28th Jul 2005 11:00
7am (EDT) 12 noon (BST)Good second quarter results with milestones met and portfolio broadenedBasingstoke, UK and Philadelphia, US - July 28, 2005 - Shire PharmaceuticalsGroup plc (LSE: SHP, NASDAQ: SHPGY, TSX: SHQ) announces results for the secondquarter to June 30, 2005.Highlights * Revenues up 32% to $424.6 million * Royalties up 9% to $62.6 million * Income from continuing operations up 30% * Recent product launches performing well * MTS (METHYPATCH) - re-submission of NDA with the FDA in June 2005 * SPD 476 - regulatory filing anticipated for Q4 2005 * SPD503 - regulatory filing anticipated for H1 2006 in order to optimize label * Shire reported positive data on Phase 3 clinical trials for METHYPATCH, SPD503 and SPD476 * New River Pharmaceuticals Inc. (New River) reported positive data on Phase 3 clinical trials for NRP104 Strategic UpdateOn July 27, 2005, shareholders of Shire and Transkaryotic Therapies Inc. (TKT)approved the all-cash transaction at $37 per outstanding TKT share, orapproximately $1.6 billion and the transaction closed. The acquisition isconsistent with Shire's focused strategy to develop and market products forspecialty physicians. TKT specializes in therapies for the treatment of geneticdiseases and is therefore a strong strategic and business fit.Matthew Emmens, Chief Executive Officer, said: "We continue to deliver on our promises, achieving good financial results andmeeting key strategic milestones. Our underlying business continues to performstrongly. Importantly, our new product launches are going well and remain in line withour expectations. We successfully filed MTS (METHYPATCH) with the Food and DrugAdministration (FDA) at the end of June. The second half should also bringpositive news with the anticipated filing of New Drug Applications (NDAs) withthe FDA for SPD476 and NRP104. Shire is successfully broadening its portfolio of specialty products. Theacquisition of TKT brings a new platform - the treatment of genetic diseases -providing for future growth and strengthening our presence in Europe.In addition, our management team has been strengthened further with the recentappointments of Mike Cola as Executive Vice President Global Therapeutic AreaBusiness Units and following the acquisition of TKT, David Pendergast asExecutive Vice President of the genetic disease unit." Second Quarter 2005 Unaudited Results Highlights Q2 2005 Q2 2004 US GAAP $M $M Growth Total revenues 424.6 321.0 +32% Operating income 140.6 110.2 Income from continuing operations 116.2 89.5 +30% Net income 116.2 34.0 Diluted Earnings Per Ordinary Share: Continuing operations 23.0c 17.9c +28% Discontinued operations - (11.1c) _______ _______ 23.0c 6.8c +238% Diluted Earnings Per American Depositary Share (ADS): Continuing operations 69.1c 53.7c +28% Discontinued operations - (33.3c) _______ _______ 69.1c 20.4c +238% Non US GAAP Adjusted Diluted Earnings Per Share (EPS) from continuing operations(1): Per Ordinary Share 23.0c 18.4c +25% Per ADS 69.1c 55.2c +25% Note: Average exchange rates for Q2 2005 and 2004 were $1.86: ‚£1.00 and $1.81:‚£1.00 respectively. 1. This is a non US GAAP financial measure that excludes a gain from sale of an investment and re-organization costs from the comparative results for Q2 2004. There were no non US GAAP adjustments for Q2 2005. Management believes that the presentation of this non US GAAP financial measure provides useful information to investors regarding Shire's underlying performance as the gain from sale of an investment and the costs associated with the re-organization were not indicative of the underlying performance of the business in Q2 2004. A reconciliation of this non US GAAP financial measure to the most directly comparable US GAAP financial measure can be found on page 20. 2005 Financial OutlookShire's underlying business continues to perform strongly.Shire updates the guidance given as part of the 2004 results announcement inMarch this year, with revenue growth for 2005 now expected to be in the lowdouble-digit range (previously high single-digit to low double-digit growth).Earnings will be affected by the costs associated with the continueddevelopment and launch of new products:¯â€š· Over the course of 2005, R&D expenditure as a percentage of total revenues isexpected to be in the range of 14-16%.¯â€š· Growth in new product sales will increasingly absorb the high SG&A costsassociated with four product launches in the first half of the year. Thesecosts are expected to moderate over the course of the full year. * 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 Shire re-organization and any further milestone payments in respect of NRP104 which may be paid before the end of the year. The above guidance does not include the financial impact of the TKTacquisition.The results of TKT will form part of the Shire Group consolidation with effectfrom today. The transaction will be dilutive for 2005. We expect that theoperational loss of TKT for the remainder of this year, excluding the chargesreferred to below, will be approximately $30 million. A time apportionedamortization charge (approximately $30 million in a full year) in respect ofthe capitalized value of approved TKT products will be included for the purposeof US GAAP EPS. There will also be a charge relating to the write-off under USGAAP of the intangible value associated with the acquired in-process R&Dpipeline, together with certain other accounting adjustments, restructuring andtransaction costs totaling approximately $800 million.As previously stated, we expect the TKT acquisition to significantly enhancesales and EPS growth beyond 2007 and to be cash EPS and US GAAP EPS neutral in2007.The total cost of the acquisition of approximately $1.6 billion will be fundedfrom Shire's existing cash resources ($1.6 billion at June 30, 2005).Operational working capital of the Group including TKT will be funded from a$500 million general purpose bank facility. In addition Shire has arranged aseparate $300 million bank facility solely for the purpose of financing certainmilestone payments due under the agreement between Shire and New River relatingto NRP104.DividendIn respect of the half year ended June 30, 2005, the Board proposes to pay aninterim dividend of 1.8246 US cents (1.0475 pence) per ordinary share (2004:1.8246 US cents) equivalent to 5.4738 US cents per ADS and 6.7629 Canadiancents per exchangeable share. The interim dividend will be paid on October 13,2005 to persons whose names appear on the register of members of the Company(or to persons registered as holders of Exchangeable Shares in ShireAcquisition Inc.) at the close of business on September 16, 2005. Dividendpayments will be made in Pounds Sterling to Ordinary Shareholders, US Dollarsto ADS holders and Canadian Dollars to Exchangeable Shareholders based onexchange rates taken on or immediately before the date of resolution.This is consistent with Shire's stated policy of paying a dividend semiannually, set in US cents per share / ADS, with the first interim payment ineach year being maintained at a consistent level. Any growth will come throughincreasing the second interim dividend in a financial year. Shire intends topursue a progressive dividend policy.Update on New Accounting StandardsSFAS No. 123 (revised 2004) Share-Based Payment (SFAS 123R)Shire's primary basis of financial reporting is US GAAP. The required date foradoption of SFAS 123R is now January 1, 2006 (previously July 1, 2005). Shire,in conjunction with many other US GAAP reporting companies, will adopt thestandard from January 1, 2006. This standard applies a fair value methodologyin quantifying the accounting charge associated with the grant of share-basedcompensation to employees.Shire has previously disclosed in its Annual Report on Form 10-K for 2004 filedwith the SEC the charge that would have resulted from the full adoption of afair value methodology under SFAS 123. The application of this methodologywould have resulted in a pre-tax, non-cash charge of $33 million for 2004, $32million for 2003 and $24 million for 2002.Based on the expectation that similar levels of share option-based compensationwill be granted to employees in 2005 and 2006, it is anticipated that the 2005annual SFAS 123 proforma charge and the 2006 annual SFAS 123R charge for Shirewill not be fundamentally different from the SFAS 123 disclosures made in thethree years to December 31, 2004. The accounting period for the year toDecember 31, 2005 will be restated for comparative purposes.IFRSFor accounting periods up to December 31, 2004, Shire has filed statutoryaccounts in the United Kingdom based on UK GAAP. With effect from January 1,2005, UK Listing Authority (UKLA) rules require listed companies to preparegroup accounts in accordance with International Financial Reporting Standards("IFRS") instead of UK GAAP. To comply with this new obligation, Shire willpublish its IFRS interim results for the six months to June 30, 2005 inSeptember 2005, together with its IFRS accounting policies, IFRS restatementsof previously published results, and reconciliations to previously publishedresults, as required by IFRS1, First-time adoption of International FinancialReporting Standards.Shire's IFRS financial statements will be expressed in US dollars, which is themain economic currency of the Group's cashflows. For Shire, material changesfrom the numbers reported under UK GAAP prior to the adoption of IFRS areexpected to include changes to share option accounting, the cessation ofgoodwill amortization and the reassessment of acquisition goodwill andintangibles.Adjustments in respect of defined benefit pension schemes and financialderivative transactions are not expected to have a significant impact on Shire;Shire only makes limited use of financial derivatives and, other than aresidual SERP scheme (net asset value of $3 million), Shire only makescontributions to defined contribution pension schemes. - 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 Pharmaceuticals Group plc (Shire) is a global specialty pharmaceuticalcompany with a strategic focus on meeting the needs of the specialist physicianand currently focuses on developing and marketing products in the areas ofcentral nervous system, gastrointestinal and renal diseases. Shire hasoperations in the world's key pharmaceutical markets (US, Canada, UK, France,Italy, Spain and Germany) as well as a specialist drug delivery unit in the US.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 withthe 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 not limitedto, legal challenges relating to Shire's ADHD franchise, government regulationand approval, including but not limited to Health Canada's suspension ofADDERALL XR‚® sales in Canada and the expected product approval dates of MTS(METHYPATCH) (ADHD), SPD503 (ADHD), SPD465 (ADHD), SPD476 (ulcerative colitis)and NRP104 (ADHD), including its scheduling classification by the DrugEnforcement Agency in the United States, Shire's ability to benefit from itsacquisition of TKT, Shire's ability to secure new products forcommercialization and/or development and other risks and uncertainties detailedfrom time to time in Shire's filings with the Securities and ExchangeCommission, including its Annual Report on Form 10-K for the year to December31, 2004.The following are trademarks of Shire Pharmaceuticals Group plc or itssubsidiaries, which are the subject of trademark registrations in certaincountries.ADDERALL XR‚® (mixed amphetamine salts)ADDERALL‚® (mixed amphetamine salts)AGRYLIN‚® (anagrelide hydrochloride)CALCICHEW‚® (calcium carbonate)CARBATROL‚® (carbamazepine)COLAZIDE‚® (balsalazide)EQUETROTM (carbamazepine)FOSRENOL‚® (lanthanum carbonate)REMINYL‚® (galantamine hydrobromide) (UK and Republic of Ireland)SOLARAZE‚® (diclofenac sodium 3%)XAGRID‚® (anagrelide hydrochloride)The following are trademarks of third parties.AMARYL‚® (glimepiride) (trademark of Sanofi-Aventis)3TC‚® (lamivudine) (trademark of GlaxoSmithKline (GSK)METHYPATCH‚® (methylphenidate) (trademark of Noven Pharmaceuticals Inc. (Noven))*PENTASA‚® (mesalamine) (trademark of Ferring AS)RAZADYNE¢â€ž¢ (galantamine hydrobromide) (trademark of Johnson & Johnson)REMINYL‚® (galantamine hydrobromide) (trademark of Johnson & Johnson, excludingUK and Republic of Ireland)ZEFFIX‚® (lamivudine) (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 June 30, 2005,increased by 32% to $424.6 million (2004: $321.0 million).Income from continuing operations for the three months to June 30, 2005,increased by 30% to $116.2 million (2004: $89.5 million) in line with theincrease in revenues over the same period.Cash inflow from operating activities for the three months to June 30, 2005,increased by 112% to $181.2 million (2004: $85.7 million). The increase in cashgeneration is primarily due to higher income from continuing operations in thequarter, and the timing of working capital payments.Cash and cash equivalents, restricted cash and short-term investments at June30, 2005 totaled $1,600.6 million compared to December 31, 2004 ($1,457.5million). 2. Product sales For the three months to June 30, 2005, product sales increased 38% to $351.6million (2004: $255.3 million) and represented 83% of total revenues (2004:80%).Second Quarter 2005 Key Product Highlights Sales Sales US Rx1 June 2005 Product $M Growth** Growth** US Market Share ADDERALL XR 205.4 +43% +15% 24% AGRYLIN and XAGRID*** 29.7 -13% -35% 13% PENTASA 31.0 +17% +10% 19% CARBATROL 21.8 +84% -5% 43% FOSRENOL 9.9 n/a n/a 8% 1 IMS Prescription Data - Product specific**Compared to Q2 2004***XAGRID not included in US Rx Growth or US Market Share dataADDERALL XR for the treatment of ADHDUS prescriptions for ADDERALL XR for the three months to June 30, 2005 were up15% due primarily to an 8% increase in the total US ADHD market compared to thesame period in 2004 and an increase in ADDERALL XR's market share.ADDERALL XR had a 24% share of the total US ADHD market in June 2005 (June2004: 23%) and continues to maintain its position as the leading brand in theUS ADHD market.Product sales growth was higher than prescription growth for the quarter duemainly to the impact of price increases in June 2004 and December 2004 andlower sales deductions.Shire is continuing with its appeal in relation to the February 2005 suspensionof sales of ADDERALL XR in Canada by Health Canada.ADDERALL XR's pediatric exclusivity in the US under the Hatch-Waxmanregulations expired on April 11, 2005.Litigation proceedings relating to our ADDERALL XR patents are in progress.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 March 31, 2005. Any decrease in the sales of ADDERALL XR couldsignificantly reduce revenues and earnings.AGRYLIN and XAGRID for the treatment of thrombocythemiaAGRYLIN/XAGRID sales worldwide for the three months to June 30, 2005 were $29.7million, down 13% compared to the same period in 2004 (Q2 2004: $34.0 million).US sales were down 31% due to the impact of generic versions of AGRYLIN beingapproved in the US market in April, after the FDA rejected Shire's Citizens'Petition.International sales (all sales outside the US) reported in US dollars were up23%, primarily due to the successful launch of XAGRID in the UK, Germany andFrance in the first quarter of 2005. In accordance with current orphan druglegislation in the EU, XAGRID will have up to 10 years of marketing exclusivityin the EU.PENTASA for the treatment of ulcerative colitisUS prescriptions for the three months to June 30, 2005 were up 10%, compared tothe same period in 2004. The increase was largely 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.Product sales for the three months to June 30, 2005 were up 17%, compared tothe same period in 2004. The difference between sales growth and prescriptiongrowth is due to the impact of the September 2004 price increase which morethan offset some limited wholesaler de-stocking and increased sales deductions.PENTASA had a 19% share of the total US oral mesalamine prescription market inJune 2005 (June 2004: 17%).CARBATROL for the treatment of epilepsyUS prescriptions for the three months to June 30, 2005 were down 5%, comparedto the same period in 2004. This was due primarily to limited promotion of thisproduct during the quarter as promotional resources were diverted to otherproducts.Product sales for the three months to June 30, 2005 were up 84%, compared tothe same period in 2004. The difference between sales growth and the lowerlevel of prescriptions is due to significant wholesaler re-stocking in order toreplenish a previously low pipeline, a price increase in August 2004 andsignificantly lower sales deductions.CARBATROL had a 43% share of the total US extended release carbamazepineprescription market in June 2005 (June 2004: 45%).Patent litigation proceedings relating to CARBATROL are in progress. Furtherinformation 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 endedMarch 31, 2005.FOSRENOL for the treatment of hyperphosphatemiaUS prescriptions for the three months to June 30, 2005 were up 100%, to 36,000prescriptions, compared to the previous quarter (Q1 2005: 18,000). FOSRENOL waslaunched in the US in January 2005.Product sales for the three months to June 30, 2005 were up 101%, to $9.9million, compared to the previous quarter (Q1 2005: $4.9 million).FOSRENOL had an 8% share of the total US phosphate binding market in June 2005.Shire continues its discussions relating to FOSRENOL with regulatoryauthorities across Europe and other regions. Launches will begin in Europeduring 2005, subject to obtaining national approvals and pricing and concludingreimbursement negotiations. 3. Royalties Royalty revenue increased 9% to $62.6 million for the three months to June 30,2005 (2004: $57.7 million) and represented 15% of total revenues (2004: 18%).The following table provides an analysis of Shire's royalty income:Second Quarter 2005 Royalty HighlightsProduct Royalties to Royalty1 Worldwide in-market sales by Shire Growth licensee2 in Q2 2005 % $M $M 3TC 40.5 +2%* 308.6 ZEFFIX 7.7 +14%** 67.5 Other 14.4 +28% n/a * The impact of foreign exchange movements has contributed +2% to the reportedgrowth** The impact of foreign exchange movements has contributed +7% to the reportedgrowth1 Compared with Q2 20042 GSK3TCRoyalties from sales of 3TC for the three months to June 30, 2005 were $40.5million, an increase of 2% compared to the three months to June 30, 2004 ($39.6million). This was due to the positive impact of foreign exchange movements.Shire receives royalties from GSK on worldwide 3TC sales, with the exception ofCanada where a commercialization partnership with GSK exists. GSK's worldwidesales of 3TC for the three months to June 30, 2005 were $308.6 million (2004:$298.3 million).ZEFFIXRoyalties from sales of ZEFFIX for the three months to June 30, 2005 were $7.7million, an increase of 14% compared to the three months to June 30, 2004 ($6.8million), due to strong growth in the Japanese market and the positive impactof foreign exchange movements.Shire receives royalties from GSK on worldwide ZEFFIX sales, with the exceptionof Canada where a commercialization partnership with GSK exists. GSK'sworldwide sales of ZEFFIX for the three months to June 30, 2005 were $67.5million (2004: $60.4 million).OtherOther royalties are primarily in respect of REMINYL (now marketed as RAZADYNEin the US), a product marketed worldwide by Janssen, with the exception of theUnited Kingdom and the Republic of Ireland where Shire acquired the exclusivemarketing 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. Shire is unaware of anysimilar dispensing errors outside the US and REMINYL continues to be marketedoutside the US under its original name.Sales of REMINYL/RAZADYNE, a treatment for mild to moderately severe dementiaof the Alzheimer's type, are growing well in the Alzheimer'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.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 getbenefit from the treatments. 4. Financial details Cost of product salesFor the three months to June 30, 2005, the cost of product sales amounted to12% of product sales (2004: 11%). The decrease in gross margin is driven by achange in the product mix, with more income being generated from lower marginproducts.Research and development (R&D)R&D expenditure increased from $47.4 million in the three months to June 30,2004 to $65.5 million in the three months to June 30, 2005. Expressed as apercentage of total revenues, R&D expenditure was 15% for the three months toJune 30, 2005 (2004: 15%). Shire's pipeline is now well advanced with fiveprojects in late stage development or registration. Further information onthese projects can be found in Section 5, R&D pipeline.Selling, general and administrative (SG&A)SG&A expenses increased from $105.1 million in the three months to June 30,2004 to $153.5 million in the three months to June 30, 2005, an increase of46%. As a percentage of product sales, these expenses were 44% (2004: 41%). Theincrease in SG&A was due to additional costs being incurred in Q2 2005 on fourproduct launches taking place in the first half of 2005. In addition there isan incremental cost in 2005 associated with the FOSRENOL and EQUETRO salesforces. In line with previous guidance SG&A expenses have moderated (Q1 2005:$157.6 million). This trend is expected to continue over the remainder of theyear.Depreciation and amortizationThe depreciation charge for the three months to June 30, 2005 was $11.1 million(2004: $3.1 million), which in Q2 2005 included property, plant and equipmentwrite-downs of $5.9 million (2004: $nil). Amortization charges were $12.0million for the three months to June 30, 2005 (2004: $10.0 million), which inQ2 2005 included an intangible asset impairment of $3.0 million (2004: $nil).Reorganization costsThe Company incurred no costs in the three months to June 30, 2005 in relationto the reorganization of the business announced in 2004 (Q2 2004: $18.2million). The remaining costs in respect of the reorganization relate toduplicate facilities and are expected to arise in Q3 2005 (approximately $9million).Interest income and expenseFor the three months to June 30, 2005, the Company received interest income of$11.3 million (2004: $4.4 million). This increase in interest income isprimarily due to higher interest rates on our US cash deposits.For the three months to June 30, 2005, the Company incurred interest expense of$1.2 million, which primarily related to costs of a bridging loan to financethe TKT transaction (2004: interest on convertible loan notes of $2.1 million).Other income, netFor the three months to June 30, 2005, other income totaled $0.8 million (2004:$14.1 million). During the three months to June 30, 2004, other income wasprimarily attributable to the realized gain on the sale of a portfolioinvestment.TaxationThe effective rate of tax for the three months to June 30, 2005 was 24% (2004:30%). The Company's effective tax rate was 4% lower than in Q1 2005. Thereduction in rate this quarter followed the conclusion of a routine tax audit.At June 30, 2005, net deferred tax assets of $87.5 million were recognized(December 31, 2004: $78.1 million).Equity in earnings of equity method investeesEarnings of $0.9 million were recorded for the three months to June 30, 2005(2004: $1.2 million). Earnings of $1.3 million, representing a 50% share ofearnings from the antiviral commercialization partnership with GSK in Canada(2004: $1.2 million) were offset by the share of losses in the GeneChem and EGSHealthcare Funds of $0.4 million (2004: $nil). 5. R&D pipeline Shire focuses its resources on later stage and lower risk projects. In H2 2005regulatory filings are expected in the US for NRP104 (ADHD) and SPD476(ulcerative colitis). SPD503 (ADHD) and SPD465 (ADHD) are expected to be filedfor US registration in H1 2006.R&D Highlights by Therapeutic Area:Central Nervous System (CNS):In June 2004, a complete response to the MTS `Non-Approvable' letter was filedwith the FDA. Shire submitted the file on behalf of its development partner,Noven. The submission followed the completion of an extensive clinical programdesigned to address concerns raised by the FDA in its `Non-Approvable' letterto the original NDA submission.During the quarter Shire's collaborative partner New River, reported positivePhase 3 data for NRP104. Shire is working with New River to support theiractivities leading to regulatory submission, which New River has stated itexpects to make in Q4 2005.Shire met with the FDA in May to discuss the current development status ofSPD503 and the proposed regulatory filing strategy. In order to optimize label,Shire has agreed with the FDA to include results from an ongoing study in itssubmission package, regulatory filing is now anticipated for H1 2006.Phase 3 development activities for SPD465 continues as planned. The anticipatedfiling date in the US is H1 2006.Gastro-Intestinal (GI):Shire has met with the FDA and EU Regulatory Agencies relating to the proposedregulatory filing strategy for SPD476. The FDA filing is anticipated in late2005.All activities investigating SPD480 (for the treatment of ulcerative colitis)were discontinued in the quarter following its failure to meet Shire's criteriafor continued development.General Products (GP):Significant pre-clinical activities to support FOSRENOL continue as planned.US GAAP Results for the 6 months to June 30, 2005Unaudited consolidated Balance Sheets June 30, December 31, 2005 2004 $'000 $'000 ______________ ______________ ASSETS Current assets: Cash and cash equivalents 1,502,179 1,111,477 Restricted cash 21,943 21,627 Short-term investments 76,486 324,411 Accounts receivable, net 246,611 222,546 Inventories 47,677 41,230 Deferred tax asset 59,722 70,387 Prepaid expenses and other current assets 65,276 137,271 ___________ ___________ Total current assets 2,019,894 1,928,949 Investments 56,835 63,267 Property, plant and equipment, net 153,766 131,351 Goodwill, net 220,450 235,396 Other intangible assets, net 280,441 309,297 Deferred tax asset 27,804 7,724 Other non-current assets 39,567 38,895 ___________ ___________ Total assets 2,798,757 2,714,879 ___________ ___________ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses 321,813 311,231 Loan facility 13,252 43,162 Other current liabilities 89,861 77,558 ___________ ____________ Total current liabilities 424,926 431,951 Long-term debt 116 116 Other non-current liabilities 32,728 32,159 ___________ ____________ Total liabilities 457,770 464,226 ___________ ___________US GAAP Results for the 6 months to June 30, 2005Unaudited consolidated Balance Sheets (continued) June 30, December 31, 2005 2004 $'000 $'000 ___________ ___________ Shareholders' equity: Ordinary shares of 5p par value; 800,000,000 40,666 40,064shares authorized; and 492,648,235 (December 31, 2004: 484,916,034) shares issued and outstanding Exchangeable shares; 2,403,000 (December 31, 111,233 195,8302004: 4,226,476) shares issued and outstanding Treasury stock (182) (264) Additional paid-in capital 1,176,390 1,072,407 Accumulated other comprehensive income 84,604 131,939 Retained earnings 928,276 810,677 ___________ ___________ Total shareholders' equity 2,340,987 2,250,653 ___________ ___________ Total liabilities and shareholders' equity 2,798,757 2,714,879 ___________ ___________US GAAP Results for the 3 months and 6 months to June 30, 2005Unaudited Consolidated Statements of Operations 3 months 3 months 6 months 6 months to to to to June 30, June 30, June 30, June 30, 2005 2004 2005 2004 $'000 $'000 $'000 $'000 __________ __________ __________ __________ Revenues: Product sales 351,555 255,280 620,999 519,874 Royalties 62,564 57,657 120,887 113,802 Licensing and development 2,714 5,482 6,583 7,397 Other revenues 7,763 2,541 9,820 3,487 __________ __________ __________ __________ Total revenues 424,596 320,960 758,289 644,560 __________ __________ __________ __________ Costs and expenses: Cost of product sales 41,945 26,984 75,278 61,077 Research and development 65,457 47,375 176,989 86,001 Selling, general and administrative 153,475 105,141 311,048 225,475 Depreciation and amortization 23,079 13,079 36,715 25,583 Reorganization costs - 18,167 2,878 21,980 __________ __________ __________ __________ Total operating expenses 283,956 210,746 602,908 420,116 __________ __________ __________ __________ Operating income 140,640 110,214 155,381 224,444 Interest income 11,267 4,375 20,992 8,404 Interest expense (1,184) (2,101) (1,199) (4,227) Other income, net 802 14,081 736 9,262 __________ __________ __________ __________ Total other income, net 10,885 16,355 20,529 13,439 __________ __________ __________ __________ Income from continuing operations 151,525 126,569 175,910 237,883before income taxes and equity in earnings of equity method investees Income taxes (36,295) (38,226) (43,098) (67,228) Equity in earnings of equity method 924 1,170 719 2,218investees __________ __________ __________ __________ Income from continuing operations 116,154 89,513 133,531 172,873 Loss from discontinued operations - (11,349) - (20,135) (Loss)/gain on disposition of - (44,157) 3,125 (44,157)discontinued operations __________ __________ __________ __________ Net income 116,154 34,007 136,656 108,581 __________ __________ __________ __________US GAAP Results for the 3 months and 6 months to June 30, 2005Unaudited Consolidated Statements of Operations (continued) 3 months to 3 months to 6 months to 6 months to June 30, June 30, June 30, June 30, 2005 2004 2005 2004 __________ __________ __________ __________ Earnings per share - basic Income from continuing 23.2c 18.1c 26.8c 34.9coperations Loss from discontinued - (2.3c) - (4.1c)operations (Loss)/gain on disposition of - (8.9c) 0.6c (8.9c)discontinued operations __________ __________ __________ __________ Net income 23.2c 6.9c 27.4c 21.9c __________ __________ __________ __________ Earnings per share - diluted Income from continuing 23.0c 17.9c 26.5c 33.9coperations Loss from discontinued - (2.3c) - (3.9c)operations (Loss)/gain on disposition of - (8.8c) 0.6c (8.5c)discontinued operations __________ __________ __________ __________ 23.0c 6.8c 27.1c 21.5c __________ __________ __________ __________ Weighted average number of shares: Basic 499,664,524 496,074,144 499,333,386 495,896,175 Diluted 504,030,518 499,241,832 503,862,040 517,822,110 ___________ ___________ ___________ ___________US GAAP Results for the 3 months and 6 months to June 30, 2005Unaudited Consolidated Statements of Cash Flows 3 months to 3 months to 6 months to 6 months to June 30, June 30, June 30, June 30, 2005 2004 2005 2004 $'000 $'000 $'000 $'000 ____________ ____________ ____________ ____________ CASH FLOWS FROM OPERATING ACTIVITIES: Net income from continuing 116,154 89,513 133,531 172,873operations Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and 892 1,284 1,721 1,284amortization 14,205 13,079 27,841 25,583Cost of goods SG&A Increase in provision for 12,495 19,451 20,441 25,342sales deductions Stock option compensation 47 98 96 98 Movement in deferred taxes (6,262) (5,082) (9,411) (7,232) Equity in earnings of (924) (1,170) (719) (2,218)equity method investees Write-down of long-term 10,461 843 10,461 8,453assets Gain on sale of long-term - (14,883) (16) (14,883)assets Changes in operating assets and liabilities, net of acquisitions: (Increase)/decrease in (17,043) 29,842 (27,789) 23,672accounts receivable Increase in inventory (1,842) (4,546) (6,500) (6,754) Decrease/(increase) in 25,060 (20,712) 8,360 (13,467)prepayments and other current assets (Increase)/decrease in (682) 6,439 (672) 12,155other assets Increase/(decrease) in 35,418 (14,314) 38,348 7,511accounts and notes payable and other liabilities Decrease in deferred (6,398) - (7,831) (551)revenue Cash flows from (362) (14,161) (362) (16,190)discontinued operations ___________ ___________ ___________ ___________ Net cash provided by 181,219 85,681 187,499 215,676operating activities ___________ ___________ ___________ ___________US GAAP Results for the 3 months and 6 months to June 30, 2005Unaudited Consolidated Statements of Cash Flows (continued) 3 months to 3 months to 6 months to 6 months to June 30, June 30, June 30, June 30, 2005 2004 2005 2004 $'000 $'000 $'000 $'000 ___________ ___________ ___________ ___________ CASH FLOWS FROM INVESTING ACTIVITIES: Movements in short-term 236,670 15,151 243,989 31,972investments Movements in restricted cash (1,255) (5,115) (316) (1,770) Loans made to ID Biomedical (9,558) - (29,910) -Corporation (IDB) Purchase of long-term (5,724) (4,802) (7,538) (5,514)investments Purchase of intangible assets (11) (12,000) (19,962) (12,000) Purchase of property, plant and (24,217) (6,131) (44,157) (13,961)equipment Proceeds from sale of long-term - 26,513 - 26,733investments Proceeds from sale of property, 20 400 68 400plant and equipment Proceeds from redemption of IDB - - 60,000 -subscription receipts Additional proceeds from sale - - 2,236 -of the vaccines business Proceeds from assets held for - 7,659 - 7,659resale Distribution from long-term - 1,202 - 1,202investments Dividends received from 2,400 1,834 2,420 1,834investments Cash flows from the investing - (8,479) - (12,715)activities of discontinued operations ___________ ___________ ___________ ___________ Net cash provided by investing 198,325 16,232 206,830 23,840activities ___________ ___________ ___________ ___________ CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of long-term debt and - (59) - (135)capital leases Proceeds from exercise of 2,296 2,569 18,464 5,351options Proceeds from issue of common - - - 326stock, net Tax benefit of stock option 1,223 - 1,428 -compensation, charged directly to reserves Payment of dividend (19,057) - (19,057) - Cash flows from discontinued - - - -operations ___________ ___________ ___________ ___________ Net cash (used in)/provided by (15,538) 2,510 835 5,542financing activitiesRelated Shares:
Shire