Shire plc | |
12 noon GMT 7am EST
Strong 2005 performance supports positive outlook
Basingstoke, UK – February 23, 2006 – Shire plc (LSE: SHP, NASDAQ: SHPGY, TSX: SHQ) announces results for the twelve months to December 31, 2005 – a year in which significant milestones were met, providing clear future development opportunities.
2005 Financial Highlights- Product sales up 19% to $1,327.7 million;
- Royalties up 5% to $242.9 million;
- Total revenues up 17% to $1,599.3 million;
- Dividend up 10%.
Matthew Emmens, Chief Executive Officer, said:
“This has been another successful year for Shire. We met all of our strategic objectives and continued to grow with product sales up 19%. During the year we made excellent progress in setting the stage for our future growth. The acquisition of TKT and the collaboration with New River Pharmaceuticals for NRP104 greatly enhances our product portfolio and we continue to file and launch several new products in the US and Europe.
“Our lead product, ADDERALL XR, achieved an all time high market share of 26%. In January we announced that we settled all pending legal proceedings with Impax Laboratories. This was an excellent outcome for both parties. Patent litigation continues and settlement discussions with Barr Laboratories are progressing.
“Over the past few years, we have transformed Shire by broadening our product range, expanding our geographic reach, enhancing our business processes and capitalizing on opportunities within the specialty pharmaceutical markets. Shire’s success in meeting key milestones in 2005 reflects our continued commitment to achieving our goal of becoming the leading specialty pharmaceutical company.”
2005 Product Highlights
- MESAVANCE (SPD476) for Ulcerative Colitis, filed with the Food and Drug Administration (FDA);
- DAYTRANA for Attention Deficit Hyperactivity Disorder (ADHD) received an approvable letter fromthe FDA;
- NRP104 for ADHD filed with the FDA by New River Pharmaceuticals Inc. (New River);
- ELAPRASE filed with the FDA and the European Medicines Agency (EMEA);
- XAGRID for Thrombocythemia, roll-out commenced in Europe;
- FOSRENOL for Hyperphosphatemia, launched in the US and launch in Europe commenced;
- FOSRENOL higher strengths (750mg and 1000mg) launched in the US.
2005 Business Development
- Collaboration agreement signed with New River for its ADHD compound, NRP104;
- Acquisition of Transkaryotic Therapies Inc., (TKT) completed – providing entry to the humangenetic therapy market and extending Shire’s portfolio for the specialist physician;
- Sale of drug formulation business (Shire Laboratories) to Supernus Pharmaceuticals, Inc.
- ADDERALL XR for ADHD. All litigation with Impax Laboratories Inc., (Impax) regarding Shire’spatents settled in January. Patent litigation continues and settlement discussions with BarrLaboratories Inc., (Barr) are progressing;
- CARBATROL for Epilepsy. A promotional services agreement for the US market with Impax wassigned in January. The agreement will take effect from July 2006;
- MESAVANCE. Marketing Authorization Application submitted to Canadian and EuropeanRegulatory Agencies;
- ELAPRASE. In January 2006 the filing was accepted for Priority Review by the FDA. Theexpected PDUFA date is May 25, 2006;
- On February 10, 2006 the Company received notice from ID Biomedical Corporation (IDB) that itintended to repay in full all of its loan drawings for injectable flu development of $70.6 million,together with accrued and capitalized interest of $8.1 million. The Company received the $78.7million outstanding on February 14, 2006. The amounts outstanding in respect of IDB’s drawingsfor pipeline development (principal drawings of $29.4 million), are unaffected by this repayment.
Full Year 2005 Unaudited Results
2005 | 2004 | |||||||||||||
US GAAP | Adjustments | Non GAAP(1) | US GAAP | Adjustments | Non GAAP(1) | |||||||||
$M | $M | $M | $M | $M | $M | |||||||||
Revenues | 1,599.3 | - | 1,599.3 | 1,363.2 | - | 1,363.2 | ||||||||
(Loss)/income from | ||||||||||||||
ongoing operations | ||||||||||||||
before income | ||||||||||||||
taxes(2) | (320.9 | ) | 784.9 | 464.0 | 459.9 | 33.7 | 493.6 | |||||||
Net (loss)/income | (410.8 | ) | 750.4 | 339.6 | 269.0 | 88.5 | 357.5 | |||||||
Diluted (losses)/ | ||||||||||||||
earnings per: | ||||||||||||||
Ordinary share | (82.1 | c) | 149.2 | c | 67.1 | c | 53.3 | c | 17.3 | c | 70.6 | c | ||
ADS | (246.4 | c) | 447.8 | c | 201.4 | c | 159.9 | c | 51.9 | c | 211.8 | c | ||
(1) Non GAAP
These are non GAAP financial measures.
For 2005, this measure for net (loss)/income excludes a net negative amount of $750.4m as follows: | ||
• | The write-off of in-process research and development (R&D) following the acquisition of TKT: $673.0m; | |
• | Cost of product sales fair value adjustments following the acquisition of TKT: $41.9m; | |
• | New River upfront payment: $50.0m; | |
• | New listed holding company costs: $4.5m; | |
• | Reorganization costs resulting from Shire’s North American site consolidation: $9.4m; | |
• | TKT integration costs: $9.7m; | |
• | Gain on disposal of drug formulation business: $(3.6)m; | |
• | Taxes on above adjustments: $(31.4)m; | |
• | Income from discontinued operations: $(3.1)m. |
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For 2004, this measure for net income excludes a net negative amount of $88.5m as follows: | ||
• | Reorganization costs resulting from Shire’s North American site consolidation: $48.5m; | |
• | Gain on sale of investment: $(14.8)m; | |
• | Taxes on above adjustments: $(9.5)m | |
• | Loss from discontinued operations: $64.3m. |
On a pre-tax basis, excluding discontinued operations, the above non GAAP adjustments relating to continuing operations total $784.9m for 2005 and $33.7m for 2004.
Management believes that the presentation of these non GAAP financial measures provides useful information to investors regarding Shire’s performance, as the excluded items are not indicative of the ongoing business in 2005. A reconciliation of these non GAAP financial measures to the most directly comparable US GAAP financial measure can be found on pages 27 and 28.
(2) (Loss)/income from continuing operations before income taxes and equity method investees.
Q4 2005 Unaudited Results2005 | 2004 | |||||||||||||
US GAAP | Adjustments | Non GAAP(1) | US GAAP | Adjustments | Non GAAP(1) | |||||||||
$M | $M | $M | $M | $M | $M | |||||||||
Revenues | 465.0 | - | 465.0 | 373.7 | - | 373.7 | ||||||||
Income from ongoing | ||||||||||||||
operations before | ||||||||||||||
income taxes(2) | 109.3 | 27.3 | 136.6 | 116.2 | 16.4 | 132.6 | ||||||||
Net Income | 76.7 | 20.7 | 97.4 | 83.4 | 11.8 | 95.2 | ||||||||
Diluted earnings per: | ||||||||||||||
Ordinary share | 15.1 | c | 4.0 | c | 19.1 | c | 16.7 | c | 2.3 | c | 19.0 | c | ||
ADS | 45.2 | c | 12.2 | c | 57.4 | c | 49.8 | c | 7.2 | c | 57.0 | c | ||
(1) Non GAAP
These are non GAAP financial measures.
For 2005, this measure for net income excludes a net negative amount of $20.7m as follows: | ||
• | Cost of product sales fair value adjustment following the acquisition of TKT: $24.7m; | |
• | TKT integration costs: $6.2m; | |
• | Gain on disposal of drug formulation business: $(3.6)m; | |
• | Taxes on above adjustments: $(7.6)m; | |
• | Impact of discontinued operations: $1.0m. | |
For 2004, this measure for net income excludes a net negative amount of $11.8m as follows: | ||
• | Reorganization costs resulting from Shire’s North American site consolidation: $16.4m; | |
• | Taxes on above adjustment: $(4.6)m |
On a pre-tax basis, excluding discontinued items, the above non GAAP adjustments relating to continuing operations total $27.3m for 2005 and $16.4m for 2004.
Management believes that the presentation of these non GAAP financial measures provides useful information to investors regarding Shire’s performance, as the excluded items are not indicative of the ongoing business in 2005. A reconciliation of these non GAAP financial measures to the most directly comparable US GAAP financial measures can be found on pages 27 and 28.
(2) Income from continuing operations before income taxes and equity method investees.
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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 2006 and H1 2007 Shire anticipates:
- Launching DAYTRANA for ADHD in the US;
- Launching ELAPRASE in the US and Europe;
- Launching MESAVANCE in the US;
- Launching NRP104 in the US;
- Filing SPD503 for ADHD with the FDA;
- Filing SPD465 for ADHD with the FDA;
- Undertaking additional pre-launch preparations and activities during Q4 2006 in order to maximizecommercial opportunities for DYNEPO, a treatment for anemia in chronic renal failure. FullEuropean launch of this product is now expected H1 2007;
- Continuing the roll-out of FOSRENOL in Europe;
- Continuing the launch of FOSRENOL higher strengths in the US.
The above launch and filing dates are indicative and subject to the regulatory/government approvals process.
Financial outlook
The following statements are based on the assumption that there will be no generic launch of ADDERALL XR during 2006 and prescription growth in the US ADHD market will be 5%.
Shire’s business continues to perform strongly. We expect 2006 revenue growth to be in the 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 in addition to the roll-out of FOSRENOL across Europe and the new higher strengths of FOSRENOL in the US.
- These launches will require additional advertising and promotional spend and, in some cases,additional sales representatives. In addition, Shire will be seeking to maximize ADDERALL XR’smarket share. Consequently, SG&A costs are expected to rise during the year to between $770 –800 million;
- The planned regulatory filings, Phase 3(b) and Phase 4 studies to support new product launches,the transfer of two Human Genetic Therapies (HGT) projects into pre-clinical development and thecommencement of Phase 3 trials on GA-GCB, are expected to result in R&D spend in the range of$310 – 330 million;
- The depreciation and amortization charge for the year will increase by approximately 50% comparedto 2005 reflecting the acquisition of TKT and the amortization of anticipated capitalized businessdevelopment milestone payments;
- The tax rate to be maintained 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 $50 million paid to New River in February 2006 following the FDA’sacceptance of the filing of NRP104. This will increase R&D expense in Q1 2006;
- A US GAAP adjustment of approximately $50m to reflect the difference between the accountingfair value and book value of acquired REPLAGAL inventory. This will increase cost of productsales;
- Shire HGT integration costs estimated at $10 million in 2006. This will increase SG&A costs;
- The adoption from January 1, 2006 of US GAAP accounting standard FAS123R for share basedcompensation. This is expected to give rise to additional charges estimated at approximately$45m, which will be split between costs of product sales, R&D and SG&A in the approximateratios of 5%, 25% and 70%, respectively.
Including these items would result, under US GAAP, in estimated increases in cost of product sales of $50 million, R&D spend in the range of $370 - 390 million and SG&A costs between $810 - 840 million.
Any launch of a generic version of ADDERALL XR during 2006 would have a material impact on the company’s performance and would materially impact the revenue growth guidance given above.
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Dividend
In respect of the six months to December 31, 2005 the Board resolved to pay a second interim dividend of 4.419 US cents per ordinary share (2004: 3.85 US cents per share). Together with the first interim payment of 1.8246 US cents per ordinary share (2004: 1.82 US cents per share) this represents total dividends for 2005 of 6.2436 US cents per share (2004: 5.67 US cents per share), an increase of 10% in US Dollar terms over 2004.
Dividend payments will be made in Pounds Sterling to Ordinary Shareholders, US Dollars to ADS holders and Canadian Dollars to Exchangeable Shareholders. A dividend of 2.5356 pence per ordinary share, 13.257 US cents per ADS and 15.2217 Canadian cents per Exchangeable Share respectively will be paid. The Board resolved to pay the dividend on April 6, 2006 to persons whose names appear on the register of members of the Company (or to persons registered as holders of Exchangeable Shares in Shire Acquisition Inc.) at the close of business on March 17, 2006.
Shire intends to pursue a progressive dividend policy. Any growth will typically come through increasing the second interim payment for each financial year.
New Accounting Standard - SFAS 123R
Shire’s primary basis of financial reporting is US GAAP. From January 1, 2006, in conjunction with many other US GAAP reporting companies, Shire is 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 the grant of share-based compensation to employees.
Shire has previously disclosed in its Annual Report on Form 10-K for 2004 filed with the SEC the charge that would have resulted from the full adoption of a fair value methodology under SFAS 123R. The application of this methodology would have resulted in a pre-tax, non-cash charge of $27 million for 2005, $33 million for 2004 and $32 million for 2003. The higher relative charges for 2003 and 2004 arise due to an all employee grant in 2001 for which the FAS123 charge was spread over the 3-year vesting period.
It is anticipated that the 2006 annual SFAS 123R charge will be approximately $45m. The increase over the comparable figure for 2005 is due partly to the acquisition of TKT and the resulting expansion of the work force, and partly to the share price growth seen over the last three years. The share price on February 21, 2006 of £8.73 was higher than the share prices at December 31, 2002, 2003 and 2004 by 120%, 61% and 60% respectively.
The valuation of stock based compensation under SFAS 123R is based on a number of market related assumptions (including share price and share price volatility at the time of grant) and internal assumptions (including numbers of new employees and employee attrition rates), which can only be estimated at this stage. Accordingly the actual valuation above is subject to variation.
The Company has decided to adopt SFAS 123R according to the modified retrospective method. As a result, comparatives including the accounting period for the year to December 31, 2005 will be restated during Q1 2006.
- Ends -
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For further information please contact:
Investor Relations | Cléa Rosenfeld (Rest of the World) | +44 1256 894 160 | |
Brian Piper (North America) | +1 484 595 8252 | ||
Media | Jessica Mann (Rest of the World) | +44 1256 894 280 | |
Matthew Cabrey (North America) | +1 484 595 8248 | ||
Notes to editors
Shire plc
Shire’s strategic goal is to become the leading specialty pharmaceutical company that focuses on meeting the needs of the specialist physician. Shire’s therapeutic focus is on central nervous system (CNS), gastrointestinal (GI), human genetic therapies (HGT) and general products (GP). The structure is sufficiently flexible to allow Shire to target new therapeutic areas to the extent that opportunities arise through acquisitions. Shire believes that a carefully selected portfolio of products with a strategically aligned and relatively small-scale sales force will deliver strong results.
Shire’s focused strategy is to develop and market products for specialty physicians. Shire’s in-licensing, merger and acquisition efforts are focused on products in niche markets with strong intellectual property protection either in the US or Europe.
For further information on Shire, please visit the Company’s website: www.shire.com
THE “SAFE HARBOR” STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Statements included herein that are not historical facts are forward-looking statements. Such forward-looking statements involve a number of risks and uncertainties and are subject to change at any time. In the event such risks or uncertainties 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 DAYTRANA (MTS/METHYPATCH) (ADHD), SPD503 (ADHD), SPD465 (ADHD), MESAVANCE (SPD476) (ulcerative colitis), ELAPRASE (I2S) (Hunter syndrome), and NRP104 (ADHD), including its scheduling classification by the Drug Enforcement Administration in the United States; Shire’s ability to benefit from its acquisition of Transkaryotic Therapies, Inc.; 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 filings and its predecessor registrant Shire Pharmaceuticals Group plc’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year to December 31, 2004.
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The following are trademarks of Shire or companies within the Shire Group, which are the subject of trademark registrations in certain territories:
ADDERALL XR® (mixed salts of a single-entity amphetamine)ADDERALL® (mixed salts of a single-entity amphetamine)
AGRYLIN® (anagrelide hydrochloride)
CALCICHEW® range (calcium carbonate with or without vitamin D3)
CARBATROL® (carbamazepine extended-release capsules)
COLAZIDE® (balsalazide)
DAYTRANA™(methylphenidate transdermal system)
ELAPRASE™ (I2S) (idursulfase)
EQUETRO™ (carbamazepine extended-release capsules)
FOSRENOL® (lanthanum carbonate)
GA-GCB® (gene-activated)
LODINE®(etodolac)
MESAVANCE™ (mesalamine)
REMINYL® (galantamine hydrobromide) (UK and Republic of Ireland)
REMINYL XL™(galantamine hydrobromide) (UK and Republic of Ireland)
REPLAGAL® (agalsidase alfa)
SOLARAZE® (3%, gel diclofenac sodium (3%w/w))
XAGRID® (anagrelide hydrochloride)
The following are trademarks of third parties referred to in this press release:
3TC (trademark of GlaxoSmithKline (GSK))
AMARYL (trademark of Sanofi-Aventis)
DYNEPO(trademark of Aventis Pharma Holdings GmbH)
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 (galantamine hydrobromide) (trademark of Johnson & Johnson, excluding UK and Republic of Ireland)
ZEFFIX (trademark of GSK)
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OVERVIEW OF US GAAP FINANCIAL RESULTS
1.IntroductionSummary of 2005
Revenues from continuing operations for the year to December 31, 2005 increased by 17% to $1,599.3 million (2004: $1,363.2 million), of which $41.3 million was derived from sales of REPLAGAL in the five months following the acquisition of TKT. Excluding REPLAGAL sales, revenues increased by 14%.
Losses from continuing operations for the year to December 31, 2005 were $414.0 million (2004 income of $333.3 million). A loss has arisen due to a $673.0 million write-off of in-process R&D acquired with TKT and a $50 million up-front milestone payment to New River. The in-process R&D adjustment is required under US GAAP and represents the value of acquired intangible assets under development and not filed for regulatory approval at the time of the TKT acquisition, including ELAPRASE and GA-GCB.
Cash inflow from operating activities for the year to December 31, 2005 reduced by 22% to $381.1 million (2004: $488.7 million). Cash inflow was affected by the $50 million payment to New River, the operating losses of the acquired TKT business and the timing of working capital payments.
Cash and cash equivalents, restricted cash and short-term investments at December 31, 2005 totaled $694.0 million (December 31, 2004: $1,457.5 million). The movement during 2005 was primarily due to $1.2 billion paid to date to purchase TKT partially offset by positive cash flows from Shire’s operations, $111.8 million of cash and cash equivalents, restricted cash and short-term investments acquired with TKT and the receipt during 2005 of $92.2 million from the sale of Shire’s vaccines business to IDB in 2004.
The total cash consideration for the acquisition of TKT is expected to be approximately $1.6 billion. At December 31, 2005, $1.2 billion had been paid. The remaining $0.4 billion is due to ex-TKT shareholders who have requested an appraisal of the $37 per share acquisition consideration pursuant to a court appraisal process and is shown as a liability, along with a provision for interest that may be payable. These dissenting shareholders previously owned 31% of TKT’s ordinary share capital, (11.3 million shares).
Summary of Q4 2005
Revenues from continuing operations for the three months to December 31, 2005 increased by 24% to $465.0 million (2004: $373.7 million), of which $25.4 million was derived from sales of REPLAGAL (which was acquired with TKT). Excluding REPLAGAL sales, revenues increased by 18%.
Income from continuing operations for the three months to December 31, 2005 decreased by 7% to $77.7 million (2004: $83.4 million). The decrease was due to operating losses of the acquired TKT business of $17.4 million during the three months to December 31, 2005.
Cash inflow from operating activities for the three months to December 31, 2005 reduced by 23% to $154.5 million (2004: $201.1 million). The reduction was due to losses of the acquired TKT business, ($17.4 million) and the timing of working capital payments.
2.Product sales
For the year to December 31, 2005 product sales increased by 19% to $1,327.7 million (2004: $1,112.5 million) and represented 83% of total revenues (2004: 82%). Excluding post acquisition sales of REPLAGAL ($41.3 million), product sales for 2005 increased by 16%.
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Product Highlights
Sales | Sales | US Rx | US Market | |||||||||
Product | $M | Growth(2) | Growth(1)(2) | Share(1) | ||||||||
ADDERALL XR | 730.8 | +20% | +12% | 26% | ||||||||
CARBATROL | 72.1 | +33% | -8% | 42% | ||||||||
PENTASA | 136.1 | +18% | +6% | 18% | ||||||||
AGRYLIN and XAGRID | ||||||||||||
North America(3) | 46.0 | -61% | -48% | 4% | ||||||||
Rest of World | 46.8 | +40% | N/A | N/A | ||||||||
FOSRENOL | 53.5 | N/A | N/A | 8% | ||||||||
REPLAGAL(4) | 41.3 | N/A | N/A | N/A | ||||||||
(1) | IMS Prescription Data – Product specific (December 2005). |
(2) | Compared to 2004. |
(3) | Includes US and Canada. |
(4) | This represents REPLAGAL sales for the five-month period since acquisition. The total sales for the full year, including TKT pre-acquisition sales, were $94.6 million (2004: $77.4 million). |
ADDERALL XR for the treatment of ADHD
US prescriptions for ADDERALL XR for the year to December 31, 2005 were up 12%. ADDERALL XR, further strengthened its position as the leading brand in the US ADHD market with a 1% increase in market share to an all time high of 26% in December 2005 (December 2004: 25%). In addition, the US ADHD market grew 5% overall compared to the same period in 2004.
Product sales growth was higher than prescription growth for the year due mainly to the impact of price increases in December 2004 and August 2005, partially offset by a decrease in pipeline inventory and higher sales deductions.
During 2005, Shire negotiated ‘fee for service’ agreements with two of its three major US wholesalers. These industry-wide agreements change the way significant wholesale distributors are compensated by pharmaceutical manufacturers and should allow for more efficient management of inventory levels held by wholesale distributors.
FDA approval of the adolescent indication for ADDERALL XR was received on July 22, 2005.
On February 12, 2005, Shire announced that it had suspended sales of ADDERALL XR in Canada at the request of Health Canada. On August 24, 2005, Shire announced that Health Canada would reinstate the marketing authorization of ADDERALL XR in Canada effective August 26, 2005. This reinstatement follows the acceptance by Health Canada of the recommendations from the New Drug Committee, which was appointed by Health Canada at Shire’s request to review the suspension of ADDERALL XR in Canada.
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 believes that these requested criteria will ensure that generic formulations of ADDERALL XR or follow-on drug products will be clinically effective and safe. In January 2006, Shire chose to file a supplemental amendment to its original Citizen Petition, which included additional clinical data in support of the original filing. The FDA has six months to respond to Shire’s petition and while this petition is under review it will not grant final approval of generic or follow-on drug products referencing ADDERALL XR.
On February 9, 2006, an FDA Advisory Committee recommended to the FDA that risk information about cardiovascular events be included in a "black box warning" for all stimulant medicines used to treat ADHD. In making its recommendation, the Advisory Committee recognized that the reported incidence rates of the rare serious cardiovascular adverse events that were discussed by the Committee are generally within the rates that would be expected from the untreated general population. ADDERALL XR and ADDERALL already include a "black box warning" in their labels for safety concerns related to amphetamine abuse or misuse and also warn of the risk of sudden death in patients with structural cardiac abnormalities. Shire stands behind the current labeling and believes that further action is unwarranted.
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In January 2006, Shire settled its ADDERALL XR patent infringement lawsuits with Impax. The litigations involved Shire’s US patents, Nos. 6,322,819 (“the ‘819 Patent”), 6,605,300 (“the ‘300 Patent”) and 6,913,768 (“the ‘768 Patent”). As part of the settlement, Impax has confirmed that its proposed generic ADDERALL XR product infringes Shire’s ‘819, ‘300 and ‘768 Patents and that the three patents are valid and enforceable. Under the terms of the settlement, Impax will be permitted to market generic versions of ADDERALL XR in the US no later than January 1, 2010 and will pay Shire a royalty from those sales. In certain situations, such as the launch of another generic version of ADDERALL XR, Impax may be permitted to enter the market as Shire’s authorized generic.
Shire’s ADDERALL XR patent infringement lawsuits with Barr continue. Shire is seeking a ruling that Barr’s Abbreviated New Drug Application (ANDA) seeking permission to market its generic versions of ADDERALL XR infringes the ‘819, ‘300 and ‘768 Patents. Barr’s 30-month stay under the Hatch-Waxman Act expired on February 18, 2006. Following the expiry of the 30-month stay, the FDA may approve Barr’s ANDA. A final pre-trial conference in the ‘819 and ‘300 patent cases is set for March 10, 2006. No trial date has been set. Shire is continuing its discussions with Barr in connection with these lawsuits and the discussions are progressing. Further information can be found in our filings with the US Securities and Exchange Commission, including our Annual Report on Form 10-K for the year to December 31, 2004 and our most recent quarterly report on Form 10-Q for the period ended September 30, 2005.
CARBATROL for the treatment of Epilepsy
US prescriptions for the year to December 31, 2005 were down 8% compared to the previous year. This was due primarily to supply constraints, a 4% decrease in Shire’s market share of the total US extended release carbamazepine prescription market to 42% in December 2005 (December 2004: 46%) and a 5% decrease in that market as a whole. The supply constraints have now been resolved.
Product sales for the year to December 31, 2005 were up 33% compared to the previous year. The difference between sales growth and the lower level of prescriptions is due to price increases in August 2004 and October 2005 and to lower sales deductions than in 2004.
Patent litigation proceedings with Nostrum Pharmaceuticals, Inc. (Nostrum) relating to CARBATROL are ongoing. 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. Further information can be found in our filings with the US Securities and Exchange Commission, including our Annual Report on Form 10-K for the year to December 31, 2004 and our most recent quarterly report on Form 10-Q for the period ended September 30, 2005.
PENTASA for the treatment of Ulcerative Colitis
US prescriptions for the year to December 31, 2005 were up 6% compared to the previous year. The increase was due to the success of the co-promotional agreement with Solvay Pharmaceuticals Inc., the impact of the 500mg dosage form launched in the third quarter of 2004 and a 2% increase in the total US oral mesalamine prescription market.
Product sales for the year to December 31, 2005 were up 18%, compared to the previous year. The difference between sales growth and prescription growth is due to the impact of the September 2004 price increase and a normalization of pipeline inventories compared to lower levels in 2004.
PENTASA had an 18% share of the total US oral mesalamine prescription market in December 2005 (December 2004: 18%).
AGRYLIN/XAGRID for the treatment of Thrombocythemia
AGRYLIN/XAGRID sales worldwide for the year to December 31, 2005 were $92.8 million, down 39% compared to the previous year (2004: $152.5 million).
North American sales were $46.0 million, down 61% compared to the previous year (2004: $119.1 million). This reduction was expected following the approval of generic versions of AGRYLIN in the US market in April 2005.
Rest of the World sales (all sales outside North America) were $46.8 million, up 40%, compared to the previous year (2004: $33.4 million). This was primarily due to the successful launch of XAGRID in the UK, Germany and France in the first quarter of 2005 and Spain in the third quarter of 2005. In accordance with current orphan drug legislation in the EU, XAGRID will have up to 10 years of marketing exclusivity in the EU.
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FOSRENOL for the treatment of Hyperphosphatemia
FOSRENOL was launched in the US in January 2005. Product sales for the year to December 31, 2005 were $53.5 million, with US prescriptions for the year totaling 137,000.
FOSRENOL had an 8% share of the total US phosphate binding market in December 2005.
On November 28, 2005 the FDA approved new, higher dose formulations of FOSRENOL. New, higher dose strengths of 750 milligrams and 1,000 milligrams were shipped to wholesalers in the US in December 2005. Higher dose strengths should help to reduce the number of pills that end-stage renal disease patients need to take to achieve target phosphorus levels.
Product sales in Q4 2005 were $29.0 million compared with $9.7 million in Q3 2005. The variance relates primarily to increased pipeline inventory sales to wholesalers of the new higher dose formulation during December.
FOSRENOL was launched in Austria in December 2005. Shire continues its discussions relating to FOSRENOL with regulatory authorities and reimbursement agencies across Europe and other regions and further launches are expected in European markets over the next few months, subject to obtaining national approvals and concluding pricing and reimbursement negotiations.
REPLAGAL for the treatment of Fabry Disease
REPLAGAL was acquired by Shire as part of the TKT acquisition, which completed on July 27, 2005. Product sales for the period since acquisition were $41.3 million. The majority of REPLAGAL sales are in Europe. Total sales for the full year, including pre-acquisition sales, were $94.6 million (2004: $77.4 million). The increase in sales (including pre-acquisition sales) is primarily due to greater European coverage by an increased number of sales representatives.
3. Royalties
Royalty revenue increased 5% to $242.9 million for the year to December 31, 2005 (2004: $230.4 million) as a result of growth in sales.
Royalty Highlights
Product | Royalties to Shire $M | Royalty(4) Growth % | Worldwide in-market sales by licensee(3)in 2005 $M |
3TC | 159.8 | +3%(1) | 1,211 |
ZEFFIX | 30.5 | +11%(2) | 266 |
Other | 52.6 | +11% | n/a |
(1) | The impact of foreign exchange movements has contributed +1% to the reported growth. |
(2) | The impact of foreign exchange movements has contributed +2% to the reported growth. |
(3) | GSK. |
(4) | Compared with 2004. |
3TC
Royalties from sales of 3TC for the year to December 31, 2005 were $159.8 million, an increase of 3% compared to 2004 ($155.8 million). This was due to the continued growth in the nucleoside analog market for HIV and the positive impact of foreign exchange movements.
Shire receives royalties from GSK on worldwide 3TC sales. GSK’s worldwide sales of 3TC for the year to December 31, 2005 were $1,211 million, an increase of 2% compared to prior year (2004: $1,184 million).
11 |
ZEFFIX
Royalties from sales of ZEFFIX for the year to December 31, 2005 were $30.5 million, an increase of 11% compared to 2004 ($27.4 million), due to strong growth in the Japanese market and the positive impact of foreign exchange movements.
Shire receives royalties from GSK on worldwide ZEFFIX sales. GSK’s worldwide sales of ZEFFIX for the year to December 31, 2005 were $266 million, an increase of 11% compared to prior year (2004: $240 million).
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 Pharmaceutica N.V. (Janssen), an affiliate of Johnson and Johnson, with the exception of the United Kingdom and the Republic of Ireland where Shire acquired the exclusive marketing rights from May 2004.
Sales of the REMINYL/RAZADYNE range, for the symptomatic treatment of mild to moderately severe dementia of the Alzheimer’s type, are growing well in the Alzheimer’s market.
On March 1, 2005, the National Institute for Health and Clinical Excellence (NICE) in England and Wales issued an Appraisal Consultation Document (ACD). This document included a recommendation that all existing approved products for the symptomatic treatment of mild to moderate Alzheimer's disease in England and Wales should no longer be reimbursed by the National Health Service (NHS) when used in the treatment of new patients. The recommendation potentially affected sales of REMINYL and of REMINYL XL in England and Wales. An amended ACD was issued by NICE on January 23, 2006. The new ACD recommends that REMINYL and REMINYL XL, together with other drugs in the same class, be reimbursed on the NHS when used for the treatment of either (i) patients with existing Alzheimer's disease already being treated with one of these drugs; or (ii) newly diagnosed patients once their disease has progressed to a moderate stage. Therefore the current recommendation excludes the reimbursement of treatment for patients presenting with mild symptoms of Alzheimer’s disease for which REMINYL and REMINYL XL are approved. A final appraisal document is expected from NICE in July 2006.
On April 11, 2005, Ortho-McNeil Neurologics Inc. (Janssen's US affiliate company) announced that REMINYL would be marketed in the US under the new product name of RAZADYNE. Subsequently, in the US, REMINYL XL was launched as RAZADYNE ER. Ortho-McNeil Neurologics Inc. worked closely with the FDA on a name change following dispensing errors in the US, between REMINYL and the Type 2 diabetes mellitus drug known as AMARYL. Shire is only aware of one similar dispensing error outside the US.
4. Financial details
Cost of product sales
For the year to December 31, 2005 the cost of product sales amounted to 16% of product sales (2004: 13%). The decrease in gross margin is primarily due to the addition of REPLAGAL to Shire’s product portfolio following the acquisition of TKT. REPLAGAL’s cost of product sales relates entirely to the acquired inventories, which in accordance with US GAAP, have been accounted for at fair value, estimated to be 97% of the expected sales price of REPLAGAL. Accordingly, little or no margin will be reflected for REPLAGAL sales until all acquired finished goods have been sold (anticipated Q3 2006). For the year to December 31, 2005 the cost of product sales for REPLAGAL includes a $41.9 million adjustment in respect of the acquired inventory, of which $39.8 million related to sales of acquired finished goods and $2.1 million was a write-off of damaged work-in-progress. In 2005, this fair value adjustment increased Shire’s cost of product sales by 3%.
Research and development (R&D)
R&D expenditure increased from $196.3 million in the year to December 31, 2004 to $336.2 million in 2005. Expressed as a percentage of total revenues, R&D expenditure was 21% for the year to December 31, 2005 (2004: 14%). The increase was primarily due to:
- The initial payment to New River of $50 million for in-licensing NRP104, which has beenexpensed in accordance with the Company’s accounting policy; and
- The addition of two significant R&D projects following the acquisition of TKT (ELAPRASE andGA-GCB).
The New River payment and the R&D expenditure on ELAPRASE and GA-GCB represented 5% of total revenues.
Shire’s pipeline is now well advanced with seven projects in late stage development or registration.
12 |
Selling, general and administrative (SG&A)
SG&A expenses increased from $458.1 million in the year to December 31, 2004 to $631.1 million in 2005, an increase of 38%. As a percentage of product sales, these expenses were 48% (2004: 41%).
This increase was expected, with additional costs attributable to four product launches during 2005, together with incremental costs in 2005 associated with the new FOSRENOL and EQUETRO sales forces, patent litigation and infrastructure, $24.5 million of SG&A costs related to the acquired TKT business and $4.5 million related to the set up of the new listed holding company for the Shire group.
Depreciation and amortization
The depreciation charge for the year to December 31, 2005 was $29.2 million (2004: $19.8 million), which in 2005 included property, plant and equipment write-downs of $6.5 million (2004: $nil). Amortization charges, including the amortization on acquired products, were $45.2 million for the year to December 31, 2005 (2004: $38.7 million).
Intangible asset impairment
The charge for intangible asset impairments for the year to December 31, 2005 was $5.6 million (2004: $13.5 million).
The approval of generic versions of AGRYLIN in April 2005 and the decision not to support and promote certain non-core products going forward resulted in changes to the estimate of Shire’s future cash flows and, as a result, impairments were required in both 2005 and 2004.
Reorganization costs
During the year to December 31, 2005 Shire incurred reorganization costs of $9.3 million (2004: $48.5 million). These costs related to Shire’s North American site consolidation, which commenced in 2004. The site consolidation is now complete and no further reorganization costs are expected.
During the year to December 31, 2005 the reorganization costs were for employee severance ($1.6 million), operating duplicate facilities ($7.2 million) and other costs ($0.5 million).
During the year to December 31, 2004 the reorganization costs were for employee severance ($20.0 million), relocation ($13.8 million) and other costs ($14.7 million).
Integration costs
For the year to December 31, 2005, the Company incurred $9.7 million of costs associated with the integration of the TKT business into the Shire group (2004: $nil). This included retention payments for key staff of $7.0 million, IT costs of $1.0 million and other costs of $1.7 million.
In-process R&D write-off
During the year to December 31, 2005, as required under US GAAP, Shire wrote off the portion of the TKT purchase price allocated to in-process R&D of $673.0 million. This amount represents the value of those intangible assets acquired as part of the TKT acquisition, which at the time of acquisition had not been approved by the FDA or other regulatory authorities, including ELAPRASE and GA-GCB.
Interest income
For the year to December 31, 2005 the Company received interest income of $35.3 million (2004: $21.9 million). The increase compared to 2004 is due to higher interest rates on Shire’s US cash deposits, which were partially offset by the interest foregone by Shire on the net payments of $1.2 billion made to date in respect of the acquisition of TKT.
13 |
Interest expense
For the year to December 31, 2005 the Company incurred interest expense of $12.0 million (2004: $12.3 million).
In 2005, this expense included a $7.7 million 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. In addition, interest expense includes $1.2 million, relating to the costs of a bridging loan to finance the TKT acquisition and other interest related expenses of $3.1 million.
In 2004, interest expense included the write-off of $8.0 million of deferred debt acquisition costs arising on the issue of convertible loan notes in August 2001. The write-off was required as a significant portion of the convertible loan notes were redeemed. The $8.0 million represented the balance of these fees at the date of redemption in August 2004. In addition, interest expense included a $4.2 million interest charge incurred prior to the redemption and $0.1 million of other interest related expenses.
Other income/(expense), net
For the year to December 31, 2005 other income totaled $9.9 million (2004: $3.8 million).
Other income for 2005 included a $3.9 million realized gain on the sale of a portfolio investment, $4.3 million in respect of other investment income, a $3.6 million gain on the sale of Shire’s drug formulation business and other net income of $ 0.1 million, offset by a write-down of certain portfolio investments ($2.0 million).
Other income for 2004 consisted of a $14.8 million realized gain on the sale of a portfolio investment, $4.1 million of other investment income and other net income of $0.4 million. This income was offset by the write-down of certain portfolio investments ($15.5 million).
Taxation
The effective tax rate for 2005 on US GAAP losses was negative 29% (a tax charge of $92.1 million on US GAAP losses from continuing operations before income taxes and equity method investees of $320.9 million). The significant difference from the prior year effective tax rate of 28% is due to the in-process R&D write-off of $673 million which is not tax deductible. Excluding the impact of this in-process R&D charge, the effective tax rate for 2005 was 26%.
At December 31, 2005 net deferred tax assets of $116.2 million were recognized (December 31, 2004: $78.1 million).
Equity in (losses)/earnings of equity method investees
Net losses of $1.0 million were recorded for the year to December 31, 2005: (2004: net earnings of $2.5 million). This comprised earnings of $5.3 million from the 50% share of the antiviral commercialization partnership with GSK in Canada (2004: $4.4 million), offset by the Company’s share of losses in the GeneChem and EGS Healthcare Funds of $6.3 million (2004: $1.9 million).
Discontinued operations
During the year to December 31, 2005 gains on disposition of the discontinued operations totaled $3.1 million. This resulted from the finalization of the working capital agreement with IDB, which was part of the sale of Shire’s vaccines business to IDB in 2004. As a result, a disputed amount, which had previously been provided for, was received and the corresponding provision was released.
14 |
Financial Information Table of Contents | |
Page | |
Unaudited US GAAP Consolidated Balance Sheets | 16 |
Unaudited US GAAP Consolidated Statements of Operations | 18 |
Unaudited US GAAP Consolidated Statements of Cash Flows | 20 |
Selected Notes to the Unaudited US GAAP Financial Statements | |
(1) Earnings per share | 23 |
(2) Analysis of revenues | 25 |
Non GAAP reconciliation of numerator for diluted EPS | 27 |
Non GAAP reconciliation of reported EPS | 28 |
US GAAP and Non GAAP Unaudited Consolidated Statements of Operations | 29 |
Unaudited IFRS Consolidated Balance Sheets | 31 |
Unaudited IFRS Consolidated Income Statements | 33 |
Unaudited IFRS Consolidated Cash Flow Statement | 34 |
Selected Notes to the Unaudited IFRS Financial Statements | |
(1) Earnings per share | 35 |
(2) Condensed statement of changes in shareholders’ equity | 36 |
(3) Basis of preparation | 36 |
15 |
Unaudited US GAAP results for the year to December 31, 2005 Consolidated Balance Sheets | ||||
December 31, 2005 $'000 | December 31, 2004 $'000 | |||
ASSETS | ||||
Current assets: | ||||
Cash and cash equivalents | 656,456 | 1,111,477 | ||
Restricted cash | 30,568 | 21,627 | ||
Short-term investments | 6,947 | 324,411 | ||
Accounts receivable, net | 329,924 | 222,546 | ||
Inventories | 136,057 | 41,230 | ||
Deferred tax asset | 54,186 | 70,387 | ||
Prepaid expenses and other current assets | 98,084 | 137,271 | ||
Total current assets | 1,312,222 | 1,928,949 | ||
Investments | 50,162 | 63,267 | ||
Property, plant and equipment, net | 233,999 | 131,351 | ||
Goodwill | 367,652 | 235,396 | ||
Other intangible assets, net | 729,304 | 309,297 | ||
Deferred tax asset | 61,994 | 7,724 | ||
Other non-current assets | 42,907 | 38,895 | ||
Total assets | 2,798,240 | 2,714,879 | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||
Current liabilities: | ||||
Loan facility to IDB | - | 43,162 | ||
Accounts payable and accrued expenses | 431,819 | 311,231 | ||
Liability to dissenting shareholders | 427,609 | - | ||
Other current liabilities | 105,993 | 77,558 | ||
Total current liabilities | 965,421 | 431,951 | ||
Long-term debt, excluding current installments | 116 | 116 | ||
Other non-current liabilities | 43,437 | 32,159 | ||
Total liabilities | 1,008,974 | 464,226 | ||
16 |
Unaudited US GAAP results for the year to December 31, 2005 Consolidated Balance Sheets (continued) | |||||
December 31, 2005 $'000 | December 31, 2004 $'000 | ||||
Shareholders’ equity: | |||||
Common stock of 5p par value; 600,000,000 shares | |||||
authorized; and 495,733,782 shares issued and | |||||
outstanding (2004: 800,000,000 shares authorized; and | |||||
484,916,034 shares issued and outstanding) | 42,728 | 41,796 | |||
Exchangeable shares: 2,187,793 shares issued and | |||||
outstanding (2004: 4,226,476) | 101,248 | 195,830 | |||
Treasury stock | (2,813 | ) | (264 | ) | |
Additional paid-in capital | 1,205,257 | 1,070,675 | |||
Accumulated other comprehensive income | 71,472 | 131,939 | |||
Retained earnings | 371,374 | 810,677 | |||
Total shareholders’ equity | 1,789,266 | 2,250,653 | |||
Total liabilities and shareholders’ equity | 2,798,240 | 2,714,879 | |||
17 |
Unaudited US GAAP results for the 3 months and year to December 31, 2005 Consolidated Statements of Operations | |||||||||
3 months to December 31, 2005 $'000 | 3 months to December 31, 2004 $'000 | 12 months to December 31, 2005 $'000 | 12 months to December 31, 2004 $'000 | ||||||
Revenues: | |||||||||
Product sales | 397,511 | 308,860 | 1,327,660 | 1,112,457 | |||||
Royalties | 61,837 | 60,363 | 242,910 | 230,364 | |||||
Licensing and development | 3,833 | 3,262 | 15,002 | 13,479 | |||||
Other revenues | 1,769 | 1,253 | 13,744 | 6,907 | |||||
Total revenues | 464,950 | 373,738 | 1,599,316 | 1,363,207 | |||||
Costs and expenses: | |||||||||
Cost of product sales | 78,605 | 41,899 | 213,964 | 141,909 | |||||
Research and development | 84,917 | 52,505 | 336,217 | 196,265 | |||||
Selling, general and administrative | 165,164 | 127,902 | 631,124 | 458,132 | |||||
Depreciation and amortization | 24,300 | 18,039 | 74,435 | 58,513 | |||||
Intangible asset impairment | 2,632 | 8,021 | 5,632 | 13,477 | |||||
Reorganization costs | - | 16,428 | 9,335 | 48,469 | |||||
Integration costs | 6,196 | - | 9,716 | - | |||||
In-process R&D write-off | - | - | 673,000 | - | |||||
Total operating expenses | 361,814 | 264,794 | 1,953,423 | 916,765 | |||||
Operating income/(loss) | 103,136 | 108,944 | (354,107 | ) | 446,442 | ||||
Interest income | 7,432 | 7,800 | 35,300 | 21,901 | |||||
Interest expense | (7,305 | ) | (35 | ) | (12,023 | ) | (12,294 | ) | |
Other income/(expense), net | 6,007 | (558 | ) | 9,945 | 3,845 | ||||
Total other income, net | 6,134 | 7,207 | 33,222 | 13,452 | |||||
Income/(loss) from continuing | |||||||||
operations before income taxes | |||||||||
and equity in (losses)/earnings of | |||||||||
equity method investees | 109,270 | 116,151 | (320,885 | ) | 459,894 | ||||
Income taxes | (30,376 | ) | (31,915 | ) | (92,083 | ) | (129,103 | ) | |
Equity in (losses)/earnings of | |||||||||
equity method investees | (1,150 | ) | (850 | ) | (1,000 | ) | 2,508 | ||
Income/(loss) from continuing | |||||||||
operations | 77,744 | 83,386 | (413,968 | ) | 333,299 | ||||
Loss from discontinued operations | - | - | - | (20,135 | ) | ||||
(Loss)/gain on disposition of | |||||||||
discontinued operations | (1,049 | ) | - | 3,125 | (44,157 | ) | |||
Net income/(loss) | 76,695 | 83,386 | (410,843 | ) | 269,007 | ||||
18 |
Unaudited US GAAP results for the 3 months and year to December 31, 2005
Consolidated Statements of Operations (continued)
3 months to December 31, 2005 | 3 months to December 31, 2004 | 12 months to December 31, 2005 | 12 months to December 31, 2004 | ||||||||
Earnings per share - basic | |||||||||||
Income/(loss) from continuing | |||||||||||
operations | 15.5c | 16.8c | (82.7c | ) | 67.2c | ||||||
Loss from discontinued operations | - | - | - | (4.1c | ) | ||||||
(Loss)/gain on disposition of | |||||||||||
discontinued operations | (0.2c | ) | - | 0.6c | (8.9c | ) | |||||
Earning per ordinary share - | |||||||||||
basic | 15.3c | 16.8c | (82.1c | ) | 54.2c | ||||||
Earnings per share – diluted | |||||||||||
Income/(loss) from continuing | |||||||||||
operations | 15.3c | 16.7c | (82.7c | ) | 65.9c | ||||||
Loss from discontinued operations | - | - | - | (4.0c | ) | ||||||
(Loss)/gain on disposition of | |||||||||||
discontinued operations | (0.2c | ) | - | 0.6c | (8.6c | ) | |||||
Earning per ordinary share - | |||||||||||
diluted | 15.1c | 16.7c | (82.1c | ) | 53.3c | ||||||
Earnings per ADS - diluted | 45.2c | 49.8c | (246.4c | ) | 159.9c | ||||||
Weighted average number of | |||||||||||
shares: | |||||||||||
Basic | 501,675,141 | 497,063,870 | 500,243,137 | 496,306,604 | |||||||
Diluted | 508,702,513 | 500,227,937 | 500,243,137 | 511,267,432 | |||||||
19 |
Unaudited US GAAP results for the 3 months and year to December 31, 2005
Consolidated Statements of Cash Flows
3 months to | 3 months to | 12 months to | 12 months to | ||||||
December 31, | December 31, | December 31, | December 31, | ||||||
2005 | 2004 | 2005 | 2004 | ||||||
$’000 | $’000 | $’000 | $’000 | ||||||
CASH FLOWS FROM OPERATING | |||||||||
ACTIVITIES: | |||||||||
Net income/(loss) from continuing | |||||||||
operations | 77,744 | 83,386 | (413,968 | ) | 333,299 | ||||
Adjustments to reconcile net income/(loss) | |||||||||
to net cash provided by operating | |||||||||
activities: | |||||||||
Depreciation and amortization: | |||||||||
- cost of product sales | 801 | 775 | 3,483 | 2,740 | |||||
- SG&A | 23,892 | 18,039 | 67,977 | 58,513 | |||||
Stock option compensation | 205 | 51 | 392 | 216 | |||||
In-process R&D write-off | - | - | 673,000 | - | |||||
Write-down of long-term assets | 3,059 | 9,925 | 14,064 | 29,317 | |||||
Loss/(gain) on sale of long-term assets | 12 | (796 | ) | (3,854 | ) | (15,268 | ) | ||
Gain on sale of drug formulation | |||||||||
business | (3,561 | ) | - | (3,561 | ) | - | |||
Movement in deferred taxes | (12,012 | ) | 8,631 | 22,295 | (14,979 | ) | |||
Equity in losses/(earnings) of equity | |||||||||
method investees | 1,150 | 850 | 1,000 | (2,508 | ) | ||||
Changes in operating assets and | |||||||||
liabilities, net of acquisitions: | |||||||||
(Increase)/decrease in accounts | |||||||||
receivable | (45,992 | ) | 21,195 | (79,885 | ) | (28,066 | ) | ||
Increase in sales deduction accrual | 4,192 | 11,195 | 18,616 | 50,746 | |||||
Decrease in inventory | 9,855 | 5,049 | 8,582 | 2,185 | |||||
(Increase)/decrease in prepayments | |||||||||
and other current assets | (15,708 | ) | 310 | (40,111 | ) | 2,509 | |||
Decrease/(increase) in other assets | 48 | 11,497 | (731 | ) | 13,520 | ||||
Increase in accounts and notes | |||||||||
payable and other liabilities | 114,814 | 29,471 | 122,949 | 76,793 | |||||
(Decrease)/increase in deferred | |||||||||
revenue | (2,989 | ) | 6,439 | (13,520 | ) | 6,151 | |||
Returns on investments | - | - | 4,710 | 4,043 | |||||
Cash flows used in discontinued | |||||||||
operations | (1,049 | ) | (4,912 | ) | (362 | ) | (30,525 | ) | |
Net cash provided by operating | |||||||||
activities(A) | 154,461 | 201,105 | 381,076 | 488,686 | |||||
20 |
Unaudited US GAAP results for the 3 months and year to December 31, 2005
Consolidated Statements of Cash Flows
3 months to | 3 months to | 12 months to | 12 months to | ||||||
December 31, | December 31, | December 31, | December 31, | ||||||
2005 | 2004 | 2005 | 2004 | ||||||
$’000 | $’000 | $’000 | $’000 | ||||||
CASH FLOWS FROM INVESTING | |||||||||
ACTIVITIES: | |||||||||
Movements in short-term investments | 15,485 | (41,321 | ) | 366,731 | (20,282 | ) | |||
Movements in restricted cash | (483 | ) | 9,274 | (768 | ) | 24,847 | |||
Purchase of subsidiary undertaking, | |||||||||
net of cash and cash equivalents | (14,398 | ) | - | (1,114,048 | ) | - | |||
Expenses of acquisition | (13,379 | ) | - | (37,491 | ) | - | |||
Purchase of long-term investments | (22 | ) | (404 | ) | (7,700 | ) | (6,124 | ) | |
Purchase of property, plant and | |||||||||
equipment | (28,601 | ) | (32,763 | ) | (86,239 | ) | (57,603 | ) | |
Purchase of intangible assets | (427 | ) | (17,824 | ) | (20,491 | ) | (30,209 | ) | |
Proceeds from sale of long-term | |||||||||
investments | - | - | 10,135 | 26,733 | |||||
Proceeds from sale of property, plant | |||||||||
and equipment | 8 | 3,083 | 116 | 3,527 | |||||
Proceeds from sale of intangible | |||||||||
assets | - | 3,701 | - | 3,701 | |||||
Proceeds from sale of assets held for | |||||||||
sale | - | - | - | 11,289 | |||||
Proceeds from sale of drug | |||||||||
formulation business | 557 | - | 557 | - | |||||
Returns of investments | - | 248 | 3,774 | 1,450 | |||||
Loans made to IDB | - | (33,018 | ) | (43,162 | ) | (56,838 | ) | ||
Proceeds from sale of the vaccines | |||||||||
business | - | 4,912 | 92,236 | 34,912 | |||||
Cash flows used in discontinued | |||||||||
operations | - | - | - | (12,715 | ) | ||||
Net cash used in investing activities(B) | (41,260 | ) | (104,112 | ) | (836,350 | ) | (77,312 | ) | |
21 |
Unaudited US GAAP results for the 3 months and year to December 31, 2005
Consolidated Statements of Cash Flows (continued)
3 months to | 3 months to | 12 months to | 12 months to | ||||||
December 31, | December 31, | December 31, | December 31, | ||||||
2005 | 2004 | 2005 | 2004 | ||||||
$’000 | $’000 | $’000 | $’000 | ||||||
CASH FLOWS FROM FINANCING | |||||||||
ACTIVITIES: | |||||||||
Redemption of 2% convertible loan | |||||||||
notes | - | - | - | (370,109 | ) | ||||
Repayment of long-term debt, capital | |||||||||
leases and notes | - | (5,908 | ) | - | (6,079 | ) | |||
Proceeds from exercise of options | 6,666 | 5,885 | 37,113 | 13,416 | |||||
Proceeds from issue of common | |||||||||
stock, net | - | 160 | - | 771 | |||||
Tax benefit of stock option | |||||||||
compensation, charged directly to | |||||||||
reserves | 949 | 354 | 3,427 | 354 | |||||
Payments to acquire treasury stock | (2,480 | ) | (264 | ) | (2,480 | ) | (264 | ) | |
Payment of dividend | (9,403 | ) | (8,905 | ) | (28,460 | ) | (8,905 | ) | |
Net cash (used in)/provided by | |||||||||
financing activities(C) | (4,268 | ) | (8,678 | ) | 9,600 | (370,816 | ) | ||
Effect of foreign exchange rate | |||||||||
changes on cash and cash | |||||||||
equivalents | (2,297 | ) | 5,272 | (9,347 | ) | 7,567 | |||
Effect of foreign exchange rate | |||||||||
changes on discontinued operations | - | - | - | (10 | ) | ||||
Net effect of foreign exchange rate | |||||||||
changes(D) | (2,297 | ) | 5,272 | (9,347 | ) | 7,557 | |||
Net increase/(decrease) in cash and | |||||||||
cash equivalents(A)+(B)+(C)+(D) | 106,636 | 93,587 | (455,021 | ) | 48,115 | ||||
Cash and cash equivalents at | |||||||||
beginning of period | 549,820 | 1,017,890 | 1,111,477 | 1,063,362 | |||||
Cash and cash equivalents at end of | |||||||||
period | 656,456 | 1,111,477 | 656,456 | 1,111,477 | |||||
22 |
US GAAP results for the 3 months and year to December 31, 2005
Selected Notes to the Unaudited US GAAP Financial Statements (continued)
(1) Earnings per share
3 months to | 3 months to | 12 months to | 12 months to | ||||||
December 31, | December 31, | December 31, | December 31, | ||||||
2005 | 2004 | 2005 | 2004 | ||||||
$’000 | $’000 | $’000 | $’000 | ||||||
Income/(loss) from continuing | |||||||||
operations | 77,744 | 83,386 | (413,968 | ) | 333,299 | ||||
Loss from discontinued operations, | |||||||||
net of tax | - | - | - | (20,135 | ) | ||||
(Loss)/gain on disposition of | |||||||||
discontinued operations | (1,049 | ) | - | 3,125 | (44,157 | ) | |||
Numerator for basic EPS | 76,695 | 83,386 | (410,843 | ) | 269,007 | ||||
Interest on convertible | |||||||||
debt, net of tax | - | (3 | ) | - | 3,421 | ||||
Numerator for diluted EPS | 76,695 | 83,383 | (410,843 | ) | 272,428 | ||||
Weighted average number of | |||||||||
shares: | No.of shares | No. of shares | No.of shares | No. of shares | |||||
Basic | 501,675,141 | 497,063,870 | 500,243,137 | 496,306,604 | |||||
Effect of dilutive shares: | |||||||||
Stock options | 6,615,836 | 3,059,348 | - | 3,035,620 | |||||
Warrants | 405,780 | 98,963 | - | 66,792 | |||||
Convertible debt | 5,756 | 5,756 | - | 11,858,416 | |||||
Diluted | 508,702,513 | 500,227,937 | 500,243,137 | 511,267,432 | |||||
23 |
US GAAP results for the 3 months and year to December 31, 2005
Selected Notes to the Unaudited US GAAP Financial Statements (continued)
The share options, warrants and convertible debt not included in the calculation of the diluted weighted average number of shares are shown below:
(1)3 months to | (1)3 months to | (2)12 months to | (1)12 months to | |||||
December 31, | December 31, | December 31, | December 31, | |||||
2005 | 2004 | 2005 | 2004 | |||||
No. of shares | No. of shares | No. of shares | No. of shares | |||||
Stock options | 10,085,752 | 9,163,492 | 20,680,407 | 16,640,724 | ||||
Warrants | - | - | 1,346,407 | - | ||||
Convertible debt | - | - | 5,756 | - | ||||
10,085,752 | 9,163,492 | 22,032,570 | 16,640,724 | |||||
(1) | Not included as the exercise price exceeded the Company’s average share price during the calculation period. | |
(2) | Not included as the Company made a loss during the calculation period. |
24 |
Unaudited US GAAP results for the 3 months to December 31, 2005
Selected Notes to the US GAAP Financial Statements (continued)
(2) Analysis of revenues
3 months to | 3 months to | 3 months to | 3 months to | ||||||
December 31, | December 31, | December 31, | December 31, | ||||||
2005 | 2004 | 2005 | 2005 | ||||||
$’000 | $’000 | % change | % of total | ||||||
revenue | |||||||||
Net product sales: | |||||||||
CNS | |||||||||
ADDERALL XR | 214,010 | 183,660 | +17% | 46% | |||||
ADDERALL | 12,078 | 12,074 | 0% | 2% | |||||
CARBATROL | 17,275 | 15,468 | 12% | 4% | |||||
243,363 | 211,202 | +15% | 52% | ||||||
GI | |||||||||
PENTASA | 42,306 | 28,290 | +50% | 9% | |||||
COLAZIDE | 2,099 | 2,268 | -7% | 1% | |||||
44,405 | 30,558 | +45% | 10% | ||||||
GP | |||||||||
AGRYLIN/XAGRID | |||||||||
NORTH AMERICA | 4,031 | 22,259 | -82% | 1% | |||||
ROW | 10,381 | 8,276 | +25% | 2% | |||||
FOSRENOL | 29,032 | - | N/A | 6% | |||||
CALCICHEW | 10,359 | 10,727 | -3% | 2% | |||||
REMINYL/REMINYL XL | 4,136 | 2,865 | +44% | 1% | |||||
SOLARAZE | 3,754 | 3,244 | +16% | 1% | |||||
LODINE | 3,114 | 2,663 | +17% | 1% | |||||
64,807 | 50,034 | +30% | 14% | ||||||
HGT | |||||||||
REPLAGAL | 25,358 | - | N/A | 5% | |||||
25,358 | - | N/A | 5% | ||||||
Other product sales | 19,578 | 17,066 | +15% | 4% | |||||
Total product sales | 397,511 | 308,860 | +29% | 85% | |||||
Royalty income: | |||||||||
3TC | 40,372 | 40,118 | +1% | 8% | |||||
ZEFFIX | 8,499 | 7,219 | +18% | 2% | |||||
Others | 12,966 | 13,026 | 0% | 3% | |||||
61,837 | 60,363 | 2% | 13% | ||||||
Licensing and development | 3,833 | 3,262 | 18% | 1% | |||||
Other | 1,769 | 1,253 | 41% | 1% | |||||
Total revenues | 464,950 | 373,738 | 24% | 100% | |||||
25 |
Unaudited US GAAP results for the year to December 31, 2005
Selected Notes to the US GAAP Financial Statements (continued)
(2) Analysis of revenues (continued)
12 months to | 12 months to | 12 months to | 12 months to | ||||||
December 31, | December 31, | December 31, | December 31, | ||||||
2005 | 2004 | 2005 | 2005 | ||||||
$’000 | $’000 | % change | % of total | ||||||
revenue | |||||||||
Net product sales: | |||||||||
CNS | |||||||||
ADDERALL XR | 730,833 | 606,657 | +20% | 46% | |||||
ADDERALL | 43,111 | 34,485 | +25% | 3% | |||||
CARBATROL | 72,098 | 54,341 | +33% | 4% | |||||
846,042 | 695,483 | +22% | 53% | ||||||
GI | |||||||||
PENTASA | 136,083 | 114,995 | +18% | 8% | |||||
COLAZIDE | 8,619 | 8,212 | +5% | 1% | |||||
144,702 | 123,207 | +17% | 9% | ||||||
GP | |||||||||
AGRYLIN/XAGRID | |||||||||
N AMERICA | 45,981 | 119,099 | -61% | 3% | |||||
ROW | 46,809 | 33,431 | +40% | 3% | |||||
FOSRENOL | 53,516 | - | N/A | 3% | |||||
CALCICHEW | 38,712 | 38,252 | +1% | 2% | |||||
REMINYL/REMINYL XL | 13,520 | 10,848 | +25% | 1% | |||||
SOLARAZE | 12,530 | 9,458 | +32% | 1% | |||||
LODINE | 12,589 | 7,582 | +66% | 1% | |||||
223,657 | 218,670 | +2% | 14% | ||||||
HGT | |||||||||
REPLAGAL | 41,314 | - | N/A | 3% | |||||
41,314 | - | N/A | 3% | ||||||
Other product sales | 71,945 | 75,097 | -4% | 4% | |||||
Total product sales | 1,327,660 | 1,112,457 | +19% | 83% | |||||
Royalty income: | |||||||||
3TC | 159,839 | 155,791 | +3% | 10% | |||||
ZEFFIX | 30,468 | 27,393 | +11% | 2% | |||||
Others | 52,603 | 47,180 | +11% | 3% | |||||
242,910 | 230,364 | +5% | 15% | ||||||
Licensing and development | 15,002 | 13,479 | +11% | 1% | |||||
Other | 13,744 | 6,907 | +99% | 1% | |||||
Total revenues | 1,599,316 | 1,363,207 | +17% | 100% | |||||
26 |
Non GAAP reconciliation of numerator for diluted EPS for the 3 months and year to December 31, 2005
3 months to | 3 months to | 12 months to | 12 months to | ||||||
December 31, | December 31, | December 31, | December 31, | ||||||
2005 | 2004 | 2005 | 2004 | ||||||
$’000 | $’000 | $’000 | $’000 | ||||||
Net income/(loss) for basic EPS | 76,695 | 83,386 | (410,843 | ) | 269,007 | ||||
Add back: | |||||||||
Loss/(gain) from discontinued | |||||||||
operations | 1,049 | - | (3,125 | ) | 20,135 | ||||
Loss on disposition of discontinued | |||||||||
operations | - | - | - | 44,157 | |||||
TKT in-process R&D write-off | - | - | 673,000 | - | |||||
TKT cost of product sales fair | |||||||||
value adjustment | 24,683 | - | 41,885 | - | |||||
New River upfront payment | - | - | 50,000 | - | |||||
New listed holding company costs | - | - | 4,527 | - | |||||
Reorganization costs | - | 16,428 | 9,335 | 48,469 | |||||
TKT integration costs | 6,196 | - | 9,716 | - | |||||
Gain on disposal of drug | |||||||||
formulation business | (3,561 | ) | - | (3,561 | ) | - | |||
Gain on sale of investment | - | - | - | (14,805 | ) | ||||
Taxes on above adjustments | (7,649 | ) | (4,600 | ) | (31,333 | ) | (9,426 | ) | |
Total non GAAP adjustment | 20,718 | 11,828 | 750,444 | 88,530 | |||||
Net income for non GAAP | 97,413 | 95,214 | 339,601 | 357,537 | |||||
Interest on convertible | |||||||||
debt | - | (3 | ) | 1 | 3,421 | ||||
Numerator for non GAAP - Diluted | |||||||||
EPS | 97,413 | 95,211 | 339,602 | 360,958 | |||||
(1) | An analysis of the results for the three months and year to December 31, 2005 between Shire (excluding TKT) and TKT is shown on pages 29 and 30. |
27 |
Non GAAP reconciliation of reported EPS for the 3 months and 12 months to December 31, 2005
3 months to | 3 months to | 12 months to | 12 months to | ||||||
December 31, | December 31, | December 31, | December 31, | ||||||
2005 | 2004 | 2005 | 2004 | ||||||
Diluted EPS per ordinary share | 15.1c | 16.7c | (82.1c) | 53.3c | |||||
Add back: | |||||||||
Loss/(gain) from discontinued | |||||||||
operations, net of tax | 0.2c | - | (0.6c) | 4.0c | |||||
Loss on disposition of discontinued | |||||||||
operations | - | - | - | 8.6c | |||||
Diluted EPS from continuing | |||||||||
operations | 15.3c | 16.7c | (82.7c) | 65.9c | |||||
Change in denominator due to | |||||||||
effect on dilution of non GAAP | |||||||||
adjustments(1) | - | - | 0.9c | - | |||||
15.3c | 16.7c | (81.8c) | 65.9c | ||||||
Add back: | |||||||||
TKT in-process R&D write-off | - | - | 133.0c | - | |||||
TKT cost of product sales fair | |||||||||
value adjustment | 4.9c | - | 8.3c | - | |||||
New River upfront payment | - | - | 9.9c | - | |||||
New listed holding company costs | - | - | 0.9c | - | |||||
Reorganization costs | - | 3.3c | 1.8c | 9.5c | |||||
TKT integration costs | 1.2c | - | 1.9c | - | |||||
Gain on disposal of drug | |||||||||
formulation business | (0.7c) | - | (0.7c) | - | |||||
Gain on sale of investment | - | - | - | (2.9c) | |||||
Taxes on above adjustments | (1.6c) | (1.0c) | (6.2c) | (1.9c) | |||||
Non GAAP – diluted EPS per | |||||||||
ordinary share | 19.1c | 19.0c | 67.1c | 70.6c | |||||
Non GAAP – diluted EPS per ADS | 57.4c | 57.0c | 201.4c | 211.8c | |||||
Total non GAAP adjustments – | |||||||||
diluted EPS per ordinary share | 4.0c | 2.3c | 149.2c | 17.3c | |||||
(1) | Since the items added back result in positive non GAAP net income for 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 non GAAP EPS. |
28 |
US GAAP and Non GAAP results for the 3 months to December 31, 2005 | |||||||||||||||
Unaudited Consolidated Statements of Operations | |||||||||||||||
Non GAAP | |||||||||||||||
(1) Shire | (2) TKT | Combined | Adjustments | US GAAP | |||||||||||
$’000 | $’000 | $’000 | $’000 | $’000 | |||||||||||
Revenues: | |||||||||||||||
Product sales | 372,153 | 25,358 | 397,511 | - | 397,511 | ||||||||||
Royalties | 61,837 | - | 61,837 | - | 61,837 | ||||||||||
Licensing and development | 3,833 | - | 3,833 | - | 3,833 | ||||||||||
Other revenues | 1,305 | 464 | 1,769 | - | 1,769 | ||||||||||
Total revenues | 439,128 | 25,822 | 464,950 | - | 464,950 | ||||||||||
Costs and expenses: | |||||||||||||||
Cost of product sales (3) | 51,844 | 2,078 | 53,922 | 24,683 | 78,605 | ||||||||||
Research and development | 61,095 | 23,822 | 84,917 | - | 84,917 | ||||||||||
Selling, general and | |||||||||||||||
administrative | 147,618 | 17,546 | 165,164 | - | 165,164 | ||||||||||
Depreciation and amortization | 17,053 | 9,879 | 26,932 | - | 26,932 | ||||||||||
Reorganization costs | - | - | - | - | - | ||||||||||
Integration costs | - | - | - | 6,196 | 6,196 | ||||||||||
In-process R&D write-off | - | - | - | - | - | ||||||||||
Total operating expenses | 277,610 | 53,325 | 330,935 | 30,879 | 361,814 | ||||||||||
Operating income/(loss) | 161,518 | (27,503 | ) | 134,015 | (30,879 | ) | 103,136 | ||||||||
Interest income | 6,907 | 525 | 7,432 | - | 7,432 | ||||||||||
Interest expense | (2,050 | ) | (5,255 | ) | (7,305 | ) | - | (7,305 | ) | ||||||
Other income, net (4) | 1,896 | 550 | 2,446 | 3,561 | 6,007 | ||||||||||
Total other income/(expense), | |||||||||||||||
net | 6,753 | (4,180 | ) | 2,573 | 3,561 | 6,134 | |||||||||
Income/(loss) from continuing | |||||||||||||||
operations before income | |||||||||||||||
taxes and equity in losses of | |||||||||||||||
equity method investees | 168,271 | (31,683 | ) | 136,588 | (27,318 | ) | 109,270 | ||||||||
Income taxes | (46,790 | ) | 8,765 | (38,025 | ) | 7,649 | (30,376 | ) | |||||||
Equity in losses of equity | |||||||||||||||
method investees | (1,150 | ) | - | (1,150 | ) | - | (1,150 | ) | |||||||
Income/(loss) from continuing | |||||||||||||||
operations | 120,331 | (22,918 | ) | 97,413 | (19,669 | ) | 77,744 | ||||||||
Gain on disposition of | |||||||||||||||
discontinued operations | - | - | - | (1,049 | ) | (1,049 | ) | ||||||||
Net income/(loss) | 120,331 | (22,918 | ) | 97,413 | (20,718 | ) | 76,695 | ||||||||
Diluted EPS | |||||||||||||||
Ordinary share | 23.6c | (4.5c | ) | 19.1c | (4.0c | ) | 15.1c | ||||||||
ADS | 70.9c | (13.5c | ) | 57.4c | (12.2c | ) | 45.2c | ||||||||
(1) | Defined as the ongoing Shire business excluding TKT and other non GAAP adjustments. |
(2) | Defined as the acquired TKT business excluding fair value adjustments and integration costs. |
(3) | The GAAP adjustment of $24.7m is the difference between fair value and cost of REPLAGAL inventory acquired with the TKT business and used during the period. |
(4) | The GAAP adjustment of $3.6 million is the gain on sale of the drug formulation business. |
29 |
US GAAP and Non GAAP results for the year to December 31, 2005 | |||||||||||||||
Unaudited Consolidated Statements of Operations | |||||||||||||||
Non GAAP | |||||||||||||||
(1)Shire | (2)TKT | Combined | Adjustments | US GAAP | |||||||||||
$’000 | $’000 | $’000 | $’000 | $’000 | |||||||||||
Revenues: | |||||||||||||||
Product sales | 1,286,346 | 41,314 | 1,327,660 | - | 1,327,660 | ||||||||||
Royalties | 242,910 | - | 242,910 | - | 242,910 | ||||||||||
Licensing and development | 15,002 | - | 15,002 | - | 15,002 | ||||||||||
Other revenues | 13,066 | 678 | 13,744 | - | 13,744 | ||||||||||
Total revenues | 1,557,324 | 41,992 | 1,599,316 | - | 1,599,316 | ||||||||||
Costs and expenses: | |||||||||||||||
Cost of product sales(3) | 167,818 | 4,261 | 172,079 | 41,885 | 213,964 | ||||||||||
Research and development | 248,197 | 38,020 | 286,217 | 50,000 | 336,217 | ||||||||||
Selling, general and | |||||||||||||||
administrative(4) | 602,088 | 24,509 | 626,597 | 4,527 | 631,124 | ||||||||||
Depreciation and amortization | 63,678 | 16,389 | 80,067 | - | 80,067 | ||||||||||
Reorganization costs | - | - | - | 9,335 | 9,335 | ||||||||||
Integration costs | - | - | - | 9,716 | 9,716 | ||||||||||
In-process R&D write-off | - | - | - | 673,000 | 673,000 | ||||||||||
Total operating expenses | 1,081,781 | 83,179 | 1,164,960 | 788,463 | 1,953,423 | ||||||||||
Operating income/(loss) | 475,543 | (41,187 | ) | 434,356 | (788,463 | ) | (354,107 | ) | |||||||
Interest income | 34,346 | 954 | 35,300 | - | 35,300 | ||||||||||
Interest expense | (4,331 | ) | (7,692 | ) | (12,023 | ) | - | (12,023 | ) | ||||||
Other income, net(5) | 5,695 | 689 | 6,384 | 3,561 | 9,945 | ||||||||||
Total other income/(expense), | |||||||||||||||
net | 35,710 | (6,049 | ) | 29,661 | 3,561 | 33,222 | |||||||||
Income/(loss) from continuing | |||||||||||||||
operations before income | |||||||||||||||
taxes and equity in losses of | |||||||||||||||
equity method investees | 511,253 | (47,236 | ) | 464,017 | (784,902 | ) | (320,885 | ) | |||||||
Income taxes | (136,463 | ) | 13,047 | (123,416 | ) | 31,333 | (92,083 | ) | |||||||
Equity in losses of equity | |||||||||||||||
method investees | (1,000 | ) | - | (1,000 | ) | - | (1,000 | ) | |||||||
Income/(loss) from continuing | |||||||||||||||
operations | 373,790 | (34,189 | ) | 339,601 | (753,569 | ) | (413,968 | ) | |||||||
Gain on disposition of | |||||||||||||||
discontinued operations | - | - | - | 3,125 | 3,125 | ||||||||||
Net income/(loss) | 373,790 | (34,189 | ) | 339,601 | (750,444 | ) | (410,843 | ) | |||||||
Diluted EPS | |||||||||||||||
Ordinary share | 73.9c | (6.8c | ) | 67.1c | (149.2c | ) | (82.1c | ) | |||||||
ADS | 221.7c | (20.3c | ) | 201.4c | (447.8c | ) | (246.4c | ) | |||||||
(1) | Defined as the ongoing Shire business excluding TKT and other non GAAP adjustments. |
(2) | Defined as the acquired TKT business excluding fair value adjustments and integration costs. |
(3) | The GAAP adjustment of $41.9m is the difference between fair value and cost of REPLAGAL inventory acquired with the TKT business and used or written off during the period. |
(4) | The GAAP adjustment of $4.5 million relates to the costs of setting up the new holding company. |
(5) | The GAAP adjustment of $3.6 million is the gain on sale of the drug formulation business. |
30 |
Unaudited IFRS results for the year to December 31, 2005 | ||||
Consolidated Balance Sheet | ||||
December 31, | December 31, | |||
2005 | 2004 | |||
$’000 | $’000 | |||
ASSETS | ||||
Non-current assets: | ||||
Goodwill | 2,209,460 | 2,246,220 | ||
Other intangible assets | 1,394,677 | 322,258 | ||
Property, plant and equipment | 218,199 | 128,202 | ||
Deferred tax assets | 67,283 | 85,041 | ||
Investments accounted for using equity method | 23,023 | 30,848 | ||
Available for sale investments | 27,139 | 76,550 | ||
Other receivables | 42,907 | 38,895 | ||
3,982,688 | 2,928,014 | |||
Current assets: | ||||
Inventories | 136,057 | 41,230 | ||
Trade and other receivables | 415,189 | 299,817 | ||
Trading investments | 6,947 | 324,845 | ||
Cash and cash equivalents | 656,456 | 1,111,477 | ||
Restricted cash | 30,568 | 21,627 | ||
1,245,217 | 1,798,996 | |||
Total assets | 5,227,905 | 4,727,010 | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||
Non-current liabilities: | ||||
Borrowings | 4,704 | 4,242 | ||
Trade and other payables | 18,036 | 12,963 | ||
Deferred tax liabilities | 127,691 | - | ||
Long-term provisions | 25,401 | 26,232 | ||
175,832 | 43,437 | |||
Current liabilities: | ||||
Borrowings | 2,667 | 2,420 | ||
Trade and other payables | 518,051 | 344,367 | ||
Liability to dissenting shareholders | 427,609 | - | ||
Current tax liabilities | 12,090 | 46,757 | ||
Provisions | 8,523 | 45,097 | ||
968,940 | 438,641 | |||
Total liabilities | 1,144,772 | 482,078 | ||
31 |
Unaudited IFRS results for the year to December 31, 2005 | ||||||
Consolidated Balance Sheet (continued) | ||||||
December 31, 2005 | December 31, 2004 | |||||
$’000 | $’000 | |||||
Shareholders’ equity: | ||||||
Share capital | 42,728 | 36,083 | ||||
Share premium | 2,977 | 4,883,219 | ||||
Treasury shares | (2,813 | ) | (264 | ) | ||
Exchangeable shares: 2,187,793 shares issued and | ||||||
outstanding (2004: 4,226,476) | 101,248 | 195,830 | ||||
Capital reduction reserve | 2,946,490 | - | ||||
Capital reserve | - | 4,729 | ||||
Other reserve | 2,099,652 | 36,121 | ||||
Retained earnings | (1,107,149 | ) | (910,786 | ) | ||
Total shareholders’ equity | 4,083,133 | 4,244,932 | ||||
Total liabilities and shareholders’ equity | 5,227,905 | 4,727,010 | ||||
32 |
Unaudited IFRS results for the year to December 31, 2005 | ||||||
Consolidated Income Statement | ||||||
Year to December 31, | 2005 | 2004 | ||||
$’000 | $’000 | |||||
Continuing operations: | ||||||
Revenue | 1,599,316 | 1,363,207 | ||||
Cost of sales | (215,336 | ) | (142,557 | ) | ||
Gross profit | 1,383,980 | 1,220,650 | ||||
Research and development | (287,146 | ) | (210,974 | ) | ||
Selling, general and administrative (including $526,956,000 | ||||||
goodwill impairment (2004: $132,576,000)) | (1,255,707 | ) | (718,890 | ) | ||
Operating (loss)/profit | (158,873 | ) | 290,786 | |||
Investment revenues | 35,300 | 21,901 | ||||
Finance costs | (17,420 | ) | (14,771 | ) | ||
Share of post tax profit from associates and joint ventures | (1,000 | ) | 4,508 | |||
(Loss)/profit before tax | (141,993 | ) | 302,424 | |||
Taxation | (38,510 | ) | (141,623 | ) | ||
(Loss)/profit for the year from continuing operations | (180,503 | ) | 160,801 | |||
Discontinued operations: | ||||||
Profit/(loss) for the year from discontinued operations | 3,125 | (64,292 | ) | |||
(Loss)/profit for the year | (177,378 | ) | 96,509 | |||
Earnings per share (expressed in cents per share) | ||||||
- Basic | (35.5c | ) | 19.4c | |||
- Diluted | (35.5c | ) | 19.3c | |||
Earnings per share from continuing operations (expressed in cents per share) | ||||||
- Basic | (36.1c | ) | 32.4c | |||
- Diluted | (36.1c | ) | 32.2c | |||
33 |
Unaudited IFRS results for the year to December 31, 2005 | ||||||
Consolidated Cash Flow Statement | ||||||
Year to December 31, | 2005 | 2004 | ||||
$’000 | $’000 | |||||
Net cash flows from operating activities | 401,187 | 465,762 | ||||
Cash flow from investing activities | ||||||
Movement in restricted cash | (768 | ) | 24,847 | |||
Purchase of subsidiary undertaking, net of cash and cash | ||||||
equivalents | (1,114,048 | ) | - | |||
Expense of acquisition | (37,491 | ) | - | |||
Loan made to IDB | (43,162 | ) | (56,838 | ) | ||
Purchase of property, plant and equipment | (71,946 | ) | (49,746 | ) | ||
Purchase of intangible assets | (92,139 | ) | (42,293 | ) | ||
Purchases of financial assets | (7,700 | ) | (6,124 | ) | ||
Net decrease/(increase) in current financial assets | 366,731 | (20,282 | ) | |||
Proceeds from sale of property, plant and equipment (PP&E) | 1,169 | 4,360 | ||||
Proceeds from sale of intangible assets | - | 3,701 | ||||
Proceeds from sale of financial assets | 10,135 | 26,733 | ||||
Proceeds from PP&E held for sale | - | 11,289 | ||||
Proceeds from sale of drug formulation business | 557 | - | ||||
Proceeds from sale of discontinued business | 92,236 | 34,912 | ||||
Interest received | 34,203 | 21,901 | ||||
Dividend received from associates | 3,774 | 1,450 | ||||
Dividend from joint venture | 4,710 | 4,043 | ||||
Investing activities of discontinued business | - | (12,715 | ) | |||
Net cash used in investing activities | (853,739 | ) | (54,762 | ) | ||
Cash flow from financing activities | ||||||
Proceeds from issuance of ordinary shares, net | - | 771 | ||||
Proceeds from exercise of share options | 37,113 | 13,416 | ||||
Purchase of treasury shares | (2,480 | ) | (264 | ) | ||
Redemption of 2% guaranteed convertible loan notes 2011 | - | (370,109 | ) | |||
Increase in/(repayment of) finance lease obligations | 708 | (5,351 | ) | |||
Dividends paid | (28,460 | ) | (8,905 | ) | ||
Net cash from/(used in) financing activities | 6,881 | (370,442 | ) | |||
Net (decrease)/increase in cash and cash equivalents | (445,671 | ) | 40,558 | |||
Cash and cash equivalents at beginning of year | 1,111,477 | 1,063,362 | ||||
Effect of foreign currency translation | (9,350 | ) | 7,557 | |||
Cash and cash equivalents at end of year | 656,456 | 1,111,477 | ||||
34 |
Unaudited IFRS results for the year to December 31, 2005
Selected Notes to the IFRS Financial Statements
(1) Earnings per share | |||||||
Weighted | Per-share | ||||||
Year to December 31, 2005 | Earnings | average no of | amount | ||||
$’000 | shares | ||||||
Basic EPS | |||||||
Loss attributable to ordinary shareholders | (177,378 | ) | 500,243,137 | (35.5c | ) | ||
Effect of dilutive securities | |||||||
Share options | - | - | - | ||||
Warrants | - | - | - | ||||
Convertible debt | - | - | - | ||||
Diluted EPS | (177,378 | ) | 500,243,137 | (35.5c | ) | ||
Earnings per share from continuing and | Weighted | Per-share | |||||
discontinued operations: | Earnings | average no of | amount | ||||
$’000 | shares | ||||||
Basic and diluted EPS | |||||||
(Loss) from continuing operations | (180,503 | ) | 500,243,137 | (36.1c | ) | ||
Gain from discontinued operations | 3,125 | - | 0.6c | ||||
Weighted | Per-share | ||||||
Year to December 31, 2004 | Earnings | average no of | amount | ||||
$’000 | shares | ||||||
Basic EPS | |||||||
Earnings attributable to ordinary shareholders | 96,509 | 496,306,604 | 19.4c | ||||
Effect of dilutive securities | |||||||
Share options | - | 3,035,620 | (0.1c | ) | |||
Warrants | - | 66,792 | - | ||||
Diluted EPS | 96,509 | 499,409,016 | 19.3c | ||||
Earnings per share from continuing and | Weighted | Per-share | |||||
discontinued operations: | Earnings | average no of | amount | ||||
$’000 | shares | ||||||
Basic EPS | |||||||
Profit from continuing operations | 160,801 | 496,306,604 | 32.4c | ||||
Loss from discontinued operations | (64,292 | ) | - | (13.0c | ) | ||
Diluted EPS | |||||||
Profit from continuing operations | 160,801 | 499,409,016 | 32.2c | ||||
Loss from discontinued operations | (64,292 | ) | - | (12.9c | ) | ||
35 |
Unaudited IFRS results for the year to December 31, 2005
Selected Notes to the IFRS Financial Statements (continued)
(2) Condensed statement of changes in shareholders’ equity | |||||
2005 | 2004 | ||||
$’000 | $’000 | ||||
Shareholders' equity at January 1, | 4,244,932 | 4,093,875 | |||
Foreign currency translation differences | (28,855 | ) | 34,066 | ||
Employee share option scheme: | |||||
- value of employee services | 27,383 | 15,464 | |||
- proceeds from shares issued | 37,113 | 13,416 | |||
Issue of share capital | - | 771 | |||
Purchase of treasury shares | (2,549 | ) | (264 | ) | |
Dividends | (28,460 | ) | (8,905 | ) | |
Tax benefit associated with the exercise of stock options | 1,721 | - | |||
Unrealized holding gain on available for sale investments | 9,226 | - | |||
(Loss)/profit for the year | (177,378 | ) | 96,509 | ||
Balance at December 31, | 4,083,133 | 4,244,932 | |||
(3) Basis of preparation
The financial information set out in the announcement does not constitute the Company's statutory accounts for the years ended December 31, 2005 or 2004. The financial information presented above under IFRS for the comparative period has been derived from the statutory accounts for the year ended December 31, 2004. It has been restated from that which was contained in those statutory financial statements, which were prepared under UK GAAP and have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under s. 237(2) or (3) Companies Act 1985. The statutory accounts for the year ended December 31, 2005 will be finalized on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's annual general meeting. This preliminary announcement was approved by the Board on February 22, 2006.
- ENDS -
36 |