's PENTASA is the market leader in France with 78% market share of the oral 5-ASA market. Norgine B.V.'s FIV-ASA had a 19% share of the French oral 5-ASA market. Overall, ASACOL had a 21% share of the EU G5 oral 5-ASA market (UK, Germany, Spain, Italy, and France). In 2010, Ferring launched a new key competitor, PENTASA 1gm tablet in the Netherlands, Denmark, Norway and Slovakia and we expect future EU launches in 2011.

Mesalamine and balsalazide (mesalamine pro-drug) products are generally protected by formulation patents only. In December 2007, the FDA denied Salix's Citizen Petition for COLAZAL and Salix subsequently announced the launch of an authorized generic version by Watson Laboratories. This was followed by the introduction of three other generic versions of COLAZAL. Generic versions of COLAZAL had a 6.9% share of the US oral 5-ASA market in December 2010.

The Group is aware of other 5-ASA and non-ASA biologic treatments in development for GI disorders by UCB, Abbott Laboratories and Centocor Ortho Biotech Inc.

Chronic constipation market

In Europe over-the-counter and prescription laxatives are the current first line therapy for chronic constipation. The highest value laxative (by revenue) is MOVICOL, a polyethylene glycol (PEG) 3350, sold by Norgine. In Europe, RESOLOR is indicated for symptomatic treatment of chronic constipation in women in whom laxatives fail to provide adequate relief. Currently, there are no other products available to treat chronic constipation in patients who do not adequately respond to laxative treatment.

The Group is aware of other therapies for the treatment of chronic constipation being developed by Ironwood Pharmaceuticals, Inc., Forest Laboratories, Inc., Almirall, Synergy Pharmaceuticals, Inc., ARYx Therapeutics, Theravance, Inc., Sucampo Pharmaceuticals, Inc., and Albireo.

Markets for the treatment of rare genetic diseases

Competitors for lysosomal storage disorder ('LSDs') include Actelion Ltd., Protalix BioTherapeutics Inc. ('Protalix'), and Genzyme. For example, REPLAGAL competes with Genzyme's FABRAZYME, and VPRIV competes with Genzyme's CEREZYME, Actelion's ZAVESCA and will compete with the Protalix compound UPLYSO (worldwide rights outside of Israel licensed to Pfizer) if approved. Shire is aware of two companies (Korea Green Cross Corporation and JCR Pharmaceuticals Co. Ltd) that are developing Enzyme Replacement Therapies ('ERT') for the treatment of Hunter syndrome.

FIRAZYR competes in Europe with CSL Behring's BERINERT P, a human plasma-derived C1-esterase inhibitor (C1-INH) product, and with Pharming Group N.V.'s RUCONEST (a recombinant version of C1-INH), which has recently received European Medicines Agency ('EMA') approval and will be launched in Europe by Swedish Orphan Biovitrum. If approved in the US, FIRAZYR will compete with BERINERT and with Dyax Corporation's KALBITOR, a plasma kallikrein inhibitor. FIRAZYR will also compete indirectly with Viropharma, Inc.'s CINRYZE, a plasma-derived CI-INH product approved in the US for prophylaxis of HAE attacks.

HIV Market

The HIV competitive landscape is becoming more crowded and complicated as treatment trends evolve. The Group's 3TC/lamivudine/EPIVIR products (all licensed to GSK) are part of the Nucleoside/Nucleotide Reverse Transcriptase Inhibitors ('NRTI') market. TRIZIVIR, COMBIVIR and EPZICOM/KIVEXA are part of the combined NRTI market. TRUVADA (tenofovir/emtricitabine), sold by Gilead, is the market leader in combination NRTI. In addition to the two NRTI HIV markets in which lamivudine is sold, there is competition from NRTIs, PIs and entry inhibitors.

TRUVADA and ATRIPLA (efavirenz/emtricitabine/tenofovir), a cross-class fixed dose combination also sold by Gilead, both represent the most direct competition to lamivudine.

Several generic drug companies have filed Abbreviated New Drug Applications ('ANDAs') seeking approval for EPIVIR, COMBIVIR, ZEFFIX and EPZICOM in the US and several tentative approvals of generic lamivudine have been issued by the FDA.

Strategy

Shire's strategic objectives are set using a balanced scorecard approach. Strategic and operational objectives are set at the corporate level and cascaded to the segment (SP/HGT), therapeutic area and functional levels so that these objectives are aligned with the corporate objectives. The Group therefore takes a fully integrated approach to strategic management and uses key performance indicators ('KPIs') to measure the achievement of these objectives. For 2010, Shire's corporate KPIs included certain financial and non financial measures.

The markets in which the Group conducts its business are highly competitive and highly regulated. The healthcare industry is experiencing:

pressure from governments and healthcare providers to keep prices low while increasing access to drugs;

increased R&D costs, because development programs are typically larger and take longer to get approval from regulators;

challenges to existing patents from generic manufacturers;

governments and healthcare systems favoring earlier entry of low cost generic drugs; and

higher marketing costs, due to increased competition for market share.

Shire's strategy to become the leading specialty biopharmaceutical company has been developed to address industry-wide competitive pressures. This strategy has resulted in a series of initiatives in the following areas:

Markets

Historically, Shire's portfolio of approved products has been heavily weighted towards the North American market. The acquisition in 2005 of Transkaryotic Therapies, Inc. ('TKT') and the consequent establishment of our HGT business, together with the acquisitions of Jerini AG ('Jerini') in 2008 (which brought the HAE product FIRAZYR), EQUASYM in 2009 (which facilitated Shire's immediate access to the European ADHD market) and Movetis NV ('Movetis') in 2010 (which brought EU rights to RESOLOR and further developed our GI pipeline), provided Shire with the platforms to increase its presence in Europe and the RoW, thereby working towards diversifying the risk associated with reliance on one geographic market.

In 2010 the SP and HGT businesses derived more than 17% and 81%, respectively, of their product sales from outside of the US. Shire has made significant progress on a path to geographic diversification with additional development and commercialization activities in 2010, including:

continued roll-out of MEZAVANT, FOSRENOL and FIRAZYR in Europe; and

the acquisition of Movetis, which has added the approved product RESOLOR to the Group's European GI portfolio.

Shire's long-term mission is to increase the value of product sales from outside of the US and outside of US, UK, Germany, France, Italy, Spain and Canada. Shire has ongoing late-stage development activities, which are expected to further supplement the diversification of revenues in the future, and include the following:

VYVANSE launches in Latin American countries and the registration program for approval in the EU;

INTUNIV registration program for approval in the EU;

the continued roll-out of VPRIV in certain EU and Latin American countries;

the continued roll-out of FIRAZYR in certain European and Latin American countries;

the LIALDA/MEZAVANT diverticulitis registration program; and

the continued roll-out of FOSRENOL, EQUASYM and RESOLOR in EU and RoW countries.

R&D

Over the last five years Shire has focused its R&D efforts on products in its core therapeutic areas and concentrated its resources on obtaining regulatory approval for later-stage pipeline products within these core therapeutic areas. In addition to continued efforts in its late-stage pipeline in core ADHD, GI and HGT therapeutic areas, Shire has also progressed work on an earlier stage pipeline.

Evidence of the successful progression of the late-stage pipeline can be seen from the granting of approval and associated launches of the Group's products over the last six years. Since January 2005, several products have received regulatory approval: in the US, ELAPRASE in 2006, LIALDA and VYVANSE in 2007, INTUNIV in 2009, and VPRIV in 2010; in the EU, FOSRENOL in 2005, ELAPRASE and MEZAVANT in 2007, and VPRIV in 2010; in Canada, VYVANSE in 2010.

Shire's strategy is focused on the development of product candidates that have a lower risk profile. As Shire further expanded its earlier phase pipeline, R&D costs in 2010 included expenditure on several pre-clinical to Phase 3 studies for products in development as well as Phase 3(b) and Phase 4 studies to support recently launched products in the SP and HGT businesses, together with the development of new projects in both the SP and HGT businesses.

Patents and Market Exclusivity

The loss or expiration of patent protection or regulatory exclusivity with respect to any of the Group's major products could have a material adverse effect on the Group's revenues, financial condition and results of operations, as generic manufacturers may enter the market. Generic manufacturers often do not need to complete extensive clinical studies when they seek registration of a copy product and accordingly, they are generally able to sell the Group's drugs at a much lower price.

As expected, in 2009 Teva and Impax commenced commercial shipments of their authorized generic versions of ADDERALL XR, leading to declines in sales of branded ADDERALL XR in both 2009 and 2010. The FDA has not yet reached a decision on the Citizen Petition for ADDERALL XR which was filed in October 2005. An FDA decision which does not require generic follow-on products to require bio-equivalence or additional clinical testing could lead to additional generic competition for ADDERALL XR.

Shire is engaged in various legal proceedings with generic manufacturers with respect to its VYVANSE, INTUNIV, FOSRENOL, LIALDA and ADDERALL XR patents.

Products under development

The Group focuses its development resources on projects within its core therapeutic areas of ADHD, GI, and HGT, as well as early development projects in additional therapeutic areas. Total R&D expenditures of $661.5 million, $638.3 million and $494.3 million were incurred in the years to December 31, 2010, 2009 and 2008 respectively.

The table below lists the Group's products in clinical development as ofDecember 31, 2010 by disease areas indicating the most advanced developmentstatus reached in key markets and the Group's territorial rights in respect ofeach product. SP Product Disease area Development status The Group's at December 31, territorial 2010 rights Treatments for ADHD INTUNIV (extended For use in Registration in US Global release combination guanfacine) with other ADHD treatments VYVANSE ADHD Phase 3 in EU Global (lisdexamfetamine dimesylate) INTUNIV ADHD Phase 3 in EU Global SPD 547 ADHD Phase 1 Global Treatments for GI diseases LIALDA Maintenance of Registration in US Global (excluding Italy and (mesalamine) remission in and Canada Latin America) (1) ulcerative colitis LIALDA Diverticulitis Phase 3 globally Global (excluding Italy and (mesalamine)/ Latin America) (1) MEZAVANT (mesalazine) Chronic RESOLOR Constipation (prucalopride) (Males) Phase 3 in EU Europe SPD 556(M0002) Ascites Phase 2 Global Refractory gastroesophageal SPD 557(M0003) reflux disease Phase 2 EU and North America ('GERD') Treatments for diseases in other therapeutic areas FOSRENOL (lanthanum Chronic kidney Pre-registration in Global carbonate) disease the US ('CKD') in pre-dialysis patients XAGRID Essential Phase 3 in Japan Global thrombocythaemia JUVISTA Improvement of scar Phase 2(2) US, Canada and appearance Mexico VYVANSE For Excessive Phase 2 Global (lisdexamfetamine Daytime dimesylate) Sleepiness ('EDS') VYVANSE Adjunctive therapy Phase 2 Global (lisdexamfetamine in dimesylate) major depressive disorder ('MDD') VYVANSE Other non ADHD Phase 2 Global (lisdexamfetamine indications in dimesylate) adults SPD 535 Arteriovenous Phase 1 Global grafts in hemodialysis patients HGT Product Disease area Development status The Group's at December 31, 2010 territorial rights Treatment for Angioedema FIRAZYR (icatibant) Acute HAE Registration in the US Global Treatment for Duchenne muscular dystrophy ('DMD') HGT-4510 DMD Phase 2a Global (excluding North America) (3) ERT HGT-2310 Hunter Syndrome with Phase 1/2 Global (4) central nervous system ('CNS') symptoms, idursulfase-IT HGT-1410 Sanfilippo Syndrome Phase 1/2 Global (Mucopolysaccharidosis IIIA) HGT-1110 Metachromatic Pre-clinical Global Leukodystrophy ('MLD')

Mochida Pharmaceutical Co., Ltd has rights to develop and sell LIALDA in Japan under license with Shire.

Phase 3 studies being conducted by Renovo in Europe.

As a result of a license and collaboration agreement with Acceleron.

Genzyme has rights to manage marketing and distribution in Japan and certain other Asia Pacific countries under a license with Shire.

Specialty Pharmaceuticals Treatments for ADHD

INTUNIV for use in combination with other ADHD treatments

On April 28, 2010 Shire submitted a supplemental New Drug application ('sNDA') to support the efficacy and safety of INTUNIV when used in combination with other approved ADHD treatments.

VYVANSE for ADHD in the EU

VYVANSE for the treatment of ADHD in children aged 6 to 17 in the EU is in Phase 3 development. Shire anticipates submission of the filing of a Marketing Authorization Approval ('MAA') for VYVANSE in certain countries in Europe in 2011.

INTUNIV for ADHD in the EU

INTUNIV for the treatment of ADHD in children aged 6 to 17 in the EU is in Phase 3 development. Shire anticipates submission of the filing of an MAA for INTUNIV in certain countries in Europe in 2013.

SPD 547 (Guanfacine Carrier Wave, ('GCW')) for the treatment of ADHD

SPD 547 is in early-stage development for the treatment of ADHD. The Phase 1 program is ongoing with results expected throughout 2011. GCW could potentially improve on the current guanfacine profile to minimize known food, GI and sedation effects.

Treatments for GI diseases

LIALDA for the maintenance of remission in ulcerative colitis in the US and Canada

On June 14, 2010 Shire submitted a sNDA and supplemental New Drug Submission to the FDA and Health Canada, respectively, to seek approval for LIALDA for the maintenance of remission of ulcerative colitis. The product was indicated for the maintenance of remission in patients who have ulcerative colitis on approval in the EU.

LIALDA/MEZAVANT for the treatment of diverticulitis

Phase 3 worldwide clinical trials investigating the use of LIALDA/MEZAVANT to prevent recurrent attacks of diverticulitis were initiated in 2007 and are ongoing.

RESOLOR for the treatment of chronic constipation in males

A Phase 3 European clinical trial to further assess the efficacy of RESOLOR for the treatment of chronic constipation in males was initiated in 2010 and is ongoing.

SPD 556 for the treatment of ascites

SPD 556 (M0002) is a selective Vasopressin V2 receptor antagonist for the treatment of ascites. This compound is ready for Phase 2 clinical trials.

SPD 557 for the treatment of refractory GERD

SPD 557 (M0003) is a selective 5-HT4 receptor agonist. An exploratory Phase 2 program to investigate the effect of the product on reflux episodes in patients currently treated with proton pump inhibitors was initiated in the fourth quarter 2010.

Treatments for diseases in other therapeutic areas

FOSRENOL for the treatment of pre-dialysis CKD

Shire is continuing to explore the regulatory pathway required to secure a label extension in the US for FOSRENOL to treat hyperphosphataemia in pre-dialysis CKD.

XAGRID for the treatment of essential thrombocythaemia in Japan

A Phase 3 clinical program has been initiated to assess the safety and efficacy of XAGRID in adult essential thrombocythaemia patients treated with cytoreductive therapy who have become intolerant to their current therapy or whose platelet counts have not been reduced to an acceptable level.

JUVISTA for the improvement of scar appearance

Renovo initiated its first pivotal European Phase 3 trial in scar revision in the fourth quarter of 2008 to support the filing of a European regulatory dossier. On February 11, 2011, Renovo announced its EU Phase 3 trial for JUVISTA in scar revision surgery did not meet its primary or secondary endpoints. Shire is currently considering the trial data and whether to exercise its rights to terminate the license agreement.

VYVANSE for the treatment of EDS

On January 10, 2011 Shire announced results from a study of VYVANSE (lisdexamfetamine dimesylate (or SPD 489)) assessing its effect in a model for EDS. In this investigational, single dose, single-site, randomized, placebo- and active-controlled study, VYVANSE was found to be statistically superior to placebo on both objective and subjective sleep measures. Statistical superiority to the active comparator 250 mg armodafinil was also found at higher VYVANSE doses. Shire plans to review potential development pathways with health authorities for VYVANSE as a possible EDS treatment option.

VYVANSE for the treatment of inadequate response in MDD

A Phase 3 program to assess the efficacy and safety of VYVANSE as adjunctive therapy in patients with MDD is expected to be initiated in mid 2011, following health authority meetings to establish the development program parameters.

VYVANSE for the treatment of other non ADHD indications in adults

Shire is conducting Phase 2 pilot clinical trials to assess the efficacy and safety of VYVANSE for the treatment of negative symptoms and cognitive impairment in schizophrenia and for the treatment of cognitive impairment in depression.

SPD 535 for the treatment of arteriovenous grafts in hemodialysis patients

SPD 535 is in development as a novel molecule with platelet lowering ability and without phosphodiesterase type III inhibition. Phase 1 development was initiated in the third quarter of 2009 and is ongoing. Data from Phase 1 clinical trials demonstrating positive proof-of-principle have been completed. The initial proof-of-concept program will target prevention of thrombotic complications associated with arteriovenous grafts in hemodialysis patients. Additional Phase 2 proof-of-concept clinical trials will also be initiated to assess opportunities in potential alternative indications.

Projects in pre-clinical development

A number of additional projects are underway in various stages of pre-clinical development for the SP area, including programs using Carrier Wave technology, which are primarily focused in the area of pain management. More data on these programs is expected throughout 2011.

Human Genetic Therapies Treatments for Angioedema FIRAZYR for HAE in the US

Prior to its acquisition by Shire, Jerini received a not approvable letter for FIRAZYR for use in the US from the FDA in April 2008. Shire agreed with the FDA that an additional clinical study would be required before approval could be considered and that a complete response to the not approvable letter would be filed after completion of this study. Shire has now completed a Phase 3 study in patients with acute attacks of HAE, known as the FAST-3 trial, and anticipates submitting a complete response to the FDA in early 2011.

Treatment for DMD HGT-4510 for DMD

HGT-4510 (also referred to as ACE-031) was added to the Shire HGT portfolio in 2010 through an exclusive license in markets outside of North America for the ActRIIB class of molecules being developed by Acceleron. The lead ActRIIB drug candidate, HGT-4510 is in development for the treatment of patients with DMD. The Phase 2a trial is on hold and clinical safety is under review. This product has been granted orphan designation in the US and the EU.

ERT

HGT-2310 for the treatment ofHunter syndrome with CNS symptoms, idursulfase-IT (intrathecal delivery)

HGT-2310 is in development as an ERT delivered intrathecally for Hunter syndrome patients with CNS symptoms. The Group initiated a Phase 1/2 clinical trial in the first quarter of 2010. This trial is ongoing. This product has been granted orphan designation in the US.

HGT-1410 for Sanfilippo A Syndrome (Mucopolysaccharidosis IIIA)

HGT-1410 is in development as an ERT delivered intrathecally for the treatment of Sanfilippo A Syndrome (Mucopolysaccharidosis IIIA), an LSD. The product has been granted orphan drug designation in the US and in the EU. The Group initiated a Phase 1/2 clinical trial in August 2010. This trial is ongoing.

HGT-1110 - for the treatment of MLD

Pre-clinical development of a formulation of HGT-1110, expressed from Shire's human cell platform and suitable for direct delivery to the CNS, is ongoing. The Group anticipates submission of an Investigational New Drug application in late 2011. This product has been granted orphan drug designation in the US and the EU.

Early Research Products

A number of additional early stage research projects are underway for the HGT business area.

Development projects discontinued during 2010

During 2010 the Group discontinued the following development project:

HGT-2610 for the treatment of Globoid cell leukodystrophy ('GLD')

HGT-2610 was in early development as an ERT for the treatment of GLD, an LSD. This program has been suspended, due to the lower observed incidence of infantile-onset GLD coupled with the rapidly progressive nature of the disease, which challenged the feasibility of clinical development.

Business Development

As a result of the issues associated with the loss or expiry of patent protection or loss of data exclusivity, Shire seeks to focus its business development activity on the acquisition and in-licensing of products and projects which have the benefit of long-term patent protection and/or data exclusivity.

For example, through the acquisition of Movetis in 2010, Shire obtained recently launched RESOLOR, a promising GI pipeline and world-class R&D talent. In 2010 Shire also acquired an exclusive license in markets outside of North America for the ActRIIB class of molecules being developed by Acceleron. The collaboration with Acceleron will initially focus on further developing HGT-4510 (also called ACE-031) for the treatment of patients with DMD.

In 2009, Shire acquired the worldwide rights (excluding the US, Canada and Barbados) to EQUASYM IR and XL from UCB and entered into a research collaboration with Santaris Pharma A/S ('Santaris') for the development of its Locked Nucleic Acid ('LNA') drug platform technology.

Organization and Structure

During 2010, to support the Group's mission to increase the proportion of product sales generated outside of the US, Shire established an international commercial hub in Switzerland.

Results of operations for the year to December 31, 2010

The Group's management analyzes product sales growth for certain products sold in markets outside of the US on a constant exchange rate ('CER') basis, so that product sales growth can be considered excluding movements in foreign exchange rates. Product sales growth on a CER basis is a Non GAAP financial measure ('Non GAAP CER'), computed by comparing 2010 product sales restated using 2009 average foreign exchange rates to 2009 actual product sales. This Non GAAP financial measure is used by Shire's management, and is considered to provide useful information to investors about the Group's results of operations, because it facilitates an evaluation of the Group's year on year performance on a comparable basis. Average key exchange rates for the year to December 31, 2010 were $1.55:£1.00 and $1.33:€1.00 (2009: $1.57:£1.00 and $1.39:€1.00).

Financial highlights for the year to December 31, 2010are as follows:

Product sales were up 16% to $3,128 million (2009: $2,694 million). Product sales excluding ADDERALL XR ('Core Product sales') grew strongly through 2010 (up 34% to $2,767 million), more than offsetting the decline in ADDERALL XR product sales (down 42% to $361 million) following loss of market exclusivity in April 2009. On a Non GAAPCER basis, Core Product sales were up 35%.

The 34% growth in Core Product sales to $2,767 million was driven by VYVANSE (up 26% to $634 million), REPLAGAL (up 81% to $351 million), LIALDA/MEZAVANT (up 24% to $293 million), and recently launched INTUNIV ($166 million) and VPRIV ($143 million).

Total revenues were up 15% (Non GAAP CER: up 16%) to $3,471 million (2009: $3,008 million) due to the growth in product sales and higher royalties (up 12% to $328 million).

Operating income increased by $174 million, or 28%, to $794 million (2009: $620 million), due to higher revenues and continued operating leverage, allowing us to absorb the effects of increased investment in our targeted R&D programs and an increase in SG&A activities to support our recent and future growth.

Net income attributable to Shire increased by $96 million to $588 million (2009: $492 million) and diluted earnings per Ordinary Share increased by 17% to 105.3c (2009: 89.7c).

Total revenuesThe following table provides an analysis of the Group's total revenues bysource: Year to December 31, 2010 2009 Change $'M $'M % ------ ------ ------ Product sales 3,128.2 2,693.7 +16% Royalties 328.1 292.5 +12% Other revenues 14.8 21.5 -31% ------ ------ ------ Total 3,471.1 3,007.7 +15% ------ ------ ------ Product sales Year to Year to Product Non GAAP US Exit December 31, December 31, sales CER prescription market 2010 2009 growth growth growth(1) share(1) $'M $'M % % % % SP ADHD VYVANSE 634.2 504.7 +26 +26 +28 15 ADDERALL XR 360.8 626.5 -42 -43 -32 7 INTUNIV 165.9 5.4 n/a(4) n/a(4) n/a(4) 3 DAYTRANA 49.4 71.0 -30 -30 n/a n/a(5) EQUASYM 22.0 22.8 -4 +1 n/a n/a(2) GI LIALDA/ MEZAVANT 293.4 235.9 +24 +24 +18 20 PENTASA 235.9 214.8 +10 +10 -5 15 RESOLOR 0.3 - n/a n/a n/a(3) n/a(3) General products FOSRENOL 182.1 184.4 -1

(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 December 31, 2010.

(2) IMS NPA data not available.(3) Not sold in the US in the year to December 31, 2010.

(4) INTUNIV was launched in the US in the fourth quarter of 2009. In 2009 VPRIV generated sales from early access programs prior to obtaining US and EU approval in 2010.

(5) The Group divested DAYTRANA to Noven effective October 1, 2010. Specialty Pharmaceuticals VYVANSE - ADHD

The increase in VYVANSE product sales was driven by both an increase in VYVANSE market share and US ADHD market growth (12%) as well as the effect of price increases taken since the fourth quarter of 2009. These factors offset the effect of higher sales deductions in 2010 due to the impact of increased Medicaid rebates principally as a result of US Healthcare Reforms.

ADDERALL XR - ADHD

ADDERALL XR product sales decreased due to lower US prescription demand (following the launch of authorized generic versions in 2009, which more than offset US ADHD market growth) and higher sales deductions in 2010 (65% of branded gross sales in 2010 compared to 47% in 2009). These factors more than offset the effects of stocking in 2010 compared to de-stocking in 2009.

There are potentially different interpretations as to how shipments of authorized generic ADDERALL XR to Teva and Impax should be included in the Medicaid rebate calculation pursuant to Medicaid rebate legislation, including the Deficit Reduction Act of 2005 (the 'Medicaid rebate legislation'). As a result, more than one unit rebate amount ('URA') is calculable for the purposes of determining the Group's Medicaid rebate liability to the States after authorized generic launch. In the years to December 31, 2010 and 2009, the Group has recorded its accrual for Medicaid rebates based on its best estimate of the rebate payable. This best estimate is consistent with (i) the Group's interpretation of the Medicaid rebate legislation, as amended in 2010 by the relevant provisions of the 2010 Affordable Care Act, (ii) the Group's repeated and consistent submission of price reporting to the Center for Medicare and Medicaid Services ('CMS'), using the Group's interpretation of the Medicaid rebate legislation, (iii) CMS calculating the URA based on that interpretation, (iv) States submitting Medicaid rebate invoices using this URA, and (v) Shire paying these invoices.

Shire believes that its interpretation of the Medicaid rebate legislation is reasonable and correct. In addition, the 2010 Affordable Care Act contained a provision, effective as of October 1, 2010, that provided further clarity, in a manner consistent with the Group's interpretation, as to how shipments of authorized generics should be included in Medicaid rebate calculations from October 1, 2010 forward. CMS has explicitly referred manufacturers with authorized generics to this new provision in making their branded rebate calculations, further supporting the Group's interpretation.

However, CMS could disagree with the Group's interpretation for determining Medicaid rebates payable for the period prior to October 1, 2010, and require Shire to apply an alternative interpretation of the Medicaid rebate legislation and pay up to $210 million above the recorded liability. For rebates in respect of 2009 prescriptions ('2009 rebates') this would represent a URA substantially in excess of the unit sales price of ADDERALL XR and accordingly in excess of the approximate amount of the full cost to the States of reimbursement for Medicaid prescriptions of ADDERALL XR. For rebates in respect of 2010 prescriptions, as a result of provisions in the 2010 Affordable Care Act, the URA would be limited to an amount approximating the unit sales price of ADDERALL XR.

Should CMS require Shire to apply an alternative interpretation of the Medicaid rebate legislation for the period prior to October 1, 2010, Shire could seek to limit any additional payment for 2009 rebates to a level approximating the full, un-rebated cost to the States of ADDERALL XR, or $130 million above the recorded liability. Further, Shire believes it has a strong legal basis supporting its interpretation of the Medicaid rebate legislation, and that there would be a strong basis to initiate litigation to recover any amount paid in excess of the recorded liability. The result of any such litigation cannot be predicted and could result in additional rebate liability above Shire's current best estimate.

Litigation proceedings regarding ADDERALL XR are ongoing.

INTUNIV - ADHD

US prescription demand for INTUNIV continued to increase throughout 2010. INTUNIV was launched in the US in November 2009, and product sales in 2010 included both shipments made in 2010 and the recognition into revenue of launch stocks which had been deferred in 2009 in accordance with Shire's accounting policies.

Litigation proceedings relating to the Group's INTUNIV patents are in progress.

LIALDA/MEZAVANT - Ulcerative colitis

Product sales for LIALDA/MEZAVANT continued to grow in 2010, driven by an increase in US market share and price increases taken since the fourth quarter of 2009. These factors were partially offset by higher sales deductions compared to the same period in 2009 due in part to US Healthcare Reforms.

Litigation proceedings regarding LIALDA/MEZAVANT are ongoing.

PENTASA - Ulcerative colitis

Product sales of PENTASA continued to grow despite lower US prescription demand due to the impact of price increases taken during 2010.

RESOLOR - Chronic Constipation

RESOLOR has generated revenues of $0.3 million since acquisition in October 2010 and sales are expected to be higher in 2011 as the product is launched in additional countries and captures a full year of revenue in existing markets.

FOSRENOL - Hyperphosphatemia

Product sales of FOSRENOL outside the US increased by 6% primarily because of higher prescription demand partially offset by mandatory price reductions that were imposed in 2010. Product sales of FOSRENOL in the US decreased by 7% due to lower US prescription demand and higher sales deductions compared to 2009, which more than offset the effect of price increases taken since the fourth quarter of 2009.

Litigation proceedings regarding Shire's FOSRENOL patents are ongoing.

Human Genetic Therapies ELAPRASE- Hunter syndrome

The growth in sales of ELAPRASE was driven by new patients commencing therapy across North America, Latin America and Europe, Middle East and Asia. On a Non GAAP CER basis sales grew by 16%.

REPLAGAL - Fabry disease

The 81% growth (87% on a Non GAAP CER basis) in REPLAGAL product sales was driven by a significant increase in demand in 2010 in all countries where REPLAGAL is sold as new patients commenced therapy and existing patients switched to REPLAGAL from a competitor product. This was attributable in part to supply shortages of that competitor product.

Litigation proceedings regarding REPLAGAL are ongoing.

VPRIV - Gaucher disease

Following the grant of a marketing authorization from the European Commission on August 26, 2010, VPRIV is now being reimbursed on an approved basis in several countries in the EU as well as in the US. VPRIV was approved by the FDA on February 26, 2010. Reimbursement on a pre-approval basis continues in other EU countries.

FIRAZYR - HAE

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

RoyaltiesRoyalty revenue increased by 12% to $328.1 million for the year to December 31,2010 (2009: $292.5 million). The following table provides an analysis ofShire's royalty income: Year to Year to December 31, December 31, 2010 2009 Change $'M $'M % ----- ----- ----- 3TC and ZEFFIX 154.0 164.0 -6% ADDERALL XR 100.3 68.0 +48% Other 73.8 60.5 +22% ----- ----- ----- Total 328.1 292.5 +12% ----- ----- -----

The increase in royalty revenue in 2010 was primarily due to higher royalties received on sales of authorized generic versions of ADDERALL XR (ADDERALL XR royalties have been received from Impax since October 2009, and were received from Teva, at a lower rate, between April and September 2009). Royalties received for 3TC and Zeffix from GSK were lower in 2010 compared to 2009 as 3TC based treatments continue to be adversely impacted by increased competition from other products.

Cost of product sales

Cost of product sales increased to $463.4 million for the year to December 31, 2010 (15% of product sales), up from $388.0 million in the corresponding period in 2009 (14% of product sales). Cost of product sales as a percentage of product sales increased by one percentage point compared to 2009 as lower gross margins on ADDERALL XR in 2010 and higher costs incurred in 2010 on the transfer of manufacturing from the Group's Owings Mills facility to a third-party offset the positive effect on gross margins of recently launched, higher margin products and higher gross margins from existing Core Products.

For the year to December 31, 2010 cost of product sales included depreciation of $38.1 million (2009: $21.8 million). Depreciation charged in 2010 is higher than 2009 due to accelerated depreciation of $25.7 million (2009: $12.0 million) following a change in the estimate of the useful lives of the property, plant and equipment at Shire's Owings Mills facility as a result of the anticipated closure of the facility in 2011.

R&D

R&D expenditure for the year to December 31, 2010 increased to $661.5 million (21% of product sales), compared to $638.3 million in the corresponding period in 2009 (24% of product sales). R&D expenditure in the year to December 31, 2010 included the up-front payment of $45.0 million (1% of product sales) on entering the collaboration with Acceleron for development of the ActRIIB class of molecules. R&D in the year to December 31, 2009 included $36.9 million (1% of product sales) related to the payment to amend an INTUNIV in-license agreement, $62.9 million (2% of product sales) following the agreement with Duramed Pharmaceuticals, Inc. ('Duramed') to terminate development of the Women's Health products, and the up-front payment to Santaris of $6.5 million for technology access and R&D funding.

Excluding these termination, license and up-front payments, R&D increased by $84.5 million in the year to December 31, 2010 compared to the same period in 2009 as the Group has continued to increase investment in a number of targeted R&D programs, including VYVANSE international and investigative uses of VYVANSE for new indications, Guanfacine Carrier Wave, R&D programs acquired with Movetis and other early stage development programs. For the year to December 31, 2010 R&D included depreciation of $19.0 million (2009: $15.5 million).

SG&A

SG&A expenses increased to $1,526.3 million (49% of product sales) for the year to December 31, 2010 from $1,342.6 million (50% of product sales) in the corresponding period in 2009. SG&A increased in 2010 compared to the same period in 2009 due to costs incurred to support the launches of INTUNIV and VPRIV, growth in new markets and the inclusion of Movetis operating costs from the fourth quarter of 2010 following completion of the acquisition. For the year to December 31, 2010 SG&A also included depreciation of $62.1 million (2009: $67.7 million), intangible asset amortization of $133.5 million (2009: $136.9 million) and intangible asset impairment charges of $42.7 million (2009: $nil) to write-down the DAYTRANA intangible asset to its fair value less costs to sell prior to divestment to Noven.

Gain on sale of product rights

For the year to December 31, 2010 the Group recorded gains on sale of product rights of $16.5 million (2009: $6.3 million) of which $10.4 million (2009: $nil) resulted from the re-measurement of contingent consideration receivable on divestment of DAYTRANA to its fair value, and $6.1 million (2009: $6.3 million) from the disposal of other non-core products.

Re-organization costs

For the year to December 31, 2010 Shire recorded re-organization costs of $34.3 million (2009: $12.7 million) of which $13.0 million (2009: $12.7 million) related to the transfer of manufacturing from its Owings Mills facility to a third-party and $21.3 million (2009: $nil) related to the establishment of an international commercial hub in Switzerland.

Integration and acquisition costs

For the year to December 31, 2010 the Group recorded integration and acquisition costs of $8.0 million (2009: $10.6 million), which in 2010 principally related to the acquisition of Movetis, and in 2009 to the integration of Jerini.

Interest expense

For the year to December 31, 2010 the Group incurred interest expense of $35.1 million (2009: $39.8 million). Interest expense principally relates to the coupon and amortization of issue costs on Shire's $1,100 million 2.75% convertible bonds due 2014.

Other income/(expense), net

For the year to December 31, 2010 the Group recognized other income, net of $7.9 million (2009: $60.7 million), primarily due to the recognition of a gain of $11.1 million (2009: $55.2 million) relating to the disposal of its investment in Virochem Pharma Inc. ('Virochem') in March 2009. At the time of disposal an element of the consideration was held in escrow for twelve months pending any warranty claims. The consideration was released from escrow in March 2010, resulting in the remaining gain being recognized in the year to December 31, 2010.

Other income/(expense), net also includes a loss of $3.6 million in the year to December 31, 2010 relating to the extinguishment of building finance obligations at Lexington Technology Park ('LTP'), and in 2009 includes a gain of $5.7 million following the substantial modification of a property lease.

Taxation

The effective rate of tax in 2010 was 24% (2009: 22%).

The effective rate of tax in 2010 benefited from increased profits in lower tax territories, including Switzerland following the implementation of an international commercial hub there in 2010, and an increase in US tax incentives (notably the domestic production deduction) partially offset by up-front payments to Acceleron which were deductible at tax rates lower than the Group's effective tax rate.

The effective rate of tax in 2009 benefited from the decrease in valuation allowances relating to state tax credits and loss carryforwards following Massachusetts state tax changes, and the favorable rate effect of the termination of the Women's Health development agreement with Duramed and the amendment to the INTUNIV in-license, which were both tax effected at rates higher than the Group's effective rate.

Financial condition at December 31, 2010

Cash and cash equivalents

Cash and cash equivalents have increased by $51.7 million to $550.6 million at December 31, 2010 (December 31, 2009: $498.9 million). In the year to December 31, 2010 cash provided by operating activities was $954.9 million. The strong operating cash flow in 2010 has funded significant investment in the business, including the acquisition of Movetis, LTP and other capital expenditures as well as enabling a reduction of net debt.

Accounts receivable, net

Accounts receivable, net have increased by $95.0 million to $692.5 million at December 31, 2010 (December 31, 2009: $597.5 million), principally due to higher gross revenues in 2010 compared to 2009. At December 31, 2010 receivables represented 50 days' sales, a reduction of one day compared to 2009 (December 31, 2009: 51 days).

Inventories

Inventories have increased by $70.3 million to $260.0 million at December 31, 2010 (December 31, 2009: $189.7 million), primarily due to an increase in the production of the Group's HGT products.

Property, plant and equipment, net

Property, plant and equipment, net increased by $176.6 million to $853.4 million at December 31, 2010 (December 31, 2009: $676.8 million), principally due to the acquisition of and construction at LTP.

Other intangible assets, net

Other intangible assets, net have increased by $188.2 million to $1,978.9 million at December 31, 2010 (December 31, 2009: $1,790.7 million) as a result of intangible assets recognized through the Movetis business combination, partially offset by amortization and impairment charges, the disposal of the DAYTRANA intangible asset and translational foreign exchange losses on non-US dollar denominated intangible assets.

Accounts payable and accrued expenses

Accounts payable and accrued expenses have increased by $310.2 million to $1,239.3 million (December 31, 2009: $929.1 million), primarily due to increases in accrued Medicaid and Managed Care rebates, partially offset by the decrease in deferred revenue following the recognition into revenues in 2010 of INTUNIV Launch Stocks which previously had been deferred.

Other long-term debt

Other long-term debt has decreased by $35.7 million to $7.9 million at December 31, 2010 (December 31, 2009: $43.6 million), due to the extinguishment of building finance obligations following the acquisition of LTP.

Liquidity and capital resources

General

The Group's funding requirements depend on a number of factors, including the timing and extent of its development programs; corporate, business and product acquisitions; the level of resources required for the expansion of manufacturing and marketing capabilities as the product base expands; increases in accounts receivable and inventory which may arise with any increase in product sales; competitive and technological developments; the timing and cost of obtaining required regulatory approvals for new products; the timing and quantum of milestone payments on collaborative projects; the timing and quantum of tax and dividend payments; the timing and quantum of purchases by the Employee Share Ownership Trust ('ESOT') of Shire shares in the market to satisfy option exercises; the timing and quantum of any amount that could be paid by the Group if CMS were to employ an alternative interpretation of the URA in respect of ADDERALL XR Medicaid rebates; and the amount of cash generated from sales of Shire's products and royalty receipts.

An important part of Shire's business strategy is to protect its products and technologies through the use of patents, proprietary technologies and trademarks, to the extent available. The Group intends to defend its intellectual property and as a result may need cash for funding the cost of litigation.

The Group finances its activities through cash generated from operating activities; credit facilities; private and public offerings of equity and debt securities; and the proceeds of asset or investment disposals.

Shire's balance sheet includes $550.6 million of cash and cash equivalents at December 31, 2010. Substantially all of Shire's debt relates to its $1,100 million 2.75% convertible bond which matures in 2014, although these bonds include a put option which could require repayment of the bonds in 2012. In addition, in November 2010 Shire entered into a new committed multicurrency revolving and swingline facilities agreement of $1,200 million, which is currently undrawn, and will mature in 2015. The Group's existing committed revolving credit facility was cancelled.

Shire 2.75% convertible bonds due 2014

On May 9, 2007 Shire issued $1,100 million in principal amount of 2.75% convertible bonds due 2014 and convertible into fully paid Ordinary Shares of Shire (the 'Bonds'). The net proceeds of issuing the Bonds, after deducting the commissions and other direct costs of issue, totaled $1,081.7 million. In connection with the 2008 Scheme of Arrangement the Trust Deed was amended and restated in order to provide that, following the substitution of Shire in place of Old Shire as the principal obligor and issuer of the Bonds, the Bonds would be convertible into Ordinary Shares of Shire.

The Bonds were issued at 100% of their principal amount, and unless previously purchased and cancelled, redeemed or converted, will be redeemed on May 9, 2014 (the 'Final Maturity Date') at their principal amount.

The Bonds bear interest at 2.75% per annum, payable semi-annually in arrears on November 9 and May 9. The Bonds constitute direct, unconditional, unsubordinated and unsecured obligations of the Company, and rank pari passu and ratably, without any preference amongst themselves, and equally with all other existing and future unsecured and unsubordinated obligations of the Company.

The Bonds may be redeemed at the option of the Company, at their principal amount together with accrued and unpaid interest if: (i) at any time after May 23, 2012 if on no less than 20 dealing days in any period of 30 consecutive dealing days the value of Shire's Ordinary Shares underlying each Bond in the principal amount of $100,000 would exceed $130,000; or (ii) at any time conversion rights have been exercised, and/or purchases and corresponding cancellations, and/or redemptions effected in respect of 85% or more in principal amount of Bonds originally issued. The Bonds may also be redeemed at the option of the Bond holder at their principal amount including accrued but unpaid interest on May 9, 2012 (the 'Put Option'), or following the occurrence of a change of control of Shire. The Bonds are repayable in US dollars, but also contain provisions entitling the Company to settle redemption amounts in Pounds sterling, or in the case of the Final Maturity Date and following exercise of the Put Option, by delivery of the underlying Ordinary Shares and a cash top-up amount.

The Bonds are convertible into Ordinary Shares during the conversion period, being the period from June 18, 2007 until the earlier of: (i) the close of business on the date falling fourteen days prior to the Final Maturity Date; (ii) if the Bonds have been called for redemption by the Company, the close of business fourteen days before the date fixed for redemption; (iii) the close of business on the day prior to a Bond holder giving notice of redemption in accordance with the conditions; and (iv) the giving of notice by the trustee that the Bonds are accelerated by reason of the occurrence of an event of default.

Upon conversion, the Bond holder is entitled to receive Ordinary Shares at the conversion price of $33.17 per Ordinary Share, (subject to adjustment as outlined below).

The conversion price is subject to adjustment in respect of (i) any dividend or distribution by the Company, (ii) a change of control and (iii) customary anti-dilution adjustments for, inter alia, share consolidations, share splits, spin-off events, rights issues, bonus issues and re-organizations. The initial conversion price of $33.5879 was adjusted to $33.17 with effect from March 11, 2009 as a result of cumulative dividend payments during the period from October 2007 to April 2009 inclusive. The Ordinary Shares issued on conversion will be delivered credited as fully paid, and will rank pari passu in all respects with all fully paid Ordinary Shares in issue on the relevant conversion date.

Revolving credit facilities agreement

On November 23, 2010 Shire entered into a committed multicurrency revolving and swingline facilities agreement with a number of financial institutions, for which Abbey National Treasury Services Plc (trading as Santander Global Banking and Markets), Bank of America Securities Limited, Barclays Capital, Citigroup Global Markets Limited, Lloyds TSB Bank plc and The Royal Bank of Scotland plc acted as mandated lead arrangers and bookrunners (the 'new RCF'). The new RCF is for an aggregate amount of $1,200 million and cancelled Shire's existing committed revolving credit facility (the 'old RCF'). The new RCF, which includes a $250 million swingline facility, may be used for general corporate purposes and matures on November 23, 2015.

The interest rate on each loan drawn under the new RCF for each interest period is the percentage rate per annum which is the aggregate of the applicable margin (ranging from 0.90 to 2.25% per annum) and LIBOR for the applicable currency and interest period. Shire also pays a commitment fee on undrawn amounts at 35% per annum of the applicable margin.

Under the new RCF it is required that (i) Shire's ratio of Net Debt to EBITDA (as defined within the new RCF agreement) does not exceed 3.5:1 for either the 12 month period ending December 31 or June 30 unless Shire has exercised its option (which is subject to certain conditions) to increase it to 4.0:1 for two consecutive testing dates; (ii) the ratio of EBITDA to Net Interest (as defined in the new RCF agreement) must not be less than 4.0:1, for either the 12 month period ending December 31 or June 30; and (iii) additional limitations on the creation of liens, disposal of assets, incurrence of indebtedness, making of loans, giving of guarantees and granting security over assets.

On entering into the new RCF agreement the Group paid arrangement costs of $8.0 million, which have been deferred and will be amortized over the contractual term of the new RCF.

The availability of loans under the new RCF is subject to customary conditions.

Financing

Shire anticipates that its operating cash flow together with available cash, cash equivalents, restricted cash and the new RCF will be sufficient to meet its anticipated future operating expenses, capital expenditures, tax and interest payments and lease obligations as they become due over the next twelve months.

If the Group decides to acquire other businesses, it expects to fund these acquisitions from existing cash resources, the new RCF and possibly through new borrowings and the issue of new equity if necessary.

Sources and uses of cash

The following table provides an analysis of the Group's gross and net debt (excluding restricted cash), as at December 31, 2010 and 2009:

2010 2009 December 31, $'M $'M ------ ------ Cash and cash equivalents 550.6 498.9 ------ ------

Shire 2.75% convertible bonds 1,100.0 1,100.0

Building financing obligation 8.4 46.7

------ ------ Total debt 1,108.4 1,146.7 ------ ------ Net debt (557.8) (647.8) ------ ------ Cash flow activity

Net cash provided by operating activities for the year to December 31, 2010 increased by $328.0 million to $954.9 million (2009: $626.9 million), primarily due to higher cash receipts from product sales and royalties, cash inflows from forward foreign exchange contracts in 2010 compared to outflows in 2009, partially offset by higher payments on sales deductions, operating costs and taxes in the year to December 31, 2010 compared to the same period in 2009.

Net cash used in investing activities was $797.4 million in the year to December 31, 2010. This included the cash paid (net of cash acquired) of $449.6 million for, and payments of $33.4 million on foreign exchange contracts related to, the acquisition of Movetis in October 2010, and expenditure on property, plant and equipment of $326.6 million. Capital expenditure on property, plant and equipment includes $121.9 million for the acquisition of new properties and properties previously occupied under operating leases and $134.5 million on construction work, at Lexington Technology Park.

Net cash used in financing activities was $99.5 million for the year to December 31, 2010, including the dividend payment of $62.0 million and $43.1 million to extinguish building finance obligations at Lexington Technology Park.

Outstanding Letters of credit

At December 31, 2010, the Group had irrevocable standby letters of credit and guarantees with various banks totaling $24.3 million, providing security for the Group's performance of various obligations. These obligations are primarily in respect of the recoverability of insurance claims, lease obligations and supply commitments. The Group has restricted cash of $9.2 million, as required by these letters of credit.

Cash RequirementsAt December 31, 2010 the Group's cash requirements for long-term liabilitiesreflected on the balance sheet and other contractual obligations were asfollows: Payments due by period Less 1 - 3 3 - 5 More than years years than Total 1 year 5 years $'M $'M $'M $'M $'M ----- ----- ----- ----- ----- Long-term debt obligations(1) 1,205.9 30.3 60.5 1,115.1 - Operating leases obligation(2) 150.2 34.2 41.7 35.3 39.0 Purchase obligations(3) 450.6 335.8 108.8 6.0 - Other long-term liabilities reflected on the balance sheet(4) 167.3 7.0 156.9 1.3 2.1 ----- ----- ----- ----- ----- Total 1,974.0 407.3 367.9 1,157.7 41.1 ----- ----- ----- ----- -----

Shire's $1,100 million principal amount of 2.75% convertible bonds due 2014 issued in May 2007 and the interest on the convertible bonds has been included based on the contractual payment dates. The principal amount of $1,100 million has been included within payments due in three to five years based on the Final Maturity Date of the convertible bonds. The bondholders have the option to redeem the convertible bonds at the principal amount in May 2012 and the Group has the option to call the bonds subject to certain conditions after May 2012. Further details are included within Liquidity and capital resources: Shire 2.75% convertible bonds due 2014 above.

The Group leases certain land, facilities, motor vehicles and certain equipment under operating leases expiring through 2016.

Purchase obligations include agreements to purchase goods, investments or services (including clinical trials, contract manufacturing and capital equipment) that are enforceable and legally binding and that specify all significant terms, including open purchase orders. Shire expects to fund these commitments with cash flows from operating activities.

Unrecognized tax benefits and associated interest and penalties of $6.5 million and $130.3 million are included within payments due in less than one year and payments due in one to three years, respectively.

The contractual obligations table above does not include certain milestones and other contractual commitments where payment is contingent upon the occurrence of events which are yet to occur (and therefore payment is not yet due). The most significant of the Group's milestone and contractual commitments which are contingent on the occurrence of future events are as follows:

Collaboration with Acceleron for ActRIIB class of molecules

On September 9, 2010 Shire announced that it had expanded its HGT pipeline by acquiring an exclusive license in markets outside of North America for the ActRIIB class of molecules being developed by Acceleron. The collaboration will initially focus on further developing ACE-031, the lead ActRIIB drug candidate, which is in development for the treatment of patients with DMD. The Phase 2a trial is on hold and clinical safety is under review. ACE-031 and the other ActRIIB class of molecules have the potential to be used in other muscular and neuromuscular disorders with high unmet medical need.

In the year to December 31, 2010 Shire made an up-front payment of $45.0 million to Acceleron which has been expensed to R&D. Shire will pay Acceleron up to a further $165.0 million, subject to certain development, regulatory and sales milestones being met for ACE-031 in DMD, up to an additional $288.0 million for successful commercialization of other indications and molecules, and royalties on product sales.

Shire and Acceleron will conduct the collaboration through a joint steering committee, with subcommittees including a joint manufacture committee, and a joint patent committee to monitor the development of ACE-031 and other compounds.

Research collaboration with 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.

In the year to December 31, 2009 Shire made an up-front payment of $6.5 million to Santaris, for technology access and R&D funding, which has been expensed to R&D.

In the year to December 31, 2010 Shire paid success milestones of $3.0 million. Shire has remaining obligations to pay Santaris a further $10.5 million subject to certain success criteria, and development and sales milestones up to a maximum of $72.0 million for each indication. Shire will also pay single or double-digit tiered royalties on net sales of the product.

Shire and Santaris have formed a joint research committee to monitor R&D activities through pre-clinical Lead Candidate selection at which point all development and commercialization costs will be the responsibility of Shire.

JUVISTA

On June 19, 2007 Shire signed an agreement with Renovo to develop and commercialize JUVISTA, Renovo's novel drug candidate being investigated for the reduction of scarring in connection with surgery, outside of the EU. On March 1, 2010 the license agreement was revised.

In the revised license agreement, the rights to sell JUVISTA in all territories outside the US, Mexico and Canada were returned to Renovo. Milestone and royalty obligations remain unchanged from the original agreement except that Shire will pay Renovo an additional $5 million milestone if Shire elects to commence a clinical trial following Shire's review of the clinical trial report from Renovo's first EU Phase 3 clinical trial. On February 11, 2011, Renovo announced that its Phase 3 trial for JUVISTA in scar revision surgery did not meet its primary or secondary endpoints. Shire is currently considering the trial data and whether to exercise its rights to terminate the license agreement.

Shire has remaining obligations to pay Renovo $25 million on the filing of JUVISTA with the FDA; up to $150 million on FDA approval; royalties on net sales of JUVISTA; and up to $525 million on the achievement of very significant sales targets. Under the revised agreement, each party is responsible for its own development costs but future development costs can be shared by agreement. Each party has free-of-charge access to the other party's data to support regulatory filings in their respective territories. In the year to December 31, 2010 Shire made a payment to Renovo of $3.2 million (2009: $3.9 million, 2008: $7.4 million), being the final payment under the terms of the original license agreement, which has been charged by Shire to R&D.

Treasury policies and organization

The Group's principal treasury operations are co-ordinated by its corporate treasury function. All treasury operations are conducted within a framework of policies and procedures approved annually by the Board of Directors (the 'Board'). As a matter of policy, the Group does not undertake speculative transactions that would increase its currency or interest rate exposure.

Interest rate risk

The Group is exposed to interest rate risk on restricted cash, cash and cash equivalents and on foreign exchange contracts on which interest is at floating rates. This exposure is primarily to US dollar, Canadian dollar, Pound sterling and Euro interest rates. As the Group maintains all of its cash, liquid investments and foreign exchange contracts on a short-term basis for liquidity purposes, this risk is not actively managed. In the year to December 31, 2010 the average interest rate received on cash and liquid investments was less than 1% per annum. The largest proportion of these cash and liquid investments was in US dollar money market and liquidity funds.

The Group incurs interest at a fixed rate of 2.75% on Shire $1,100 million in principal convertible bonds due 2014.

No derivative instruments were entered into during the year to December 31, 2010 to manage interest rate exposure. The Group continues to review its interest rate risk and the policies in place to manage the risk.

Foreign exchange risk

The Group trades in numerous countries and as a consequence has transactional and translational foreign exchange exposure.

Transactional exposure arises where transactions occur in currencies different to the functional currency of the relevant subsidiary. The main trading currencies of the Group are the US dollar, the Canadian dollar, Pound sterling and the Euro. It is the Group's policy that these exposures are minimized to the extent practicable by denominating transactions in the subsidiary's functional currency.

Where significant exposures remain, the Group uses foreign exchange contracts (being spot, forward and swap contracts) to manage the exposure for balance sheet assets and liabilities that are denominated in currencies different to the functional currency of the relevant subsidiary. These assets and liabilities relate predominantly to inter-company financing and accruals for royalty receipts. The foreign exchange contracts have not been designated as hedging instruments. Cash flows from derivative instruments are presented within net cash provided by operating activities in the consolidated cash flow statement, unless the derivative instruments are economically hedging specific investing or financing activities (such as restricted cash held in respect of the purchase price of Movetis).

Translational foreign exchange exposure arises on the translation into US dollars of the financial statements of non-US dollar functional subsidiaries.

At December 31, 2010 the Group had 31 swap and forward foreign exchange contracts outstanding to manage currency risk. The swaps and forward contracts mature within 90 days. The Group did not have credit risk related contingent features or collateral linked to the derivatives. At December 31, 2010 the fair value of these contracts was a net asset of $1.0 million. Further details are included below.

Foreign exchange risk sensitivity

The table below provides information about the Group's swap and forward foreign exchange contracts by currency pair. The table presents the net principal amounts and weighted-average exchange rates of all outstanding contracts. All contracts have a maturity date of less than three months.

December 31, 2010 Principal value of amount Weighted-average receivable exchange Rate Fair value $'M $'M ----- ----- ----- Swap foreign exchange contracts Receive USD/Pay EUR 20.0 1.50 2.0 Receive GBP/Pay USD 109.2 1.60 (1.6) Receive CAD/Pay USD 78.0 0.99 0.8 Receive USD/Pay SEK 2.6 6.84 - Receive USD/Pay AUD 3.6 1.02 (0.1) Receive USD/Pay CHF 2.7 1.05 (0.1) Market risk of investments

As at December 31, 2010 the Group has $101.6 million of investments comprising available-for-sale investments in publicly quoted companies ($83.9 million), equity-method investments ($11.8 million) and cost method investments in private companies ($5.9 million). The investment in publicly-quoted companies and equity-method investments in respect of certain investment funds which contain a mixed portfolio of public and private investments are exposed to market risk. No financial instruments or derivatives have been employed to hedge this risk.

Credit risk

Financial instruments that potentially expose Shire to concentrations of credit risk consist primarily of short-term cash investments, trade accounts receivable (from product sales and royalty receipts) and derivative contracts. Shire has cash invested in short-term money market instruments, including money market and liquidity funds and bank term deposits. The money market and liquidity funds in which Shire invests are all triple A rated by both Standard & Poor's and by Moody's credit rating agencies.

The Group is exposed to the credit risk of the counterparties with which it enters into derivative contracts. The Group aims to limit this exposure through a system of internal credit limits which require counterparties to have a long-term credit rating of A / A2 or better from the major rating agencies. The internal credit limits are approved by the Board and exposure against these limits is monitored by the corporate treasury function. The counterparties to the derivative contracts are major international financial institutions.

The Group's revenues from product sales are mainly governed by agreements with major pharmaceutical wholesalers and relationships with other pharmaceutical distributors and retail pharmacy chains. For the year to December 31, 2010 there were two customers in the US who accounted for 44% of the Group's product sales. However, such customers typically have significant cash resources and as such the risk from concentration of credit is considered minimal. The Group has taken positive steps to manage any credit risk associated with these transactions and operates clearly defined credit evaluation procedures.

Off-balance sheet arrangements

There are no off-balance sheet arrangements aside from the milestone payments mentioned above that have, or are reasonably likely to have, a current or future effect on the Group's financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Inflation

Although at reduced levels in recent years, inflation continues to apply upward pressure on the cost of goods and services which are used in the business. However, the Group believes that the net effect of inflation on its revenues and operations has been minimal during the past three years.

Dividend policy

A first interim dividend for the first half of 2010 of 2.25 US cents (1.41 pence) per Ordinary Share, equivalent to 6.75 US cents per ADS, was paid in October 2010. The Board has resolved to pay a second interim dividend of 10.85 US cents (6.73 pence) per Ordinary Share equivalent to 32.55 US cents per ADS for the six months to December 31, 2010.

A first interim dividend for the first half of 2009 of 2.147 US cents (1.302 pence) per Ordinary Share, equivalent to 6.441 US cents per ADS, was paid in October 2009. A second interim dividend for the second half of 2009 of 9.250 US cents (5.910 pence) per Ordinary Share equivalent to 27.750 US cents per ADS was paid in April 2010.

This is consistent with Shire's stated policy of paying a dividend semi-annually, set in US cents per Ordinary Share. Typically, the first interim payment each year will be the higher of the previous year's first interim USD dividend and the USD equivalent of the previous year's first interim GBP dividend. Dividend growth for the full year will be reviewed by the Board when the second interim dividend is determined. Any dividend growth will come through increasing the second interim dividend in a financial year.

2. Principal risks and uncertainties

Risk factors related to Shire's business

The Group's key products may not be a commercial success

The commercial success of the Group's key products - ELAPRASE, VYVANSE, LIALDA/ MEZAVANT, PENTASA, FOSRENOL, REPLAGAL, INTUNIV, VPRIV, FIRAZYR and RESOLOR as well as other new products that the Group may launch in the future, will depend on their approval and acceptance by physicians, patients and other key decision-makers, as well as the timing of the receipt of additional marketing approvals, the scope of marketing approvals as reflected in the product's label, the countries in which such approvals are obtained, the authorization of price and reimbursement in those countries where price and reimbursement is negotiated, and safety, efficacy, convenience and cost-effectiveness of the product as compared to competitive products.

The Group may not be able to grow its product revenues as quickly as anticipated if any or all of the following occur:

competitive products are genericized or if the prices of competitor products are otherwise reduced significantly, and the prescribing of treatments for the indications that the Group's products treat is adversely affected;

there are unanticipated adverse events experienced with the Group's products not seen in clinical trials that impact the physician's willingness to prescribe the Group's products;

issues arise from clinical trials being conducted for post marketing purposes or for registration in another country or if regulatory agencies in one country act in a way that raises concerns for regulatory agencies or for prescribers or patients in another country;

patients, payors or physicians favor other treatments over the Group's products;

government regulation is stricter for the Group's products than for other treatments;

loss of patent protection or ability of competitors to challenge or circumvent patents;

planned geographical expansion into emerging markets is not successful;

the size of the patient populations for the Group's products are less than expected or the Group fails to identify new patients for its products; or

product liability claims.

If the Group is unable to commercialize any of its key products successfully, there may be a material adverse effect on the Group's revenues, financial condition and results of operations.

In addition, the Group derives significant revenues and earnings from mature portfolio products (whether or not promoted) including CARBATROL, CALCICHEW, REMINYL and XAGRID. Sales of these products could decrease as a result of any or all of the following:

if competitive products are genericized or if the prices of competitor products are otherwise reduced significantly, and the prescribing of treatments for the indications that the Group's products treat is adversely affected;

if there are unanticipated adverse events experienced with the Group's products not seen in clinical trials that impact the physician's willingness to prescribe the Group's products;

if patients, payors or physicians favor other treatments over the Group's products; or

if the Group's products suffer a loss of patent protection or competitors successfully challenge or circumvent the Group's patents or regulatory exclusivity.

Unanticipated decreases in revenues from ADDERALL XR could significantly reduce the Group's revenues and earnings

In the year to December 31, 2010 sales of ADDERALL XR declined 42% to $360.8 million, representing approximately 10% of the Group's total revenues, (sales of ADDERALL XR in the years to December 31, 2009 and 2008 were $626.5 million and $1,101.7 million respectively). This decline resulted directly from the launch by Teva and Impax of authorized generic versions of ADDERALL XR in April and October 2009, respectively. The Group sells the authorized generic version of ADDERALL XR to Teva and Impax and currently receives royalties from Impax on the sale of its authorized generic. Shire continues to sell the branded version of ADDERALL XR.

Factors that could negatively impact total revenue from ADDERALL XR include, but are not limited to:

faster than anticipated erosion of ADDERALL XR sales and elimination of the Impax royalty as a result of FDA approval of additional generic competitors;

issues impacting the production of ADDERALL XR or the supply of amphetamine salts including, but not limited to, the ability to get sufficient quota from the US Drug Enforcement Administration ('DEA');

changes in reimbursement policies of third-party payors; and

changes to the level of sales deductions for ADDERALL XR for private or public payors.

In addition, in respect of the period prior to October 1, 2010, when certain provisions of the 2010 Affordable Care Act became effective and provided further clarity, there were potentially different interpretations as to how shipments of authorized generic ADDERALL XR to Teva and Impax should be included in the Medicaid rebate calculation. The CMS may disagree with the Group's interpretation as to how shipments of authorized generic ADDERALL XR should be included in the Medicaid rebate calculation, require the Group to apply an alternative interpretation of the Medicaid rebate legislation and pay an additional amount in excess of the liability recorded by the Group.

Any decrease in royalties derived from the sales of 3TC and ZEFFIX could significantly reduce earnings

The Group receives royalties from GSK on the worldwide sales of 3TC and ZEFFIX. In 2010, the Group's royalty income relating to 3TC and ZEFFIX sales was $154.0 million (2009: $164.0 million; 2008: $180.5 million). Any factors that decrease sales of 3TC and ZEFFIX by GSK could significantly reduce the Group's royalty revenue, and negatively affect results of operations. These include, but are not limited to:

loss of patent protection or ability of competitors to challenge or circumvent patents;

reduction in the production of 3TC and ZEFFIX;

technological advances;

government action/intervention;

public opinion towards Acquired Immunodeficiency Syndrome ('AIDS') treatments; and

product liability claims.

The failure to obtain and maintain reimbursement, or an adequate level of reimbursement, by third-party payors in a timely manner for the Group's products may impact future revenues and earnings

The Group's revenues are partly dependent on the level of reimbursement provided to the Group by governmental reimbursement schemes for pharmaceutical products. Changes to governmental policy or practices could adversely affect the Group's revenues, financial condition and results of operations. In addition, the reimbursement of treatment established by healthcare providers, private health insurers and other organizations, such as health maintenance organizations and managed care organizations are under downward pressure and this, in turn, could impact on the prices at which the Group can sell its products.

The market for pharmaceutical products could be significantly influenced by the following, which could result in lower prices for the Group's products and/or a reduced demand for the Group's products:

the ongoing trend toward managed healthcare, particularly in the US;

legislative proposals to reform healthcare and government insurance programs in many of the Group's markets; and

price controls and non-reimbursement of new and highly priced medicines for which the economic and therapeutic rationales are not established.

The prices for certain of the Group's products when commercialized, in particular products for the treatment of rare genetic diseases such as REPLAGAL, ELAPRASE and VPRIV, may be high compared to other pharmaceutical products. The Group may encounter particular difficulty in obtaining satisfactory pricing and reimbursement for its products, particularly those with a high cost of treatment. The failure to obtain and maintain pricing and reimbursement at satisfactory levels for such products may adversely affect the Group's revenues, financial condition and results of operations.

A disruption to the product supply chain may result in the Group being unable to continue marketing or developing a product or may result in the Group being unable to do so on a commercially viable basis

The Group sources its products from third-party contract manufacturers, and for certain products has its own manufacturing capability. In the event of either the Group's failure or the failure of any third-party contract manufacturer to comply with mandatory manufacturing standards (often referred to as 'Current Good Manufacturing Standards' or cGMP) in the countries in which the Group sells or intends to sell or have its products sold or suffering another form of disruption to the supply chain, the Group may experience a delay in supply or be unable to market or develop its products.

The Group dual-sources certain key products and/or active ingredients. However, the Group currently relies on a single source for production of the final drug product for each of ADDERALL XR, FOSRENOL, FIRAZYR, INTUNIV, CARBATROL, PENTASA, VPRIV, RESOLOR and XAGRID and relies on a single active ingredient source for each of ELAPRASE, FIRAZYR, FOSRENOL, REMINYL, REPLAGAL, VPRIV, RESOLOR and XAGRID.

In the event of financial failure of a third-party contract manufacturer or the failure of the third-party manufacturer to comply with its contractual obligations, the Group may experience a delay in supply or be unable to market or develop its products. This could have a material adverse affect on the Group's financial condition and results of operations.

There is no assurance that suppliers will continue to supply on commercially viable terms, or be able to supply components that meet regulatory requirements. The Group is also subject to the risk that suppliers will not be able to meet the quantities needed to meet market requirements which may result in the shortage of product supplies in the market

The development and approval of the Group's products depend on the ability to procure active ingredients and special packaging materials from sources approved by regulatory authorities. As the marketing approval process requires manufacturers to specify their own proposed suppliers of active ingredients and special packaging materials in their applications, regulatory approval of a new supplier would be required if active ingredients or such packaging materials were no longer available from the supplier specified in the marketing approval. The need to qualify a new supplier could delay the Group's development and commercialization efforts.

The Group uses bovine-derived serum sourced from New Zealand and North America in the manufacturing process for ELAPRASE. The discovery of additional cattle in North America or the discovery of cattle in New Zealand with bovine spongiform encephalopathy, or mad cow disease, could cause the regulatory agencies in some countries to impose restrictions on these products, or prohibit the Group from using these products at all in such countries.

The actions of certain customers can affect the Group's ability to sell or market products profitably, as well as impact net sales and growth comparisons

A small number of large wholesale distributors control a significant share of the US and certain European markets. In 2010, for example, 44% of the Group's product sales were attributable to two customers in the US: McKesson Corp. and Cardinal Health, Inc. In the event of financial failure of any of these customers, the Group may suffer financial loss and a decline in revenues and earnings. In addition, the number of independent drug stores and small chains has decreased as retail pharmacy consolidation has occurred. Consolidation or financial difficulties could cause customers to reduce their inventory levels, or otherwise reduce purchases of the Group's products. Such actions could have an adverse effect on the Group's revenues, financial condition and results of operations. A significant portion of the Group's SP product sales are made to major pharmaceutical wholesale distributors as well as to large pharmacies in both the US and Europe. Consequently, product sales and growth comparisons may be affected by fluctuations in the buying patterns of major distributors and other trade buyers. These fluctuations may result from seasonality, pricing, wholesaler buying decisions, or other factors. In addition, a significant portion of the Group's revenues for certain products for treatment of rare genetic diseases are concentrated with a small number of customers. Changes in the buying patterns of those customers may have an adverse effect on the Group's revenues, financial condition and results of operations.

Investigations or enforcement action by regulatory authorities or law enforcement agencies relating to the Group's activities in the highly regulated markets in which it operates may result in the distraction of senior management, significant legal costs and the payment of substantial compensation or fines

The Group engages in various marketing, promotional and educational activities pertaining to, as well as the sale of, pharmaceutical products in a number of jurisdictions around the world. The promotion, marketing and sale of pharmaceutical products is highly regulated and the operations of market participants, such as the Group, are closely supervised by regulatory authorities and law enforcement agencies, including the US Department of Health and Human Services ('HHS'), the FDA, the US Department of Justice and the DEA in the US. Any inquiries or investigations into the operations of, or enforcement or other regulatory action against, the Group by such regulatory authorities could result in the distraction of senior management for prolonged periods of time, significant defence costs, substantial monetary penalties and require extensive government monitoring of Group activities in the future. As an example, on September 23, 2009 the Group received a subpoena from the HHS 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, VYVANSE and DAYTRANA. Shire is cooperating and responding to this subpoena.

The outsourcing of services can create a significant dependency on third-parties, the failure of whom can affect the ability to operate the Group's business and to develop and market products

The Group has entered into many agreements with third-parties for the provision of services to enable it to operate its business. If the third-party can no longer provide the service on the agreed basis, the Group may not be able to continue the development or commercialization of its products as planned or on a commercial basis. Additionally, it may not be able to establish or maintain good relationships with the suppliers.

The Group has also entered into licensing and co-development agreements with a number of parties. There is a risk that, upon expiration or termination of a third-party agreement, the Group may not be able to renew or extend the agreement with the third-party as commercial interests may no longer coincide. In such circumstances, the Group may be unable to continue to develop or market its products as planned and could be required to abandon or divest a product line.

Risk factors related to the pharmaceutical industry in general

The actions of governments, industry regulators and the economic environments in which the Group operates may adversely affect its ability to develop and market its products profitably

Changes to laws or regulations impacting the pharmaceutical industry, in any country in which the Group conducts its business, may adversely impact the Group's revenues, financial condition and results of operations. In particular, changes to the regulations relating to orphan drug status may affect the exclusivity granted to products with such designation.

The introduction of new products by competitors may impact future revenues

The manufacture and sale of pharmaceuticals is highly competitive. Many of the Group's competitors are large, well-known pharmaceutical, biotechnology, chemical and healthcare companies with considerable resources. Companies with more resources and larger R&D expenditures have a greater ability to fund clinical trials and other development work necessary for regulatory applications. They may also be more successful than the Group in acquiring or licensing new products for development and commercialization. If any product that competes with one of the Group's principal drugs is approved, the Group's sales of that drug could fall.

The pharmaceutical and biotechnology industries are also characterized by continuous product development and technological change. The Group's products could, therefore, be rendered obsolete or uneconomical, through the development of new products, technological advances in manufacturing or production by its competitors.

The successful development of pharmaceutical products is highly uncertain and requires significant expenditures and time

Products that appear promising in research or development may be delayed or fail to reach later stages of development or the market for several reasons, including:

pre-clinical or clinical tests may show the product to lack safety or efficacy;

delays may be caused by slow enrollment in clinical studies; additional clinical supplies requirements; extended length of time to achieve study endpoints; additional time requirements for data analysis or dossier preparation; discussions with regulatory agencies, including regulatory agency requests for additional pre-clinical or clinical data; delays at regulatory agencies due to staffing or resource limitations; analysis of or changes to study design; unexpected safety, efficacy, or manufacturing issues. Delays may arise from shared control with collaborative partners in the planning and execution of the product development, scaling of the manufacturing process, or getting approval for manufacturing;

manufacturing issues, pricing, reimbursement issues, or other factors may render the product economically unviable;

the proprietary rights of others and their competing products and technologies may prevent the product from being developed or commercialized; and

failure to receive necessary regulatory approvals.

Success in pre-clinical and early clinical trials does not ensure that large-scale clinical trials will be successful. Clinical results are frequently susceptible to varying interpretations that may delay, limit, or prevent regulatory approvals. The length of time necessary to complete clinical trials and to submit an application for marketing approval for a final decision by a regulatory authority varies significantly and may be difficult to predict. If the Group's large-scale or late state clinical trials for a product are not successful, the Group will not recover its substantial investments in that product.

In addition, even if the products receive regulatory approval, they remain subject to ongoing regulatory requirements, including, for example, obligations to conduct additional clinical trials or other non-clinical testing, changes to the product label, new or revised requirements for manufacturing, written notifications to physicians, or product recalls or withdrawals. Further, a number of the Group's products that treat ADHD contain controlled substances and are subject to regulation by the US DEA and equivalent agencies in other countries.

The failure of a strategic partner to develop and commercialize products could result in delays in approval or loss of revenue

The Group enters into strategic partnerships with other companies in areas such as product development and sales and marketing. In these partnerships, the Group is sometimes dependent on its partner to deliver results. While these partnerships are supported by contracts, the Group may not exercise direct control. If a partner fails to perform or experiences financial difficulties, the Group may suffer a delay in the development, a delay in the approval or a reduction in sales or royalties of a product.

The failure to secure new products or compounds for development, either through in-licensing, acquisition or internal research and development efforts, may have an adverse impact on the Group's future results

The Group's future results will depend, to a significant extent, upon its ability to in-license, acquire or develop new products or compounds. The Group also expends significant resources on research and development. The failure to in-license or acquire new products or compounds, on a commercially viable basis, could have a material adverse effect on the Group's revenues, financial condition and results of operations. The failure of these efforts to result in the development of products appropriate for testing in human clinical trials could have a material adverse effect on the Group's revenues, financial condition and results of operations.

The Group may fail to obtain, maintain, enforce or defend the intellectual property rights required to conduct its business

The Group's success depends upon its ability and the ability of its partners and licensors to protect their intellectual property rights. Where possible, the Group's strategy is to register intellectual property rights, such as patents and trademarks. The Group also relies variously on trade secrets, unpatented know-how and technological innovations and contractual arrangements with third-parties to maintain its competitive position.

Patents and patent applications covering a number of the technologies and processes owned or licensed to the Group have been granted, or are pending in various countries, including the US, Canada, major European countries and Japan. The Group intends to enforce vigorously its patent rights and believes that its partners intend to enforce vigorously patent rights they have licensed to the Group. However, patent rights may not prevent other entities from developing, using or commercializing products that are similar or functionally equivalent to the Group's products or technologies. The Group's patent rights may be successfully challenged in the future or laws providing such rights may be changed or withdrawn. The Group cannot assure investors that its patents and patent applications or those of its third-party manufacturers will provide valid patent protection sufficiently broad to protect the Group's products and technology or that such patents will not be challenged, revoked, invalidated, infringed or circumvented by third-parties. In the regular course of business, the Group is party to litigation or other proceedings relating to intellectual property rights.

Additionally, the Group's products, or the technologies or processes used to formulate or manufacture those products may now, or in the future, infringe the patent rights of third-parties. It is also possible that third-parties will obtain patent or other proprietary rights that might be necessary or useful for the development, manufacture or sale of the Group's products. If third-parties are the first to invent a particular product or technology, it is possible that those parties will obtain patent rights that will be sufficiently broad to prevent the Group or its strategic partners from developing, manufacturing or selling its products. The Group may need to obtain licenses for intellectual property rights from others to develop, manufacture and market commercially viable products and may not be able to obtain these licenses on commercially reasonable terms, if at all. In addition, any licensed patents or proprietary rights may not be valid and enforceable.

The Group also relies on trade secrets and other un-patented proprietary information, which it generally seeks to protect by confidentiality and nondisclosure agreements with its employees, consultants, advisors and partners. These agreements may not effectively prevent disclosure of confidential information and may not provide the Group with an adequate remedy in the event of unauthorized disclosure of such information. If the Group's employees, scientific consultants or partners develop inventions or processes that may be applicable to the Group's products under development, such inventions and processes will not necessarily become the Group's property, but may remain the property of those persons or their employers. Protracted and costly litigation could be necessary to enforce and determine the scope of the Group's proprietary rights. The failure to obtain or maintain patent and trade secret protection, for any reason, could allow other companies to make competing products and reduce the Group's product sales.

The Group has filed applications to register various trademarks for use in connection with its products in various countries including the US and countries in Europe and Latin America and intends to trademark new product names as new products are developed. In addition, with respect to certain products, the Group relies on the trademarks of third-parties. These trademarks may not afford adequate protection or the Group or the third-parties may not have the financial resources to enforce any rights under any of these trademarks. The Group's inability or the inability of these third-parties to protect their trademarks because of successful third-party claims to those trademarks could allow others to use the Group's trademarks and dilute their value.

If a marketed product fails to work effectively or causes adverse side-effects, this could result in damage to the Group's reputation, the withdrawal of the product and legal action against the Group

Unanticipated side-effects or unfavorable publicity from complaints concerning any of the Group's products, or those of its competitors, could have an adverse effect on the Group's ability to obtain or maintain regulatory approvals or successfully market its products. The testing, manufacturing, marketing and sales of pharmaceutical products entails a risk of product liability claims, product recalls, litigation and associated adverse publicity. The cost of defending against such claims is expensive even when the claims are not merited. A successful product liability claim against the Group could require the Group to pay a substantial monetary award. If, in the absence of adequate insurance coverage, the Group does not have sufficient financial resources to satisfy a liability resulting from such a claim or to fund the legal defense of such a claim, it could become insolvent. Product liability insurance coverage is expensive, difficult to obtain and may not be available in the future on acceptable terms. Although the Group carries product liability insurance when available, this coverage may not be adequate. In addition, it cannot be certain that insurance coverage for present or future products will be available. Moreover, an adverse judgement in a product liability suit, even if insured or eventually overturned on appeal, could generate substantial negative publicity about the Group's products and business and inhibit or prevent commercialization of other products.

Loss of highly qualified management and scientific personnel could cause the Group subsequent financial loss

The Group faces competition for highly qualified management and scientific personnel from other companies, academic institutions, government entities and other organizations. It may not be able to successfully attract and retain such personnel. The Group has agreements with a number of its key scientific and management personnel for periods of one year or less. The loss of such personnel, or the inability to attract and retain the additional, highly skilled employees required for its activities could have an adverse effect on the Group's business.

Mitigation of principal risks

The management and mitigation of the above mentioned risks is a key focus for the Group. The Risk Council has been established to oversee the management and mitigation of the principal risks faced by the Group, as set out above. The Risk Council comprises a cross functional group of senior executives chaired by the Chief Compliance and Risk Officer. Material risks are recorded twice a year on a corporate risk schedule (the 'Schedule') which allocates specific mitigation or management responsibility to senior management, and is reviewed by both the Leadership Team and the Risk Council. The items on the Schedule considered by the Risk Council to constitute areas of higher risk were also reviewed by the Audit, Compliance & Risk Committee and the Board of Directors.

3. Directors' responsibility statement

Each of the current Directors, whose names and functions are listed below, confirms that, to the best of his or her knowledge:

the Group financial statements, which have been prepared under accounting principles generally accepted in the United States ('US GAAP'), present fairly, in all material respects, the financial condition, results of operations and cash flows of the Group; and

the Business review includes a fair review of the development and performance of the business and the position of the Group and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face.

Matthew Emmens - ChairmanAngus Russell - Chief Executive OfficerGraham Hetherington - Chief Financial OfficerDavid Kappler - Non-Executive DirectorDr Jeffrey Leiden - Non-Executive DirectorWilliam Burns - Non-Executive DirectorDr David Ginsburg - Non-Executive DirectorPatrick Langlois - Non-Executive DirectorAnne Minto OBE - Non-Executive DirectorDavid Stout - Non-Executive Director

The following are trademarks either owned or licensed by Shire plc or companies within the Shire Group which are the subject of trademark registrations in certain territories, or which are owned by third-parties as indicated and referred to in this document:

ADDERALL XR® (mixed salts of a single entity amphetamine)APRISO® (trademark of Salix Pharmaceuticals, Ltd. ('Salix'))ASACOL® (trademark of Medeva Pharma Suisse AG (used under license by WarnerChilcott Company, LLC ('Warner Chilcott')))ATRIPLA® (trademark of Bristol Myers Squibb Company ('BMS') and GileadSciences, Inc. ('Gilead'))BERINERT P® (trademark of Aventis Behring GmbH)CALCICHEW® range (calcium carbonate with or without vitamin D3)CARBATROL® (carbamazepine extended-release capsules)CEREZYME® (trademark of Genzyme Corporation ('Genzyme'))CINRYZE® (trademark of Viropharma Biologics, Inc.)CLAVERSAL® (trademark of Merckle Recordati)COLAZAL® (trademark of Salix Pharmaceuticals, Inc.)COMBIVIR® (trademark of GlaxoSmithKline ('GSK'))CONCERTA® (trademark of Alza Corporation ('Alza'))DAYTRANA® (trademark of Noven Pharmaceutical Inc. ('Noven'))DIPENTUM® (trademark of UCB Pharma Ltd ('UCB'))ELAPRASE® (idursulfase)EPIVIR® (trademark of GSK)EPIVIR-HBV® (trademark of GSK)EPZICOM®/KIVEXA (EPZICOM) (trademark of GSK)EQUASYM® IR (methylphenidate hydrochloride)EQUASYM® XL (methylphenidate hydrochloride)FABRAZYME® (trademark of Genzyme)FIRAZYR® (icatibant)FOCALIN XR® (trademark of Novartis Pharmaceuticals Corporation ('Novartis'))FOSRENOL® (lanthanum carbonate)HEPTOVIR® (trademark of GSK)INTUNIV® (guanfacine extended release)JUVISTA® (trademark of Renovo Limited ('Renovo'))KALBITOR® (trademark of Dyax Corporation)KAPVAY® (trademark of Shionogi Pharma, Inc. ('Shionogi'))LIALDA® (mesalamine)MEDIKINET® (trademark of Medice Arzneimittel P¼tter GmbH & Co. KG ('Medice'))METADATE CD® (trademark of UCB)MEZAVANT®(mesalazine)MOVICOL® (trademark of Edra AG, S.A.)PENTASA® (trademark of Ferring A/S Corp ('Ferring'))RAZADYNE® (trademark of Johnson & Johnson ('J&J'))RAZADYNE® ER (trademark of J&J)REMINYL® (galantamine hydrobromide) (United Kingdom ('UK') and Republic ofIreland) (trademark of J&J, excluding UK and Republic of Ireland)REMINYL XLâ„¢ (galantamine hydrobromide) (UK and Republic of Ireland) (trademarkof J&J, excluding UK and Republic of Ireland)REPLAGAL® (agalsidase alfa)RESOLOR® (prucalopride)RITALIN LA® (trademark of Novartis)RUCONEST® (trademark of Pharming Intellectual Property B.V.)SALOFALK® (trademark of Dr Falk Pharma)STRATTERA® (trademark of Eli Lilly)TRIZIVIR® (trademark of GSK)TRUVADA® (trademark of Gilead)VENVANSE (lisdexamfetamine dimesylate)VPRIVTM (velaglucerase alfa)VYVANSE® (lisdexamfetamine dimesylate)XAGRID® (anagrelide hydrochloride)ZAVESCA® (trademark of Actelion Pharmaceuticals, Ltd.)ZEFFIX® (trademark of GSK)3TC® (trademark of GSK)

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