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. On April 20, 2006 Shire received correspondence from the FDA informing Shire that the FDA has not yet resolved the issues raised in Shire’s pending ADDERALL XR Citizen Petition. The correspondence states that, due to the complex issues raised requiring extensive review and analysis by the FDA’s officials, a decision cannot be reached at this time. The FDA’s interim response is in accordance with FDA regulations concerning Citizen Petitions.
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. On March 22, 2006 another FDA Advisory Committee met and discussed the same issue, as well as psychiatric adverse events for all medicines used to treat ADHD. This second Advisory Committee determined that a "black box warning," as recommended at the February 9, 2006 meeting, was not warranted. In addition, this second Advisory Committee recommended that increased warnings for certain psychiatric events should be incorporated as class labeling for all ADHD medicines. The FDA is not obligated to follow the recommendations of the Advisory Committees. Shire will work with the FDA to continue to ensure that the prescribing information for ADDERALL and ADDERALL XR is appropriate and takes into account the available safety data.
In October 2005 Shire announced that it had filed a lawsuit against Barr and Impax with respect to US patent No. 6,913,768 (‘768). Shire believes that both Barr’s and Impax’s generic ADDERALL XR products infringe the ‘768 patent claims. The case was filed in the Southern District of New York. On January 19, 2006 Shire settled all of its ADDERALL XR patent infringement lawsuits with Impax. There will be no 30-month stay associated with the filing of the ‘768 patent case. The ‘768 patent is directed to pharmaceutical compositions comprising a once-a-day sustained release formulation of at least one amphetamine salt for the treatment of ADHD. Barr has moved to dismiss the ‘768 lawsuit action asserting that there is no subject matter jurisdiction. A hearing on this motion was held on February 17, 2006. No decision has yet been made. The earlier filed case against Barr involving the ‘819 and ‘300 patents is scheduled to go to trial on October 30, 2006.
Further information can be found in our filings with the US Securities and Exchange Commission, including our Annual Report on Form 10-K for the year to December 31, 2005.
CARBATROL for the treatment of Epilepsy
US prescriptions for the three months to March 31, 2006 were down 13% compared to the same period in 2005. This was primarily due to limited promotion of the product and supply constraints during 2005 leading to a 3% decrease in Shire’s market share of the total US extended release carbamazepine prescription market to 42% in March 2006 (2005: 45%) and a 6% decrease in that market as a whole.
Sales of CARBATROL for the three months to March 31, 2006 were $14.1 million, a decrease of 17% compared to the same period in 2005 (2005: $16.9 million). The difference between the decrease in sales and the lower levels of prescriptions is due to higher sales deductions in Q1 2006.
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.
On March 30, 2006 the Company was notified that Corepharma LLC had filed an ANDA under the Hatch-Waxman Act seeking permission to market its generic version of carbamazepine extended release products in 100mg, 200mg and 300mg strengths. Shire is currently reviewing the details of the notice letter.
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 period ended December 31, 2005.
9
PENTASA for the treatment of Ulcerative Colitis
PENTASA had a 17% share of the total US oral mesalamine prescription market in March 2006 (March 2005: 18%), a market that grew 4% compared with the same period in 2005. US prescriptions for the three months to March 31, 2006, were down 1% compared to the same period in 2005, due to reduced promotional activity in Q1 2006.
Sales of PENTASA for the three months to March 31, 2006 were $28.1 million, an increase of 7% compared to the same period in 2005 (2005: $26.2 million). The difference between sales growth and the lower levels of prescriptions is due to the impact of the January 2006 price increase and a change in the product sales mix from the 250mg to 500mg dose strength.
REPLAGAL for the treatment of Fabry Disease
REPLAGAL was acquired by Shire as part of the TKT acquisition, which was completed on July 27, 2005. Product sales for the three months to March 31, 2006 were $25.8 million. The majority of REPLAGAL sales are in Europe. Pre-acquisition sales for the three months to March 31, 2005 were $22.5 million. The increase in sales of 15% is primarily due to greater European coverage by an increased number of sales representatives.
AGRYLIN/XAGRID for the treatment of Thrombocythemia
AGRYLIN/XAGRID sales worldwide for the three months to March 31, 2006 were $13.5 million, down 58% compared to the same period in 2005 (2005: $32.0 million).
North American sales were $1.4 million (2005: $19.9 million). This reduction was expected following the approval of generic versions of AGRYLIN in the US market in April 2005.
For the Rest of the World (all sales outside North America) sales were $12.1 million, (2005: $12.1 million). The impact of unfavorable exchange rate movements during the quarter offset a 6% increase in sales as expressed in the transaction currencies (XAGRID is primarily sold in Euros).
FOSRENOL for the treatment of Hyperphosphatemia
US prescriptions for the three months to March 31, 2006 were up 128% compared to the same period in 2005. This was primarily due to FOSRENOL increasing its share of the total US phosphate binding market, which in March 2006 was 9% (2005: 6%), in a market that had itself grown 10% over the same period. FOSRENOL was launched in the US in January 2005.
Sales of FOSRENOL for the three months to March 31, 2006 were $7.8 million, an increase of 59% compared to the same period in 2005. The difference between sales growth and prescription growth is due mainly to a decrease in pipeline inventory as the new higher dose strengths launch stocks shipped to wholesalers in the US in December 2005 were sold in Q1 2006, and higher sales deductions.
FOSRENOL was launched in Austria, Ireland, Sweden and Denmark 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.
10
3. Royalties
Royalty revenue increased by 5% to $61.0 million for the three months to March 31, 2006 (2005: $58.3 million), as a result of growth in sales.
Royalty Highlights
| Product | Royalties to Shire
$M | Royalty growth1
% | Worldwide in-market sales
by licensee2 in 2005 $M |
| 3TC | 39.5 | 0%* | 305 |
| ZEFFIX | 7.7 | +18%* | 67 |
| Other | 13.8 | +11% | n/a |
| Total | 61.0 | 5% | n/a |
| | * | The impact of foreign exchange movements has contributed -2% to the reported growth |
| | 1 | Compared to Q1 2005 |
| | 2 | GSK |
3TC
Royalties from sales of 3TC for the three months to March 31, 2006 were $39.5 million (2005: $39.4 million). This increase was due to the continued growth in the nucleoside analog market for HIV, offset by the impact of unfavorable exchange rate movements during the quarter.
Shire receives royalties from GSK on worldwide 3TC sales. GSK’s worldwide sales of 3TC for the three months to March 31, 2006 were $305 million, an increase of 2% compared to the same period in 2005 (2005: $298 million).
ZEFFIX
Royalties from sales of ZEFFIX for the three months to March 31, 2006 were $7.7 million (2005: $6.5 million). This increase was primarily due to strong growth in the Chinese, Japanese and Korean markets.
Shire receives royalties from GSK on worldwide ZEFFIX sales. GSK’s worldwide sales of ZEFFIX for the three months to March 31, 2006 were $67 million, an increase of 20% compared to the same period in 2005 (2005: $56 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 Pharmaceutical N.V. (Janssen), an affiliate of Johnson and Johnson, with the exception of the United Kingdom and the Republic of Ireland where Shire previously co-promoted REMINYL with Janssen and 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.
11
4. Financial details
Cost of product sales
For the three months to March 31, 2006 the cost of product sales amounted to 18% of product sales (2005: 12%). 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 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 three months to March 31, 2006 the cost of product sales for REPLAGAL included a $23.6 million adjustment in respect of the acquired inventory. This fair value adjustment increased Shire’s cost of product sales by 7%.
Research and Development (R&D)
R&D expenditure increased from $112.1 million in the three months to March 31, 2005 to $127.4 million for the three months to March 31, 2006. The increase was primarily due to the addition of two significant R&D projects following the acquisition of TKT (ELAPRASE and GA-GCB).
Expressed as a percentage of total revenues, R&D expenditure was 31% for the three months to March 31, 2006 (2005: 34%). In both periods payments have been made to New River of $50.0 million for in-licensing NRP104, representing 12% of total revenues in Q1 2006 (2005: 15%); these have been expensed in accordance with the Company’s accounting policy. In line with our guidance, the level of quarterly R&D expenditure is expected to increase over the Q1 2006 spend (excluding the NRP payment) as we commence new phase 3(b)/4 studies to support new product launches (including DAYTRANA and FOSRENOL).
Shire’s pipeline is now well advanced with six projects in late stage development or registration.
Selling, general and administrative (SG&A)
SG&A expenses increased from $163.2 million in the three months to March 31, 2005 to $182.0 million in the three months to March 31, 2006, an increase of 12%.
In line with our guidance, the level of quarterly SG&A expenditure is expected to increase over the Q1 2006 spend as we recruit new US sales forces for GI (to launch MESAVANCE) and HGT (to launch ELAPRASE) as well as expanding the CNS sales force (to launch DAYTRANA).
As a percentage of product sales, SG&A expenses were 53% (2005: 61%) reflecting the increased ADDERALL XR sales for the quarter. This ratio of SG&A to product sales should remain broadly consistent for the whole year.
Depreciation and amortization
The depreciation charge for the three months to March 31, 2006 was $9.2 million (2005: $4.4 million). Amortization charges, including the amortization on acquired products, were $13.7 million for the three months to March 31, 2006 (2005: $9.2 million). The increase in both depreciation and amortization is primarily due to the increase in the asset base as a result of the TKT acquisition.
Integration costs
For the three months to March 31, 2006 the Company incurred $2.3 million of costs associated with the integration of the TKT business into the Shire group (2005: $nil). This included retention payments for key staff of $1.6 million, IT costs of $0.3 million and other costs of $0.4 million.
12
Interest income
For the three months to March 31, 2006 the Company received interest income of $14.2 million (2005: $9.7 million).
In Q1 2005, interest income primarily related to interest received on Shire’s cash balances.
In Q1 2006, interest income comprised $7.9 million of interest received on cash balances together with $6.3 million of interest recognized following the repayment by IDB of a $70.6 million loan (of the $8.1 million of interest received from IDB in the quarter, $1.8 million was recognized in previous periods). Interest received on cash balances is lower than in Q1 2005 due to the interest foregone on net TKT acquisition payments of $1.1 billion being partially offset by higher interest rates in Q1 2006.
Interest expense
For the three months to March 31, 2006 the Company incurred interest expense of $5.6 million (2005: $nil). In 2006, this expense primarily relates to a provision for interest, which may be awarded by the court in respect of amounts due to those ex-TKT shareholders who have requested appraisal of the acquisition consideration payable for their TKT shares.
Taxation
The effective rate of tax for the three months to March 31, 2006 was 28% (2005: 30%). At March 31, 2006 net deferred tax assets of $126.0 million were recognized (December 2005: $116.2 million).
Equity in earnings/(losses) of equity method investees
Net earnings of $3.5 million were recorded for the three months to March 31, 2006 (2005: net losses of $0.2 million). This comprised earnings of $1.6 million from the 50% share of the antiviral commercialization partnership with GSK in Canada (2005: $1.4 million), and $1.9 million being the Company’s share of earnings in the GeneChem and EGS Healthcare Funds (2005: loss of $1.6 million).
Discontinued operations
During the three months to March 31, 2006, IDB repaid $70.6 million, being the injectable flu development tranche of the $100.0 million development loan facility provided to IDB as part of their acquisition of Shire’s vaccine business. The repayment followed GSK’s acquisition of IDB, after which IDB was provided with resources by GSK to fund the early repayment of the injectible flu tranche. The $29.4 million pipeline development tranche of the loan facility is still outstanding.
At the time of the disposal, a provision of $70.0 million was charged to discontinued operations on the basis that there was no certainty of recovery of this amount. The $70.0 million provision was allocated against all of the pipeline development tranche ($29.4 million) and against $40.6 million of the $70.6 million injectable flu development tranche.Accordingly, a gain on disposition of discontinued operations of $40.6 million (2005: $3.1 million) was recognized on repayment of the loan by IDB.
The repayment of the $70.6 million injectable flu tranche had no tax effect.
13
FINANCIAL INFORMATION
TABLE OF CONTENTS
| | | | Page |
| Unaudited US GAAP Consolidated Balance Sheets | 15 |
| Unaudited US GAAP Consolidated Statements of Operations | 17 |
| Unaudited US GAAP Consolidated Statements of Cash Flow | 19 |
| Selected notes to the unaudited Financial Statements | 21 |
| (1) | | Earnings per share | 21 |
| (2) | | Analysis of revenues | 22 |
| Non GAAP reconciliation of numerator for diluted EPS | 23 |
| Non GAAP reconciliation of reported EPS | 23 |
14
Unaudited US GAAP results for the 3 months to March 31, 2006
Consolidated Balance Sheets
| | | | | ¹ Adjusted |
| | | March 31, | | December 31, |
| | | 2006 | | 2005 |
| | | $M | | $M |
| ASSETS | |
| |
|
| | | | | |
| Current assets: | | | | |
| Cash and cash equivalents | | 842.4 | | 656.5 |
| Restricted cash | | 30.9 | | 30.6 |
| Short-term investments | | 1.5 | | 6.9 |
| Accounts receivable, net | | 272.8 | | 329.9 |
| Inventories | | 130.2 | | 136.0 |
| Deferred tax asset | | 68.8 | | 54.2 |
| Prepaid expenses and other current assets | | 75.0 | | 98.1 |
| |
| |
|
| Total current assets | | 1,421.6 | | 1,312.2 |
| | | | | |
| Investments | | 54.4 | | 50.2 |
| Property, plant and equipment, net | | 252.9 | | 234.0 |
| Goodwill | | 368.9 | | 367.6 |
| Other intangible assets, net | | 714.1 | | 729.3 |
| Deferred tax asset | | 57.2 | | 62.0 |
| Other non-current assets | | 10.6 | | 42.9 |
| |
| |
|
| Total assets | | 2,879.7 | | 2,798.2 |
| |
| |
|
| LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | |
| | | | | |
| Current liabilities: | | | | |
| Accounts payable and accrued expenses | | 401.4 | | 431.8 |
| Liability to dissenting shareholders | | 432.9 | | 427.6 |
| Other current liabilities | | 125.9 | | 106.0 |
| |
| |
|
| Total current liabilities | | 960.2 | | 965.4 |
| | | | | |
| Long-term debt, excluding current installments | | - | | 0.1 |
| Other non-current liabilities | | 41.5 | | 43.4 |
| |
| |
|
| Total liabilities | | 1,001.7 | | 1,008.9 |
| | |
| |
|
¹ Retrospectively adjusted following the adoption of SFAS 123R.
15
Unaudited US GAAP results for the 3 months to March 31, 2006
Consolidated Balance Sheets (continued)
| | | | | | ¹Adjusted | |
| | | March 31, | | | December 31, | |
| | | 2006 | | | 2005 | |
| | | $M | | | $M | |
| | |
| | |
| |
| Shareholders’ equity | | | | | | |
| Common stock of 5p par value: 18,314.0 million | | | | | | |
| shares authorized; and 498.5 million shares issued | | | | | | |
| and outstanding (2005: 495.7 million) | | 42.9 | | | 42.7 | |
| Exchangeable shares: 1.9 million shares issued and | | | | | | |
| outstanding (2005: 2.2 million) | | 86.7 | | | 101.2 | |
| Treasury stock | | (4.7 | ) | | (2.8 | ) |
| Additional paid-in capital | | 1,365.8 | | | 1,327.5 | |
| Accumulated other comprehensive income | | 77.0 | | | 71.5 | |
| Retained earnings | | 310.3 | | | 249.2 | |
| |
| | |
| |
| Total shareholders’ equity | | 1,878.0 | | | 1,789.3 | |
| |
| | |
| |
| Total liabilities and shareholders’ equity | | 2,879.7 | | | 2,798.2 | |
| | |
| | |
| |
¹ Retrospectively adjusted following the adoption of SFAS 123R.
16
Unaudited US GAAP results for the 3 months to March 31, 2006
Consolidated Statement of Operations
| | | | | | ¹ Adjusted | |
| | | 3 months to | | | 3 months to | |
| | | March 31, | | | March 31, | |
| | | 2006 | | | 2005 | |
| | | $M | | | $M | |
| |
| | |
| |
| Revenues: | | | | | | |
| Product sales | | 346.0 | | | 269.4 | |
| Royalties | | 61.0 | | | 58.3 | |
| Other revenues | | 4.0 | | | 6.0 | |
| |
| | |
| |
| Total revenues | | 411.0 | | | 333.7 | |
| |
| | |
| |
| Costs and expenses: | | | | | | |
| Cost of product sales | | 62.0 | | | 33.6 | |
| Research and development | | 127.4 | | | 112.1 | |
| Selling, general and administration | | 182.0 | | | 163.2 | |
| Depreciation and amortization | | 22.9 | | | 13.6 | |
| Integration costs | | 2.3 | | | - | |
| Reorganization costs | | - | | | 2.9 | |
| |
| | |
| |
| Total operating expenses | | 396.6 | | | 325.4 | |
| |
| | |
| |
| Operating income | | 14.4 | | | 8.3 | |
| | | | | | | |
| Interest income | | 14.2 | | | 9.7 | |
| Interest expense | | (5.6 | ) | | - | |
| Other income/(expense), net | | 0.5 | | | (0.1 | ) |
| |
| | |
| |
| Total other income, net | | 9.1 | | | 9.6 | |
| |
| | |
| |
| Income from continuing operations | | | | | | |
| before income taxes and equity in | | | | | | |
| earnings/(losses) of equity method | | | | | | |
| investees | | 23.5 | | | 17.9 | |
| Income taxes | | (6.5 | ) | | (5.4 | ) |
| Equity in earnings/(losses) of equity | | | | | | |
| method investees | | 3.5 | | | (0.2 | ) |
| |
| | |
| |
| Income from continuing operations | | 20.5 | | | 12.3 | |
| Gain on disposition of discontinued | | | | | | |
| operations | | 40.6 | | | 3.1 | |
| |
| | |
| |
| Net income | | 61.1 | | | 15.4 | |
| | |
| | |
| |
¹ Retrospectively adjusted following the adoption of SFAS 123R.
17
Unaudited US GAAP results for the 3 months to March 31, 2006
Consolidated Statement of Operations (continued)
| | | | | ¹ Adjusted |
| | | 3 months to | | 3 months to |
| | | March 31, | | March 31, |
| | | 2006 | | 2005 |
| |
| |
|
| Earnings per share - basic | | | | |
| Income from continuing operations | | 4.0c | | 2.5c |
| Gain on disposition of discontinued operations | | 8.1c | | 0.6c |
| |
| |
|
| Earning per ordinary share - basic | | 12.1c | | 3.1c |
| |
| |
|
| Earnings per share - diluted | | | | |
| Income from continuing operations | | 4.0c | | 2.5c |
| Gain on disposition of discontinued operations | | 8.0c | | 0.6c |
| |
| |
|
| Earnings per ordinary share - diluted | | 12.0c | | 3.1c |
| |
| |
|
| Earning per ADS - diluted | | 35.9c | | 9.2c |
| |
| |
|
| Weighted average number of shares (Millions): | | | | |
| Basic | | 503.2 | | 499.0 |
| Diluted | | 510.3 | | 500.6 |
| | |
| |
|
¹ Retrospectively adjusted following the adoption of SFAS 123R.
18
Unaudited US GAAP results for the 3 months to March 31, 2006
Consolidated Statement of Cash Flows
| | | | | | ¹Adjusted | |
| | | 3 months to | | | 3 months to | |
| | | March 31, | | | March 31, | |
| | | 2006 | | | 2005 | |
| | | $M | | | $M | |
| |
| | |
| |
| CASH FLOWS FROM OPERATING | | | | | | |
| ACTIVITIES: | | | | | | |
| | | | | | | |
| Net income | | 61.1 | | | 15.4 | |
| Adjustments to reconcile net income to net | | | | | | |
| cash provided by operating activities: | | | | | | |
| Depreciation and amortization | | | | | | |
| - cost of product sales | | 1.1 | | | 0.8 | |
| - SG&A | | 22.9 | | | 13.6 | |
| Share based compensation | | 9.0 | | | 5.1 | |
| Movement in deferred taxes | | (10.2 | ) | | (3.1 | ) |
| Equity in (earnings)/losses on equity method | | | | | | |
| investees | | (3.5 | ) | | 0.2 | |
| Gain on disposition of discontinued | | | | | | |
| operations | | (40.6 | ) | | (3.1 | ) |
| Changes in operating assets and liabilities, | | | | | | |
| net of acquisitions: | | | | | | |
| Decrease/(increase) in accounts receivable | | 56.4 | | | (10.7 | ) |
| Increase in sales deductions accrual | | 4.9 | | | 7.9 | |
| Decrease/(increase) in inventory | | 5.1 | | | (4.6 | ) |
| Decrease/(increase) in prepayments and | | | | | | |
| other current assets | | 22.6 | | | (16.7 | ) |
| Decrease in other assets | | 2.4 | | | - | |
| (Decrease)/increase in accounts and notes | | | | | | |
| payable and other liabilities | | (4.5 | ) | | 2.9 | |
| Decrease in deferred revenue | | (3.3 | ) | | (1.4 | ) |
| |
| | |
| |
| Net cash provided by operating activities(A) | | 123.4 | | | 6.3 | |
| |
| | |
| |
¹ Retrospectively adjusted following the adoption of SFAS 123R.
19
Unaudited US GAAP results for the 3 months to March 31, 2006
Consolidated Statement of Cash Flows (continued)
| | | | | | ¹Adjusted | |
| | | 3 months to | | | 3 months to | |
| | | March 31, | | | March 31, | |
| | | 2006 | | | 2005 | |
| | | $M | | | $M | |
| |
| | |
| |
| CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | |
| | | | | | | |
| Movement in short-term investments | | 5.5 | | | 7.3 | |
| Movement in restricted cash | | (0.3 | ) | | 1.0 | |
| Purchase of subsidiary undertaking | | (0.8 | ) | | - | |
| Purchase of long-term investments | | (0.5 | ) | | (1.8 | ) |
| Purchase of property, plant and equipment | | (26.5 | ) | | (19.9 | ) |
| Purchase of intangible assets | | (0.2 | ) | | (20.0 | ) |
| Loan repaid by/(made to) IDB | | 70.6 | | | (20.3 | ) |
| Proceeds from sale of the vaccines business | | - | | | 62.2 | |
| |
| | |
| |
| Net cash provided by investing activities(B) | | 47.8 | | | 8.5 | |
| |
| | |
| |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | |
| | | | | | | |
| Redemption of 2% convertible loan | | (0.1 | ) | | - | |
| Proceeds from exercise of options | | 13.8 | | | 16.2 | |
| Tax benefit of share based compensation, charged | | | | | | |
| directly to reserves | | 1.2 | | | 0.2 | |
| Payments to acquire treasury stock | | (2.0 | ) | | - | |
| |
| | |
| |
| Net cash provided by financing activities(C) | | 12.9 | | | 16.4 | |
| |
| | |
| |
| Effect of foreign exchange rate changes on cash and | | | | | | |
| cash equivalents(D) | | 1.8 | | | (1.6 | ) |
| |
| | |
| |
| Net increase in cash and cash equivalents(A+B+C+D) | | 185.9 | | | 29.6 | |
| Cash and cash equivalents at beginning of period | | 656.5 | | | 1,111.5 | |
| |
| | |
| |
| Cash and cash equivalents at end of period | | 842.4 | | | 1,141.1 | |
| |
| | |
| |
¹ Retrospectively adjusted following the adoption of SFAS 123R.
20
US GAAP results for the 3 months to March 31, 2006
Selected notes to the Unaudited US GAAP Financial Statements
| | | | | ¹ Adjusted |
| | | 3 months to | | 3 months to |
| | | March 31, | | March 31, |
| | | 2006 | | 2005 |
| (1) Earnings per share | | $M | | $M |
| |
| |
|
| Income from continuing operations | | 20.5 | | 12.3 |
| Gain on disposition of discontinued operations | | 40.6 | | 3.1 |
| |
| |
|
| Numerator of basic and diluted EPS | | 61.1 | | 15.4 |
| |
| |
|
¹ Retrospectively adjusted following the adoption of SFAS 123R.
| | | No of shares | | No of shares |
| Weighted average number of shares: | | Millions | | Millions |
| |
| |
|
| Basic | | 503.2 | | 499.0 |
| Effect of dilutive shares: | | | | |
| Stock options | | 6.5 | | 1.3 |
| Warrants | | 0.6 | | 0.3 |
| |
| |
|
| Diluted | | 510.3 | | 500.6 |
| |
| |
|
The share options not included in the calculation of the diluted weighted average number of shares, because the exercise prices exceeded Shire’s average share price during the calculation period, are shown below:
| | | | | Adjusted |
| | | 3 months to | | 3 months to |
| | | March 31, | | March 31, |
| | | 2006 | | 2005 |
| | | No. of shares | | No. of shares |
| | | Millions | | Millions |
| |
| |
|
| Stock options | | 2.2 | | 7.7 |
| |
| |
|
21
Unaudited US GAAP results for the 3 months to March 31, 2006
Selected notes to the US GAAP Financial Statements (continued)
| | | | | 3 months | | | | 3 months to |
| | | 3 months to | | to March | | 3 months to | | March 31, |
| | | March 31, | | 31, | | March 31, | | 2006 |
| | | 2006 | | 2005 | | 2006 | | % of total |
| (2) Analysis of revenues | | $M | | $M | | % change | | revenue |
| |
| |
| |
| |
|
| Net product sales: | | | | | | | | |
| CNS | | | | | | | | |
| ADDERALL XR | | 206.1 | | 145.6 | | +42% | | 50% |
| ADDERALL | | 9.1 | | 9.4 | | -3% | | 2% |
| CARBATROL | | 14.1 | | 16.9 | | -17% | | 4% |
| |
| |
| |
| |
|
| | | 229.3 | | 171.9 | | +33% | | 56% |
| |
| |
| |
| |
|
| GI | | | | | | | | |
| PENTASA | | 28.1 | | 26.2 | | +7% | | 6% |
| COLAZIDE | | 2.3 | | 2.1 | | +10% | | 1% |
| |
| |
| |
| |
|
| | | 30.4 | | 28.3 | | +7% | | 7% |
| |
| |
| |
| |
|
| HGT | | | | | | | | |
| REPLAGAL | | 25.8 | | - | | n/a | | 6% |
| |
| |
| |
| |
|
| GP | | | | | | | | |
| AGRYLIN/XAGRID | | | | | | | | |
| North America | | 1.4 | | 19.9 | | -93% | | - |
| Rest of world | | 12.1 | | 12.1 | | - | | 3% |
| FOSRENOL | | 7.8 | | 4.9 | | +59% | | 2% |
| CALCICHEW | | 10.4 | | 8.1 | | +28% | | 3% |
| REMINYL/REMINYL XL | | 4.2 | | 2.9 | | +45% | | 1% |
| SOLARAZE | | 3.3 | | 2.4 | | +38% | | 1% |
| LODINE | | 3.0 | | 3.0 | | - | | 1% |
| |
| |
| |
| |
|
| | | 42.2 | | 53.3 | | -21% | | 11% |
| |
| |
| |
| |
|
| Other product sales | | 18.3 | | 15.9 | | +15% | | 4% |
| |
| |
| |
| |
|
| Total product sales | | 346.0 | | 269.4 | | +28% | | 84% |
| |
| |
| |
| |
|
| Royalty income: | | | | | | | | |
| 3TC | | 39.5 | | 39.4 | | - | | 10% |
| ZEFFIX | | 7.7 | | 6.5 | | +18% | | 2% |
| Others | | 13.8 | | 12.4 | | +11% | | 3% |
| |
| |
| |
| |
|
| | | 61.0 | | 58.3 | | +5% | | 15% |
| |
| |
| |
| |
|
| Other revenues | | 4.0 | | 6.0 | | -33% | | 1% |
| |
| |
| |
| |
|
| Total revenues | | 411.0 | | 333.7 | | +23% | | 100% |
| |
| |
| |
| |
|
22
Non GAAP reconciliation of numerator for diluted EPS
for the 3 months to March 31, 2006
| | | | | | Adjusted | |
| | | 3 months to | | | 3 months to | |
| | | March 31, | | | March 31, | |
| | | 2006 | | | 2005 | |
| | | $M | | | $M | |
| |
| | |
| |
| Net income for basic EPS | | 61.1 | | | 15.4 | |
| Add back: | | | | | | |
| TKT cost of product sales fair value adjustment | | 23.6 | | | - | |
| New River milestone payment | | 50.0 | | | - | |
| New River upfront payment | | - | | | 50.0 | |
| TKT integration costs | | 2.3 | | | - | |
| Reorganization costs | | - | | | 2.9 | |
| Taxes on above adjustments | | (21.3 | ) | | (14.8 | ) |
| Gain on disposition of discontinued operations | | (40.6 | ) | | (3.1 | ) |
| |
| | |
| |
| Total non GAAP adjustment | | 14.0 | | | 35.0 | |
| |
| | |
| |
| Numerator for non GAAP – diluted EPS | | 75.1 | | | 50.4 | |
| |
| | |
| |
| | | | | | | |
| Non GAAP reconciliation of reported EPS | | | | | | |
| for the 3 months to March 31, 2006 | | | | | | |
| | | | | | Adjusted | |
| | | 3 months to | | | 3 months to | |
| | | March 31, | | | March 31, | |
| | | 2006 | | | 2005 | |
| |
| | |
| |
| Diluted EPS per ordinary share | | 12.0c | | | 3.1c | |
| Add back: | | | | | | |
| Gain on disposition of discontinued | | | | | | |
| operations | | (8.0c | ) | | (0.6c | ) |
| |
| | |
| |
| Diluted EPS from continuing operations | | 4.0c | | | 2.5c | |
| |
| | |
| |
| Add back: | | | | | | |
| TKT cost of product sales fair value | | | | | | |
| adjustment | | 4.6c | | | - | |
| New River milestone payment | | 9.8c | | | - | |
| New River upfront payment | | - | | | 10.0c | |
| TKT integration costs | | 0.5c | | | - | |
| Reorganization costs | | - | | | 0.6c | |
| Taxes on above investments | | (4.2c | ) | | (3.0c | ) |
| |
| | |
| |
| Non GAAP – diluted EPS per ordinary share | | 14.7c | | | 10.1c | |
| |
| | |
| |
| Non GAAP – diluted EPS per ADS | | 44.1c | | | 30.2c | |
| |
| | |
| |
| Total non GAAP adjustments – diluted EPS per | | | | | | |
| ordinary share | | 2.7c | | | 7.0c | |
| | |
| | |
| |
23
