Shire delivers record revenues and Non GAAP EPS in 2014

Press ReleaseShire delivers record revenues and Non GAAP earnings per ADS in 2014, andenters 2015 with strongest-ever pipeline February 12, 2015 - Shire (LSE: SHP, NASDAQ: SHPG) announces unaudited resultsfor the year to December 31, 2014. Financial Highlights Full Year Growth(1) 2014 Product sales $5,830 million +23%(2)(3) Total revenues $6,022 million +22% Non GAAP operating income $2,593 million +39% US GAAP operating income $1,698 million -2% Non GAAP EBITDA margin (excluding royalties & otherrevenues)(4) 44% +6 pps(5)US GAAP net income margin(6) 57% +44 pps Non GAAP diluted earnings per ADS $10.60 +38%US GAAP diluted earnings per ADS $17.28 +390% Non GAAP cash generation $2,402 million +35% Non GAAP free cash flow $2,529 million +94% US GAAP net cash provided by operating activities $4,228 million +189% (1) Results and percentages compare to the full financial year 2013. (2) Product sales from continuing operations, including ViroPharmaIncorporated ("ViroPharma") acquired January 24, 2014, and excluding theDERMAGRAFT business sold on January 17, 2014. Product sales excluding productsacquired with ViroPharma were up 11% in 2014. (3) On a Constant Exchange Rate ("CER") basis, which is a Non GAAPmeasure, product sales were up 23%. (4) Non GAAP earnings before interest, tax, depreciation andamortization ("EBITDA") as a percentage of product sales, excluding royaltiesand other revenues. (5) Percentage point change ("PPS"). (6) US GAAP net income as a percentage of total revenues. The Non GAAP financial measures included within this release are explained onpage 32, and are reconciled to the most directly comparable financial measuresprepared in accordance with US GAAP on pages 24 - 29. Highlights - Delivered exceptionally strong product sales and Non GAAP diluted earningsper ADS - Successful integration of ViroPharma including accelerated CINRYZE sales - On track to complete the acquisition of NPS Pharma([1]) in the first quarterof 2015 - Substantially enhanced and progressed pipeline including recent FDA approvalof VYVANSE for BED - Positioned for further growth in 2015 despite currency headwinds and theloss of exclusivity for INTUNIV - Confident in our ability to deliver our 10x20 organic growth aspirationswith additional upside from Lumena, Fibrotech, Bikam and NPS Pharmaacquisitions Flemming Ornskov, M.D., Shire's Chief Executive Officer, commented: 2014 was a transformational year for Shire as we delivered on our strategy byachieving record revenues and Non GAAP diluted earnings per ADS, anddeveloping the strongest pipeline in our history. We also successfullyexecuted on value-enhancing M&A and generated strong cash flows which willenable us to continue investing in drivers of growth. In 2014 Shire delivered value through commercial excellence across our productportfolio. Bolstered by demand for therapies in our expanded HereditaryAngioedema (HAE) portfolio, sales by our Rare Diseases business unit grew by46%([2]). CINRYZE grew 30%([3]) on a pro-forma basis and contributed sales of$503 million, and FIRAZYR saw a 55% increase with $364 million in sales.Neuroscience and GI also contributed to our strong results, with VYVANSE salesup 18% and LIALDA sales up 20%.---------------------------------([1]) NPS Pharma acquisition expected to close in Q1 2015, subject tosatisfaction of customary closing conditions. ([2]) On a pro-forma basis including Cinryze sales in 2013 and prior toacquisition in 2014, growth was 18%. ([3]) 2013 Cinryze product sales as reported by ViroPharma. We significantly enhanced our pipeline in 2014, and now have 21 distinctprograms in clinical development. Importantly, our pipeline is advancing, mostrecently with the US approval of VYVANSE for Binge Eating Disorder (BED) inadults. VYVANSE is the first product approved for BED that will help addressthis condition which affects an estimated 2.8 million adults in the US. Inaddition, positive results from a second phase 2 maribavir study in patientswith disease which is resistant or refractory to the standard of care CMVtherapy showed that maribavir, at all doses, was effective at lowering CMV tobelow the limits of assay detection. The acquisition of ViroPharma contributed significantly to our growth thisyear, and the Lumena acquisition materially expanded our Gastrointestinal (GI)pipeline. Recently we announced plans to acquire NPS Pharma, a rare diseasefocused biopharmaceutical company. The transaction, expected to close in thefirst quarter of 2015, will enhance our growth profile and enable us to applyour GI and rare disease expertise to deliver two therapies - GATTEX for shortbowel syndrome and NATPARA for hypoparathyroidism - to patients. Following an exceptional 2014, we expect to deliver further growth in 2015despite significant foreign currency headwinds, the loss of exclusivity forINTUNIV, and the inclusion of CINRYZE in our 2014 results. In 2015, Shire iswell-positioned on our journey to become a leading global biotech as wecomplete our One Shire reorganization with the expected benefits ofprofitability and efficiency, and advance pivotal regulatory and clinicalmilestones that will contribute to $10 billion in product sales by 2020. FINANCIAL SUMMARY Full Year 2014 Unaudited Results from Continuing Operations Full Year 2014 Full Year 2013 US GAAP Adjustments Non GAAP US GAAP Adjustments Non GAAP $M $M $M $M $M $MTotal revenues 6,022 - 6,022 4,934 - 4,934Operating income 1,698 895 2,593 1,734 126 1,860 Diluted earningsper ADS $17.28 ($6.68) $10.60 $3.53 $4.13 $7.66 - Product sales grew strongly in 2014, up 23% to $5,830 million (2013: $4,757million). Product sales in 2014 included $538 million for products acquiredwith ViroPharma, primarily $503 million from CINRYZE®. The inclusion ofViroPharma contributed 12 percentage points of reported product sales growthin the year. Excluding products acquired with ViroPharma, product sales were up 11%. Thisgrowth was driven by VYVANSE®([4]) (up 18% to $1,449 million),LIALDA®/MEZAVANT® (up 20% to $634 million), ELAPRASE® (up 9% to $593 million),REPLAGAL® (up 7% to $500 million), VPRIV® (up 7% to $367 million), andFIRAZYR® (up 55% to $364 million). - Total revenues were up 22% to $6,022 million (2013: $4,934 million), due toour strong product sales growth and higher royalties and other revenues (up8%). The higher royalty income included $22 million of INTUNIV® royaltiesfollowing generic entry in December and other revenues included the receipt ofa $13 million milestone relating to FOSRENOL®. - On a Non GAAP basis: Operating income grew strongly in 2014, up 39% to $2,593 million (2013: $1,860million), due to higher total revenues (up 22%), and a 5% increase in combinedResearch & Development expenditure ("R&D") and Selling, General andAdministrative expenditure ("SG&A"), demonstrating our focus on deliveringefficient growth. R&D was down 6% due to the completion/termination of certainsignificant late stage R&D programs since 2013. SG&A increased 12%, due to theinclusion of ViroPharma's costs as well as Sales and Marketing ("S&M") spendin anticipation of future product launches. Non GAAP EBITDA margin (excluding royalties and other revenues)([5]) was 44%,up 6 percentage points when compared to 2013 (38%). On a US GAAP basis (from continuing operations): Operating income in 2014 was down 2% to $1,698 million (2013: $1,734 million),due to higher intangible asset impairment charges, higher costs in relation toacquisition and integration activities, higher One Shire reorganization costs,as well as costs associated with AbbVie Inc.'s ("AbbVie") terminated offer forShire. Combined R&D and SG&A was up by 20%, with R&D up by 14% and SG&A up by23%. - Non GAAP diluted earnings per American Depository Share ("ADS") increased38% to $10.60 (2013: $7.66) primarily due to the higher Non GAAP operatingincome. On a US GAAP basis diluted earnings per ADS increased 390% to $17.28 (2013:$3.53) primarily due to the receipt of a $1,635 million break fee in relationto AbbVie's terminated offer for Shire and a lower effective US GAAP tax rateof 2% (2013: 16%), which was partially offset by the lower US GAAP operatingincome. 2013 also included a net loss on discontinued operations of $755million following the divestment of the DERMAGRAFT business. The lower US GAAP tax rate in 2014 was driven primarily by the receipt of thebreak fee due under the cooperation agreement with AbbVie. The Company hasobtained advice that the break fee should not be taxable in Ireland. However,this has not been agreed with the tax authorities. In 2014 the Company alsorecognized a net credit of $235 million, following the settlement with ---------------------------------([4]) Lisdexamfetamine dimesylate ("LDX") currently marketed as VYVANSE in theUS and Canada, VENVANSE® in Latin America and ELVANSE® in certain territoriesin the EU for the treatment of Attention Deficit Hyperactivity Disorder("ADHD"). ([5]) EBITDA as a percentage of product sales, excluding royalties and otherrevenues. the Canadian revenue authorities. Excluding the effect of these two items theeffective US GAAP tax rate would have been 17%. - Cash generation, a Non GAAP measure, was 35% higher at $2,402 million (2013:$1,781 million), due to strong cash receipts from higher sales and the benefitof effective cost management. Free cash flow, also a Non GAAP measure, was up 94% to $2,529 million (2013:$1,306 million), due to higher cash generation and the benefit of the $417million repayment received from the Canadian revenue authorities. On a US GAAP basis, net cash provided by operating activities was up 189% to$4,228 million (2013: $1,463 million), due to the receipt of the $1,635million break fee in relation to AbbVie's terminated offer for Shire and thebenefit of the $417 million repayment received from the Canadian revenueauthorities. - Net cash (a Non GAAP measure) at December 31, 2014 was $2,119 million(December 31, 2013: $2,231 million). On a US GAAP basis, cash and cash equivalents were $2,982 million at December31, 2014 (December 31, 2013: $2,239 million). OUTLOOK Following our delivery of record revenues and Non GAAP diluted earnings perADS in 2014, we are positioning ourselves in 2015 to deliver further growth. This outlook includes our preliminary assessment of the effect of the NPSPharmaceuticals, Inc. ("NPS") acquisition, which we expect to close in thefirst quarter of 2015, subject to satisfaction of customary closingconditions. On a Constant Exchange Rate basis we anticipate product sales growth in themid-to-high single digits. When excluding the effect of INTUNIV product sales,we anticipate low double digit product sales growth on a CER basis. Based on actual exchange rates([6]) we anticipate low-to-mid single digitproduct sales growth in 2015. This rate of product sales growth is lower thanwe saw in 2014 as we compare against the initial year of CINRYZE product salesand expect significantly lower INTUNIV sales following its December 2014 lossof exclusivity. Additionally, we expect product sales growth in 2015 will beheld back by approximately three to four percentage points by foreign exchangeheadwinds from the strengthening US dollar, which particularly impactsELAPRASE, REPLAGAL and VPRIV sales. Royalties and other revenues are expected to increase by 30-40% in 2015, as weinclude NPS's royalty streams for the first time. Our Non GAAP gross margin is expected to be in line with 2014 (2014: 85.8%). In 2015 we expect to continue seeing the benefit of our effective costmanagement, with underlying (excluding NPS) combined Non GAAP R&D and SG&Aremaining flat compared with 2014. After including NPS's operating costs weanticipate combined Non GAAP R&D and SG&A to grow in the high single digits. We expect our net interest and other expense to be in line with 2014 levels. For 2015, we expect our effective tax rate on Non GAAP income to be in therange of 15-17%, before reverting to the 17-19% range in 2016 and beyond. Taken together, we expect Non GAAP diluted earnings per ADS growth in themid-single digits in 2015 (high single digit growth on a CER basis). We remain confident of our ability to deliver our 10x20 organic growthaspirations, with additional upside from Lumena, Fibrotech, Bikam and NPSPharma acquisitions. -----------------------------------([6]) This Outlook has been based on exchange rates as at January 31, 2015(Euro:$1.13, £:$1.51, CHF:$1.09). FINANCIAL SUMMARY Fourth Quarter 2014 Unaudited Results Financial Highlights Q4 2014 Growth Product sales $1,501 million +17%(1)Total revenues $1,576 million +19% Non GAAP operating income $655 million +28%US GAAP operating income $481 million -20% Non GAAP EBITDA margin (excluding royalties & otherrevenues) 41% +2 ppsUS GAAP net income margin 138% +133 pps Non GAAP diluted earnings per ADS $2.63 +17%US GAAP diluted earnings per ADS $11.02 +3,039% Non GAAP cash generation $800 million +20%Non GAAP free cash flow $892 million +58%US GAAP net cash provided by operating activities $2,555 million +319% (1) On a Constant Exchange Rate basis, which is a Non GAAP measure, productsales were up 20%. - Product sales in Q4 2014 were up 17% to $1,501 million (Q4 2013: $1,280million). Product sales in Q4 2014 included $150 million for products acquiredwith ViroPharma, primarily $142 million from CINRYZE. The inclusion ofViroPharma contributed 12% to reported product sales growth in the quarter. Product sales grew 5% excluding products acquired with ViroPharma. Growth wasprimarily driven by VYVANSE (up 16% to $383 million), LIALDA/MEZAVANT (up 24%to $185 million) and FIRAZYR (up 26% to $102 million). Product sales growth was held back by significantly lower INTUNIV sales (down44% to $48 million) reflecting the impact of generic competition from December1, 2014. Additionally, sales from ELAPRASE (down 6% to $143 million) andREPLAGAL (down 9% to $120 million) in Q4 2014 were impacted by the timing oflarge orders from customers who order less frequently (these orders wererecorded in Q3 2014, whereas comparable orders were recorded in Q4 2013). Product sales growth in Q4 2014 was also held back 3 percentage points byforeign exchange headwinds from the strengthening US dollar. Product salesgrowth on a CER basis, which is a Non GAAP measure, was 20%. - Total revenues were up 19% to $1,576 million (Q4 2013: $1,326 million), asQ4 2014 benefited from higher royalties and other revenues, principally $22million of INTUNIV royalties following generic entry in December and receiptof a $13 million milestone relating to FOSRENOL. - On a Non GAAP basis: Operating income grew strongly in Q4 2014, up 28% to $655 million (Q4 2013:$510 million) as combined R&D and SG&A costs increased at a lower rate (up11%) than total revenues (up 19%). R&D costs increased by 5% compared to Q42013. SG&A costs increased by 15%, primarily due to the inclusion ofViroPharma costs and S&M spend in anticipation of future product launches. Non GAAP EBITDA margin (excluding royalties and other revenues) was 41%, up 2percentage points compared to Q4 2013 (Q4 2013: 39%). On a US GAAP basis (from continuing operations): Operating income was down 20% to $481 million (Q4 2013: $598 million),principally because Q4 2013 benefited from a net credit of $188 million on there-measurement of contingent consideration liabilities. Combined R&D and SG&Awas up 20%, with R&D up 5% and SG&A up 27%. - Non GAAP diluted earnings per ADS increased 17% to $2.63 (Q4 2013: $2.26) asa result of higher Non GAAP operating income in Q4 2014, partially offset by ahigher effective tax rate on Non GAAP income of 19% in Q4 2014 (Q4 2013: 12%). On a US GAAP basis, diluted earnings per ADS increased by $10.67 to $11.02 (Q42013: $0.35), principally due to the receipt of the $1,635 million break feefrom AbbVie, and a comparison against Q4 2013 which included a net loss ondiscontinued operations of $483 million following the divestment of theDERMAGRAFT business. - Cash generation, a Non GAAP measure, was up 20% to $800 million (Q4 2013:$668 million) reflecting higher receipts from product sales. Free cash flow, also a Non GAAP measure, was up 58% to $892 million (Q4 2013:$564 million) due to higher cash generation and the receipt of the repaymentfrom the Canadian revenue authorities ($169 million). On a US GAAP basis, net cash provided by operating activities was up 319% to$2,555 million (Q4 2013: $610 million), primarily due to the receipt of the$1,635 million break fee from AbbVie. FOURTH QUARTER 2014 AND RECENT PRODUCT AND PIPELINE DEVELOPMENTS Products VYVANSE - for the treatment of BED in adults - On January 30, 2015 the US Food and Drugs Administration ("FDA") grantedapproval for VYVANSE for the treatment of adults with moderate to severe BED. AGRYLIN®([7]) - for the treatment of essential thrombocythemia - On November 25, 2014 Shire launched AGRYLIN in Japan for treatment of adultswith essential thrombocythemia, following approval of a marketingauthorization on September 26, 2014 by the Ministry of Health, Labor andWelfare in Japan. Pipeline SHP465 - for the treatment of ADHD in adults - On October 9, 2014 Shire announced that it had received furtherguidance from the FDA on the regulatory path for SHP465 (triple-bead mixedamphetamine salts), an investigational oral stimulant medication beingevaluated as a potential treatment for ADHD in adults. After a series offollow-up discussions, the FDA has now clarified that additional pediatricdata is required for resubmission of SHP465. SHP607 - for the prevention of retinopathy of prematurity ("ROP") - On December 4, 2014 Shire received notification that SHP607 wasgranted Fast Track designation by the FDA. In addition, this product haspreviously been granted orphan drug designation in both the US and EU. A Phase2 clinical trial is currently ongoing. SHP609 - for the treatment of Hunter syndrome with Central Nervous System("CNS") symptoms - On December 30, 2014 Shire received notification that SHP609 wasgranted Fast Track designation by the FDA. In addition, this product haspreviously been granted orphan drug designation in the US. A pivotal Phase 2/3clinical trial was initiated by Shire in the fourth quarter of 2013 and isongoing. SHP626 (formerly LUM002) - for the treatment of non-alcoholic steatohepatitis("NASH") - SHP626 was acquired as part of the acquisition of Lumena and is indevelopment for the treatment of NASH, a common and often "silent" liverdisease characterized by fat deposits in the liver and inflammation which canprogress to significant fibrosis. An Investigational New Drug ("IND") wasapproved by the FDA in Q4 2014, and we expect to initiate a Phase 1b multipledose trial in the first half of 2015. SHP620 (maribavir) - for the treatment of CMV in transplant patients - Shire has completed two Phase 2 studies in transplant recipients. The firsttrial was in first-line treatment of asymptomatic CMV viremia in transplantrecipients and we previously disclosed the results showed that maribavir, atall doses, was at least as effective as valganciclovir in the reduction ofcirculating CMV to below the limits of assay detection (undetectable plasmaCMV). The second study recently completed was for the treatment ofresistant/refractory CMV infection/disease in transplant recipients. Thepurpose of this study was to determine whether maribavir is efficacious andsafe in patients with disease which is resistant or refractory to the standardof care CMV therapy (e.g., valganciclovir, foscarnet). This study also showedthat maribavir, at all doses, was effective at lowering CMV to below thelimits of assay detection. Approximately two-thirds of patients across themaribavir treatment groups achieved an undetectable plasma CMV DNA (viralload) within 6 weeks.--------------------------------([7]) Currently marketed as XAGRID in the EU for the treatment of essentialthrombocythaemia. Currently marketed as XAGRID OTHER DEVELOPMENTS Shire to Acquire NPS Pharmaceuticals, Inc. ("NPS Pharma") - On January 11, 2015 Shire announced it had reached an agreementto acquire all the outstanding shares of NPS Pharma for $46.00 per share incash, for a total consideration of approximately $5.2 billion. Thistransaction is subject to customary closing conditions and is expected toclose in Q1 2015. If the acquisition is completed, Shire plans to acceleratethe growth of NPS Pharma's innovative portfolio through its market expertisein GI disorders, core capabilities in rare disease patient management, andglobal footprint. 2015 PIPELINE ANTICIPATED NEWSFLOW 2015 is expected to include multiple key regulatory and clinical milestones,which are expected to drive future growth. These anticipated milestonesinclude: SHP606 (lifitegrast) - for the treatment of the signs and symptoms of Dry EyeDisease - SHP606 New Drug Application filing. SHP625 (formerly LUM001) - for the treatment of cholestatic liver disease - Alagile Syndrome Phase 2 head line data (ITCH and IMAGO). - Primary Biliary Cirrhosis Phase 2 head line data. SHP611 - for the treatment of Metachromatic Leukodystrophy - SHP611 Phase 1/2 head line data. SHP607 - for the prevention of retinopathy of prematurity - SHP607 Phase 2 head line data. BOARD AND COMMITTEE CHANGES Shire announces that David Stout has informed the Board of his intention tostep down from the Board and the Committees on which he serves with effectfrom the conclusion of the Company's AGM on April 28, 2015. The advanced stageof the proposed combination with AbbVie in 2014 led Mr. Stout to considerother opportunities for 2015. Mr. Stout has been on the Shire Board sinceOctober 2009. The Board thanks Mr. Stout for his many contributions to theShire Board during his tenure. Shire also announces that David Kappler's will be reappointed for another yearfollowing the expiration of his current term of appointment at the conclusionof the AGM on April 28, 2015. Mr. Kappler is Shire's Senior IndependentDirector and Deputy Chairman, Chairman of the Nomination Committee and amember of the Audit, Compliance and Risk Committee. DIVIDEND In respect of the six months ended December 31, 2014 the Board has resolved topay an interim dividend of 19.09 US cents per Ordinary Share (2013: 16.93 UScents per Ordinary Share). Dividend payments will be made in Pounds Sterling to holders of OrdinaryShares and in US Dollars to holders of ADSs. A dividend of 12.51(1) pence perOrdinary Share (2013: 10.21 pence) and 57.27 US cents per ADS (2013: 50.79 UScents) will be paid on April 14, 2015 to shareholders on the register as atthe close of business on March 13, 2015. Together with the first interim payment of 3.83 US cents per Ordinary Share(2013: 3.00 US cents per Ordinary Share), this represents total dividends for2014 of 22.92 US cents per Ordinary Share (2013: 19.93 US cents per OrdinaryShare), an increase of 15% in US Dollar terms. (1) Translated using a GBP:USD exchange rate of 1.5265. ADDITIONAL INFORMATION The following additional information is included in this press release: PageOverview of Full Year 2014 Financial Results 10Financial Information 15Non GAAP Reconciliation 24Notes to Editors 30Forward-Looking Statements 31Non GAAP Measures 32Trade Marks 33 For further information please contact: Investor Relations - Sarah Elton-Farr [email protected] +44 1256 894 157 Media - Brooke Clarke [email protected] +44 1256 894 829 - Jessica Cotrone [email protected] +1 781 482 9538 - Stephanie Fagan [email protected] +1 781 482 0460 Dial in details for the live conference call for investors at 14:00 BST /09:00 EDT on February 12, 2015: UK dial in: 0808 237 0030 or 0203 139 4830 US dial in: 1 866 928 7517 or 1 718 873 9077 International Access Numbers: Click herePassword/Conf ID: 86223013# Live Webcast: Click here The quarterly earnings presentation will be available today at 13:00 BST /08:00 EDT on: - Shire.com Investors section - Shire's IR Briefcase in the iTunes Store OVERVIEW OF FULL YEAR 2014 FINANCIAL RESULTS 1. Product sales For the year to December 31, 2014 product sales increased by 23% to $5,830.4million (2013: $4,757.5 million) and represented 97% of total revenues (2013:96%). US Exit Market Year on year growth Share(2) Non GAAPProduct sales(1) Sales $M Sales CER US Rx(2) VYVANSE 1,449.0 +18% +18% +4% 16%LIALDA/MEZAVANT 633.8 +20% +20% +25% 33%ELAPRASE 592.8 +9% +11% n/a(4) n/a(4)CINRYZE(3) 503.0 n/a n/a n/a(4) n/a(4)REPLAGAL 500.4 +7% +10% n/a(5) n/a(5)ADDERALL XR® 383.2 +2% +3% +7% 5%VPRIV 366.7 +7% +8% n/a(4) n/a(4)FIRAZYR 364.2 +55% +55% n/a(4) n/a(4)INTUNIV 327.2 -2% -2% -3% 2%PENTASA® 289.7 +3% +3% -4% 13%OTHER 420.4 +0% -0% n/a n/aTotal 5,830.4 +23% +23% (1) Product sales from continuing operations, including ViroPharmaacquired January 24, 2014, and excluding DERMAGRAFT which has been treated asdiscontinued operations following divestment on January 17, 2014. (2) Data provided by IMS Health National Prescription Audit ("IMSNPA"). Exit market share represents the average US market share in the monthended December 31, 2014. (3) CINRYZE product sales in 2014 were up 30% on a pro-forma basiscompared with 2013. 2013 sales were recorded by ViroPharma, prior to theacquisition of ViroPharma by Shire. (4) IMS NPA Data not available. (5) Not sold in the US in 2014. VYVANSE - ADHD VYVANSE product sales grew strongly (up 18%) in 2014 primarily due to thebenefit of price increases and to a lesser extent higher US prescriptiondemand and growth in ex-US product sales. This growth was partially offset bya lower level of stocking in 2014 as compared to 2013. LIALDA/MEZAVANT - Ulcerative Colitis The 20% growth in product sales for LIALDA/MEZAVANT in 2014 was primarilydriven by higher prescription demand (up 25%) and to a lesser extent a priceincrease taken at the beginning of 2014. The growth was partially offset by alower level of stocking and higher sales deductions as a percentage of salesin 2014 as compared to 2013. ELAPRASE - Hunter syndrome ELAPRASE sales growth was up 9% (up 11% on a Non GAAP CER basis),driven by continued growth in the number of treated patients, especially inemerging markets. The decrease in ELAPRASE sales between Q4 and Q3 of 2014 waspartly driven by the timing of certain large orders from markets which orderless frequently. Sales growth was also negatively impacted by foreignexchange. CINRYZE - for the prophylactic treatment of HAE Shire acquired CINRYZE through its acquisition of ViroPharma onJanuary 24, 2014. CINRYZE sales were $503 million in 2014, growing 30% on apro-forma basis on 2013([8]) primarily driven by more patients on therapy andto a lesser extent the impact of a price increase in the US and an increase inchannel inventory.-----------------------([8]) 2013 recorded by ViroPharma, prior to the acquisition ofViroPharma by Shire. REPLAGAL - Fabry disease REPLAGAL sales were up 7% compared to 2013 (up 10% on a Non GAAPCER basis), driven primarily by higher unit sales as we continue to see anincrease in the number of patients on therapy, with good growth in emergingmarkets and to a lesser extent in Europe. The benefit of the higher unit saleswas partially offset by foreign exchange. ADDERALL XR - ADHD ADDERALL XR product sales were up 2% in 2014, as a result of higherprescription demand, partially offset by lower stocking in 2014 compared to2013. VPRIV - Gaucher disease VPRIV sales were up 7% (up 8% on a Non GAAP CER basis), driven by astrong performance in the EU and US as we continue to add naïve patients andgain patients switching from other therapies. Sales growth was also negativelyimpacted by foreign exchange. FIRAZYR - for the treatment of acute HAE attacks FIRAZYR sales growth was up 55% compared to 2013, driven by ahigher number patients on therapy and the effect of a price increase in the USmarket. INTUNIV - ADHD INTUNIV product sales were down 2% compared to 2013, reflecting theimpact of generic competition from December 2014, which resulted in lowerprescription demand, significantly higher sales deductions as a percentage ofproduct sales and destocking as compared to a slight level of stocking in2013. This was partially offset by price increases taken in 2014. The impactof generic competition saw INTUNIV market share fall to 2.3% at the end of2014 from 4.6% at the beginning of the year. PENTASA - Ulcerative Colitis PENTASA product sales were up 3% as the benefit of price increases waspartially offset by higher sales deductions and a lower prescription demand in2014 compared to 2013. 2. Royalties Product Royalties to Shire $M Year on year growth CERFOSRENOL 51.4 +7% +7%3TC® and ZEFFIX® 33.9 -27% -27%ADDERALL XR 28.9 +5% +5%INTUNIV 22.0 n/a n/aOther 24.6 -21% -21%Total 160.8 +5% +5%Shire has received royalty income from Actavis following INTUNIVgeneric competition from December 2014. Royalty income is based on 25% ofActavis' gross profits from INTUNIV sales. 3. Financial details Cost of product sales % of % of product product 2014 sales 2013 sales $M $MCost of product sales (US 979.3 17% 670.8 14%GAAP)Unwind of inventory fairvalue adjustment (91.9) -Depreciation (57.1) (37.5)Cost of product sales (Non 830.3 14% 633.3 13%GAAP) Non GAAP cost of product sales as a percentage of product sales increased by 1percentage point in 2014 compared to 2013. Cost of product sales was slightlyhigher in 2014 than 2013 as a result of expiry provisions and the inclusion oflower margin CINRYZE acquired with ViroPharma. US GAAP cost of product sales as a percentage of product sales was 3percentage points higher than in 2013, as in addition to the factors above,2014 also included charges of $91.9 million on the unwind of the fair valueadjustment on acquired ViroPharma inventories. R&D % of % of product product 2014 sales 2013 sales $M $MR&D (US GAAP) 1,067.5 18% 933.4 20%Impairment of intangible (190.3) (19.9)assetsPayment in respect of (12.5) -in-licensed and acquiredproductsDepreciation (24.5) (23.3)R&D (Non GAAP) 840.2 14% 890.2 19% Non GAAP R&D decreased by $50.0 million, or 6%, due to thecompletion/termination of certain significant late stage R&D programs,partially offset by increased spend on programs acquired through BusinessDevelopment activities, including ViroPharma and Lumena Pharmaceuticals Inc.("Lumena"), and increased spend on the SHP607 (prevention of ROP), SHP608(Dystrophic Epidermolysis Bullosa) and SHP606 (Dry Eye Disease) programs. US GAAP R&D increased by $134.1 million, or 14%, as 2014 included higherimpairment charges relating to in-process R&D ("IPR&D") intangible assets ascompared to 2013. SG&A % of % of product product 2014 sales 2013 sales $M $MSG&A (US GAAP) 2,025.8 35% 1,651.3 35%Intangible asset (243.8) (152.0)amortizationLegal and litigation costs (9.2) (9.0)Costs incurred in (95.8) -connection with AbbVie'sterminated offer for ShireDepreciation (81.9) (66.8)SG&A (Non GAAP) 1,595.1 27% 1,423.5 30% Non GAAP SG&A increased by $171.6 million, or 12%, due to the inclusion ofSG&A costs related to ViroPharma (approximately 6 percentage points of theincrease) and S&M spend in anticipation of the launch of VYVANSE for thetreatment of BED, which offset savings from the One Shire reorganization. US GAAP SG&A increased by $374.5 million, or 23%, a higher rate of increasethan on a Non GAAP basis, as 2014 included the impact of higher intangibleamortization as a result of new assets acquired with ViroPharma, and costsincurred in connection with AbbVie's terminated offer for Shire. Gain on sale of product rights For the year to December 31, 2014 Shire recorded a net gain on saleof product rights of $88.2 million (2013: $15.9 million) following thedivestment of CALCICHEW, VANCOCIN, ESTRACE and EXPUTEX. The net gain on saleof product rights also included the loss on re-measurement of the contingentconsideration receivable relating to the divestment of DAYTRANA. Reorganization costs For the year to December 31, 2014 Shire recorded reorganizationcosts of $180.9 million (2013: $88.2 million) comprising costs relating to theOne Shire reorganization, which included involuntary termination benefits andother reorganization costs. Amounts recorded in 2014 also include certaincosts associated with moving more than 500 positions from Chesterbrook toLexington, which will be effected over 2015 and 2016. Integration and acquisition costs For the year to December 31, 2014 Shire recorded integration and acquisitioncosts of $158.8 million, comprising acquisition and integration costs of$144.1 million, primarily related to ViroPharma, and a $14.7 million chargerelating to the change in fair value of contingent consideration liabilities. In 2013 Shire recorded a net credit of $134.1 million in integration andacquisition costs primarily related to the change in fair values of contingentconsideration liabilities offset by the costs of acquiring ViroPharma andintegrating SARcode BioSciences Inc. ("SARcode") and Lotus Tissue Repair, Inc. Interest expense For the year to December 31, 2014 Shire incurred interest expense of $30.8million (2013: $38.1 million). Interest expense in 2014 principally relates tointerest and financing costs incurred on facilities drawn down in respect ofthe acquisition of ViroPharma. Receipt of Break Fee On July 18, 2014 the Boards of AbbVie and Shire announced that they had agreedthe terms of a recommended combination of Shire with AbbVie, subject to anumber of conditions including approval by shareholders and regulators. On thesame date Shire and AbbVie entered into a co-operation agreement in connectionwith the recommended combination. On October 16, 2014 the Board of AbbVieconfirmed that it had withdrawn its recommendation of its offer for Shire as aresult of the anticipated impact of the US Treasury Notice on the benefitsthat AbbVie expected from its offer. As AbbVie's offer was conditional on theapproval of its stockholders, and given their Board's decision to change itsrecommendation and to advise AbbVie's stockholders to vote against the offer,there was no realistic prospect of satisfying this condition. Accordingly,Shire's Board agreed with AbbVie to terminate the cooperation agreement onOctober 20, 2014. The Company entered into a termination agreement withAbbVie, pursuant to which AbbVie paid the break fee due under the cooperationagreement of approximately $1,635 million. The Company has obtained advicethat the break fee should not be taxable in Ireland. The Company has thereforeconcluded that no tax liability should arise and has not recognised a taxcharge in the income statement in the current accounting period. However, thishas not been agreed with the tax authorities. Taxation The effective tax rate on Non GAAP income in 2014 was 18% (2013: 19%) and theeffective tax rate on US GAAP income from continuing operations was 2% (2013:16%). The effective rate of tax on Non GAAP income from continuing operations in2014 is slightly lower than the same period in 2013 primarily due to changesin profit mix. The effective rate of tax on US GAAP income from continuing operations islower than 2013 primarily due to the receipt of the break fee from AbbVie andrecognition of a net credit to income taxes of $235 million, following thesettlement of certain tax positions with the Canadian revenue authorities in2014. The Company has obtained advice that the break fee should not be taxablein Ireland. The Company has therefore concluded that no tax liability shouldarise and has not recognised a tax charge in the income statement in thecurrent accounting period. However, this has not been agreed with the taxauthorities. Excluding the effect of these two items the effective US GAAP taxrate in 2014 would have been 17%. Discontinued operations The gain from discontinued operations for the year to December 31, 2014 was$122.7 million net of tax (2013: loss of $754.5 million). The gain fromdiscontinued operations includes a tax credit of $211.3 million primarilydriven by a tax benefit arising following a reorganization of the RegenerativeMedicine business undertaken in Q4 2014, associated with the divestment of theDERMAGRAFT business in Q1 2014. This gain was partially offset by costsassociated with the divestment of the DERMAGRAFT business, including a loss onre-measurement of contingent consideration receivable from Organogenesis toits fair value. FINANCIAL INFORMATION TABLE OF CONTENTS Page Unaudited US GAAP Consolidated Balance Sheets 16 Unaudited US GAAP Consolidated Statements of Income 17 Unaudited US GAAP Consolidated Statements of CashFlows 19 Selected Notes to the Unaudited US GAAP FinancialStatements(1) Earnings per share 21(2) Analysis of revenues 22 Non GAAP reconciliation 24 Unaudited US GAAP financial position as of December 31, 2014Consolidated Balance Sheets December 31, December 31, 2014 2013 $M $MASSETSCurrent assets:Cash and cash equivalents 2,982.4 2,239.4Restricted cash 54.6 22.2Accounts receivable, net 1,035.1 961.2Inventories 544.8 455.3Assets held for sale - 31.6Deferred tax asset 344.7 315.6Prepaid expenses and other current assets 221.5 263.0 Total current assets 5,183.1 4,288.3 Non-current assets:Investments 43.7 31.8Property, plant and equipment ("PP&E"), net 837.5 891.8Goodwill 2,474.9 624.6Other intangible assets, net 4,934.4 2,312.6Deferred tax asset 112.1 141.1Other non-current assets 46.4 32.8 Total assets 13,632.1 8,323.0 LIABILITIES AND EQUITYCurrent liabilities:Accounts payable and accrued expenses 1,909.4 1,688.4Short term borrowings 850.0 -Other current liabilities 262.5 119.5 Total current liabilities 3,021.9 1,807.9 Non-current liabilities:Deferred tax liability 1,210.6 560.6Other non-current liabilities 736.7 588.5 Total liabilities 4,969.2 2,957.0 Equity:Common stock of 5p par value; 1,000 millionshares authorized; and 599.1 million sharesissued and outstanding (2013: 1,000 millionshares authorized; and 597.5 million sharesissued and outstanding) 58.7 58.6Additional paid-in capital 4,338.0 4,186.3Treasury stock: 10.6 million shares (2013: 13.4million) (345.9) (450.6)Accumulated other comprehensive (loss)/income (31.5) 110.2Retained earnings 4,643.6 1,461.5 Total equity 8,662.9 5,366.0 Total liabilities and equity 13,632.1 8,323.0 Unaudited US GAAP results for the three months and year to December 31, 2014Consolidated Statements of Income 3 months to December 31, Year to December 31, 2014 2013 2014 2013 $M $M $M $MRevenues:Product sales 1,500.7 1,280.4 5,830.4 4,757.5Royalties 59.4 41.3 160.8 153.7Other revenues 16.0 4.3 30.9 23.1Total revenues 1,576.1 1,326.0 6,022.1 4,934.3 Costs and expenses:Cost of product sales 218.5 178.6 979.3 670.8R&D(1) 241.5 230.1 1,067.5 933.4SG&A(1) 576.4 453.3 2,025.8 1,651.3Goodwill impairment charge - - - 7.1Gain on sale of productrights (2.0) (1.3) (88.2) (15.9)Reorganization costs 57.5 41.0 180.9 88.2Integration and acquisitioncosts 3.0 (174.0) 158.8 (134.1)Total operating expenses 1,094.9 727.7 4,324.1 3,200.8 Operating income fromcontinuing operations 481.2 598.3 1,698.0 1,733.5 Interest income 1.9 0.5 24.7 2.1Interest expense (5.1) (10.6) (30.8) (38.1)Other (expense)/income, net (5.9) (2.3) 8.9 (3.9)Receipt of break fee 1,635.4 - 1,635.4 - Income from continuingoperations before incometaxes and equity inearnings/(losses) of equitymethod investees 2,107.5 585.9 3,336.2 1,693.6Income taxes (120.8) (42.6) (56.1) (277.9)Equity in earnings/(losses)of equity method investees,net of taxes (1.1) 3.3 2.7 3.9Income from continuingoperations, net of tax 1,985.6 546.6 3,282.8 1,419.6Gain/(loss) fromdiscontinued operations, netof taxes 186.7 (482.6) 122.7 (754.5)Net income 2,172.3 64.0 3,405.5 665.1 (1) R&D includes intangible asset impairment charges of $190.3 million for theyear to December 31, 2014 (2013: $19.9 million). SG&A costs includeamortization charges of intangible assets relating to intellectual propertyrights acquired of $61.9 million for the three months to December 31, 2014(2013: $45.5 million) and $243.8 million for the year to December 31, 2014(2013: $152.0 million). Unaudited US GAAP results for the three months and year to December 31, 2014Consolidated Statements of Income (continued) 3 months to December 31, Year to December 31, 2014 2013 2014 2013Earnings per Ordinary Share- basicEarnings from continuingoperations 338.3c 98.0c 559.6c 257.2cGain/(loss) fromdiscontinued operations 31.8c (86.5c) 20.9c (136.7c) Earnings per Ordinary Share- basic 370.1c 11.5c 580.5c 120.5c Earnings per ADS - basic 1,110.3c 34.5c 1,741.5c 361.5c Earnings per Ordinary Share- dilutedEarnings from continuingoperations 335.7c 93.4c 555.2c 245.3cGain/(loss) fromdiscontinued operations 31.6c (81.7c) 20.8c (127.8c) Earnings per Ordinary Share- diluted 367.3c 11.7c 576.0c 117.5c Earnings per ADS - diluted 1,101.9c 35.1c 1,728.0c 352.5c Weighted average number ofshares: Millions Millions Millions Millions Basic 586.9 558.0 586.7 552.0Diluted 591.4 590.6 591.3 590.3Unaudited US GAAP results for the three months and year to December 31, 2014Consolidated Statements of Cash Flows 3 months to December 31, Year to December 31, 2014 2013 2014 2013 $M $M $M $MCASH FLOWS FROM OPERATING ACTIVITIES: Net income 2,172.3 64.0 3,405.5 665.1Adjustments to reconcile net income to net cash provided byoperating activities: Depreciation and amortization 100.2 96.1 407.3 324.4 Share based compensation 18.7 22.2 97.0 77.4 Change in fair value of contingent consideration (11.6) (187.5) 14.7 (159.1) Impairment of intangible assets 2.3 - 190.3 19.9 Goodwill impairment charge - - - 198.9 Impairment of assets held for sale - 636.9 - 636.9 Write down of assets 0.3 50.4 14.3 58.2 Gain on sale of product rights (2.0) (1.4) (54.6) (15.9) Unwind of ViroPharma inventory fair value step-up 1.3 - 91.9 - Other, net (1.4) 11.7 15.1 8.3Movement in deferred taxes (77.4) (366.0) (14.3) (349.9)Equity in (earnings)/losses of equity method investees 1.1 (3.1) (2.7) (3.9)Changes in operating assets and liabilities: Decrease/(increase) in accounts receivable 26.0 66.9 (66.1) (148.3) Increase in sales deduction accrual 79.4 68.8 107.6 177.5 (Increase)/decrease in inventory (9.5) 3.3 (25.3) (36.6) Decrease/(increase) in prepayments and other assets 157.1 12.7 42.4 (60.9) Increase in accounts payable and other liabilities 98.1 135.3 5.3) 67.9Returns on investment from joint venture - - - 3.1Net cash provided by operating activities(A) 2,554.9 610.3 4,228.4 1,463.0 CASH FLOWS FROM INVESTING ACTIVITIES: Movements in restricted cash (0.3) (5.7) (32.6) (5.3)Purchases of subsidiary undertakings andbusinesses, net of cash acquired - - (4,104.4) (227.8)Purchases of non-current investments (0.3) (0.8) (23.1) (10.6)Purchases of PP&E (27.2) (46.7) (77.0) (157.0)Proceeds from short-term investments - - 57.8 -Proceeds from disposal of non-currentinvestments 0.2 3.5 21.5 12.1Proceeds received on sale of productrights 4.3 4.2 127.0 19.2Returns of investments - 5.4 - 5.4Other, net (1.1) - 0.2 3.1Net cash used in investing activities(B) (24.4) (40.1) (4,030.6) (360.9) Unaudited US GAAP results for the three months and year to December 31, 2014Consolidated Statements of Cash Flows (continued) 3 months to December 31, Year to December 31, 2014 2013 2014 2013 $M $M $M $M CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from revolving line of credit,long term and short term borrowings - - 2,310.8 -Repayment of revolving line of credit andshort term borrowings - - (1,461.8) -Repayment of debt acquired throughbusiness combinations - - (551.5) -Proceeds from ViroPharma call options - - 346.7 -Payment of dividend (21.6) (17.2) (121.2) (96.4)Payments to acquire shares under theshare buy-back program - (3.1) - (193.8)Payments to acquire shares by theEmployee Benefit Trust ("EBT") - - - (50.0)Excess tax benefit associated withexercise of stock options 2.3 3.9 39.7 13.4Proceeds from exercise of options 16.2 16.9 17.4 17.2Facility arrangement fee (6.8) (13.9) (10.2) (13.9)Contingent consideration payments (2.4) (2.8) (15.2) (14.1)Other, net (0.4) (0.9) (0.2) (7.0)Net cash (used in)/provided by financingactivities(C) (12.7) (17.1) 554.5 (344.6)Effect of foreign exchange rate changeson cash and cash equivalents (D) (3.1) 0.2 (9.3) (0.3)Net increase in cash and cashequivalents(A) +(B) +(C) +(D) 2,514.7 553.3 743.0 757.2Cash and cash equivalents at beginning ofperiod 467.7 1,686.1 2,239.4 1,482.2Cash and cash equivalents at end ofperiod 2,982.4 2,239.4 2,982.4 2,239.4 Unaudited US GAAP results for the three months and year to December 31, 2014 Selected Notes to the Financial Statements (1) Earnings Per Share ("EPS") 3 months to December 31, Year to December 31, 2014 2013 2014 2013 $M $M $M $M Income from continuingoperations 1,985.6 546.6 3,282.8 1,419.6Gain/(loss) from discontinuedoperations 186.7 (482.6) 122.7 (754.5) Numerator for basic EPS 2,172.3 64.0 3,405.5 665.1Interest on convertiblebonds, net of tax - 5.4 - 28.3 Numerator for diluted EPS 2,172.3 69.4 3,405.5 693.4 Weighted average number ofshares: Millions Millions Millions MillionsBasic(1) 586.9 558.0 586.7 552.0Effect of dilutive shares:Share based awards toemployees(2) 4.5 4.9 4.6 4.8Convertible bonds(3) - 27.7 - 33.5 Diluted 591.4 590.6 591.3 590.3(1) Excludes shares purchased by the EBT and under the share buy-back programand presented by Shire as treasury stock. (2) Calculated using the treasury stock method. (3) Calculated using the "if converted" method. The share equivalents not included in the calculation of the diluted weightedaverage number of shares are shown below: 3 months to December 31, Year to December 31, 2014 2013 2014 2013 Millions Millions Millions MillionsShare based awards toemployees(1) 0.3 0.5 0.3 0.5(1) Certain stock options have been excluded from the calculationof diluted EPS because (a) their exercise prices exceeded Shire's averageshare price during the calculation period or (b) the required performanceconditions were not satisfied as at the balance sheet date. Unaudited US GAAP results for the year to December 31, 2014 Selected Notes to the Financial Statements (2) Analysis of revenues Year to December 31, 2014 2013 2014 2014 % % of total $M $M change revenueNet product sales:VYVANSE 1,449.0 1,227.8 18% 24%LIALDA/MEZAVANT 633.8 528.9 20% 11%ELAPRASE 592.8 545.6 9% 10%CINRYZE 503.0 - n/a 8%REPLAGAL 500.4 467.9 7% 8%ADDERALL XR 383.2 375.4 2% 6%VPRIV 366.7 342.7 7% 6%FIRAZYR 364.2 234.8 55% 6%INTUNIV 327.2 334.9 -2% 5%PENTASA 289.7 280.6 3% 5%FOSRENOL 183.0 183.4 0% 3%XAGRID 108.5 99.4 9% 2%Other product sales 128.9 136.1 -5% 2%Total product sales 5,830.4 4,757.5 23% 97% Royalties:FOSRENOL 51.4 48.1 7% 1%3TC and ZEFFIX 33.9 46.7 -27% 1%ADDERALL XR 28.9 27.6 5%