Publication of Shire plc's Annual Report 2008
Posted on: Wednesday, 25 March 2009, 09:05 CDT
Copies of the Annual Report and Accounts, Notice of Annual General
Meeting and Proxy Card will be submitted to the UK Listing Authority on or
about
In accordance with the requirements of Rule 4.1 of the Disclosure and
Transparency Rules which applies in respect of accounting periods commencing
after
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 hyperactivity disorder (ADHD), human genetic therapies (HGT) and gastrointestinal (GI) 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.
For further information on Shire, please visit the Company's website: http://www.shire.com.
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, the Company'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 the Company'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 the Company's products; the Company's ability to manufacture its products in sufficient quantities to meet demand; the impact of competitive therapies on the Company's products; the Company's ability to register, maintain and enforce patents and other intellectual property rights relating to its products; the Company'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 the Company's filings with the Securities and Exchange Commission.
APPENDIX 1. Principal Risks and Uncertainties RISKS RELATED TO THE GROUP'S BUSINESS The Group's new products may not be a commercial successShire has launched a number of new products in the last four years, including key new products ELAPRASE, VYVANSE, LIALDA, FIRAZYR and FOSRENOL (Rest of World ('ROW')). The commercial success of these new products, as well as other new products that the Group may launch in the future, will depend on their approval and acceptance by physicians, patients and other key decision-makers, as well as the timing of the receipt of marketing approvals, the scope of marketing approvals as reflected in the product's label, the countries in which such approvals are obtained, the authorization of price and reimbursement in those countries where price and reimbursement is negotiated, and safety, efficacy, convenience and cost-effectiveness of the product as compared to competitive products.
The Group may not be able to grow revenues in its new products as quickly as anticipated if any or all of the following occur:
- if competitive products are genericised and the impact on the market negatively affects the prescribing of branded treatments for the indications that the Group's new products treat; - if there are unanticipated adverse events experienced with the Group's new products not seen in clinical trials that impact the physician's willingness to prescribe the Group's new products; - if issues arise from clinical trials being conducted for post marketing purposes or for registration in another country or regulatory agencies in one country act in a way that causes concern for prescribers or patients in another country; - if patients, payors or physicians favor older treatments over newer treatments; - if government regulation is stricter for the Group's new products than for existing treatments; - if the new products suffer a loss of patent protection or competitors successfully challenge or circumvent the Group's patents or regulatory exclusivity; - if planned geographical expansion into emerging markets is not successful; or - if the size of the patient population for the new product is less than expected or the Group fails to identify new patients for the new products.If the Group is unable to commercialize ELAPRASE, VYVANSE, LIALDA, FIRAZYR, FOSRENOL (ROW) or any of its new products successfully, there may be a material adverse effect on the Group's revenues, financial condition and results of operations.
Any decrease in the combined sales of VYVANSE and ADDERALL XR will significantly reduce revenues and earnings
In 2008, the combined sales of VYVANSE and ADDERALL XR were
Any decrease in the sales of 3TC could significantly reduce earnings
The Group receives royalties from GlaxoSmithKline ('GSK') on the
worldwide sales of 3TC. In 2008, the Group's royalty income relating to 3TC
sales was
Any factors that decrease sales of 3TC by GSK could significantly reduce the Group's earnings. These include:
- development and marketing of competitive pharmaceuticals, including generic versions; - loss of patent protection or ability of competitors to challenge or circumvent patents; - reduction in the production of 3TC; - technological advances; - government action/intervention; - marketing or pricing actions by GSK's competitors; - any change in the label or other such regulatory intervention; - public opinion towards AIDS treatments; and - product liability claims.The failure to obtain and maintain reimbursement, or an adequate level of reimbursement, by third-party payers in a timely manner for certain of the Group's products and parallel importation may impact future revenues and earnings
The Group's revenues are partly dependent on the level of reimbursement provided to the Group by governmental reimbursement schemes for pharmaceutical products. Changes to governmental policy or practices could adversely affect the Group's sales, financial condition and results of operations. In addition, the cost of treatment established by health care providers, private health insurers and other organizations, such as health maintenance organizations and managed care organizations are under downward pressure and this, in turn, could impact on the prices at which the Group can sell its products.
The market for pharmaceutical products could be significantly influenced by the following, which could result in lower prices for the Group's products and/or a reduced demand for the Group's products:
- the ongoing trend toward managed health care, particularly in the US; - legislative proposals to reform health care and government insurance programs in many of the Group's markets; and - price controls and non-reimbursement of new and highly priced medicines for which the economic and therapeutic rationales are not established.The prices for certain of the Group's products when commercialized, in particular products for the treatment of rare genetic diseases such as REPLAGAL and ELAPRASE, may be high compared to other pharmaceutical products. The Group may encounter particular difficulty in obtaining satisfactory pricing and reimbursement for its products, including those that are likely to have a high annual cost of therapy. The failure to obtain and maintain pricing and reimbursement at satisfactory levels for such products may adversely affect revenues and earnings.
Parallel importation occurs when an importer finds a cheaper price for a product or equivalent product on the world market and imports that product from the lower price jurisdiction to the higher price jurisdiction. If the parallel importation of lower priced drugs is permitted in the US, it could have the effect of reducing sales of equivalent drugs in the US. To the extent that parallel importation increases, the Group may receive less revenue and earnings from its commercialized products. The parallel importation of prescription drugs is relatively common within the EU.
A disruption to the product supply chain may result in the Group being unable to continue marketing or developing a product or may result in the Group being unable to do so on a commercially viable basis
The Group sources its products from third party contract manufacturers, and for certain products has its own manufacturing capability. In the event of either the Group's failure or the failure of any third party contract manufacturer to comply with mandatory manufacturing standards (often referred to as 'Current Good Manufacturing Standards' or cGMP) in the countries in which the Group intends to sell or have its products sold, the Group may experience a delay in supply or be unable to market or develop its products.
The Group dual-sources certain key products and/or active ingredients. However, the Group currently relies on a single source for production of the final drug product for each of DAYTRANA, FIRAZYR, LIALDA, PENTASA, REMINYL and XAGRID and relies on a single active ingredient source for each of ELAPRASE, FIRAZYR, FOSRENOL, REMINYL, REPLAGAL and XAGRID.
In the event of financial failure of a third party contract manufacturer, the Group may experience a delay in supply or be unable to market or develop its products. This could have a material adverse affect on the Group's financial condition and results of operations.
There is no assurance that suppliers will continue to supply on commercially viable terms, or be able to supply components that meet regulatory requirements. The Group is also subject to the risk that suppliers will not be able to meet the quantities needed to meet market requirements
The development and approval of the Group's products depends on the ability to procure active ingredients and special packaging materials from sources approved by regulatory authorities. As the marketing approval process requires manufacturers to specify their own proposed suppliers of active ingredients and special packaging materials in their applications, regulatory approval of a new supplier would be required if active ingredients or such packaging materials were no longer available from the supplier specified in the marketing approval. The need to qualify a new supplier could delay the Group's development and commercialization efforts.
The Group uses bovine-derived serum sourced from
The actions of certain customers can affect the Group's ability to sell or market products profitably, as well as impact net sales and growth comparisons
A small number of large wholesale distributors control a significant
share of the US and European markets. In 2008, for example, approximately 56%
of the Group's product sales were attributable to two customers; McKesson
Corp. and Cardinal Health, Inc. In the event of financial failure of any of
these customers, the Group may suffer financial loss and a decline in
revenues and earnings. In addition, the number of independent drug stores and
small chains has decreased as retail pharmacy consolidation has occurred.
Consolidation or financial difficulties could cause customers to reduce their
inventory levels, or otherwise reduce purchases of the Group's products. Such
actions could have an adverse effect on the Group's revenues, financial
condition and results of operations. A significant portion of the Group's
Specialty Pharmaceuticals product sales are made to major pharmaceutical
wholesale distributors as well as to large pharmacies in both the US and
The outsourcing of services can create a significant dependency on third parties, the failure of whom can affect the ability to operate the Group's business and to develop and market products
The Group has entered into many agreements with third parties for the provision of services to enable it to operate its business. If the third party can no longer provide the service on the agreed basis, the Group may not be able to continue the development or commercialization of its products as planned or on a commercial basis. Additionally, it may not be able to establish or maintain good relationships with the suppliers.
The Group has also entered into licensing and co-development agreements with a number of parties. There is a risk that, upon expiration or termination of a third party agreement, the Group may not be able to renew or extend the agreement with the third party as commercial interests may no longer coincide. In such circumstances, the Group may be unable to continue to develop or market its products as planned and could be required to abandon or divest a product line.
In the event of breakdown, failure or breach of security on any of the Group's IT systems, the Group may be unable to maintain its business operations
The Group operates several complex information systems upon which it is dependent. The Group has back-up procedures and disaster recovery plans in place to enable the business to continue its normal operations and to mitigate any loss in the event of a failure. However, in the event of breakdown, failure or breach of security of any of these systems or the associated suppliers, the Group may be unable to maintain its business operations.
This could lead to loss of revenue and delay in product development. In addition, the Group is in the process of installing enterprise-wide information systems in its operations throughout the world. Any failure in the operation of these systems could have an adverse effect on the Group's business operations.
The Group may incur unexpected expenditure in order to comply with US environmental laws
The Group's manufacturing sites are situated in the US and are subject to national, state and local environmental laws. Compliance with environmental laws requires ongoing expenditure and any spillage or contamination found to be caused by the Group may result in clean up costs and financial penalties for the Group which could adversely affect the Group's revenues, financial condition and results of operations.
Contracts are used in all areas of operation of the business. They may contain provisions that do not protect the Group's position or with which it cannot comply
Contracts form the basis of agreement in many key activities such as mergers and acquisitions, arrangements with suppliers, outsourcing, product licensing and marketing. These contracts may contain provisions that impose duties on the parties involved or may fail to contain adequate conditions to protect the Group's position. The Group may be unable to meet its obligations under a contract or may be unable to require other parties to comply with their obligations and, therefore, may suffer financial loss or penalty.
RISK FACTORS RELATED TO THE PHARMACEUTICAL INDUSTRY IN GENERAL
The actions of governments, industry regulators and the economic environments in which the Group operates may adversely affect its ability to develop and market its products profitably
Changes to laws or regulations impacting the pharmaceutical industry, in any country in which the Group conducts its business, may adversely impact the Group's sales, financial condition and results of operations. In particular, changes to the regulations relating to orphan drug status may affect the exclusivity granted to products with such designation. Changes in the general economic conditions in any of the Group's major markets may also affect the Group's sales, financial condition and results of operations.
The introduction of new products by competitors may impact future revenues
The manufacture and sale of pharmaceuticals is highly competitive. Many of the Group's competitors are large, well-known pharmaceutical, biotechnology, chemical and healthcare companies with considerable resources. Companies with more resources and larger R&D expenditures have a greater ability to fund clinical trials and other development work necessary for regulatory applications. They may also be more successful than the Group in acquiring or licensing new products for development and commercialization. If any product that competes with one of the Group's principal drugs is approved, the Group's sales of that drug could fall.
The pharmaceutical and biotechnology industries are also characterized by continuous product development and technological change. The Group's products could, therefore, be rendered obsolete or uneconomic, through the development of new products, technological advances in manufacturing or production by its competitors.
If the Group's projects or clinical trials for the development of products are unsuccessful, its products will not receive authorization for manufacture and sale
Due to the complexity of the formulation and development of pharmaceuticals, the Group cannot be certain that it or its collaborative partners will successfully complete the development of new products, or, if successful, that such products will be commercially viable.
Before obtaining regulatory approvals for the commercial sale of each
product under development, the Group or its collaborative partners must
demonstrate through clinical and other studies that the product is of
appropriate quality and is safe and effective for the claimed use. Clinical
trials of any product under development may not demonstrate the quality,
safety and efficacy required to result in an approvable or a marketable
product. Failure to demonstrate adequately the quality, safety and efficacy
of a therapeutic drug under development would delay or prevent regulatory
approval of the product. In addition, regulatory authorities in
If the Group is unable to meet the requirements of regulators in relation to a particular product, it may be unable to develop the product or obtain or retain the necessary marketing approvals
Drug companies are required to obtain regulatory approval before manufacturing and marketing most drug products. Regulatory approval is generally based on the results of:
- quality testing (chemistry, manufacturing and controls); - non-clinical testing; and - clinical testing.The clinical development, manufacture, marketing and sale of pharmaceutical products is subject to extensive regulation, including separate regulation by each member state of the European Union ('EU'), the European Medicines Agency ('EMEA') itself and federal, state and local regulation in the US. Unanticipated legislative and other regulatory actions and developments concerning various aspects of the Group's operations and products may restrict its ability to sell one or more of its products or to sell those products at a profit. The generation of data is regulated and any generated data is susceptible to varying interpretations that could delay, limit or prevent regulatory approval. Required regulatory approvals may not be obtained in a timely manner, if at all. In addition, other regulatory requirements for any such proposed products may not be met.
Even if the Group obtains regulatory approvals, the terms of any product approval, including labeling, may be more restrictive than desired and could affect the marketability of its products. Regulatory authorities also have the power amongst other things, to:
- revoke or suspend approvals of previously approved products; - require the recall of products that fail to meet regulatory requirements; and - close manufacturing plants that do not operate in conformity with cGMP and/or other regulatory requirements or approvals.Such delays or actions could affect the Group's ability to manufacture and sell its products.
The failure of a strategic partner to develop and commercialize products could result in delays in approval or loss of revenue
The Group enters into strategic partnerships with other companies in areas such as product development and sales and marketing. In these partnerships, the Group is dependent on its partner to deliver results. While these partnerships are supported by contracts, the Group does not exercise direct control. If a partner fails to perform or experiences financial difficulties, the Group may suffer a delay in the development, a delay in the approval or a reduction in sales or royalties of a product.
The failure to secure new products or compounds for development, either through in-licensing, acquisition or internal research and development efforts, may have an adverse impact on the Group's future results
The Group's future results will depend, to a significant extent, upon its ability to in-license, acquire or develop new products or compounds. The Group also expends significant resources on research and development. The failure to in-license or acquire new products or compounds, on a commercially viable basis, could have a material adverse effect on the Group's financial position. The failure of these efforts to result in the development of products appropriate for testing in human clinical trials could have a material adverse effect on the Group's revenues, financial condition and results of operations.
The Group may fail to obtain, maintain, enforce or defend the intellectual property rights required to conduct its business
The Group's success depends upon its ability and the ability of its partners and licensors to protect their intellectual property rights. Where possible, the Group's strategy is to register intellectual property rights, such as patents and trademarks. The Group also relies variously on trade secrets, unpatented know-how and technological innovations and contractual arrangements with third parties to maintain its competitive position.
Patents and patent applications covering a number of the technologies and
processes owned or licensed to the Group have been granted, or are pending in
various countries, including the US,
Additionally, the Group's products, or the technologies or processes used to formulate or manufacture those products may now, or in the future, infringe the patent rights of third parties. It is also possible that third parties will obtain patent or other proprietary rights that might be necessary or useful for the development, manufacture or sale of the Group's products. If third parties are the first to invent a particular product or technology, it is possible that those parties will obtain patent rights that will be sufficiently broad to prevent the Group or its strategic partners from developing, manufacturing or selling its products. The Group may need to obtain licenses for intellectual property rights from others to develop, manufacture and market commercially viable products and may not be able to obtain these licenses on commercially reasonable terms, if at all. In addition, any licensed patents or proprietary rights may not be valid and enforceable.
The Group also relies on trade secrets and other un-patented proprietary information, which it generally seeks to protect by confidentiality and nondisclosure agreements with its employees, consultants, advisors and partners. These agreements may not effectively prevent disclosure of confidential information and may not provide the Group with an adequate remedy in the event of unauthorized disclosure of such information. If the Group's employees, scientific consultants or partners develop inventions or processes that may be applicable to the Group's products under development, such inventions and processes will not necessarily become the Group's property, but may remain the property of those persons or their employers. Protracted and costly litigation could be necessary to enforce and determine the scope of the Group's proprietary rights. The failure to obtain or maintain patent and trade secret protection, for any reason, could allow other companies to make competing products and reduce the Group's product sales.
The Group has filed applications to register various trademarks for use
in connection with its products in various countries including the US and
countries in
If a marketed product fails to work effectively or causes adverse side effects, this could result in damage to the Group's reputation, the withdrawal of the product and legal action against the Group
Unanticipated side effects or unfavorable publicity concerning any of the Group's products, or those of its competitors, could have an adverse effect on the Group's ability to obtain or maintain regulatory approvals or successfully market its products. The testing, manufacturing, marketing and sales of pharmaceutical products entails a risk of product liability claims, product recalls, litigation and associated adverse publicity. The cost of defending against such claims is expensive even when the claims are not merited. A successful product liability claim against the Group could require the Group to pay a substantial monetary award. If, in the absence of adequate insurance coverage, the Group does not have sufficient financial resources to satisfy a liability resulting from such a claim or to fund the legal defense of such a claim, it could become insolvent. Product liability insurance coverage is expensive, difficult to obtain and may not be available in the future on acceptable terms. Although the Group carries product liability insurance, this coverage may not be adequate. In addition, it cannot be certain that insurance coverage for present or future products will be available. Moreover, an adverse judgment in a product liability suit, even if insured or eventually overturned on appeal, could generate substantial negative publicity about the Group's products and business and inhibit or prevent commercialization of other products.
Investigations or enforcement action by regulatory authorities or law enforcement agencies relating to the Group's activities in the highly regulated markets in which it operates may result in the distraction of senior management, significant legal costs and the payment of substantial compensation or fines
The Group engages in various marketing, promotional and educational activities pertaining to, as well as the sale of, pharmaceutical products in a number of jurisdictions around the world. The promotion, marketing and sale of pharmaceutical products is highly regulated and the operations of market participants, such as the Group, are closely supervised by regulatory authorities and law enforcement agencies, including the US Food and Drug Administration ('FDA'), the US Department of Justice and the DEA in the US. Any inquiries or investigations into the operations of, or enforcement or other regulatory action against, the Group by such regulatory authorities could result in the distraction of senior management for prolonged periods of time, significant defense costs and substantial monetary penalties.
Loss of highly qualified management and scientific personnel could cause the Group subsequent financial loss
The Group faces intense competition for highly qualified management and scientific personnel from other companies, academic institutions, government entities and other organizations. It may not be able to successfully attract and retain such personnel. The Group has agreements with a number of its key scientific and management personnel for periods of one year or less. The loss of such personnel, or the inability to attract and retain the additional, highly skilled employees required for its activities could have an adverse effect on the Group's business.
2. Business Review
Chief Executive Officer's review
Risks-wisely measured and judiciously taken-are part and parcel of every successful company, and certainly we've taken our fair share at Shire. In our brightest moments we have stood at a critical juncture, made defining, not-always-obvious decisions, and redefined the future not just for ourselves, but for the physicians and patients we serve.
Since succeeding
Of course, achieving our mission demands quite a lot of Shire's pipeline
as well as its marketed portfolio, and I am very pleased with the steps that
we have taken to further leverage both. Consider this: over the course of the
last two years alone, we've successfully completed six deals that have
yielded eight new products in our pipeline/portfolio. Consider, also, this:
The combined sales of new products launched in past four years achieved
We're committed to going the distance with every product at Shire-asking hard questions, exploring new indications, looking for ways to extend proven technologies into new treatments; always with the patients' needs most at heart. The acquisition of New River Pharmaceuticals Inc. ('New River'), for example, didn't just provide Shire with VYVANSE, a next-generation treatment for ADHD; it opened the door to new possibilities associated with CarrierWave technology, which enhances drug metabolism and may well have applications for other medicines. At the same time we're expanding our patient populations with plans to expand our presence in markets outside the US and the proposed launch in the US of INTUNIV, our first non-stimulant ADHD drug.
In the gastrointestinal business unit, we are taking similar strides-leveraging our success with LIALDA, our expertise in ulcerative colitis, and our relationships with gastro-enterologists to explore new options for patients suffering from an entire range of inflammatory bowel diseases. We're currently in the midst of Phase 2 trials for SPD550, a compound we licensed in from Alba Therapeutics Corporation ('Alba') because we believe that it can have important implications for patients suffering from Celiac disease.
Three and a half years ago, when Shire acquired what has since become
known as Shire Human Genetic Therapies, there were only four projects in the
pipeline and there were many questions about this relatively small company's
future. Three deals later-with Amicus Therapeutics, Inc. ('Amicus'), Zymenex
A/S ('Zymenex'), and Jerini AG ('Jerini')- Human Genetic Therapies ('HGT') is
1,000 people strong, with three marketed drugs in its portfolio (REPLAGAL,
ELAPRASE, and FIRAZYR) and a number of very exciting Phase 2 and 3 products
designed to treat such debilitating conditions as Gaucher disease, Fabry
disease and Metachromatic Leukodystrophy. HGT now occupies an entire campus
in
Moreover, HGT products are helping Shire meet its goal of global
diversification, with REPLAGAL and ELAPRASE together now approved and in use
in more than 40 countries, and 70% of HGT sales now generated outside
Pressures abound in the current economy, but at Shire we're not just merely biding our time. We are moving forward-bolstering our pipeline through business-enhancing acquisitions, anticipating breakthroughs for patients with unmet needs, capitalizing on new patient populations, and looking for commonalities between our Specialty and HGT businesses. It's been an exciting time and the future promises even more. I thank my colleagues for continuing to help Shire live up to its own promise.
Overview
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 ADHD, HGT and gastrointestinal ('GI') 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.
Substantially all of the Group's revenues, expenditures and net assets are attributable to the R&D, manufacture, sale and distribution of pharmaceutical products within two operating segments: Specialty Pharmaceuticals and HGT. The Group also earns royalties (where Shire has out-licensed products to third parties) which are recorded as revenues within "All Other" in the segmental analysis.
Revenues are derived primarily from two sources - sales of the Group's own products and royalties:
- 91% (2007: 89%) of total revenues are derived from product sales, of which 75% (2007: 76%) are within the Specialty Pharmaceuticals operating segment and 16% (2007: 13%) are within the HGT operating segment; - 8% of total revenues are derived from royalties (2007: 10%).Shire's strategic objectives are set using a balanced scorecard approach. Objectives are also set at the business, functional and therapeutic area levels and are aligned with the Group-wide strategic and operational objectives. The Group therefore takes a fully integrated approach to strategic management. Key performance indicators ('KPIs') are used to measure achievement of the objectives. Strategic objectives are categorized into fields - 'financial', 'customers', 'people & capabilities' and 'operational excellence'. For 2008, Shire's corporate objectives included: target net revenue and defined levels of revenue growth; target sales and contributions for core products; development of a strategy to improve customer care and customer service levels; drug application filing and launch targets for new products; development of a strategy to achieve the optimum Shire product portfolio; development of optimal manufacturing and supply chain strategy; development and communication of career development tools for employees; development and commencement of rollout of corporate brand positioning; and maintenance of robust risk management practices including internal controls.
The markets in which the Group conducts its business are highly competitive and highly regulated. The health care industry is experiencing:
- pressure from governments and healthcare providers to keep prices low while increasing access to drugs; - increased R&D costs as development programs are typically larger and take longer to get approval from regulators; - challenges to existing patents from generic manufacturers; - low cost generic drugs entering the market on expiration of patent protection; and - higher marketing costs due to the use of direct to consumer campaigns in the US and competition for market share.Shire's strategy to become the leading specialty biopharmaceutical company has been developed to address these industry-wide competitive pressures. This strategy has resulted in a series of initiatives in the following areas:
Markets
Historically, Shire's portfolio of approved products has been heavily
weighted towards the North American market. With the acquisition of
Transkaryotic Therapies Inc ('TKT') in 2005 and the establishment of our HGT
business, Shire has substantially increased its presence in
For 2008, sales outside
Shire's continued expansion beyond
This program of new product launches will require significant investment in advertising, promotional spend and in some cases, additional sales representatives.
The orphan disease nature of HGT products means that relatively low
associated Selling, general and administrative ('SG&A') and sales
infrastructure investment is required, making them ideal products for Shire
to launch into new markets. In markets outside
Patents and Market Exclusivity
The loss or expiration of patent protection or market exclusivity with respect to any of the Group's major products could have a material adverse effect on future revenues and net income as generic manufacturers may produce similar drugs and be able to sell the Group's drugs at a lower price as their costs of development are significantly lower than Shire's.
The Group anticipates that there will be one or more generic competitors
to ADDERALL XR in the ADHD market beginning
Shire is engaged in various legal proceedings with generic manufacturers with respect to its ADDERALL XR and CARBATROL patents, as well as the patents for certain other products.
R&D
Over the last five years Shire has focused its R&D efforts on products in its core therapeutic areas, which meet the needs of the specialist physician. The Group has also concentrated its resources on obtaining regulatory approval for later-stage pipeline products within its core therapeutic areas.
Evidence of the successful execution of this strategy can be seen from
the progression of the Group's development pipeline over the last five years.
Since
Shire's strategy is focused on the development of product candidates that have a lower risk profile. R&D costs in 2009 will include expenditure on several pre-clinical to Phase 3 studies and Phase 3(b) and Phase 4 studies to support recently launched products in the Specialty Pharmaceuticals and HGT businesses, and the development of new projects in both the Specialty Pharmaceuticals and HGT businesses.
At
Specialty Pharmaceuticals
Treatments for ADHD
VYVANSE for ADHD in EU and
In
VYVANSE for the treatment of ADHD in children aged 6 to 17 in the EU is
in Phase 3 development and Shire expects to submit the regulatory filing for
VYVANSE in
DAYTRANA for ADHD in EU &
Regulatory submissions were filed for approval of the product with Health
Canada in
INTUNIV for ADHD in US
In
SPD487 (Amphetamine transdermal system)
In
Treatments for GI diseases
LIALDA/MEZAVANT for the maintenance of remission in ulcerative colitis in the US
Phase 3 trials investigating the use of the product to maintain remission in patients who have ulcerative colitis were initiated in 2006 for the US market and are continuing. The product was given this indication on approval in the EU.
LIALDA/MEZAVANT for the treatment of diverticulitis
Phase 3 worldwide clinical trials investigating the use of the product for the treatment of diverticulitis were initiated in 2007 and are continuing.
SPD550 (Larazotide Acetate; also known as AT-1001) for the treatment of Celiac disease
SPD550 is being developed for the treatment of Celiac disease. In
Treatments for diseases in other therapeutic areas
FOSRENOL for the treatment of pre-dialysis chronic kidney disease ('CKD')
Following the FDA Cardiovascular and Renal Drugs Advisory Committee recommendation in October of 2007 on the use of phosphate binders, including FOSRENOL, to treat hyperphosphatemia in pre-dialysis CKD patients, Shire continues to work with the FDA to determine whether FOSRENOL can launch in the pre-dialysis CKD market in the US without conducting additional clinical outcomes trials.
JUVISTA
Renovo Limited ('Renovo') initiated its first pivotal European Phase 3 trial in scar revision in the fourth quarter of 2008 to support the filing of a European regulatory dossier. If the outcome from Renovo's multi centre, EU Phase 3 study is suitably positive, the data will be used to inform the strategy and design of Shire's US development plan and to strengthen the chances of regulatory and commercial success in the US.
SEASONIQUE an extended cycle oral contraceptive
In
On
Projects in pre-clinical development
A number of projects are underway in the early stages of pre-clinical development for the Specialty Pharmaceuticals area.
Human Genetic Therapies
Treatments for Angioedema
FIRAZYR for hereditary angioedema ('HAE') in the US
FIRAZYR is a treatment for acute HAE which Shire added to the portfolio
through its acquisition of a majority voting interest in Jerini during 2008.
Jerini received a not approvable letter for FIRAZYR for use in the US from
the FDA in
ERT
Velaglucerase alfa (GA-GCB) - for the treatment of Gaucher disease
Velaglucerase alfa is an enzyme replacement therapy being developed for the treatment of Gaucher disease. Shire has completed enrolment in a worldwide Phase 3 clinical program for velaglucerase alfa. This comprehensive development program includes the evaluation of velaglucerase alfa in naive patients and patients previously treated with imiglucerase across three clinical studies. It is anticipated that this development program will support global filings in the second half of 2009.
HGT-1111 / METAZYM - for the treatment of Metachromatic Leukodystrophy ('MLD')
Shire has an ongoing enzyme replacement therapy program for the treatment
of MLD, which is a lysosomal storage disorder that results from a deficiency
in the enzyme arylsulfatase-A ('ASA'). In
HGT-1110 was in development at Shire for the treatment of MLD following successful pre-clinical proof of concept studies. The HGT-1110 program was replaced with the HGT-1111 development program upon completion of the acquisition from Zymenex.
HGT-2310 - Hunter syndrome with central nervous system symptoms, idursulfase-IT
Following the acceptance by the FDA in
HGT-1410 for Sanfilippo Syndrome (Mucopolysaccharidosis IIIA)
HGT-1410 is in development as an enzyme replacement therapy for the treatment of Sanfilippo Syndrome (Mucopolysaccharidosis IIIA), a lysosomal storage disorder.
HGT-2610 for the treatment of Krabbe disease (Globoid Cell Leukodystrophy, ('GLD'))
In
Pharmacological Chaperone Technology
In
PLICERA (HGT-3410 for the treatment of Gaucher disease)
PLICERA is an orally-administered, small molecule pharmacological chaperone that is being developed for the treatment of Gaucher disease. PLICERA has received orphan drug designation by the European Medicines Agency ('EMEA'),which may provide it with up to ten years market exclusivity in the EU.
In
AMIGAL (HGT-3310 for the treatment Fabry disease)
AMIGAL is an orally-administered, small molecule pharmacological chaperone being developed for the treatment of Fabry disease. AMIGAL has received orphan drug designation by the EMEA, which may provide it with up to ten years market exclusivity in the EU.
Amicus met with the FDA to discuss the AMIGAL development program in
HGT-3510 for the treatment of Pompe disease
HGT-3510 is an orally-administered, small molecule pharmacological
chaperone being developed for the treatment of Pompe disease. In
Early Research Products
A number of additional projects are underway in the early stages of development for the HGT business area.
Business Development
As a result of the issues associated with the loss or expiry of patent protection or market exclusivity, Shire seeks to focus its business development activity on the acquisition and in-licensing of products and projects which have the benefit of long-term patent protection and market exclusivity.
The Group remains active in seeking out opportunities to acquire new products or companies that fit its business strategy, its existing therapeutic areas or are in complementary therapeutic areas. During 2008 Shire:
- acquired more than 98% of Jerini, adding Jerini's HAE product, FIRAZYR, to the portfolio; and - acquired the global rights to METAZYM, a clinical candidate arylsulfatase-A, from Zymenex. In 2007, the Group acquired New River, allowing Shire to capture the full
economic value of VYVANSE and gain control of the development and
commercialization of this product. In 2007 Shire also in-licensed the rights
to AMIGAL, PLICERA and AT-2220, three pharmacological chaperone compounds for
lysosomal storage disorders in markets outside the US; SPD550 for Celiac
disease in markets outside of the US and
As part of its strategy of focusing on drugs with long term patent protection in its core therapeutic areas, the Group will continue to evaluate opportunities to dispose of non-core assets. In 2007 the Group divested a portfolio of non-core products, including SOLARAZE and VANIQA, to Laboratorios Almirall ('Almirall') and sold EQUETRO and transferred post-approval study commitments to Validus Pharmaceuticals Inc.
Organization and Structure
During 2008, the Group undertook a court sanctioned Scheme of Arrangement, establishing Shire plc as the new Shire holding company.
In 2008, Shire acquired more than 98% of Jerini and is in the process of
integrating Jerini into the Group: integration and acquisition related costs
expensed during the year to
Results of operations for the years to
For the year to
Total revenues
The following table provides an analysis of the Group's total revenues by source: Year to December 31, 2008 2007 Change $'M $'M % __________ __________ ________ Product sales 2,754.2 2,170.2 27 Royalties 245.5 247.2 -1 Other revenues 22.5 18.9 19 __________ __________ ________ Total 3,022.2 2,436.3 24 __________ __________ ________ Product sales US prescription Year to December Product sales growth 31, growth 2008 2007 $'M $'M % % __________ __________ __________ __________ Specialty Pharmaceuticals ADHD ADDERALL XR 1,101.7 1,030.9 7 -5 VYVANSE 318.9 76.5 317 388 DAYTRANA 78.7 64.2 23 -11 GI PENTASA 185.5 176.4 5 -1 LIALDA / MEZAVANT 140.4 50.5 178 204 General Products FOSRENOL 155.4 102.2 52 -4 CALCICHEW 52.8 54.2 -3 n/a CARBATROL 75.9 72.3 5 -4 REMINYL/REMINYL XL 34.4 31.2 10 n/a XAGRID 78.7 66.8 18 n/a Other product sales 50.1 119.3 -58 n/a ______________ ______________ ______________ 2,272.5 1,844.5 23 ______________ ______________ ______________ Human Genetic Therapies ELAPRASE 305.1 181.8 68 n/a REPLAGAL 176.1 143.9 22 n/a FIRAZYR 0.5 - n/a n/a ______________ ______________ ______________ 481.7 325.7 48 ___________ ___________ ___________ Total 2,754.2 2,170.2 27 ______________ ______________ ______________ The following discussion includes references to US prescription and US
market share data for key products. The source of this data is IMS Health
('IMS'),
Specialty Pharmaceuticals
US ADHD market share
The continued growth in market share of VYVANSE helped Shire grow its
average annual share of the US ADHD market to 32.6% for the year to
ADDERALL XR - ADHD
ADDERALL XR's average share of the US ADHD market for 2008 fell to 22.6%
(2007: 25.5%). US prescriptions for ADDERALL XR for the year to
Sales of ADDERALL XR for the year to
As previously disclosed, the United States Federal Trade Commission
('FTC') informed Shire on
VYVANSE - ADHD
VYVANSE was launched in the US in
In
In
Product sales for the year to
DAYTRANA - ADHD
Product sales for the year to
Despite the 11% decrease in prescriptions compared to 2007, sales of DAYTRANA grew 23% compared to the same period last year due to growth in the US ADHD market of 7% and lower sales deductions in 2008 over 2007, primarily due to reduced coupon expense.
During 2008 Shire announced two voluntary market recalls of a limited portion of DAYTRANA patches because certain patches did not meet their release liner removal specifications which may have resulted in some patients and caregivers having difficulties removing the liners. The voluntary recalls were not due to safety issues. Shire and Noven Pharmaceuticals, Inc. ('Noven') (the manufacturer of DAYTRANA) continue to pursue enhancements to the product and to work closely with the FDA to implement changes that may improve the usability of DAYTRANA. There has been no interruption in the production of DAYTRANA.
US oral mesalamine market share
Shire's average annual market share of the US oral mesalamine market rose
to 28.4% for the year to
LIALDA/MEZAVANT - Ulcerative colitis
US prescriptions of LIALDA for the year to
In
Sales of MEZAVANT outside the US for the year to
PENTASA - Ulcerative colitis
US prescriptions of PENTASA for the year to
Sales of PENTASA for the year to
FOSRENOL - Hyperphosphatemia
At
US sales of FOSRENOL for the year to
In
In
XAGRID - Thrombocythemia
Sales for the year to
DYNEPO - Anemia associated with chronic kidney disease
In
Human Genetic Therapies
ELAPRASE - Hunter syndrome
Sales for the year to
REPLAGAL - Fabry disease
Sales for the year to
FIRAZYR - HAE
During the second half of 2008 FIRAZYR was launched in some countries in
Foreign exchange effect
Revenues reported in US dollars include the impact of translating sales made in local currency (primarily Euros and Pounds sterling) into US dollars. The table below shows the effect of foreign exchange translations on the revenue growth of the key affected products (for the principal currencies for each product) as well as the underlying performance of those products in their local currency: 2008 sales Impact of 2008 sales growth in 2008 sales translation in US local growth in US to US dollars currency dollars dollars $'M % % % ___________ ___________ ___________ ___________ XAGRID - sales in Euros 53.0 +18 +26 +8 - sales in Pounds 25.4 +11 +3 -8 Sterling REPLAGAL - sales in Euros 100.9 +15 +23 +8 - sales in Pounds 24.5 +5 -3 -8 Sterling ELAPRASE - sales in Euros 137.3 +41 +51 +10 - sales in Pounds 28.0 +43 +31 -12 Sterling CALCICHEW sales in Pounds Sterling 47.8 +6 -2 -8 REMINYL and REMINYL XL sales in Pounds Sterling 32.2 +21 +11 -10 ___________ ___________ ____________ ____________Royalties
Royalty revenue decreased by 1% to
3TC - HIV infection and AIDS
Royalties from sales of 3TC for the year to
Shire receives royalties from GSK on worldwide 3TC sales. GSK's worldwide
sales of 3TC for the year to
In 2007 generic drug companies filed ANDAs seeking approval for Epivir,
Combivir, Zeffix and Epzicom in the US. Pursuant to the GSK/Shire license for
lamivudine products, GSK has the right to enforce the licensed patents. In
ZEFFIX - Chronic hepatitis B infection
Royalties from sales of ZEFFIX for the year to
OTHER
Other royalties are primarily in respect of REMINYL and REMINYL XL (known
as RAZADYNE and RAZADYNE ER in the US). REMINYL and REMINYL XL are indicated
for the symptomatic treatment of mild to moderately severe dementia of the
Alzheimer type and are marketed by the Group in the UK and
Certain companies filed ANDAs with the FDA for generic versions of
RAZADYNE. Janssen and Synaptech filed lawsuits against some of those ANDA
filers. A trial was held during the week of
REMINYL XL is a once-daily prolonged release formulation of REMINYL,
which was launched by Janssen in the US in
Sales of the REMINYL/RAZADYNE range continue to grow in most countries, however the entry of generic versions of RAZADYNE and RAZADYNE ER into the US market has significantly decreased sales in that region.
Cost of product sales
The Cost of product sales increased by 27% to
R&D
R&D expenditure decreased to
R&D in 2008 over 2007 includes higher expenditure on projects in-licensed and acquired since the second half of 2007 including SPD 550, PLICERA, AMIGAL, FIRAZYR and METAZYM together with Phase 3(b) and Phase 4 studies to support new product launches.
SG&A expenses
SG&A expenses increased 21% to
SG&A for the year to
The year to
SG&A for the year to
In-Process R&D ('IPR&D')
For the year to
The IPR&D charge in respect of FIRAZYR of
METAZYM (HGT-1111) has completed a Phase 1b clinical trial in 12 MLD
patients in
During the year to
Gain on sale of product rights
For the year to
The gains of
Integration costs
For the year to
Interest income
For the year to
Interest expense
For the year to
Interest expense for the year to
Prior to reaching this settlement, the Group accrued interest based on a
reasonable estimate of the amount that may be awarded by the Court to those
former TKT shareholders who requested appraisal. This estimate of interest
was based on Shire's cost of borrowing. Between the close of the merger and
Upon reaching agreement in principle with all the dissenting
shareholders, the Group determined that settlement had become the probable
manner through which the appraisal rights litigation would be resolved. Under
current law, (although not applicable in this case because the merger was
entered into before the relevant amendment to the law became effective) the
court presumptively awards interest in appraisal rights cases at a statutory
rate that is 5 percentage points above the Federal Reserve discount rate (as
it varies over the duration of the case). In connection with the settlement,
the Group agreed to an interest rate that approximates to this statutory
rate. Based on the settlement, the Group amended the method of determining
its interest provision to reflect this revised manner of resolution, and upon
reaching settlement with the dissenting shareholders recorded an additional
interest expense of
(1) Includes gains and losses arising on translation of foreign currency transactions and balances and gains and losses on swap and forward foreign exchange contracts
Other (expense)/ income, net for the year to
The decline in the market value of the Group's investment in Renovo Group plc initially arose from the results of clinical trials for JUVISTA announced over 2007 and 2008. During the third quarter of 2008, in considering whether the decline in value was temporary or "other than temporary" under US GAAP the Group considered the following factors: the severity of the decline from historical cost (87%) and its duration (eleven months); market analysts' targets of Renovo Group plc's share price for the next 18-24 months; and the revised expected filing date for JUVISTA due to the adoption of a sequential rather than parallel Phase 3 development plan.
These factors, together with the significant decline in global equity markets during the third quarter of 2008 meant that the Group was unable to reasonably estimate the period over which a full recovery in the value of its investment in Renovo Group plc could occur. As such, the Group concluded that for US GAAP purposes the decline in value was "other than temporary".
In such circumstances US GAAP requires the full difference between the
book value of the investment and the fair (market) value be recognized as an
other than temporary impairment. Accordingly the Group recognized an
impairment charge of
Other (expense)/income, net also includes a gain of
Income taxes
The effective tax rate for the year to
Equity in earnings of equity method investees
Net earnings of equity method investees of
Discontinued Operations
Losses from discontinued operations in the year to
Liquidity and capital resources
General
The Group's funding requirements depend on a number of factors, including the timing and number of its development programs; corporate, business and product acquisitions; the level of resources required for the expansion of manufacturing and marketing capabilities as the product base expands; increases in accounts receivable and inventory which may arise with any increase in product sales; competitive and technological developments; the timing and cost of obtaining required regulatory approvals for new products; the timing and quantum of milestone payments on collaborative projects; the timing and quantum of tax and dividend payments; the timing and quantum of purchases by the Employee Share Ownership Trust, ('ESOT') of Shire shares in the market to satisfy option exercises and the continuing cash generated from sales of Shire's key products.
An important part of Shire's business strategy is to protect its products and technologies through the use of patents, proprietary technologies and trademarks, to the extent available. Shire intends to defend its intellectual property and as a result may need cash for funding the cost of litigation.
The Group finances its activities through cash generated from operating activities; credit facilities; private and public offerings of equity and debt securities; and the proceeds of asset or investment disposals.
Shire's robust balance sheet includes
Cash flow activity
Net cash provided by operating activities for the year to
Net cash used in investing activities was
Capital expenditure on property, plant and equipment included
Net cash used in financing activities was
Related party transactions
Xanodyne Pharmaceuticals Inc.
In
3. Directors' Responsibility Statement
Each of the current Directors, whose names and functions are listed below, confirms that, to the best of his or her knowledge:
a. the Group Financial statements, which have been prepared under US GAAP, present fairly, in all material respects, the financial condition, results of operations and cash flows of the group; and
b. the Business Review includes a fair review of the development and performance of the business and the position of the Group and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face.
Matthew Emmens - Chairman Angus Russell - Chief Executive Officer Graham Hetherington - Chief Financial Officer David Kappler - Non executive director Barry Price - Non executive director Patrick Langlois - Non executive director David Mott - Non executive director Kate Nealon - Non executive director Jeffrey Leiden - Non executive director Michael Rosenblatt - Non executive directorTRADEMARKS
The following are trademarks either owned or licensed by Shire plc or companies within the Shire group which are the subject of trademark registrations in certain territories, or which are owned by third parties as indicated and referred to herein.
ADDERALL XR(R) (mixed salts of a single entity amphetamine) CALCICHEW(R) range (calcium carbonate with or without vitamin D3) CARBATROL(R) (carbamazepine extended-release capsules) DAYTRANA(R) (methylphenidate transdermal system) ELAPRASE(R) (idursulfase) FIRAZYR(R) (icatibant) FOSRENOL(R) (lanthanum carbonate) INTUNIV(TM) (guanfacine extended release) LIALDA(R) (mesalamine) METAZYM(TM) (arylsulfatase-A) MEZAVANT(R) (mesalazine) REMINYL(R) (galantamine hydrobromide) (United Kingdom ('UK') and Republic of Ireland) REMINYL XL(TM) (galantamine hydrobromide) (UK and Republic of Ireland) REPLAGAL(R) (agalsidase alfa) VYVANSE(R) (lisdexamfetamine dimesylate) XAGRID(TM) (anagrelide hydrochloride) The following are trademarks of third parties referred to herein. 3TC (trademark of GSK AMIGAL (trademark of Amicus) COMBIVIR (trademark of GSK) DYNEPO (trademark of Sanofi-Aventis) EPIVIR (trademark of GSK) EPZICOM/KIVEXA (EPZICOM) (trademark of GSK) EQUETRO (trademark of Validus Pharmaceuticals) JUVISTA (trademark of Renovo) PENTASA (trademark of Ferring) PLICERA (trademark of Amicus) RAZADYNE (trademark of Johnson & Johnson) RAZADYNE ER (trademark of Johnson & Johnson) REMINYL (trademark of Johnson & Johnson, excluding UK and Republic of Ireland) REMINYL XL (trademark of Johnson & Johnson, excluding UK and Republic of Ireland) SOLARAZE (trademark of Almirall) VANIQA (trademark of Almirall) ZEFFIX (trademark of GSK) For further information please contact: Investor Relations Clea Rosenfeld (Rest of the World) +44-1256-894-160 Eric Rojas (North America) +1-617-551-9715SOURCE Shire Plc
Source: PR Newswire
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