Exhibit 99.1
Shire Pharmaceuticals Group plc Hampshire International Business Park, Chineham, Basingstoke RG24 8EP UK Tel +44 126 894000 Fax +44 1256 694708 httyp://www.shire.com |  |
Shire announces strong first quarter 2004 results
Basingstoke, UK – 29 April 2004 – Shire Pharmaceuticals Group plc (LSE: SHP, NASDAQ: SHPGY, TSX: SHQ) announces results for the three months ended March 31, 2004.
First Quarter 2004 Unaudited Results Highlights
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US GAAP | Q1 2004 | | Q1 2003 | | % Growth | |
| $M | | $M | | | |
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Total revenues | 326.3 | | 304.5 | | +7 | % |
Operating income | 105.7 | | 89.2 | | +18 | % |
Income before income taxes and equity in | | | | | | |
earnings / (losses) of equity method investees | 102.5 | | 88.0 | | +16 | % |
Net income | 74.6 | | 63.1 | | +18 | % |
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US GAAP | | | | | | |
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Diluted Earnings Per Share (EPS): | | | | | | |
Per ordinary share | 14.6c | | 12.3c | | +19 | % |
Per American Depositary Share (ADS) | 43.9c | | 36.9c | | +19 | % |
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Non-US GAAP | | | | | | |
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Diluted Earnings Per Share (EPS) excluding | | | | | | |
reorganization costs(2): | | | | | | |
Per ordinary share | 15.2c | | 12.3c | | +23 | % |
Per American Depositary Share (ADS) | 45.5c | | 36.9c | | +23 | % |
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| (1) | Average exchange rates for Q1 2004 and 2003 were $1.84: £1.00 and $1.60: £1.00 respectively. |
| (2) | This is a non-GAAP financial measure. Management believes that the presentation of this non-GAAP financial measure provides useful information to investors regarding Shire’s underlying performance, as the costs associated with the reorganization are not part of the Company’s ongoing operations. A reconciliation of this non-GAAP financial measure to the most directly comparable US GAAP financial measure can be found on page 16. |
Matthew Emmens, Chief Executive Officer, said:
“Shire's solid Q1 performance shows that the Company continues to deliver robust sales from its underlying portfolio. The recent announcement of our first European approval for FOSRENOL® is an important milestone for Shire and with seven further promising projects in registration or in late stage of development, we look forward to the ongoing successful progress of our pipeline.
“In July 2003, we announced that we would re-focus our business activities by implementing a new strategy. Since then, we have advanced our pipeline considerably and consolidated ownership of our portfolio by both acquiring the patents rights for FOSRENOL and by buying back the UK commercialization rights for REMINYL®. We have also taken active steps to improve operating efficiency and create a unified culture by integrating our development and commercial activities. Continuing our increased focus and reduced risk profile, this month we announced our intention to sell our vaccines business to ID Biomedical Corporation.
“All of these actions, combined with relevant M&A, will enable Shire to continue to create shareholder value. We remain committed to achieving our target of earnings growth, on average, in the mid-teens range and maintaining consistent operating margins beyond 2004.”
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First Quarter 2004 and Recent Events Highlights
- Revenues up 7% to $326.3 million, compared with high base in Q1 2003.
- Diluted earnings per ADS up 19% to 43.9c, including $3.8 million of expenses relating to the reorganization program announced in our year-end results.
- Despite increased competition within the Attention Deficit Hyperactivity Disorder (ADHD) market, ADDERALL XR® continues to perform extremely well. Share of the total US ADHD market was maintained at 23% in March 2004, whilst sales increased by 21% to $139.5 million.
- Royalties up 18% to $56.1 million.
- Cash flows from operating activities totaled $130.9 million, resulting in a net cash position of $1,157.4 million.
- FOSRENOL – Following receipt of Swedish approval, Shire expects first European launches by the end of 2004. Worldwide patents rights acquired, with an option for Japan, from AnorMED Inc.
- REMINYL – UK commercialization rights bought back from Janssen Pharmaceutica NV.
- Shire announces that it has signed an agreement to sell the assets of its vaccines business to ID Biomedical Corporation, hence:
- Reducing the risk profile of the Group;
- Focusing R&D resources on later stage projects; and
- Re-allocating funds to the Company’s core therapeutic projects.
- Shire has currently six projects in registration, two projects in Phase III and two projects in Phase II.
2004 Financial Outlook
Shire expects revenue growth to be in the high single digit range, despite the loss of exclusivity on PROAMATINE® in Q3 2003 and the anticipated loss of exclusivity on AGRYLIN® in the US in Q4 2004.
As stated in our year-end 2003 press release, 2004 earnings will include approximately $55 million of restructuring costs for the planned reorganization. The exit of the vaccines business will be reported separately from the continuing operations of Shire as a “discontinued operation”.
In respect of Shire’s continuing operations, we remain committed to our stated aim of achieving earnings growth, on average, in the mid-teens range and maintaining consistent operating margins.
– Ends –
For further information please contact: | | |
| | |
Cléa Rosenfeld – Investor Relations | + | 44 1256 894 160 |
Jessica Mann – Media | + | 44 1256 894 160 |
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Notes to editors
Shire Pharmaceuticals Group plc
Shire Pharmaceuticals Group plc (Shire) is a global pharmaceutical company with a strategic focus on meeting the needs of the specialist physician and currently focuses on developing projects and marketing products in the areas of central nervous system, gastrointestinal, and renal diseases. Shire has operations in the world’s key pharmaceutical markets (US, Canada, UK, France, Italy, Spain and Germany) as well as a specialist drug delivery unit in the US.
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 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 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 lanthanum carbonate (FOSRENOL), methylphenidate (METHYPATCH®), anagrelide hydrochloride (XAGRID®), carbarnazepine (BIPOTROL®),mesalamine (PENTASA® 500mg) and the adult indication for extended release mixed amphetamine salts (ADDERALL XR), the implementation of the planned reorganization and other risks and uncertainties detailed from time to time in Shire’s filings with the Securities and Exchange Commission.
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 amphetamine salts)
AGRYLIN® (anagrelide hydrochloride)
BIPOTROL® (carbamazepine)
CARBATROL® (carbamazepine)
FOSRENOL® (lanthanum carbonate)
PROAMATINE® (midodrine hydrochloride)
TROXATYL® (troxacitabine)
XAGRID® (anagrelide hydrochloride)
The following are trademarks of third parties.
3TC® (trademark of GlaxoSmithKline (GSK))
PENTASA® (trademark of Ferring AS)
REMINYL® (trademark of Johnson & Johnson)
ZEFFIX® (trademark of GSK)
STRATERRA® (trademark of Eli Lilly)
METHYPATCH® (trademark of Noven)
Data sources.
1 IMS Prescription Data – Product specific
2GSK
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OVERVIEW OF US GAAP FINANCIAL RESULTS
Introduction
Revenues for the three months ended March 31, 2004 increased by 7% to $326.3 million (Q1 2003: $304.5 million). Growth was depressed by a full quarter’s impact of generic competition on PROAMATINE sales and comparison to a high base quarter in Q1 2003, which included high levels of wholesaler inventories.
The Company recorded net income of $74.6 million, an increase of 18% compared to the three months ended March 31, 2003 ($63.1 million). Diluted earnings per ordinary share were 14.6 cents, or 43.9 cents per ADS, an increase of 19% over Q1 2003. These figures included corporate reorganization costs of $3.8 million.
The business generated a cash inflow from operating activities of $130.9 million (2003: $82.6 million).
Cash and cash equivalents, restricted cash and marketable securities at March 31, 2004 amounted to $1,535.2 million (December 31, 2003: $1,414.2 million). After deduction of borrowings, this translates to a net cash position of $1,157.4 million (December 31, 2003: $1,036.4 million). Where appropriate, this may be used to further enhanceour portfolio through product and project acquisitions.
Product sales
For the three months ended March 31, 2004, product sales increased $10.9 million (4%) to $267.3 million (Q1 2003: $256.4 million) and represented 82% of total revenues (Q1 2003: 84%).
First Quarter 2004 Product Highlights
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Product | Sales $M | | Sales Growth % | | US Rx1 Growth % | | March 20041 US Market Share % | |
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ADDERALL XR | 139.5 | | +21% | | +21% | | 23% | |
AGRYLIN | 38.3 | | -3% | | +3% | | 27% | |
PENTASA | 27.2 | | -8% | | +3% | | 17% | |
CARBATROL | 15.8 | | +68% | | +15% | | 45% | |
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ADDERALL XR for the treatment of ADHD
ADDERALL XR
Sales of ADDERALL XR for the 3 months ended March 31, 2004 were $139.5 million, an increase of 21% compared to prior year (2003: $115.2 million).
US prescriptions were up 21% over the same period, due primarily to a 22% increase in the total US ADHD market.
ADDERALL XR maintained its 23% share of the total US ADHD market in March 2004 (March 2003: 23%), despite increased competition within the market.
Sales growth was in line with prescription volume growth. Price rises in April and November 2003 were offset by modest adjustments in customer inventory levels and higher rates of contractual discounting.
The Company’s extended release “once daily” ADDERALL XR, is covered by two US patents. During 2003 the Company was notified that Barr Laboratories Inc. (Barr) had submitted an Abbreviated New Drug Application (ANDA) under the Hatch-Waxman Act seeking permission to market a generic version of ADDERALL XR prior to the expiration date of the Company’s two US
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patents and alleging that one patent is invalid and one is not infringed by Barr’s mixed amphetamine salt product. The Company has filed two suits against Barr seeking a ruling that Barr’s product infringes both of the Company’s US patents.
The Company was also notified in November 2003 that Impax Laboratories Inc. (Impax) has submitted an ANDA under the Hatch-Waxman Act seeking permission to market a generic version of ADDERALL XR, prior to the expiry of the Company’s two US patents and alleging that the patents are not infringed by Impax’s mixed amphetamine salt product. In December 2003, the Company filed suit against Impax seeking a ruling that Impax’s product infringes the Company’s two US patents.
AGRYLIN for the treatment of thrombocythemia
Worldwide sales of AGRYLIN for the three months ended March 31, 2004 were $38.3 million, a decrease of 3% compared to the prior year (2003: $39.7 million).
The decrease was driven by an 11% decrease in US revenues being offset by a 20% increase in revenues outside the US market, where AGRYLIN is currently available on a named patient basis.
US prescription volumes were up 3% over the same period.
The sales growth in the US is below prescription growth due to significant customer stocking in Q1 2003.
AGRYLIN had a 27% share of the total US AGRYLIN, Hydrea and generic hydroxyurea prescription market in March 2004 (March 2003: 27%).
AGRYLIN remains the only product specifically approved for essential thrombocythemia in the US. A pediatric exclusivity process is underway with the FDA, which is expected to extend the existing exclusivity to mid-September 2004, after which time, it is expected to face generic competition. In waiting for the FDA’s formal response, Shire was granted a “de facto” extension to its orphan drug exclusivity.
The expected launch of XAGRID in the EU (the trade name of AGRYLIN in the EU), in the second half of 2004, will continue to drive growth from markets outside the US.
PENTASA for the treatment of ulcerative colitis
Sales of PENTASA for the three months ended March 31, 2004 were $27.2 million, a decrease of 8% compared to prior year (2003: $29.7 million).
US prescription volumes were up 3% over the same period.
The sales growth for the quarter is below prescription growth due to significant customer stocking in Q1 2003.
PENTASA had a 17% share of the total US oral mesalmine/olsalazine prescription market in March 2004 (March 2003: 17%).
CARBATROL for the treatment of epilepsy
Sales of CARBATROL for the three months ended March 31, 2004 were $15.8 million, an increase of 68% compared to prior year (2003: $9.4 million).
US prescription volumes were up 15% over the same period, due to the impact of promotional efforts.
Pricing increases combined with favorable movements in customer inventory levels (estimated to be $3 million) contributed to the revenue growth between quarters.
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CARBATROL had a 45% share of the total US extended release carbamazepine prescription market in March 2004, compared with 36% in March 2003.
In August 2003, the Company received notification that Nostrum Pharmaceuticals Inc. (Nostrum) had submitted an application seeking permission to market its generic version of the 300mg strength of CARBATROL prior to the expiry of the Company’s US patents for CARBATROL. Shire filed a complaint against Nostrum for patent infringement in September 2003.
Royalties
Royalty revenue increased 18% to $56.1 million for the 3 months ended March 31, 2004 (Q1 2003: $47.8 million).
First Quarter 2004 Royalty Highlights
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Product | Royalties to Shire $M | | Royalty growth % | | Worldwide in-market sales by licensee in Q1 20042 $M | |
|
3TC | 38.2 | | +12%* | | 289 | |
ZEFFIX | 6.3 | | -1%** | | 55 | |
Other | 11.6 | | +61% | | n/a | |
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* The impact of foreign exchange movements has contributed +10% to the reported growth. |
** The impact of foreign exchange movements has contributed -5% to the reported growth. |
3TC
Royalties from 3TC for Q1 2004 were $38.2 million, an increase of 12%compared to Q1 2003 ($34.1 million). This was primarily due to the impact of foreign exchange movements but also continued growth in the nucleoside analogue market for HIV.
For 3TC, Shire receives royalties from GSK on worldwide sales, with the exception of Canada where a commercialization partnership with GSK exists. GSK’s worldwide sales of 3TC, for the three months ended March 31, 2004 were $289 million, an increase of 8% compared to the three months ended March 31, 2003 ($267 million).
ZEFFIX
Royalties from ZEFFIX for Q1 2004 were $6.3 million, a decrease of 1%compared to Q1 2003 ($6.4 million). Foreign exchange movements and reduction in wholesaler inventory levels in Asia Pacific have adversely impacted the quarter on quarter performance. However, the product continues to show strong growth in China and Japan.
For ZEFFIX, Shire receives royalties from GSK on worldwide sales, with the exception of Canada where a commercialization partnership with GSK exists. GSK’s worldwide sales of ZEFFIX, for the three months ended March 31, 2004, were $55 million, an increase of 12% compared to the three months ended March 31, 2003 ($49 million).
OTHER
Other royalties are primarily in respect of REMINYL, a product marketed worldwide by Johnson & Johnson (J&J), with the exception of the United Kingdom, where a commercialization partnership with J&J existed for the quarter ended March 31, 2004. With effect from March 31, 2004, the Company acquired the exclusive marketing rights to REMINYL in the UK and Ireland.
Sales of REMINYL, a treatment for mild to moderately severe dementia of the Alzheimer’s type, are growing well in the Alzheimer’s market.
Cost of product sales
For the three months ended March 31, 2004, our cost of product sales amounted to 14% of product sales (Q1 2003: 15%). The decrease is driven by a change in the product mix, with more income coming from higher margin products.
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Research and development (R&D)
R&D expenditure decreased from $54.6 million in Q1 2003 to $44.5 million in Q1 2004. Expressed as a percentage of total revenues, R&D expenditure was 14% (Q1 2003: 18%). This expenditure is below normal levels due to the phasing of project spend; however, it is anticipated that R&D expenditure will return to higher levels (16-17% of revenues) for the full year, excluding any new costs arising from in-licensing transactions.
Selling, general and administrative
Selling, general and administrative expenses increased from $110.4 million in Q1 2003 to $121.6 million in Q1 2004, an increase of 10%. As a percentage of product sales, these expenses were 46% (2003: 43%). The increase in expenditure relates primarily to additional advertising and promotional spend on ADDERALL XR, together with the adverse impact of exchange rate movements.
Depreciation and amortization
The depreciation charge for Q1 2004 was $4.5 million, an increase of $0.8 million compared to 2003. Amortization charges were $9.1 million, an increase of $1.1 million compared to Q1 2003.
Reorganization costs
During Q1 we incurred costs of $3.8 million in relation to the reorganization of the business announced earlier this year. The costs related to employee severance, relocation and the write-down of tangible fixed assets.
Interest income and expense
For the three months ended March 31, 2004, the Company received interest income of $4.0 million (Q1 2003: $5.1 million). The decrease is due to the reduction in interest rates more than offsetting the benefit of the increased cash balances.
Interest expense decreased from $2.6 million in Q1 2003 to $2.1 million in 2004, as a result of the partial buy-back of the convertible notes in Q2 2003.
Other expense, net
For the three months ended March 31, 2004, other expense totaled $5.1 million (Q1 2003: expense of $3.6 million). In 2004 and 2003, other expense was primarily attributable to the write-downs of certain portfolio investments.
Taxation
The effective rate of tax for Q1 2004 was 28% (Q1 2003: 28%). At March 31, 2004, net deferred tax assets of $65.3 million were recognized (December 31, 2003: $63.1 million).
Equity in earnings / (losses) of equity method investees
We received $1.0 million representing our 50% share of earnings from our anti-viral commercialization partnership with GSK in Canada (Q1 2003: $0.7 million). Included in the figure to March 31, 2003 is our 50% share of the losses of our commercialization partnership with Qualia Computing Inc., which was sold in December 2003.
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R&D Focus
FOSRENOL update
FOSRENOL received its first European approval from Reference Member State Sweden, on March 19, 2004. The approved label is excellent and includes description of clinical and pre-clinical datasets. The first European launch is expected to occur by the end of 2004 following pricing approvals.
As previously announced on March 11, 2004, Shire completed its response to the FDA's approvable letter for FOSRENOL in January 2004. The next step in the regulatory process is anticipated by mid-year 2004.
On March 23, 2004, Shire announced that it acquired the rights to the global patents for FOSRENOL, excluding Japan, from AnorMED Inc. for a consideration of up to $31 million. Under this agreement, Shire’s royalty obligations for the North American and European regions cease. The agreement also provides Shire with a 12-month option to purchase the Japanese patents for $6 million, to be paid upon receipt of regulatory approval in Japan.
In anticipation of FOSRENOL launch both in Europe and in the US, Shire has submitted a total of 62 abstracts to scientific publications in 2003 and 2004. All of the abstracts were accepted for publication.
ADDERALL XR
The information will be released on May 4, 2004, at the 157th annual meeting of the American Psychiatric Association (APA), the details of a classroom study involving 200 children over a period of 21 days. This study was conducted by the University of California, Irvine, and was designed to examine the comparative effects of ADDERALL XR and STRATTERA (atomoxetine).
R&D Pipeline |
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Shire now has six products in Registration. These are FOSRENOL, XAGRID, METHYPATCH, ADDERALL XR Adult, BIPOTROL and PENTASA 500mg. In addition, Shire has two other projects in Phase III: SPD503 and SPD476 and two projects in Phase II: SPD473 and SPD480. |
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US GAAP Results for the 3 months ended March 31, 2004
Consolidated Balance Sheets
| (Unaudited) March 31, 2004 $’000 | | December 31, 2003 $’000 | |
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ASSETS | | | | |
Current assets: | | | | |
Cash and cash equivalents | 1,204,742 | | 1,103,286 | |
Restricted cash | 43,129 | | 6,795 | |
Marketable securities | 287,308 | | 304,129 | |
Accounts receivable, net | 212,917 | | 215,690 | |
Inventories | 50,615 | | 45,258 | |
Deferred tax asset | 66,906 | | 64,532 | |
Prepaid expenses and other current assets | 40,425 | | 48,017 | |
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Total current assets | 1,906,042 | | 1,787,707 | |
Investments | 78,051 | | 73,153 | |
Property, plant and equipment, net | 166,691 | | 161,225 | |
Goodwill, net | 230,331 | | 225,860 | |
Other intangible assets, net | 329,654 | | 307,882 | |
Other non-current assets | 17,237 | | 22,953 | |
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Total assets | 2,728,006 | | 2,578,780 | |
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LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | |
Current liabilities: | | | | |
Current installments of long-term debt | 1,039 | | 1,054 | |
Accounts payable and accrued expenses | 234,706 | | 215,494 | |
Other current liabilities | 72,157 | | 37,127 | |
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Total current liabilities | 307,902 | | 253,675 | |
Long-term debt, excluding current installments | 376,720 | | 376,781 | |
Deferred tax liability | 1,624 | | 1,400 | |
Other non-current liabilities | 37,598 | | 23,798 | |
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Total liabilities | 723,844 | | 655,654 | |
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Shareholders’ equity: | | | | |
Common stock of 5p par value; 800,000,000 shares | | | | |
authorized; and 479,836,849 (December 31, 2003: | | | | |
477,894,726) shares issued and outstanding | 39,699 | | 39,521 | |
Exchangeable shares; 5,329,695 (December 31, 2003: | | | | |
5,839,559) shares issued and outstanding | 246,980 | | 270,667 | |
Additional paid-in capital | 1,009,972 | | 983,356 | |
Accumulated other comprehensive income | 82,362 | | 79,007 | |
Retained earnings | 625,149 | | 550,575 | |
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Total shareholders’ equity | 2,004,162 | | 1,923,126 | |
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Total liabilities and shareholders’ equity | 2,728,006 | | 2,578,780 | |
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US GAAP Results for the 3 months ended March 31, 2004
Unaudited Consolidated Statements of Operations
3 months ended March 31, | 2004 $’000 | | 2003 $’000 | |
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Total revenues | 326,280 | | 304,517 | |
Cost of revenues | (37,013 | ) | (38,645 | ) |
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Gross profit | 289,267 | | 265,872 | |
Total operating expenses | (183,531 | ) | (176,680 | ) |
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Operating income | 105,736 | | 89,192 | |
Interest income | 4,040 | | 5,113 | |
Interest expense | (2,126 | ) | (2,648 | ) |
Other expense, net | (5,122 | ) | (3,616 | ) |
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Total other expense, net | (3,208 | ) | (1,151 | ) |
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Income before income taxes and equity in earnings/(losses) of | | | | |
equity method investees | 102,528 | | 88,041 | |
Income taxes | (29,002 | ) | (24,526 | ) |
Equity in earnings/(losses) of equity method investees | 1,048 | | (449 | ) |
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Net income | 74,574 | | 63,066 | |
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Earnings per share: | | | | |
Basic | 15.0 | c | 12.6 | c |
Diluted | 14.6 | c | 12.3 | c |
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Weighted average number of shares: | | | | |
Basic | 495,718,205 | | 501,989,884 | |
Diluted | 518,119,910 | | 522,547,153 | |
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US GAAP Results for the 3 months ended March 31, 2004
Unaudited Consolidated Statements of Cash Flows
3 months ended March 31, | 2004 $’000 | | 2003 $’000 | |
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CASH FLOWS FROM OPERATING ACTIVITIES: | | | | |
Net income | 74,574 | | 63,066 | |
Adjustments to reconcile net income to net cash provided by operating | | | | |
activities: | | | | |
Depreciation and amortization | 13,594 | | 11,661 | |
Increase in provision for doubtful accounts and discounts | 609 | | 133 | |
Increase/(decrease) in provision for rebates and returns | 5,282 | | (3,989 | ) |
Stock option compensation | - | | (24 | ) |
Increase in deferred tax asset | (2,150 | ) | (11,170 | ) |
Write-down of long term investments | 7,214 | | 3,973 | |
Equity in (earnings)/losses of equity method investees | (1,048 | ) | 449 | |
Changes in operating assets and liabilities, net of acquisitions: | | | | |
Decrease/(increase) in accounts receivable | 2,066 | | (1,033 | ) |
Increase in inventory | (5,115 | ) | (2,781 | ) |
Increase/(decrease) in prepayments and other current assets | 6,853 | | (554 | ) |
Decrease in assets held for re-sale | 396 | | - | |
Decrease in other assets | 5,716 | | 1,440 | |
Increase in accounts and notes payable and other liabilities | 23,450 | | 21,460 | |
Decrease in deferred revenue | (551 | ) | - | |
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Net cash provided by operating activities | 130,890 | | 82,631 | |
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CASH FLOWS FROM INVESTING ACTIVITIES: | | | | |
Decrease in short-term deposits | 16,821 | | 67,623 | |
Purchase of long-term investments | (712 | ) | (1,475 | ) |
Purchase of property, plant and equipment | (12,066 | ) | (13,613 | ) |
Proceeds from sale of long-term investments | 220 | | - | |
Movements in restricted cash | (36,334 | ) | - | |
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Net cash (used in)/provided by investing activities | (32,071 | ) | 52,535 | |
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US GAAP Results for the 3 months ended March 31, 2004
Unaudited Consolidated Statements of Cash Flows (continued)
3 months ended March 31, | 2004 $’000 | | 2003 $’000 | |
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CASH FLOWS FROM FINANCING ACTIVITIES: | | | | |
Repayment of capital leases | (76 | ) | (63 | ) |
Proceeds from exercise of options | 3,108 | | 911 | |
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Net cash provided by financing activities | 3,032 | | 848 | |
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Effect of foreign exchange rate changes on cash and cash equivalents | (395 | ) | 7,736 | |
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Net increase in cash and cash equivalents | 101,456 | | 143,750 | |
Cash and cash equivalents at beginning of period | 1,103,286 | | 897,718 | |
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Cash and cash equivalents at end of period | 1,204,742 | | 1,041,468 | |
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US GAAP Results for the 3 months ended March 31, 2004
Selected Notes to the Unaudited US GAAP Financial Statements
(1) Analysis of revenues, operating income and reportable segments
The Company has disclosed segment information for the individual reporting segments of the business, based on the way in which the business is managed and controlled. The Company’s principal reporting segments are by operational function, each being managed and monitored separately and serving different markets. The Company evaluates performance based on operating income.
The US segment represents our commercial operations in the United States and the International segment represents the commercial operations in the Rest of the World. The Biologics segment represents the vaccine operations in Canada and the research and development center in the United States. The R&D segment represents all direct research and development costs incurred by the Company throughout the world. Corporate represents the royalty business that is managed at the corporate office and certain costs that are managed at the corporate office and not allocated to the other segments.
3 months ended March 31, 2004 | US $’000 | | International $’000 | | Biologics $’000 | | Corporate $’000 | | R&D $’000 | | Total $’000 | |
Product sales | 223,296 | | 41,262 | | 2,716 | | - | | - | | 267,274 | |
Licensing and development | 1,884 | | 31 | | - | | - | | - | | 1,915 | |
Royalties | - | | 2,798 | | - | | 53,347 | | - | | 56,145 | |
Other revenues | 723 | | 223 | | - | | - | | - | | 946 | |
|
| |
| |
| |
| |
| |
| |
Total revenues | 225,903 | | 44,314 | | 2,716 | | 53,347 | | - | | 326,280 | |
|
| |
| |
| |
| |
| |
| |
| | | | | | | | | | | | |
Cost of product sales | 21,760 | | 13,285 | | 1,968 | | - | | - | | 37,013 | |
Research and development | - | | - | | - | | - | | 44,505 | | 44,505 | |
Selling, general and administrative | 77,195 | | 23,762 | | 3,124 | | 17,538 | | - | | 121,619 | |
Depreciation and amortization(1) | 9,951 | | 2,454 | | 1,090 | | 99 | | - | | 13,594 | |
Reorganization costs | 2,861 | | - | | - | | 61 | | 891 | | 3,813 | |
|
| |
| |
| |
| |
| |
| |
Total operating expenses | 111,767 | | 39,501 | | 6,182 | | 17,698 | | 45,396 | | 220,544 | |
|
| |
| |
| |
| |
| |
| |
Operating income/(loss) | 114,136 | | 4,813 | | (3,466 | ) | 35,649 | | (45,396 | ) | 105,736 | |
|
| |
| |
| |
| |
| |
| |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
3 months ended March 31, 2003 | US $’000 | | International $’000 | | Biologics $’000 | | Corporate $’000 | | R&D $’000 | | Total $’000 | |
| | | | | | | | | | | | |
Product sales | 219,963 | | 35,691 | | 699 | | - | | - | | 256,353 | |
Licensing and development | 394 | | - | | - | | - | | - | | 394 | |
Royalties | - | | 2,199 | | - | | 45,564 | | - | | 47,763 | |
Other revenues | 7 | | - | | - | | - | | - | | 7 | |
|
| |
| |
| |
| |
| |
| |
Total revenues | 220,364 | | 37,890 | | 699 | | 45,564 | | - | | 304,517 | |
|
| |
| |
| |
| |
| |
| |
| | | | | | | | | | | | |
Cost of product sales | 26,372 | | 11,646 | | 627 | | - | | - | | 38,645 | |
Research and development | - | | - | | - | | - | | 54,598 | | 54,598 | |
Selling, general and administrative | 69,685 | | 19,157 | | 2,252 | | 19,327 | | - | | 110,421 | |
Depreciation and amortization(1) | 7,325 | | 2,365 | | 1,149 | | 822 | | - | | 11,661 | |
Reorganization costs | - | | - | | - | | - | | - | | - | |
|
| |
| |
| |
| |
| |
| |
Total operating expenses | 103,382 | | 33,168 | | 4,028 | | 20,149 | | 54,598 | | 215,325 | |
|
| |
| |
| |
| |
| |
| |
Operating income/(loss) | 116,982 | | 4,722 | | (3,329 | ) | 25,415 | | (54,598 | ) | 89,192 | |
|
| |
| |
| |
| |
| |
| |
(1) Depreciation from manufacturing plants is included within cost of product sales. Depreciation and amortization relating to R&D assets are included within US and International segments.
13
US GAAP Results for the 3 months ended March 31, 2004
Selected Notes to the Unaudited US GAAP Financial Statements (continued)
(2) Earnings per share (EPS)
Basic EPS is based upon the net income available to common stockholders divided by the weighted-average number of ordinary shares outstanding during the period.
Diluted EPS is based upon net income available to common stockholders divided by the weighted-average number of ordinary shares outstanding during the period and adjusted for the effect of all dilutive potential ordinary shares that were outstanding during the period.
Stock options to purchase approximately 10.3 million ordinary shares for the 3 months ended March 31, 2004 were not dilutive and were therefore not included in the computation of diluted EPS.
3 months ended March 31, | 2004 No. of shares | | 2003 No. of shares | |
|
| |
| |
Weighted average number of shares: | | | | |
Basic | 495,718,205 | | 501,989,884 | |
Effect of dilutive shares: | | | | |
Stock options | 3,899,118 | | 709,269 | |
Warrants | 132,023 | | - | |
Convertible debt | 18,370,564 | | 19,848,000 | |
|
| |
| |
Diluted | 518,119,910 | | 522,547,153 | |
|
| |
| |
| | | | |
Reconciliation of reported EPS: | | | | |
| | | | |
3 months ended March 31, | 2004 $’000 | | 2003 $’000 | |
|
| |
| |
Net income for basic EPS | 74,574 | | 63,066 | |
Interest charged on convertible debt, net of tax | 1,296 | | 1,381 | |
|
| |
| |
Net income for diluted EPS | 75,870 | | 64,447 | |
|
| |
| |
Basic EPS | 15.0c | | 12.6c | |
| | | | |
Diluted EPS | 14.6c | | 12.3c | |
|
| |
| |
14
US GAAP Results for the 3 months ended March 31, 2004
Selected Notes to the Unaudited US GAAP Financial Statements (continued)
(3)Analysis of revenues
3 months ended March 31, | 2004 $’000 | | 2003 $’000 | | 2004 % change | | 2004 % of total | |
|
| |
| |
| |
| |
Net product sales: | | | | | | | | |
ADDERALL XR | 139,462 | | 115,163 | | +21 | % | 43 | % |
AGRYLIN | 38,300 | | 39,674 | | -3 | % | 12 | % |
PENTASA | 27,247 | | 29,719 | | -8 | % | 8 | % |
CARBATROL | 15,785 | | 9,421 | | +68 | % | 5 | % |
Others | 46,480 | | 62,376 | | -25 | % | 14 | % |
|
| |
| |
| |
| |
| 267,274 | | 256,353 | | +4 | % | 82 | % |
|
| |
| |
| |
| |
Royalty income: | | | | | | | | |
3TC | 38,166 | | 34,139 | | +12 | % | 12 | % |
ZEFFIX | 6,338 | | 6,399 | | -1 | % | 2 | % |
Others | 11,641 | | 7,225 | | +61 | % | 3 | % |
|
| |
| |
| |
| |
| 56,145 | | 47,763 | | +18 | % | 17 | % |
|
| |
| |
| |
| |
Licensing | 1,915 | | 394 | | 386 | % | 1 | % |
Other | 946 | | 7 | | n/a | | - | |
|
| |
| |
| |
| |
Total revenues | 326,280 | | 304,517 | | +7 | % | 100 | % |
|
| |
| |
| |
| |
15
Non-GAAP measures for the 3 months ended March 31, 2004
Reconciliation of reported EPS excluding reorganization costs:
3 months ended March 31, | 2004 $’000 | | 2003 $’000 | |
|
| |
| |
Net income for diluted EPS | 75,870 | | 64,447 | |
Reorganization costs, net of tax | 2,669 | | - | |
|
| |
| |
Net income for diluted EPS excluding reorganization costs | 78,539 | | 64,447 | |
|
| |
| |
| | | | |
Diluted EPS (as reported) | 14.6c | | 12.3c | |
Add back charges: | | | | |
Reorganization costs, net of tax | 0.6c | | – | |
|
| |
| |
Diluted EPS excluding reorganization costs | 15.2c | | 12.3c | |
|
| |
| |
16
UK GAAP Results for the 3 months ended March 31, 2004
Unaudited Consolidated Profit and Loss Account
3 months to March 31, | 2004 £’000 | | 2003 £’000 | |
|
| |
| |
Turnover: group and share of joint venture | 179,371 | | 192,010 | |
Less: share of joint venture’s turnover | - | | (726 | ) |
|
| |
| |
Group turnover | 179,371 | | 191,284 | |
Cost of sales | (20,947 | ) | (22,334 | ) |
|
| |
| |
Gross profit | 158,424 | | 168,950 | |
Net operating expenses | (120,633 | ) | (143,949 | ) |
|
| |
| |
Operating profit | 37,791 | | 25,001 | |
Share of joint venture’s operating loss | - | | (728 | ) |
|
| |
| |
Total operating profit | 37,791 | | 24,273 | |
Finance charges, net | 1,485 | | 1,685 | |
|
| |
| |
Profit on ordinary activities before taxation | 39,276 | | 25,958 | |
Tax on profit on ordinary activities | (15,844 | ) | (15,187 | ) |
|
| |
| |
Retained profit for the period transferred to reserves | 23,432 | | 10,771 | |
|
| |
| |
| | | | |
Earnings per share: | | | | |
Basic | 4.7 | p | 2.1 | p |
Diluted | 4.7 | p | 2.1 | p |
|
| |
| |
Unaudited Consolidated Statement of Total Recognized Gains and Losses
3 months to 31 March, | 2004 £’000 | | 2003 £’000 | |
|
| |
| |
Profit for the period | 23,432 | | 10,771 | |
Translation of the financial statements of overseas subsidiaries | | | | |
| (28,317 | ) | 28,873 | |
|
| |
| |
Total recognized gains and losses relating to the period | (4,885 | ) | 39,644 | |
|
| |
| |
17
UK GAAP Results for the 3 months ended March 31, 2004
Unaudited Consolidated Balance Sheet
| March 31, 2004 £’000 | | December 31, 2003 £’000 | |
|
| |
| |
Fixed assets | | | | |
Intangible assets – intellectual property | 178,906 | | 171,548 | |
Intangible assets – goodwill | 1,348,282 | | 1,365,583 | |
Tangible assets | 97,201 | | 97,054 | |
Fixed asset investments | 29,362 | | 33,269 | |
|
| |
| |
| 1,653,751 | | 1,667,454 | |
|
| |
| |
Current assets | | | | |
Stocks | 27,541 | | 25,282 | |
Debtors | | | | |
- due within one year excluding deferred tax | 131,914 | | 141,046 | |
- due within one year – deferred tax | 36,406 | | 36,049 | |
- due after more than one year excluding deferred tax | 6,007 | | 9,224 | |
Current asset investments | 156,333 | | 169,895 | |
Cash at bank and in hand | 681,171 | | 621,670 | |
|
| |
| |
| 1,039,372 | | 1,003,166 | |
| | | | |
Creditors: Amounts falling due within one year | (165,405 | ) | (141,722 | ) |
|
| |
| |
Net current assets | 873,967 | | 861,444 | |
|
| |
| |
Total assets less current liabilities | 2,527,718 | | 2,528,898 | |
Creditors: amounts falling due after more than one year | | | | |
Convertible debt | (201,066 | ) | (202,659 | ) |
Deferred tax | (883 | ) | (782 | ) |
Other creditors | (20,460 | ) | (16,957 | ) |
|
| |
| |
| (222,409 | ) | (220,398 | ) |
|
| |
| |
Net assets | 2,305,309 | | 2,308,500 | |
|
| |
| |
Capital and reserves | | | | |
Called-up share capital | 23,992 | | 23,895 | |
Share premium | 3,236,919 | | 3,218,695 | |
Exchangeable shares | 173,798 | | 190,425 | |
Capital reserve | 3,135 | | 3,135 | |
Other reserves | 24,247 | | 24,247 | |
Profit and loss account | (1,156,782 | ) | (1,151,897 | ) |
|
| |
| |
Equity shareholders’ funds | 2,305,309 | | 2,308,500 | |
|
| |
| |
18
UK GAAP Results for the 3 months ended March 31, 2004
Selected Notes to the Unaudited UK GAAP Financial Statements
(1) Earnings per share (EPS)
Basic EPS is based upon the profit on ordinary activities after taxation divided by the weighted-average number of ordinary shares outstanding during the period.
Diluted EPS is based upon the profit on ordinary activities after taxation divided by the weighted-average number of ordinary shares outstanding during the period and adjusted for the effect of all dilutive potential ordinary shares that were outstanding during the period.
Stock options to purchase approximately 10.3 million ordinary shares for the 3 months ended March 31, 2004 were not dilutive and were therefore not included in the computation of diluted EPS.
3 months ended March 31, | 2004 No. of shares | | 2003 No. of shares | |
|
| |
| |
Weighted average number of shares: | | | | |
Basic | 495,718,205 | | 501,989,884 | |
Effect of dilutive shares: | | | | |
Stock options | 3,899,118 | | 709,269 | |
Warrants | 132,023 | | - | |
Convertible debt | 18,370,564 | | - | |
|
| |
| |
Fully diluted | 518,119,910 | | 502,699,153 | |
|
| |
| |
| | | | |
Reconciliation of reported EPS: | | | | |
3 months ended March 31, | 2004 £’000 | | 2003 £’000 | |
|
| |
| |
Profit for basic EPS | 23,432 | | 10,771 | |
Interest charged on convertible debt, net of tax | 706 | | - | |
|
| |
| |
Profit for diluted EPS | 24,138 | | 10,771 | |
|
| |
| |
(2) Basis of preparation
The Group has applied consistent accounting policies throughout both periods.
The results for the quarter ended March 31, 2004 have not been audited and do not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985.
19