Shire plc: Excellent Third Quarter With Execution Plan on Track - Upgrading 2006 Revenue Guidance |
BASINGSTOKE, England and PHILADELPHIA, Pennsylvania, October 27
/PRNewswire-FirstCall/ -- Shire plc (LSE: SHP, NASDAQ: SHPGY, TSX: SHQ)
announces results for the third quarter 2006.
Matthew Emmens, Chief Executive Officer, commented:
"It's been an excellent quarter across all areas of our business. We
have continued to make good progress. Our execution plan is well on track
and therefore we are upgrading our revenue guidance for the full year.
"Our leading Attention Deficit Hyperactivity Disorder (ADHD) franchise
continues to grow, capturing over 29% of the US market in Q3 2006 following
the success of our newly launched patch DAYTRANA(TM) and the continued
strong performance of ADDERALL XR(R). We are well positioned to build on
our strengths - this month, the Food and Drug Administration (FDA) issued
an approvable letter for our latest ADHD treatment, NRP104 that we expect
to launch in Q2 2007. We filed for US regulatory approval of SPD465 and
SPD503, demonstrating our commitment to provide patients and physicians
with the broadest range of ADHD treatment choices. In addition, in August,
we settled all pending litigation with Barr Laboratories Inc. (Barr) in
connection with ADDERALL XR.
"We are also making good progress in other areas of our portfolio. In
July, we received approval for ELAPRASE(TM) in the US, for the treatment of
Hunter syndrome and last week the Committee for Medicinal Products for
Human Use (CHMP) recommended approval in the EU. We already have 127
patients worldwide on this treatment.
"We expect a response from the European Authorities for our ulcerative
colitis product, MESAVANCE(TM) by the end of this year and from the FDA in
the US in January; this product remains on track for launch in Q1 2007.
"Earlier this year we gave revenue guidance of low double digit growth.
As we approach the year end we now anticipate this will be in the range of
12-14%. Total costs are expected to be in line with previous guidance. As
2007 approaches, we remain focused on implementing our strategy and we are
on track to deliver several more new products to market."
Q3 2006 Financial highlights
- Product sales of US$386.2 million - up 25% versus Q3 2005 (19% growth
YTD).
- Total revenues of US$449.4 million - up 19% versus Q3 2005 (15%
growth in YTD).
Product highlights and recent events
NRP104 - ADHD
- Shire's collaborative partner, New River Pharmaceuticals Inc. (New
River), received an approvable letter from the FDA for NRP104 for the
treatment of pediatric ADHD. No additional studies were requested by the
FDA as a condition for full approval. Shire and New River are preparing for
a product launch in Q2 2007, pending final labeling and scheduling
discussions.
DAYTRANA - ADHD
- DAYTRANA captured 1.7% of the total US ADHD market after only three
months.
ELAPRASE - Hunter syndrome.
- On October 19, the CHMP of the European Medicines Agency (EMEA)
issued a positive opinion recommending approval of ELAPRASE for the
long-term treatment of patients with Hunter syndrome. The EU Marketing
Authorisation is expected early in 2007 and will result in unified labeling
that will be valid in the 25 current EU member states as well as in Iceland
and Norway.
- The FDA granted approval for ELAPRASE in July this year and to date
there are 67 patients on this treatment in the US. Early access has been
granted to patients with Hunter syndrome in a number of European countries
including Italy, Germany, Spain, France, Sweden, Norway and Denmark. Demand
from patients' families and clinicians has been high and 60 patients have
already been infused with the treatment in these countries.
REPLAGAL(R) - Fabry disease
- In September 2006, Shire agreed to partner with the Canadian
government to support a Fabry post-marketing study that will monitor all
Fabry patients. As a result of the agreement, Fabry patients currently or
previously on enzyme replacement therapy and new Fabry patients who meet
the guidelines will be eligible for funded enzyme replacement therapy.
- During the quarter, the European Commission approved a variation to
update sections of the product information to include data on the treatment
of children with REPLAGAL. A beneficial effect of treatment was seen in a
small number of children aged 7-18 years with no unexpected safety issues.
FOSRENOL(R) - Hyperphosphatemia
- On October 18, Health Canada granted a marketing license application
for FOSRENOL. Launch is now planned for Q2 2007.
- The roll-out of FOSRENOL continues in the European markets. Earlier
this year, the product was launched both in Sweden and Ireland. According
to wholesaler data, FOSRENOL captured 15% of the Swedish and 10% of the
Irish total phosphate binder End Stage Renal Disease (ESRD) market.
Pipeline Highlights
SPD465 - ADHD
- A new drug application (NDA) was submitted to the FDA for SPD465 on
July 21, for the treatment of ADHD in the adult population. The
Prescription Drug User Fee Act (PDUFA) date is May 21, 2007 for this
application. SPD465 has the same active ingredient as ADDERALL XR, but is
designed to provide ADHD symptom control for up to 16 hours.
SPD503 (guanfacine) - ADHD
- An NDA was submitted to the FDA on August 24, for investigational
compound SPD503 extended release, which, if approved, would be the first
once daily selective alpha-2A-adrenoceptor agonist for the treatment of
ADHD in children aged 6 to 17 years. The PDUFA date for this application is
June 24, 2007.
MESAVANCE - Ulcerative Colitis
- The FDA has extended by 90 days the review period for the NDA for
MESAVANCE. This extension has been sought by the FDA to allow additional
time to review supplemental Phase 1 data which Shire had agreed with the
FDA to submit during the review process. The PDUFA date for the application
is January 21, 2007.
Human Genetic Therapies (HGT)
- HGT has completed proof of concept studies on three projects and has
advanced them into pre-clinical development; namely enzyme replacement
therapies for Sanfilippo (Mucopolysaccharidosis IIIA), Metachromatic
Leukodystrophy and intrathecal delivery of ELAPRASE for Hunter syndrome
patients with significant central nervous system symptoms. Details of these
programs will be available during Shire's third quarter conference call
presentation.
Business highlights
Barr Laboratories Inc. (Barr)
- Shire has settled all pending litigation with Barr, in connection
with Barr's Abbreviated New Drug Application ("ANDA") and its attempt to
market generic versions of Shire's ADDERALL XR for the treatment of ADHD.
Barr will not be permitted to market a generic version of ADDERALL XR in
the US until April 1, 2009, except for certain limited circumstances, such
as the launch of another party's generic version of ADDERALL XR.
- Shire and Duramed Pharmaceuticals, Inc. ("Duramed"), a subsidiary of
Barr have entered into an agreement related to Duramed's transvaginal ring
technology that will be applied to at least five women's health products,
as well as a license to Duramed's currently marketed oral contraceptive,
SEASONIQUE(R) (levonorgestrel/ethinyl estradiol tablets 0.15 mg/0.03 mg and
ethinyl estradiol tablets 0.01 mg). Under this agreement, Shire made an
initial payment of US$25 million to Duramed for previously incurred product
development expenses, and will reimburse Duramed for development expenses
incurred going forward up to a maximum of US$140 million over eight years,
with an amount capped at US$30 million per annum. Shire has exclusive
rights to market these products in the five major European markets of the
UK, Germany, France, Italy and Spain and other areas, excluding North
America, and to the subsequent sales they will generate on a royalty-free
basis.
- Duramed has purchased Shire's ADDERALL(R) (immediate-release mixed
amphetamine salts) product for US$63 million. This transaction was
completed at the end of the third quarter.
Warren Pharmaceuticals, Inc. (Warren)
- Shire has in-licensed rights to tissue protective cytokine (TPC)
technology under an agreement with Warren. The agreement gives Shire
exclusive worldwide rights to develop TPCs in non-Nervous System
indications, including renal and genetic disease areas. An upfront payment
of US$6 million was payable to Warren, of which US$0.5 million was
satisfied by a payment made and expensed to R&D in the three months ended
June 30, 2006 and the remaining US$5.5 million was paid and expensed to R&D
in the three months ended September 30, 2006.
Q3 2006 Unaudited Results
Q3 2006 Q3 2005
US Non US Non
GAAP Adjustments GAAP(1) GAAP Adjustments GAAP(1)
US$M US$M US$M US$M US$M US$M
_______ ________ _________ _______ ____________ _______
Revenues 449.4 - 449.4 376.1 - 376.1
Income/(loss)
from ongoing
operations
(2) 119.1 (25.8) 93.3 (613.6) 704.7 91.1
Net 87.2 (18.7) 68.5 (630.7) 694.8 64.1
income/(loss)
Diluted
earnings per:
Ordinary 17.1c (3.7c) 13.4c (126.0c) 138.8c 12.8c
Share
ADS 51.3c (11.1c) 40.2c (378.0c) 416.4c 38.3c
Note: Average exchange rates for Q3 2006 and 2005 were US$1.87: GBP1.00
and US$1.78: GBP1.00 respectively.
(1) Non GAAP
These are non GAAP financial measures.
For Q3 2006, this measure for net income excludes a net gain of US$18.7
million as follows:
- Cost of product sales fair value adjustment following acquisition of
Transkaryotic Therapies Inc (TKT): US$6.7 million
- Upfront payments to Warren : US$5.5 million
- Upfront payments to Duramed : US$25.0 million
- Gain on sale of ADDERALL product rights to Duramed: US$63.0 million
- Net tax charges on above adjustments: US$7.1 million.
For Q3 2005, this measure for net income excludes net expenses of
US$694.8 million as follows:
- Costs associated with the write-off of in-process R&D following the
acquisition of TKT: US$673.0 million
- Cost of product sales fair value adjustment following the acquisition
of TKT: US$17.2 million
- TKT integration costs: US$3.5 million
- Reorganization costs resulting from Shire's North American site
consolidation: US$6.5 million
- New listed holding company costs: US$4.5 million
- Impact of the gain on the disposition of discontinued operations:
US$1.0 million
- Net tax benefit on above adjustments: US$8.9 million.
On a pre-tax basis, the above non GAAP adjustments relating to ongoing
operations total net gains of US$25.8 million for 2006 and expenses of
US$704.7 million for 2005.
The non-GAAP financial measures presented in the above table are used
by Shire management to gain an understanding of the comparative performance
of the Company. These measures are presented in order to provide
supplemental information regarding the operational performance of the
Company to enhance investors' understanding of core financial performance.
A reconciliation of these non GAAP financial measures to the most directly
comparable US GAAP financial measure can be found on pages 24 to 25.
(2) Income/(loss) from continuing operations before income taxes and
equity in earnings/(losses) of equity method investees.
2006 Outlook
R&D pipeline and new product launches
Shire has a strong product pipeline to support the medium and long-term
future growth of the Company. In Q4 2006 and H1 2007 Shire anticipates that
it will:
- Launch ELAPRASE in Europe;
- Launch MESAVANCE in the US and in Europe;
- Launch NRP104 in the US;
- Launch DYNEPO in Europe;
- Continue the roll out of FOSRENOL in Europe; and
- Continue the roll out of DAYTRANA and ELAPRASE in the US.
Timings of launches are subject to the regulatory/governmental
approvals process.
Financial Outlook
We are upgrading the previous guidance given as part of the Q2 2006
results, as follows:
We now anticipate 2006 revenue growth to be in the range of 12% to 14%
(prior guidance: low double-digit range).
As previously announced, earnings for 2006 will be impacted by the
costs associated with the continued development and launch of five new
products in 2006 and H1 2007, including DAYTRANA and ELAPRASE, in addition
to the roll-out of FOSRENOL across Europe and the new higher strengths of
FOSRENOL in the US.
- These launches require additional advertising and promotional spend
and, in some cases, additional sales representatives. Also, Shire has been
seeking in 2006 to maximize ADDERALL XR's market share. As a result, SG&A
costs are expected to be at the top end of the original guidance range
(US$770-800 million);
- 2006 activities include regulatory filings for ELAPRASE, SPD465,
SPD503 and MESAVANCE, Phase 3(b) and Phase 4 studies to support new product
launches, the transfer of three HGT projects into pre-clinical development
and the commencement of Phase 3 trials on Gene Activated Glucocerebrosidase
(GA-GCB). R&D spend for the full year is expected to be at the lower end of
the original guidance range (US$310-330 million);
- The depreciation and amortization charge for the year will be
approximately 30% higher than the 2005 charge reflecting the acquisition of
TKT and the amortization of milestone payments for DAYTRANA (prior
guidance: 50% higher); and
- The tax rate for the full year is expected to remain at a rate of
approximately 28%.
The financial outlook for the full year stated above excludes the
accounting impact under US GAAP of the following items:
- The milestone payment of US$50 million paid to New River in February
2006 following the FDA's acceptance of the filing of NRP104. This increased
R&D expense in Q1 2006;
- Upfront payments totaling US$30.5 million paid to Duramed (US$25
million) and Warren (US$5.5 million). These increased the R&D expense in Q3
2006;
- The gain of US$63 million made on disposal of ADDERALL product rights
to Duramed;
- A US GAAP adjustment to cost of product sales of US$47 million (prior
guidance: US$50 million) to reflect the difference between the accounting
fair value and book value of acquired REPLAGAL inventory, all of which has
now been charged;
- Shire HGT integration costs estimated at US$6 million in 2006 (prior
guidance: US$7 million), of which US$3.9 million was incurred to the end of
Q3 2006; and
- The adoption from January 1, 2006 of US GAAP accounting standard SFAS
123R for share based compensation. This is expected to give rise to
additional charges estimated at approximately US$45 million, which will be
split between costs of product sales, R&D and SG&A in approximate ratios of
10%, 15% and 75% respectively. US$25.8 million was charged across these
categories for the nine months ending September 30, 2006 (2005: US$20.6
million adjusted retrospectively).
Including these items would result, under US GAAP, in an estimated
increase in cost of product sales of US$50 million, R&D spend in the range
of US$395-415 million and SG&A and integration costs between US$805-835
million.
New Accounting Standard - SFAS 123R
Shire's primary basis of financial reporting is US GAAP. From January
1, 2006 Shire has been required to adopt 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.
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 attention deficit and
hyperactivity disorder (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:
http://www.shire.com.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995
Statements included herein that are not historical facts are
forward-looking statements. Such forward-looking statements involve a
number of risks and uncertainties and are subject to change at any time. In
the event such risks or uncertainties materialize, Shire's results could be
materially affected. The risks and uncertainties include, but are not
limited to, risks associated with: the inherent uncertainty of
pharmaceutical research, product development, manufacturing and
commercialization; the impact of competitive products, including, but not
limited to the impact of those on Shire's Attention Deficit and
Hyperactivity Disorder (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), MESAVANCE
(mesalamine) with MMX technology (SPD476) (ulcerative colitis), ELAPRASE
(idursulfase) (Hunter Syndrome) and NRP104 (lisdexamfetamine dimesylate)
(ADHD), including its scheduling classification by the Drug Enforcement
Administration in the United States; Shire's ability to secure new products
for commercialization and/or development; and other risks and uncertainties
detailed from time to time in Shire's and its predecessor registrant Shire
Pharmaceuticals Group plc's filings with the Securities and Exchange
Commission, particularly Shire plc's Annual Report on Form 10-K for the
year ended December 31, 2005.
The following are trademarks of Shire or companies within the Shire
Group, which are the subject of trademark registrations in certain
territories:
ADDERALL XR(R) (mixed salts of a single-entity amphetamine)
ADDERALL(R) (mixed salts of a single-entity amphetamine)
AGRYLIN(R) (anagrelide hydrochloride)
CALCICHEW(R) range (calcium carbonate with or without vitamin D3)
CARBATROL(R) (carbamazepine extended-release capsules)
COLAZIDE(R) (balsalazide)
DAYTRANA(TM) (methylphenidate transdermal system)
ELAPRASE(TM) (idursulfase)
EQUETRO(TM) (carbamazepine extended-release capsules)
FOSRENOL(R) (lanthanum carbonate)
LODINE (R) (etodolac)
MESAVANCE(TM) (mesalamine)
REMINYL(R) (galantamine hydrobromide) (UK and Republic of Ireland)
REMINYL XL(TM) (galantamine hydrobromide) (UK and Republic of Ireland)
REPLAGAL(R) (agalsidase alfa)
SOLARAZE(R) (3%, gel diclofenac sodium (3%w/w))
VANIQA(R) (eflornithine hydrochloride)
XAGRID(R) (anagrelide hydrochloride)
The following are trademarks of third parties referred to in this press
issue:
3TC (lamivudine) (trademark of GlaxoSmithKline (GSK))
DYNEPO (trademark of Sanofi Aventis)
MMX Multi Matrix Systems (trademark of Cosmo Technologies Limited)
PENTASA (trademark of Ferring AS)
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 Duramed Pharmaceuticals Inc.)
ZEFFIX (lamivudine) (trademark of GSK)
OVERVIEW OF US GAAP FINANCIAL RESULTS
1. Introduction
Summary of Q3 2006
Revenues from continuing operations for the three months to September
30, 2006 increased by 19% to US$449.4 million (2005: US$376.1 million).
Income from continuing operations (before income taxes and equity
method investees) for the three months to September 30, 2006 was US$119.1
million (2005 loss of: US$613.6 million). The difference is primarily due
to the write-off of in-process R&D of US$673.0 million in Q3 2005 following
the TKT acquisition, and the gain on the sale of ADDERALL of US$63.0
million in Q3 2006. The increased revenues in the period were broadly
offset by increased costs in funding Shire's new product launches.
Cash inflow from operating activities for the three months to September
30, 2006 was US$82.1 million (2005: US$39.1 million). This increase
primarily resulted from favorable movements in working capital. Cash and
cash equivalents, restricted cash and short-term investments at September
30, 2006 totaled US$984.8 million (December 31, 2005: US$694.0 million).
2. Product sales
For the three months to September 30, 2006 product sales increased by
25% to US$386.2 million (2005: US$309.2 million) and represented 86% of
total revenues (2005: 82%).
Product Highlights
Sales Sales US Rx US Market
Product US$M Growth (2) Growth (2) Share (1)
ADDERALL XR 207.6 +25% +9% 26%
DAYTRANA 9.9 n/a n/a 2%
CARBATROL 20.4 +27% -7% 42%
PENTASA 36.9 +1% +4% 18%
REPLAGAL (3) 32.4 n/a n/a n/a
ELAPRASE 4.3 n/a n/a n/a
XAGRID (4) 13.3 +11% n/a n/a
FOSRENOL 12.2 +26% +12% 9%
(1) IMS Prescription Data-Product specific (September 2006)
(2) Compared to Q3 2005
(3) REPLAGAL was acquired as part of the TKT acquisition, which
completed on July 27, 2005. Total sales for REPLEGAL, including pre
acquisition sales, for the 3 months ended September 30, 2005 were US$24.1
million with total growth for the 3 months, including pre-acquisition
sales, of 34%. In Q3 2005 total post acquisition sales were US$16.0 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 a market
share of 26% in September 2006 (2005: 25%). The US ADHD market growth of 4%
and the increase in market share contributed to a 9% increase in US
prescriptions for ADDERALL XR for the three months to September 30, 2006
compared to the same period in 2005.
Sales of ADDERALL XR for the three months to September 30, 2006 were
US$207.6 million, an increase of 25% compared to the same period in 2005
(2005: US$165.9 million). Product sales growth was significantly more than
prescription growth, due to price increases in August 2005 and April 2006
and lower levels of pipeline de-stocking compared with Q3 2005.
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.
Further information about the litigation proceedings relating to the
Company's ADDERALL XR patents 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 June 30, 2006.
DAYTRANA for the treatment of ADHD
Following its launch in June 2006, DAYTRANA achieved a 1.7% share of
the ADHD market by the end of Q3 2006. Sales in this period were US$9.9
million. The addition of DAYTRANA combined with growth in ADDERALL XR share
has helped Shire grow its total share of the ADHD market to 29% in the
quarter ending September 30, 2006 compared to 26% in the quarter ending
September 30, 2005.
CARBATROL for the treatment of Epilepsy
US prescriptions for the three months to September 30, 2006 were down
7% compared to the same period in 2005. This was primarily due to a 5%
decline in the US extended release carbamazepine prescription market.
CARBATROL's market share remained constant at 42%.
Sales of CARBATROL for the three months to September 30, 2006 were
US$20.4 million, an increase of 27% compared to the same period in 2005
(2005: US$16.1 million). The difference between the increase in sales and
decrease in prescriptions is due to price increases in October 2005 and
July 2006, lower levels of pipeline de-stocking compared with Q3 2005 and
reduced sales deductions.
In July 2006 Impax Laboratories, Inc. (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.
(Nostrum) relating to CARBATROL are ongoing. On July 17, 2006 the Court
entered an order staying discovery in this case until and through September
15, 2006. The parties have requested and the Court has granted a stay of
discovery until and through December 29, 2006. No trial date has been set.
Nostrum's 30-month stay under the Hatch-Waxman Act expired on February 6,
2006. Accordingly, the FDA may approve Nostrum's ANDA, once it meets all
regulatory requirements.
On March 30, 2006 the Company was notified that Corepharma LLC
(Corepharma) had filed an ANDA under the Hatch-Waxman Act seeking
permission to market its generic version of carbamazepine extended release
products in 100mg, 200mg and 300mg strengths. Shire Laboratories, Inc.
filed suit against Corepharma for the infringement of US Patent No.
5,326,570 (the '570 Patent) in the District Court of New Jersey. The
lawsuit triggered a stay of FDA approval of Corepharma's generic products
for 30 months from the date of Shire's receipt of Corepharma's notice of
ANDA filing. No discovery schedule or trial date has been set.
Further information about the litigation 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 June 30, 2006.
PENTASA for the treatment of Ulcerative Colitis
US prescriptions for the three months to September 30, 2006 were up 4%
compared to the same period in 2005 primarily due to a 4% increase in the
US oral mesalamine prescription market. PENTASA's market share remained
constant at 18%.
Sales of PENTASA for the three months to September 30, 2006 were
US$36.9 million, an increase of 1% compared to the same period in 2005
(2005: US$36.6 million). Sales growth is lower than prescription growth due
to the lower levels of pipeline stocking in Q3 2006 partly offset by the
impact of the January 2006 price increase.
REPLAGAL for the treatment of Fabry Disease
REPLAGAL was acquired by Shire as part of the TKT acquisition, which
was completed on July 27, 2005. Product sales for the three months to
September 30, 2006 were US$32.4 million, the majority of which were in
Europe. Total sales for REPLAGAL, including pre-acquisition sales
(US$8.1m), for the three months to September 30, 2005 were US$24.1 million.
This represents a like-for-like increase in sales of 34% which was due to
greater European coverage by an increased number of sales representatives,
and strong growth in the Rest of the World market.
ELAPRASE for the treatment of Hunter Disease
ELAPRASE was launched at the end of July 2006 and has had a strong
start with sales reaching US$4.3 million by the end of Q3 2006.
XAGRID for the treatment of Thrombocythemia
Rest of the World (outside North America) sales were up by 11% to
US$13.3 million (2005: US$12.0 million). Sales increased by 7% as expressed
in the transaction currencies (XAGRID is primarily sold in Euros), due
mainly to strong growth in France and Spain and benefited by 4% from
favorable exchange rate movements against the USUS$.
FOSRENOL for the treatment of Hyperphosphatemia
US prescriptions for the three months to September 30, 2006 were up 12%
compared to the same period in 2005. This was primarily due to FOSRENOL
increasing its share of the total US phosphate binding market, which in
September 2006 was 9% (2005: 8.5%), in a market that had itself grown 8%
over the same period. FOSRENOL was launched in the US in January 2005.
US sales of FOSRENOL for the three months to September 30, 2006 were up
18% to US$11.4 million (2005: US$9.7 million). The increase in net sales
compared to prescription growth is due to price increases in January 2006
and July 2006, larger prescription sizes due to the addition of the 1g and
750mg units and lower sales deductions, partially offset by destocking in
Q3 2006.
European sales of FOSRENOL for the 3 months to September 30, 2006 were
US$0.8 million, giving total FOSRENOL sales worldwide of US$12.2 million.
FOSRENOL was launched in Austria, Ireland, Sweden and Denmark in
December 2005 and in South Korea in June 2006. On July 11, 2006 Shire
received confirmation that FOSRENOL had been recommended for approval
through the Mutual Recognition Procedure in 11 markets in Europe. On
September 8, 2006 FOSRENOL was approved in Germany and on September 21,
2006 it was approved in the UK. In Europe, FOSRENOL has also been approved
in Sweden, Portugal, Italy, Poland, Austria, Finland, Czech Republic,
Denmark, France, Belgium, Cyprus, Greece, Luxembourg, Netherlands, Ireland,
Iceland, Malta and Estonia. Launches will continue throughout Q4 2006 and
2007 in the EU, subject to finalization of national licensing and
conclusion of pricing re-imbursement negotiations.
On October 18, Health Canada granted a marketing license application
for FOSRENOL. Launch is now planned for Q2 2007.
3. Royalties
Royalty revenues increased to US$60.4 million for the three months to
September 30, 2006 (2005: US$60.2 million).
Royalty Highlights
Worldwide
in-market
sales by
Royalties to Royalty licensee2 in
Shire growth1 Q3 2006
Product US$M % US$M
3TC 36.5 -8%(i) 275
ZEFFIX 9.3 +21%(ii) 80
Other(iii) 14.6 +13% n/a
Total 60.4 0% n/a
(i) The impact of foreign exchange movements has contributed +1% to the
reported growth
(ii) The impact of foreign exchange movements has contributed +2% to
the reported growth
(iii) Includes REMINYL/RAZADYNE
1 Compared to Q3 2005
2 GlaxoSmithKline (GSK)
3TC
Royalties from sales of 3TC for the three months to September 30, 2006
were US$36.5 million (2005: US$39.6 million).
Shire receives royalties from GSK on worldwide 3TC sales. GSK's
worldwide sales of 3TC for the three months to September 30, 2006 were
US$275 million, a decrease of 9% compared to the same period in 2005 (2005:
US$301 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 three months to September 30,
2006 were US$9.3 million (2005: US$7.7 million).
Shire receives royalties from GSK on worldwide ZEFFIX sales. GSK's
worldwide sales of ZEFFIX for the three months to September 30, 2006 were
US$80 million, an increase of 19% compared to the same period in 2005
(2005: US$67 million). This increase was primarily due to strong growth in
the Korean, Japanese and Chinese markets.
OTHER
Other royalties are primarily in respect of REMINYL and REMINYL XL (now
marketed as RAZADYNE and RAZADYNE ER in the US), a product marketed
worldwide by Janssen Pharmaceutical N.V. (Janssen), an affiliate of Johnson
& Johnson, with the exception of the United Kingdom and the Republic of
Ireland where Shire has the exclusive marketing rights.
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 the Alzheimer's market. Revenue in Q3 2006 was higher than in the
same period in 2005, partly due to the impact of wholesalers destocking in
Q3 2005 following the launch of RAZADYNE ER in the US in Q2 2005.
In June 2006 Janssen and Synaptech, Inc.(Synaptech) filed 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 RAZADYNE ER. No court date
has been set.
Barr and other generics have filed ANDAs with the FDA as regards
RAZADYNE and Janssen and Synaptech have filed suit against some of those
ANDA filers. The court date for these proceedings is June 2007.
4. Financial details
Cost of product sales
For the three months to September 30, 2006 the cost of product sales
amounted to 16% of product sales (2005: 20%). The increase in gross margin
is primarily due to the lower fair value adjustment for REPLAGAL acquired
inventory in Q3 2006 versus Q3 2005. REPLAGAL's cost of product sales
includes acquired inventories, which in accordance with US GAAP have been
accounted for at fair value. For the three months to September 30, 2006 the
cost of product sales for REPLAGAL included a US$6.7 million adjustment in
respect of the acquired inventory (2005: US$17.2 million). This fair value
adjustment increased Shire's cost of product sales as a percentage of
product sales in Q3 2006 by 2% (2005: 6%). All REPLAGAL inventories
acquired as part of the TKT acquisition have now been consumed.
Research and Development (R&D)
R&D expenditure increased from US$75.1 million in the three months to
September 30, 2005 to US$104.0 million for the three months to September
30, 2006. The increase was primarily due to upfront payments made to
Duramed and Warren of US$25 million and US$5.5 million respectively.
Expressed as a percentage of total revenues, R&D expenditure was 23%
for the three months to September 30, 2006 (2005: 20%). The upfront
payments increased Shire's R&D expenditure as a percentage of total
revenues in Q3 2006 by 7%.
Selling, general and administrative (SG&A)
SG&A expenses increased from US$161.3 million in the three months to
September 30, 2005 to US$214.9 million in the three months to September 30,
2006, an increase of 33%. This increase is primarily related to the
promotion and launch of DAYTRANA (including an increase in the ADHD sales
force) and the recruitment of new US and European sales forces to launch
MESAVANCE and new US and European sales forces to launch Elaprase.
As a percentage of product sales, SG&A expenses were 56% (2005: 52%),
reflecting the recruitment of the new US sales forces prior to the launch
of their associated products. This ratio of SG&A to product sales should
reduce for Q4 2006 as sales from these launches increase.
Depreciation and amortization
The depreciation charge for the three months to September 30, 2006 was
US$11.0 million (2005: US$4.6 million). Amortization charges were US$14.6
million for the three months to September 30, 2006 (2005: US$11.8 million).
The increase in both depreciation and amortization is primarily due to the
increase in the asset base as a result of the TKT acquisition, together
with the amortization of capitalized milestone payments for DAYTRANA.
Integration costs
For the three months to September 30, 2006 the Company did not record
any costs for the integration of the TKT business into Shire (2005: US$3.5
million).
Gain on sale of product rights
For the three months to September 30, 2006, the Company recognized a
pre-tax gain of US$63.0 million (2005: nil), on the disposal of ADDERALL to
Duramed for US$63.0 million in cash.
Interest income
For the three months to September 30, 2006 the Company received
interest income of US$12.6 million (2005: US$6.9 million). For both periods
this income primarily related to interest received on Shire's cash
balances. Interest income for Q3 2006 is higher than Q3 2005 as a result of
increased cash balances and increases in US dollar interest rates.
Interest expense
For the three months to September 30, 2006 the Company incurred
interest expense of US$7.0 million (2005: US$3.5 million). In 2006 and 2005
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.
Taxation
The effective rate of tax for the three months to September 30, 2006
was 28% (2005: 29%, after excluding the in-process R&D write-off in respect
of the TKT acquisition from the loss from continuing operations before
income taxes). At September 30, 2006 net deferred tax assets of US$107.4
million were recognized (December 31, 2005: US$116.2 million).
Equity in earnings/(losses) of equity method investees
Net earnings of US$1.2 million were recorded for the three months to
September 30, 2006 (2005: net losses of US$0.6 million). This comprised
earnings of US$1.6 million from the 50% share of the antiviral
commercialization partnership with GSK in Canada (2005: US$1.2 million),
offset by losses of US$0.4 million being the Company's share of losses in
the GeneChem and EGS Healthcare Funds (2005: losses of US$1.8 million).
FINANCIAL INFORMATION
Unaudited US GAAP results for the 9 months to September 30, 2006
Consolidated Balance Sheets
Adjusted
September 30, December 31,
2006 2005
US$M US$M
ASSETS ---------- -----------
Current assets:
Cash and cash equivalents 955.2 656.5
Restricted cash 29.6 30.6
Short-term investments - 6.9
Accounts receivable, net 308.5 329.9
Inventories 122.8 136.0
Deferred tax asset 63.9 54.2
Prepaid expenses and other current
assets 106.6 98.1
---------- -----------
Total current assets 1,586.6 1,312.2
Investments 56.8 50.2
Property, plant and equipment, net 275.9 234.0
Goodwill 381.8 367.6
Other intangible assets, net 748.9 729.3
Deferred tax asset 43.5 62.0
Other non-current assets 9.9 42.9
---------- -----------
Total assets 3,103.4 2,798.2
---------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses 473.1 431.8
Liability to dissenting shareholders 445.8 427.6
Other current liabilities 147.8 106.0
---------- -----------
Total current liabilities 1,066.7 965.4
Long-term debt, excluding current
installments - 0.1
Other non-current liabilities 46.3 43.4
---------- -----------
Total liabilities 1,113.0 1,008.9
---------- -----------
Retrospectively adjusted following the adoption of SFAS 123R.
Unaudited US GAAP results for the 9 months to September 30, 2006
Consolidated Balance Sheets (continued)
Adjusted
September 30, December 31,
2006 2005
US$M US$M
---------- -----------
Shareholders' equity:
Common stock of 5p par value: 18,314.0
million shares authorized; and 502.1
million shares issued and outstanding
(2005: 495.7 million) 43.2 42.7
Exchangeable shares: 1.5 million shares
issued and outstanding (2005: 2.2 million) 69.6 101.2
Treasury stock (71.1) (2.8)
Additional paid-in capital 1,417.7 1,327.5
Accumulated other comprehensive income 94.8 71.5
Retained earnings 436.2 249.2
---------- -----------
Total shareholders' equity 1,990.4 1,789.3
---------- -----------
Total liabilities and shareholders' equity 3,103.4 2,798.2
---------- -----------
Retrospectively adjusted following the adoption of SFAS 123R. Unaudited
US GAAP results for the 3 months and 9 months to September 30, 2006
Consolidated Statements of Operations
Adjusted Adjusted
3 months to 3 months to 9 months to 9 months to
September 30, September September September
2006 30, 30, 30,
US$M 2005 2006 2005
US$M US$M US$M
--------- -------- ------- -------
Revenues:
Product sales 386.2 309.2 1,108.2 930.2
Royalties 60.4 60.2 181.8 181.1
Other revenues 2.8 6.7 9.5 23.1
--------- -------- ------- -------
Total revenues 449.4 376.1 1,299.5 1,134.4
--------- -------- ------- -------
Costs and expenses:
Cost of product sales 61.7 60.5 185.3 136.4
Research and
development 104.0 75.1 304.0 253.2
Selling, general and 214.9 161.3
administration 594.2 483.6
Depreciation and
amortization 25.6 16.4 72.3 50.1
Intangible asset - -
impairment - 3.0
Integration costs - 3.5 3.9 3.5
Reorganization costs - 6.5 - 9.4
In-process R&D - 673.0
write-off - 673.0
Gain on sale of product (63.0) -
rights (63.0) -
--------- -------- ------- -------
Total operating 343.2 996.3
expenses 1,096.7 1,612.2
--------- -------- ------- -------
Operating income/(loss) 106.2 (620.2) 202.8 (477.8)
Interest income 12.6 6.9 36.8 27.9
Interest expenses (7.0) (3.5) (19.1) (4.7)
Other income, net 7.3 3.2 5.9 3.9
--------- -------- ------- -------
Total other income, net 12.9 6.6 23.6 27.1
--------- -------- ------- -------
Income/(loss) from
continuing operations
before income taxes and
equity in
earnings/(losses) of
equity method investees 119.1 (613.6) 226.4 (450.7)
Income taxes (33.1) (17.5) (62.9) (58.9)
Equity in
earnings/(losses) of
equity method investees 1.2 (0.6) 5.5 0.1
--------- -------- ------- -------
Income/(loss) from
continuing operations 87.2 (631.7) 169.0 (509.5)
Gain on disposition of
discontinued operations
(net of income tax
expense of US$nil and
US$nil) - 1.0 40.6 4.1
--------- -------- ------- -------
Net income/(loss) 87.2 (630.7) 209.6 (505.4)
--------- -------- ------- -------
Retrospectively adjusted following the adoption of SFAS 123R.
Unaudited US GAAP results for the 3 months and 9 months to September
30, 2006
Consolidated Statements of Operations (continued)
Adjusted Adjusted
3 months to 9 months to 9 months to
3 months to September September September
September 30, 30, 30, 30,
2006 2005 2006 2005
--------- -------- ------- -------
Earnings per share -
basic
Income/(loss) from
continuing operations 17.3c (126.2c) 33.5c (101.9c)
Gain on disposition of
discontinued operations - 0.2c 8.1c 0.8c
--------- -------- ------- -------
Earning/(loss) per
ordinary share - basic 17.3c (126.0c) 41.6c (101.1c)
--------- -------- ------- -------
Earnings per share -
diluted
Income/(loss) from
continuing operations 17.1c (126.2c) 33.2c (101.9c)
Gain on disposition of
discontinued operations - 0.2c 8.0c 0.8c
--------- -------- ------- -------
Earnings/(loss) per
ordinary share -
diluted 17.1c (126.0c) 41.2c (101.1c)
--------- -------- ------- -------
Earning/(loss) per ADS
- diluted 51.3c (378.0c) 123.6c (303.3c)
--------- -------- ------- -------
Weighted average number
of shares (millions):
Basic 504.0 500.5 503.6 499.7
Diluted 509.1 500.5 508.7 499.7
--------- -------- ------- -------
Retrospectively adjusted following the adoption of SFAS 123R.
Unaudited US GAAP results for the 3 months and 9 months to September
30, 2006
Consolidated Statements of Cash Flows
Adjusted Adjusted
3 months to 3 months to 9 months to 9 months
September 30, September 30, September to
2006 2005 30, September
US$M US$M 2006 30,
US$M 2005
US$M
----------- ----------- ------- --------
CASH FLOWS FROM
OPERATING
ACTIVITIES:
Net income/(loss) 87.2 (630.7) 209.6 (505.4)
Adjustments to
reconcile net
income/(loss) to
net cash provided
by operating
activities:
Depreciation and
amortization
- In cost of
product sales 1.4 1.0 3.5 2.7
- In other costs
and expenses 25.6 16.3 72.3 44.1
Share based
compensation 9.1 7.8 25.8 20.8
In-process R&D
write-off - 673.0 - 673.0
Movement in
deferred taxes 6.0 42.6 5.0 31.6
Write-down of long
term assets - 0.5 1.8 11.0
(Gain)/loss on sale
of long-term assets - (3.9) 0.2 (3.9)
Equity in
(earnings)/losses
of equity method
investees (1.2) 0.7 (5.5) (0.1)
Gain on sale of
product rights (63.0) - (63.0) -
Gain on disposition
of discontinued
operations - (1.1) (40.6) (4.2)
Changes in
operating assets
and liabilities,
net of
acquisitions:
Decrease/(increase)
in accounts
receivable 4.8 (6.1) 18.6 (33.9)
Increase/(decrease)
in sales deductions
accrual 4.6 (6.0) 17.6 14.4
Decrease/(increase)
in inventory 2.4 5.2 10.7 (1.3)
Increase in
prepayments and
other current
assets (28.5) (32.8) (10.4) (24.4)
Decrease/(increase)
in other assets 0.2 (0.1) 3.0 (0.8)
Increase/(decrease)
in accounts payable
and other
liabilities 40.1 (30.4) 94.9 8.1
Decrease in
deferred revenue (12.4) (2.7) (6.4) (10.5)
Returns on
investment from
joint venture 5.8 4.7 5.8 4.7
Cash flow from
discontinued
operations - 1.1 - 0.7
----------- ----------- ------- --------
Net cash provided
by operating
activities (A) 82.1 39.1 342.9 226.6
----------- ----------- ------- --------
Retrospectively adjusted following the adoption of SFAS 123R.
Unaudited US GAAP results for the 3 months and 9 months to September
30, 2006
Consolidated Statements of Cash Flows (continued)
Adjusted Adjusted
3 months to 3 months 9 months 9 months
September to to to
30, September September September
2006 30, 30, 30,
US$M 2005 2006 2005
US$M US$M US$M
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Movement in short-term
investments 1.4 107.3 6.9 351.3
Movement in restricted cash (0.1) - 1.0 (0.3)
Purchase of subsidiary
undertaking, net of cash
acquired - (1,099.6) (0.8) (1,099.6)
Expense of acquisitions - (24.1) - (24.1)
Purchase of long-term
investments (0.3) (0.2) (9.6) (7.7)
Purchase of property, plant and
equipment (20.6) (13.5) (71.2) (57.6)
Purchase of intangible assets (2.6) (0.1) (52.8) (20.1)
Proceeds from sale of long-term
investments 0.1 10.1 0.9 10.1
Proceeds from sale of property,
plant and equipment - - - 0.1
Proceeds on sale of product
rights 63.0 - 63.0 -
Proceeds from loan repaid by
IDB - - 70.6 -
Loans made to IDB - (13.3) - (43.2)
Proceeds from sale of the
vaccines business - 30.0 - 92.2
Returns of investments from
equity investments - 1.4 0.3 3.8
--------- --------- --------- ---------
Net cash provided by/(used in)
investing activities (B) 40.9 (1,002.0) 8.3 (795.1)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Redemption of 2% convertible
loan - - (0.1) -
Proceeds from exercise of
options 15.6 11.9 33.3 30.4
Excess tax benefit of share
based compensation, charged
directly to equity (2.0) 1.1 - 2.5
Payment of dividend - - (22.6) (19.1)
Payments to acquire treasury
stock (66.3) - (68.3) -
--------- --------- --------- ---------
Net cash (used in)/provided by
financing activities (C ) (52.7) 13.0 (57.7) 13.8
--------- --------- --------- ---------
Effect of foreign exchange rate
changes on cash and cash
equivalents (D) (0.2) (2.5) 5.2 (7.0)
--------- --------- --------- ---------
Net increase/(decrease) in cash
and cash equivalents (A+B+C+D) 70.1 (952.4) 298.7 (561.7)
Cash and cash equivalents at
beginning of period 885.1 1,502.2 656.5 1,111.5
--------- --------- --------- ---------
Cash and cash equivalents at
end of period 955.2 549.8 955.2 549.8
--------- --------- --------- ---------
Retrospectively adjusted following the adoption of SFAS 123R.
US GAAP results for the 3 months and 9 months to September 30, 2006
Selected notes to the Unaudited US GAAP Financial Statements
Adjusted Adjusted
3 months to 3 months to 9 months 9 months to
September 30, September 30, to September 30,
2006 2005 September 2005
US$M US$M 30, US$M
2006
(1) Earnings per share US$M
--------- --------- --------- ----------
Income/(loss) from
continuing operations 87.2 (631.7) 169.0 (509.5)
Gain on disposition of
discontinued
operations - 1.0 40.6 4.1
--------- --------- --------- ----------
Numerator for basic
and diluted EPS 87.2 (630.7) 209.6 (505.4)
--------- --------- --------- ----------
Retrospectively adjusted following the adoption of SFAS 123R.
Weighted average No of shares No of shares No of shares No of shares
number of shares: Millions Millions Millions Millions
--------- --------- --------- ----------
Basic 504.0 500.5 503.6 499.7
Effect of dilutive
shares:
Stock options 4.5 - 4.5 -
Warrants 0.6 - 0.6 -
--------- --------- --------- ----------
Diluted 509.1 500.5 508.7 499.7
--------- --------- --------- ----------
The share options and warrants not included in the calculation of the
diluted weighted average number of shares because the exercise prices
exceeded Shire's average share price during the calculation period, are shown
below:
9 months
to
September
3 months to 3 months to 30, 9 months to
September 30, September 30, 2006 September 30,
2006 2005 No of 2005
No of shares No of shares shares No of shares
Millions Millions Millions Millions
--------- --------- --------- ----------
Share options 10.1 23.1 10.1 20.3
Warrants - 1.3 - 1.3
--------- --------- --------- ----------
10.1 24.4 10.1 21.6
--------- --------- --------- ----------
Unaudited US GAAP results for the 3 months to September 30, 2006
Selected notes to the US GAAP Financial Statements (continued)
3 months to
3 months to 3 months to 3 months September 30,
September 30 September 30, to 2006
2006 2005 September % of total
US$M US$M 30, revenue
(2) Analysis of 2006
revenues % change
--------- ---------- -------- ----------
Net product sales:
CNS
ADDERALL XR 207.6 165.9 +25% 46%
ADDERALL 6.3 9.6 -34% 1%
CARBATROL 20.4 16.1 +27% 5%
DAYTRANA 9.9 - n/a 2%
--------- ---------- -------- ----------
244.2 191.6 +27% 54%
--------- ---------- -------- ----------
GI
PENTASA 36.9 36.6 +1% 8%
COLAZIDE 2.2 2.3 -4% 1%
--------- ---------- -------- ----------
39.1 38.9 +1% 9%
--------- ---------- -------- ----------
HGT
REPLAGAL(i) 32.4 16.0 n/a 7%
ELAPRASE 4.3 - n/a 1%
--------- ---------- -------- ----------
36.7 16.0 129% 8%
--------- ---------- -------- ----------
GP
XAGRID 13.3 12.0 +11% 3%
FOSRENOL 12.2 9.7 +26% 3%
CALCICHEW 11.1 10.1 +10% 2%
REMINYL/REMINYL XL 5.7 3.3 +72% 1%
SOLARAZE 2.9 3.3 -12% 1%
VANIQA 1.7 1.8 -6% 0%
LODINE 3.1 3.2 -3% 1%
--------- ---------- -------- ----------
50.0 43.4 +15% 11%
--------- ---------- -------- ----------
Other product sales 16.2 19.3 -16% 4%
--------- ---------- -------- ----------
Total product sales 386.2 309.2 +25% 86%
--------- ---------- -------- ----------
Royalty income:
3TC 36.5 39.6 -8% 8%
ZEFFIX 9.3 7.7 +21% 2%
Others 14.6 12.9 +13% 3%
--------- ---------- -------- ----------
60.4 60.2 +0% 13%
--------- ---------- -------- ----------
Other revenues 2.8 6.7 -58% 1%
--------- ---------- -------- ----------
Total revenues 449.4 376.1 +19% 100%
--------- ---------- -------- ----------
(i) REPLAGAL was acquired in the acquisition of TKT which was completed
on July 27, 2005. Total sales for REPLAGAL, including pre-acquisition sales
for the 3 months ended September 30, 2005 were US$24.1 million. Including
pre-acquisition sales for the 3 months ended September 30, 2005, product
sales growth was 34% for REPLAGAL.
Unaudited US GAAP results for the 9 months to September 30, 2006
Selected notes to the US GAAP Financial Statements (continued)
9 months
9 months 9 months to 9 months to to
to September 30, September 30, September
September 2005 2006 30,
30 US$M % change 2006
2006 % of
(2) Analysis of US$M total
revenues revenue
--------- ---------- -------- ---------
Net product sales:
CNS
ADDERALL XR 634.4 516.8 +23% 48%
ADDERALL 25.2 31.0 -19% 2%
CARBATROL 50.7 54.8 -7% 4%
DAYTRANA 9.9 - n/a 1%
--------- ---------- -------- ---------
720.2 602.6 +20% 55%
--------- ---------- -------- ---------
GI
PENTASA 99.5 93.8 +6% 8%
COLAZIDE 6.8 6.5 +5% 0%
--------- ---------- -------- ---------
106.3 100.3 +6% 8%
--------- ---------- -------- ---------
HGT
REPLAGAL 86.5 16.0 n/a 7%
ELAPRASE 4.3 - - 0%
--------- ---------- -------- ---------
90.8 16.0 468% 7%
--------- ---------- -------- ---------
GP
XAGRID 39.5 36.4 +9% 3%
FOSRENOL 26.1 24.5 +7% 2%
CALCICHEW 33.2 28.4 +17% 3%
REMINYL/REMINYL XL 15.0 9.4 +60% 1%
SOLARAZE 9.8 8.8 +11% 1%
VANIQA 5.7 4.3 +33% 0%
LODINE 9.5 9.5 0% 1%
--------- ---------- -------- ---------
138.8 121.3 +14% 11%
--------- ---------- -------- ---------
Other product sales 52.1 90.0 -42% 4%
--------- ---------- -------- ---------
Total product sales 1,108.2 930.2 +19% 85%
--------- ---------- -------- ---------
Royalty income:
3TC 114.3 119.5 -4% 9%
ZEFFIX 25.4 22.0 +15% 2%
Others 42.1 39.6 +6% 3%
--------- ---------- -------- ---------
181.8 181.1 +0% 14%
--------- ---------- -------- ---------
Other revenues 9.5 23.1 -59% 1%
--------- ---------- -------- ---------
Total revenues 1,299.5 1,134.4 +15% 100%
--------- ---------- -------- ---------
(i) REPLAGAL was acquired in the acquisition of TKT which was completed
on July 27, 2005. Total sales for REPLAGAL, including pre-acquisition sales
for the 9 months ended September 30, 2005 were US$69.2 million. Including
pre-acquisition sales for the 9 months ended September 30, 2005, product
sales growth was 25% for REPLAGAL.
Non GAAP reconciliation of numerator for diluted EPS
for the 3 months and 9 months to September 30, 2006
Adjusted Adjusted
3 months to 3 months to 9 months 9 months
September 30, September 30, to to
2006 2005 September September
US$M US$M 30, 30,
2006 2005
US$M US$M
--------- --------- --------- ---------
Net income/(loss) for
basic EPS 87.2 (630.7) 209.6 (505.4)
Add back:
TKT in-process R&D
write-off - 673.0 - 673.0
TKT cost of product sales
fair value adjustment 6.7 17.2 47.0 17.2
New River milestone
payment - - 50.0 -
New River upfront payment - - - 50.0
Warren upfront payment 5.5 - 5.5 -
Duramed upfront payment 25.0 - 25.0 -
New listed holding company
costs - 4.5 - 4.5
TKT integration costs - 3.5 3.9 3.5
Reorganization costs - 6.5 - 9.4
Gain on sale of product
rights (63.0) - (63.0) -
Taxes on above adjustments 7.1 (8.9) (19.1) (23.7)
Gain on disposition of
discontinued operations - (1.0) (40.6) (4.1)
--------- --------- --------- ---------
Total non GAAP adjustment (18.7) 694.8 8.7 729.8
--------- --------- --------- ---------
Numerator for non GAAP -
diluted EPS 68.5 64.1 218.3 224.4
--------- --------- --------- ---------
Non GAAP reconciliation of reported EPS
for the 3 months and 9 months to September 30, 2006
Adjusted
3 months
3 months to to Adjusted
September September 9 months to 9 months to
30, 30, September 30, September 30,
2006 2005 2006 2005
--------- --------- --------- ---------
Earnings/(loss) per
ordinary share-diluted 17.1c (126.0c) 41.2c (101.1c)
Add back:
Gain on disposition of
discontinued operations - (0.2c) (8.0c) (0.8c)
--------- --------- --------- ---------
Diluted EPS from 17.1c (126.2c)
continuing operations 33.2c (101.9c)
Change in denominator
due to effect on
dilution of non GAAP
adjustments(i) - 1.6c - 0.2c
--------- --------- --------- ---------
17.1c (124.6c) 33.2c (101.7c)
Add back:
TKT in-process
R&D write-off - 132.7c - 134.3c
TKT cost of product
sales fair value
adjustment 1.3c 3.4c 9.3c 3.4c
New River milestone - -
payment 9.8c -
New River upfront - -
payment - 10.0c
Warren upfront
payment 1.1c - 1.1c -
Duramed upfront
payment 4.9c - 4.9c -
New listed
holding company
costs - 0.9c - 0.9c
TKT integration costs - 0.7c 0.8c 0.7c
Reorganization costs - 1.3c - 1.9c
Gain on sale of product (12.4c) - (12.4c) -
rights
Taxes on above 1.4c (1.6c) (3.8c) (4.7c)
adjustments
--------- --------- --------- ---------
Non GAAP - diluted EPS
per ordinary share 13.4c 12.8c 42.9c 44.8c
--------- --------- --------- ---------
Non GAAP - diluted EPS 40.2c 38.3c
per ADS 128.7c 134.4c
--------- --------- --------- ---------
Total non GAAP
adjustments - diluted
EPS per ordinary share (3.7c) 138.8c 9.7c 145.9c
--------- --------- --------- ---------
(i) Since the items added back result in positive non GAAP net income
for Q3 2005 and the year to December 31, 2005, the options, warrants
and convertible debt become dilutive under this measure and are
therefore included in the calculation of the denominator for the non
GAAP EPS.
SOURCE Shire plc
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Investor Relations: Clea Rosenfeld (Rest of the World),
+44-1256-894-160. Brian Piper (North America), +1-484-595-8252.
Media: Jessica Mann (Rest of the World), +44-1256-894-280,
Matthew Cabrey (North America), +1-484-595-824
