DUBLIN, February 19, 2010 /PRNewswire-FirstCall/ -- Shire plc (LSE: SHP,
NASDAQ: SHPGY) the global specialty biopharmaceutical company, announces
results for the year to December 31, 2009.
(1) Percentages compare to equivalent 2008 periods.
(2) Core products represent Shire's products excluding ADDERALL XR.
Angus Russell, Chief Executive Officer, commented:
"In this challenging and transformational year for Shire, I believe these excellent results reflect the success of our focused strategy and business model.
Strong fourth quarter sales growth of 36% from our core product portfolio, supported by our increasing international reach, has contributed significantly to our full year Non GAAP diluted earnings per ADS of $3.49. Our recent decision to lower our best estimate of the Medicaid sales rebates for ADDERALL XR contributed 32 cents to these earnings, which was not previously anticipated in our guidance framework.
Our growth prospects remain excellent and our core product portfolio currently has robust exclusivity protection. We have launched INTUNIV successfully in the US, we plan to launch velaglucerase alfa (VPRIV) imminently, and there is also an opportunity for REPLAGAL to enter the US market. We have already seen encouraging signs for the future success of these three products. REPLAGAL has increased its share in ex-US markets and we expect this momentum to increase.
VYVANSE, our leading ADHD treatment with a current monthly US ADHD market share of 13.6%, continues to grow and build strong brand recognition in the US and has recently been launched in Canada. ADDERALL XR continues to generate value from both product sales and a considerable royalty stream.
We have also demonstrated a pro-active approach to cost management in 2009 as promised, and have the opportunity to leverage our existing infrastructure to deliver expanding margins in the future. We enter 2010 with a strong balance sheet and excellent cash generation. This will allow us to continue to expand our international presence and consider potential acquisitions and in-licensing opportunities that fit our strategy.
We look forward to growing revenues and earnings in 2010 and re-iterate our aspirational target of mid-teen revenue growth on average between 2009 and 2015."
The Non GAAP financial measures included in the tables above are explained on pages 27 and 28, and are reconciled to the most directly comparable financial measures prepared in accordance with US GAAP on pages 22 to 23 and 26 (full year) and pages 24 to 26 (Q4).
We enter 2010 with good momentum driven by the growth of our core product portfolio. 2010 will also benefit from the change in best estimate for ADDERALL XR rebates implemented in the fourth quarter of 2009 against a background of further erosion of the brand and the impact of adverse business mix trends.
In the first quarter of 2010 we expect our total revenues and Non GAAP diluted earnings per ADS to be lower than the same period in 2009, which was the last quarter before ADDERALL XR faced generic competition. For the balance of the year Shire expects to generate both total revenue growth and Non GAAP diluted earnings per ADS growth compared to 2009.
During 2010 we expect to see gross margins as a percentage of product sales at a similar level to 2009. We will further increase our focused investment in R&D and targeted investment will increase SG&A year on year. We expect a Non GAAP effective tax rate in 2010 at a similar level to 2009.
We look forward to growing both total revenues and reported Non GAAP diluted earnings per ADS in the full year 2010 compared to the excellent 2009 Non GAAP results and re-iterate our aspirational target of mid-teen revenue growth on average between 2009 and 2015.
PRODUCT LAUNCHES
Subject to obtaining the relevant regulatory/governmental approvals, product launches in 2010 will include:
The Non GAAP financial measures included above are explained on pages 27 and 28, and are reconciled to the most directly comparable financial measures prepared in accordance with US GAAP on pages 24 to 26.
For the six months to December 31, 2009 the Board has resolved to pay an interim dividend of 9.250 US cents per ordinary share (2008: 7.761 US cents per ordinary share).
Dividend payments will be made in Pounds Sterling to ordinary shareholders and in US Dollars to holders of American Depository Shares. A dividend of 5.910 pence per ordinary share (2008: 5.469 pence) and 27.750 US cents per ADS (2008: 23.283 US cents) will be paid on April 14, 2010 to persons whose names appear on the register of members of the Company at the close of business on March 12, 2010.
Together with the first interim payment of 2.147 US cents per ordinary share (2008: 2.147 US cents per ordinary share), this represents total dividends for 2009 of 11.397 US cents per ordinary share (2008: 9.908 US cents per ordinary share), an increase of 15% in US Dollar terms over 2008.
BOARD CHANGES
On December 23, 2009 Dr Michael Rosenblatt stepped down from the Shire Board as a non-executive director, following Dr Rosenblatt's appointment as Executive Vice President and Chief Medical Officer at Merck & Co., Inc. Matt Emmens, Chairman of Shire said "On behalf of the Shire Board, I would like to thank Michael for his contributions and we wish him well in his new position".
Dr Barry Price retired from the Shire Board as a non-executive director upon the completion of his term of office on January 24, 2010. Matt Emmens, Chairman of Shire said "On behalf of the Shire Board, I would like to thank Barry for his significant contributions over the past 14 years. Barry brought a wealth of expertise and experience to the Board and we wish him well for the future".
Sales of core products increased by 25% to $2,067.2 million (2008: $1,652.5 million), up 28% on a CER basis.
ELAPRASE - Hunter syndrome
The growth in sales of ELAPRASE was driven by increased volumes across all regions where ELAPRASE is sold. On a CER basis sales grew by 20% (66% of ELAPRASE sales are made outside of the US).
LIALDA/MEZAVANT - Ulcerative colitis
Strong product sales of LIALDA/MEZAVANT continued in the year to December 31, 2009 driven by an increase in market share over 2008, growth in the US oral mesalamine market and price increases taken during 2009.
PENTASA - Ulcerative colitis
Product sales of PENTASA continued to grow despite a decrease in US prescription demand in 2009 compared to 2008 due to the impact of price increases taken during 2009.
REPLAGAL - Fabry disease
The growth in REPLAGAL product sales in 2009 over 2008 was driven by a significant increase in demand in the fourth quarter of 2009 due to an acceleration of patients switching to REPLAGAL in the EU, attributable in part to supply shortages of a competitor product. Sales increased 16% on a CER basis (REPLAGAL is sold primarily in Euros and Pounds sterling).
FOSRENOL - Hyperphosphatemia
Product sales increased as FOSRENOL entered new countries and grew in existing markets outside the US. In the US, FOSRENOL sales grew despite lower prescriptions due to a price increase in 2009.
INTUNIV - ADHD
INTUNIV was launched in the US in November 2009. In line with Shire's revenue recognition policy for launch shipments, initial stocking shipments have been deferred and are being recognised into revenue in line with end-user prescription demand. At December 31, 2009 deferred revenues on the balance sheet represented gross sales of $38.8 million.
Other products
ADDERALL XR - ADHD
The launch by Teva and Impax of their authorised generic versions of ADDERALL XR led to the expected decline in 2009 of branded ADDERALL XR prescription demand, and resulted in higher US sales deductions in 2009 compared to 2008. These factors more than offset the positive impacts of price increases taken since the fourth quarter of 2008, and the inclusion in product sales of shipments of authorized generic ADDERALL XR to Teva and Impax in 2009.
Sales deductions represented 47% of branded ADDERALL XR gross sales in the year to December 31, 2009 compared to 25% in the same period in 2008, following higher Medicaid and Managed Care rebates subsequent to the authorized generic launches.
There are potentially different interpretations as to how shipments of authorized generic ADDERALL XR to Teva and Impax should be included in the Medicaid rebate calculation pursuant to Medicaid rebate legislation, including the Deficit Reduction Act of 2005 ("Medicaid rebate legislation"). As a result more than one unit rebate amount ("URA") is calculable for the purpose of determining Shire's Medicaid rebate liability to States after the authorized generic launch. During 2009 Shire highlighted the different interpretations to the Centers for Medicare and Medicaid Services, ("CMS") and submitted data to the CMS for the purpose of computing the URA, based on Shire's reasonable interpretation of the Medicaid rebate legislation and related guidance. The State Medicaid agencies have invoiced Shire for Medicaid rebates, and Shire has paid these Medicaid rebate invoices, based on this URA. Despite this CMS has the ability to subsequently challenge Shire's interpretation of the Medicaid rebate legislation, and require an alternative interpretation to be applied (both retrospectively and prospectively), which could result in a significantly higher Medicaid liability.
Throughout 2009 Shire's management has recorded its accrual for Medicaid rebates based on its best estimate of the rebate payable. For the first three quarters of 2009, Shire's management based this best estimate on an amount that Shire could pay were CMS to challenge Shire's interpretation and require an alternative interpretation of the Medicaid rebate legislation to be applied. In the fourth quarter of 2009, Shire's management lowered its best estimate of the Medicaid rebate payable down to be consistent with (i) Shire's interpretation of the Medicaid rebate legislation, (ii) Shire's repeated and consistent submission of price reporting to CMS using Shire's interpretation of the Medicaid rebate legislation, (iii) CMS calculating the URA based on that interpretation, (iv) States submitting Medicaid rebate invoices using this URA, and (v) Shire paying these invoices. This change of estimate increased ADDERALL XR product sales by $97.7 million in the fourth quarter of 2009 (of which $73.6 million related to ADDERALL XR product sales recognized in Q1-Q3 2009).
In determining its best estimate of the Medicaid rebate liability at December 31, 2009 Shire's management has considered a number of factors taken in combination (including the receipt of a further quarter's invoices from the States with a URA based on Shire's interpretation of the Medicaid rebate legislation and related guidance, and Shire's likely response were CMS to employ an alternative interpretation of the Medicaid rebate legislation). Any future change in Shire's interpretation which results in a change of estimate could significantly decrease sales of ADDERALL XR in the period of any such change in estimate.
Shire strongly believes that its interpretation of the Medicaid rebate legislation is reasonable and correct. However, CMS could disagree with Shire's interpretation, and require Shire to apply an alternative interpretation of the Medicaid rebate legislation and pay up to $210 million above the recorded liability. This would represent a URA substantially in excess of the unit sales price of ADDERALL XR and accordingly be in excess of the approximate amount of the full cost to the States of reimbursement for Medicaid prescriptions of ADDERALL XR. Should CMS take such an approach, Shire could seek to limit any additional payments to a level approximating the full, un-rebated cost to the States of ADDERALL XR, or $98 million above the recorded liability. Further, Shire believes it has a strong legal basis supporting its interpretation of the Medicaid rebate legislation, and that there would be a strong basis to initiate litigation to recover any amount paid in excess of its recorded liability. The result of any such litigation cannot be predicted and could result in additional rebate liability above Shire's current best estimate.
Royalties were received on Teva's sales of an authorized generic version of ADDERALL XR between April and September 2009, and on Impax's sales of its authorized generic version of ADDERALL XR from October 2009.
Other royalties are received primarily on worldwide (excluding UK and Republic of Ireland) sales of REMINYL(R) and REMINYL(R) XL (known as RAZADYNE(R) and RAZADYNE(R) ER in the US). Royalties on sales of these products decreased in 2009 to $47.7 million (2008: $63.5 million) due to generic competition in the US from August 2008.
Gain on sale of product rights
For the year to December 31, 2009 Shire recorded gains of $6.3 million (2008: $20.7 million) from the sale of non-core products to Laboratorios Almirall S.A. in 2007. These gains had been deferred since 2007 pending obtaining the relevant consents to transfer certain assets.
IPR&D
For the year to December 31, 2009, Shire recorded IPR&D charges of $1.6 million (2008: $128.1 million) relating to FIRAZYR in markets outside of the EU. In 2008 IPR&D also included a charge of $135.0 million relating to the acquisition of METAZYM from Zymenex A/S.
Reorganization costs
For the year to December 31, 2009 Shire recorded reorganization costs of $12.7 million (2008: $nil) relating to the transfer of manufacturing from its Owings Mills facility.
Integration and acquisition costs
For the year to December 31, 2009 Shire recorded integration and acquisition costs of $10.6 million (2008: $10.3 million), primarily relating to the integration of Jerini.
Interest income
For the year to December 31, 2009 Shire received interest income of $1.9 million (2008: $25.5 million), primarily earned on cash and cash equivalents. Interest income for the year to December 31, 2009 is lower than the same period in 2008 due to significantly lower interest rates in 2009 compared to 2008, and lower average cash and cash equivalent balances throughout the year.
Taxation
The effective rate of tax for the year to December 31, 2009 was 22% (2008: 37%). Excluding the impact of IPR&D charges of $263.1 million in 2008, which are either not tax deductable or for which no tax benefit is currently recognised, the effective rate of tax for 2008 was 19%. The effective tax rate on Non GAAP income is 25% (2008: 23%).
The Non GAAP effective rate of tax in 2009 is higher than 2008 due to increased profits in higher tax territories, together with the recognition of valuation allowances against certain EU and US deferred tax assets. These factors more than offset reductions to the Non GAAP effective rate of tax from the decrease in valuation allowances held in respect of US State tax credits and losses. In addition, the effect of the change in best estimate of ADDERALL XR Medicaid rebates increased the Non GAAP effective rate of tax by one percentage point in 2009.
Discontinued operations
The loss from discontinued operations for the year to December 31, 2009 was $12.4 million (2008: $17.6 million), relating to net losses on discontinued Jerini businesses which were either divested or closed during 2009.
(2) Promotional costs totaling $6.3 million and $32.3 million have been reclassified from Research and development to Selling, general and administrative costs for the three and twelve months to December 31, 2008 respectively.
Unaudited US GAAP results for the three months and year to December 31, 2009 Consolidated Statements of Operations (continued)
(3) Calculated using the treasury stock method.
The share equivalents not included in the calculation of the diluted weighted average number of shares are shown below:
(2) For the twelve month periods ended December 31, 2009 and 2008 the ordinary shares underlying the convertible bonds have not been included in the calculation of the diluted weighted average number of shares, because the effect of their inclusion would be anti-dilutive.
The following items are included in Adjustments:
(a) Amortization and asset impairments: Amortization of intangible assets relating to intellectual property rights acquired ($136.9 million) and tax effect of adjustment;
(b) Acquisitions and Integration activities: Inventory fair value adjustment related to the acquisition of Jerini ($1.9 million), payment on amendment of INTUNIV in-licence agreement ($36.9 million), IPR&D charge in respect of Jerini ($1.6 million), costs associated with the integration and acquisition of Jerini and EQUASYM ($10.6 million) and tax effect of adjustments;
(c) Divestments, reorganizations and discontinued operations: Accelerated depreciation ($12.0 million) and reorganization costs ($12.7 million) for the transition of manufacturing from Owings Mills, costs associated with agreement to terminate Women's Health products with Duramed ($62.9 million), gain on the disposal of non-core product rights ($6.3 million), gain on disposal of the investment in Virochem ($55.2 million), discontinued operations in respect of non-core Jerini operations ($12.4 million) and tax effect of adjustments; and
(d) Depreciation: Depreciation of $93.0 million included in Cost of product sales, R&D costs and SG&A costs for US GAAP separately disclosed for the presentation of Non GAAP earnings.
(2) The impact of convertible debt, net of tax has a dilutive effect on a Non GAAP basis.
The following items are included in Adjustments:
(a) Amortization and asset impairments: Amortization of intangible assets relating to intellectual property rights acquired ($126.2 million), impairment charge in respect of DYNEPO intangible asset ($94.6 million), impairment of other intangible assets ($2.5 million), other than temporary impairment of available for sale securities ($58.0 million), and tax effect of adjustments;
(b) Acquisitions & integration activities: Integration and transaction related costs in respect of the acquisition of Jerini ($10.3 million), IPR&D in respect of METAZYM acquired from Zymenex A/S ($135.0 million), IPR&D in respect of the acquisition of Jerini ($128.1 million), additional interest expense incurred on settlement of the TKT appraisal rights litigation ($73.0 million), and tax effect of adjustments;
(c) Divestments, reorganizations and discontinued operations: Costs associated with inventory write down and other exit costs in respect of DYNEPO ($48.8 million), R&D commitment in respect of DYNEPO ($6.5 million), costs associated with the introduction of a new holding company ($14.8 million), gains on the disposal of non-core assets ($20.7 million), gain on disposal of minority equity investment ($9.4 million), discontinued operations in respect of non-core Jerini operations ($17.6 million) and tax effect of adjustments; and
(d) Depreciation: Depreciation of $77.2 million included in Cost of product sales, R&D costs and SG&A costs for US GAAP separately disclosed for the presentation of Non GAAP earnings.
(a) Amortization and asset impairments: Amortization of intangible assets relating to intellectual property rights acquired ($35.3 million) and tax effect of adjustment;
(b) Acquisitions and integration activities IPR&D charge in respect of Jerini ($1.6 million); costs associated with the integration of Jerini ($0.6 million) and tax effect of adjustments;
(c) Divestments, reorganizations and discontinued operations: Accelerated depreciation ($4.5 million) and reorganization costs ($5.6 million) for the transfer of manufacturing from Owings Mills; release of accrual for costs associated with agreement to terminate Women's Health products with Duramed ($2.1 million) and tax effect of adjustments; and
(d) Depreciation: Depreciation of $23.0 million included in Cost of product sales, R&D costs and SG&A costs for US GAAP separately disclosed for the presentation of Non GAAP earnings.
The following items are included in Adjustments:
(a) Amortization and asset impairments: Amortization of intangible assets relating to intellectual property rights acquired ($34.7 million), impairment charge in respect of intangible assets ($6.3 million), other than temporary impairment of available for sale securities ($3.8 million) and tax effect of adjustments;
(b) Acquisitions & integration activities: IPR&D in respect of the acquisition of Jerini ($7.6 million), integration and transaction related costs in respect of the acquisition of Jerini ($2.8 million) and tax effect of adjustments;
(c) Divestments, reorganizations and discontinued operations: Release of provision for exit costs on DYNEPO ($4.7 million), costs associated with the introduction of a new holding company ($1.0 million), discontinued operations in respect of non-core Jerini operations ($16.7 million) and tax effect of adjustments; and
(d) Depreciation: Depreciation of $25.0 million included in Cost of product sales, R&D costs and SG&A costs for US GAAP separately disclosed for the presentation of Non GAAP earnings.
Unaudited results for the three and twelve months to December 31, 2009
Non GAAP reconciliation
The following table reconciles US GAAP diluted earnings per ADS to Non GAAP diluted earnings per ADS, including or excluding the effect of the change in best estimate for ADDERALL XR Medicaid rebates:
The following table reconciles US GAAP net cash provided by operating activities to Non GAAP cash generation:
THE "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Statements included herein that are not historical facts are forward-looking statements. Such forward-looking statements involve a number of risks and uncertainties and are subject to change at any time. In the event such risks or uncertainties materialize, Shire's results could be materially adversely affected. The risks and uncertainties include, but are not limited to, risks associated with: the inherent uncertainty of research, development, approval, reimbursement, manufacturing and commercialization of Shire's Specialty Pharmaceutical and Human Genetic Therapies products, as well as the ability to secure and integrate new products for commercialization and/or development; government regulation of Shire's products; Shire's ability to manufacture its products in sufficient quantities to meet demand; the impact of competitive therapies on Shire's products; Shire's ability to register, maintain and enforce patents and other intellectual property rights relating to its products; Shire's ability to obtain and maintain government and other third-party reimbursement for its products; and other risks and uncertainties detailed from time to time in Shire's filings with the Securities and Exchange Commission.
Non GAAP Measures
This press release contains financial measures not prepared in accordance with US GAAP. These measures are referred to as "Non GAAP" measures and include: Non GAAP operating income; Non GAAP net income; Non GAAP diluted earnings per ADS; effective tax rate on Non GAAP income from continuing operations before income taxes and earnings of equity method investees ("Effective tax rate on Non GAAP income"); Non GAAP Cost of product sales; Non GAAP Research and development; Non GAAP Selling, general and administrative; Non GAAP operating expenses; Non GAAP interest expense; Non GAAP other income; and Non GAAP cash generation. These Non GAAP measures exclude the effect of certain cash and non-cash items, both recurring and non-recurring, that Shire's management believes are not related to the core performance of Shire's business.
These Non GAAP financial measures are used by Shire's management to make operating decisions because they facilitate internal comparisons of Shire's performance to historical results and to competitors' results. Shire's Remuneration Committee uses certain key Non GAAP measures when assessing the performance and compensation of employees, including Shire's executive directors.
The Non GAAP measures are presented in this press release as Shire's management believe that they will provide investors with a means of evaluating, and an understanding of how Shire's management evaluates, Shire's performance and results on a comparable basis that is not otherwise apparent on a US GAAP basis, since many one-time, infrequent or non-cash items that Shire's management believe are not indicative of the core performance of the business may not be excluded when preparing financial measures under US GAAP.
These Non GAAP measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with US GAAP.
The following items, including their tax effect, have been excluded from both 2008 and 2009 Non GAAP earnings, and from our 2010 outlook:
Sales growth at CER, which is a Non GAAP measure, is computed by restating 2009 results using average 2008 foreign exchange rates for the relevant period.
Average exchange rates for the year to December 31, 2009 were $1.57:GBP1.00 and $1.39:EUR1.00 (2008: $1.85:GBP1.00 and $1.47:EUR1.00).
Average exchange rates for Q4 2009 were $1.63:GBP1.00 and $1.48:EUR1.00 (2008: $1.57:GBP1.00 and $1.32:EUR1.00).
2008 BALANCE SHEET RESTATEMENT
The consolidated financial information at December 31, 2008 has been restated. The effect of this restatement was to reduce Shire's non-current deferred tax liabilities and decrease Shire's accumulated deficit by $29 million. The restatement does not affect Shire's net income or cash flows for the years and quarters ended December 31, 2009 and 2008.
TRADEMARKS
All trademarks defined as (R) and (TM) used in this press release are trademarks of Shire plc or companies within the Shire group except for 3TC(R) and ZEFFIX(R) which are trademarks of GSK, DYNEPO(TM) which is a trademark of Sanofi Aventis, PENTASA(R) which is a trademark of Ferring A/S Corp, and REMINYL(R), REMINYL XL(TM), RAZADYNE(R) and RAZADYNE(R) ER which are trademarks of J&J outside the UK and Republic of Ireland(1). Certain trademarks of Shire plc or companies within the Shire group are set out in Shire's Quarterly Report on Form 10-Q for the nine months ended September 30, 2009.
1 REMINYL(R) and REMINYL XL(TM) are both trademarks of Shire in the UK and Republic of Ireland.
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Financial Highlights
Full Year 2009(1) Q4 2009(1)
Product sales $2,694 million -2% $777 million +10%
Product sales from core
products(2) $2,067 million +25% $585 million +36%
Total revenues $3,008 million 0% $893 million +17%
Non GAAP operating income $889 million -7% $313 million +30%
US GAAP operating income $620 million +51% $268 million +39%
Non GAAP diluted earnings per
ADS $3.49 -10% $1.11 +9%
US GAAP diluted earnings per
ADS $2.69 +214% $0.94 +20%
These results include the effect of a change in best estimate of the
Medicaid rebate liability for ADDERALL XR, which increased fourth quarter
product sales by $98 million, and fourth quarter Non GAAP diluted earnings
per American Depositary Share ("ADS") by 32 cents. Product sales excluding
this change in best estimate would have been $2,596 million for the year to
December 31, 2009 and $679 million for the fourth quarter. Non GAAP diluted
earnings per ADS excluding this change in best estimate would have been $3.17
for the year to December 31, 2009 and 79 cents for the fourth quarter. For
further details see pages 9 to 10 and 26.Advertisement
(1) Percentages compare to equivalent 2008 periods.
(2) Core products represent Shire's products excluding ADDERALL XR.
Angus Russell, Chief Executive Officer, commented:
"In this challenging and transformational year for Shire, I believe these excellent results reflect the success of our focused strategy and business model.
Strong fourth quarter sales growth of 36% from our core product portfolio, supported by our increasing international reach, has contributed significantly to our full year Non GAAP diluted earnings per ADS of $3.49. Our recent decision to lower our best estimate of the Medicaid sales rebates for ADDERALL XR contributed 32 cents to these earnings, which was not previously anticipated in our guidance framework.
Our growth prospects remain excellent and our core product portfolio currently has robust exclusivity protection. We have launched INTUNIV successfully in the US, we plan to launch velaglucerase alfa (VPRIV) imminently, and there is also an opportunity for REPLAGAL to enter the US market. We have already seen encouraging signs for the future success of these three products. REPLAGAL has increased its share in ex-US markets and we expect this momentum to increase.
VYVANSE, our leading ADHD treatment with a current monthly US ADHD market share of 13.6%, continues to grow and build strong brand recognition in the US and has recently been launched in Canada. ADDERALL XR continues to generate value from both product sales and a considerable royalty stream.
We have also demonstrated a pro-active approach to cost management in 2009 as promised, and have the opportunity to leverage our existing infrastructure to deliver expanding margins in the future. We enter 2010 with a strong balance sheet and excellent cash generation. This will allow us to continue to expand our international presence and consider potential acquisitions and in-licensing opportunities that fit our strategy.
We look forward to growing revenues and earnings in 2010 and re-iterate our aspirational target of mid-teen revenue growth on average between 2009 and 2015."
FINANCIAL SUMMARY
Full Year 2009 Unaudited Results
Full Year 2009 Full Year 2008
Non Non
US GAAP Adjustments GAAP US GAAP Adjustments GAAP
$M $M $M $M $M $M
Revenues 3,008 - 3,008 3,022 - 3,022
Operating
income 620 269 889 412 546 958
Diluted
earnings
per ADS $2.69 $0.80 $3.49 $0.86 $3.00 $3.86
These results include the effect of a change in best estimate of the
Medicaid rebate liability for ADDERALL XR, which increased product sales by
$98 million, and Non GAAP diluted earnings per ADS by 32 cents. Revenues and
Non GAAP diluted earnings per ADS excluding this change in best estimate for
the year to December 31, 2009 would have been $2,910 million and $3.17
respectively. For further details see pages 9-10 and 26.The Non GAAP financial measures included in the tables above are explained on pages 27 and 28, and are reconciled to the most directly comparable financial measures prepared in accordance with US GAAP on pages 22 to 23 and 26 (full year) and pages 24 to 26 (Q4).
- Product sales from core products were up 25% to $2,067 million (2008:
$1,653 million). On a constant exchange rate ("CER") basis, which is a
Non GAAP measure, core product sales were up 28% driven by continued
strong growth from:
- VYVANSE(R) (up 58% to $505 million, CER: up 58%);
- LIALDA(R) / MEZAVANT(R) (up 68% to $236 million, CER: up 69%);
- ELAPRASE(R) (up 16% to $353 million, CER: up 20%); and
- REPLAGAL(R) (up 10% to $194 million, CER: up 16%).
- Product sales including ADDERALL XR(R) were down 2% to $2,694 million
(CER: 0%), due to the expected decline in ADDERALL XR product sales
($627 million, down 43% on 2008) following the launch of authorized
generic versions by Teva Pharmaceuticals USA Inc. ("Teva") in April
2009 and Impax Laboratories Inc. ("Impax") in October 2009, with the
strong performance from Shire's core products (up 25%) offsetting the
decrease in ADDERALL XR product sales.
- Revenues for the year to December 31, 2009 decreased marginally to
$3,008 million (2008: $3,022 million), as the 25% increase in core
product sales and royalty income received on Teva and Impax's sales of
authorized generic ADDERALL XR offset the decline in ADDERALL XR
product sales.
- Non GAAP operating income decreased by 7%, or $69 million, to $889
million as a result of the marginally lower revenues and Shire's
increased investment in research and development in 2009, which were
partially offset by lower selling, general and administrative costs
from Shire's continued focus on cost management. On a US GAAP basis,
operating income in 2009 was $620 million, compared to $412 million in
2008, an increase of 51% (2008 included in-process R&D ("IPR&D")
charges of $263 million related to the acquisitions of Jerini AG
("Jerini") and METAZYM).
- Non GAAP diluted earnings per ADS were down 10% to $3.49 (2008: $3.86).
On a US GAAP basis diluted earnings per ADS increased to $2.69 compared
to $0.86 in 2008, up 214% (earnings in 2008 were impacted by interest
charges on the Transkaryotic Therapies Inc. ("TKT") appraisal rights
settlement, IPR&D and other impairment charges, all of which reduced US
GAAP diluted earnings per ADS in 2008).
- Cash generation, which is a Non GAAP measure, in 2009 was $921 million
(2008: $1,231 million), a decrease of $310 million. Cash generation was
lower in 2009 due to lower net sales receipts following the
genericization of ADDERALL XR. Cash generation in 2008 also included
cash inflows from forward exchange contracts which were not repeated in
2009.
2010 OUTLOOKWe enter 2010 with good momentum driven by the growth of our core product portfolio. 2010 will also benefit from the change in best estimate for ADDERALL XR rebates implemented in the fourth quarter of 2009 against a background of further erosion of the brand and the impact of adverse business mix trends.
In the first quarter of 2010 we expect our total revenues and Non GAAP diluted earnings per ADS to be lower than the same period in 2009, which was the last quarter before ADDERALL XR faced generic competition. For the balance of the year Shire expects to generate both total revenue growth and Non GAAP diluted earnings per ADS growth compared to 2009.
During 2010 we expect to see gross margins as a percentage of product sales at a similar level to 2009. We will further increase our focused investment in R&D and targeted investment will increase SG&A year on year. We expect a Non GAAP effective tax rate in 2010 at a similar level to 2009.
We look forward to growing both total revenues and reported Non GAAP diluted earnings per ADS in the full year 2010 compared to the excellent 2009 Non GAAP results and re-iterate our aspirational target of mid-teen revenue growth on average between 2009 and 2015.
PRODUCT LAUNCHES
Subject to obtaining the relevant regulatory/governmental approvals, product launches in 2010 will include:
- VPRIV(TM) for the treatment of Gaucher disease in the US and
EU;
- REPLAGAL for the treatment of Fabry disease in the US;
- MEZAVANT for the treatment of ulcerative colitis in certain
EU and RoW countries;
- FIRAZYR(R) for the symptomatic treatment of acute attacks of hereditary
angiodema in certain European and Latin American countries;
- EQUASYM(R) for the treatment of ADHD in certain EU
countries; and
- VYVANSE for the treatment of ADHD in Canada.
Fourth Quarter 2009 Unaudited Results
Q4 2009 Q4 2008
Non Non
US GAAP Adjustments GAAP US GAAP Adjustments GAAP
$M $M $M $M $M $M
Revenues 893 - 893 766 - 766
Operating
income 268 45 313 193 48 241
Diluted
earnings
per ADS $0.94 $0.17 $1.11 $0.78 $0.23 $1.01
These results include the effect of a change in best estimate of the
Medicaid rebate liability for ADDERALL XR, which increased product sales by
$98 million, and Non GAAP diluted earnings per ADS by 32 cents. Revenues and
Non GAAP diluted earnings per ADS excluding this change in best estimate for
the fourth quarter would have been $795 million and 79 cents respectively.
For further details see pages 9 to 10 and 26.The Non GAAP financial measures included above are explained on pages 27 and 28, and are reconciled to the most directly comparable financial measures prepared in accordance with US GAAP on pages 24 to 26.
- Product sales from core products were up 36% (CER: up 32%) to $585
million (2008: $429 million) following continued growth from VYVANSE,
LIALDA/MEZAVANT, ELAPRASE and REPLAGAL.
- Product sales including ADDERALL XR, increased by 10% to $777 million
(CER: up 8%). In Q4 2009 ADDERALL XR sales included the effect of a
change in best estimate of the amount of Medicaid rebate payable on
sales of ADDERALL XR. The effect of this change in best estimate
increased ADDERALL XR net product sales for Q4 2009 by $98 million, of
which $74 million related to product sales recognized in Q1 - Q3 2009.
Q4 product sales, excluding the effect of the change in best estimate
relating to product sales recognized in Q1 - Q3 2009, declined
marginally to $703 million (2008: $704 million).
- Revenues in Q4 2009 increased by 17% to $893 million (2008: $766
million). The decline in ADDERALL XR product sales following
genericization was more than offset by strong core product sales growth
and royalty income on Impax's sales of authorized generic ADDERALL XR.
- Non GAAP operating income increased by 30%, or $72 million, to $313
million as the higher product sales and royalty income were only
partially offset by increased investment in research and development.
On a US GAAP basis operating income in Q4 2009 increased 39%, or $75
million to $268 million (2008: $193 million).
- Non GAAP diluted earnings per ADS for Q4 2009 were up 9% to $1.11 (Q4
2008: $1.01). On a US GAAP basis diluted earnings per ADS were up 20%
to $0.94 (2008: $0.78).
FOURTH QUARTER 2009 AND RECENT PRODUCT AND PIPELINE DEVELOPMENTS
Products
VYVANSE - for the treatment of ADHD
- On February 1, 2010 Shire announced the Canadian
availability of VYVANSE (lisdexamfetamine dimesylate capsule), the
first and only prodrug therapy approved for ADHD treatment in Canada.
INTUNIV - for the treatment of ADHD in children and adolescents in the US
- Once-daily INTUNIV became available in US pharmacies on
November 9, 2009 and comes in four dosage strengths (1 mg, 2 mg, 3 mg,
and 4 mg). INTUNIV is marketed in the US by the existing Shire ADHD
sales team of nearly 600 representatives.
- Revenue on the launch shipments of INTUNIV has been deferred
and is being recognised in line with prescription demand. On this
basis, INTUNIV achieved sales of $5.4 million from launch through
December 31, 2009.
DAYTRANA - for the treatment of ADHD in adolescents in the US
- On December 4, 2009 and on January 29, 2010 Shire issued a
voluntary recall of certain lots of DAYTRANA because some of the
patches do not meet, or in future may not meet, their release liner
removal specification, and as a result, patients and caregivers could
have difficulty removing the liners. This action was not due to any
safety issues and no interruption in product supply is anticipated.
Pipeline
VPRIV - for the treatment of Type 1 Gaucher disease
- On November 24, 2009 Shire submitted a marketing authorization
application to the European Medicines Agency ("EMEA") for VPRIV,
Shire's enzyme replacement therapy in development for the treatment of
Type 1 Gaucher disease. The submission has been granted an accelerated
review by EMEA. Submissions have also been made in the US on September
1, 2009 and Canada on October 20, 2009. In the U.S., the application is
being reviewed by the US Food and Drug Administration ("FDA") under
Priority Review with a Prescription Drug User Fee Act action date of
February 28, 2010. The FDA recently completed pre-approval inspections
of Shire's Massachusetts facilities for the manufacturing and testing
of VPRIV. These inspections were an important milestone in the review
and approval process for the VPRIV New Drug Application.
- VPRIV is available ahead of its commercial launch in the US via an
FDA-accepted treatment protocol and elsewhere on a pre-approval basis
using the fastest mechanisms available in each country, in response to
the ongoing shortage of a currently marketed treatment for Type 1
Gaucher disease.
- Pending FDA approval, Shire intends to price the VPRIV 400 Unit vial at
a wholesale acquisition cost ("WAC") of $1,350 in the US.
- We are pleased to announce enhancements to our OnePathSM Access
program. In addition to our existing patient assistance programs and
our support of patient associations, Shire will provide direct co-pay
assistance, covering the first 3 months of out-of-pocket prescription
costs for eligible US patients this year. In 2011, we also plan to cap
the out-of-pocket prescription costs for these patients at $500. This
new program will be effective March 1, 2010 for eligible ELAPRASE
patients and VPRIV patients pending FDA approval.
VYVANSE - for the treatment of ADHD
- On December 21, 2009 a supplemental New Drug Submission for VYVANSE was
submitted in Canada for the extension of the indication to adolescents
and adults with ADHD.
- On January 14, 2010 a supplemental New Drug Application for VYVANSE was
submitted to the FDA for the extension of the indication to adolescents
aged 13 to 17 years with ADHD.
REPLAGAL - for the treatment of Fabry disease
- On December 22, 2009 Shire submitted a Biologics License Application to
the FDA for REPLAGAL, its enzyme replacement therapy for Fabry disease.
Shire has worked closely with the FDA to establish an early access
program in response to the ongoing shortage of the currently marketed
treatment for Fabry disease in the US. REPLAGAL is currently available
to Fabry patients in the US under an FDA-approved treatment protocol,
and Shire is also supporting emergency Investigational New Drug
requests. REPLAGAL first received marketing authorization in the
European Union in 2001, and is approved for the treatment of Fabry
disease in 45 countries. Shire expects its REPLAGAL supply to be
adequate to meet anticipated global demand.
OTHER FOURTH QUARTER AND RECENT DEVELOPMENTS
- On December 23, 2009 Shire completed the purchase of the remaining
Jerini shares from the minority shareholders, and now owns 100% of
Jerini.
- On February 24, 2009 Actavis Elizabeth LLC brought a lawsuit against
the FDA seeking to overturn the FDA's decision granting new chemical
entity exclusivity to VYVANSE. Shire has intervened in the lawsuit. On
October 23, 2009, following a period for public comment, the FDA issued
a letter setting forth its analysis of the legal and regulatory issues
and reaffirming its decision that VYVANSE is entitled to new chemical
entity exclusivity. A hearing on cross-motions for summary judgment
was held on February 17, 2010. No rulings on the cross-motions were made
at the hearing.
- On December 2, 2009 Shire announced that it had settled the litigation
with Teva over Shire's supply to Teva of an authorized generic version
of ADDERALL XR. Shire has been supplying Teva with authorized generic
ADDERALL XR since April 1, 2009. Shire's ability to supply the product
had been limited by restrictions that the US Drug Enforcement
Administration ("DEA") places on amphetamine, which is the product's
active ingredient. Teva filed suit claiming that Shire was in breach of
its supply contract. After the lawsuit was filed, the DEA granted
Shire additional quota for 2009, allowing Shire to supply Teva with
additional product. Teva dismissed its lawsuit, including its claims for
monetary damages, specific performance and other equitable relief. No
consideration was exchanged by the parties as part of the settlement.
DIVIDENDFor the six months to December 31, 2009 the Board has resolved to pay an interim dividend of 9.250 US cents per ordinary share (2008: 7.761 US cents per ordinary share).
Dividend payments will be made in Pounds Sterling to ordinary shareholders and in US Dollars to holders of American Depository Shares. A dividend of 5.910 pence per ordinary share (2008: 5.469 pence) and 27.750 US cents per ADS (2008: 23.283 US cents) will be paid on April 14, 2010 to persons whose names appear on the register of members of the Company at the close of business on March 12, 2010.
Together with the first interim payment of 2.147 US cents per ordinary share (2008: 2.147 US cents per ordinary share), this represents total dividends for 2009 of 11.397 US cents per ordinary share (2008: 9.908 US cents per ordinary share), an increase of 15% in US Dollar terms over 2008.
BOARD CHANGES
On December 23, 2009 Dr Michael Rosenblatt stepped down from the Shire Board as a non-executive director, following Dr Rosenblatt's appointment as Executive Vice President and Chief Medical Officer at Merck & Co., Inc. Matt Emmens, Chairman of Shire said "On behalf of the Shire Board, I would like to thank Michael for his contributions and we wish him well in his new position".
Dr Barry Price retired from the Shire Board as a non-executive director upon the completion of his term of office on January 24, 2010. Matt Emmens, Chairman of Shire said "On behalf of the Shire Board, I would like to thank Barry for his significant contributions over the past 14 years. Barry brought a wealth of expertise and experience to the Board and we wish him well for the future".
ADDITIONAL INFORMATION
The following additional information is included in this press release:
Page
Overview of Full Year Financial 8
Results
Financial Information 13
Notes to Editors 27
Safe Harbor Statement 27
Explanation of Non GAAP Measures 27
Trademarks 28
Dial in details for the live conference call for investors 14:00
GMT/09:00 EST on February 19, 2010:
UK dial in: 0844-800-3850 or 01296-311-600
US dial in: 1-866-8048688 or 1-718-3541175
International dial +44(0)1296-311-600
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Live Webcast: http://www.shire.com/shireplc/en/investors
OVERVIEW OF FULL YEAR FINANCIAL RESULTS
1. Product sales
For the year to December 31, 2009 product sales decreased by 2% to
$2,693.7 million (2008: $2,754.2 million) and represented 90% of total
revenues (2008: 91%). On a CER basis product sales were flat compared to 2008.Sales of core products increased by 25% to $2,067.2 million (2008: $1,652.5 million), up 28% on a CER basis.
Product Highlights
Exit
Market
Year on year growth Share(1)
Product Sales $M Sales CER US Rx(1)
VYVANSE 504.7 58% 58% 65% 13%
ELAPRASE 353.1 16% 20% n/a(3) n/a(3)
LIALDA / MEZAVANT 235.9 68% 69% 43% 18%
PENTASA(R) 214.8 16% 16% -2% 16%
REPLAGAL 193.8 10% 16% n/a(2) n/a(2)
FOSRENOL 184.4 19% 23% -2% 8%
FIRAZYR 6.1 n/a(4) n/a(4) n/a(2) n/a(2)
INTUNIV 5.4 n/a n/a n/a(2) 1%
VPRIV(5) 2.5 n/a n/a n/a(2) n/a(2)
OTHER 366.5 -1% n/a n/a(2) n/a(2)
Core product sales 2,067.2 25% 28%
ADDERALL XR 626.5 -43% -43% -42% 8%
Total product sales 2,693.7 -2% 0%
(1) TRx data provided by IMS Health ("IMS") National Prescription Audit.
Exit market share represents the US market share in the last week of December
2009. (2) Not sold in the US in 2009, or awaiting approval in the US.
(3) IMS Data not available.
(4) Product launched Q3 2008. FY 2008 sales totaled $0.5 million.
(5) Not yet approved. Sales achieved under early access programs.
Core Products
VYVANSE - ADHD
The increase in VYVANSE product sales was driven by higher US
prescription demand versus 2008, 9% growth in the US ADHD market and price
increases. Product sales growth was lower than prescription growth due to
lower stocking in 2009 compared to 2008.ELAPRASE - Hunter syndrome
The growth in sales of ELAPRASE was driven by increased volumes across all regions where ELAPRASE is sold. On a CER basis sales grew by 20% (66% of ELAPRASE sales are made outside of the US).
LIALDA/MEZAVANT - Ulcerative colitis
Strong product sales of LIALDA/MEZAVANT continued in the year to December 31, 2009 driven by an increase in market share over 2008, growth in the US oral mesalamine market and price increases taken during 2009.
PENTASA - Ulcerative colitis
Product sales of PENTASA continued to grow despite a decrease in US prescription demand in 2009 compared to 2008 due to the impact of price increases taken during 2009.
REPLAGAL - Fabry disease
The growth in REPLAGAL product sales in 2009 over 2008 was driven by a significant increase in demand in the fourth quarter of 2009 due to an acceleration of patients switching to REPLAGAL in the EU, attributable in part to supply shortages of a competitor product. Sales increased 16% on a CER basis (REPLAGAL is sold primarily in Euros and Pounds sterling).
FOSRENOL - Hyperphosphatemia
Product sales increased as FOSRENOL entered new countries and grew in existing markets outside the US. In the US, FOSRENOL sales grew despite lower prescriptions due to a price increase in 2009.
INTUNIV - ADHD
INTUNIV was launched in the US in November 2009. In line with Shire's revenue recognition policy for launch shipments, initial stocking shipments have been deferred and are being recognised into revenue in line with end-user prescription demand. At December 31, 2009 deferred revenues on the balance sheet represented gross sales of $38.8 million.
Other products
ADDERALL XR - ADHD
The launch by Teva and Impax of their authorised generic versions of ADDERALL XR led to the expected decline in 2009 of branded ADDERALL XR prescription demand, and resulted in higher US sales deductions in 2009 compared to 2008. These factors more than offset the positive impacts of price increases taken since the fourth quarter of 2008, and the inclusion in product sales of shipments of authorized generic ADDERALL XR to Teva and Impax in 2009.
Sales deductions represented 47% of branded ADDERALL XR gross sales in the year to December 31, 2009 compared to 25% in the same period in 2008, following higher Medicaid and Managed Care rebates subsequent to the authorized generic launches.
There are potentially different interpretations as to how shipments of authorized generic ADDERALL XR to Teva and Impax should be included in the Medicaid rebate calculation pursuant to Medicaid rebate legislation, including the Deficit Reduction Act of 2005 ("Medicaid rebate legislation"). As a result more than one unit rebate amount ("URA") is calculable for the purpose of determining Shire's Medicaid rebate liability to States after the authorized generic launch. During 2009 Shire highlighted the different interpretations to the Centers for Medicare and Medicaid Services, ("CMS") and submitted data to the CMS for the purpose of computing the URA, based on Shire's reasonable interpretation of the Medicaid rebate legislation and related guidance. The State Medicaid agencies have invoiced Shire for Medicaid rebates, and Shire has paid these Medicaid rebate invoices, based on this URA. Despite this CMS has the ability to subsequently challenge Shire's interpretation of the Medicaid rebate legislation, and require an alternative interpretation to be applied (both retrospectively and prospectively), which could result in a significantly higher Medicaid liability.
Throughout 2009 Shire's management has recorded its accrual for Medicaid rebates based on its best estimate of the rebate payable. For the first three quarters of 2009, Shire's management based this best estimate on an amount that Shire could pay were CMS to challenge Shire's interpretation and require an alternative interpretation of the Medicaid rebate legislation to be applied. In the fourth quarter of 2009, Shire's management lowered its best estimate of the Medicaid rebate payable down to be consistent with (i) Shire's interpretation of the Medicaid rebate legislation, (ii) Shire's repeated and consistent submission of price reporting to CMS using Shire's interpretation of the Medicaid rebate legislation, (iii) CMS calculating the URA based on that interpretation, (iv) States submitting Medicaid rebate invoices using this URA, and (v) Shire paying these invoices. This change of estimate increased ADDERALL XR product sales by $97.7 million in the fourth quarter of 2009 (of which $73.6 million related to ADDERALL XR product sales recognized in Q1-Q3 2009).
In determining its best estimate of the Medicaid rebate liability at December 31, 2009 Shire's management has considered a number of factors taken in combination (including the receipt of a further quarter's invoices from the States with a URA based on Shire's interpretation of the Medicaid rebate legislation and related guidance, and Shire's likely response were CMS to employ an alternative interpretation of the Medicaid rebate legislation). Any future change in Shire's interpretation which results in a change of estimate could significantly decrease sales of ADDERALL XR in the period of any such change in estimate.
Shire strongly believes that its interpretation of the Medicaid rebate legislation is reasonable and correct. However, CMS could disagree with Shire's interpretation, and require Shire to apply an alternative interpretation of the Medicaid rebate legislation and pay up to $210 million above the recorded liability. This would represent a URA substantially in excess of the unit sales price of ADDERALL XR and accordingly be in excess of the approximate amount of the full cost to the States of reimbursement for Medicaid prescriptions of ADDERALL XR. Should CMS take such an approach, Shire could seek to limit any additional payments to a level approximating the full, un-rebated cost to the States of ADDERALL XR, or $98 million above the recorded liability. Further, Shire believes it has a strong legal basis supporting its interpretation of the Medicaid rebate legislation, and that there would be a strong basis to initiate litigation to recover any amount paid in excess of its recorded liability. The result of any such litigation cannot be predicted and could result in additional rebate liability above Shire's current best estimate.
2. Royalties
Product Royalties to Shire $M Year on year change CER
3TC(R) and Zeffix(R) 164.0 -9% -6%
ADDERALL XR 68.0 n/a n/a
Other 60.5 -7% -3%
Total 292.5 +19% +22%
Shire receives royalties from GlaxoSmithKline ("GSK") on worldwide sales
of 3TC and ZEFFIX which have decreased mainly due to competition from other
treatments.Royalties were received on Teva's sales of an authorized generic version of ADDERALL XR between April and September 2009, and on Impax's sales of its authorized generic version of ADDERALL XR from October 2009.
Other royalties are received primarily on worldwide (excluding UK and Republic of Ireland) sales of REMINYL(R) and REMINYL(R) XL (known as RAZADYNE(R) and RAZADYNE(R) ER in the US). Royalties on sales of these products decreased in 2009 to $47.7 million (2008: $63.5 million) due to generic competition in the US from August 2008.
3. Financial details
Cost of product sales
% of % of
2009 product 2008 product
$M sales $M sales
Cost of product sales 388.0 14% 408.0 15%
Accelerated depreciation on
transfer of manufacturing
from Owings Mills (12.0) -
Fair value adjustment for
acquired inventories (1.9) -
DYNEPO exit costs - (48.8)
Depreciation (9.8) (16.2)
Non GAAP cost of product 364.3 14% 343.0 12%
sales
Non GAAP cost of product sales as a percentage of product sales increased
in 2009 due to changes to the product mix following the launch of authorized
generic versions of ADDERALL XR by Teva and Impax. Higher deductions on
Shire's sales of branded ADDERALL XR, together with lower margins on sales of
the authorized generic version to Teva and Impax have both depressed gross
margins. Research and development ("R&D")
% of % of
2009 product 2008 product
$M sales $M sales
R&D 638.3 24% 494.3 18%
INTUNIV license payment (36.9) -
Women's Health exit costs (62.9) -
DYNEPO exit costs - (6.5)
Depreciation (15.5) (12.5)
Non GAAP R&D 523.0 19% 475.3 17%
Non GAAP R&D increased 10% in 2009 compared to 2008 as Shire has
continued to increase investment in R&D programs, due in part to an
acceleration of investment in VPRIV and REPLAGAL in the US. Selling, general and administrative ("SG&A")
% of % of
2009 product 2008 product
$M sales $M sales
SG&A 1,342.6 50% 1,455.2 53%
Intangible asset (136.9) (126.2)
amortization
Impairment of intangible - (97.1)
assets
New holding company costs - (14.8)
Depreciation (67.7) (48.5)
Non GAAP SG&A 1,138.0 42% 1,168.6 42%
Non GAAP SG&A decreased in absolute terms by 3% due to Shire's continued
focus on cost management.Gain on sale of product rights
For the year to December 31, 2009 Shire recorded gains of $6.3 million (2008: $20.7 million) from the sale of non-core products to Laboratorios Almirall S.A. in 2007. These gains had been deferred since 2007 pending obtaining the relevant consents to transfer certain assets.
IPR&D
For the year to December 31, 2009, Shire recorded IPR&D charges of $1.6 million (2008: $128.1 million) relating to FIRAZYR in markets outside of the EU. In 2008 IPR&D also included a charge of $135.0 million relating to the acquisition of METAZYM from Zymenex A/S.
Reorganization costs
For the year to December 31, 2009 Shire recorded reorganization costs of $12.7 million (2008: $nil) relating to the transfer of manufacturing from its Owings Mills facility.
Integration and acquisition costs
For the year to December 31, 2009 Shire recorded integration and acquisition costs of $10.6 million (2008: $10.3 million), primarily relating to the integration of Jerini.
Interest income
For the year to December 31, 2009 Shire received interest income of $1.9 million (2008: $25.5 million), primarily earned on cash and cash equivalents. Interest income for the year to December 31, 2009 is lower than the same period in 2008 due to significantly lower interest rates in 2009 compared to 2008, and lower average cash and cash equivalent balances throughout the year.
Interest expense
2009 2008
$M $M
Interest expense 39.8 139.0
Additional interest on settlement of TKT appraisal rights - (73.0)
litigation
Non GAAP interest expense 39.8 66.0
For the year to December 31, 2009 Shire incurred interest expense of
$39.8 million (2008: $139.0 million), including interest expense on Shire's
convertible bond of $33.6 million (2008: $33.6 million). Interest expense in
2008 was higher than 2009 due to interest expense of $87.3 million recorded
in respect of the TKT appraisal rights litigation, of which $73.0 million was
additional interest arising from the settlement of the litigation in November
2008. Other income/(expense), net
2009 2008
$M $M
Other income/(expense), net 60.7 (32.9)
Gain on sale of investment in Virochem Pharma Inc. (55.2) -
Gain on sale of investment in Questcor Pharmaceuticals Inc. - (9.4)
Other than temporary impairment of available for sale
securities (including $44.3 million for Renovo Group plc) - 58.0
Non GAAP other income, net 5.5 15.7
Non GAAP other income, net in 2009 included a gain of $5.7 million on
substantial modification of a property lease. In 2008 Non GAAP other income,
net primarily related to foreign exchange gains.Taxation
The effective rate of tax for the year to December 31, 2009 was 22% (2008: 37%). Excluding the impact of IPR&D charges of $263.1 million in 2008, which are either not tax deductable or for which no tax benefit is currently recognised, the effective rate of tax for 2008 was 19%. The effective tax rate on Non GAAP income is 25% (2008: 23%).
The Non GAAP effective rate of tax in 2009 is higher than 2008 due to increased profits in higher tax territories, together with the recognition of valuation allowances against certain EU and US deferred tax assets. These factors more than offset reductions to the Non GAAP effective rate of tax from the decrease in valuation allowances held in respect of US State tax credits and losses. In addition, the effect of the change in best estimate of ADDERALL XR Medicaid rebates increased the Non GAAP effective rate of tax by one percentage point in 2009.
Discontinued operations
The loss from discontinued operations for the year to December 31, 2009 was $12.4 million (2008: $17.6 million), relating to net losses on discontinued Jerini businesses which were either divested or closed during 2009.
FINANCIAL INFORMATION
TABLE OF CONTENTS
Page
Unaudited US GAAP Statement of Financial Position 14
Unaudited US GAAP Consolidated Statements of
Operations 15
Unaudited US GAAP Consolidated Statements of Cash
Flows 17
Selected Notes to the Unaudited US GAAP Financial
Statements
(1) Earnings per share 19
(2) Analysis of revenues 20
Non GAAP reconciliation 22
Unaudited US GAAP financial position as of December 31, 2009 Consolidated
Balance Sheets
Restated(1)
December 31, December 31,
2009 2008
$M $M
ASSETS
Current assets:
Cash and cash equivalents 498.9 218.2
Restricted cash 33.1 29.2
Accounts receivable, net 597.5 395.0
Inventories 189.7 154.5
Assets held for sale 1.7 16.6
Deferred tax asset 135.8 89.5
Prepaid expenses and other current assets 113.5 141.4
Total current assets 1,570.2 1,044.4
Non-current assets:
Investments 105.7 42.9
Property, plant and equipment, net 676.8 534.2
Goodwill 384.7 350.8
Other intangible assets, net 1,790.7 1,824.9
Deferred tax asset 79.0 118.1
Other non-current assets 10.4 18.4
Total assets 4,617.5 3,933.7
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued expenses 929.1 708.6
Deferred tax liability 2.9 10.9
Other current liabilities 88.0 104.3
Total current liabilities 1,020.0 823.8
Non-current liabilities:
Convertible bonds 1,100.0 1,100.0
Other long-term debt 43.6 43.1
Deferred tax liability 294.3 348.0
Other non-current liabilities 247.1 291.3
Total liabilities 2,705.0 2,606.2
Shareholders' equity:
Common stock of 5p par value; 1,000 million
shares authorized; and 561.5 million shares
issued and outstanding (2008: 1,000 million
shares authorized; and 560.2 million shares
issued and outstanding) 55.6 55.5
Additional paid-in capital 2,677.6 2,594.6
Treasury stock: 17.8 million shares (2008: 20.7
million) (347.4) (397.2)
Accumulated other comprehensive income 149.1 97.0
Accumulated deficit (622.4) (1,022.7)
Total Shire plc shareholders' equity 1,912.5 1,327.2
Noncontrolling interest in subsidiaries - 0.3
Total equity 1,912.5 1,327.5
Total liabilities and equity 4,617.5 3,933.7
(1) See page 28 for details.
Unaudited US GAAP results for the three months and year to December 31,
2009 Consolidated Statements of Operations
12 months 12 months
3 months to 3 months to to to
December 31, December 31, December 31, December 31
2009 2008 2009 2008
$M $M $M $M
Revenues:
Product sales 776.9 704.3 2,693.7 2,754.2
Royalties 114.7 54.8 292.5 245.5
Other revenues 1.7 6.7 21.5 22.5
Total revenues 893.3 765.8 3,007.7 3,022.2
Costs and expenses:
Cost of product sales(1) 103.1 90.6 388.0 408.0
Research and
development(2) 145.8 125.9 638.3 494.3
Selling, general and
administrative(1) (2) 368.8 345.5 1,342.6 1,455.2
Gain on sale of product
rights - - (6.3) (20.7)
IPR&D 1.6 7.6 1.6 263.1
Reorganization costs 5.6 - 12.7 -
Integration and
acquisition costs 0.6 2.8 10.6 10.3
Total operating expenses 625.5 572.4 2,387.5 2,610.2
Operating income 267.8 193.4 620.2 412.0
Interest income 0.4 2.5 1.9 25.5
Interest expense (9.2) (12.1) (39.8) (139.0)
Other (expenses)/income,
net (1.2) 5.8 60.7 (32.9)
Total other
(expense)/income, net (10.0) (3.8) 22.8 (146.4)
Income from continuing
operations before income
taxes and equity in
(losses)/earnings of
equity method investees 257.8 189.6 643.0 265.6
Income taxes (81.8) (35.0) (138.5) (98.0)
Equity in
(losses)/earnings of
equity method investees,
net of taxes (1.7) 1.1 (0.7) 2.4
Income from continuing
operations, net of tax 174.3 155.7 503.8 170.0
Loss from discontinued
operations (net of income
tax expense of $nil in
all periods) - (16.7) (12.4) (17.6)
Net income 174.3 139.0 491.4 152.4
Add: Net loss
attributable to
noncontrolling interest
in subsidiaries - 2.3 0.2 3.6
Net income attributable
to Shire plc 174.3 141.3 491.6 156.0
(1) Cost of product sales includes amortization of intangible assets
relating to favorable manufacturing contracts of $0.4 million for the three
months to December 31, 2009 (2008: $0.4 million) and $1.7 million for the
twelve months to December 31, 2009 (2008: $1.7 million). Selling, general and
administrative costs include amortization and impairment charges of
intangible assets relating to intellectual property rights acquired of $35.3
million for the three months to December 31, 2009 (2008: $41.0 million) and
$136.9 million for the twelve months to December 31, 2009 (2008: $223.3
million).(2) Promotional costs totaling $6.3 million and $32.3 million have been reclassified from Research and development to Selling, general and administrative costs for the three and twelve months to December 31, 2008 respectively.
Unaudited US GAAP results for the three months and year to December 31, 2009 Consolidated Statements of Operations (continued)
12 months 12 months
3 months to 3 months to to to
December December
December 31, December 31, 31, 31,
2009 2008 2009 2008
Earnings per ordinary
share - basic
Earnings from continuing
operations 32.1c 29.3c 93.2c 32.1c
Loss from discontinued
operations - (3.1c) (2.3c) (3.3c)
Earnings per ordinary
share - basic 32.1c 26.2c 90.9c 28.8c
Earnings per ADS - basic 96.3c 78.6c 272.7c 86.4c
Earnings per ordinary
share - diluted
Earnings from continuing
operations 31.2c 28.9c 91.9c 31.8c
Loss from discontinued
operations - (2.9c) (2.2c) (3.2c)
Earnings per ordinary 31.2c 26.0c 89.7c 28.6c
Earnings per ADS -
diluted 93.6c 78.0c 269.1c 85.8c
Weighted average number
of shares (millions):
Basic 542.6 538.8 540.7 541.6
Diluted 584.6 575.5 548.0 545.4
Unaudited US GAAP results for the three months and year to December 31,
2009 Consolidated Statements of Cash Flows
3 months 3 months 12 months 12 months
to to to to
December December December December
31, 31, 31, 31,
2009 2008 2009 2008
$M $M $M $M
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income 174.3 139.0 491.4 152.4
Adjustments to reconcile net
income to net cash provided by
operating activities:
Loss from
discontinued
operations - 16.7 12.4 17.6
Depreciation and
amortization 72.8 57.9 250.2 202.9
Share based
compensation 15.6 13.2 65.7 65.2
IPR&D 1.6 7.6 1.6 128.1
Impairment of
intangible assets - 6.3 - 97.1
Impairment of
available for sale
securities - 3.8 0.8 58.0
Gain on sale of
non-current
investments - (0.7) (55.2) (10.1)
Gain on sale of
product rights - - (6.3) (20.7)
Other 1.5 4.1 12.2 10.5
Movement in deferred taxes (11.3) 60.1 (98.8) 74.0
Equity in losses/(earnings) of
equity method investees 1.7 (1.1) 0.7 (2.4)
Changes in operating assets
and liabilities:
(Increase)/decrease
in accounts
receivable (55.9) 50.1 (212.3) 9.4
(Decrease)/increase
in sales deduction
accrual (77.5) 47.4 134.7 84.3
(Increase)/decrease
in inventory (14.5) (3.2) (38.7) 36.4
Decrease/(increase)
in prepayments and
other current assets 38.2 (9.4) 30.1 (9.6)
(Increase)/decrease
in other assets (4.5) 57.1 0.8 3.6
Increase/(decrease)
in accounts and notes
payable and other
liabilities 94.9 (169.6) 38.6 (99.0)
Returns on investment from
joint venture - - 4.9 7.1
Cash flows used in
discontinued operations - (4.7) (5.9) (4.7)
Net cash provided by operating
activities(A) 236.9 274.6 626.9 800.1
Unaudited US GAAP results for the three months and year to December 31,
2009 Consolidated Statements of Cash Flows (continued)
12 months 12 months
3 months to 3 months to to to
December December
December 31, December 31, 31, 31,
2009 2008 2009 2008
$M $M $M $M
CASH FLOWS FROM INVESTING
ACTIVITIES:
Movements in restricted
cash 6.2 2.6 (3.9) 10.3
Purchases of subsidiary
undertakings and
businesses, net of cash
acquired (7.8) (36.9) (83.3) (499.4)
Payment on settlement of
TKT appraisal rights
litigation - (419.9) - (419.9)
Purchases of non-current
investments (0.9) (0.9) (0.9) (2.2)
Purchases of property,
plant and equipment (85.0) (69.5) (254.4) (236.0)
Purchases of intangible
assets - - (7.0) (25.0)
Proceeds from disposal of
non-current investments - - 19.2 10.3
Proceeds from disposal of
property, plant and
equipment 0.5 - 1.0 1.8
Proceeds/deposits
received on sales of
product rights - - - 5.0
Proceeds from disposal of
subsidiary undertakings - - 6.7 -
Returns of equity
investments - 0.2 0.2 0.6
Net cash used in
investing activities(B) (87.0) (524.4) (322.4) (1,154.5)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from drawings
under bank facility - 190.0 - 190.0
Repayment of drawings
under bank facility - (190.0) - (190.0)
Proceeds from building
finance obligation - 11.3 - 11.3
Payment under building
financing obligation (0.8) (0.6) (4.7) (1.8)
Tax benefit of stock
based compensation 16.8 - 16.8 -
Costs of issue of common
stock - (2.6) - (5.6)
Proceeds from exercise of
options 11.8 9.7 14.6 11.4
Payment of dividend (11.4) (10.4) (54.4) (46.8)
Payments to acquire
shares by Employee Share
Ownership Trust ("ESOT") - (6.3) (1.0) (146.6)
Net cash provided
by/(used in) financing
activities(C) 16.4 1.1 (28.7) (178.1)
Effect of foreign
exchange rate changes on
cash and cash equivalents
(D) (0.1) (6.4) 4.9 (11.8)
Net increase/(decrease)
in cash and cash
equivalents(A) +(B) +(C)
+(D) 166.2 (255.1) 280.7 (544.3)
Cash and cash equivalents
at beginning of period 332.7 473.3 218.2 762.5
Cash and cash equivalents
at end of period 498.9 218.2 498.9 218.2
Unaudited US GAAP results for the three months and year to December 31,
2009 Selected Notes to the Financial Statements
(1) Earnings per share
12 months 12 months
3 months to 3 months to to to
December December
December 31, December 31, 31, 31,
2009 2008 2009 2008
$M $M $M $M
Income from continuing
operations 174.3 155.7 503.8 170.0
Loss from discontinued
operations - (16.7) (12.4) (17.6)
Noncontrolling interest
in subsidiaries - 2.3 0.2 3.6
Numerator for basic EPS 174.3 141.3 491.6 156.0
Interest on convertible
bonds, net of tax (1) 8.3 8.4 - -
Numerator for diluted EPS 182.6 149.7 491.6 156.0
Weighted average number
of shares:
Millions Millions Millions Millions
Basic(2) 542.6 538.8 540.7 541.6
Effect of dilutive
shares:
Stock options(3) 8.8 4.0 7.3 3.8
Convertible bonds 2.75%
due 2014(1) 33.2 32.7 - -
Diluted 584.6 575.5 548.0 545.4
(1) Calculated using the "if-converted" method.
(2) Excludes shares purchased by the ESOT and presented by Shire as
treasury stock.(3) Calculated using the treasury stock method.
The share equivalents not included in the calculation of the diluted weighted average number of shares are shown below:
12 months 12 months
3 months to 3 months to to to
December December December December
31, 31, 31, 31,
2009 2008 2009 2008
Millions(1) Millions
Millions(1) Millions(1) (2) (1), (2)
Stock options out of
the money 4.5 22.1 16.4 17.3
Convertible bonds 2.75%
due 2014 - - 33.1 32.7
(1) For the three and twelve month periods ended December 31, 2009 and
2008, certain stock options have been excluded from the calculation of
diluted EPS because their exercise prices exceeded Shire plc's average share
price during the calculation period.(2) For the twelve month periods ended December 31, 2009 and 2008 the ordinary shares underlying the convertible bonds have not been included in the calculation of the diluted weighted average number of shares, because the effect of their inclusion would be anti-dilutive.
Unaudited US GAAP results for the twelve months to December 31, 2009
Selected Notes to the Financial Statements
(2) Analysis of revenues
12 months to December 31, 2009 2008 2009 2009
% % of total
$M $M change revenue
Net product sales:
Specialty Pharmaceuticals
("Speciality")
ADHD
ADDERALL XR 626.5 1,101.7 -43% 21%
VYVANSE 504.7 318.9 58% 17%
DAYTRANA 71.0 78.7 -10% 3%
EQUASYM 22.8 - n/a 1%
INTUNIV 5.4 - n/a <1%
1,230.4 1,499.3 -18% 42%
GI
PENTASA 214.8 185.5 16% 7%
LIALDA / MEZAVANT 235.9 140.4 68% 8%
450.7 325.9 38% 15%
General products
FOSRENOL 184.4 155.4 19% 6%
CALCICHEW(R) 43.7 52.8 -17% 1%
CARBATROL(R) 82.4 75.9 9% 3%
REMINYL/REMINYL XL 42.4 34.4 23% 1%
XAGRID 84.8 78.7 8% 3%
437.7 397.2 10% 14%
Other product sales 19.4 50.1 -61% 1%
Total Specialty product
sales 2,138.2 2,272.5 -6% 72%
Human Genetic Therapies ("HGT")
ELAPRASE 353.1 305.1 16% 12%
REPLAGAL 193.8 176.1 10% 6%
FIRAZYR 6.1 0.5 n/a <1%
VPRIV 2.5 - n/a <1%
Total HGT product sales 555.5 481.7 15% 18%
Total product sales 2,693.7 2,754.2 -2% 90%
Royalties:
3TC and ZEFFIX 164.0 180.5 -9% 5%
ADDERALL XR 68.0 - n/a 2%
Other 60.5 65.0 -7% 2%
Total royalties 292.5 245.5 19% 9%
Other revenues 21.5 22.5 -4% 1%
Total Revenues 3,007.7 3,022.2 0% 100%
Unaudited results for the year to December 31, 2009
Non GAAP reconciliation
US GAAP Adjustments
Acquisitions Divestments,
Amortization & reorganizations
December 31, & asset integration & discontinued
Year to, 2009 impairments activities operations
(a) (b) (c)
$M $M $M $M
Total revenues 3,007.7 - - -
Costs and expenses:
Cost of product
sales 388.0 - (1.9) (12.0)
Research and
development 638.3 - (36.9) (62.9)
Selling, general
and administrative 1,342.6 (136.9) - -
Gain on sale of
product rights (6.3) - - 6.3
IPR&D 1.6 - (1.6) -
Reorganization
costs 12.7 - - (12.7)
Integration &
acquisition costs 10.6 - (10.6) -
Depreciation - - - -
Total operating
expenses 2,387.5 (136.9) (51.0) (81.3)
Operating income 620.2 136.9 51.0 81.3
Interest income 1.9 - - -
Interest expense (39.8) - - -
Other income, net 60.7 - - (55.2)
Total other
income/(expense),
net 22.8 - - (55.2)
Income from
continuing
operations before
income taxes and
equity in losses of
equity method
investees 643.0 136.9 51.0 26.1
Income taxes (138.5) (38.8) (16.2) (20.7)
Equity in losses of
equity method
investees, net of
tax (0.7) - - -
Income from
continuing
operations, net of
tax 503.8 98.1 34.8 5.4
Loss from
discontinued
operations (12.4) - - 12.4
Net income 491.4 98.1 34.8 17.8
Add: Net loss
attributable to
noncontrolling
interest in
subsidiaries 0.2 - - -
Net income
attributable to
Shire plc 491.6 98.1 34.8 17.8
Impact of
convertible debt,
net of tax (1) - 33.6 - -
Numerator for
diluted EPS 491.6 131.7 34.8 17.8
Weighted average
number of shares
(millions) -
diluted(1) 548.0 33.1 - -
Diluted earning
per ADS 269.1c 52.6c 18.0c 9.2c
Non GAAP
Reclassify December 31,
Year to, depreciation 2009
(d)
$M $M
Total revenues - 3,007.7
Costs and expenses:
Cost of product
sales (9.8) 364.3
Research and
development (15.5) 523.0
Selling, general
and administrative (67.7) 1,138.0
Gain on sale of
product rights - -
IPR&D - -
Reorganization
costs - -
Integration &
acquisition costs - -
Depreciation 93.0 93.0
Total operating
expenses - 2,118.3
Operating income - 889.4
Interest income - 1.9
Interest expense - (39.8)
Other income, net - 5.5
Total other
income/(expense),
net - (32.4)
Income from
continuing
operations before
income taxes and
equity in losses of
equity method
investees - 857.0
Income taxes - (214.2)
Equity in losses of
equity method
investees, net of
tax - (0.7)
Income from
continuing
operations, net of
tax - 642.1
Loss from
discontinued
operations - -
Net income - 642.1
Add: Net loss
attributable to
noncontrolling
interest in
subsidiaries - 0.2
Net income
attributable to
Shire plc - 642.3
Impact of
convertible debt,
net of tax (1) - 33.6
Numerator for
diluted EPS - 675.9
Weighted average
number of shares
(millions) -
diluted(1) - 581.1
Diluted earnings
per ADS - 348.9c
(1) The impact of convertible debt, net of tax has a dilutive effect on a
Non GAAP basis.The following items are included in Adjustments:
(a) Amortization and asset impairments: Amortization of intangible assets relating to intellectual property rights acquired ($136.9 million) and tax effect of adjustment;
(b) Acquisitions and Integration activities: Inventory fair value adjustment related to the acquisition of Jerini ($1.9 million), payment on amendment of INTUNIV in-licence agreement ($36.9 million), IPR&D charge in respect of Jerini ($1.6 million), costs associated with the integration and acquisition of Jerini and EQUASYM ($10.6 million) and tax effect of adjustments;
(c) Divestments, reorganizations and discontinued operations: Accelerated depreciation ($12.0 million) and reorganization costs ($12.7 million) for the transition of manufacturing from Owings Mills, costs associated with agreement to terminate Women's Health products with Duramed ($62.9 million), gain on the disposal of non-core product rights ($6.3 million), gain on disposal of the investment in Virochem ($55.2 million), discontinued operations in respect of non-core Jerini operations ($12.4 million) and tax effect of adjustments; and
(d) Depreciation: Depreciation of $93.0 million included in Cost of product sales, R&D costs and SG&A costs for US GAAP separately disclosed for the presentation of Non GAAP earnings.
Unaudited results for the year to December 31, 2008
Non GAAP reconciliation
US GAAP Adjustments
Acquisitions Divestments,
Amortization & reorganizations
December & asset integration & discontinued
Year to, 31, 2008 impairments activities operations
(a) (b) (c)
$M $M $M $M
Total revenues 3,022.2 - - -
Costs and expenses:
Cost of product sales 408.0 - - (48.8)
Research and
development(1) 494.3 - - (6.5)
Selling, general and
administrative(1) 1,455.2 (223.3) - (14.8)
Integration and
acquisition costs 10.3 - (10.3) -
Gain on sale of product
rights (20.7) - - 20.7
IPR&D 263.1 - (263.1) -
Depreciation - - - -
Total operating
expenses 2,610.2 (223.3) (273.4) (49.4)
Operating income 412.0 223.3 273.4 49.4
Interest income 25.5 - - -
Interest expense (139.0) - 73.0 -
Other (expense)/income,
net (32.9) 58.0 - (9.4)
Total other expense,
net (146.4) 58.0 73.0 (9.4)
Income from continuing
operations before
income taxes and equity
in earnings of equity
method investees 265.6 281.3 346.4 40.0
Income taxes (98.0) (39.1) (60.9) (12.4)
Equity in earnings of
equity method
investees, net of tax 2.4 - - -
Income from continuing
operations, net of tax 170.0 242.2 285.5 27.6
Loss from discontinued
operations (17.6) - - 17.6
Net income 152.4 242.2 285.5 45.2
Add: Net loss
attributable to
noncontrolling interest
in subsidiaries 3.6 - - -
Net income attributable
to Shire plc 156.0 242.2 285.5 45.2
Impact of convertible
debt, net of tax (2) - 14.6 - -
Numerator for diluted
EPS 156.0 256.8 285.5 45.2
Weighted average number
of shares (millions) -
diluted(2) 545.4 32.7 - -
Diluted earnings per
ADS 85.8c 128.4c 148.2c 23.4c
Year to, Non GAAP
Reclassify depreciation December 31, 2008
(d)
Total revenues $M $M
- 3,022.2
Costs and expenses:
Cost of product sales
Research and
development(1) (16.2) 343.0
Selling, general and
administrative(1) (12.5) 475.3
Integration and
acquisition costs (48.5) 1,168.6
Gain on sale of product
rights - -
IPR&D - -
Depreciation - -
Total operating expenses 77.2 77.2
- 2,064.1
Operating income
- 958.1
Interest income
Interest expense - 25.5
Other (expense)/income,
net - (66.0)
Total other expense, net - 15.7
Income from continuing
operations before income
taxes and equity in
earnings of equity
method investees - (24.8)
Income taxes - 933.3
Equity in earnings of
equity method investees,
net of tax - (210.4)
Income from continuing
operations, net of tax - 2.4
Loss from discontinued
operations - 725.3
Net income - -
Add: Net loss
attributable to
noncontrolling interest
in subsidiaries - 725.3
Net income attributable
to Shire plc - 3.6
Impact of convertible
debt, net of tax (2) - 728.9
Numerator for diluted
EPS - 14.6
Weighted average number
of shares (millions) -
diluted(2) - 743.5
Diluted earnings per ADS - 578.1
- 385.8c
(1) Promotional costs totaling $32.3 million have been reclassified from
Research and development to Selling, general and administrative costs for the
year to December 31, 2008.(2) The impact of convertible debt, net of tax has a dilutive effect on a Non GAAP basis.
The following items are included in Adjustments:
(a) Amortization and asset impairments: Amortization of intangible assets relating to intellectual property rights acquired ($126.2 million), impairment charge in respect of DYNEPO intangible asset ($94.6 million), impairment of other intangible assets ($2.5 million), other than temporary impairment of available for sale securities ($58.0 million), and tax effect of adjustments;
(b) Acquisitions & integration activities: Integration and transaction related costs in respect of the acquisition of Jerini ($10.3 million), IPR&D in respect of METAZYM acquired from Zymenex A/S ($135.0 million), IPR&D in respect of the acquisition of Jerini ($128.1 million), additional interest expense incurred on settlement of the TKT appraisal rights litigation ($73.0 million), and tax effect of adjustments;
(c) Divestments, reorganizations and discontinued operations: Costs associated with inventory write down and other exit costs in respect of DYNEPO ($48.8 million), R&D commitment in respect of DYNEPO ($6.5 million), costs associated with the introduction of a new holding company ($14.8 million), gains on the disposal of non-core assets ($20.7 million), gain on disposal of minority equity investment ($9.4 million), discontinued operations in respect of non-core Jerini operations ($17.6 million) and tax effect of adjustments; and
(d) Depreciation: Depreciation of $77.2 million included in Cost of product sales, R&D costs and SG&A costs for US GAAP separately disclosed for the presentation of Non GAAP earnings.
Unaudited results for the three months to December 31, 2009
Non GAAP reconciliation
US GAAP Adjustments
Acquisitions Divestments,
Amortization & reorganizations
December 31, & asset integration & discontinued
3 months to, 2009 impairments activities operations
(a) (b) (c)
$M $M $M $M
Total revenues 893.3 - - -
Costs and expenses:
Cost of product
sales 103.1 - - (4.5)
Research and
development 145.8 - - 2.1
Selling, general
and administrative 368.8 (35.3) - -
IPR&D 1.6 - (1.6) -
Reorganization
costs 5.6 - - (5.6)
Integration and
acquisition costs 0.6 - (0.6) -
Depreciation - - - -
Total operating
expenses 625.5 (35.3) (2.2) (8.0)
Operating income 267.8 35.3 2.2 8.0
Interest income 0.4 - - -
Interest expense (9.2) - - -
Other expenses, net (1.2) - - -
Total other
expense, net (10.0) - - -
Income from
continuing
operations before
income taxes and
equity in losses of
equity method
investees 257.8 35.3 2.2 8.0
Income taxes (81.8) (9.8) - (2.9)
Equity in losses of
equity method
investees, net of
tax (1.7) - - -
Net income
attributable to
Shire plc 174.3 25.5 2.2 5.1
Impact of
convertible debt,
net of tax 8.3 - - -
Numerator for
diluted EPS 182.6 25.5 2.2 5.1
Weighted average
number of shares
(millions) -
diluted 584.6 - - -
Diluted earnings
per ADS 93.6c 13.1c 1.1c 2.7c
3 months to, Non GAAP
Reclassify December 31,
depreciation 2009
(d)
Total revenues $M $M
- 893.3
Costs and expenses:
Cost of product
sales
Research and
development (0.4) 98.2
Selling, general
and administrative (4.2) 143.7
IPR&D (18.4) 315.1
Reorganization
costs - -
Integration and
acquisition costs - -
Depreciation - -
Total operating
expenses 23.0 23.0
- 580.0
Operating income
- 313.3
Interest income
Interest expense - 0.4
Other expenses, net - (9.2)
Total other
expense, net - (1.2)
Income from
continuing
operations before
income taxes and
equity in losses of
equity method
investees - (10.0)
Income taxes - 303.3
Equity in losses of
equity method
investees, net of
tax - (94.5)
Net income
attributable to
Shire plc - (1.7)
Impact of
convertible debt,
net of tax - 207.1
Numerator for
diluted EPS - 8.3
Weighted average
number of shares
(millions) -
diluted - 215.4
Diluted earnings
per ADS - 584.6
- 110.5c
The following items are included in Adjustments:(a) Amortization and asset impairments: Amortization of intangible assets relating to intellectual property rights acquired ($35.3 million) and tax effect of adjustment;
(b) Acquisitions and integration activities IPR&D charge in respect of Jerini ($1.6 million); costs associated with the integration of Jerini ($0.6 million) and tax effect of adjustments;
(c) Divestments, reorganizations and discontinued operations: Accelerated depreciation ($4.5 million) and reorganization costs ($5.6 million) for the transfer of manufacturing from Owings Mills; release of accrual for costs associated with agreement to terminate Women's Health products with Duramed ($2.1 million) and tax effect of adjustments; and
(d) Depreciation: Depreciation of $23.0 million included in Cost of product sales, R&D costs and SG&A costs for US GAAP separately disclosed for the presentation of Non GAAP earnings.
Unaudited results for the three months to December 31, 2008
Non GAAP reconciliation
US GAAP Adjustments
Acquisitions Divestments,
Amortization & reorganizations
December 31, & asset integration & discontinued
3 months to, 2008 impairments activities operations
(a) (b) (c)
$M $M $M $M
Total revenues 765.8 - - -
Costs and
expenses:
Cost of product
sales 90.6 - - 4.7
Research and
development(1) 125.9 - - -
Selling, general
and
administrative(1) 345.5 (41.0) - (1.0)
IPR&D 7.6 - (7.6) -
Integration and
acquisition costs 2.8 - (2.8) -
Depreciation - - - -
Total operating
expenses 572.4 (41.0) (10.4) 3.7
Operating income 193.4 41.0 10.4 (3.7)
Interest income 2.5 - - -
Interest expense (12.1) - - -
Other income, net 5.8 3.8 - -
Total other
expense, net (3.8) 3.8 - -
Income from
continuing
operations before
income taxes and
equity in
earnings of
equity method
investees 189.6 44.8 10.4 (3.7)
Income taxes (35.0) (6.3) (1.0) (17.1)
Equity in
earnings of
equity method
investees, net of
tax 1.1 - - -
Income from
continuing
operations, net
of tax 155.7 38.5 9.4 (20.8)
Loss from
discontinued
operations (16.7) - - 16.7
Net income 139.0 38.5 9.4 (4.1)
Add: Net loss
attributable to
noncontrolling
interest in
subsidiaries 2.3 - - -
Net income
attributable to
Shire plc 141.3 38.5 9.4 (4.1)
Impact of
convertible debt,
net of tax 8.4 - - -
Numerator for
diluted EPS 149.7 38.5 9.4 (4.1)
Weighted average
number of shares
(millions) -
diluted 575.5 - - -
Diluted earnings
per ADS 78.0c 20.2c 4.9c (2.0c)
Non GAAP
Reclassify December
3 months to, depreciation 31, 2008
(d)
$M $M
Total revenues - 765.8
Costs and
expenses:
Cost of product
sales (7.4) 87.9
Research and
development(1) (3.1) 122.8
Selling, general
and
administrative(1) (14.5) 289.0
IPR&D - -
Integration and
acquisition costs - -
Depreciation 25.0 25.0
Total operating
expenses - 524.7
Operating income - 241.1
Interest income - 2.5
Interest expense - (12.1)
Other income, net - 9.6
Total other
expense, net - -
Income from
continuing
operations before
income taxes and
equity in
earnings of
equity method
investees - 241.1
Income taxes - (59.4)
Equity in
earnings of
equity method
investees, net of
tax - 1.1
Income from
continuing
operations, net
of tax - 182.8
Loss from
discontinued
operations - -
Net income - 182.8
Add: Net loss
attributable to
noncontrolling
interest in
subsidiaries - 2.3
Net income
attributable to
Shire plc - 185.1
Impact of
convertible debt,
net of tax - 8.4
Numerator for
diluted EPS - 193.5
Weighted average
number of shares
(millions) -
diluted - 575.5
Diluted earnings
per ADS - 101.1c
(1) $6.3m of promotional costs have been reclassified from Research and
development to Selling, general and administrative costs for the three months
to December 31, 2008.The following items are included in Adjustments:
(a) Amortization and asset impairments: Amortization of intangible assets relating to intellectual property rights acquired ($34.7 million), impairment charge in respect of intangible assets ($6.3 million), other than temporary impairment of available for sale securities ($3.8 million) and tax effect of adjustments;
(b) Acquisitions & integration activities: IPR&D in respect of the acquisition of Jerini ($7.6 million), integration and transaction related costs in respect of the acquisition of Jerini ($2.8 million) and tax effect of adjustments;
(c) Divestments, reorganizations and discontinued operations: Release of provision for exit costs on DYNEPO ($4.7 million), costs associated with the introduction of a new holding company ($1.0 million), discontinued operations in respect of non-core Jerini operations ($16.7 million) and tax effect of adjustments; and
(d) Depreciation: Depreciation of $25.0 million included in Cost of product sales, R&D costs and SG&A costs for US GAAP separately disclosed for the presentation of Non GAAP earnings.
Unaudited results for the three and twelve months to December 31, 2009
Non GAAP reconciliation
The following table reconciles US GAAP diluted earnings per ADS to Non GAAP diluted earnings per ADS, including or excluding the effect of the change in best estimate for ADDERALL XR Medicaid rebates:
3 months to 12 months to
December 31, December 31,
2009 2009
$M $M
US GAAP diluted earnings per ADS 93.6c 269.1c
Non GAAP adjustments(1)
Amortization & asset impairments 13.1c 52.6c
Acquisitions & integration activities 1.1c 18.0c
Divestments, reorganizations & discontinued
operations 2.7c 9.2c
Non GAAP diluted earnings per ADS 110.5c 348.9c
Effect of change in best estimate for ADDERALL
XR Medicaid rebates (32.0c) (32.3c)
Non GAAP diluted earnings per ADS excluding the
effect of the change in best estimate 78.5c 316.6c
(1) The Non GAAP adjustments are stated net of their tax effects, and are
detailed on pages 22 and 24.The following table reconciles US GAAP net cash provided by operating activities to Non GAAP cash generation:
3 months to 12 months to
December 31, December 31,
2009 2008 2009 2008
$M $M $M $M
Net cash provided by operating
activities 236.9 274.6 626.9 800.1
Tax and interest payments, net 32.0 27.4 252.7 133.9
Interest on TKT appraisal
rights settlement - 147.0 - 147.0
Payments for acquired and
in-licensed products - - 36.9 135.0
Class action escrow payment - - - 27.0
Foreign exchange on cash (0.1) (6.4) 4.9 (11.8)
Non GAAP cash generation 268.8 442.6 921.4 1,231.2
Notes to Editors
SHIRE PLC
Shire's strategic goal is to become the leading specialty
biopharmaceutical company that focuses on meeting the needs of the specialist
physician. Shire focuses its business on attention deficit and hyperactivity
disorder, human genetic therapies and gastrointestinal diseases as well as
opportunities in other therapeutic areas to the extent they arise through
acquisitions. Shire's in-licensing, merger and acquisition efforts are
focused on products in specialist markets with strong intellectual property
protection and global rights. Shire believes that a carefully selected and
balanced portfolio of products with strategically aligned and relatively
small-scale sales forces will deliver strong results.THE "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Statements included herein that are not historical facts are forward-looking statements. Such forward-looking statements involve a number of risks and uncertainties and are subject to change at any time. In the event such risks or uncertainties materialize, Shire's results could be materially adversely affected. The risks and uncertainties include, but are not limited to, risks associated with: the inherent uncertainty of research, development, approval, reimbursement, manufacturing and commercialization of Shire's Specialty Pharmaceutical and Human Genetic Therapies products, as well as the ability to secure and integrate new products for commercialization and/or development; government regulation of Shire's products; Shire's ability to manufacture its products in sufficient quantities to meet demand; the impact of competitive therapies on Shire's products; Shire's ability to register, maintain and enforce patents and other intellectual property rights relating to its products; Shire's ability to obtain and maintain government and other third-party reimbursement for its products; and other risks and uncertainties detailed from time to time in Shire's filings with the Securities and Exchange Commission.
Non GAAP Measures
This press release contains financial measures not prepared in accordance with US GAAP. These measures are referred to as "Non GAAP" measures and include: Non GAAP operating income; Non GAAP net income; Non GAAP diluted earnings per ADS; effective tax rate on Non GAAP income from continuing operations before income taxes and earnings of equity method investees ("Effective tax rate on Non GAAP income"); Non GAAP Cost of product sales; Non GAAP Research and development; Non GAAP Selling, general and administrative; Non GAAP operating expenses; Non GAAP interest expense; Non GAAP other income; and Non GAAP cash generation. These Non GAAP measures exclude the effect of certain cash and non-cash items, both recurring and non-recurring, that Shire's management believes are not related to the core performance of Shire's business.
These Non GAAP financial measures are used by Shire's management to make operating decisions because they facilitate internal comparisons of Shire's performance to historical results and to competitors' results. Shire's Remuneration Committee uses certain key Non GAAP measures when assessing the performance and compensation of employees, including Shire's executive directors.
The Non GAAP measures are presented in this press release as Shire's management believe that they will provide investors with a means of evaluating, and an understanding of how Shire's management evaluates, Shire's performance and results on a comparable basis that is not otherwise apparent on a US GAAP basis, since many one-time, infrequent or non-cash items that Shire's management believe are not indicative of the core performance of the business may not be excluded when preparing financial measures under US GAAP.
These Non GAAP measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with US GAAP.
The following items, including their tax effect, have been excluded from both 2008 and 2009 Non GAAP earnings, and from our 2010 outlook:
Amortization and asset impairments:
- Intangible asset amortization and impairment charges; and
- Other than temporary impairment of investments.
Acquisitions and integration activities:
- Upfront payments and milestones in respect of in-licensed and acquired
products;
- Costs associated with acquisitions, including transaction costs, and
fair value adjustments on contingent consideration and acquired
inventory;
- Costs associated with the integration of companies; and
- Incremental interest charges arising on the settlement of litigation
with the former dissenting shareholders of TKT.
Divestments, re-organizations and discontinued operations
- Gains and losses on the sale of non-core assets;
- Costs associated with restructuring and re-organization activities;
- Termination costs;
- Costs associated with the introduction of the new holding company; and
- Income / (losses) from discontinued operations.
Depreciation, which is included in Cost of product sales, Research and
development and Selling, general and administrative costs in our US GAAP
results, has been separately disclosed for the presentation of 2008 and 2009
Non GAAP earnings. A reconciliation of Non GAAP financial measures to the
most directly comparable measure under US GAAP is presented on pages 22-26.Sales growth at CER, which is a Non GAAP measure, is computed by restating 2009 results using average 2008 foreign exchange rates for the relevant period.
Average exchange rates for the year to December 31, 2009 were $1.57:GBP1.00 and $1.39:EUR1.00 (2008: $1.85:GBP1.00 and $1.47:EUR1.00).
Average exchange rates for Q4 2009 were $1.63:GBP1.00 and $1.48:EUR1.00 (2008: $1.57:GBP1.00 and $1.32:EUR1.00).
2008 BALANCE SHEET RESTATEMENT
The consolidated financial information at December 31, 2008 has been restated. The effect of this restatement was to reduce Shire's non-current deferred tax liabilities and decrease Shire's accumulated deficit by $29 million. The restatement does not affect Shire's net income or cash flows for the years and quarters ended December 31, 2009 and 2008.
TRADEMARKS
All trademarks defined as (R) and (TM) used in this press release are trademarks of Shire plc or companies within the Shire group except for 3TC(R) and ZEFFIX(R) which are trademarks of GSK, DYNEPO(TM) which is a trademark of Sanofi Aventis, PENTASA(R) which is a trademark of Ferring A/S Corp, and REMINYL(R), REMINYL XL(TM), RAZADYNE(R) and RAZADYNE(R) ER which are trademarks of J&J outside the UK and Republic of Ireland(1). Certain trademarks of Shire plc or companies within the Shire group are set out in Shire's Quarterly Report on Form 10-Q for the nine months ended September 30, 2009.
1 REMINYL(R) and REMINYL XL(TM) are both trademarks of Shire in the UK and Republic of Ireland.
For further information please contact:
Investor Relations Clea Rosenfeld (Rest of the World) +44-1256-894-160
Eric Rojas (North America) +1-617-551-9715
Media Jessica Mann (Rest of the World) +44-1256-894-280
Jessica Cotrone (North America) +1-617-613-4640
Matt Cabrey (North America) +1-484-595-8248
SOURCE Shire Pharmaceutical