Hampshire International Business Park
Chineham Basingstoke
Hampshire RG24 8EP
United Kingdom
Tel +44 (0)1256 894000
Fax +44 (0)1256 894708
www.shire.com
Press Release
11.00 am GMT 6am EST
On time execution of operating plan delivers strong 2006 performance
SHIRE AGREES TO ACQUIRE NEW RIVER TO GAIN FULL CONTROL OF VYVANSE, ITS FUTURE
FLAGSHIP PRODUCT FOR ADHD
All cash transaction for $2.6 billion funded by $2.3 billion new debt
facilities and
$800 million equity financing.
Basingstoke, UK - February 20, 2007 - Shire plc (LSE: SHP, NASDAQ: SHPGY, TSX:
SHQ) announces results for the twelve months to December 31, 2006 - a year in
which significant milestones were met, providing long-term drivers for the
future growth of the Company. In addition, Shire announces in a separate press
release that it has agreed to acquire New River Pharmaceuticals Inc (New River)
for $2.6 billion in cash funded by $2.3billion new debt facilities and
approximately $800 million of equity financing, a move that will increase the
value of its leadership in the US Attention Deficit and Hyperactivity Disorder
(ADHD) market.
2006 Financial Highlights
* Product sales up 16% to $1,536 million;
* Total revenues up 12% to $1,797 million;
* Cash and cash equivalents up $470 million;
* Dividends up 15%.
Matthew Emmens, Chief Executive Officer, said:
"2006 was an exceptional year for Shire in which we increased our strong
leadership position in the US ADHD market and successfully executed all our
planned regulatory filings and new product launches. We delivered good
financial results, including a 12% rise in revenues and strong cash generation.
"This is an important and complementary acquisition that gives us full control
of VYVANSE, a novel drug. We are confident and expect that the final labeling
will provide patients and physicians with real benefits that differentiate this
compound from other ADHD products. It will enable us to drive the launch and
future development of VYVANSE and gain the full economic benefits of the drug.
Based on VYVANSE's expected profile, we believe it has the potential to be the
next generation stimulant product to ADDERALL XR®. This acquisition continues
our leadership position in the growing US ADHD market, improves our operating
margins, significantly enhances our earnings growth from late 2009 and delivers
on our overall global growth strategy. The combined debt and equity financing
announced today enables us to both acquire New River and retain the financial
flexibility to make further acquisitions that will continue to drive Shire's
growth."
Looking ahead, in 2007 we expect to see the positive impact of our strategic
plan put in place three years ago. We will benefit from the recent launches of
DAYTRANA™ and ELAPRASE™ and roll-out of FOSRENOL® in Europe and anticipate
three additional product launches during the first half of the year namely
LIALDA™ / MEZAVANT™, VYVANSE™ and DYNEPO®. This year should also see the
approval of SPD465 and SPD503 for ADHD. In addition, we have added nine new
products into our development pipeline, including three new HGT (Human Genetic
Therapies) products.
Shire continues to look at ways in which it can effectively apply its cash flow
to generate long-term shareholder value through strengthening its pipeline of
specialty products with long lifecycles and strong intellectual property."
2006 Product highlights
* ADDERALL XR - ADHD - Sales for 2006 up 18% to $864 million.
* DAYTRANA - ADHD - Approved by the Food and Drug Administration (FDA) in
April 2006 and launched in the US in June 2006. By December 31, 2006
DAYTRANA had a 2% share of the US ADHD market and had achieved sales of $25
million.
* ELAPRASE - Hunter syndrome
* Launched in the US in August 2006 and by December 31, 2006 over 110
patients in the US had received treatment.
* EU pre-approval process commenced in July 2006. By December 31, 2006 over
100 patients were receiving treatment on a named-patient basis.
* Sales for 2006 of $24 million.
* REPLAGAL® - Fabry disease - Sales for 2006 up 24% to $118 million.
* FOSRENOL - Hyperphosphatemia
*
+ Prescription growth of 34% in the US. While US net sales were down 16%,
this was due to significant stocking of higher strength formulations at
the end of 2005.
+ Sales in Europe reached $4.6 million.
+ In October 2006, Health Canada granted a marketing license application
for FOSRENOL. Launch in Canada is planned for Q2 2007.
2006 Pipeline highlights
* VYVANSE (NRP104) - ADHD - New River received a second approvable letter
from the FDA on December 21, 2006. Shire expects New River to receive the
FDA's final response by February 24, 2007 with launch for the pediatric
indication still expected for Q2 2007, pending final scheduling
discussions.
* SPD465 - ADHD - Filed with the FDA in July 2006. The Prescription Drug User
Fee Act (PDUFA) date is May 21, 2007.
* SPD503 - ADHD - Filed with the FDA in August 2006. The PDUFA date is June
24, 2007.
* GA-GCB - Gaucher disease - Phase 3 clinical program initiated and enrolment
began in January 2007.
* Shire Human Genetic Therapies (HGT) - Three projects advanced to
pre-clinical development; namely enzyme replacement therapies for
Sanfilippo syndrome (Mucopolysaccharidosis IIIA), Metachromatic
Leukodystrophy and intrathecal delivery of ELAPRASE for Hunter syndrome
patients with significant central nervous system symptoms.
* SPD491 - A once-a-day, non opiate, transdermal analgesic being developed
with the goal of non-scheduled labeling to treat moderate to severe pain,
will enter Phase 1 testing in Q1 2007.
* SPD535 - Pre-clinical evaluation for development of a novel
platelet-lowering agent.
In addition we in-licensed:
* Rights to the transvaginal ring technology of Duramed Pharmaceuticals Inc.
(Duramed) in the larger European markets in August 2006, together with a
license in the same countries to Duramed's oral contraceptive, SEASONIQUE®
(levonorgestrel/ethinyl estradiol).
* Global rights to SPD500 (Tissue Protective Cytokine Technology), from
Warren Pharmaceuticals, Inc. (Warren) in September 2006. SPD500 is being
developed pre-clinically in non-nervous system indications, including renal
and genetic disease areas.
* Global rights to SPD493 (Valrocemide) and other related compounds, from
Yissum Research and Development Company in July 2006. SPD493 is being
developed at Phase 1 for the treatment of a number of central nervous
system disorders.
2006 Business Highlights
* All pending patent infringement litigations with Impax Laboratories Inc.
(Impax) and Barr Laboratories Inc. (Barr) in connection with ADDERALL XR
were settled in January 2006 and August 2006, respectively.
* Repayment by IDB Biomedical Inc (IDB) of its loan for flu development ($71
million plus interest of $8 million) in February 2006.
* ADDERALL® (immediate-release mixed amphetamine salts) was sold to Duramed
for $63 million in August 2006.
* FOSRENOL - Hyperphosphatemia. Agreement with Abbott Laboratories (Abbott)
signed in December 2006 for the co-promotion of FOSRENOL in the US.
Abbott's US renal care sales team will co-promote FOSRENOL with Abbott's
Vitamin D product ZEMPLAR®. Shire's US renal sales force will also
continue to promote FOSRENOL. Abbott's co-promotion activities began in Q1
2007 and will continue for a term of five years.
Recent Developments
* Shire agrees to acquire New River for $2.6 billion in an all cash tender
offer and merger and raises approximately $800 million in equity financing.
For details see separate release.
* ELAPRASE - Marketing authorisation granted by the European Medicines Agency
on January 8, 2007. Pricing and reimbursement procedures are underway in
many EU countries and launch is expected across the majority of EU
countries in 2007.
* LIALDA - Ulcerative Colitis. Approval received from the FDA on January 16,
2007. US launch is planned for Q1 2007.
* SPD754 - HIV. Shire licensed the US and Canadian rights for the
investigational HIV compound, SPD754 (also known as apricitabine), to the
Australian biotechnology company Avexa Limited (Avexa) on January 23, 2007.
Shire received an up-front cash payment of US$10 million, 8 million
additional Avexa shares (taking its shareholding in Avexa to just over 8%)
and may receive further milestones and royalties.
* MEZAVANT XL - Ulcerative Colitis. UK national licence received from the
Medicines and Healthcare Products Regulatory Agency on January 19, 2007.
* ADDERALL XR - Health Canada granted a marketing license application for the
adult indication in February 2007.
* FOSRENOL - Launched in the UK on February 19, 2007.
* REPLAGAL - To launch in Japan with partner Dainippon Sumitomo Pharma Co.,
Ltd by the end of Q1 2007.
Non-Executive Director Changes
* July 2006 - Kate Nealon joined the Shire board as a Non-Executive Director
and a member of the Remuneration Committee. Kate Nealon was Group Head of
Legal & Compliance at Standard Chartered plc until 2004. She also holds
Non-Executive Director positions with HBOS and Cable and Wireless plc.
* December 2006 - Mr Ronald Nordmann stepped down from Shire's Board after
seven years of service following expiry of his term of office.
* January 2007 - Dr Jeffrey M. Leiden, MD, PhD joined Shire's board as a Non
Executive Director. Dr Leiden served as President and Chief Operating
Officer, Pharmaceutical Products Group and Chief Scientific Officer at
Abbott Laboratories from 2001-2006.
Full Year 2006 Unaudited Results
2006 2005
US GAAP Adjustments Non GAAP Restated Restated Non GAAP
(1) US GAAP Adjustments (1)
$M $M $M
$M $M $M
_______ __________ __________ _______ __________ __________
Revenues 1,796.5 - 1,796.5 1,599.3 - 1,599.3
Income/(loss) from 316.8 70.1 386.9 (491.7) 926.9 435.2
ongoing operations
(2)
Net income/(loss) 278.2 10.7 288.9 (578.4) 892.4 314.0
Diluted earnings/
(losses) per:
Ordinary share 54.6c 2.1c 56.7c (115.6c) 178.2c 62.6c
ADS 163.8c 6.3c 170.1c (346.8c) 534.6c 187.8c
Q4 2006 Unaudited Results
Q4 2006 Q4 2005
US GAAP Adjustments Non GAAP US GAAP Adjustments Non GAAP
(1) (1)
$M $M $M $M
$M $M
_______ _________ __________ _______ __________ __________
Revenues 497.0 - 497.0 464.9 - 464.9
Income from 90.3 1.7 92.0 101.0 27.3 128.3
ongoing operations
(2)
Net Income 68.6 1.2 69.8 69.0 20.6 89.6
Diluted earnings
per:
Ordinary share 13.4c 0.2c 13.6c 13.7c 4.1c 17.8c
ADS 40.2c 0.6c 40.8c 41.1c 12.3c 53.4c
Note: Average exchange rates for 2006 and 2005 were $1.84: £1.00 and $1.82: £
1.00, respectively. Average exchange rates for Q4 2006 and Q4 2005 were $1.92:
£1.00 and $1.75: £1.00, respectively.
(1)For an explanation of why Shire's management believes that these non-GAAP
financial measures are useful to investors, see page 7. For a reconciliation
of these non-GAAP financial measures to the most directly comparable financial
measures prepared in accordance with US GAAP, see pages 26-27.
(2) Income/(loss) from continuing operations before income taxes and equity in
earnings/(losses) of equity method investees.
Restatement of 2005 US GAAP Results
The Company today announces the restatement of its financial statements for the
year to December 31, 2005, in respect of the value ascribed to in-process
research and development (IPR&D), acquired as part of the Transkaryotic
Therapies, Inc. (TKT) acquisition and subsequently written off as required
under US GAAP in Q3, 2005. IPR&D represented those assets which, at the time of
the acquisition, had not been approved by the FDA or other regulatory
authorities, including I2S (now known as ELAPRASE) and GA-GCB.
The Company has determined that the value ascribed to IPR&D acquired as a
result of the TKT acquisition did not include the benefit of tax amortization
as required by the American Institute of Certified Public Accountants (AICPA)
Practice Aid, Assets Acquired in a Business Combination to Be Used in Research
and Development Activities: A Focus on Software, Electronic Devices, and
Pharmaceutical Industries. The effect of this omission was to understate the
value of IPR&D expensed in the year to December 31, 2005 by $142 million, with
a corresponding overstatement of goodwill as at December 31, 2005.
However, as the additional IPR&D write-off in the year ended December 31, 2005
is a non-cash accounting item, it has no impact on the cash flows of the
Company for the year ended December 31, 2005. In addition, it has no impact on
the cash flows or earnings of the Company for the year ended December 31, 2006
or beyond.
The results for the year to December 31, 2005 have been restated to record the
value of IPR&D written off in Q3 2005 at $815 million (previously $673
million). As a result of this restatement the net loss as reported under US
GAAP for the year to December 31, 2005 has increased from $436.4 million to
$578.4 million, with the diluted loss per ordinary share as reported under US
GAAP for the year to December 31, 2005 increasing from 87.2 cents to 115.6
cents per ordinary share.
Non-GAAP income from continuing operations of $435.2 million, net income of
$314.0 million and diluted earnings per ordinary share of 62.6 cents (187.8
cents per ADS), for the year to December 31, 2005, are unaffected by this
restatement.
2007 Outlook
R&D pipeline and new product launches
Shire has a strong product pipeline to support the future growth of the
Company. In 2007 and H1 2008, the following launches are planned:
* VYVANSE in the US;
* ELAPRASE in Europe;
* LIALDA in the US and MEZAVANT in Europe;
* FOSRENOL in the UK, Spain and Italy;
* DYNEPO in Europe; and
* REPLAGAL in Japan by Shire's partner Dainippon Sumitomo Pharmaceuticals,
Inc.
In addition, Shire is anticipating FDA decisions on:-
* SPD503 for ADHD in the US; and
* SPD465 for ADHD in the US.
Timings of approvals and launches are subject to the regulatory/governmental
approvals process.
Financial Outlook
This outlook excludes the impact of the New River acquisition.
Shire's business continues to perform strongly. We expect 2007 revenue growth
to be around 20% (assuming prescription growth in the ADHD market of 4-6%).
As in 2006, earnings for 2007 will continue to be impacted by the costs
associated with the continued development and launch of new products. We
anticipate that up to six new products will be launched during 2007 and H1 2008
in addition to the expected continued growth of DAYTRANA, ELAPRASE and FOSRENOL
in the US and ELAPRASE and FOSRENOL in Europe.
* These launches will require additional advertising and promotional spend
and in some cases additional sales representatives. Consequently, SG&A
costs are expected to rise to between $930 - 960 million for 2007;
* Phase 3(b) and Phase 4 studies to support new product launches and the
continuation of Phase 3 trials on GA-GCB, the development of the Women's
Health franchise, pre-clinical development of three HGT projects and two
new Phase 1 projects and two further pre-clinical projects, are all
expected to result in R&D spend in the range of $360 - 380 million;
* The depreciation charge for the year is expected to increase by
approximately 20% compared to 2006; and
* The effective tax rate for 2007 is expected to be approximately 26%.
In 2007 Shire intends to commence reporting its non-GAAP earnings based on
adjusted EPS, which will exclude amortisation charges and the accounting impact
of SFAS123R for share based compensation. Consequently the financial outlook
for the full year stated above excludes amortisation charges, which are
expected to rise by 20% over 2006 and the accounting impact of SFAS123R
estimated at approximately $45m, which will be split for GAAP purposes between
cost of goods, R&D and SG&A in the approximate ratio of 10%, 20% and 70%,
respectively.
Dividend
In respect of the six months to December 31, 2006 the Board has resolved to pay
a second interim dividend of 5.2455 US cents per ordinary share (2005: 4.419 US
cents per share). Together with the first interim payment of 1.9346 US cents
per ordinary share (2005: 1.8246 US cents per share), this represents total
dividends for 2006 of 7.1801 US cents per share (2005: 6.2436 US cents per
share), an increase of 15% in US Dollar terms over 2005.
Dividend payments will be made in Pounds Sterling to Ordinary Shareholders, US
Dollars to ADS holders and Canadian Dollars to Exchangeable Shareholders. A
dividend of 2.6933 pence per ordinary share, 15.7365 US cents per ADS and an
amount in Canadian cents per Exchangeable Share, to be determined based on the
February 20, 2007 noon rate of the Bank of Canada, respectively will be paid.
The Board has resolved to pay the dividend on April, 5, 2007 to persons whose
names appear on the register of members of the Company (or to persons
registered as holders of Exchangeable Shares in Shire Acquisition Inc.) at the
close of business on March 16, 2007.
Shire intends to pursue a progressive dividend policy.
New Accounting Standard - SFAS 123R
Shire's primary basis of financial reporting is US GAAP. From January 1, 2006
Shire has applied SFAS 123R in accounting for share-based compensation. This
accounting standard applies a fair value methodology in quantifying the
accounting charge associated with share-based compensation.
The Company has adopted SFAS 123R according to the modified retrospective
method. As a result, comparatives, including accounting periods in 2005, have
been retrospectively adjusted.
For further information please contact:
Investor Relations Cléa Rosenfeld (Rest of the World) +44 1256 894 160
Brian Piper (North America) +1 484 595 8252
Eric Rojas (North America) +1 484 595 8252
Media Jessica Mann (Rest of the World) +44 1256 894 280
Matthew Cabrey (North America) +1 484 595 8248
Notes to editors
SHIRE PLC
Shire's strategic goal is to become the leading specialty pharmaceutical
company that focuses on meeting the needs of the specialist physician. Shire
focuses its business on ADHD, human genetic therapies (HGT), gastrointestinal
(GI) and renal diseases. The structure is sufficiently flexible to allow Shire
to target new therapeutic areas to the extent opportunities arise through
acquisitions. Shire believes that a carefully selected portfolio of products
with a strategically aligned and relatively small-scale sales force will
deliver strong results.
Shire's focused strategy is to develop and market products for specialty
physicians. Shire's in-licensing, merger and acquisition efforts are focused on
products in niche markets with strong intellectual property protection either
in the US or Europe.
For further information on Shire, please visit the Company's website:
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 materialise, Shire's results could be materially affected. The
risks and uncertainties include, but are not limited to: risks associated with
the inherent uncertainty of pharmaceutical research, product development,
manufacturing and commercialisation; the impact of competitive products,
including, but not limited to the impact of those on Shire's ADHD franchise;
patents, including but not limited to, legal challenges relating to Shire's
ADHD franchise; government regulation and approval, including but not limited
to the expected product approval dates of SPD503 (guanfacine extended release)
(ADHD), SPD465 (extended release of mixed amphetamine salts) (ADHD), and
VYVANSE (NRP104) (lisdexamfetamine dimesylate) (ADHD), including its scheduling
classification by the Drug Enforcement Administration in the United States;
Shire's ability to complete, and achieve anticipated benefits from the
acquisition of New River; Shire's ability to secure new products for
commercialisation and/or development; and other risks and uncertainties
detailed from time to time in Shire's filings with the Securities and Exchange
Commission.
Non-GAAP Measures
This press release contains financial measures not prepared in accordance with
US GAAP. These measures are referred to as "non GAAP" measures and include Non
GAAP income from ongoing operations, Non GAAP net income, Non GAAP diluted
earnings per ordinary share and Non GAAP diluted earnings per ADS. 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 ongoing performance of Shire's business.
These non GAAP financial measures are used by Shire's management to make
operating decisions because they facilitate internal comparisons of the
Company's performance to historical results and to competitors' results. These
measures are also considered by the Remuneration Committee of Shire's Board of
Directors in assessing the performance and compensation of employees, including
its executive officers.
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 GAAP basis, since many one-time or infrequent items that the Company's
management believe are not indicative of the ongoing performance of the
business may not be excluded when preparing financial measures under US GAAP.
However, 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.
Additional Information
The tender offer described in this press release has not yet commenced, and
this press release is neither an offer to purchase nor a solicitation of an
offer to sell New River common stock. Investors and security holders are urged
to read both the tender offer statement and the solicitation/recommendation
statement regarding the tender offer described in this report when they become
available because they will contain important information. The tender offer
statement will be filed by a subsidiary of Shire with the Securities and
Exchange Commission (SEC), and the solicitation/recommendation statement will
be filed by New River with the SEC. Investors and security holders may obtain a
free copy of these statements (when available) and other documents filed by
Shire or New River with the SEC at the website maintained by the SEC at
www.sec.gov. The tender offer statement and related materials may be obtained
for free by directing such requests to Shire at Hampshire International
Business Park, Chineham, Basingstoke, Hampshire, England, RG24 8EP, attention:
Investor Relations. The solicitation/recommendation statement and such other
documents may be obtained by directing such requests to New River at 1881 Grove
Avenue, Radford, Virginia 24141, attention: Director of Corporate
Communications.
The following are trademarks of Shire or companies within the Shire Group which
are the subject of trademark registrations in certain territories:
ADDERALL XR® (mixed salts of a single-entity amphetamine)
ADDERALL® (mixed salts of a single-entity amphetamine)
AGRYLIN® (anagrelide hydrochloride)
CALCICHEW® range (calcium carbonate with or without vitamin D3)
CARBATROL® (carbamazepine extended-release capsules)
COLAZIDE® (balsalazide)
DAYTRANA™ (methylphenidate transdermal system)
ELAPRASE™ (idursulfase)
FOSRENOL® (lanthanum carbonate)
GENE-ACTIVATED®
LIALDA™ (mesalamine)
LODINE ® (etodolac)
MEZAVANT ™ (mesalamine)
REMINYL® (galantamine hydrobromide) (UK and Republic of Ireland)
REMINYL XL™ (galantamine hydrobromide) (UK and Republic of Ireland)
REPLAGAL® (agalsidase alfa)
SOLARAZE® (3%, gel diclofenac sodium (3%w/w))
VANIQA® (eflornithine hydrochloride)
VYVANSE™ (lisdexamfetamine dimesylate)
XAGRID® (anagrelide hydrochloride)
The following are trademarks of third parties referred to in this press release
:
3TC (trademark of GlaxoSmithKline (GSK))
DYNEPO (trademark of Sanofi Aventis)
MMX Multi Matrix Systems (trademark of Cosmo Technologies Limited)
PENTASA (trademark of Ferring)
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)
SEASONIQUE (trademark of Barr Laboratories, Inc.)
ZEFFIX (trademark of GSK)
ZEMPLAR (trademark of Abbott Laboratories)
OVERVIEW OF US GAAP FINANCIAL RESULTS
1. Introduction
Summary of 2006
Revenues from continuing operations for the year to December 31, 2006 increased
by 12% to $1,796.5 million (2005: $1,599.3 million).
Income from continuing operations (before income taxes and equity in earnings/
(losses) of equity method investees) for the year to December 31, 2006 was
$316.8 million (2005: loss of $491.7 million, as restated (see page 4)). The
difference is primarily due to the write-off in 2005 of in-process R&D of
$815.0 million following the TKT acquisition.
Cash inflow from operating activities for the year to December 31, 2006
increased by 38% to $531.9 million (2005: $384.3 million). The net increase
resulted mainly from favourable movements in working capital, in particular the
timing of sales within the final quarter of 2006 coupled with a reduction in
the net tax paid of $48.5 million.
Cash and cash equivalents, restricted cash and short-term investments at
December 31, 2006 totaled $1,156.7 million (December 31, 2005: $694.0 million).
The increase in cash and cash equivalents during the year of $470.4 million was
primarily due to positive cash flows from Shire's operations, the sale of
product rights to Duramed for $63.0 million and proceeds from loans repaid by
IDB of $70.6 million, offset by purchases of property, plant and equipment
($100.3 million) and a milestone payment to Noven Pharmaceuticals Inc. (Noven)
on DAYTRANA's approval ($50.0 million).
Summary of Q4 2006
Revenues from continuing operations for the three months to December 31, 2006
increased by 7% to $497.0 million (2005: $464.9 million) with ELAPRASE and
DAYTRANA contributing $34.5 million to Q4 2006 sales.
Income from continuing operations (before income taxes and equity in earnings/
(losses) of equity method investees) for the three months to December 31, 2006
was $90.3 million (2005: $101.0 million).
Cash inflow from operating activities for the three months to December 31, 2006
was $188.8 million (2005: $155.0 million). This increase primarily resulted
from favourable movements in working capital.
2. Product sales
For the year to December 31, 2006 product sales increased by 16% to $1,535.8
million (2005: $1,327.7 million) and represented 86% of total revenues (2005:
83%).
Product Highlights
Sales Sales US Rx US Market
Product $M Growth (2) Growth (1) Share (1)
(2)
ADDERALL XR 863.6 +18% +8% 26%
DAYTRANA 25.1 n/a n/a 2%
CARBATROL 68.3 -5% -9% 42%
PENTASA 137.8 +1% +2% 18%
REPLAGAL(3) 117.7 n/a n/a n/a
ELAPRASE 23.6 n/a n/a n/a
XAGRID(4) 53.3 +14% n/a n/a
FOSRENOL 44.8 -16% +34% 9%
(1) IMS Prescription Data - Product specific (December 2006).
(2) Compared to 2005.
(3) REPLAGAL was acquired as part of the TKT acquisition, which completed in
July 2005. Total sales for REPLAGAL, including pre-acquisition sales, for the
year ended 2005 were $94.6 million with total growth for the year ended 2006,
including pre-acquisition sales, of 24%. In 2005 total post-acquisition sales
were $41.3 million.
(4) Worldwide sales excluding US and Canada.
ADDERALL XR for the treatment of ADHD
ADDERALL XR is the leading brand in the US ADHD market with an average market
share of 26% in 2006 (2005: 25%). US ADHD market growth of 4% and the 1%
increase in average market share contributed to an 8% increase in US
prescriptions for ADDERALL XR for year to December 31, 2006 compared to the
same period in 2005.
Sales of ADDERALL XR for the year to December 31, 2006 were $863.6 million, an
increase of 18% compared to the same period in 2005 (2005: $730.8 million).
Product sales growth was significantly higher than prescription growth due
primarily to price increases in August 2005 and April 2006.
During October 2005 Shire filed a Citizen Petition with the FDA requesting that
the FDA require more rigorous bioequivalence testing or additional clinical
testing for generic or follow-on drug products that reference ADDERALL XR
before they can be approved. Shire received correspondence from the FDA in
April 2006 stating that, due to the complex issues raised requiring extensive
review and analysis by the FDA's officials, a decision cannot yet be reached by
the FDA. The FDA did not provide any guidance as to when that decision may be
reached.
On August 14, 2006 Shire and Barr announced that all pending litigation in
connection with Barr's Abbreviated New Drug Application (ANDA) and its attempt
to market generic versions of Shire's ADDERALL XR had been settled. As part of
the settlement, Barr entered into consent judgments and agreed to permanent
injunctions confirming the validity and enforceability of Shire's US Patents
Nos. 6,322,819 (the "819 Patent"), 6,601,300 (the "300 Patent") and 6,913,768
(the "768 Patent"). Barr has also admitted that any generic product made under
its ANDA would infringe the 768 patent. Under the terms of the settlement,
Barr will not be permitted to market a generic version of ADDERALL XR in the US
until April 1, 2009, except in certain limited circumstances, such as the
launch of another party's generic version of ADDERALL XR. No payments to Barr
are involved in the settlement agreement.
In January 2006, Shire settled its ADDERALL XR patent infringement lawsuits
with Impax. Under the terms of the settlement, Impax will be permitted to
market generic versions of ADDERALL XR in the US no later than January 1, 2010
and will pay the Company a royalty from those sales. In certain situations,
such as the launch of another generic version of ADDERALL XR, Impax may be
permitted to enter the market as the Company's authorized generic. No payments
to Impax are involved in the settlement agreement.
Litigation proceedings concerning Shire's ADDERALL XR patents are ongoing.
Further information can be found in our filings with the US Securities and
Exchange Commission, including our Annual Report on Form 10-K for the year to
December 31, 2005 and our most recent Quarterly Report on Form 10-Q for the
period ended September 30, 2006.
DAYTRANA for the treatment of ADHD
Following its launch in June 2006, DAYTRANA achieved a 2% share of the US ADHD
market by December 31, 2006. Sales for the year to December 31, 2006 were $25.1
million, a level of sales which triggered the first of three potential $25.0
million sales milestone payments to Noven. This milestone, which was paid on
February 14, 2007, has been capitalized as at December 31, 2006 and will be
amortized over 10 years. Net sales for 2006 were impacted by the redemption of
$14 million of coupons issued to support the product launch.
The addition of DAYTRANA, combined with growth in ADDERALL XR market share has
helped Shire grow its total share of the US ADHD market to 28% at December 31,
2006 compared to 26% (which included a 1% share relating to ADDERALL) at
December 31, 2005.
CARBATROL for the treatment of Epilepsy
US prescriptions for the year ending December 31, 2006 were down 9% compared to
the same period in 2005. This was primarily due to a 6% decline in the US
extended release carbamazepine prescription market. CARBATROL's US market share
remained at 42%.
Sales of CARBATROL for the year ending December 31, 2006 were $68.3 million, a
decrease of 5% compared to the same period in 2005 (2005: $72.1 million). The
fall in sales is due to the decrease in the extended release carbamezapine
market and a reduction of pipeline inventory in 2006 compared to stocking in
2005, offset by price increases in October 2005 and July 2006.
In July 2006 Impax deployed a sales force to begin promotion of CARBATROL under
a promotional services agreement for the US market signed in January 2006.
Patent litigation proceedings with Nostrum Pharmaceuticals, Inc. and Corepharma
LLC relating to CARBATROL are ongoing. Further information about the ongoing
proceedings relating to the Company's CARBATROL patents can be found in our
filings with the US Securities and Exchange Commission, including our Annual
Report on Form 10-K for the period ended December 31, 2005 and our most recent
Quarterly Report on Form 10-Q for the period ended September 30, 2006.
PENTASA for the treatment of Ulcerative Colitis
US prescriptions for the year ending December 31, 2006 were up 2% compared to
the same period in 2005 primarily due to a 4% increase in the US oral
mesalamine prescription market. PENTASA's US market share remained at 18%.
Sales of PENTASA for the year ending December 31, 2006 were $137.8 million, an
increase of 1% compared to the same period in 2005 (2005: $136.1 million).
Sales growth is marginally lower than prescription growth due to the lower
levels of pipeline stocking in 2006, partly offset by the impact of price
increases in January 2006 and November 2006.
REPLAGAL for the treatment of Fabry Disease
Sales for the year ending December 31, 2006 were $117.7 million, of which 88%
were in Europe and 12% in the rest of the world. Sales for REPLAGAL for the
year ending December 31, 2005 were $94.6 million, including pre-acquisition
sales of $53.3 million. This represents a like-for-like increase in sales of
24% which was due to greater European coverage by an increased number of sales
representatives and strong growth in the rest of the world market (excluding
the US).
ELAPRASE for the treatment of Hunter Syndrome
ELAPRASE was launched in the US in August 2006 and has had a strong start with
over 110 patients receiving treatment by the end of December 2006. In addition,
through the pre-approval process, over 100 patients were receiving treatment in
Europe by the end of the year. Sales reached $23.6 million by December 31,
2006.
XAGRID for the treatment of Thrombocythemia
Sales for the year ended December 31, 2006 were $53.3 million, an increase of
14% compared to the same period in 2005 (2005: $46.8 million). Expressed in
transaction currencies (XAGRID is primarily sold in Euros), sales increased by
13% due mainly to strong growth in France and Spain. In addition there was a
benefit of 1% from favorable exchange rate movements against the US dollar.
AGRYLIN sales in North America (US and Canada) were $7.5 million for the year
ended December 31, 2006 (2005: $46.0 million). This reduction was expected
following the approval of generic versions of AGRYLIN in the US market in April
2005.
FOSRENOL for the treatment of Hyperphosphatemia
US prescriptions for the year ending December 31, 2006 were up 34% compared to
2005 due to FOSRENOL increasing its average share of the total US phosphate
binding market to 9% (2005: 7%) and market growth of 9% over the same period.
FOSRENOL was launched in the US in January 2005.
US sales of FOSRENOL for the year ending December 31, 2006 were $40.2 million
(2005: $53.0 million). The decrease in net sales of 16% compared to
prescription growth of 34% is primarily due to destocking in 2006 compared to
significant stocking of higher strength formulations at the end of 2005.
An agreement with Abbott was signed in December 2006 for the co-promotion of
FOSRENOL in the US. Abbott's US renal care sales team will co-promote FOSRENOL
with its own renal product ZEMPLAR. Shire's US sales force will also continue
to promote FOSRENOL. This agreement began in Q1 2007, and will continue for a
term of five years.
European sales of FOSRENOL for the year ending December 31, 2006 were $4.6
million (2005: $0.5 million), giving total FOSRENOL sales worldwide of $44.8
million (2005: $53.5 million).
FOSRENOL has now been launched in Germany, France and a number of other
European countries. Launches will continue throughout 2007 in the EU including
the UK, Italy and Spain, subject to finalization of national licensing and
conclusion of pricing and reimbursement negotiations.
On October 18, 2006 Health Canada granted a marketing license application for
FOSRENOL. The Canadian launch is planned for Q2 2007.
3. Royalties
Royalty revenue remained constant at $242.9 million for the year to December
31, 2006 (2005: $242.9 million).
Royalty Highlights
Product Royalties to Shire Royalty (1) Worldwide sales by
$M Growth licensee (2) in 2006
%
$M
3TC 150.9 -6% 1,138
ZEFFIX 34.8 14%(3) 301
Other 57.2 9% n/a
Total 242.9 0%
(1) Compared with 2005.
(2) GSK
(3) The impact of foreign exchange movements has contributed +1% to the
reported growth.
3TC
Royalties from sales of 3TC for the year to December 31, 2006 were $150.9
million, a decrease of 6% compared to the prior year (2005: $159.8 million).
Shire receives royalties from GSK on worldwide 3TC sales. GSK's worldwide sales
of 3TC for the year to December 31, 2006 were $1,138 million, a decrease of 6%
compared to prior year (2005: $1,211 million). The nucleoside analogue market
for HIV has continued to grow, however competitive pressures within the market
have increased, leading to a decline in 3TC sales.
ZEFFIX
Royalties from sales of ZEFFIX for the year to December 31, 2006 were $34.8
million, an increase of 14% compared to the prior year (2005: $30.5 million).
Shire receives royalties from GSK on worldwide ZEFFIX sales. GSK's worldwide
sales of ZEFFIX for the year to December 31, 2006 were $301 million, an
increase of 13% compared to prior year (2005: $266 million). This increase was
mainly due to strong growth in the Korean, Japanese and Chinese markets.
OTHER
Other royalties are primarily in respect of REMINYL and REMINYL ER (known as
RAZADYNE and RAZADYNE ER in the US), a product marketed worldwide (excluding
the UK and the Republic of Ireland) by Janssen Pharmaceutical N.V. (Janssen),
an affiliate of Johnson & Johnson. Shire has the exclusive marketing rights in
the UK and the Republic of Ireland.
Sales of the REMINYL/ RAZADYNE range, for the symptomatic treatment of mild to
moderately severe dementia of the Alzheimer's type, continue to grow.
In June 2006 Janssen and Synaptech, Inc. filed a law suit against Barr for
infringement of their patent rights relating to RAZADYNE ER as a result of Barr
filing an ANDA with the FDA for a generic version of RAZADYNE ER. No court date
has been set.
Barr and other companies have filed ANDAs with the FDA for generic versions of
RAZADYNE and Janssen and Synaptech Inc. have filed law suits against some of
those ANDA filers. The court date for the first of these proceedings is May
2007.
4. Financial details
Cost of product sales
For the year to December 31, 2006 the cost of product sales was 16% of product
sales (2005: 16%). The cost of product sales for REPLAGAL in 2006 included a
$47.0 million adjustment in respect of acquired inventories (2005: $41.9
million). This fair value adjustment increased Shire's cost of product sales as
a percentage of sales for the year ended December 31, 2006 by 3% (2005: 3%).
For the year to December 31, 2006 cost of product sales included a charge of
$3.2 million for share based compensation under SFAS 123R (2005: $1.5 million).
Research and development (R&D)
R&D expenditure increased from $339.1 million in the year to December 31, 2005
to $386.9 million in the year to December 31, 2006, an increase of 14%. The
increase was primarily due to:
* The addition of two significant R&D projects following the acquisition of
TKT (ELAPRASE and GA-GCB); and
* Upfront payments made to Duramed and Warren of $25.0 million and $5.5
million, respectively.
Expressed as a percentage of total revenues, R&D expenditure was 22% for the
year to December 31, 2006 (2005: 21%). In both periods payments were made to
New River of $50 million for in-licensing VYVANSE. These payments have both
been expensed in accordance with Shire's accounting policy. The payments to New
River, Duramed and Warren in the year to December 31, 2006 totalled $80.5
million, equivalent to 5% of total revenues. In the year to December 31, 2005
the $50.0 million payment to New River was equivalent to 3% of total revenues.
For the year to December 31, 2006 R&D included a charge of $5.4 million for
share based compensation under SFAS 123R (2005: $2.9 million).
Selling, general and administrative (SG&A)
SG&A expenses increased from $655.5 million in the year to December 31, 2005 to
$835.4 million in the year to December 31, 2006, an increase of 27%. As a
percentage of product sales, SG&A expenses were 54% (2005: 49%).
The increase in SG&A expenses was expected, with additional expenditure
required for:
* The promotion and launch of DAYTRANA (including an increase in the ADHD
sales force);
* The recruitment of a new GI sales force in the US;
* The recruitment of new US and European sales forces to launch Elaprase; and
* Pre-launch activities relating to the 2007 launches of DYNEPO, LIALDA and
VYVANSE.
For the year to December 31, 2006 SG&A included a charge of $34.4 million for
share based compensation under SFAS 123R (2005: $24.8 million), representing 2%
of total revenue (2005: 1%).
Depreciation and amortization
The depreciation charge for the year to December 31, 2006 was $43.3 million
(2005: $29.2 million, including $6.5 million for impairments of property, plant
and equipment). The amortization charge for the year to December 31, 2006 was
$56.3 million (2005: $45.2 million). The increase in both depreciation and
amortization is primarily due to the inclusion of a full year's amortization
and depreciation charge in respect of assets acquired through the TKT
acquisition, together with the amortization of capitalized milestone payments
for DAYTRANA following its launch in June 2006.
Intangible asset impairment
The charge for intangible asset impairments for the year to December 31, 2006
was $1.1 million (2005: $5.6 million). The impairment charge for the year to
December 31, 2006 resulted from the decision to stop selling a non-core
product.
The impairment charge for the year to December 31, 2005 resulted from the
approval of generic versions of AGRYLIN and the decision not to support and
promote certain non-core products.
Integration costs
For the year to December 31, 2006 the Company incurred $5.6 million of costs
associated with the integration of the TKT business into the Shire group (2005:
$9.7 million). This included retention payments for key staff of $3.0 million,
IT costs of $1.2 million and other costs of $1.4 million.
Gain on sale of product rights
For the year to December 31, 2006 the Company recognized a pre-tax gain of
$63.0 million (2005: $nil) on the disposal of ADDERALL to Duramed for $63.0
million in cash.
Interest income
For the year to December 31, 2006 the Company received interest income of $50.5
million (2005: $35.3 million). This income primarily related to interest
received on Shire's cash balances. Interest income for the year ending December
31, 2006 is higher than for the year ending December 31, 2005 primarily as a
result of increases in US dollar interest rates.
Interest expense
For the year to December 31, 2006 the Company incurred interest expense of
$26.4 million (2005: $12.0 million).
In both years this expense primarily relates to a provision for interest, which
may be awarded by the Court in respect of amounts due to those ex-TKT
shareholders who have requested appraisal of the acquisition consideration
payable for their TKT shares. The trial date for the appraisal rights
litigation has been set for April 23, 2007. Further information can be found in
our filings with the US Securities and Exchange Commission, including our
Annual Report on Form 10-K for the year to December 31, 2005 and our most
recent Quarterly Report on Form 10-Q for the period ended September 30, 2006.
Other income, net
For the year to December 31, 2006 other income totaled $9.5 million. This
included $4.6 million of investment income, foreign exchange gains of $3.2
million and $3.8 million of other income, offset by impairments of long-term
investments of $2.1 million.
For the year to December 31, 2005 other income totaled $9.9 million. This
included $4.3 million of investment income, a gain on sale of
available-for-sale securities of $3.9 million, a gain on sale of the drug
formulation business of $3.6 million and $1.5 million of other income, offset
by impairments of long-term investments of $2.0 million and foreign exchange
losses of $1.4 million.
Taxation
The effective rate of tax for the year to December 31, 2006 was 26.8% (2005:
27.5%, after excluding the impact of the $815.0 million write-off of in-process
R&D in respect of the TKT acquisition). The effective rate has fallen by 0.7%
as a result of a reduction in deferred taxes offset by an increase in current
taxes as a result of additional tax contingencies of $187 million recognised in
relation to ongoing tax audits. The reduction in deferred taxes was primarily
due to the reversal of valuation allowances following changes in estimates as
to the realisation of certain deferred tax assets. Following this reversal of
valuation allowances the net deferred tax asset has increased to $261.0 million
at December 31, 2006 (December 31, 2005: $116.2 million). Realization of
deferred tax assets is dependent upon generating sufficient taxable income to
utilize such assets. Although realization of these assets is not assured, it is
more likely than not that the amount recognized will be realized.
Equity in earnings/(losses) of equity method investees
Net earnings of equity method investees of $5.7 million were recorded for the
year to December 31, 2006 (2005: net losses of $1.0 million). This comprised
earnings of $6.2 million from the 50% share of the antiviral commercialization
partnership with GSK in Canada (2005: $5.3 million), offset by losses of $0.5
million being the Company's share of losses in the GeneChem and EGS Healthcare
Funds (2005: losses of $6.3 million).
Unaudited US GAAP results for the years to December 31, 2006 and 2005
Consolidated Balance Sheets
December 31, 1 Adjusted
and restated
2006
December 31,
$M
2005
$M
___________ ___________
ASSETS
Current assets:
Cash and cash equivalents 1,126.9 656.5
Restricted cash 29.8 30.6
Short-term investments - 6.9
Accounts receivable, net 310.8 329.9
Inventories 131.1 136.0
Deferred tax asset 105.7 54.2
Prepaid expenses and other current assets 106.0 98.1
___________ ___________
Total current assets 1,810.3 1,312.2
Non current assets:
Investments 55.8 50.2
Property, plant and equipment, net 292.8 234.0
Goodwill 237.4 225.6
Other intangible assets, net 762.4 729.3
Deferred tax asset 155.3 62.0
Other non-current assets 12.4 42.9
___________ ___________
Total assets 3,326.4 2,656.2
___________ ___________
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses 566.1 431.8
Liability to dissenting shareholders 452.3 427.6
Other current liabilities 313.6 106.0
___________ ___________
Total current liabilities 1,332.0 965.4
Non-current liabilities 52.1 43.5
___________ ___________
Total liabilities 1,384.1 1,008.9
___________ ___________
1 Retrospectively adjusted following the adoption of SFAS 123R, and restated
for the correction to the value ascribed to IPR&D acquired with the acquisition
of TKT, as explained on page 4.
Unaudited US GAAP results for the years to December 31, 2006 and 2005
Consolidated Balance Sheets (continued)
December 31, 1 Adjusted
and restated
2006
December 31,
$M
2005
$M
___________ ___________
Shareholders' equity:
Common stock of 5p par value: 750 million 43.7 42.7
shares authorized; and 506.7 million shares
issued and outstanding (2005: 750 million
shares authorized; and 495.7 million shares
issued and outstanding)
Exchangeable shares: 1.3 million shares 59.4 101.2
issued and outstanding (2005: 2.2 million)
Treasury stock (94.8) (2.8)
Additional paid-in capital 1,493.2 1,327.5
Accumulated other comprehensive income 87.8 71.5
Retained earnings 353.0 107.2
___________ ___________
Total shareholders' equity 1,942.3 1,647.3
___________ ___________
Total liabilities and shareholders' equity 3,326.4 2,656.2
___________ ___________
1 Retrospectively adjusted following the adoption of SFAS 123R, and restated
for the correction to the value ascribed to IPR&D acquired with the acquisition
of TKT, as explained on page 4.
Unaudited US GAAP results for the 3 months and years to December 31, 2006 and
2005
Consolidated Statements of Operations
3 months to 1 Adjusted 12 months to 1 Adjusted
December 31, December 31, and restated
2006 3 months to 2006
December 31, 12 months to
$M 2005 $M December 31,
$M 2005
$M
___________ ___________ ___________ ___________
Revenues:
Product sales 427.6 397.5 1,535.8 1,327.7
Royalties 61.1 61.8 242.9 242.9
Other revenues 8.3 5.6 17.8 28.7
___________ ___________ ___________ ___________
Total revenues 497.0 464.9 1,796.5 1,599.3
___________ ___________ ___________ ___________
Costs and expenses:
Cost of product sales 62.4 79.1 247.7 215.5
Research and development 82.9 85.9 386.9 339.1
Selling, general and 241.3 171.9 835.4 655.5
administrative
Depreciation and 27.3 24.3 99.6 74.4
amortization
Intangible asset 1.1 2.6 1.1 5.6
impairment
Reorganization costs - - - 9.4
Integration costs 1.7 6.2 5.6 9.7
In-process R&D write-off - - - 815.0
Gain on sale of product - - (63.0) -
rights
___________ ___________ ___________ ___________
Total operating expenses 416.7 370.0 1,513.3 2,124.2
___________ ___________ ___________ ___________
Operating income/(loss) 80.3 94.9 283.2 (524.9)
Interest income 13.7 7.4 50.5 35.3
Interest expense (7.3) (7.3) (26.4) (12.0)
Other income, net 3.6 6.0 9.5 9.9
___________ ___________ ___________ ___________
Total other income, net 10.0 6.1 33.6 33.2
___________ ___________ ___________ ___________
Income/(loss) from 90.3 101.0 316.8 (491.7)
continuing operations
before income taxes and
equity in earnings /
(losses) of equity method
investees
Income taxes (21.9) (29.9) (84.9) (88.8)
Equity in earnings/ 0.2 (1.1) 5.7 (1.0)
(losses) of equity method
investees
___________ ___________ ___________ ___________
Income/(loss) from 68.6 70.0 237.6 (581.5)
continuing operations
Gain/(loss) from - (1.0) 40.6 3.1
discontinued operations
(net of income tax expense
of $nil and $nil)
__________ ___________ ___________ ___________
Net income/(loss) 68.6 69.0 278.2 (578.4)
___________ ___________ ___________ ___________
1 Retrospectively adjusted following the adoption of SFAS 123R, and restated
for the correction to the value ascribed to IPR&D acquired with the acquisition
of TKT, as explained on page 4.
Unaudited US GAAP results for the 3 months and years to December 31, 2006 and
2005
Consolidated Statements of Operations (continued)
3 months to 1 Adjusted 12 months to 1 Adjusted
December 31, December 31, and restated
2006 3 months to 2006
December 31, 12 months to
2005 December 31,
2005
___________ ___________ ___________ ___________
Earnings per share - basic
Income/(loss) from 13.6c 14.0c 47.2c (116.2c)
continuing operations
Gain/(loss) on disposition - (0.2c) 8.1c 0.6c
of discontinued operations
___________ ___________ ___________ ___________
Earning/(loss) per 13.6c 13.8c 55.3c (115.6c)
ordinary share - basic
___________ ___________ ___________ ___________
Earnings per share -
diluted
Income/(loss) from 13.4c 13.9c 46.6c (116.2c)
continuing operations
Gain/(loss) on disposition - (0.2c) 8.0c 0.6c
of discontinued operations
___________ ___________ ___________ ___________
Earnings/(loss) per 13.4c 13.7c 54.6c (115.6c)
ordinary share - diluted
___________ ___________ ___________ ___________
Earnings/(loss) per ADS - 40.2c 41.1c 163.8c (346.8c)
diluted
___________ ___________ ___________ ___________
Weighted average number of No. of No. of No. of No. of
shares: shares shares shares shares
Millions Millions Millions Millions
Basic 502.5 501.7 503.4 500.2
Diluted 510.3 504.1 509.3 500.2
___________ ___________ ___________ ___________
1 Retrospectively adjusted following the adoption of SFAS 123R, and restated
for the correction to the value ascribed to IPR&D acquired with the acquisition
of TKT, as explained on page 4.
Unaudited US GAAP results for the 3 months and years to December 31, 2006 and
2005
Consolidated Statements of Cash Flows
3 months to 1 Adjusted 12 months to 1 Adjusted
December 31, December 31, and restated
2006 3 months to 2006
December 12 months to
$M 31, 2005 $M December 31,
2005
$M
$M
___________ ___________ ___________ ___________
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income/(loss) 68.6 69.0 278.2 (578.4)
Adjustments to reconcile net
income/(loss) to net cash
provided by operating
activities:
Depreciation and 1.3 0.8 4.8 3.5
amortization:
26.8 23.9 99.1 68.0
- in cost of product sales
- in other costs and
expenses
Share based compensation 17.2 8.4 43.0 29.2
In-process R&D write-off - - - 815.0
Write-down of long-term 2.0 3.1 3.8 14.1
assets
Gain on sale of long-term (0.5) - (0.3) (3.9)
assets
Gain on sale of drug - (3.6) - (3.6)
formulation business
Equity in (earnings)/losses (0.2) 1.1 (5.7) 1.0
of equity method investees
Gain on sale of product - - (63.0) -
rights
Loss/(gain) on disposition - 1.1 (40.6) (3.1)
of discontinued operations
Changes in operating assets
and liabilities, net of
acquisitions:
Decrease/(increase) in 9.0 (46.0) 27.6 (79.9)
accounts receivable
Increase in sales deduction 7.2 4.2 24.8 18.6
accrual
(Increase)/decrease in (3.5) 9.9 7.2 8.6
inventory
Decrease/(increase) in 4.2 (15.7) (6.2) (40.1)
prepayments and other
current assets
(Increase)/decrease in other (2.3) 0.1 0.7 (0.7)
assets
Movement in deferred taxes (147.4) (12.0) (142.4) 22.3
Increase in accounts and 201.9 114.8 297.0 122.9
notes payable and other
liabilities
Increase/(decrease) in 4.5 (3.0) (1.9) (13.5)
deferred revenue
Returns on investments from - - 5.8 4.7
joint ventures
Cash flows used in - (1.1) - (0.4)
discontinued operations
___________ ___________ ___________ ___________
Net cash provided by 188.8 155.0 531.9 384.3
operating activities(A)
___________ ___________ ___________ ___________
1 Retrospectively adjusted following the adoption of SFAS 123R, and restated
for the correction to the value ascribed to IPR&D acquired with the acquisition
of TKT, as explained on page 4.
Unaudited US GAAP results for the 3 months and years to December 31, 2006 and
2005
Consolidated Statements of Cash Flows
3 months to 1 Adjusted 12 months to 1 Adjusted
December 31, December 31,
2006 3 months to 2006 12 months to
December 31, December 31,
$M 2005 $M 2005
$M $M
___________ ___________ ___________ ___________
CASH FLOWS FROM INVESTING
ACTIVITIES:
Movements in short-term - 15.4 6.9 366.7
investments
Movements in restricted (0.3) (0.5) 0.7 (0.8)
cash
Purchase of subsidiary - (14.4) (0.8) (1,114.0)
undertaking, net of cash
acquired
Expenses of acquisitions - (13.4) - (37.5)
Purchase of long-term (0.2) - (9.8) (7.7)
investments
Purchase of property, plant (29.1) (28.6) (100.3) (86.2)
and equipment
Purchase of intangible (6.0) (0.4) (58.8) (20.5)
assets
Proceeds from sale of - - - 10.1
long-term investments
Proceeds from sale of - - 0.9 0.1
property, plant and
equipment
Proceeds from sale of 0.4 - 0.4 -
intangible assets
Proceeds from sale of drug - 0.6 - 0.6
formulation business
Proceeds from sale of - - 63.0 -
product rights
Proceeds from loan repaid - - 70.6 -
by IDB
Loans made to IDB - - (43.2)
Proceeds from sale of the - - - 92.2
vaccines business
Returns of equity - - 0.3 3.8
investments
___________ ___________ ___________ ___________
Net cash used in investing (35.2) (41.3) (26.9) (836.4)
activities(B)
___________ ___________ ___________ ___________
1 Retrospectively adjusted following the adoption of SFAS 123R
Unaudited US GAAP results for the 3 months and years to December 31, 2006 and
2005
Consolidated Statements of Cash Flows
3 months to 1 Adjusted 12 months to 1 Adjusted
December 31, December 31,
2006 3 months to 2006 12 months to
December 31, December 31,
$M 2005 $M 2005
$M $'M
___________ ___________ ___________ ___________
CASH FLOWS FROM FINANCING
ACTIVITIES:
Redemption of 2% - - (0.1) -
convertible loan notes
Proceeds from exercise of 48.7 6.7 81.9 37.1
options
Excess tax benefit of share - 0.4 - 0.2
based compensation, charged
directly to equity
Payment of dividend (9.8) (9.4) (32.4) (28.5)
Payments to acquire (23.6) (2.5) (92.0) (2.5)
treasury stock
___________ ___________ ___________ ___________
Net cash provided by/(used 15.3 (4.8) (42.6) 6.3
in) financing activities(C)
___________ ___________ ___________ ___________
Effect of foreign exchange 2.8 (2.2) 8.0 (9.2)
rate changes on cash and
cash equivalents (D)
___________ ___________ ___________ ___________
Net increase/(decrease) in 171.7 106.7 470.4 (455.0)
cash and cash equivalents
(A) +(B) +(C) +(D)
Cash and cash equivalents 955.2 549.8 656.5 1,111.5
at beginning of period
___________ ___________ ___________ ___________
Cash and cash equivalents 1,126.9 656.5 1,126.9 656.5
at end of period
___________ ___________ ___________ ___________
1 Retrospectively adjusted following the adoption of SFAS 123R
US GAAP results for the 3 months and years to December 31, 2006 and 2005
Selected Notes to the Unaudited US GAAP Financial Statements
(1) Earnings per share
3 months to 1 Adjusted 12 months to 1 Adjusted
December 31, December 31, and restated
2006 3 months to 2006
December 31, 12 months to
$M 2005 $M December 31,
2005
$M
$M
___________ ___________ ___________ ___________
Income/(loss) from 68.6 70.0 237.6 (581.5)
continuing operations
Gain/(loss) on disposition - (1.0) 40.6 3.1
of discontinued operations
___________ ___________ ___________ ___________
Numerator for basic and 68.6 69.0 278.2 (578.4)
diluted EPS
___________ ___________ ___________ ___________
Weighted average number of No. of No. of No. of No. of
shares: shares shares shares shares
Millions Millions Millions Millions
___________ ___________ ___________ ___________
Basic 502.5 501.7 503.4 500.2
Effect of dilutive shares:
Stock options 7.1 2.0 5.3 -
Warrants 0.7 0.4 0.6 -
___________ ___________ ___________ ___________
Diluted 510.3 504.1 509.3 500.2
___________ ___________ ___________ ___________
1Retrospectively adjusted following the adoption of SFAS 123R, and restated for
the correction to the value ascribed to IPR&D acquired with the acquisition of
TKT, as explained on page 4
The share options and warrants not included in the calculation of the diluted
weighted average number of shares are shown below:
(1) 3 months (1) 3 months (1) 12 months (2) 12 months
to December to December to December to December
31, 2006 31, 2005 31, 2006 31, 2005
No. of shares No. of shares No. of shares No. of shares
Millions Millions Millions Millions
___________ ___________ ___________ ___________
Stock options 2.6 11.2 7.7 20.7
Warrants - - - 1.3
___________ ___________ ___________ ___________
2.6 11.2 7.7 22.0
___________ ___________ ___________ ___________
1. Not included as the exercise price exceeded the Company's average share
price during the calculation period.
2. Not included as the Company made a loss during the calculation period.
Unaudited US GAAP results for the 3 months to December 31, 2006 and 2005
Selected Notes to the US GAAP Financial Statements (continued)
(2) Analysis of revenues
3 months to 3 months to 3 months to 3 months to
December 31,
December 31, December 31, December 31,
2006
2006 2005 2006 % of total
$M $M % change revenue
Net product sales: ___________ ___________ ___________ ___________
CNS
ADDERALL XR 229.2 214.0 +7% 46%
ADDERALL - 12.1 n/a -
DAYTRANA 15.2 - n/a 3%
CARBATROL 17.6 17.3 +2% 5%
___________ ___________ ___________ ___________
262.0 243.4 +8% 54%
___________ ___________ ___________ ___________
GI
PENTASA 38.3 42.3 -9% 8%
COLAZIDE 2.4 2.1 +14% -
___________ ___________ ___________ ___________
40.7 44.4 -8% 8%
___________ ___________ ___________ ___________
GP
XAGRID 13.8 10.4 +33% 3%
FOSRENOL 18.7 29.0 -36% 4%
CALCICHEW 12.3 10.4 +18% 2%
REMINYL/REMINYL XL 6.5 4.1 +59% 1%
SOLARAZE 3.4 3.8 -11% 1%
%%
VANIQA 2.2 2.0 +10% -
LODINE 3.1 3.1 - 1%
___________ ___________ ___________ ___________
60.0 62.8 -4% 12%
___________ ___________ ___________ ___________
HGT
REPLAGAL 31.2 25.4 +23% 6%
ELAPRASE 19.3 - n/a 4%
___________ ___________ ___________ ___________
50.5 25.4 n/a 10%
___________ ___________ ___________ ___________
Other product sales 14.4 21.5 -33% 3%
___________ ___________ ___________ ___________
Total product sales 427.6 397.5 +8% 87%
___________ ___________ ___________ ___________
Royalty income:
3TC 36.6 40.4 -9% 7%
ZEFFIX 9.4 8.5 +11% 2%
Others 15.1 12.9 +17% 3%
___________ ___________ ___________ ___________
61.1 61.8 -1% 12%
___________ ___________ ___________ ___________
Other 8.3 5.6 +48% 1%
___________ ___________ ___________ ___________
Total revenues 497.0 464.9 +7% 100%
___________ ___________ ___________ ___________
Unaudited US GAAP results for the years to December 31, 2006 and 2005
Selected Notes to the US GAAP Financial Statements (continued)
(2) Analysis of 12 months to 12 months to 12 months to 12 months to
revenues (continued)
December 31, December 31, December 31, December 31,
Net product sales
2006 2005 2006 2006
$M $M % change % of total
revenue
___________ ___________ ___________ ___________
CNS
ADDERALL XR 863.6 730.8 +18% 48%
ADDERALL 23.6 43.1 -45% 1%
DAYTRANA 25.1 - n/a 1%
CARBATROL 68.3 72.1 -5% 5%
___________ ___________ ___________ ___________
980.6 846.0 16% 55%
___________ ___________ ___________ ___________
GI
PENTASA 137.8 136.1 +1% 8%
COLAZIDE 9.2 8.6 +7% 1%
___________ ___________ ___________ ___________
147.0 144.7 +2% 9%
___________ ___________ ___________ ___________
GP
AGRYLIN/XAGRID
N AMERICA 7.5 46.0 -84% -
ROW 53.3 46.8 +14% 3%
FOSRENOL 44.8 53.5 -16% 2%
CALCICHEW 45.5 38.7 +18% 3%
REMINYL/REMINYL XL 21.5 13.5 +59% 1%
SOLARAZE 13.2 12.5 +6% 1%
VANIQA 7.9 6.3 +25% -
LODINE 12.6 12.6 - 1%
___________ ___________ ___________ ___________
206.3 229.9 -10% 11%
___________ ___________ ___________ ___________
HGT
REPLAGAL* 117.7 41.3 n/a 7%
ELAPRASE 23.6 - n/a 1%
___________ ___________ ___________ ___________
141.3 41.3 n/a 8%
___________ ___________ ___________ ___________
Other product sales 60.6 65.8 -8% 3%
___________ ___________ ___________ ___________
Total product sales 1,535.8 1,327.7 +16% 86%
___________ ___________ ___________ ___________
Royalty income:
3TC 150.9 159.8 -6% 8%
ZEFFIX 34.8 30.5 +14% 2%
Others 57.2 52.6 +9% 3%
___________ ___________ ___________ ___________
242.9 242.9 - 13%
___________ ___________ ___________ ___________
Other 17.8 28.7 -38% 1%
___________ ___________ ___________ ___________
Total revenues 1,796.5 1,599.3 12% 100%
___________ ___________ ___________ ___________
* REPLAGAL was acquired in the acquisition of TKT which was completed in July
2005. Total sales for REPLAGAL, including pre-acquisition sales for the year to
December 31, 2005 were $94.6 million. Including pre-acquisition sales for the
year to December 31, 2005, product sales growth was 24% for REPLAGAL.
Non GAAP reconciliation of income/(loss) from ongoing operations, net income
and numerator for diluted EPS for the 3 months and years to December 31, 2006
and 2005
3 months to 1 Adjusted 12 months to 1 Adjusted
December 31, December 31, and restated
3 months to
2006 December 31, 2006 12 months to
December 31,
$M 2005 $M
2005
$M
$M
__________ __________ __________ __________
Non GAAP reconciliation of
income/(loss) from ongoing
operations(2)
Income/(loss) from ongoing 90.3 101.0 316.8 (491.7)
operations(2)
Add back:
TKT in-process R&D - - - 815.0
write-off
TKT cost of product sales - 24.7 47.0 41.9
fair value adjustment
New River milestone - - 50.0 -
payment
New River upfront payment - - - 50.0
Warren upfront payment - - 5.5 -
Duramed upfront payment - - 25.0 -
New listed holding company - - - 4.5
costs
Reorganization costs - - - 9.4
TKT integration costs 1.7 6.2 5.6 9.7
Gain on disposal of drug - (3.6) - (3.6)
formulation business
Gain on sale of product - - (63.0) -
rights
_________ _________ _________ _________
Non GAAP adjustment to 1.7 27.3 70.1 926.9
income/(loss) from ongoing
operations
_________ _________ _________ _________
Non GAAP income from 92.0 128.3 386.9 435.2
ongoing operations(2)
_________ _________ _________ _________
Non GAAP reconciliation of
net income and numerator
for diluted EPS
Net income/(loss) 68.6 69.0 278.2 (578.4)
Non GAAP adjustment to 1.7 27.3 70.1 926.9
income/(loss) from ongoing
operations(2) (0.5) (7.7) (18.8) (31.4)
Taxes on above adjustments
(Gain)/loss on disposition - 1.0 (40.6) (3.1)
of discontinued operations
_________ _________ _________ _________
Non GAAP adjustment to net 1.2 20.6 10.7 892.4
income/(loss) and
numerator for diluted EPS
_________ _________ _________ _________
Non GAAP net income and 69.8 89.6 288.9 314.0
numerator for non GAAP
diluted EPS
_________ _________ _________ _________
1 Retrospectively adjusted following the adoption of SFAS 123R, and restated
for the correction to the value ascribed to IPR&D acquired with the acquisition
of TKT, as explained on page 4
2Income/(loss) from continuing operations before income taxes and equity in
earnings/ (losses) of equity method investees.Non GAAP reconciliation of repo
rted EPS for the 3 months and the years
to December 31, 2006 and 2005
3 months to 1 Adjusted 12 months to 1 Adjusted
December 31, December 31, and restated
3 months to
2006 December 31, 2006 12 months to
December 31,
2005
2005
__________ __________ __________ __________
Earnings/(loss) per 13.4c 13.7c 54.6c (115.6c)
ordinary share-diluted
(Gain)/loss on disposition - 0.2c (8.0c) (0.6c)
of discontinued operations
__________ __________ __________ __________
Diluted EPS from 13.4c 13.9c 46.6c (116.2c)
continuing operations
Change in denominator due - - - 0.3c
to effect on dilution of
non GAAP adjustments(2)
__________ __________ __________ __________
13.4c 13.9c 46.6c (115.9c)
Add back:
TKT in-process R&D - - - 162.5c
write-off
TKT cost of product sales - 4.9c 9.3c 8.4c
fair value adjustment
New River milestone - - 9.8c -
payment
New River upfront payment - - - 10.0c
Warren upfront payment - - 1.1c -
Duramed upfront payment - - 4.9c -
New listed holding company - - - 0.9c
costs
Reorganization costs - - - 1.8c
TKT integration costs 0.3c 1.2c 1.1c 1.9c
Gain on disposal of drug - (0.7c) - (0.7c)
formulation business
Gain on sale product - - (12.4c) -
rights
Taxes on above adjustments (0.1c) (1.5c) (3.7c) (6.3c)
__________ __________ __________ __________
Non GAAP - diluted EPS per 13.6c 17.8c 56.7c 62.6c
ordinary share
__________ __________ __________ __________
Non GAAP - diluted EPS per 40.8c 53.4c 170.1c 187.8c
ADS
__________ __________ __________ __________
Total non GAAP adjustments 0.2c 4.1c 2.1c 178.2c
- diluted EPS per ordinary
share
___________ ___________ ___________ ___________
1 Retrospectively adjusted following the adoption of SFAS 123R, and restated
for the correction to the value ascribed to IPR&D acquired with the acquisition
of TKT, as explained on page 4
2 As the items added back to the net loss for the year to December 31, 2005
result in non GAAP net income for the year to December 31, 2005, the options
and warrants become dilutive under this measure and are therefore included in
the calculation of the denominator for non GAAP EPS.
- ENDS -
END
SHIRE PLC: Final Results
© 2007 PR Newswire
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