Strong start to 2014 and full year guidance increased

Shire delivers a strong start to 2014 and increases full year guidance May 1, 2014 - Shire (LSE: SHP, NASDAQ: SHPG) announces unaudited results forthe three months to March 31, 2014. Financial Highlights Q1 2014 Growth(1) Product sales $1,308 +19% million Total revenues $1,347 +18% million Non GAAP operating income $591 million +40% US GAAP operating income from continuing $307 million -15%operations Non GAAP diluted earnings per ADS $2.36 +38% US GAAP diluted earnings per ADS $1.17 +218% Non GAAP cash generation $331 million +29% Non GAAP free cash flow $231 million +104% US GAAP net cash provided by operating $246 million +53%activities (1) Percentages compare to equivalent 2013 period. The 2013 comparatives inthis release have been recast to exclude the DERMAGRAFT® business fromcontinuing operations following its divestment on January 17, 2014. The Non GAAP financial measures included within this release are explained onpage 22, and are reconciled to the most directly comparable financial measuresprepared in accordance with US GAAP on pages 19 - 21. Flemming Ornskov, M.D., Shire's Chief Executive Officer, commented: "I'm pleased with our strong first quarter results. Our sharpened strategy, theaddition of CINRYZE from the ViroPharma acquisition and our continued focus onoperational discipline have all contributed to this strong financialperformance and our ability to drive further future growth. We have multipledrivers of growth within our portfolio. Sales in ADHD were driven by strong performance of VYVANSE (up 18%). Our USprescription growth was in line with the overall market growth. We believe wecan significantly increase our Neuroscience revenue through developing atreatment option in the growing adult market, expanding our international salesand progressing a potential new indication in Binge Eating Disorder. LIALDA continues to grow (up 28%) and has very positive sales and prescriptionmomentum, carrying on the outstanding performance from 2013 with total USprescriptions up 33% on the prior year and an increase in market share of eightpercentage points in the past twelve months. Our Rare Diseases products delivered good sales growth this quarter; we'repleased with FIRAZYR's strong performance (up 80%) and the $86 millioncontribution to product sales from CINRYZE in the first two months since theViroPharma acquisition closed. The integration of ViroPharma is progressing well and we are on target todeliver the previously estimated cost synergies by the end of 2015. We're excited about the growing value in our innovative pipeline. We'll shortlybe meeting with the FDA to determine our next steps with lifitegrast. Wecontinue to advance our intrathecal enzyme replacement therapy program for rarepediatric CNS diseases. In addition, the ViroPharma acquisition brought us thePhase 2 program for maribavir, an investigational treatment under developmentfor cytomegalovirus infection in transplant patients, as well as severalpotential new uses for CINRYZE. And, our acquisition of Fibrotech adds FT011, asmall molecule targeting an innovative, novel mechanism of action, currently ina Phase 1B study in patients with renal impairment, and a Phase 2 study inpatients with FSGS, a rare kidney disease, is planned. Our strong financial performance and business progress this quarter gives usthe confidence to increase our guidance for the full year 2014 and we nowexpect to deliver Non GAAP earnings per ADS growth in the mid-to-high twentypercent range." FINANCIAL SUMMARY First Quarter 2014 Unaudited Results Q1 2014 Q1 2013 US GAAP Adjustments Non GAAP US GAAP Adjustments Non GAAP $M $M $M $M $M $M Total 1,347 - 1,347 1,143 - 1,143revenues Operating 307 284 591 362 59 421income Diluted $1.17 1.19 $2.36 $0.37 $1.35 $1.72earningsper ADS * Product sales grew strongly in Q1 2014 (up 19% to $1,308 million from $1,098 million in Q1 2013). Product sales in Q1 2014 included $93 million for products acquired with ViroPharma Incorporated ("ViroPharma"), including $86 million from CINRYZE®. The inclusion of ViroPharma contributed eight percentage points to our reported product sales growth. Excluding products acquired with ViroPharma, product sales grew 11%, driven byVYVANSE® (up 18% to $351 million), LIALDA®/MEZAVANT® (up 28% to $129 million),ELAPRASE® (up 13% to $129 million) and FIRAZYR® (up 80% to $75 million). * Total revenues were up 18% to $1,347 million (Q1 2013: $1,143 million), with the growth in product sales being partially offset by lower royalties and other revenues (down 14%). * On a Non GAAP basis: Operating income grew strongly in Q1 2014, up 40% to $591 million (Q1 2013:$421 million) due to higher total revenues (up 18%) and lower combined Researchand Development ("R&D") and Selling, General and Administrative ("SG&A") costs(down 3%). R&D costs were down 13% following the completion of several largePhase 3 programs since Q1 2013 including new uses for LDX(), the effect ofportfolio prioritization decisions taken during 2013 and lower overheads due tothe One Shire reorganization, partially offset by the inclusion of ViroPharma R&D costs. SG&A costs increased by 4%, an increase wholly attributable to theinclusion of ViroPharma SG&A costs for the first time in Q1 2014. On a US GAAP basis (from continuing operations): Operating income was down 15% to $307 million (Q1 2013: $362 million), as Q12014 included an impairment charge of $166 million in respect of our in-processR&D ("IPR&D") intangible asset for SHP602, higher intangible asset amortizationcharges and the unwind of the inventory fair value step-up resulting from theViroPharma acquisition. Combined R&D and SG&A was up 29% with R&D up 63% and SG&A up 10% as compared with Q1 2013. * Non GAAP diluted earnings per American Depository Share ("ADS") increased 38% to $2.36 (Q1 2013: $1.72) primarily due to the higher Non GAAP operating income. On a US GAAP basis, diluted earnings per ADS increased 218% to $1.17 (Q1 2013:$0.37), as lower losses from discontinued operations (Q1 2013 included goodwillimpairment charges of $192 million) more than offset lower US GAAP operatingincome from continuing operations. * Cash generation, a Non GAAP measure, was up 29% to $331 million (Q1 2013: $257 million). Higher cash receipts from product sales were partially offset by higher payments for sales deductions, the One Shire reorganization and the costs related to the acquisition and integration of ViroPharma. Free cash flow, also a Non GAAP measure, was up 104% to $231 million (Q1 2013:$113 million) due to higher cash generation and lower cash tax and capitalexpenditure payments in the quarter. On a US GAAP basis, net cash provided by operating activities was up 53% to$246 million (Q1 2013: $160 million). * Net debt, also a Non GAAP measure, at March 31, 2014 was $1,413 million (December 31, 2013: net cash of $2,231 million). On a US GAAP basis, cash and cash equivalents were $139 million at March 31,2014 (December 31, 2013: $2,239 million). OUTLOOK Reflecting our strong start to the year, we are increasing our guidance for NonGAAP earnings per ADS to mid-to-high twenty percent growth for the full year2014, (previous guidance: growth at a similar level to 2013) (2013: up 23%).This guidance reflects the contribution from the ViroPharma acquisition for theeleven months post closing. We expect our operating costs to continue to benefit from our reorganizationefforts and the focus on operational discipline shown in the first quarter. Asa result we now anticipate combined Non GAAP R&D and SG&A to grow by 4-6%compared to 2013 (previous guidance: growth of 6-8%). We expect to see higher Combined Non GAAP R&D and SG&A in the remainingquarters of 2014 than seen in the first quarter, as we continue to investbehind our pipeline and new acquisitions, including Fibrotech Therapeutics PtyLtd ("Fibrotech"). The balance of the year will also see us increase ourcommercial spending on the preparation for the anticipated launch of SHP465 inthe US and XAGRID in Japan, Binge Eating Disorder disease awareness investmentsand the continued international expansion of VYVANSE. All other elements of our guidance remain unchanged, and we continue to expect: * Full year 2014 product sales growth in the mid-to-high teens. * Royalties and other revenues to be 10-15% lower than 2013. * Non GAAP gross margin to be approximately 1 percentage point lower than in 2013, due to slight dilution from ViroPharma. * Net interest expense to be at a similar level to 2013. * Core effective tax rate on Non GAAP income in the range of 18-20%. Taken together, we are increasing our guidance for the full year 2014 and wenow expect to deliver Non GAAP earnings per ADS growth in the mid-to-hightwenty percent range. FIRST QUARTER 2014 AND RECENT PRODUCT AND PIPELINE DEVELOPMENTS Products INTUNIV® - for the treatment of Attention Deficit Hyperactivity Disorder("ADHD") in children/adolescents * On March 27, 2014 Shire announced the acceptance of submission of a Marketing Authorization Application by the European Medicines Agency for its once-daily, non-stimulant guanfacine extended release product for the treatment of ADHD in children/adolescents aged 6-17 years. Pipeline Shire continues to invest in its valuable pipeline, which now includes manyexciting potential products. Following the completion of the acquisition ofViroPharma in January which added a number of new programs, Shire believes itwill be helpful this quarter to provide a more detailed than usual summary ofthe developments in its pipeline: SHP465 for the treatment of ADHD * SHP465 (mixed salts of a single entity amphetamine) capsules provide an extended-release of amphetamines to provide coverage of ADHD symptoms for adults throughout the day. Based on the US Food and Drug Administration ("FDA") feedback received on April 25, 2014, Shire is planning to resubmit the SHP465 New Drug Application ("NDA") as a Class 2 resubmission with a six month FDA review time. SHP465, if approved, will be a once daily, product designed to treat ADHD in adults, with statistically significant endpoints at 16 hours post-dose (statistically significant endpoints in clinical trials beginning at the 4-hour time point). SHP 606 lifitegrast for the treatment of Dry Eye disease * Shire continues to evaluate the lifitegrast clinical program in whole, examining the totality of evidence and will engage in a pre-NDA meeting with FDA regarding next steps. The totality of data encompasses all efficacy studies conducted to date, one Phase 2 study and two Phase 3 studies (OPUS-1 and OPUS-2, with top-line results announced in the fourth quarter of 2013). On April 30, 2014 Shire announced top-line results from the prospective,randomized, double-masked, placebo-controlled SONATA trial which indicated noocular or drug-related serious adverse events. The safety data indicated in theSONATA trial was entirely consistent with that observed in the Phase 2, OPUS-1and OPUS-2 studies. Additional data and analyses will be submitted forpresentation at upcoming medical meetings. CINRYZE life cycle management and new uses * Shire is pursuing additional new formulations of CINRYZE for routine prophylaxis against Hereditary Angioedema ("HAE") attacks in adolescent and adult patients. Shire plans to initiate discussions with FDA in H2 2014 to determine the appropriate path forward. In addition, Shire is further considering opportunities to pursue additional therapeutic indications that may involve the C1 Inhibitor. SHP620 maribavir for the treatment of cytomegalovirus ("CMV") infection intransplant patients * Shire is currently conducting two Phase 2 studies in transplant recipients, both of which are fully enrolled. The first is a 160 patient trial in first-line treatment of asymptomatic CMV in transplant recipients. The second is a 120 patient trial for the treatment of resistant/refractory CMV infection/disease in transplant recipients. Preliminary results are expected in the first half of 2015. SHP602 - for the treatment of Iron Overload * In March 2014, the SHP602 Phase 2 trial in pediatric and adult patients with transfusion iron overload was placed on clinical hold as Shire evaluates nonclinical toxicology findings. The potential relevance of these findings to humans, if any, is unknown, however this assessment will lead to a delay that will impact the commercial value of this program. Following our decision to put the current trial on clinical hold, an impairment charge relating to the IPR&D intangible asset has been recorded in Q1 2014. OTHER DEVELOPMENTS Proposed acquisition of Fibrotech * On May 1, 2014 Shire entered into a definitive agreement to acquire Fibrotech, a privately held, biotechnology company focused on the development of small molecules for the treatment of renal diseases and fibrosis. The acquisition of Fibrotech strengthens our growing and innovative portfolio targeting renal and fibrotic diseases, and leverages our existing renal capabilities. Shire will make an upfront payment of $75 million and additional contingent payments based on the achievement of development and regulatory milestones. The closing of the acquisition is subject to customary conditions, including approval of Australia's Foreign Investment Review Board. FT011, the lead molecule, targets an innovative, novel and previously undescribed mechanism of action, which completed a Phase 1A study in healthy volunteers and is currently in a Phase 1B study in patients with renal impairment. The first Phase 2 study is planned to enroll patients with Focal Segmental Glomerulosclerosis (FSGS), a rare fibrotic kidney disease with high unmet medical need. Shire will also explore the application of this technology in other potential fibrotic conditions. Given recent advancements in the scientific understanding of fibrosis, as well as the development of biomarkers to aid in clinical development, it is an exciting time to expand our interest in anti-fibrotic agents with a clinical stage candidate as well as a library of additional novel molecules. Transfer of CALCICHEW® product rights * In Q1 2014 Shire transferred the marketing authorizations for the CALCICHEW range of products in the UK and Ireland to Takeda Pharmaceutical Company Limited. From January 1, 2014 Shire no longer recognizes product sales from CALCICHEW. In addition in Q1 2014, Shire sold certain CALCICHEW trade marks to Takeda Nycomed AS ("Takeda") for cash proceeds of $43.5 million and recognized a gain for the same amount. ADDITIONAL INFORMATION The following additional information is included in this press release: Page Overview of First Quarter 2014 Financial Results 7 Financial Information 11 Non GAAP Reconciliation 19 Notes to Editors 21 Safe Harbor Statement 22 Explanation of Non GAAP Measures 22 Trade Marks 23 For further information please contact: Investor Relations - Eric Rojas [email protected] +1 781 482 0999 - Sarah Elton-Farr [email protected] +44 1256 894 157 Media - Jessica Mann [email protected] +44 1256 894 280 - Gwen Fisher [email protected] +1 484 595 9836 Dial in details for the live conference call for investors at 14:00 BST / 09:00EDT on May 1, 2014: 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 here Password/Conf ID: 22580956# Live Webcast: Click here The quarterly earnings presentation will be available today at 12:00 BST / 07:00 EDT on: - Shire.com Investors section - Shire's IR Briefcase in the iTunes Store OVERVIEW OF FIRST QUARTER 2014 FINANCIAL RESULTS 1. Product sales For the three months to March 31, 2014 product sales increased by 19% to $1,308million (Q1 2013: $1,098 million) and represented 97% of total revenues (Q12013: 96%). Year on year US Exit Market growth Share(2) Product Sales $M Sales Non GAAP US Rxsales CER(1) (2) VYVANSE 351.2 +18% +18% +3% 16% LIALDA/ 128.9 +28% +29% +33% 30%MEZAVANT ELAPRASE 128.6 +13% +14% n/a n/a (3) (3) REPLAGAL® 114.3 +0% +2% n/a n/a (4) (4) VPRIV® 86.9 +6% +7% n/a n/a (3) (3) CINRYZE 85.6 n/a n/a n/a n/a (3) (3) ADDERALL 85.1 -15% -14% -2% 5%XR® INTUNIV 82.3 +6% +6% +3% 4% FIRAZYR 74.9 +80% +79% n/a n/a (3) (3) PENTASA® 72.3 +2% +2% -1% 13% OTHER 98.0 -1% -3% n/a n/a Total 1,308.1 +19% +20% 1. On a Constant Exchange Rate ("CER") basis, which is a Non GAAP measure. 2. Data provided by IMS Health National Prescription Audit ("IMS NPA") relates solely to US-based prescriptions. Growth rates have been calculated based on the restated 2013 data issued by IMS on February 12, 2014. Exit market share represents the average monthly US market share in the month ended March 31, 2014. 3. IMS NPA Data not available. 4. Not sold in the US in Q1 2014. VYVANSE - ADHD VYVANSE product sales showed strong growth (up 18%) in Q1 2014 compared to Q12013 due to price increases taken since Q1 2013 and to a lesser extent higherprescription demand. The benefit of these positive factors was partially offsetby destocking in Q1 2014. LIALDA/MEZAVANT - Ulcerative Colitis Product sales for LIALDA/MEZAVANT in Q1 2014 were up 28% primarily due tohigher US prescription demand (up 33%), as LIALDA reached a US exit marketshare of 30%, and to a lesser extent the effect of a price increase taken sinceQ1 2013. These positive factors were partially offset by higher salesdeductions as a percentage of product sales as compared to Q1 2013 andapproximately $10 million of destocking in Q1 2014. ELAPRASE - Hunter syndrome ELAPRASE product sales in Q1 2014 were up 13% compared to Q1 2013 driven bycontinued growth in the number of treated patients. REPLAGAL - Fabry disease REPLAGAL sales were flat compared to Q1 2013 as slight volume growth was offsetby lower pricing. We continue to see good growth in emerging markets and steadyvolume demand in Europe. VPRIV - Gaucher disease VPRIV product sales in Q1 2014 were up 6% compared to Q1 2013 driven bycontinued growth in the number of treated patients. CINRYZE - for the prophylactic treatment of HAE Shire acquired CINRYZE through its acquisition of ViroPharma on January 24,2014 and CINRYZE achieved product sales of $85.6 million in the first twomonths post acquisition. On a proforma basis CINRYZE grew 16% on Q1 2013 primarily drivenby an increase in the number of patients on therapy. ADDERALL XR - ADHD ADDERALL XR product sales decreased (down 15%) in Q1 2014 primarily due toslightly lower demand and higher sales deductions as a percentage of sales ascompared to Q1 2013. Market share has remained relatively stable over the pastsix months and we expect ADDERALL XR to remain competitive in its market. INTUNIV - ADHD The growth in INTUNIV product sales (up 6%) in Q1 2014 was driven by acombination of price increases taken since Q1 2013 and higher US prescriptiondemand. The benefit of these positive factors was offset by higher salesdeductions as a percentage of product sales in Q1 2014. FIRAZYR - for the treatment of acute HAE attacks FIRAZYR product sales growth (up 80%) was primarily due to growth in patientson therapy, the effect of a price increase and a higher number of treatedattacks particularly in the US market. PENTASA - Ulcerative Colitis PENTASA product sales (up 2%) benefited from higher stocking compared to Q12013, partially offset by higher sales deductions as a percentage of productsales in Q1 2014 as compared to Q1 2013. 2. Royalties Year on year growth Product Royalties to Shire Royalties CER $M FOSRENOL® 1.00 12.8 +42% +42% ADDERALL XR 1.00 9.0 +11% +11% 3TC® and ZEFFIX 1.00 7.5 -40% -40%® Other 1.00 3.0 -66% -66% Total 1.00 32.3 -16% -16% Royalties from ADDERALL XR in Q1 2014 benefited from royalties received fromTeva Pharmaceuticals Inc. ("Teva"). Shire will not receive royalties from Tevaafter Q1 2014. 3. Financial details Cost of product sales Q1 % of product Q1 % of product 2014 sales 2013 sales $M $M Cost of product sales (US GAAP) 229.5 18% 147.4 13% Unwind of ViroPharma inventory (38.8) -fair value step-up Depreciation (10.2) (7.1) Cost of product sales (Non GAAP) 180.5 14% 140.3 13% Non GAAP cost of product sales as a percentage of product sales increasedmarginally in Q1 2014 reflecting the inclusion of CINRYZE. US GAAP cost of product sales as a percentage of product sales was fivepercentage points higher than the same period in 2013, as Q1 2014 includedcharges of $38.8 million on the unwind of the fair value adjustment on acquiredViroPharma inventories. R&D Q1 2014 % of product Q1 % of product sales 2013 sales $M $M R&D (US GAAP) 360.5 28% 220.6 20% Impairment of intangible (166.0) -assets Depreciation (5.8) (4.6) R&D (Non GAAP) 188.7 14% 216.0 20% Non GAAP R&D decreased by $27.3 million, or 13% in Q1 2014, following thecompletion of several large Phase 3 programs since Q1 2013 including new usesfor LDX, the effect of portfolio prioritization decisions taken during 2013 andlower overheads due to the One Shire reorganization, partially offset by theinclusion of ViroPharma R&D costs. US GAAP R&D increased by $139.9 million, or 63%, as Q1 2014 included impairmentcharges relating to the SHP602 IPR&D intangible asset currently on clinicalhold. SG&A Q1 % of product Q1 % of product 2014 sales 2013 sales $M $M SG&A (US GAAP) 430.3 33% 391.7 36% Intangible asset (57.8) (36.1)amortization Legal and litigation costs (1.7) (1.6) Depreciation (20.8) (16.1) SG&A (Non GAAP) 350.0 27% 337.9 31% Non GAAP SG&A increased by $12.1 million, or 4%, an increase whollyattributable to the inclusion of ViroPharma SG&A costs for the first time in Q12014. SG&A as a percentage of product sales decreased compared to Q1 2013 as webenefited from the One Shire reorganization and the focus on operationaldiscipline in Q1 2014. US GAAP SG&A increased by $38.6 million, or 10%, as compared to Q1 2013. Gain on sale of product rights For the three months to March 31, 2014 Shire recorded a net gain on sale ofproduct rights of $36.4 million (2013: $6.5 million), primarily a gain of $43.5million on the sale of certain CALCICHEW trade marks to Takeda, partiallyoffset by the re-measurement of the contingent consideration receivable fromthe divestment of DAYTRANA®. Reorganization costs For the three months to March 31, 2014 Shire recorded reorganization costs of$49.4 million (Q1 2013: $17.5 million), which in 2014 related to the One Shirereorganization as we implement our new operating structure. Integration and acquisition costs For the three months to March 31, 2014 Shire recorded net charges forintegration and acquisition costs of $6.6 million. This net charge includescosts of $65.8 million related to the acquisition and integration ofViroPharma, partially offset by a net credit of $59.2 million relating to thechange in fair values of contingent consideration liabilities, principally acredit of $71.9 million relating to the release of contingent considerationliabilities in respect of the acquisition of FerroKin Biosciences, Inc.("FerroKin"). In Q1 2013 integration and acquisition costs ($4.1 million) primarily relatedto the acquisition of Lotus Tissue Repair inc. ("Lotus") and the integration ofFerroKin. Interest expense For the three months to March 31, 2014 Shire incurred interest expense of $7.8million (Q1 2013: $9.2 million). Interest expense in Q1 2014 primarily relatedto interest and amortization of issue costs incurred on borrowings to fund theViroPharma acquisition. Interest expense in Q1 2013 principally related to thecoupon and amortization of issue costs on Shire's convertible bonds which werefully redeemed or converted in Q4 2013. Taxation The effective rate of tax on Non GAAP income in Q1 2014 was 20% (Q1 2013: 20%),and on a US GAAP basis the effective rate of tax was 17% (Q1 2013: 20%). The effective rate of tax in Q1 2014 on US GAAP income from continuingoperations is lower than the same period in 2013 primarily due to the impact ofchanges in the fair value of contingent consideration liabilities and the gainon sale of product rights which have no tax effect. Discontinued operations The loss from discontinued operations for the three months to March 31, 2014was $22.7 million net of tax (2013: $216.2 million), primarily relating tocosts associated with the divestment of the DERMAGRAFT business. The loss fromdiscontinued operations in Q1 2013 primarily related to the goodwill impairmentof the former Regenerative Medicine Business Unit ($191.8 million) and otheroperating losses of the DERMAGRAFT business. FINANCIAL INFORMATION TABLE OF CONTENTS Page Unaudited US GAAP Consolidated Balance Sheets 12 Unaudited US GAAP Consolidated Statements of Income 13 Unaudited US GAAP Consolidated Statements of Cash 15Flows Selected Notes to the Unaudited US GAAP FinancialStatements (1) Earnings per share 17 (2) Analysis of revenues 18 Non GAAP reconciliation 19 Unaudited US GAAP financial position as of March 31, 2014Consolidated Balance Sheets March 31, December 31, 2014 2013 $M $M ASSETS Current assets: Cash and cash equivalents 139.1 2,239.4 Restricted cash 32.3 22.2 Accounts receivable, net 1,091.2 961.2 Inventories 637.4 455.3 Assets held for sale - 31.6 Deferred tax asset 392.1 315.6 Prepaid expenses and other current assets 350.3 263.0 Total current assets 2,642.4 4,288.3 Non-current assets: Investments 35.2 31.8 Property, plant and equipment ("PP&E"), net 884.0 891.8 Goodwill 2,070.1 624.6 Other intangible assets, net 5,103.4 2,312.6 Deferred tax asset 145.5 141.1 Other non-current assets 89.7 32.8 Total assets 10,970.3 8,323.0 LIABILITIES AND EQUITY Current liabilities: Accounts payable and accrued expenses 1,765.2 1,688.4 Short term borrowings 671.3 - Other current liabilities 83.5 119.5 Total current liabilities 2,520.0 1,807.9 Non-current liabilities: Long term borrowings 850.0 - Deferred tax liability 1,295.5 560.6 Other non-current liabilities 659.0 588.5 Total liabilities 5,324.5 2,957.0 Equity: Common stock of 5p par value; 1,000 million 58.6 58.6shares authorized; and 597.9 million sharesissued and outstanding (2013: 1,000 millionshares authorized; and 597.5 million sharesissued and outstanding) Additional paid-in capital 4,233.0 4,186.3 Treasury stock: 12.0 million shares (2013: 13.4 (381.7) (450.6)million) Accumulated other comprehensive income 112.8 110.2 Retained earnings 1,623.1 1,461.5 Total equity 5,645.8 5,366.0 Total liabilities and equity 10,970.3 8,323.0 Unaudited US GAAP results for the three months to March 31, 2014Consolidated Statements of Income 3 months to March 31, 2014 2013 $M $M Revenues: Product sales 1,308.1 1,098.2 Royalties 32.3 38.5 Other revenues 6.4 6.7 Total revenues 1,346.8 1,143.4 Costs and expenses: Cost of product sales 229.5 147.4 R&D(1) 360.5 220.6 SG&A(1) 430.3 391.7 Goodwill impairment charge - 7.1 Gain on sale of product rights (36.4) (6.5) Reorganization costs 49.4 17.5 Integration and acquisition costs 6.6 4.1 Total operating expenses 1,039.9 781.9 Operating income from continuing operations 306.9 361.5 Interest income 0.5 0.7 Interest expense (7.8) (9.2) Other income/(expense), net 4.7 (1.0) Total other expense, net (2.6) (9.5) Income from continuing operations before 304.3 352.0income taxes and equity in (losses)/earningsof equity method investees Income taxes (50.6) (71.4) Equity in (losses)/earnings of equity method (0.6) 0.4investees, net of taxes Income from continuing operations, net of tax 253.1 281.0 Loss from discontinued operations, net of tax (22.7) (216.2) Net income 230.4 64.8 1. R&D costs include impairment of IPR&D intangible asset of $166.0 million for the three months to March 31, 2014 (2013: $nil). SG&A costs include amortization of intangible assets relating to intellectual property rights acquired of $57.8 million for the three months to March 31, 2014 (2013: $36.1 million). Unaudited US GAAP results for the three months to March 31, 2014Consolidated Statements of Income (continued) 3 months to March 31, 2014 2013 Earnings per ordinary share - basic Earnings from continuing operations 43.3c 51.0c Loss from discontinued operations (3.9c) (39.2c) Earnings per ordinary share - basic 39.4c 11.8c Earnings per ADS - basic 118.2c 106.2c Earnings per ordinary share - diluted Earnings from continuing operations 43.0c 49.0c Loss from discontinued operations (3.9c) (36.7c) Earnings per ordinary share - diluted 39.1c 12.3c Earnings per ADS - diluted 117.3c 36.9c Weighted average number of shares: Millions Millions Basic 584.3 551.5 Diluted 588.8 588.9 Unaudited US GAAP results for the three months to March 31, 2014Consolidated Statements of Cash Flows 3 months to March 31, 2014 2013 $M $M CASH FLOWS FROM OPERATING ACTIVITIES: Net income 230.4 64.8 Adjustments to reconcile net income to net cashprovided by operating activities: Depreciation and amortization 96.5 75.0 Share based compensation 26.2 16.6 Change in fair value of contingent (59.2) 1.8 consideration Goodwill impairment charge - 198.9 Unwind of ViroPharma inventory fair value 38.8 - step-up Impairment of IPR&D intangible assets 166.0 - Impairment of Property Plant and Equipment 12.1 ("PP&E") Gain on sale of product rights (36.4) (6.5) Other, net (2.2) 0.1 Movement in deferred taxes 18.5 1.4 Equity in losses/(earnings) of equity method 0.6 (0.4)investees Changes in operating assets and liabilities: Increase in accounts receivable (77.3) (51.3) Increase in sales deduction accrual 70.8 44.4 Increase in inventory (18.6) (29.1) Increase in prepayments and other assets (74.6) (61.8) Decrease in accounts and notes payable and (145.5) (93.5) other liabilities Net cash provided by operating activities(A) 246.1 160.4 CASH FLOWS FROM INVESTING ACTIVITIES: Movements in restricted cash (10.1) (2.2) Purchases of subsidiary undertakings and (3,764.4) (77.2)businesses, net of cash acquired Purchases of non-current investments and PP&E (15.6) (50.1) Proceeds from short-term investments 46.8 - Proceeds received on sale of product rights 48.0 4.8 Proceeds from capital expenditure grants - 2.7 Proceeds from disposal of non-current investments 8.0 0.7and PP&E Other, net (2.9) - Net cash used in investing activities(B) (3,690.2) (121.3) Unaudited US GAAP results for the three months to March 31, 2014Consolidated Statements of Cash Flows (continued) 3 months to March 31, 2014 2013 $M $M CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from revolving line of credit, long term 2,170.0 -and short term borrowings Repayment of revolving line of credit (650.2) - Repayment of debt acquired with ViroPharma (533.9) - Proceeds from ViroPharma call options 346.7 - Payments to acquire shares under the share - (70.6)buy-back program Contingent consideration payments (7.8) (6.0) Excess tax benefit associated with exercise of 20.5 4.4stock options Other, net 0.2 (0.7) Net cash provided by/(used in) financing 1,345.5 (72.9)activities(C) Effect of foreign exchange rate changes on cash (1.7) 2.3and cash equivalents(D) Net decrease in cash and cash equivalents(A) +(B) (2,100.3) (31.5)+(C) +(D) Cash and cash equivalents at beginning of period 2,239.4 1,482.2 Cash and cash equivalents at end of period 139.1 1,450.7 Unaudited US GAAP results for the three months to March 31, 2014 Selected Notes to the Financial Statements (1) Earnings Per Share ("EPS") 3 months to March 31, 2014 2013 $M $M Income from continuing operations 253.1 281.0 Loss from discontinued operation (22.7) (216.2) Numerator for basic EPS 230.4 64.8 Interest on convertible bonds, net of tax - 7.6 Numerator for diluted EPS 230.4 72.4 Weighted average number of shares: Millions Millions Basic(1) 584.3 551.5 Effect of dilutive shares: Share based awards to employees(2) 4.5 3.8 Convertible bonds 2.75% due 2014(3) - 33.6 Diluted 588.8 588.9 1. Excludes shares purchased by the EBT and under the share buy-back program and 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 March 31, 2014 2013 No. of shares No. of shares Millions Millions Share based awards to employees(1) 0.8 5.6 1. Certain stock options have been excluded from the calculation of diluted EPS because (a) their exercise prices exceeded Shire's average share price during the calculation period or (b) the required performance conditions were not satisfied as at the balance sheet date. Unaudited US GAAP results for the three months to March 31, 2014 Selected Notes to the Financial Statements (2) Analysis of revenues 3 months to March 31, 2014 2013 2014 2014 % % of total $M $M change revenue Net product sales: VYVANSE 351.2 298.4 18% 26% LIALDA/MEZAVANT 128.9 100.5 28% 10% ELAPRASE 128.6 114.3 13% 10% REPLAGAL 114.3 114.0 0% 9% VPRIV 86.9 81.6 6% 6% CINRYZE 85.6 - n/a 6% ADDERALL XR 85.1 99.8 -15% 6% INTUNIV 82.3 77.7 6% 6% FIRAZYR 74.9 41.7 80% 6% PENTASA 72.3 71.0 2% 5% FOSRENOL 41.4 42.3 -2% 3% XAGRID® 27.1 23.4 16% 2% Other product sales 29.5 33.5 -12% 2% Total product sales 1,308.1 1,098.2 19% 97% Royalties: FOSRENOL 12.8 9.0 42%

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