Shire Continues to Deliver Excellent Growth From Core Products
Posted on: Friday, 30 October 2009, 08:12 CDT
"Shire continues to deliver excellent growth from its core products, which were up 20% over an exceptionally strong Q3 2008. This performance reflects our transformation in the past few years into a global biopharmaceutical company with a proven differentiated strategy and a balanced portfolio of new products which is protected by strong exclusivity and patent protection.
The growth of our core products and continued pro-active cost management are positioning us well to deliver on our unchanged guidance framework for 2009 and our aspiration of growing sales in the mid-teens range on average between 2009 and 2015.
Following US approval of INTUNIV, our new ADHD treatment, we are preparing for the US launch next week. INTUNIV adds a new choice of treatment for physicians and patients within our market-leading branded portfolio of ADHD products. We have also continued to grow VYVANSE's market share which is now 13.4%, benefiting from both the 'back to school' season and strong 10% ADHD market growth. These results reinforce our confidence that VYVANSE will grow to become a leading product in this market.
Our HGT business continues to deliver; a New Drug Application for
velaglucerase alfa, for Gaucher disease, was filed with the FDA at the end of
August. Velaglucerase alfa is available ahead of its commercial launch in the
US via a treatment protocol and elsewhere on a pre-approval access basis. We
are supporting the Fabry disease community with a stronger uptake of REPLAGAL
in
We continue to invest in our R&D pipeline. This quarter we announced a research collaboration with Santaris Pharma A/S, a leading player in RNA-based therapeutics, to develop its proprietary Locked Nucleic Acid technology in a range of rare diseases, thereby enabling us to build on our already strong competitive position in this area."
Third Quarter 2009 Unaudited Results Q3 2009 Q3 2008 US Adjust- Non Adjust- Non GAAP ments GAAP(1) US GAAP ments GAAP(1) $M $M $M $M $M $M Revenues 667 - 667 779 - 779 Operating income 92 42 134 123 156 279 Net income/(loss) 60 29 89 (35) 251 216 Diluted earnings /(loss) per ADS 33c 16c 49c (20c) 137c 117c Note: Average exchange rates for Q3 2009 were $1.64:GBP1.00 and $1.43:EUR1.00, (Q3 2008: $1.89:GBP1.00 and $1.52:EUR1.00). (1) The Non GAAP financial measures included above are explained on pages 26 and 27, together with an explanation of why Shire's management believes that these measures are useful to investors. For a reconciliation of these Non GAAP financial measures to the most directly comparable financial measures prepared in accordance with US GAAP, see pages 22 to 25. FINANCIAL SUMMARY Third Quarter 2009 (see page 7 for full Financial Results) - Product sales from core products were up 20% (up 23% at CER) to $532 million, driven by continued strong growth from: - VYVANSE(R) (up 34% to $129 million); - LIALDA(R)/MEZAVANT(R) (up 62% to $65 million); - ELAPRASE(R) (up 16% to $91 million, up 20% at CER); and - REPLAGAL(R) (up 8% to $48 million, up 15% at CER). - Product sales including ADDERALL(R) XR, were down 15% to $603 million, as ADDERALL XR product sales declined by 74%, or $198 million to $71 million. - Non GAAP operating income decreased by 52%, or $145 million, to $134 million due to the lower ADDERALL XR revenues in Q3 2009 and increased investment in research and development, which were partially offset by higher revenues from core products and lower selling, general and administrative costs. On a US GAAP basis operating income in Q3 2009 was $92 million, compared to $123 million in 2008 (2008 included the impact of a $121 million in-process R&D charge relating to the acquisition of Jerini AG ("Jerini")). - Non GAAP diluted earnings per ADS were down 58% to $0.49 (Q3 2008: $1.17), and on a US GAAP basis diluted earnings per ADS were $0.33 (Q3 2008: $(0.20)). - During the first three quarters of 2009 Shire has generated Non GAAP diluted earnings per ADS of $2.38 ($1.74 on a US GAAP basis). THIRD QUARTER HIGHLIGHTS AND RECENT DEVELOPMENTS Products VYVANSE - for the treatment of Attention Deficit and Hyperactivity Disorder ("ADHD") - Following a review of governing statutory and regulatory standards and public comments, the US Food and Drug Administration ("FDA") has affirmed its prior decision to grant five-year New Chemical Entity ("NCE") exclusivity to lisdexamfetamine dimesylate. The five-year exclusivity period for VYVANSE expires on February 23, 2012. As a consequence of this decision, the FDA appropriately refused to file the Abbreviated New Drug Application submitted by Actavis Elizabeth, LLC ("Actavis") for generic lisdexamfetamine dimesylate in January 2009. VYVANSE is covered by US patents which remain in effect until June 29, 2023. INTUNIV(TM) - for the treatment of ADHD in children and adolescents in the US - On September 3, 2009 Shire announced that it received approval from the FDA for INTUNIV Extended Release Tablets for the treatment of ADHD in children and adolescents aged 6 to 17 years. INTUNIV, a once-daily non-scheduled formulation of guanfacine, is the first selective alpha-2A adrenergic receptor agonist approved for the treatment of ADHD. - Once-daily INTUNIV is expected to be widely available in US pharmacies in November 2009 and will come in four dosage strengths (1 mg, 2 mg, 3 mg, and 4 mg). INTUNIV will be marketed in the US by the existing Shire ADHD sales team of nearly 600 representatives. FOSRENOL(R) - for the treatment of pre-dialysis chronic kidney disease ("CKD") in the EU - Shire has received approval through the European Mutual Recognition Procedure for an extension to the current indication for FOSRENOL as a treatment to control hyperphosphataemia in CKD patients who are not on dialysis and with a serum phosphorus level greater than or equal to 1.78mmol/L (5.5mg/dL). Pipeline Velaglucerase alfa - for the treatment of Gaucher disease - On July 30, 2009 Shire began the rolling submission with the FDA under Fast Track designation of a New Drug Application ("NDA") for velaglucerase alfa, its enzyme replacement therapy in development for the treatment of Type 1 Gaucher disease. On September 1, 2009 Shire reported that it had completed its NDA submission. Velaglucerase alfa is available ahead of its commercial launch, in the US via a treatment protocol and elsewhere on a pre-approval basis, to 300-600 patients in 2009 and will be available to several hundred more in 2010. REPLAGAL - for the treatment of Fabry disease - On October 21, 2009 Shire announced plans to file a Biologics License Application with the FDA for REPLAGAL (agalsidase alfa), its enzyme replacement therapy for Fabry disease, by the end of the year. The Company also announced that a treatment protocol for REPLAGAL, filed at the request of the FDA, has been approved, and that Shire will support emergency Investigational New Drug requests, in view of the announced supply restriction of the only currently marketed treatment for Fabry disease in the US. FIRAZYR(R) - for the treatment of hereditary angioedema ("HAE") - In September 2009 Shire initiated a clinical trial to investigate the safety of self-administration of FIRAZYR. Amicus collaboration for the development of pharmacological chaperones - On November 7, 2007 Shire licensed from Amicus Therapeutics Inc. ("Amicus") the rights to three pharmacological chaperone compounds in markets outside of the US: AMIGAL (HGT-3310) for Fabry disease, PLICERA (HGT-3410) for Gaucher Disease and HGT-3510 (formerly referred to as AT2220) for Pompe disease which were in clinical development. The parties have mutually agreed to terminate the collaboration and to return all rights for the three products to Amicus. Alba collaboration for the development of SPD 550 - On October 16, 2009 and following review of Phase 2 data, Shire informed Alba Therapeutics Corporation ("Alba") of its intent to terminate the collaboration. Effective November 15, 2009 Shire will return to Alba all rights to SPD 550 (larazotide cetate for celiac disease), also known as AT-1001. In December 2007 Shire had acquired rights to SPD550 in markets outside of the US and Japan. Business Research Collaboration with Santaris Pharma A/S ("Santaris") on Locked Nucleic Acid ("LNA") Drug Platform - On August 24, 2009 Shire announced that it had entered into a research collaboration with Santaris, to develop its proprietary LNA technology in a range of rare diseases. LNA technology has the benefit of shortened target validation and proof of concept, potentially increasing the speed and lowering the cost of development. As part of the joint research project Santaris will design, develop and deliver pre-clinical LNA oligonucleotides for Shire-selected orphan disease targets, and Shire will have the exclusive right to further develop and commercialize these candidate compounds on a worldwide basis. Legal proceedings - On September 23, 2009 the Company received a subpoena from the US Department of Health and Human Services Office of Inspector General in coordination with the US Attorney for the Eastern District of Pennsylvania, seeking production of documents related to the sales and marketing of ADDERALL XR, DAYTRANA(R) and VYVANSE. Shire is cooperating and responding to this subpoena. - On October 19, 2009 Teva Pharmaceuticals USA, Inc. ("Teva") filed suit against Shire claiming that Shire is in breach of its supply contract for the 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 this product, however, is limited by quota restrictions that the US Drug Enforcement Administration places on amphetamine, which is the product's active ingredient.2009 OUTLOOK
We are reiterating our previously announced guidance framework for Non
GAAP diluted earnings per ADS for 2009, which remains unchanged from that
provided in our Q3 2008 earnings release. At that time, and in subsequent
earnings releases, we provided details of the effect of changes in foreign
exchange rates on the earnings guidance. Specifically, our plans for 2009,
supporting Non GAAP diluted earnings per ADS for 2009 in the range of
We identified that each 10c movement in the EUR:$ and GBP:$ exchange
rates impacts Shire's Non GAAP diluted earnings per ADS by
BOARD CHANGES
The Shire Board announces that Mr
The Shire Board also announces that Mr
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We would also like to thank
Dial in details for the live conference call for investors
Revenues from continuing operations for the three months to
Non GAAP operating income for the three months to
US GAAP operating income from continuing operations for the three months
to
Net cash provided by operating activities decreased by 52% to
Cash, cash equivalents and restricted cash at
2. Product sales
For the three months to
Shire's share of the total US ADHD market for the three months to
VYVANSE - ADHD
Product sales of VYVANSE for the three months to
ADDERALL XR - ADHD
Product sales of ADDERALL XR for the three months to
Sales deductions represented 73% of branded ADDERALL XR gross sales in Q3 2009, compared to 26% in the same period in 2008 following higher Medicaid and Managed Care rebates subsequent to generic launch. These factors more than offset the positive impacts of price increases taken since Q3 2008, and the inclusion in product sales of shipments of authorized generic ADDERALL XR to Teva and Impax Laboratories, Inc. ("Impax") in Q3 2009.
US oral mesalamine market share
Shire's average market share of the US oral mesalamine market was 33% for
the three months to
LIALDA/MEZAVANT - Ulcerative colitis
Product sales of LIALDA/MEZAVANT for the three months to
By
PENTASA - Ulcerative colitis
Product sales of PENTASA(R) for the three months to
FOSRENOL - Hyperphosphatemia
Product sales of FOSRENOL for the three months to
Human Genetic Therapies
ELAPRASE - Hunter syndrome
Product sales for the three months to
REPLAGAL - Fabry disease
Product sales for the three months to
FIRAZYR - HAE
Product sales for the three months to
3. Royalties
Royalty revenue decreased by 1% to
Royalties from Teva's sales of authorized generic ADDERALL XR for the
three months to
Non GAAP cost of product sales as a percentage of product sales increased
by 5 percentage points compared to 2008. This increase primarily results from
changes to the product mix following the launch by Teva of an authorized
generic version of ADDERALL XR in
Non GAAP R&D increased 23% to
Non GAAP SG&A declined in absolute terms by 6% due to the Company's continued focus on cost management. Non GAAP SG&A increased as a percentage of product sales due to lower product sales following the genericization of ADDERALL XR.
Gain on sale of product rights
For the three months to
Reorganization costs
For the three months to
Integration and acquisition costs
For the three months to
Interest income
For the three months to
For the three months to
Non GAAP other income, net in 2009 was higher than the same period in 2008 due to a gain recognized following the substantial modification of a property lease.
Taxation
The effective rate of tax for the three months to
The Non GAAP effective tax rate was higher in Q3 2009 compared to the same period in 2008 principally as a result of the recognition of valuation allowances against certain EU deferred tax assets and increases to accrued interest on tax contingencies in the third quarter of 2009. The adverse rate impact of these items was partially offset by foreign exchange gains on the retranslation of certain deferred tax assets, together with the benefit of tax return to provision adjustments following the submission of various tax returns in Q3 2009.
Equity in earnings of equity method investees
Equity in earnings of equity method investees of
The share equivalents not included in the calculation of the diluted weighted average number of shares are shown below:
3 months to 3 months to 9 months to 9 months to September September September September 30, 30, 30, 30, 2009 2008 2009 2008 Millions Millions Millions Millions (1)(2) (3) (1)(2) (1)(2) Stock options in the money - 1.2 - - Stock options out of the money 16.8 17.0 18.0 17.0 Convertible bonds 2.75% due 2014 33.2 32.7 33.1 32.7 (1) For the three and nine month periods ended September 30, 2009 and the nine month period ended September 30, 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 three and nine month periods ended September 30, 2009 and the nine month period ended September 30, 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. (3) For the three month period ended September 30, 2008 no share options or ordinary shares underlying the convertible bonds have been included in the calculation of the diluted weighted average number of shares because the Company made a net loss during the calculation period and the inclusion of these items would be anti-dilutive. Unaudited US GAAP results for the three months to September 30, 2009 Selected Notes to the Financial Statements (2) Analysis of revenues 3 months to September 30, 2009 2008 2009 2009 % % of total $M $M change revenue Net product sales: Specialty Pharmaceuticals ("Specialty") ADHD ADDERALL XR 70.9 268.7 -74% 11% VYVANSE 129.0 96.0 34% 19% DAYTRANA 17.4 18.1 -4% 3% EQUASYM 9.2 - n/a 1% 226.5 382.8 -41% 34% GI PENTASA 51.3 49.2 4% 8% LIALDA / MEZAVANT 65.4 40.4 62% 10% 116.7 89.6 30% 18% General products FOSRENOL 47.7 43.0 11% 7% CALCICHEW(R) 12.4 13.3 -7% 2% CARBATROL(R) 20.8 21.6 -4% 3% REMINYL(R)/REMINYL XL(TM) 10.5 9.6 9% 2% XAGRID 21.5 19.4 11% 3% 112.9 106.9 6% 17% Other product sales 5.4 10.2 -47% 1% Total Specialty product sales 461.5 589.5 -22% 70% Human Genetic Therapies ("HGT") ELAPRASE 90.9 78.2 16% 14% REPLAGAL 48.3 44.6 8% 7% FIRAZYR 1.8 0.2 n/a 0% Total HGT product sales 141.0 123.0 15% 21% Total product sales 602.5 712.5 -15% 91% Royalties: 3TC and ZEFFIX 42.0 44.5 -6% 6% ADDERALL XR 2.2 - n/a 0% Other 16.1 16.3 -1% 2% Total royalties 60.3 60.8 -1% 8% Other revenues 4.2 5.3 -21% 1% Total Revenues 667.0 778.6 -14% 100% Unaudited US GAAP results for the nine months to September 30, 2009 Selected Notes to the Financial Statements (2) Analysis of revenues 9 months to September 30, 2009 2008 2009 2009 % % of total $M $M change revenue Net product sales: Specialty Pharmaceuticals ("Specialty") ADHD ADDERALL XR 434.2 826.6 -47% 21% VYVANSE 359.7 215.6 67% 17% DAYTRANA 52.2 61.0 -14% 2% EQUASYM 14.1 - n/a 1% 860.2 1,103.2 -22% 41% GI PENTASA 156.5 138.2 13% 7% LIALDA / MEZAVANT 169.4 99.6 70% 8% 325.9 237.8 37% 15% General products FOSRENOL 137.2 121.6 13% 6% CALCICHEW 32.8 40.8 -20% 2% CARBATROL 59.7 55.7 7% 3% REMINYL/REMINYL XL 28.8 26.6 8% 1% XAGRID 62.3 58.7 6% 3% 320.8 303.4 6% 15% Other product sales 14.3 43.0 -67% 1% Total Specialty product sales 1,521.2 1,687.4 -10% 72% Human Genetic Therapies ("HGT") ELAPRASE 258.9 230.5 12% 12% REPLAGAL 132.9 131.8 1% 6% FIRAZYR 3.8 0.2 n/a 1% Total HGT product sales 395.6 362.5 9% 19% Total product sales 1,916.8 2,049.9 -6% 91% Royalties: 3TC and ZEFFIX 120.3 138.6 -13% 5% ADDERALL XR 15.8 - n/a 1% Other 41.7 52.1 -20% 2% Total royalties 177.8 190.7 -7% 8% Other revenues 19.8 15.8 25% 1% Total Revenues 2,114.4 2,256.4 -6% 100% Unaudited results for the three months to September 30, 2009 Non GAAP reconciliation US GAAP Adjustments Acquisitions Divestments, Amortization & reorganizations September & asset integration & discontinued 3 months to, 30, 2009 impairments activities operations (a) (b) (c) $M $M $M $M Total revenues 667.0 - - - Costs and expenses: Cost of product sales 104.9 - (0.6) (4.5) Research and development 147.8 - - - Selling, general and administrative 320.6 (34.8) - - Gain on sale of product rights (6.3) - - 6.3 Reorganization costs 2.0 - - (2.0) Integration and acquisition costs 6.2 - (6.2) - Depreciation - - - - Total operating expenses 575.2 (34.8) (6.8) (0.2) Operating income 91.8 34.8 6.8 0.2 Interest income 0.2 - - - Interest expense (9.4) - - - Other income, net 7.0 - - - Total other expense, net (2.2) - - - Income from continuing operations before income taxes and equity in earnings of equity method investees 89.6 34.8 6.8 0.2 Income taxes (30.6) (9.9) (1.8) (0.5) Equity in earnings of equity method investees, net of tax 0.6 - - - Net income attributable to Shire plc 59.6 24.9 5.0 (0.3) Numerator for diluted EPS 59.6 24.9 5.0 (0.3) Weighted average number of shares (millions) - diluted 548.3 - - - Diluted earnings per ADS 32.7c 13.5c 2.7c - Non GAAP Reclassify September 3 months to, depreciation 30, 2009 (d) $M $M Total revenues - 667.0 Costs and expenses: Cost of product sales (0.8) 99.0 Research and development (3.6) 144.2 Selling, general and administrative (18.5) 267.3 Gain on sale of product rights - - Reorganization costs - - Integration and acquisition costs - - Depreciation 22.9 22.9 Total operating expenses - 533.4 Operating income - 133.6 Interest income - 0.2 Interest expense - (9.4) Other income, net - 7.0 Total other expense, net - (2.2) Income from continuing operations before income taxes and equity in earnings of equity method investees - 131.4 Income taxes - (42.8) Equity in earnings of equity method investees, net of tax - 0.6 Net income attributable to Shire plc - 89.2 Numerator for diluted EPS - 89.2 Weighted average number of shares (millions) - diluted - 548.3 Diluted earnings per ADS - 48.9c The following items are included in Adjustments: (a) Amortization and asset impairments: Amortization of intangible assets relating to intellectual property rights acquired ($34.8 million) and tax effect of adjustment; (b) Acquisitions and integration activities Inventory fair value adjustment related to the acquisition of Jerini ($0.6 million); costs associated with the integration and acquisition of Jerini and EQUASYM from UCB ($6.2 million) and tax effect of adjustments; (c) Divestments, reorganizations and discontinued operations: Accelerated depreciation ($4.5 million) and reorganization costs ($2.0 million) for the transition of manufacturing from Owings Mills, gains on the disposal of non-core product rights ($6.3 million) and tax effect of adjustments; and (d) Depreciation: Depreciation of $22.9 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 September 30, 2008 Non GAAP reconciliation US GAAP Adjustments Acquisitions Divestments, September Amortization & reorganizations 30, & asset integration & discontinued 3 months to, 2008 impairments activities operations (a) (b) (c) $M $M $M $M Total revenues 778.6 - - - Costs and expenses: Cost of product sales 84.2 - - - Research and development(1) 120.2 - - - Selling, general and administrative(1) 327.3 (29.7) - (2.0) In-process R&D charge 120.5 - (120.5) - Integration and acquisition costs 7.5 - (7.5) - Gain on sale of product rights (4.0) - - 4.0 Depreciation - - - - Total operating expenses 655.7 (29.7) (128.0) 2.0 Operating income 122.9 29.7 128.0 (2.0) Interest income 3.8 - - - Interest expense (92.9) - 73.0 - Other (expense)/income, net (52.0) 54.1 - - Total other expense, net (141.1) 54.1 73.0 - (Loss)/income from continuing operations before income taxes and equity in earnings of equity method investees (18.2) 83.8 201.0 (2.0) Income taxes (18.7) (9.7) (23.3) 0.2 Equity in earnings of equity method investees, net of tax 1.6 - - - (Loss)/income from continuing operations, net of tax (35.3) 74.1 177.7 (1.8) Loss from discontinued operations (0.9) - - 0.9 Net (loss)/income (36.2) 74.1 177.7 (0.9) Add: Net loss attributable to noncontrolling interest in subsidiaries 1.3 - - - Net (loss)/income attributable to Shire plc (34.9) 74.1 177.7 (0.9) Impact of convertible debt, net of tax(2) - 8.6 - - Numerator for diluted EPS (34.9) 82.7 177.7 (0.9) Weighted average number of shares (millions) - diluted(2) 540.3 33.9 - - Diluted earnings per ADS (19.5c) 44.7c 92.7c (0.6c) Non GAAP Reclassify 3 months to, depreciation September (d) 30, 2008 $M $M Total revenues - 778.6 Costs and expenses: Cost of product sales (3.2) 81.0 Research and development(1) (3.4) 116.8 Selling, general and administrative(1) (12.0) 283.6 In-process R&D charge - - Integration and acquisition costs - - Gain on sale of product rights - - Depreciation 18.6 18.6 Total operating expenses - 500.0 Operating income - 278.6 Interest income - 3.8 Interest expense - (19.9) Other (expense)/income, net - 2.1 Total other expense, net - (14.0) (Loss)/income from continuing operations before income taxes and equity in earnings of equity method investees - 264.6 Income taxes - (51.5) Equity in earnings of equity method investees, net of tax - 1.6 (Loss)/income from continuing operations, net of tax - 214.7 Loss from discontinued operations - - Net (loss)/income - 214.7 Add: Net loss attributable to noncontrolling interest in subsidiaries - 1.3 Net (loss)/income attributable to Shire plc - 216.0 Impact of convertible debt, net of tax (2) - 8.6 Numerator for diluted EPS - 224.6 Weighted average number of shares (millions) - diluted(2) - 574.2 Diluted earnings per ADS - 117.3c (1) $6.9m of promotional costs have been reclassified from Research and development to Selling, general and administrative costs for the three months to September 30, 2008. (2) After the above adjustments, the Company made Non GAAP net income during the calculation period. As a result (i) the after tax impact of the convertible bonds has been added back to the numerator and (ii) in the money share options and convertible bonds are now included in the calculation of the diluted weighted average number of shares as they have a dilutive effect. The following items are included in Adjustments: (a) Amortization and asset impairments: Amortization of intangible assets relating to intellectual property rights acquired ($29.7 million), other than temporary impairment of available for sale securities ($54.1 million) and tax effect of adjustments; (b) Acquisitions & integration activities: In-process R&D in respect of the acquisition of Jerini ($120.5 million), Integration and transaction related costs in respect of the acquisition of Jerini ($7.5 million), additional interest expense incurred on the settlement of the TKT appraisal rights litigation ($73.0 million) and tax effect of adjustments; (c) Divestments, reorganizations and discontinued operations: Costs associated with the introduction of a new holding company ($2.0 million), gains on the disposal of non-core product rights ($4.0 million), discontinued operations in respect of non-core Jerini operations ($0.9 million) and tax effect of adjustments; and (d) Depreciation: Depreciation of $18.6 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 nine months to September 30, 2009 Non GAAP reconciliation US GAAP Adjustments Acquisitions Divestments, Amortization & reorganizations September & asset integration & discontinued 9 months to, 30, 2009 impairments activities operations (a) (b) (c) $M $M $M $M Total revenues 2,114.4 - - - Costs and expenses: Cost of product sales 284.9 - (1.9) (7.5) Research and development 492.5 - (36.9) (65.0) Selling, general and administrative 973.8 (101.6) - - Gain on sale of product rights (6.3) - - 6.3 Reorganization costs 7.1 - - (7.1) Integration & acquisition costs 10.0 - (10.0) - Depreciation - - - - Total operating expenses 1,762.0 (101.6) (48.8) (73.3) Operating income 352.4 101.6 48.8 73.3 Interest income 1.5 - - - Interest expense (30.6) - - - Other income, net 61.9 - - (55.2) Total other income/(expense), net 32.8 - - (55.2) Income from continuing operations before income taxes and equity in earnings of equity method investees 385.2 101.6 48.8 18.1 Income taxes (56.7) (29.0) (16.2) (17.8) Equity in earnings of equity method investees, net of tax 1.0 - - - Income from continuing operations, net of tax 329.5 72.6 32.6 0.3 Loss from discontinued operations (12.4) - - 12.4 Net income 317.1 72.6 32.6 12.7 Add: Net loss attributable to noncontrolling interest in subsidiaries 0.2 - - - Net income attributable to Shire plc 317.3 72.6 32.6 12.7 Impact of convertible debt, net of tax (1) - 25.1 - - Numerator for diluted EPS 317.3 97.7 32.6 12.7 Weighted average number of shares (millions) - diluted(1) 547.1 33.1 - - Diluted earnings per ADS 174.0c 40.5c 16.8c 6.6c Non GAAP Reclassify September 9 months to, depreciation 30, 2009 (d) $M $M Total revenues - 2,114.4 Costs and expenses: Cost of product sales (9.4) 266.1 Research and development (11.3) 379.3 Selling, general and administrative (49.3) 822.9 Gain on sale of product rights - - Reorganization costs - - Integration & acquisition costs - - Depreciation 70.0 70.0 Total operating expenses - 1,538.3 Operating income - 576.1 Interest income - 1.5 Interest expense - (30.6) Other income, net - 6.7 Total other income/(expense), net - (22.4) Income from continuing operations before income taxes and equity in earnings of equity method investees - 553.7 Income taxes - (119.7) Equity in earnings of equity method investees, net of tax - 1.0 Income from continuing operations, net of tax - 435.0 Loss from discontinued operations - - Net income - 435.0 Add: Net loss attributable to noncontrolling interest in subsidiaries - 0.2 Net income attributable to Shire plc - 435.2 Impact of convertible debt, net of tax (1) - 25.1 Numerator for diluted EPS - 460.3 Weighted average number of shares (millions) - diluted(1) - 580.2 Diluted earnings per ADS - 237.9c (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 ($101.6 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), costs associated with the integration and acquisition of Jerini and EQUASYM from UCB ($10.0 million) and tax effect of adjustments; (c) Divestments, reorganizations and discontinued operations: Accelerated depreciation ($7.5 million) and reorganization costs ($7.1 million) for the transition of manufacturing from Owings Mills, costs associated with agreement to terminate Women's Health products with Duramed ($65.0 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 $70.0 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 nine months to September 30, 2008 Non GAAP reconciliation US GAAP Adjustments Acquisitions Divestments, Amortization & reorganizations September & asset integration & discontinued 9 months to, 30, 2008 impairments activities operations (a) (b) (c) $M $M $M $M Total revenues 2,256.4 - - - Costs and expenses: Cost of product sales 317.4 - - (53.4) Research and development(1) 368.4 - - (6.5) Selling, general and administrative(1) 1,109.7 (181.9) - (14.2) Integration and acquisition costs 7.5 - (7.5) - Gain on sale of product rights (20.7) - - 20.7 In-process R&D charge 255.5 - (255.5) - Depreciation - - - - Total operating expenses 2,037.8 (181.9) (263.0) (53.4) Operating income 218.6 181.9 263.0 53.4 Interest income 23.0 - - - Interest expense (127.0) - 73.0 - Other (expense)/income, net (38.6) 54.1 - (9.4) Total other expense, net (142.6) 54.1 73.0 (9.4) Income from continuing operations before income taxes and equity in earnings of equity method investees 76.0 236.0 336.0 44.0 Income taxes (63.0) (33.7) (48.0) (6.2) Equity in earnings of equity method investees, net of tax 1.3 - - - Income from continuing operations, net of tax 14.3 202.3 288.0 37.8 Loss from discontinued operations (0.9) - - 0.9 Net income 13.4 202.3 288.0 38.7 Add: Net loss attributable to noncontrolling interest in subsidiaries 1.3 - - - Net income attributable to Shire plc 14.7 202.3 288.0 38.7 Impact of convertible debt, net of tax (2) - 6.2 - - Numerator for diluted EPS 14.7 208.5 288.0 38.7 Weighted average number of shares (millions) - diluted(2) 545.3 32.7 - - Diluted earnings per ADS 8.1c 107.7c 149.4c 20.1c Non GAAP Reclassify September 9 months to, depreciation 30, 2008 (d) $M $M Total revenues - 2,256.4 Costs and expenses: Cost of product sales (8.8) 255.2 Research and development(1) (9.4) 352.5 Selling, general and administrative(1) (34.0) 879.6 Integration and acquisition costs - - Gain on sale of product rights - - In-process R&D charge - - Depreciation 52.2 52.2 Total operating expenses - 1,539.5 Operating income - 716.9 Interest income - 23.0 Interest expense - (54.0) Other (expense)/income, net - 6.1 Total other expense, net - (24.9) Income from continuing operations before income taxes and equity in earnings of equity method investees - 692.0 Income taxes - (150.9) Equity in earnings of equity method investees, net of tax - 1.3 Income from continuing operations, net of tax - 542.4 Loss from discontinued operations - - Net income - 542.4 Add: Net loss attributable to noncontrolling interest in subsidiaries - 1.3 Net income attributable to Shire plc - 543.7 Impact of convertible debt, net of tax (2) - 6.2 Numerator for diluted EPS - 549.9 Weighted average number of shares (millions) - diluted(2) - 578.0 Diluted earnings per ADS - 285.3c (1) Promotional costs totaling $26.0 million have been reclassified from Research and development to Selling, general and administrative costs for the nine months to September 30, 2008. (2) Under US GAAP the convertible bonds were not included in the calculation of the diluted weighted average number of shares nor was the after tax income statement effect of the bonds added to the numerator as the impact was anti-dilutive. On a Non GAAP basis the after tax impact of the convertible bond has been added to the numerator and the number of shares underlying the convertible bond are now included in the calculation of the diluted weighted average number of shares as they have a dilutive effect. The following items are included in Adjustments: (a) Amortization and asset impairments: Amortization of intangible assets relating to intellectual property rights acquired ($91.5 million), impairment charge in respect of DYNEPO intangible asset ($90.4 million), other than temporary impairment of available for sale securities ($54.1 million), and tax effect of adjustments; (b) Acquisitions & integration activities: In-process R&D in respect of METAZYM acquired from Zymenex A/S ($135.0 million), In-process R&D in respect of the acquisition of Jerini ($120.5 million), integration and transaction related costs in respect of the acquisition of Jerini ($7.5 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 ($53.4 million), R&D commitment in respect of DYNEPO ($6.5 million), costs associated with the introduction of a new holding company ($14.2 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 ($0.9 million) and tax effect of adjustments; and (d) Depreciation: Depreciation of $52.2 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. Notes to Editors SHIRE PLCShire'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.
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.
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; and Non GAAP other income. 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. In the case of product sales, growth at constant exchange rates is calculated after restating current period product sales using the comparative periods' average foreign exchange rates.
These Non GAAP financial measures are used by Shire's management to make operating decisions because they facilitate internal comparisons of the Company's performance to historical results and to competitors' results. These measures are also considered by Shire's Remuneration Committee in assessing the performance and compensation of employees, including the Company's executive directors.
The Non GAAP measures are presented in this press release as the Company's management believe that they will provide investors with a means of evaluating, and an understanding of how Shire's management evaluates, the Company'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 the Company'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 2009 guidance for Non GAAP diluted earnings per ADS:
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 costs 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 22-25.
2008 Comparative Financial Information
Subsequent to the announcement of Shire's Q3 2008 results but prior to
the filing with the SEC of the Company's Form 10-Q for the third quarter of
2008, the Company settled the TKT appraisal rights litigation. On settlement,
the Company amended the method of determining its interest provision for this
litigation, and as a result recorded additional interest expense of
A reconciliation between the US GAAP financial information included in the original Q3 2008 results announcement and the comparative US GAAP financial information included herein is as follows:
Interest Income Net income/ expense taxes (loss) $M $M $M 3 months to September 30, 2008 US GAAP information in Q3 2008 announcement (19.9) (45.0) 11.8 Recognition of additional interest (73.0) 26.3 (46.7) US GAAP comparative information included herein (92.9) (18.7) (34.9) 9 months to September 30, 2008 US GAAP information in Q3 2008 announcement (54.0) (89.3) 61.4 Recognition of additional interest (73.0) 26.3 (46.7) US GAAP comparative information included herein (127.0) (63.0) 14.7This additional interest expense, and related tax effect, has been excluded from Non GAAP earnings, therefore Non GAAP earnings are unaffected by this restatement.
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, EQUASYM(R) which is a trademark of UCB S.A.,
PENTASA(R) which is a trademark of Ferring A/S Corp, and REMINYL(R) and
REMINYL XL(TM) which are trademarks of J&J (except in the UK and
A full list of the trademarks of Shire plc or companies within the Shire
group is set out in the Company's Quarterly Report on Form 10-Q for the six
months ended
(1) REMINYL(R) and REMINYL XL(TM) are both trademarks of Shire in the UK
and
SOURCE Shire Plc
Source: PR Newswire
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