29th Oct 2010 12:00
Continued excellent performance in Q3. Full year earnings expectations increased. New value in pipeline emerging.
October 29, 2010 - Shire plc the global specialtybiopharmaceutical company, announces results for the three months to September30, 2010.Financial Highlights Q3 2010(2) $794Product sales(1) million +32% $874Total revenues million +31% $298Non GAAP operating income million +123% $156US GAAP operating income million +70%Non GAAP diluted earnings per ADS $1.16 +138%US GAAP diluted earnings per ADS $0.52 +59%(1) Product sales excluding ADDERALL XR ("Core Product Sales") were up 31% to$694 million. Core Product Sales at constant exchange rates ("CER"), computedby restating 2010 results using average 2009 foreign exchange rates, were up34%.
(2) Percentages compare to equivalent 2009 period.
Angus Russell, Chief Executive Officer, commented:
"We delivered another outstanding set of results this quarter with strong revenue growth and operating leverage driving increases in Non GAAP earnings. This continued excellent performance demonstrates the overall strength of Shire's business and the sustained execution of our strategy.
In ADHD, VYVANSE sales are up 17% and the number of new physicians prescribing INTUNIV continues to increase.
Sales of REPLAGAL have increased by 91% as we respond to the great need of ourFabry patients; we estimate that our global market share now exceeds 60%. Onlyseven months into the initial launch of our treatment for Gaucher patients,around 1,000 patients are now on VPRIV, representing a 16% global marketshare.We've made progress in several significant programs in our research anddevelopment pipeline, including investigative uses of VYVANSE for adjunctivetherapy in patients with Major Depressive Disorder ("MDD"). We've alsorecently completed our acquisition of Movetis NV, bringing the approvedproduct RESOLOR to our gastro-intestinal ("GI") portfolio, and announced thein-licence from Acceleron of a Phase 2 orphan drug for Duchenne MuscularDystrophy.Alongside delivery of these outstanding quarterly results, we're building ourbusiness for the future. We're investing to enhance the value of our productpipeline, building our international structure to maximise the global reach ofour products and using our strong cash generation to complete value enhancingacquisitions and in-licenses.
We now expect to see Non GAAP earnings of up to $4.20 per ADS for the full year. This includes the financial effect of the Movetis acquisition and the DAYTRANA disposal. Looking ahead, we re-iterate our aspirational target of mid-teens sales growth on average between 2009 and 2015."
FINANCIAL SUMMARY
Third Quarter 2010 Unaudited Results
Q3 2010 Q3 2009 US GAAP Adjustments Non GAAP US GAAP Adjustments Non GAAP $M $M $M $M $M $MRevenues 874 - 874 667 - 667Operating income 156 142 298 92 42 134 Diluted earnings per ADS $0.52 $0.64 $1.16 $0.33 $0.16 $0.49
The Non GAAP financial measures included within this release are explained onpage 26, and are reconciled to the most directly comparable financial measuresprepared in accordance with US GAAP on pages 21 - 24.- Product sales were up 32% to $794 million (2009: $603 million) due to growthfrom both Core Products Sales (up 31% to $694 million) and ADDERALL XR®, (up41% to $100 million). On a CER basis, which is a Non GAAP measure, CoreProduct Sales were up 34%.- Core Products Sales growth was driven by both existing and new products,particularly REPLAGAL® (up 91% to $92 million; CER: up 103%), VYVANSE® (up 17%to $151 million) and recently launched VPRIV® ($50 million) and INTUNIV® ($37million).
- Total revenues were up 31% (CER: up 34%) to $874 million (2009: $667 million), as a result of higher product sales and higher royalty income on authorized generic sales of ADDERALL XR compared to Q3 2009.
- Non GAAP operating income increased by $164 million, or 123%, to $298million (2009: $134 million) as the increased investments we are making in ourresearch and development ("R&D") programs and selling, general andadministrative ("SG&A") activities to support recent growth were more thanoffset by higher revenues compared to 2009. On a US GAAP basis, operatingincome increased by $64 million, or 70%, to $156 million (2009: $92 million).US GAAP operating income in Q3 2010 also included an up-front payment of $45million made to Acceleron Pharma Inc. ("Acceleron") in relation to thecollaboration for activin receptor type IIB ("ActRIIB") molecules andimpairment charges of $43 million following the decision to divest DAYTRANA®to Noven Pharmaceuticals Inc. ("Noven").
- Cash generation, which is a Non GAAP measure, increased by $51 million to $271 million (2009: $220 million). Higher cash receipts from product sales and royalties were partially offset by higher cash payments on the increased investment in R&D and SG&A, and the timing of sales deduction payments in 2010.
- Net debt at September 30, 2010 was $309 million (December 31, 2009: $615 million), a reduction of $306 million in the year to date. Strong cash generation of $959 million in the nine months to September 30, 2010 has reduced net debt as well as funded the acquisition of and construction at Lexington Technology Park, cash tax payments and the upfront payment made to Acceleron. Excluding restricted cash of $584 million held to pay for the acquisition of Movetis NV ("Movetis") in the fourth quarter, net debt at September 30, 2010 was $893 million.
2010 OUTLOOK
Following a stronger than expected third quarter, we have increased our expectations for the full year 2010. We now expect to see Non GAAP earnings per ADS of up to $4.20. This increase includes the financial effect of the Movetis acquisition and the disposal of DAYTRANA on October 1, 2010; it also includes the cumulative impact of US Healthcare Reform, mandated European price cuts and adverse foreign exchange rates.
The strong growth of our core portfolio will continue to drive total revenuegrowth; however, the rate of growth will reduce in the fourth quarter as wewill not benefit from the one off adjustment to ADDERALL XR Medicaid rebatesand high level of royalties experienced in the same period last year. Theconsolidation of Movetis will also mean that combined R&D and SG&A spend for2010 is likely to grow at marginally above 10% year on year.Shire has made significant progress in 2010. Growth across our core portfolio,particularly the accelerated growth of our HGT business, has enabled us toincrease our expectations of earnings while also making targeted investmentsin our pipeline and international structure. We expect to see solid earningsgrowth in 2011, but at a rate that reflects the pull ahead into 2010 of someof HGT's growth potential.PRODUCT LAUNCHES
Subject to obtaining the relevant regulatory/governmental approvals, future product launches in the next 12 months include:
- VYVANSE/VENVANSE for the treatment of Attention Deficit Hyperactivity Disorder ("ADHD") in adolescents in the US and children in Brazil;
- INTUNIV as adjunctive treatment to long acting oral stimulants for the treatment of ADHD in children and adolescents in the US;
- EQUASYM® for the treatment of ADHD in certain European Union ("EU") countries;
- RESOLOR® in certain EU countries, for the symptomatic treatment of chronic constipation in women for whom laxatives fail to provide adequate relief;
- LIALDA/MEZAVANT for the maintenance of remission of ulcerative colitis in the US and for the treatment of ulcerative colitis in certain countries;
- VPRIV for the treatment of type 1 Gaucher disease in certain European and Latin American countries; and
- FIRAZYR® for the symptomatic treatment of acute attacks of hereditary angioedema ("HAE") in the US and certain European and Latin American countries.
PRODUCT AND PIPELINE DEVELOPMENTS
Products
PENTASA® - for the treatment of Ulcerative Colitis
- On August 24, 2010 Shire received a ruling from the US Food andDrug Administration ("FDA") on its Citizen Petition relating to PENTASA. Theruling granted Shire's request with regard to the requirement thatbioequivalence to PENTASA be shown by dissolution testing and further imposeda requirement for rigorous pharmacokinetic data. The ruling denied the requestthat studies with clinical outcomes endpoints also be required because the FDAconcluded that comparative clinical endpoint studies would be less sensitive,accurate and reproducible than pharmacokinetic studies.
RESOLOR - for the treatment of chronic constipation in women
- Through its acquisition of Movetis, Shire has expanded its GI presence in Europe with the recently launched RESOLOR, a new chemical entity. RESOLOR is approved in the 27 countries of the EU, Switzerland, Iceland, Lichtenstein and Norway.
REPLAGAL - for the treatment of Fabry disease
- REPLAGAL is now the global market leader for the treatment ofFabry disease. Shire's continuing priority is to ensure long term,uninterrupted supply at the approved dose to patients treated with REPLAGAL.There are over 2,300 patients on REPLAGAL worldwide and Shire anticipatesbeing able to continue to accommodate additional Fabry patients in 2010 whilecarefully monitoring supply and demand. Shire will be in a position to makeREPLAGAL available to at least 300 additional patients in 2011, phasedthroughout the year, based on current manufacturing capacity. Approval of thenew Lexington Manufacturing facility will allow treatment of several hundredmore Fabry patients with REPLAGAL, and Shire is working closely with theauthorities towards this goal.
VPRIV - for the treatment of Type 1 Gaucher disease
- On August 26, 2010 the European Commission granted Shiremarketing authorization for VPRIV, an ERT for the long-term treatment of Type1 Gaucher disease. VPRIV has been authorized as an orphan medicine through theCentralized Procedure, making it available in 30 countries across Europe.- Shire has seen rapid adoption of VPRIV worldwide. There arecurrently over 1,000 Gaucher patients treated with VPRIV and initiation oftreatment continues. Based on its current manufacturing capacity, Shireanticipates being able to accommodate approximately 200 additional Gaucherpatients until the approval of the Lexington Manufacturing facility providessubstantial additional capacity. Shire has an ongoing program to monitordemand and manage requests for VPRIV. Shire's priority is ensuring long-term,uninterrupted treatment of patients on therapy.
FIRAZYR - for the treatment of HAE
- In October 2010, Shire submitted data to support a change in the label in the EU to include the potential for self-administered subcutaneous injections of FIRAZYR in patients who are experiencing acute attacks of HAE.
Pipeline
This quarter we have made significant developments in our pipeline, including:
Collaboration with Acceleron for ActRIIB molecules
- On September 9, 2010 Shire announced the expansion of its HGT pipelinethrough the exclusive licence, in markets outside of North America, for theActRIIB class of molecules being developed by Acceleron. The collaborationwill initially investigate ACE-031, Acceleron's lead ActRIIB drug candidate,which is currently in a Phase 2a trial for the treatment of patients withDuchenne Muscular Dystrophy. ACE-031 and other ActRIIB molecules have thepotential to be used in other muscular and neuromuscular disorders with highunmet medical need.
Pipeline obtained through Movetis acquisition
- The acquisition of Movetis brings to Shire a promising GI pipeline, offering additional opportunities that include two projects in early clinical development and several pre-clinical leads as well as the rights to a large library of qualified lead compounds with potential for development in different GI indications.
VYVANSE for the adjunctive therapy in the treatment of inadequate response in MDD
- Today Shire announced positive results from a Phase 2 clinical trial ofVYVANSE as adjunctive therapy for patients who have had an inadequate responsein their treatment of MDD. Given the encouraging results and the promise totreat a large unmet medical need, Shire will initiate Phase 3 trials ofVYVANSE in patients with MDD mid 2011, following health authority meetings toestablish the development program parameters. Phase 2 clinical trials inadditional non-ADHD indications (treatment of negative symptoms and cognitiveimpairment in schizophrenia and for the treatment of cognitive impairment indepression) remain ongoing.
SPD535 for the treatment of arteriovenous grafts in hemodialysis patients
- SPD535 is a novel platelet reducing agent. Phase 1 development was initiatedin the third quarter of 2009 and is ongoing. Data from Phase 1 clinical trialsdemonstrating positive proof-of-principle have been completed. The initialPhase 2 proof-of-concept program will target prevention of thromboticcomplications associated with arteriovenous grafts in hemodialysis patients.Additional Phase 2 proof-of-concept clinical trials will also be initiated toassess opportunities in other indications.
INTUNIV for ADHD in the EU
- A clinical program to support the filing of a Marketing Authorization Approval for INTUNIV for the treatment of ADHD in children aged 6 to 17 in the EU has been initiated. Shire anticipates submission of the regulatory filing for INTUNIV in Europe will occur in 2013.
OTHER THIRD QUARTER AND RECENT DEVELOPMENTS
Acquisition of Movetis
- On September 6, 2010 Shire launched a voluntary public takeover offer forall the shares in Movetis, a Belgium-based speciality GI company, for a fullydiluted equity purchase price of €428 million (or €19 per share) in cash,equivalent to $592 million at closing of the transaction.- On October 12, 2010 the Company's wholly owned subsidiary, Shire HoldingsLuxembourg S.a.r.l. acquired 99.21% of the shares of Movetis as a result ofthe successful tender offer. Shire is proceeding with a statutory squeeze-outof those shares and warrants not tendered to the offer in accordance withapplicable Belgian legislation. An additional tender period opened, on thesame terms, on October 12, 2010 and will close on November 2, 2010. Shares andwarrants not tendered to the additional offer will transfer to Shire byoperation of law on November 8, 2010. Movetis shares will be delisted fromEuronext Brussels at close of trading on November 2, 2010.
Divesture of DAYTRANA
- On August 10, 2010 Shire announced the divestiture of DAYTRANA to Noven. The divesture became effective on October 1, 2010. Following the decision to divest DAYTRANA, Shire recognised an impairment charge of $43 million to write-down its DAYTRANA intangible asset to its fair value less costs to sell.
Co-promotion for VYVANSE with Glaxo SmithKline ("GSK")
- In the third quarter, Shire terminated its co-promotion agreement forVYVANSE with GSK. Under the terms of the agreement, no termination payment orany other payments were made or are due to GSK since agreed upon salesthresholds were not achieved. The Company does not believe that thetermination of the co-promotion agreement will impact the future performanceof VYVANSE in the United States.- Following Shire's termination, GSK filed a lawsuit against Shire in thePhiladelphia Court of Common Pleas relating to the co-promotion agreement. GSKis seeking compensation despite the failure to achieve the required salesthresholds. Shire believes that the lawsuit is frivolous and without merit andwill vigorously defend itself.
Paragraph IV Notice Letter for INTUNIV
- On October 25, 2010 Shire received a Paragraph IV Notice Letter from WatsonPharmaceuticals, Inc. ("Watson") advising of the filing of an Abbreviated NewDrug Application for a generic version of INTUNIV. Shire is currentlyreviewing the details of Watson's Paragraph IV Notice Letter which wasdirected to all three Orange Book listed patents for INTUNIV.
ADDITIONAL INFORMATION
The following additional information is included in this press release:
PageOverview of Q3 2010 Financial 8ResultsFinancial Information 12Notes to Editors 25Safe Harbor Statement 25Explanation of Non GAAP Measures 26Trademarks 27
For further information please contact:
Investor Relations Eric Rojas [email protected] +1 781 482 0999
Media Jessica Mann [email protected] +44 1256 894 280 Matthew Cabrey [email protected] +1 484 595 8248 Jessica Cotrone +1 781 482 9538 [email protected]
Dial in details for the live conference call for investors 14:00 BST/9:00 EDT on October 29, 2010:
UK dial in: 0844 335 0351
US dial in: 1 866 8048688 or 1 718 3541175
International dial in: +44 844 335 0351
Password/Conf ID: 921510
Live Webcast: http://www.shire.com/shireplc/en/investors
OVERVIEW OF Q3 2010 FINANCIAL RESULTS
1. Product sales
For the three months to September 30, 2010 product sales increased by 32% to $794.3 million (2009: $602.5 million) and represented 91% of total revenues (2009: 90%).
Core Product Sales increased by 31% to $694.6 million (2009: $531.6 million),up 34% on a CER basis.Product Highlights Exit Market Growth Share(1)Product Sales $M Sales CER US Rx(1) VYVANSE 151.2 +17% 1 +17% +28% 15%ELAPRASE 96.8 +7% 1 +11% n/a(2) n/a(2)REPLAGAL 92.1 +91% 1 +103% n/a(3) n/a(3)LIALDA / MEZAVANT 76.0 +16% 1 +17% +16% 19%PENTASA 57.1 +11% +11% -5% 15%VPRIV 49.5 n/a 1 n/a n/a(2) n/a(2)FOSRENOL 45.2 -5% 1 -1% -17% 7%INTUNIV 37.3 n/a 1 n/a n/a 3%FIRAZYR 2.9 +61% 1 +73% n/a(3) n/a(3)OTHER 86.5 -11% 1 -8% n/a n/aCore product sales 694.6 +31% 1 +34%ADDERALL XR 99.7 +41% 1 +40% +1% 7%Total product sales 794.3 +32% 1 +35%
(1) Data provided by IMS Health National Prescription Audit ("IMS NPA"). Exit market share represents the average monthly US market share in the month ended September 30, 2010.
(2) IMS NPA Data not available.
(3) Not sold in the US in Q3 2010.
VYVANSE - ADHD
The increase in VYVANSE product sales was principally due to a 28% increase in US prescription demand, from both 13% growth in the US ADHD market and increases to VYVANSE's share of that market. Price increases taken since Q3 2009 also contributed to the product sales growth.
Product sales growth was lower than prescription growth due to higher sales deductions, principally increased Medicaid rebates following US Healthcare Reform, and decreases in wholesaler inventories, or "de-stocking", at the end of Q3 2010 (de-stocking in Q3 2010 was equivalent to $12 million of gross sales compared to stocking of $4 million in Q3 2009).
ELAPRASE - Hunter syndrome
The growth in sales of ELAPRASE was driven by increased volumes across all regions in which ELAPRASE is sold. On a CER basis sales grew by 11%.
REPLAGAL - Fabry disease
The growth in REPLAGAL product sales was driven by an acceleration of patients switching to REPLAGAL in Europe, principally due to the ongoing supply disruption affecting the only other approved ERT for Fabry disease. Sales increased 103% on a CER basis (REPLAGAL is sold primarily in Euros and Pounds sterling).
LIALDA/MEZAVANT - Ulcerative colitis
Product sales for LIALDA/MEZAVANT continued to grow in Q3 2010, driven by increased US prescription demand as a result of higher US market share and price increases taken since Q3 2009, which were partially offset by higher sales deductions compared to the same period in 2009.
PENTASA - Ulcerative colitis
The growth in PENTASA product sales was due to price increases taken since Q3 2009, which more than offset lower US prescription demand.
VPRIV - Gaucher disease
Following the grant of marketing authorization from the European Commission on August 26, 2010, VPRIV is now being sold on an approved basis in both the US and the EU.
FOSRENOL - Hyperphosphatemia
Product sales of FOSRENOL in the EU decreased primarily due to mandatory pricereductions taken in 2010. Product sales of FOSRENOL in the US decreased due tolower US prescription demand and higher sales deductions in Q3 2010 comparedto 2009, which more than offset the effect of price increases taken since Q32009.INTUNIV - ADHDUS prescription demand for INTUNIV increased by 29% in Q3 2010compared to Q2 2010, leading to product sales of $37 million. Product sales inQ2 2010 of $51 million included $16 million of net sales from initial stockingshipments made in 2009 ("Launch Stocks") which had been deferred in accordancewith Shire's accounting policy. All revenue from Launch Stocks had beenrecognized by June 30, 2010.Excluding revenue from Launch Stocks, product sales increased by 6%in Q3 compared to Q2 2010. This increase in product sales was lower than thegrowth in US prescription demand due to higher sales deductions, principallyas a result of US Healthcare Reform.
FIRAZYR - HAE
Product sales grew in line with increased volumes across markets in Europe. FIRAZYR is the first new product for HAE in Europe in 30 years and has orphan exclusivity for acute attacks of HAE in adults in the EU until 2018.
ADDERALL XR - ADHD
ADDERALL XR product sales increased as a result of slightly higher US prescription demand, lower sales deductions in Q3 2010 compared to the same period in 2009 and the effect of stocking in Q3 2010.
Sales deductions represented 60% of branded ADDERALL XR gross sales in Q3 2010(2009: 73%). Medicaid rebates were accrued at a higher level in Q3 2009 assales deductions for that quarter did not reflect the benefit of the change inestimate of the Medicaid rebate liability recorded in Q4 2009. Additionally,sales deductions in Q3 2010 were reduced following refinements to Medicaidrebate liability estimates made in earlier quarters.ADDERALL XR product sales in Q3 2010 also benefited from a 1% increase in USprescription demand, as US ADHD market growth of 13% more than offset thedecline in ADDERALL XR's market share (7% in Q3 2010 compared to 8% in Q32009).2. Royalties Year on year growth Royalties toProduct Shire $M Royalties CER 3TC® and Zeffix® 1.00 40.6 -3% -4%ADDERALL XR 1.00 18.0 718% 718%Other 1.00 17.9 11% 16%Total 1.00 76.5 27% 28% Royalty income increased by 27% due to higher royalties received onsales of authorized generic versions of ADDERALL XR (royalties in Q3 2010 werereceived from Impax Laboratories Inc. and in Q3 2009 were received, at a lowerrate, from Teva Pharmaceuticals Industries Ltd). Royalties received for 3TCand Zeffix from GSK were lower in 2010 compared to 2009 as 3TC royaltiescontinue to be adversely impacted by increased competition from othertreatments.3. Financial detailsCost of product sales % of % of product product Q3 2010 sales Q3 2009 sales $M $MCost of product sales (US 112.7 14% 104.9 17%GAAP)Transfer of manufacturingfrom Owings Mills (7.3) (4.5)Fair value adjustment foracquired inventories - (0.6)Depreciation (2.3) (0.8)Cost of product sales (Non 103.1 13% 99.0 16%GAAP) Cost of product sales as a percentage of product sales decreased in Q3 2010compared to the same period in 2009 due to higher margins from existing CoreProducts and the positive effect on gross margins of newly launched, highermargin products.R&D % of % of product product Q3 2010 sales Q3 2009 sales $M $MR&D (US GAAP) 197.9 25% 147.8 25%Up-front payment to (45.0) -AcceleronDepreciation (4.4) (3.6)R&D (Non GAAP) 148.5 19% 144.2 24%
R&D increased due to continued investment in a number of R&D programs, principally VYVANSE international and investigative uses of VYVANSE for new indications, Guanfacine Carrier Wave and other early stage development programs.
On a US GAAP basis, R&D increased by $50.1 million over the same period in 2009 primarily due to the up-front payment of $45.0 million made to Acceleron on entering the licence and collaboration agreement for development of the ActRIIB class of molecules.
SG&A % of % of product product Q3 2010 sales Q3 2009 sales $M $MSG&A (US GAAP) 392.4 49% 320.6 53%Intangible asset (31.2) (34.8)amortizationImpairment of intangible (42.7) -assetsDepreciation (16.1) (18.5)SG&A (Non GAAP) 302.4 38% 267.3 44%
SG&A increased in part due to increased sales and marketing costs incurred to support newly launched products (INTUNIV and VPRIV) and growth in new markets.
On a US GAAP basis, SG&A included an impairment charge of $42.7 million to write down the DAYTRANA intangible asset to its fair value less costs to sell following agreement to divest the product to Noven.
Reorganization costs
For the three months to September 30, 2010 Shire recorded reorganization costs of $9.7 million (2009: $2.0 million) relating to the transfer of manufacturing from its Owings Mills facility and the establishment of an international commercial hub in Switzerland.
Integration and acquisition costs
For the three months to September 30, 2010 Shire recorded integration and acquisition costs of $5.8 million (2009: $6.2 million), which in 2010 related to the acquisition of Movetis, and in 2009 to the integration of Jerini AG.
Interest expense
For the three months to September 30, 2010 the Company incurred interest expense of $8.3 million (2009: $9.4 million). Interest expense principally relates to the coupon and amortization of issue costs on Shire's $1,100 million 2.75% convertible bonds due 2014.
Taxation
The US GAAP effective rate of tax in Q3 2010 was 35% (2009: 34%), and the effective tax rate on Non GAAP income was 24% (2009: 33%).
The Non GAAP effective tax rate in both Q3 2010 and 2009 benefited fromchanges in estimate of the amount of certain tax liabilities following thesubmission of various tax returns. The Non GAAP effective tax rate in 2010 waslower than 2009 as the Non GAAP rate in Q3 2009 was adversely impacted by theinitial recognition of valuation allowances against certain EU deferred taxassets and increases to accrued interest on tax contingencies, which resultedin charges not repeated in Q3 2010.The US GAAP effective rate of tax in Q3 2010 was 11 percentage points higherthan the Non GAAP effective tax rate as certain items excluded from Non GAAPincome, such as the up-front payment to Acceleron and the write-down of theDAYTRANA intangible asset, were either made from territories with tax rateslower than Shire's effective rate or in territories where the establishment ofvaluation allowances precluded the recognition of any tax benefit.FINANCIAL INFORMATIONTABLE OF CONTENTS Page Unaudited US GAAP Consolidated Balance Sheets 13
Unaudited US GAAP Consolidated Statements of Income 14
Unaudited US GAAP Consolidated Statements of CashFlows 16 Selected Notes to the Unaudited US GAAP FinancialStatements(1) Earnings per share 18(2) Analysis of revenues 19 Non GAAP reconciliation 21
Unaudited US GAAP results for the three months and nine months to September 30, 2010 Consolidated Balance Sheets
September 30, December 31, 2010 2009 $M $MASSETSCurrent assets:Cash and cash equivalents 193.3 498.9Restricted cash 605.1 33.1Accounts receivable, net 722.1 597.5Inventories 252.6 189.7Assets held for sale 61.5 1.7Deferred tax asset 145.8 135.8Prepaid expenses and other current assets 179.6 113.5 Total current assets 2,160.0 1,570.2 Non-current assets:Investments 89.1 105.7Property, plant and equipment, net 818.6
676.8
Goodwill 375.0
384.7
Other intangible assets, net 1,567.2 1,790.7Deferred tax asset 86.3 79.0Other non-current assets 5.4 10.4 Total assets 5,101.6 4,617.5 LIABILITIES AND EQUITYCurrent liabilities:Accounts payable and accrued expenses 1,098.1 929.1Deferred tax liability 2.9 2.9Other current liabilities 70.2 88.0 Total current liabilities 1,171.2 1,020.0 Non-current liabilities:Convertible bonds 1,100.0 1,100.0Other long-term debt 6.8 43.6Deferred tax liability 356.1 294.3Other non-current liabilities 169.7 247.1 Total liabilities 2,803.8 2,705.0 Equity:Common stock of 5p par value; 1,000 millionshares authorized; and 562.2 million sharesissued and outstanding (2009: 1,000 millionshares authorized; and 561.5 million sharesissued and outstanding) 55.7
55.6
Additional paid-in capital 2,731.9
2,677.6
Treasury stock: 14.9 million shares (2009: 17.8million) (299.0)
(347.4)
Accumulated other comprehensive income 108.6 149.1Accumulated deficit (299.4) (622.4) Total equity 2,297.8 1,912.5 Total liabilities and equity 5,101.6
4,617.5
Unaudited US GAAP results for the three months and nine months to September 30, 2010 Consolidated Statements of Income
3 months to 3 months to 9 months to 9 months to September 30, September 30, September 30, September 30, 2010 2009 2010 2009 $M $M $M $MRevenues:Product sales 794.3 602.5 2,276.8 1,916.8Royalties 76.5 60.3 254.5 177.8Other revenues 3.5 4.2 8.6 19.8Total revenues 874.3 667.0 2,539.9 2,114.4 Costs and expenses:Cost of product sales(1) 112.7 104.9 333.7 284.9Research and development 197.9 147.8 475.9 492.5Selling, general andadministrative(1) 392.4 320.6 1,106.7 973.8Gain on sale of productrights - (6.3) (4.1) (6.3)Reorganization costs 9.7 2.0 23.3 7.1Integration andacquisition costs 5.8 6.2 6.4 10.0Total operating expenses 718.5 575.2 1,941.9 1,762.0 Operating income 155.8 91.8 598.0 352.4 Interest income 1.0 0.2 1.9 1.5Interest expense (8.3) (9.4) (25.6) (30.6)Other income, net 0.8 7.0 9.0 61.9Total other(expense)/income, net (6.5) (2.2) (14.7) 32.8 Income from continuingoperations before incometaxes and equity in(losses)/earnings ofequity method investees 149.3 89.6 583.3 385.2Income taxes (52.7) (30.6) (160.8) (56.7)Equity in(losses)/earnings ofequity method investees,net of taxes (0.3) 0.6 0.2 1.0Income from continuingoperations, net of tax 96.3 59.6 422.7 329.5 Loss from discontinuedoperations (net of incometax expense of $nil in allperiods) - - - (12.4)Net income 96.3 59.6 422.7 317.1 Add: Net loss attributableto noncontrolling interestin subsidiaries - - - 0.2Net income attributable toShire plc 96.3 59.6 422.7 317.3(1) Cost of product sales includes amortization of intangible assets relatingto favorable manufacturing contracts of $0.4 million for the three months toSeptember 30, 2010 (2009: $0.4 million) and $1.3 million for the nine monthsto September 30, 2010 (2009: $1.3 million). Selling, general andadministrative costs include amortization and impairment charges of intangibleassets relating to intellectual property rights acquired of $73.9 million forthe three months to September 30, 2010 (2009: $34.8 million) and $142.3million for the nine months to September 30, 2010 (2009: $101.6 million).
Unaudited US GAAP results for the three months and nine months to September 30, 2010 Consolidated Statements of Income (continued)
3 months to 3 months to 9 months to 9 months to September 30, September 30, September 30, September 30, 2010 2009 2010 2009Earnings per ordinary share- basicEarnings from continuingoperations 17.6c 11.0c 77.4c 61.1cLoss from discontinuedoperations - - - (2.3c)Earnings per ordinary share- basic 17.6c 11.0c 77.4c 58.8c Earnings per ADS - basic 52.8c 33.0c 232.2c 176.4c Earnings per ordinary share- dilutedEarnings from continuingoperations 17.3c 10.9c 76.0c 60.3cLoss from discontinuedoperations - - - (2.3c)Earnings per ordinary share- diluted 17.3c 10.9c 76.0c
58.0c
Earnings per ADS - diluted 51.9c 32.7c 228.0c
174.0c
Weighted average number ofshares (millions): Basic 547.0 540.6 546.1 540.0Diluted 556.7 548.3 589.7 547.1
Unaudited US GAAP results for the three months and nine months to September 30, 2010 Consolidated Statements of Cash Flows
3 months to 3 months
to 9 months to 9 months to
September 30, September
30, September 30, September 30,
2010 2009 2010 2009 $M $M $M $MCASH FLOWS FROM OPERATING ACTIVITIES:Net income 96.3 59.6 422.7 317.1Adjustments to reconcile net income to net cashprovided by operating activities: Loss from discontinued operations - - - 12.4 Depreciation and amortization 60.0 59.7 189.2 177.4 Share based compensation 17.5 16.9 44.2 50.1 Impairment of intangible assets 42.7 - 42.7 - Gain on sale of non-current investments - - (11.1) (55.2) Gain on sale of product rights - (6.3) (4.1) (6.3) Other (5.7) 5.2 5.2 11.5Movement in deferred taxes (10.0) (41.9) 48.7 (87.5)Equity in losses/(earnings) of equity methodinvestees 0.3 (0.6) (0.2) (1.0)Changes in operating assets and liabilities: Increase in accounts receivable (94.1) (113.4) (138.0) (156.4) Increase in sales deduction accrual 14.8 94.7 169.0 212.2 Increase in inventory (4.1) (11.3) (54.1) (24.2) Decrease/(increase) in prepayments and other current assets 14.7 25.7 (67.7) (8.1) Decrease in other assets 1.5 0.9 0.7 5.3 Increase/(decrease) in accounts payable and other liabilities 2.3 44.8 (41.0) (56.3)
Returns on investment from joint venture 5.8 - 5.8 4.9Cash flows used in discontinued operations - - - (5.9)Net cash provided by operating activities(A) 142.0
134.0 612.0 390.0 Unaudited US GAAP results for the three months and nine months to September 30, 2010 Consolidated Statements of Cash Flows (continued)
3 months to 3 months to 9 months to 9 months to September 30, September 30, September 30, September 30, 2010 2009 2010 2009 $M $M $M $M CASH FLOWS FROM INVESTINGACTIVITIES:Movements in restrictedcash (553.0) (3.4) (547.0) (10.1)Payments on foreignexchange contracts relatedto Movetis acquisition (21.2) - (21.2) -Purchases of subsidiaryundertakings andbusinesses, net of cashacquired - - - (75.5)Purchases of non-currentinvestments (1.0) - (1.0) -Purchases of property,plant and equipment (53.5) (67.5) (261.7) (169.4)Purchases of intangibleassets - (1.0) (2.7) (7.0)Proceeds from disposal ofnon-current investmentsand property plant andequipment - - 2.1 19.7Proceeds from disposal ofsubsidiary undertakings - - - 6.7Returns of equityinvestments - - - 0.2Net cash used in investingactivities(B) (628.7) (71.9) (831.5) (235.4)CASH FLOWS FROM FINANCINGACTIVITIES:Payment under buildingfinancing obligation (0.4) (0.9) (1.8) (3.9)Extinguishment of buildingfinance obligation - - (43.1) -Tax benefit of stock basedcompensation 5.2 - 9.6 -Proceeds from exercise ofoptions 0.2 1.8 2.1 2.8Payment of dividend - - (49.8) (43.0)Payments to acquire sharesby Employee ShareOwnership Trust ("ESOT") - - (1.7) (1.0)Net cash provided by/(usedin) financingactivities(C) 5.0 0.9 (84.7) (45.1)Effect of foreign exchangerate changes on cash andcash equivalents (D) (7.5) 6.4 (1.4) 5.0Net (decrease)/increase incash and cashequivalents(A) +(B) +(C)+(D) (489.2) 69.4 (305.6) 114.5Cash and cash equivalentsat beginning of period 682.5 263.3 498.9 218.2Cash and cash equivalentsat end of period 193.3 332.7 193.3 332.7
Unaudited US GAAP results for the three months and nine months to September 30, 2010
Selected Notes to the Financial Statements
(1) Earnings per share 3 months to 3 months to 9 months to 9 months to September 30, September 30, September 30, September 30, 2010 2009 2010 2009 $M $M $M $M Income from continuingoperations 96.3 59.6 422.7 329.5Loss from discontinuedoperations - - - (12.4)Noncontrolling interest insubsidiaries - - - 0.2 Numerator for basic EPS 96.3 59.6 422.7 317.3Interest on convertiblebonds, net of tax (1) - - 25.2 -Numerator for diluted EPS 96.3 59.6 447.9 317.3 Weighted average number ofshares: Millions Millions Millions MillionsBasic(2) 547.0 540.6 546.1 540.0Effect of dilutive shares:Stock options(3) 9.7 7.7 10.4 7.1Convertible bonds 2.75% due2014(4) - - 33.2 - Diluted 556.7 548.3 589.7 547.1(1) For the three month period ended September 30, 2010 and for the three andnine month periods ended September 30, 2009 interest on the convertible bondhas not been added back as the effect would be anti-dilutive.
(2) Excludes shares purchased by the ESOT and presented by Shire as treasury stock.
(3) Calculated using the treasury stock method.
(4) Calculated using the "if converted" method.
The share equivalents not included in the calculation of the diluted weighted average number of shares are shown below:
3 months to 3 months to 9 months to 9 months to September 30, September 30, September 30, September 30, 2010 2009 2010 2009 Millions(1) Millions(1) Millions(1) (2) (2) Millions(1) (2)Stock options out of themoney 3.6 16.8 8.9 18.0Convertible bonds 2.75%due 2014 33.2 33.2 - 33.1
(1) For the three and nine month periods ended September 30, 2010 and 2009, certain stock options have been excluded from the calculation of diluted EPS because their exercise prices exceeded Shire plc's average share price during the calculation period.
(2) For the three month period ended September 30, 2010 and for the three and nine month periods ended September 30, 2009 the ordinary shares underlying the convertible bonds have not been included in the calculation of the diluted weighted average number of shares, as the effect of their inclusion would be anti-dilutive.
Unaudited US GAAP results for the three months to September 30, 2010
Selected Notes to the Financial Statements
(2) Analysis of revenues3 months to September 30, 2010 2009 2010 2010 % % of total $M $M change revenueNet product sales:Specialty Pharmaceuticals("Specialty")ADHDVYVANSE 151.2 129.0 17% 17%ADDERALL XR 99.7 70.9 41% 11%INTUNIV 37.3 1 - n/a 4%DAYTRANA 14.7 17.4 -16% 2%EQUASYM 5.7 1 9.2 -38% 1% 308.6 226.5 36% 35%GILIALDA / MEZAVANT 76.0 65.4 16% 9%PENTASA 57.1 51.3 11% 6% 133.1 116.7 14% 15%General productsFOSRENOL 45.2 47.7 -5% 5%XAGRID® 20.5 21.5 -5% 2%CARBATROL® 20.3 20.8 -2% 2%CALCICHEW® 9.9 12.4 -20% 1%REMINYL/REMINYL XL® 9.1 10.5 -13% 1% 105.0 112.9 -7% 12% Other product sales 6.3 5.4 17% 1%Total Specialty productsales 553.0 461.5 20% 63% Human Genetic Therapies ("HGT")ELAPRASE 96.8 90.9 7% 11%REPLAGAL 92.1 48.3 91% 11%VPRIV 49.5 1 - n/a 6%FIRAZYR 2.9 1.8 61%
Unaudited US GAAP results for the nine months to September 30, 2010
Selected Notes to the Financial Statements
(2) Analysis of revenues9 months to September 30, 2010 2009 2010 2010 % % of total $M $M change revenueNet product sales:Specialty Pharmaceuticals("Specialty")ADHDVYVANSE 453.6 359.7 26% 18%ADDERALL XR 271.9 434.2 -37% 11%INTUNIV 123.0 - n/a 5%DAYTRANA 49.4 52.2 -5% 2%EQUASYM 16.3 14.1 16% 1% 914.2 860.2 6% 36%GILIALDA / MEZAVANT 209.2 169.4 23% 8%PENTASA 175.9 156.5 12% 7% 385.1 325.9 18% 15%General productsFOSRENOL 137.4 137.2 0% 6%XAGRID 65.4 62.3 5% 3%CARBATROL 63.4 59.7 6% 2%REMINYL/REMINYL XL 33.1 28.8 15% 1%CALCICHEW 29.7 32.8 -9% 1% 329.0 320.8 3% 13% Other product sales 17.4 14.3 22%
Unaudited results for the three months to September 30, 2010
Non GAAP reconciliation
US GAAP Adjustments Non GAAP Acquisitions Divestments, Amortization & reorganizations & asset integration & discontinued Reclassify3 months to, September 30, impairments activities
operations depreciation September 30,
2010 2010 (a) (b) (c) (d) $M $M $M $M $M $MTotal revenues 874.3 - - - - 874.3 Costs and expenses:Cost of product sales 112.7 - - (7.3) (2.3) 103.1Research anddevelopment 197.9 - (45.0) - (4.4) 148.5Selling, general andadministrative 392.4 (73.9) - - (16.1) 302.4Reorganization costs 9.7 - - (9.7) - -Integration andacquisition costs 5.8 - (5.8) - - -Depreciation - - - - 22.8 22.8Total operatingexpenses 718.5 (73.9) (50.8) (17.0) - 576.8 Operating income 155.8 73.9 50.8 17.0 - 297.5 Interest income 1.0 - - - - 1.0Interest expense (8.3) - - - - (8.3)Other income, net 0.8 - - - - 0.8Total other expense,net (6.5) - - - - (6.5)Income from continuingoperations beforeincome taxes and equityin losses of equitymethod investees 149.3 73.9 50.8 17.0 - 291.0Income taxes (52.7) (10.1) (3.5) (4.1) - (70.4)Equity in losses ofequity methodinvestees, net of tax (0.3) - - - - (0.3)Net income attributableto Shire plc 96.3 63.8 47.3 12.9 - 220.3Impact of convertibledebt, net of tax (1) - 8.4 - - - 8.4Numerator for dilutedEPS 96.3 72.2 47.3 12.9 - 228.7Weighted average numberof shares (millions) -diluted(1) 556.7 33.2 - - - 589.9Diluted earnings perADS 51.9c 33.8c 24.0c 6.6c - 116.3c
(1) The impact of convertible debt, net of tax has a dilutive effect on Non GAAP basis.
The following items are included in Adjustments:
(a) Amortization and asset impairments: Amortization of intangible assets relating to intellectual property rights acquired ($31.2 million), impairment charges to record DAYTRANA assets at fair value less costs to sell ($42.7 million) and tax effect of adjustments;
(b) Acquisitions and integration activities: Upfront payment to Acceleron ($45.0 million), acquisition costs are principally costs associated with the acquisition of Movetis ($5.8 million) and tax effect of adjustments;
(c) Divestments, reorganizations and discontinued operations: Accelerated depreciation ($6.2 million) and dual running costs ($1.1 million) on the transfer of manufacturing from Owings Mills and reorganization costs ($9.7 million) on the transfer of manufacturing from Owings Mills and establishment of an international commercial hub in Switzerland, and tax effect of adjustments; and
(d) Depreciation: Depreciation of $22.8 million included in Cost of product sales, R&D costs and SG&A costs for US GAAP separately disclosed for the presentation of Non GAAP earnings.
Unaudited results for the three months to September 30, 2009
Non GAAP reconciliation
US GAAP Adjustments Non GAAP Acquisitions Divestments, Amortization & reorganizations & asset integration &
discontinued Reclassify 3 months to, September 30, impairments activities operations depreciation September 30,
2009 2009 (a) (b) (c) (d) $M $M $M $M $M $MTotal revenues 667.0 - - - - 667.0 Costs and expenses:Cost of productsales 104.9 - (0.6) (4.5) (0.8) 99.0Research anddevelopment 147.8 - - - (3.6) 144.2Selling, general andadministrative 320.6 (34.8) - - (18.5) 267.3Gain on sale ofproduct rights (6.3) - - 6.3 - -Reorganization costs 2.0 - - (2.0) - -Integration andacquisition costs 6.2 - (6.2) - - -Depreciation - - - - 22.9 22.9Total operatingexpenses 575.2 (34.8) (6.8) (0.2) - 533.4 Operating income 91.8 34.8 6.8 0.2 - 133.6 Interest income 0.2 - - - - 0.2Interest expense (9.4) - - - - (9.4)Other income, net 7.0 - - - - 7.0Total other expense,net (2.2) - - - - (2.2)Income fromcontinuingoperations beforeincome taxes andequity in earningsof equity methodinvestees 89.6 34.8 6.8 0.2 - 131.4Income taxes (30.6) (9.9) (1.8) (0.5) - (42.8)Equity in earningsof equity methodinvestees, net oftax 0.6 - - - - 0.6Net incomeattributable toShire plc 59.6 24.9 5.0 (0.3) - 89.2Numerator fordiluted EPS 59.6 24.9 5.0 (0.3) - 89.2Weighted averagenumber of shares(millions) - diluted 548.3 - - - - 548.3Diluted earnings perADS 32.7c 13.5c 2.7c - - 48.9c
The following items are included in Adjustments:
(a) Amortization and asset impairments: Amortization of intangible assets relating to intellectual property rights acquired ($34.8 million), and tax effect of adjustment;
(b) Acquisitions & integration activities: Inventory fair value adjustment related to the acquisition of Jerini AG ($0.6 million); costs associated with the integration and acquisition of Jerini AG and EQUASYM from UCB ($6.2 million) and tax effect of adjustments;
(c) Divestments, reorganizations and discontinued operations: Accelerated depreciation ($4.5 million) and reorganization costs ($2.0 million) for the transition of manufacturing from Owings Mills; gains on disposal of non-core product rights ($6.3 million) and tax effect of adjustments; and
(d) Depreciation: Depreciation of $22.9 million included in Cost of Product Sales, R&D costs and SG&A costs for US GAAP separately disclosed for the presentation of Non GAAP earnings.
Unaudited results for the nine months to September 30, 2010
Non GAAP reconciliation
US GAAP Adjustments Non GAAP Acquisitions Divestments, Amortization & reorganizations & asset integration &
discontinued Reclassify 9 months to, September 30, impairments activities operations depreciation September 30,
2010 2010 (a) (b) (c) (d) $M $M $M $M $M $MTotal revenues 2,539.9 - - - - 2,539.9
Costs and expenses:Cost of productsales 333.7 - - (21.9) (8.6) 303.2Research anddevelopment 475.9 - (45.0) - (11.6) 419.3Selling, general andadministrative 1,106.7 (142.3) - - (49.0) 915.4Gain on sale ofproduct rights (4.1) - - 4.1 - -Reorganization costs 23.3 - - (23.3) - -Integration &acquisition costs 6.4 - (6.4) - - -Depreciation - - - - 69.2 69.2Total operatingexpenses 1,941.9 (142.3) (51.4) (41.1) - 1,707.1 Operating income 598.0 142.3 51.4 41.1 - 832.8 Interest income 1.9 - - - - 1.9Interest expense (25.6) - - - - (25.6)
Other
income/(expense),
net 9.0 - - (11.1) - (2.1)Total other expense,net (14.7) - - (11.1) - (25.8)Income fromcontinuingoperations beforeincome taxes andequity in earningsof equity methodinvestees 583.3 142.3 51.4 30.0 - 807.0Income taxes (160.8) (29.4) (3.6) (9.1) - (202.9)Equity in earningsof equity methodinvestees, net oftax 0.2 - - - - 0.2Net incomeattributable toShire plc 422.7 112.9 47.8 20.9 - 604.3Impact ofconvertible debt,net of tax 25.2 - - - - 25.2Numerator fordiluted EPS 447.9 112.9 47.8 20.9 - 629.5Weighted averagenumber of shares(millions) - diluted 589.7 - - - - 589.7Diluted earnings perADS 228.0c 57.3c 24.3c 10.6c - 320.2c
The following items are included in Adjustments:
(a) Amortization and asset impairments: Amortization of intangible assets relating to intellectual property rights acquired ($99.6 million), impairment charges to record DAYTRANA assets at fair value less costs to sell ($42.7 million) and tax effect of adjustments;
(b) Acquisitions and integration activities: Up-front payment to Acceleron ($45.0 million), acquisition costs are principally costs associated with the acquisition of Movetis ($6.4 million) and tax effect of adjustments;
(c) Divestments, reorganizations and discontinued operations: Accelerated depreciation ($18.3 million) and dual running costs ($3.6 million) on the transfer of manufacturing from Owings Mills, gain on sale of product rights relating to the disposal of non core products to Laboratorios Almirall S.A. ($4.1 million), reorganization costs ($23.3 million) on the transfer of manufacturing from Owings Mills and the establishment of an international commercial hub in Switzerland, gain on disposal of the investment in Virochem ($11.1 million) and tax effect of adjustments; and
(d) Depreciation: Depreciation of $69.2 million included in Cost of product sales, R&D costs and SG&A costs for US GAAP separately disclosed for the presentation of Non GAAP earnings.
Unaudited results for the nine months to September 30, 2009
Non GAAP reconciliation
US GAAP Adjustments Non GAAP Acquisitions Divestments, Amortization & reorganizations & asset integration & discontinued Reclassify9 months to, September 30, impairments activities
operations depreciation September 30,
2009 2009 (a) (b) (c) (d) $M $M $M $M $M $MTotal revenues 2,114.4 - - - - 2,114.4Costs and expenses:Cost of product sales 284.9 - (1.9) (7.5) (9.4) 266.1Research anddevelopment 492.5 - (36.9) (65.0) (11.3) 379.3Selling, general andadministrative 973.8 (101.6) - - (49.3) 822.9Gain on sale ofproduct rights (6.3) - - 6.3 - -Reorganization costs 7.1 - - (7.1) - -Integration andacquisition costs 10.0 - (10.0) - - -Depreciation - - - - 70.0 70.0Total operatingexpenses 1,762.0 (101.6) (48.8) (73.3) - 1,538.3Operating income 352.4 101.6 48.8 73.3 - 576.1 Interest income 1.5 - - - - 1.5Interest expense (30.6) - - - - (30.6)Otherincome/(expense), net 61.9 - - (55.2) - 6.7Total otherincome/(expense), net 32.8 - - (55.2) - (22.4)Income from continuingoperations beforeincome taxes andequity in earnings ofequity methodinvestees 385.2 101.6 48.8 18.1 - 553.7Income taxes (56.7) (29.0) (16.2) (17.8) - (119.7)Equity in earnings ofequity methodinvestees, net of tax 1.0 - - - - 1.0Income from continuingoperations, net of tax 329.5 72.6 32.6 0.3 - 435.0Loss from discontinuedoperations (12.4) - - 12.4 - -Net income 317.1 72.6 32.6 12.7 - 435.0Add: Net lossattributable tononcontrollinginterest insubsidiaries 0.2 - - - - 0.2Net incomeattributable to Shireplc 317.3 72.6 32.6 12.7 - 435.2Impact of convertibledebt, net of tax (1) - 25.1 - - - 25.1Numerator for dilutedEPS 317.3 97.7 32.6 12.7 - 460.3Weighted averagenumber of shares(millions) -diluted(1) 547.1 33.1 - - - 580.2Diluted earnings perADS 174.0c 40.5c 16.8c 6.6c - 237.9c
(1) The impact of convertible debt, net of tax has a dilutive effect on a Non GAAP basis.
The following items are included in Adjustments:
(a) Amortization and asset impairments: Amortization of intangible assets relating to intellectual property rights acquired ($101.6 million) and tax effect of adjustment;
(b) Acquisitions & integration activities: Inventory fair value adjustmentrelated to the acquisition of Jerini AG ($1.9 million); payment on amendmentof INTUNIV in-licence agreement ($36.9 million); costs associated with theintegration and acquisition of Jerini AG and EQUASYM from UCB ($10.0 million);and tax effect of adjustments;(c) Divestments, reorganizations and discontinued operations: Accelerateddepreciation ($7.5 million) and reorganization costs ($7.1 million) for thetransition of manufacturing from Owings Mills; costs associated with theagreement to terminate Women's Health products with Duramed ($65.0 million);gain on disposal of non-core product rights ($6.3 million); gain on disposalof the investment in Virochem ($55.2 million); discontinued operations inrespect of non core Jerini AG operations ($12.4 million); and tax effect ofadjustments;
(d) Depreciation: Depreciation of $70.0 million included in Cost of product sales, R&D costs and SG&A costs for US GAAP separately disclosed for the presentation of Non GAAP earnings.
Unaudited results for the three and nine months to September 30, 2010
Non GAAP reconciliation
The following table reconciles US GAAP net cash provided by operating activities to Non GAAP cash generation:
3 months to September 30, 9 months to September 30, 2010 2009 2010 2009 $M $M $M $MNet cash provided byoperating activities 142.0 134.0 612.0 390.0Tax and interest payments,net 83.6 86.0 301.6 220.6Payments for acquired andin-licenced products 45.0 - 45.0 36.9Non GAAP cash generation 270.6 220.0 958.6 647.5Net debt comprises: September, 30 December, 31 2010 2009 $M $MCash and cash equivalents 193.3 498.9Restricted cash 605.1 33.1 Convertible bonds (1,100.0) (1,100.0)Building finance obligation (7.3) (46.7)Net Debt (308.9) (614.7)Notes to EditorsSHIRE PLC
Shire's strategic goal is to become the leading specialty biopharmaceuticalcompany that focuses on meeting the needs of the specialist physician. Shirefocuses its business on attention deficit and hyperactivity disorder, humangenetic therapies and gastrointestinal diseases as well as opportunities inother therapeutic areas to the extent they arise through acquisitions. Shire'sin-licensing, merger and acquisition efforts are focused on products inspecialist markets with strong intellectual property protection and globalrights. Shire believes that a carefully selected and balanced portfolio ofproducts with strategically aligned and relatively small-scale sales forceswill deliver strong results.
THE "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Statements included herein that are not historical facts are forward-lookingstatements. Such forward-looking statements involve a number of risks anduncertainties and are subject to change at any time. In the event such risksor uncertainties materialize, the Company's results could be materiallyadversely affected. The risks and uncertainties include, but are not limitedto, risks associated with: the inherent uncertainty of research, development,approval, reimbursement, manufacturing and commercialization of the Company'sSpecialty Pharmaceutical and Human Genetic Therapies products, as well as theability to secure new products for commercialization and/or development;government regulation of the Company's products; the Company's ability tomanufacture its products in sufficient quantities to meet demand; the impactof competitive therapies on the Company's products; the Company's ability toregister, maintain and enforce patents and other intellectual property rightsrelating to its products; the Company's ability to obtain and maintaingovernment and other third-party reimbursement for its products; and otherrisks and uncertainties detailed from time to time in the Company's filingswith the Securities and Exchange Commission.
Non GAAP Measures
This press release contains financial measures not prepared in accordance withUS GAAP. These measures are referred to as "Non GAAP" measures and include:Non GAAP operating income; Non GAAP net income; Non GAAP diluted earnings perADS; effective tax rate on Non GAAP income from continuing operations beforeincome taxes and earnings of equity method investees ("Effective tax rate onNon GAAP income"); Non GAAP cost of product sales; Non GAAP research anddevelopment; Non GAAP selling, general and administrative; Non GAAP otherincome; and Non GAAP cash generation and net debt. These Non GAAP measuresexclude the effect of certain cash and non-cash items, both recurring andnon-recurring, that Shire's management believes are not related to the coreperformance of Shire's business.
These Non GAAP financial measures are used by Shire's management to make operating decisions because they facilitate internal comparisons of Shire's performance to historical results and to competitors' results. Shire's Remuneration Committee uses certain key Non GAAP measures when assessing the performance and compensation of employees, including Shire's executive directors.
The Non GAAP measures are presented in this press release as Shire'smanagement believe that they will provide investors with a means ofevaluating, and an understanding of how Shire's management evaluates, Shire'sperformance and results on a comparable basis that is not otherwise apparenton a US GAAP basis, since many one-time, infrequent or non-cash items thatShire's management believe are not indicative of the core performance of thebusiness may not be excluded when preparing financial measures under US GAAP.
These Non GAAP measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with US GAAP.
The following items, including their tax effect, have been excluded from both 2010 and 2009 Non GAAP earnings, and from our 2010 outlook:
Amortization and asset impairments:
- Intangible asset amortization and impairment charges; and
- Other than temporary impairment of investments.
Acquisitions and integration activities:
- Upfront payments and milestones in respect of in-licensed and acquired products;
- Costs associated with acquisitions, including transaction costs, and fair value adjustments on contingent consideration and acquired inventory; and
- Costs associated with the integration of companies.
Divestments, re-organizations and discontinued operations
- Gains and losses on the sale of non-core assets;
- Costs associated with restructuring and re-organization activities;
- Termination costs; and
- Income / (losses) from discontinued operations.
Depreciation, which is included in Cost of product sales, Research anddevelopment and Selling, general and administrative costs in our US GAAPresults, has been separately disclosed for the presentation of 2009 and 2010Non GAAP earnings. A reconciliation of Non GAAP financial measures to the mostdirectly comparable measure under US GAAP is presented on pages 21 to 24.
Sales growth at CER, which is a Non GAAP measure, is computed by restating 2010 results using average 2009 foreign exchange rates for the relevant period.
Average exchange rates for the nine months to September 30, 2010 were$1.54:£1.00 and $1.32:€1.00 (2009: $1.54:£1.00 and $1.37:€1.00). Averageexchange rates for Q3 2010 were $1.55:£1.00 and $1.29:€1.00 (2009: $1.64:£1.00and $1.43:€1.00).TRADEMARKSAll trademarks defined as ® and â„¢ used in this press release are trademarks ofShire plc or companies within the Shire group except for 3TC® and ZEFFIX®which are trademarks of GSK, PENTASA® which is a trademark of Ferring A/SCorp, and REMINYL®, REMINYL XLâ„¢, RAZADYNE® and RAZADYNE® ER which aretrademarks of J&J outside the UK and Republic of Ireland1. Certain trademarksof Shire plc or companies within the Shire group are set out in Shire's AnnualReport on Form 10-K for the year ended December 31, 2009 and the QuarterlyReport on Form 10-Q for the three months ended June 30, 2010.
1 REMINYL® and REMINYL XLâ„¢ are both trademarks of Shire in the UK and Republic of Ireland.
vendorRelated Shares:
Shire