Shire delivers double digit product sales growth

Shire delivers double digit product sales growth and 23% increase in Non GAAP earnings per ADS - Shire expects similar Non GAAP earnings per ADS growth in 2014 - February 13, 2014 - Shire (LSE: SHP, NASDAQ: SHPG) announces unaudited resultsfor the year to December 31, 2013. Financial Highlights Full Year 2013(1) Product sales $4,757 million +12%Total revenues $4,934 million +9% Non GAAP operating income $1,860 million +23%US GAAP operating income $1,734 million +66% Non GAAP diluted earnings per ADS $7.66 +23%US GAAP diluted earnings per ADS $3.53 -10% Non GAAP cash generation $1,781 million +9%Non GAAP free cash flow $1,306 million +4%US GAAP net cash provided by operating activities $1,463 million +6% (1) Results and percentages compare to the full financial year 2012. Thereported results for all periods presented in this release have been restatedto exclude the DERMAGRAFT® business from continuing operations. Product sales for the full year 2013 including DERMAGRAFT would have been up10% and Non GAAP diluted earnings per American Depository Share ("ADS") wouldhave been up 21%. The Non GAAP financial measures reported in this release are explained on page27, and are reconciled to the most directly comparable financial measuresprepared in accordance with US GAAP on pages 22 - 26, which includes areconciliation of the Reported results to Memo performance which includesDERMAGRAFT. Flemming Ornskov, M.D., Chief Executive Officer, commented: "Shire has delivered excellent financial results in 2013 and now has thefoundations in place for further future growth. Our sharpened strategic focusand strong operational discipline have enabled us to deliver double digitproduct sales growth and Non GAAP earnings per ADS growth in excess of 20%.We've generated strong cash flows during the year, which have helped us tostrengthen our balance sheet. We've simplified and unified our structure to One Shire, enabling better teamworking, faster decision-making and tighter cost management to drive improvedmargins. Our business development focus has brought us strategically aligned assetsmainly in Rare Diseases; we're particularly excited to have closed theacquisition of ViroPharma and to be progressing well with the integration ofthis business, which will drive further growth in our Rare Diseases business. We've prioritized our investments, including executing the recent divestmentof DERMAGRAFT, and have a promising pipeline of innovative products. We expectfurther news flow from our pipeline in 2014 from mid and late stage clinicalstudies. We've achieved strong Non GAAP earnings per ADS growth in 2013 and todayannounce that we expect to deliver a similar level of Non GAAP earnings perADS growth in 2014". DISCONTINUED OPERATIONS On January 17, 2014 Shire announced that it had sold its DERMAGRAFT business,comprising the key operating assets relating to the development, manufactureand sale of the DERMAGRAFT product, to Organogenesis Inc. ("Organogenesis")(refer to page 6 for more details). Shire has therefore reclassified theDERMAGRAFT business as "discontinued operations" for the years ended December31, 2013 and 2012. The reported results for all the periods presented in thisrelease have been recast to exclude the impact of the DERMAGRAFT business fromcontinuing operations. This press release also includes Non GAAP Memofinancial information on pages 22 - 26, which include DERMAGRAFT operationsand are intended to help readers reconcile 2013 performance back to previouslyprovided guidance. Including the DERMAGRAFT business, product sales for the full year2013 would have been up 10% and Non GAAP diluted earnings per ADS would havebeen up 21%. FINANCIAL SUMMARY Full Year 2013 Unaudited Results from Continuing Operations Full Year 2013 Full Year 2012 US GAAP Adjustments Non GAAP US GAAP Adjustments Non GAAP $M $M $M $M $M $MProduct sales 4,757 - 4,757 4,253 - 4,253Total revenues 4,934 - 4,934 4,527 - 4,527Operating income 1,734 126 1,860 1,045 464 1,509 Diluted earningsper ADS $7.36 $0.30 $7.66 $4.23 $1.98 $6.21 - Product sales from continuing operations in 2013 were up 12% to $4,757million (2012: $4,253 million). The strong growth in product sales from continuing operations was driven byVYVANSE® (up 19% to $1,228 million), LIALDA®/MEZAVANT® (up 32% to $529million), VPRIV® (up 12% to $343 million), INTUNIV® (up 16% to $335 million)and FIRAZYR® (up 102% to $235 million). - Total revenues from continuing operations were up 9% to $4,934 million(2012: $4,527 million) as the growth in product sales was partially offset, asexpected, by lower royalties and other revenues (down 36%). - On a Non GAAP basis (from continuing operations): Operating income was up 23% to $1,860 million (2012: $1,509 million), as totaloperating costs increased at a significantly lower rate (up 2%) than totalrevenues (up 9%) demonstrating our focus on delivering efficient growth.Research and Development expenditure ("R&D") was up 6% particularly due toinvestment in new uses for LDX(1) (the active ingredient in VYVANSE), SHP602and Lifitegrast. The effect of higher R&D was moderated by a decrease inSelling, General and Administrative expenditure ("SG&A") (down 6%). On a US GAAP basis (from continuing operations): Operating income in 2013 was up 66% to $1,734 million (2012: $1,045 million),a higher rate of increase than on a Non GAAP basis, primarily due to a netcredit of $159 million relating to the change in the fair values of contingentconsideration liabilities, in particular relating to the acquisition ofSARcode Bioscience Inc. ("SARcode") following the release of top-line Opus-2data. R&D decreased by 2%. SG&A decreased by 15%. - Non GAAP diluted earnings per ADS from continuing operations increased 23%to $7.66 (2012: $6.21) primarily due to the higher Non GAAP operating income. On a US GAAP basis diluted earnings per ADS from continuing operationsincreased 74% to $7.36 (2012: $4.23) primarily due to the higher US GAAPoperating income from continuing operations and a lower effective US GAAP taxrate of 16% (2012: 20%). --------------------------------- (1) Lisdexamfetamine dimesylate ("LDX") currently marketed as VYVANSE in theUS & Canada, VENVANSE® in Latin America and ELVANSE® in certain territories inthe EU for the treatment of Attention Deficit Hyperactivity Disorder ("ADHD"). - Cash generation, a Non GAAP measure, was 9% higher at $1,781 million (2012:$1,637 million) as higher cash receipts from product sales more than offsetpayments made in relation to the One Shire reorganization (approximately $42million) and costs incurred on the closure of Shire's facility at Turnhout inBelgium (approximately $24 million). The growth in cash generation was alsoheld back compared to the growth in Non GAAP operating income due to a paymentto Impax Laboratories Inc. ("Impax") of $48 million which was accrued in 2012but not paid until 2013 and higher cash outflows from discontinued operationsin 2013. Free cash flow, also a Non GAAP measure, increased by 4% to $1,306 million(2012: $1,256 million) due to the higher cash generation, partially offset byhigher cash tax payments in 2013. On a US GAAP basis, net cash provided by operating activities was up 6% to$1,463 million (2012: $1,383 million). - Net cash (also a Non GAAP measure) at December 31, 2013 was $2,231 million(December 31, 2012: $373 million) reflecting our strong cash generation andthe impact of conversion and redemption of our $1.1 billion convertible bond. On a US GAAP basis, cash and cash equivalents were $2,239 million at December31, 2013 (December 31, 2012: $1,482 million). - After paying for the ViroPharma acquisition Shire's Non GAAP net debt willbe approximately $1.5 billion. OUTLOOK After a strong performance in 2013, and the completion of the ViroPharmaacquisition, we are well positioned in 2014 to deliver further growth. We now expect Non GAAP earnings per ADS in 2014 to grow at a similar level to2013 (2013: up 23%). This growth in 2014 benefits from ViroPharma's earnings,with estimated accretion of approximately 7% for the eleven months postclosing. We anticipate mid-to-high teens product sales growth in 2014, includingViroPharma's product sales. Royalties and other revenues are expected to be 10-15% lower than 2013. Our Non GAAP gross margin is expected to be approximately 1 percentage pointlower than in 2013, due to slight dilution from ViroPharma. In 2014 we will continue to see the benefits from the reset of our cost base,and we expect underlying (excluding ViroPharma) combined Non GAAP R&D and SG&Ato be slightly lower than 2013. After including ViroPharma's operating costs,we anticipate combined Non GAAP R&D and SG&A to grow by 6-8% compared to 2013. We expect net interest expense to be at a similar level to 2013. Our core effective tax rate on Non GAAP income is expected to remain in therange of 18-20%. Taken together, we expect to deliver a similar level of Non GAAP earnings perADS growth in 2014 as 2013 (2013: up 23%). FINANCIAL SUMMARY Fourth Quarter 2013 Unaudited Results from Continuing Operations Financial Highlights Q4 2013(1) Product sales $1,280 million +19%Total revenues $1,326 million +12% Non GAAP operating income $510 million +29%US GAAP operating income $598 million +389% Non GAAP diluted earnings per ADS $2.26 +36%US GAAP diluted earnings per ADS - from continuingoperations $2.80 +666% Non GAAP cash generation $668 million +48%Non GAAP free cash flow $564 million +80%US GAAP net cash provided by operating activities $610 million +64% (1) Results and percentages compare to equivalent 2012 period. Product sales for Q4 2013 including DERMAGRAFT would have been up 19% and NonGAAP diluted earnings per ADS would have been up 40%. - Product sales from continuing operations grew strongly in Q4 2013 (up 19% to$1,280 million). Growth in product sales from continuing operations was driven by VYVANSE (up29% to $330 million), LIALDA/MEZAVANT (up 34% to $149 million), VPRIV (up 17%to $91 million) and FIRAZYR (up 134% to $81 million). - Total revenues from continuing operations were up 12% to $1,326 million (Q42012: $1,182 million) as the growth in product sales was partially offset bylower royalties and other revenues (down 56%). - On a Non GAAP basis (from continuing operations): Operating income was up 29% to $510 million (Q4 2012: $396 million), as totaloperating costs in Q4 2013 increased at a lower rate (up 4%) than totalrevenues (up 12%) demonstrating our focus on delivering efficient growth. R&Ddecreased 4% and SG&A increased 1%. SG&A was up 14% compared to Q3 2013 as weinvested behind the continued growth of our products. On a US GAAP basis (from continuing operations): Operating income was up 389% to $598 million (Q4 2012: $122 million), a higherrate of increase than on a Non GAAP basis as Q4 2012 included impairmentcharges not repeated in Q4 2013 and Q4 2013 included the impact of a netcredit of $188 million relating to the change in fair values of contingentconsideration liabilities, in particular relating to the acquisition ofSARcode. R&D was down 17% and SG&A was down 28% as compared with Q4 2012. - Non GAAP diluted earnings per ADS from continuing operations increased 36%to $2.26 (Q4 2012: $1.66) primarily due to the higher Non GAAP operatingincome and a lower effective tax rate on Non GAAP income of 12% (2012: 17%). On a US GAAP basis, diluted earnings per ADS from continuing operationsincreased 666% to $2.80 (Q4 2012: $0.37), primarily due to the higher US GAAPoperating income and a lower effective tax rate of 7% (2012: 38%). - Cash generation, a Non GAAP measure, increased by 48% to $668 million (Q42012: $452 million) due to higher cash receipts from product sales includingsignificant cash receipts from factored European receivables, which more thanoffset lower royalty receipts and higher operating expenses in the quarter. Free cash flow, also a Non GAAP measure, increased by 80% to $564 million (Q42012: $314 million) due to higher cash generation in addition to lower cashtax and capital expenditure payments in the quarter. On a US GAAP basis, net cash provided by operating activities was up 64% to$610 million (Q4 2012: $372 million). FOURTH QUARTER 2013 AND RECENT PRODUCT AND PIPELINE DEVELOPMENTS Products ADDERALL XR® - for the treatment of ADHD - On December 2, 2013 Shire announced that it had entered into anew agreement to supply an authorized generic version of ADDERALL XR. Underthe agreement, Sandoz Inc. ("Sandoz") will market an authorized genericversion of ADDERALL XR beginning July 1, 2016. From the December 1, 2013effective date of the agreement through the end of the agreement's five-yearterm, Sandoz has agreed to exclusively sell the authorized generic version ofADDERALL XR supplied by Shire. Shire will manufacture and supply Sandoz withall dosage strengths of the authorized generic product. Sandoz will distributethe product in the United States and Shire will receive a royalty based onSandoz's sales of the product. Teva Pharmaceutical Industries, Ltd. ("Teva") commenced commercialshipment of their authorized generic versions of ADDERALL XR in April 2009.Shire has extended its supply agreement with Teva until September 30, 2016. Pipeline FIRAZYR - for the treatment of Acute Angiotensin Converting EnzymeInhibitor-Induced Angioedema ("ACE-I AE") - In the fourth quarter of 2012, following the completion of asmall investigator sponsored trial ("IST"), Shire submitted a supplementalMarketing Authorization Application ("MAA"), to the European Medicines Agencyseeking approval for FIRAZYR for the treatment of ACE-I AE in Europe. InFebruary 2014, following the review and discussion of the data from this ISTwith the EU agencies, Shire expects to withdraw its supplemental MAA and toresubmit it with the data from the ongoing Shire sponsored Phase 3 trial whichwas initiated in the fourth quarter of 2013. This trial will now serve forboth EU and US registrations. LDX - for the treatment of Major Depressive Disorder ("MDD") - On February 6, 2014 Shire announced top-line results from twopivotal Phase 3 investigational studies evaluating the efficacy and safety ofLDX versus placebo as an adjunctive treatment for MDD in adults whoinadequately responded to antidepressant monotherapy with selective serotoninreuptake inhibitors or serotonin and norepinephrine reuptake inhibitors. LDXdid not meet the primary efficacy endpoint versus placebo for either study.The safety profile for LDX in these two studies appears to be generallyconsistent with the known profile established in studies in adults with ADHD.Based on these clinical trial results, Shire will no longer pursue thisclinical development program. Lifitegrast - for the treatment of Dry Eye disease - On December 5, 2013 Shire announced top-line results from OPUS-2,a Phase 3 efficacy and safety study. OPUS-2 compared Lifitegrast to placeboadministered twice daily for 84 days (12 weeks) in dry eye patients withhistory of active artificial tear use within 30 days prior to screening.Lifitegrast met the prespecified co-primary endpoint for the patient-reportedsymptom of eye dryness (change in Eye Dryness Score from baseline to week 12)(p-value

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