3rd Nov 2005 12:00
Investing in a promising futureBasingstoke, UK and Philadelphia, US - November 3, 2005 - Shire PharmaceuticalsGroup plc (LSE: SHP, NASDAQ: SHPGY, TSX: SHQ) announces results for the thirdquarter to September 30, 2005.Q3 Financial Highlights (unaudited): * Revenues up 9% to $376.1 million * Royalties up 7% to $60.2 million * US GAAP net loss $624.2 million (includes $673.0 million write-off of Transkaryotic Therapies, Inc. (TKT) in-process research and development): loss per ADS (374.1 cents) * Non GAAP(1) net income $70.6 million and Non GAAP(1) adjusted earnings per ADS: 41.8 cents The TKT acquisition completed on July 27, 2005. The table below sets out thekey adjustments resulting from the acquisition which give rise to a US GAAP netloss for the quarter. Q3 2005 Q3 2004 US GAAP Adjustments Non GAAP US GAAP Adjustments NonGAAP (1) (1) $M $M $M $M $M $M _______ _______ _______ _______ _______ _______ Revenues 376.1 - 376.1 344.9 - 344.9 (Loss)/income (606.1) 704.7 98.6 105.9 10.1 116.0from continuing operations before income taxes (2) Net (loss)/income (624.2) 694.8 70.6 77.0 7.2 84.2 Diluted (losses)/ (374.1c) 415.9c 41.8c 45.9c 4.2c 50.1cearnings per ADS Note: Average exchange rates for Q3 2005 and 2004 were $1.78: ‚£1.00 and $1.82: ‚£1.00 respectively. (1) Non GAAPThis is a non GAAP financial measure. For Q3 2005, this measure for net incomeexcludes $694.8m on a post-tax basis as follows: * Costs associated with the write-off of in-process R&D following the acquisition of TKT: $673.0m * Cost of product sales fair value adjustment following the acquisition of TKT: $12.4m * TKT integration costs: $2.5m * Reorganization costs resulting from Shire's North American site consolidation: $4.6m * New listed holding company costs: $3.3m * Impact of discontinued operations: ($1.0)m For the Q3 2004 results, this measure for net income excludes on a post-taxbasis: * Reorganization costs resulting from Shire's North American site consolidation: $7.2m On a pre tax basis, the adjustments relating to continuing operations total$704.7m and $10.1m respectively.Management believes that the presentation of this non GAAP financial measureprovides useful information to investors regarding Shire's performance aftercompletion of the acquisition of TKT, as the excluded costs are not indicativeof the ongoing business in Q3 2005. A reconciliation of this non GAAP financialmeasure to the most directly comparable US GAAP financial measure can be foundon pages 22 and 23.(2) (Loss)/income from continuing operations before income taxes and equitymethod investeesQ3 Business Highlights: * GA-GCB: positive six month interim phase 1/2 data presented * MESAVANCE (SPD476): positive phase 3 data presented * ADDERALL XR: reinstated in Canada * ADDERALL XR: Citizen Petition (CP) filed with the Food and Drug Administration (FDA) * Lawsuit filed against Barr Laboratories, Inc., (Barr) and Impax Laboratories, Inc., (Impax) for infringement claims of US Patent No. 6,913,768 Matthew Emmens, Chief Executive Officer, said:"Our achievements during this quarter reflect a commitment to grow ourunderlying business while expanding our portfolio of new products. Thesuccessful acquisition of TKT expands our therapeutic offerings into thepromising area of human genetic diseases, and brings us closer to achieving ourobjective of rolling out six new products in the US and Europe by the end of2006. More recently, we've also made significant steps in enhancing the valueof our ADHD franchise including the filing of what we believe to be a verycompelling Citizen Petition and the lawsuits filed to protect Shire's US patent`768 from infringement. Shire has the products and execution capabilities tolook ahead to a promising future."2005 OutlookR&D pipeline and planned new product launches* * December 28, 2005 PDUFA date for DAYTRANA (MTS) * NRP104 for attention deficit hyperactivity disorder (ADHD) to be filed with FDA by New River Pharmaceuticals Inc. (New River) * File I2S for Hunter syndrome with the FDA and the European Medicines Agency (EMEA) * File MESAVANCE (SPD476) for ulcerative colitis with FDA * Commence launch of FOSRENOL for hyperphosphatemia in Europe *Launch dates are indicative and subject to the regulatory/government approvalsprocess.FinancialsShire's underlying business continues to perform strongly. We continue toexpect 2005 revenue growth to be in the low double-digit range. Earnings for2005 are affected by the costs associated with the continued development andlaunch of new products: * For full year 2005, R&D expenditure for Shire's underlying business as a percentage of total revenues is expected to be approximately 16% (previously 14-16%). * SG&A costs have reduced from quarter to quarter in the year to date (as per previous guidance). However, it is now anticipated that fourth quarter costs, in dollar terms, will increase to a level consistent with Q1 2005 to support new product launches. * The financial outlook for the full year stated above excludes the accounting impact of the upfront cash payment of $50 million to New River in Q1 2005, the final costs associated with the North American site consolidation and any further milestone payments in respect of NRP104 which may be paid before the end of 2005 if New River's New Drug Application (NDA) for NRP104 is accepted for filing by the FDA prior to the end of 2005. The above guidance does not include the impact of the TKT acquisition, which aspreviously stated, is expected to be dilutive for 2005 due to the inclusion ofthe following costs: * An operating loss of approximately $25 million. * An amortization charge of approximately $10 million in respect of the capitalized value of approved and commercialized TKT products ($25 million in a full year). * Charges relating to the following accounting adjustments and one off costs arising on acquisition (previously estimated at approximately $800 million). These costs are now expected to be approximately $785 million ($730 million for 2005 and $55 million during 2006) and comprise: * The write-off under US GAAP of the intangible value associated with the acquired in-process R&D pipeline of $673 million (Q3 2005). * A US GAAP adjustment to reflect the difference between the accounting fair value and book value of acquired REPLAGAL inventory. This incremental value adjustment is currently estimated at $90 million, of which approximately $40 million will be booked in 2005 (Q3 2005: $17 million) with the balance charged during 2006. * TKT integration costs estimated at $22 million, of which approximately $17 million is expected to be incurred in 2005 (Q3 2005: $3.5 million) with the balance charged during 2006. As previously stated, we expect the TKT acquisition to significantly enhancesales and EPS growth beyond 2007 and to be EPS neutral in 2007.2006 OutlookR&D pipeline and new product launches*Shire has a strong pipeline and in 2006 is planning to: * File MESAVANCE (SPD476) for ulcerative colitis with the EMEA during H1 2006 * File SPD503 for ADHD with the FDA during H1 2006 * File SPD465 for ADHD with the FDA during H1 2006 * Continue the roll-out of FOSRENOL in Europe * Launch DYNEPO for anemia in Europe during H2 2006 * Launch DAYTRANA (MTS) for ADHD in the US during H1 2006 * Launch I2S for Hunter syndrome mid 2006 * Launch MESAVANCE in the US late 2006 * Launch NRP104 in the US late 2006 *Approval and launch dates are indicative and subject to the regulatory/government approvals process.FinancialsShire is planning five new product launches in 2006 and will be continuing theroll-out of FOSRENOL across Europe. These launches will require additionaladvertising and promotional spend and in some cases additional salesrepresentatives. Consequently, SG&A costs are expected to rise in 2006 to atleast $700 million(1). The planned regulatory filings, together with phase 3(b)and 4 studies to support the new product launches and the commencement of thephase 3 trials on GA-GCB, are expected to result in an R&D spend of at least$300 million(2). These costs are currently subject to detailed review as partof Shire's annual budget and planning process. A further update will beprovided with the Q4 results.(1) Includes the impact of TKT and excludes the impact of SFAS123R(2) Includes the impact of TKT and excludes any milestone payments made to NewRiver and Noven Pharmaceuticals Inc. - Ends - For further information please contact:Investor Relations Clƒ©a Rosenfeld (Rest of the World) +44 1256 894 160 Brian Piper (North America) +1 484 595 8252 Media Jessica Mann (Rest of the World) +44 1256 894 280 Matthew Cabrey (North America) +1 484 595 8248 Notes to editorsShire Pharmaceuticals Group plcShire's strategic goal is to become the leading specialty pharmaceuticalcompany that focuses on meeting the needs of the specialist physician. Shirefocuses its business on central nervous system (CNS), gastrointestinal (GI),general products (GP) and human genetic therapies (HGT) - all being areas inwhich Shire has a commercial presence. The structure is sufficiently flexibleto allow Shire to target new therapeutic areas to the extent opportunitiesarise through acquisitions. Shire believes that a carefully selected portfolioof products with a strategically aligned and relatively small-scale sales forcewill deliver strong results.Shire's focused strategy is to develop and market products for specialtyphysicians. This approach aims to deliver increased returns and lower risks.Shire's in-licensing and merger and acquisition efforts are focused on productsin niche markets with strong intellectual property protection either in the USor Europe.For further information on Shire, please visit the Company's website: www.shire.com."SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF1995Statements 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 risks oruncertainties materialize, Shire's results could be materially affected. Therisks and uncertainties include, but are not limited to, risks associated with:the inherent uncertainty of pharmaceutical research, product development,manufacturing and commercialization; the impact of competitive products,including, but not limited to, the impact of those on Shire's Attention Deficitand Hyperactivity Disorder (ADHD) franchise; patents, including, but notlimited to, legal challenges relating to Shire's ADHD franchise; governmentregulation and approval, including, but not limited to, the expected productapproval dates of DAYTRANA (MTS) (ADHD), SPD503 (ADHD), SPD465 (ADHD),MESAVANCE (SPD476) (ulcerative colitis), I2S (iduronate-2-sulfatase) (Huntersyndrome), and NRP104 (ADHD), including its scheduling classification by theDrug Enforcement Administration in the United States; Shire's ability tobenefit from its acquisition of Transkaryotic Therapies, Inc.; Shire's abilityto secure new products for commercialization and/or development; and otherrisks and uncertainties detailed from time to time in Shire's filings with theSecurities and Exchange Commission, including its Annual Report on Form 10-Kfor the year to December 31, 2004.The following are trademarks of Shire Pharmaceuticals Group plc or itssubsidiaries, which are the subject of trademark registrations in certain countries:ADDERALL XR‚® (mixed salts of a single-entity amphetamine product)ADDERALL‚® (mixed salts of a single-entity amphetamine product)AGRYLIN‚® (anagrelide hydrochloride)CALCICHEW‚® (range (calcium carbonate with or without vitamin D3))CARBATROL‚® (carbamazepine)COLAZIDE‚® (balsalazide)EQUETRO¢â€ž¢ (carbamazepine)FOSRENOL‚® (lanthanum carbonate)MESAVANCE¢â€ž¢ (mesalamine)REMINYL‚® (galantamine hydrobromide) (UK and Republic of Ireland)REMINYL XL‚® (galantamine hydrobromide) (UK and Republic of Ireland)REPLAGAL‚® (agalsidase alfa)SOLARAZE‚® (3%, gel diclofenac sodium (3%w/w))XAGRID‚® (anagrelide hydrochloride)The following are trademarks of third parties:3TC‚® (trademark of GlaxoSmithKline (GSK))AMARYL‚® (glimepiride) (trademark of Sanofi-Aventis)DYNEPO‚® (epoetin delta) (trademark of Aventis Pharma Holdings GmbH)DAYTRANA¢â€ž¢ (methylphenidate transdermal) (trademark of Noven PharmaceuticalsInc. (Noven))*PENTASA‚® (trademark of Ferring AS)RAZADYNE¢â€ž¢ (galantamine hydrobromide) (trademark of Johnson & Johnson)RAZADYNE ER¢â€ž¢ (galantamine hydrobromide) (trademark of Johnson & Johnson)REMINYL‚® (galantamine hydrobromide) (trademark of Johnson & Johnson, excludingUK and Republic of Ireland)REMINYL XL‚® (galantamine hydrobromide) (trademark of Johnson & Johnson,excluding UK and Republic of Ireland)ZEFFIX‚® (trademark of GSK)* Referred to as MTS in this documentOVERVIEW OF US GAAP FINANCIAL RESULTS 1. Introduction Revenues from continuing operations for the three months to September 30, 2005increased by 9% to $376.1 million (2004: $344.9 million) of which $16.0 millionwas derived from sales of REPLAGAL in the two months following the acquisitionof TKT.Losses from continuing operations for the three months to September 30, 2005were $625.2 million (2004 income of: $77.0 million). The decrease was mainlydue to a $673.0 million write-off of in-process R&D acquired with TKT. Thisadjustment is required under US GAAP and represents the value of acquiredintangible assets still under development including I2S and GA-GCB.Cash inflow from operating activities for the three months to September 30,2005 reduced by 49% to $33.4 million (2004: $66.0 million). Cash generation wasaffected by the operating losses of the acquired TKT business and the timing ofworking capital payments.Cash and cash equivalents, restricted cash and short-term investments atSeptember 30, 2005 totaled $602.3 million (December 31, 2004: $1,457.5million). The difference was primarily due to $1,156.5 million having been paidto date to purchase TKT, partly offset by positive cash flow from Shire'soperations and the receipt of the final $30.0 million installment from IDB forthe purchase of Shire's vaccines business in 2004.In addition, $111.8 million of cash and cash equivalents, restricted cash andshort-term investments was acquired with the purchase of TKT.The total cash consideration for the acquisition of TKT is expected to beapproximately $1.6 billion of which $1,156.5 million has been paid to date. Thebalancing amount, which has been recorded on the balance sheet as a liability,is due to shareholders who have requested an appraisal of the $37 per shareacquisition consideration pursuant to a court appraisal process. Theseshareholders previously owned $11.7 million of TKT's ordinary share capital(32% of total share capital). 2. Product sales For the three months to September 30, 2005 product sales increased 9% to $309.2million (2004: $283.7 million) and represented 82% of total revenues (2004:82%).Third Quarter 2005 Key Product Highlights Sales Sales US Rx (1) September 2005 Product $M Growth (2) Growth (2) US Market Share ADDERALL XR 165.9 +18% +11% 25% CARBATROL 16.1 +44% -12% 43% PENTASA 36.6 +11% +6% 18% AGRYLIN and XAGRID North America (3) 4.8 -88% -71% 4% Rest of World 12.0 +37% n/a n/a FOSRENOL 9.7 n/a n/a 8% REPLAGAL (4) 16.0 n/a n/a n/a (1) IMS Prescription Data - Product specific(2) Compared to Q3 2004(3) Includes US and Canada(4) This represents REPLAGAL sales for the two-month period since acquisition.The total sales for the full quarter, including pre acquisition sales, were$24.1 million (2004: $19.5 million)ADDERALL XR for the treatment of ADHDUS prescriptions for ADDERALL XR for the three months to September 30, 2005were up 11%. ADDERALL XR enhanced its leading market position with a 1%increase in US market share, in a market that grew 4% overall compared to thesame period in 2004.ADDERALL XR had a 25% share of the total US ADHD market in September 2005 andstrengthened its position as the leading brand in the US ADHD market.Product sales growth was higher than prescription growth for the quarter duemainly to the impact of price increases in December 2004 and August 2005 andlower sales deductions.FDA approval of the adolescent indication for ADDERALL XR was received duringJuly 2005.On August 24, 2005, Shire announced that Health Canada would reinstate themarketing authorization of ADDERALL XR in Canada effective August 26, 2005.This reinstatement follows the acceptance by Health Canada of therecommendations from the New Drug Committee (NDC), which was appointed byHealth Canada at Shire's request to review the suspension in Canada of ADDERALLXR. The NDC, comprised of three highly qualified, independent experts in thefields of pediatric cardiology, pediatric development and behavioral problems,and pharmacoepidemiology, examined the scientific evidence made available tothem by both Shire and Health Canada. The NDC recommended that Health Canadareinstate ADDERALL XR.During October 2005, Shire filed a Citizen Petition with the FDA requestingthat the FDA require more rigorous bioequivalence testing or additionalclinical testing for generic or follow-on drug products that reference ADDERALLXR, before they can be approved. Shire believes that these requested criteriawill ensure that generic formulations of ADDERALL XR or follow-on drug productswill be clinically effective and safe. The FDA has six months to respond toShire's petition, however it does not preclude the FDA from granting approvalor tentative approval to generic or follow-on products referencing ADDERALL XRduring that time.Shire continues to defend its intellectual property. In October 2005, Shireannounced that it has filed a lawsuit against Barr and Impax with respect to USpatent No. 6,913,768 (`768). Shire believes that both Barr's and Impax'sgeneric ADDERALL XR products infringe the `768 patent claims. The case wasfiled in the Southern District of New York. The earlier filed cases againstBarr and Impax involving the `819 and `300 patents are scheduled to go to trialin January 2006 and on February 23, 2006 respectively. There will be no 30month stay associated with the filing of the `768 patent case. The `768 patentis directed to pharmaceutical compositions comprising a once-a-day sustainedrelease formulation of at least one amphetamine salt for the treatment of ADHD.Impax has filed for summary judgment in respect to non-infringement of the `819and `300 patents in the district court of Delaware. The Court has not yet ruledon Impax's motion. The schedule in the Barr case provided that summaryjudgement motions were to be filed and fully briefed by October 14, 2005.Neither Shire nor Barr filed any summary judgement motions. Trial in the Barrcase is scheduled for January 2006.Further information about the litigation proceedings relating to our ADDERALLXR patents can be found in our filings with the US Securities and ExchangeCommission, including our Annual Report on Form 10-K for the year to December31, 2004 and our most recent quarterly report on Form 10-Q for the period endedJune 30, 2005. Any decrease in the sales of ADDERALL XR could significantlyreduce revenues and earnings.CARBATROL for the treatment of epilepsyUS prescriptions for the three months to September 30, 2005 were down 12%,compared to the same period in 2004. This was due primarily to supplyconstraints and a 6% decrease in the total US carbamazepine prescriptionmarket. The supply constraints have now been resolved.Product sales for the three months to September 30, 2005 were up 44%, comparedto the same period in 2004. The difference between sales growth and the lowerlevel of prescriptions is due to a December 2004 price increase and lower salesdeductions in comparison to the high levels in the same period in 2004.CARBATROL had a 43% share of the total US extended release carbamazepineprescription market in September 2005 (September 2004: 45%).Patent litigation proceedings with Nostrum Pharmaceuticals, Inc. (Nostrum)relating to CARBATROL are in progress. On July 18, 2005, Judge Mary LittleCooper of the United States Federal District Court in Trenton, New Jerseydenied Nostrum's motion for summary judgment. Consequently, the lawsuit betweenShire and Nostrum will continue to move toward trial. No trial date has beenset by the Court.Further information can be found in our filings with the US Securities andExchange Commission, including our Annual Report on Form 10-K for the year toDecember 31, 2004 and our most recent quarterly report on Form 10-Q for theperiod ended June 30, 2005.PENTASA for the treatment of ulcerative colitisUS prescriptions for the three months to September 30, 2005 were up 6%,compared to the same period in 2004. The increase was due to the success of theco-promotional agreement with Solvay Pharmaceuticals Inc. and the impact of the500mg dosage form launched in the third quarter of 2004, in conjunction with a2% increase in the total US oral mesalamine prescription market.Product sales for the three months to September 30, 2005 were up 11%, comparedto the same period in 2004. The difference between sales growth andprescription growth is due to the impact of the September 2004 price increase.PENTASA had an 18% share of the total US oral mesalamine prescription market inSeptember 2005 (September 2004: 17%).AGRYLIN and XAGRID for the treatment of thrombocythemiaAGRYLIN/XAGRID sales worldwide for the three months to September 30, 2005 were$16.8 million, down 66% compared to the same period in 2004 (Q3 2004: $49.7million).As expected, North American sales were down 88% due to the impact of genericversions of AGRYLIN being approved in the US market in April 2005.Rest of the World sales (all sales outside North America) were up 37%, due tothe successful launch of XAGRID in the UK, Germany and France in the firstquarter of 2005. In accordance with current orphan drug legislation in the EU,XAGRID will have up to 10 years of marketing exclusivity in the EU.FOSRENOL for the treatment of hyperphosphatemiaUS prescriptions for the three months to September 30, 2005 were up 19%, to43,000 prescriptions, compared to the previous quarter (Q2 2005: 36,000).FOSRENOL was launched in the US in January 2005.Product sales for the three months to September 30, 2005 were $9.7 million (Q22005: $9.9 million). The difference between sales and prescription growth isdue to pipeline inventories declining from a comparatively high level ofstocking in the prior quarter after the initial launch of FOSRENOL in the firstquarter.FOSRENOL had an 8% share of the total US phosphate binding market in September2005.Shire continues its discussions relating to FOSRENOL with regulatoryauthorities across Europe and other regions. Launches are anticipated to beginin Europe shortly, subject to obtaining national approvals and concludingpricing and reimbursement negotiations.REPLAGAL for the treatment of Fabry diseaseREPLAGAL was acquired by Shire as part of the TKT acquisition, which completedon July 27, 2005. Product sales for the period since acquisition were $16.0million. The majority of REPLAGAL sales are in Europe. 3. Royalties Royalty revenue increased 7% to $60.2 million for the three months to September30, 2005 (2004: $56.2 million) and represented 16% of total revenues (2004:16%). The following table provides an analysis of Shire's royalty income:Third Quarter 2005 Royalty HighlightsProduct Royalties to Royalty(1) Worldwide in-market sales by Shire Growth licensee(2) in Q3 2005 % $M $M 3TC 39.6 +5%* 301 ZEFFIX 7.7 +10%** 67 Other 12.9 +14% N/A * The impact of foreign exchange movements has contributed +3% to the reportedgrowth** The impact of foreign exchange movements has contributed +1% to the reportedgrowth(1) Compared with Q3 2004(2) GSK3TCRoyalties from sales of 3TC for the three months to September 30, 2005 were$39.6 million, an increase of 5% compared to the three months to September 30,2004 ($37.9 million). This was due to the continued growth in the nucleosideanalogue market for HIV and the positive impact of foreign exchange movements.Shire receives royalties from GSK on worldwide 3TC sales. GSK's worldwide salesof 3TC for the three months to September 30, 2005 were $301 million (2004: $291million).ZEFFIXRoyalties from sales of ZEFFIX for the three months to September 30, 2005 were$7.7 million, an increase of 10% compared to the three months to September 30,2004 ($7.0 million), due to strong growth in the Japanese market.Shire receives royalties from GSK on worldwide ZEFFIX sales. GSK's worldwidesales of ZEFFIX for the three months to September 30, 2005 were $67 million(2004: $61 million).OtherOther royalties are primarily in respect of REMINYL and REMINYL XL (nowmarketed as RAZADYNE and RAZADYNE ER in the US), a product marketed worldwideby Janssen, with the exception of the United Kingdom and the Republic ofIreland where Shire acquired the exclusive marketing rights from May 2004.On April 11, 2005, Ortho-McNeil Neurologics Inc. (Janssen's US affiliatecompany) announced that REMINYL would be marketed in the US under the newproduct name of RAZADYNE. Ortho-McNeil Neurologics Inc. worked closely with theFDA on a name change following dispensing errors in the US, between REMINYL andthe Type 2 diabetes mellitus drug known as AMARYL. REMINYL continues to bemarketed outside the US under its original name. Shire is only aware of onesimilar dispensing error outside the US.Sales of the REMINYL/RAZADYNE range, for the symptomatic treatment of mild tomoderately severe dementia of the Alzheimer's type, are growing well in theAlzheimer's market.Shire and Janssen's affiliate, Johnson & Johnson Pharmaceutical Research &Development, LLC, are in ongoing discussions with the European regulatoryauthorities in relation to their assessment of the data for REMINYL frominvestigational studies in mild cognitive impairment. Labeling changes have nowbeen agreed.Shire has submitted its response to the preliminary Appraisal ConsultationDocument issued by the National Institute for Clinical Excellence in Englandand Wales (NICE). This preliminary appraisal recommends that all existingapproved products for the symptomatic treatment of mild to moderate Alzheimer'sdisease in England and Wales are no longer reimbursable by the National HealthService when used by new patients. NICE's final recommendation was expected tobe published in June 2005. However, on July 18, 2005 NICE announced that it haddelayed its decision and asked the pharmaceutical companies that market drugsto treat Alzheimer's disease to identify sub-groups of patients who may benefitfrom the treatments. 4. Financial details Cost of product salesFor the three months to September 30, 2005 the cost of product sales amountedto 19% of product sales (2004: 14%). The decrease in gross margin is primarilydriven by the addition of REPLAGAL to Shire's product portfolio following theacquisition of TKT. REPLAGAL's cost of product sales relates entirely toacquired inventories and is therefore based on the fair value of that acquiredinventory. In accordance with US GAAP acquired finished goods have been valuedat 97% of the expected sales price of REPLAGAL and so virtually no margin willbe reflected for REPLAGAL sales until acquired finished goods have been sold(anticipated Q3 2006). For the three months to September 30, 2005 the REPLAGALcost of product sales includes a $17.2 million adjustment in respect of theacquired inventory, of which $15.1 million related to sales of acquiredfinished goods and $2.1 million was a write off of damaged work in progress.Excluding this fair value adjustment, the cost of product sales would have been14%.Research and development (R&D)R&D expenditure increased from $57.8 million in the three months to September30, 2004 to $74.3 million in the three months to September 30, 2005. Expressedas a percentage of total revenues, R&D expenditure was 20% for the three monthsto September 30, 2005 (2004: 17%). The increase in R&D expenditure is primarilythe result of adding two significant projects following the acquisition of TKT.Excluding TKT, R&D expenditure expressed as a percentage of revenues was 17%.Shire's pipeline is now well advanced with seven projects in late stagedevelopment or registration.Selling, general and administrative (SG&A)SG&A expenses increased from $104.8 million in the three months to September30, 2004 to $154.9 million in the three months to September 30, 2005 anincrease of 48%. As a percentage of product sales, these expenses were 50%(2004: 37%).This increase was expected with additional costs in the three months toSeptember 30, 2005 attributable to four product launches during 2005,incremental costs in 2005 associated with the FOSRENOL and EQUETRO salesforces, $7.0 million of SG&A costs associated with TKT and $4.5 millionrelating to the set up of the new listed holding company for the Shire group.SG&A costs, excluding the impact of TKT and the new listed holding companycosts, were $143.4 million and have been moderating over the course of the year(Q2 2005: $153.5 million), as per previous guidance.Depreciation and amortizationThe depreciation charge for the three months to September 30, 2005 was $4.6million (2004: $5.3 million). Amortization charges, including the amortizationon acquired products, were $11.8 million for the three months to September 30,2005 (2004: $9.5 million).Reorganization costsDuring the three months to September 30, 2005 Shire incurred costs of $6.5million (2004: $10.1 million) following the closure of the Newport, Kentuckysite in July 2005. Following this closure, the site consolidation is nowcomplete and no further reorganization costs are expected to be incurred.During the three months to September 30, 2004 the reorganization costs relatedto employee severance ($2.6 million), relocation ($3.6 million) and other costsassociated with the reorganization ($3.9 million).Integration costsFor the three months to September 30, 2005, the company incurred $3.5 millionof costs associated with the integration of the TKT business into the Group.This primarily related to retention payments for key staff.In-process R&DDuring the three months to September 30, 2005, as required under US GAAP(business combination accounting), Shire wrote off the portion of the purchaseprice allocated to in-process R&D of $673.0 million. This amount represents thevalue of those intangible assets acquired as part of the TKT acquisition whichhave not been approved by the FDA or other regulatory authorities, includingI2S and GA-GCB.Interest income and expenseFor the three months to September 30, 2005 the Company received interest incomeof $6.9 million (2004: $5.7 million). This increase in interest income is dueto higher interest rates on our US cash deposits partially offset by theinterest foregone by Shire on the net payments of $1.1 billion made to date inrespect of the acquisition of TKT.For the three months to September 30, 2005 the Company incurred interestexpense of $3.5 million. This expense includes a $2.5 million provision inrespect of interest, which may arise as a result of the court appraisal processon amounts due to shareholders who have requested appraisal of the acquisitionconsideration payable for their shares.The charge in Q3 2004 of $8.0 million included the write-off of deferredissuance costs capitalized at the time of Shire's convertible loan notes issuein 2001. These costs were being amortized over the life of the notes but werewritten off following the redemption of $370.1 million of loan notes in Q32004.Other income/(expense), netFor the three months to September 30, 2005 other income totaled $3.2 million(2004: expense of $4.9 million). During the three months to September 30, 2005other income was primarily attributable to the income generated from the saleof certain portfolio investments. During the three months to September 30, 2004other expense was primarily attributable to the write down of certain portfolioinvestments.TaxationThe effective rate of tax for the three months to September 30, 2005 excludingthe write-off of in-process R&D was 28% (2004: 28%).At September 30, 2005 net deferred tax assets of $85.4 million were recognized(December 31, 2004: $78.1 million).Equity in (losses)/earnings of equity method investeesLosses of $0.6 million were recorded for the three months to September 30, 2005(2004 earnings of: $1.1 million) being the earnings of $1.2 million from the50% share of the antiviral commercialization partnership with GSK in Canada(2004: $1.1 million), offset by the share of losses in the GeneChem and EGSHealthcare Funds of $1.8 million (2004: $nil).Discontinued operationsDuring the three months to September 30, 2005 $1.0 million of the pipeline loanto ID Biomedical Corporation (IDB) was repaid. The pipeline loan had been fullyprovided for in 2004 at the time of the sale of the vaccines business to IDB.This part repayment of the pipeline loan was in compliance with the terms ofthe loan agreement requiring IDB to make such payment in the event IDB sold andleased back any property acquired from Shire as part of the sale of thevaccines business.US GAAP Results for the 9 months to September 30, 2005Unaudited consolidated Balance Sheets September 30, December 31, 2005 2004 $'000 $'000 ____________ ____________ ASSETS Current assets: Cash and cash equivalents 549,820 1,111,477 Restricted cash 30,085 21,627 Short-term investments 22,380 324,411 Accounts receivable, net 282,262 222,546 Inventories 145,694 41,230 Deferred tax asset 35,607 70,387 Prepaid expenses and other current assets 81,159 137,271 ___________ ___________ Total current assets 1,147,007 1,928,949 Investments 47,205 63,267 Property, plant and equipment, net 218,108 131,351 Goodwill, net 381,747 235,396 Other intangible assets, net 749,375 309,297 Deferred tax asset 49,782 7,724 Other non-current assets 42,955 38,895 ___________ ___________ Total assets 2,636,179 2,714,879 ___________ ___________ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses 374,941 311,231 Outstanding TKT shareholders 434,876 - Loan facility - 43,162 Other current liabilities 53,583 77,558 ___________ ____________ Total current liabilities 863,400 431,951 Long-term debt 116 116 Other non-current liabilities 45,062 32,159 ___________ ____________ Total liabilities 908,578 464,226 ___________ ___________US GAAP Results for the 9 months to September 30, 2005Unaudited Consolidated Balance Sheets (continued) September December 31, 30, 2004 2005 $'000 $'000 ___________ ___________ Shareholders' equity: Ordinary shares of 5p par value; 800,000,000 shares 40,803 40,064authorized; and 494,192,907 (December 31, 2004: 484,916,034) shares issued and outstanding Exchangeable shares; 2,363,000 (December 31, 2004: 109,377 195,8304,226,476) shares issued and outstanding Treasury stock (144) (264) Additional paid-in capital 1,191,233 1,072,407 Accumulated other comprehensive income 91,653 131,939 Retained earnings 294,679 810,677 ___________ ___________ Total shareholders' equity 1,727,601 2,250,653 ___________ ___________ Total liabilities and shareholders' equity 2,636,179 2,714,879 ___________ ___________US GAAP Results for the 3 months and 9 months to September 30, 2005Unaudited Consolidated Statements of Operations 3 months to 3 months to 9 months to 9 months to September September September September 30, 30, 30, 30, 2005 2004 2005 2004 $'000 $'000 $'000 $'000 __________ __________ __________ __________ Revenues: Product sales 309,150 283,723 930,149 803,597 Royalties 60,186 56,199 181,073 170,001 Licensing and development 4,586 2,820 11,169 10,217 Other revenues 2,155 2,167 11,975 5,654 __________ __________ __________ __________ Total revenues 376,077 344,909 1,134,366 989,469 __________ __________ __________ __________ Costs and expenses: Cost of product sales 60,081 38,933 135,359 100,010 Research and development 74,311 57,759 251,300 143,760 Selling, general and 154,912 104,755 465,960 330,230administrative Depreciation and 16,420 14,891 50,135 40,474amortization Intangible asset - 5,456 3,000 5,456impairment Reorganization costs 6,457 10,061 9,335 32,041 Integration costs 3,520 - 3,520 - In-process R&D write-off 673,000 - 673,000 - __________ __________ __________ __________ Total operating expenses 988,701 231,855 1,591,609 651,971 __________ __________ __________ __________ Operating (loss)/income (612,624) 113,054 (457,243) 337,498 Interest income 6,876 5,697 27,868 14,101 Interest expense (3,519) (8,032) (4,718) (12,259) Other income/(expense), 3,202 (4,859) 3,938 4,403net __________ __________ __________ __________ Total other income/ 6,559 (7,194) 27,088 6,245(expense), net __________ __________ __________ __________ (Loss)/income from (606,065) 105,860 (430,155) 343,743continuing operations before income taxes and equity in (losses)/ earnings of equity method investees Income taxes (18,609) (29,960) (61,707) (97,188) Equity in (losses)/ (569) 1,140 150 3,358earnings of equity method investees __________ __________ __________ __________ (Loss)/income from (625,243) 77,040 (491,712) 249,913continuing operations Loss from discontinued - - - (20,135)operations Gain/(loss) on disposition 1,049 - 4,174 (44,157)of discontinued operations __________ __________ __________ __________ Net (loss)/income (624,194) 77,040 (487,538) 185,621 __________ __________ __________ __________US GAAP Results for the 3 months and 9 months to September 30, 2005Unaudited Consolidated Statements of Operations (continued) 3 months to 3 months to 9 months to 9 months to September 30, September September September 30, 30, 30, 2005 2004 2005 2004 __________ __________ __________ __________ Earnings per share - basic (Loss)/ income from (124.9c) 15.5c (98.4c) 50.4ccontinuing operations Loss from discontinued - - - (4.1c)operations Gain/(loss) on 0.2c - 0.8c (8.9c)disposition of discontinued operations __________ __________ __________ __________ Net (loss)/income (124.7c) 15.5c (97.6c) 37.4c __________ __________ __________ __________ Earnings per share - diluted (Loss)/income from (124.9c) 15.3c (98.4c) 49.2ccontinuing operations Loss from discontinued - - - (3.9c)operations Gain/(loss) on 0.2c - 0.8c (8.6c)disposition of discontinued operations __________ __________ __________ __________ Earnings per ordinary (124.7c) 15.3c (97.6c) 36.7cshare __________ __________ __________ __________ Earnings per ADS (374.1c) 45.9c (292.8c) 110.1c __________ __________ __________ __________ Weighted average number of shares: Basic 500,542,616 496,474,005 499,741,042 496,090,191 Diluted 500,542,616 509,777,052 499,741,042 515,070,302 ___________ ___________ ___________ ___________US GAAP Results for the 3 months and 9 months to September 30, 2005Unaudited Consolidated Statements of Cash Flows 3 months to 3 months to 9 months to 9 months to September September September September 30, 30, 30, 2005 30, $'000 2005 2004 2004 $'000 $'000 $'000 ____________ ____________ ____________ ____________ CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss)/income from (625,243) 77,040 (491,712) 249,913continuing operations Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and 962 681 2,682 1,965amortization 16,244 14,891 44,085 40,474Cost of product sales SG&A Stock option compensation 90 67 187 165 In-process R&D write-off 673,000 - 673,000 - Write-down of long-term 544 10,939 11,005 19,392assets (Gain)/loss on sale of long (3,850) 411 (3,866) (14,472)term assets Dissenting shareholders' 2,435 - 2,435 -interest Movement in deferred taxes 43,718 (16,378) 34,307 (23,610) Equity in losses/(earnings) 569 (1,140) (150) (3,358)of equity method investees Changes in operating assets and liabilities, net of acquisitions: Increase in accounts (6,107) (72,933) (33,893) (49,261)receivable (Decrease)/ increase in (6,016) 14,209 14,424 39,551provision for sales deductions Decrease/(increase) in 5,227 3,890 (1,273) (2,864)inventory (Increase)/decrease in (32,763) 13,832 (24,403) 2,199prepayments and other current assets (Increase)/decrease in (107) (10,132) (779) 2,023other assets (Decrease)/increase in (32,648) 39,811 5,700 47,322accounts and notes payable and other liabilities (Decrease)/increase in (2,700) 263 (10,531) (288)deferred revenue Cash flows from - (9,423) (362) (25,613)discontinued operations ___________ ___________ ___________ ___________ Net cash provided by 33,355 66,028 220,856 283,538operating activities ___________ ___________ ___________ ___________US GAAP Results for the 3 months and 9 months to September 30, 2005Unaudited Consolidated Statements of Cash Flows (continued) 3 months to 3 months to 9 months to 9 months to September September September September 30, 2005 30, 2004 30, 2005 30, 2004 $'000 $'000 $'000 $'000 ___________ ___________ ___________ ___________ CASH FLOWS FROM INVESTING ACTIVITIES: Movements in short-term 108,372 (10,933) 351,246 21,039investments Movements in restricted 31 17,343 (285) 15,573cash Purchase of subsidiary (1,099,650) - (1,099,650) -undertaking, net of cash and cash equivalents Expenses of acquisition (24,112) - (24,112) - Purchase of long-term (140) (206) (7,678) (5,720)investments Purchase of property, plant (13,481) (10,879) (57,638) (24,840)and equipment Purchase of intangible (102) (385) (20,064) (12,385)assets Proceeds from sale of 10,135 - 10,135 26,733long-term investments Proceeds from sale of 40 44 108 444property, plant and equipment Proceeds from assets held - 3,630 - 11,289for sale Dividends received from 6,063 4,043 8,483 5,245investments Loans made to IDB (13,252) (23,820) (43,162) (23,820) Repayment of loan made to 1,049 - 1,049 -IDB Proceeds from IDB - - 60,000 -subscription receipts Deferred proceeds from sale 30,000 30,000 32,236 30,000of the vaccines business Cash flows from - - - (12,715)discontinued operations ___________ ___________ ___________ ___________ Net cash (used in)/ (995,047) 8,837 (789,332) 30,843provided by investing activities ___________ ___________ ___________ ___________The assets acquired with the purchase of TKT included: cash and cashequivalents ($56.8 million), restricted cash ($8.2 million) and short-terminvestments ($46.8 million), totalling $111.8 million.US GAAP Results for the 3 months and 9 months to September 30, 2005Unaudited Consolidated Statements of Cash Flows (continued) 3 months to 3 months to 9 months to 9 months to September September September September 30, 2005 30, 2004 30, 2005 30, 2004 $'000 $'000 $'000 $'000 ___________ ___________ ___________ ___________ CASH FLOWS FROM FINANCING ACTIVITIES: Redemption of 2% - (370,109) - (370,109)convertible loan notes Repayment of long-term debt - (36) - (171)and capital leases Proceeds from exercise of 11,984 2,180 30,447 7,531options Proceeds from issue of - 285 - 611common stock Tax benefit of stock option 1,051 - 2,478 -compensation, charged directly to reserves Payment of dividend - - (19,057) - ___________ ___________ ___________ ___________ Net cash provided by/(used 13,035 (367,680) 13,868 (362,138)in) financing activities ___________ ___________ ___________ ___________ Effect of foreign exchange (3,702) 3,575 (7,049) 2,295rate changes on cash and cash equivalents Discontinued operations - - - (10) ___________ ___________ ___________ ___________ Net decrease in cash and (952,359) (289,240) (561,657) (45,472)cash equivalents Cash and cash equivalents 1,502,179 1,307,130 1,111,477 1,063,362at beginning of period ___________ ___________ ___________ ___________ Cash and cash equivalents 549,820 1,017,890 549,820 1,017,890at end of period ___________ ___________ ___________ ___________US GAAP Results for the 3 months and 9 months to September 30, 2005Selected Notes to the Unaudited US GAAP Financial Statements(1) Earnings per share 3 months to 3 months to 9 months to 9 months to September September September September 30, 2005 30, 2004 30, 2005 30, 2004 $'000 $'000 $'000 $'000 __________ __________ __________ __________ (Loss)/income from (625,243) 77,040 (491,712) 249,913continuing operations Loss from discontinued - - - (20,135)operations, net of tax Gain/(loss) on disposition 1,049 - 4,174 (44,157)of discontinued operations __________ __________ __________ __________ Numerator for basic EPS (624,194) 77,040 (487,538) 185,621 Interest charged on - 766 - 3,432convertible debt, net of tax __________ __________ __________ __________ Numerator for diluted EPS (624,194) 77,806 (487,538) 189,053 __________ __________ __________ __________ Weighted average number of No. of No. of No. of No. ofshares: shares shares shares shares __________ __________ __________ __________ Basic 500,542,616 496,474,005 499,741,042 496,090,191 Effect of dilutive shares: Stock options - 2,474,699 - 3,086,390 Warrants - - - 55,579 Convertible debt - 10,828,348 - 15,838,142 __________ __________ __________ __________ Diluted 500,542,616 509,777,052 499,741,042 515,070,302 __________ __________ __________ __________For the three and nine months ended September 30, 2005, the share options,warrants and convertible debt not included in the calculation of the dilutedweighted average number of shares, because the Company made a net loss duringthe calculation period, are shown below:For the three and nine months ended September 30, 2004, the share options,warrants and convertible debt not included in the calculation of the dilutedweighted average number of shares, because the exercise prices exceeded theCompany's average share price during the calculation period, are shown below: 3 months to 3 months to 9 months to 9 months to September September September 30, September 30, 30, 2005 30, 2004 2005 2004 No. of No. of No. of shares No. of shares shares shares __________ __________ __________ __________ Stock options 23,092,439 18,866,415 20,278,370 17,567,632 Warrants 1,346,407 1,346,407 1,346,407 - Convertible debt 5,756 - 5,756 - __________ __________ __________ __________ 24,444,602 20,212,822 21,630,533 17,567,632 __________ __________ __________ __________ US GAAP Results for the 3 months and 9 months to September 30, 2005Selected Notes to the Unaudited US GAAP Financial Statements(2) Analysis of revenues 3 months to 3 months to 3 months to 3 months to September September September 30, September 30, 30, 30, 2004 2005 2005 2005 $'000 % change % of total $'000 revenue ____________ _____________ ____________ ____________ Net product sales: CNS ADDERALL XR 165,863 140,051 +18% 44% ADDERALL 9,571 11,736 -18% 3% CARBATROL 16,129 11,225 +44% 4% ____________ ____________ ____________ ____________ 191,563 163,012 +18% 51% ____________ ____________ ____________ ____________ GI PENTASA 36,568 33,025 +11% 10% COLAZIDE 2,288 2,126 +8% 1% ____________ ____________ ____________ ____________ 38,856 35,151 11% 11% ____________ ____________ ____________ ____________ GP AGRYLIN/XAGRID NORTH AMERICA 4,783 40,993 -88% 1% ROW 11,978 8,728 +37% 3% FOSRENOL 9,722 - N/A 3% CALCICHEW 10,124 9,550 +6% 2% SOLARAZE 3,343 2,444 +37% 1% REMINYL/REMINYL XL 3,238 2,609 +24% 1% ____________ ____________ ____________ ____________ 43,188 64,324 -33% 11% ____________ ____________ ____________ ____________ HGT REPLAGAL 15,956 - N/A 4% ____________ ____________ ____________ ____________ 15,956 - N/A 4% ____________ ____________ ____________ ____________ Other product sales 19,587 21,236 -8% 5% ____________ ____________ ____________ ____________ Total product sales 309,150 283,723 +9% 82% ____________ ____________ ____________ ____________ Royalty income: 3TC 39,599 37,871 +5% 11% ZEFFIX 7,731 7,034 +10% 2% Others 12,856 11,294 +14% 3% ____________ ____________ ____________ ____________ 60,186 56,199 +7% 16% ____________ ____________ ____________ ____________ Licensing and development 4,586 2,820 +63% 1% Other 2,155 2,167 N/A 1% ____________ _____________ ____________ ____________ Total revenues 376,077 344,909 +9% 100% ____________ _____________ ____________ ____________US GAAP Results for the 3 months and 9 months to September 30, 2005Selected Notes to the Unaudited US GAAP Financial Statements(2) Analysis of revenues (continued) 9 months to 9 months to 9 months to 9 months to September September 30, September 30, September 30, 30, 2004 2005 2005 $'000 % change 2005 $'000 % of total revenue ____________ _____________ ____________ ____________ Net product sales: CNS ADDERALL XR 516,823 422,997 +22% 45% ADDERALL 31,033 22,411 +38% 3% CARBATROL 54,823 38,873 +41% 5% ____________ ____________ ____________ ____________ 602,679 484,281 +24% 53% ____________ ____________ ____________ ____________ GI PENTASA 93,777 86,705 +8% 8% COLAZIDE 6,520 5,944 +10% 1% ____________ ____________ ____________ ____________ 100,297 92,649 +8% 9% ____________ ____________ ____________ ____________ GP AGRYLIN/XAGRID N AMERICA 41,950 96,840 -57% +4% ROW 36,428 25,155 +45% +3% FOSRENOL 24,484 - N/A 2% CALCICHEW 28,353 27,525 +3% 2% SOLARAZE 8,776 6,214 +41% 1% REMINYL/REMINYL XL 9,384 7,983 +17% 1% ____________ ____________ ____________ ____________ 149,375 163,717 -9% 13% ____________ ____________ ____________ ____________ HGT REPLAGAL 15,956 - N/A 1% ____________ _____________ ____________ ____________ 15,956 - N/A 1% ____________ _____________ ____________ ____________ Other product sales 61,842 62,950 N/A 6% ____________ ____________ ____________ ____________ Total product sales 930,149 803,597 +16% 82% ____________ ____________ ____________ ____________ Royalty income: 3TC 119,467 115,673 +3% 11% ZEFFIX 21,969 20,174 +9% 2% Others 39,637 34,154 +16% 3% ____________ ____________ ____________ ____________ 181,073 170,001 +7% 16% ____________ ____________ ____________ ____________ Licensing and 11,169 10,217 +9% 1%development Other 11,975 5,654 +112% 1% ____________ _____________ ____________ ____________ Total revenues 1,134,366 989,469 +15% 100% ____________ _____________ ____________ ____________Non GAAP for the 3 months and 9 months to September 30, 2005(3)(a) Reconciliation of numerator for diluted EPS (1) 3 months 3 months to 9 months to 9 months to to September September September September 30, 30, 30, 30, 2005 2004 2005 2004 $'000 $'000 $'000 $'000 __________ __________ __________ __________ Net (loss)/income for (624,194) 77,040 (487,538) 185,621basic EPS Add back: Loss from discontinued - - - 20,135operations, net of tax (Gain)/loss on disposition (1,049) - (4,174) 44,157of discontinued operations TKT cost of product sales 12,385 - 12,385 -fair value adjustment, net of tax New River upfront payment, - - 36,000 -net of tax New listed holding company 3,259 - 3,259 -costs, net of tax Reorganization costs, net 4,649 7,244 6,721 23,069of tax TKT integration costs, net 2,534 - 2,534 -of tax TKT in process R&D 673,000 - 673,000 -write-off Gain on sale of - - - (10,660)investment, net of tax __________ __________ __________ __________ Net (loss)/income for Non 70,584 84,284 242,187 262,322GAAP Interest charged on - 766 - 3,432convertible debt, net of tax __________ __________ __________ __________ Numerator for non GAAP - 70,584 85,050 242,187 265,754Diluted EPS __________ __________ __________ __________(1) An analysis of the results for the three months to September 30, 2005,between Shire (excluding TKT) and TKT is shown on page 24.Non GAAP diluted EPS for the 3 months and 9 months to September 30, 2005(b) Reconciliation of reported EPS 3 months to 3 months to 9 months to 9 months to September September September September 30, 30, 30, 30, 2005 2004 2005 2004 __________ __________ __________ __________ Diluted EPS per ordinary (124.7c) 15.3c (97.6c) 36.7cshare Add back: Loss from discontinued - - - 3.9coperations, net of tax (Gain)/loss on disposition (0.2 c) - (0.8c) 8.6cof discontinued operations __________ __________ __________ __________ Diluted EPS from (124.9c) 15.3c (98.4c) 49.2ccontinuing operations Change in denominator due 1.6c - 1.0c -to effect on dilution of non GAAP adjustments(1) __________ __________ __________ __________ (123.3c) 15.3c (97.4c) 49.2c Add back: TKT cost of product sales 2.4c - 2.5c -fair value adjustment, net of tax New River upfront payment, - - 7.1c -net of tax New listed holding company 0.7c - 0.7c -costs, net of tax Reorganization costs, net 0.9c 1.4c 1.3c 4.5cof tax TKT integration costs, net 0.5c - 0.5c -of tax TKT in-process R&D 132.7c - 133.3c -write-off Gain on sale of - - - (2.1c)investment, net of tax __________ __________ __________ __________ Non GAAP - Diluted EPS per 13.9c 16.7c 48.0c 51.6cordinary share __________ __________ __________ __________ Non GAAP - Diluted EPS per 41.8c 50.1c 144.0c 154.8cADS __________ __________ __________ __________(1) Because the items added back result in positive non GAAP net income for theperiods to September 30, 2005, the options, warrants and convertible debtbecome dilutive under this measure, and are therefore included in thecalculation of the denominator for non GAAP EPS.US GAAP and Non GAAP results for the 3 months to September 30, 2005Unaudited Consolidated Statements of Operations Non GAAP (1) Shire (2) TKT Combined Adjustments US GAAP $'000 $'000 $'000 $'000 $'000 __________ __________ __________ __________ __________ Revenues: Product sales 293,194 15,956 309,150 - 309,150 Royalties 60,186 - 60,186 - 60,186 Licensing and 4,586 - 4,586 - 4,586development Other revenues 1,940 215 2,155 - 2,155 __________ __________ __________ __________ __________ Total revenues 359,906 16,171 376,077 - 376,077 __________ __________ __________ __________ __________ Costs and expenses: Cost of product sales 40,697 2,182 42,879 17,202 60,081(3) Research and 60,114 14,197 74,311 - 74,311development Selling, general and 143,422 6,963 150,385 4,527 154,912administrative (4) Depreciation and 9,909 6,511 16,420 - 16,420amortization Reorganization costs - - - 6,457 6,457 Integration costs - - - 3,520 3,520 In-process R&D - - - 673,000 673,000write-off __________ __________ __________ __________ __________ Total operating 254,142 29,853 283,995 704,706 988,701expenses __________ __________ __________ __________ __________ Operating income/ 105,764 (13,682) 92,082 (704,706) (612,624)(loss) Interest income * 6,447 429 6,876 - 6,876 Interest expense (1,083) (2,436) (3,519) - (3,519) Other income, net 3,064 138 3,202 - 3,202 __________ __________ __________ __________ __________ Total other income/ 8,428 (1,869) 6,559 - 6,559(expense), net __________ __________ __________ __________ __________ Income/(loss) from 114,192 (15,551) 98,641 (704,706) (606,065)continuing operations before income taxes and equity in losses of equity method investees Income taxes (31,770) 4,282 (27,488) 8,879 (18,609) Equity in losses of (569) - (569) - (569)equity method investees __________ __________ __________ __________ __________ Income/(loss) from 81,853 (11,269) 70,584 (695,827) (625,243)continuing operations Gain on disposition of - - - 1,049 1,049discontinued operations __________ __________ __________ __________ __________ Net income/(loss) 81,853 (11,269) 70,584 (694,778) (624,194) __________ __________ __________ __________ __________ Diluted EPS 48.5c (6.7c) 41.8c (415.9c) (374.1c) __________ __________ __________ __________ __________* In addition, Shire estimates that the interest foregone on the $1.1billion ofnet cash used to fund the acquisition was $6.5 million (pre tax) or $4.7million(post tax). This is equivalent to 2.7c per ADS. Added to the Non GAAP Shireearnings per ADS (excluding TKT's net income) of 48.5c per ADS, Shire's EPS perADS would have been approximately 51.2c had the TKT acquisition not beencompleted. This is an increase of 4% over prior year. Management believes thatthe presentation of this non GAAP financial measure provides useful informationto investors of the historic Shire business as it was before the TKTacquisition.(1) Defined as the ongoing Shire business excluding TKT and other non GAAPadjustments.(2) Defined as the acquired TKT business excluding fair value adjustments andintegration costs.(3) The GAAP adjustment of $17.2m is the difference between fair value and costof REPLAGAL inventory acquired with the TKT business and used during theperiod.(4) SG&A of $154.9 million includes $4.5 million of costs relating to the setup of the new holding company.2525Hampshire International Business Park Chineham Basingstoke Hampshire RG24 8EP United Kingdom Tel +44 (0)1256 894000 Fax +44 (0)1256 894708 www.shire.com Press Release Registered in England 2883758 Registered Office as aboveENDShire Pharmaceuticals Group PLCRelated Shares:
Shire