On July 30, 2009 Shire began the rolling submission with the FDA under Fast Track designation of a New Drug Application (“NDA”) for velaglucerase alfa, its enzyme replacement therapy in development for the treatment of Type 1 Gaucher disease. On September 1, 2009 Shire reported that it had completed its NDA submission. On November 4, 2009 Shire announced
that the FDA has granted Priority Review of this application, and issued an action date of February 28, 2010. Velaglucerase alfa is available ahead of its commercial launch in the US via a treatment protocol and elsewhere on a pre-approval basis to 300-600 patients in 2009 and will be available to several hundred more in 2010.
FIRAZYR – for the treatment of hereditary angioedema (“HAE”)
In September 2009 Shire initiated a clinical trial to investigate the safety of self-administration of FIRAZYR.
Research Collaboration with Santaris Pharma A/S (“Santaris”) on Locked Nucleic Acid (“LNA”) Drug Platform
On August 24, 2009 Shire announced that it had entered into a research collaboration with Santaris, to develop its proprietary LNA technology in a range of rare diseases. LNA technology has the benefit of shortened target validation and proof of concept, potentially increasing the speed and lowering the cost of development. As part of the joint research project Santaris will design, develop and deliver pre-clinical LNA oligonucleotides for Shire-selected orphan disease targets, and Shire will have the exclusive right to further develop and commercialize these candidate compounds on a worldwide basis.
FOSRENOL for the treatment of pre-dialysis chronic kidney disease (“CKD”) in EU
Shire has received approval through the European Mutual Recognition Procedure for an extension to the current indication for FOSRENOL as a treatment to control hyperphosphataemia in CKD patients who are not on dialysis and with a serum phosphorus level ≥1.78mmol/L (5.5mg/dL).
Legal proceedings
On September 23, 2009 the Company received a subpoena from the US Department of Health and Human Services Office of Inspector General in coordination with the US Attorney for the Eastern District of Pennsylvania seeking production of documents related to the sales and marketing of ADDERALL XR, DAYTRANA and VYVANSE. Shire is cooperating and responding to this subpoena.
On October 19, 2009 Teva filed suit in the US District Court for the Southern District of New York against Shire claiming that Shire is in breach of its supply contract for the authorized generic version of ADDERALL XR. Shire has been supplying Teva with authorized generic ADDERALL XR since April 1, 2009. Shire’s ability to supply this product, however, is limited by quota restrictions that the US Drug Enforcement Administration places on amphetamine, which is the product’s active ingredient. Teva is seeking specific performance and equitable relief. Shire will defend the action.
For further details on these legal proceedings, see ITEM 1, Note 19 (d) vii.
Board Changes
On October 31, 2009 Shire Board announced that Mr David Stout would be joining the Board as a non executive director with effect from October 31, 2009. Mr Stout brings significant pharmaceutical industry experience to the Shire Board, having spent many years at both GSK and prior to that Schering-Plough. Most recently, he was President of Pharmaceutical Operations at GSK. In this role he had responsibility for GSK’s pharmaceutical operations in the United States, Europe, Japan and all other International Markets. Mr Stout was also responsible for global manufacturing and global Biologics (vaccines) at GSK.
The Shire Board also announces that Mr David Mott stepped down from the Shire Board on the expiry of his term of office on October 30, 2009.
Research and development
Products in registration as at September 30, 2009
FOSRENOL for the treatment of pre-dialysis CKD in the US
Shire is continuing to explore the regulatory pathway required to secure a label extension for FOSRENOL to treat hyperphosphataemia in CKD in the US.
DAYTRANA for ADHD in Canada
Regulatory submissions were filed for approval of the product with Health Canada in November 2007. Review is ongoing.
Velaglucerase alfa for the treatment of Gaucher Disease
In July 2009 Shire announced that the results from the first of the three Phase 3 trials of velaglucerase alfa were positive, and achieved statistically significant improvements in the primary endpoint. In September 2009 the Company announced positive results from the final two Phase 3 studies, with both studies reaching all of their primary and secondary efficacy endpoints. In all three studies, most adverse events were mild to moderate in intensity. Most of the drug-related adverse events were reported in association with the velaglucerase alfa infusions, all of which resolved without complications. The development of antibodies to velaglucerase alfa was rare in all three studies, occurring in approximately 1% of patients treated.
On July 30, 2009 Shire began the rolling submission with the FDA under Fast Track designation of a NDA for velaglucerase alfa, its enzyme replacement therapy in development for the treatment of Type 1 Gaucher disease. On November 4, 2009 Shire announced that the FDA has granted Priority Review of this application, and issued an action date of February 28, 2010.
On September 1, 2009 Shire reported that it had completed its NDA submission. Velaglucerase alfa is available ahead of its commercial launch in the US via a treatment protocol and elsewhere on a pre-approval basis. In the EU and other regions, Shire is engaging with national and regional authorities to seek pre-approval access using the fastest mechanisms available in each region. The total number of patients Shire can treat is dependent on the patient weight, as well as the administered dose as recommended by their treating physician; Shire estimates this could translate into a range of 300 to 600 patients globally for uninterrupted treatment starting in September 2009 through the end of the year. Velaglucerase supplies are such that several hundred patients could be added over the course of next year.
Products in clinical development as at September 30, 2009
Phase 3
VYVANSE for ADHD in Europe
Shire plans to submit the regulatory filing for VYVANSE in Europe for the treatment of ADHD in children aged 6 to 17 in 2010.
INTUNIV for use in combination with other ADHD treatments
Phase 3 trials in the US are ongoing to support the efficacy and safety of INTUNIV when combined with other approved ADHD treatments.
LIALDA/MEZAVANT for the maintenance of remission in ulcerative colitis in the US
Phase 3 trials investigating the use of the product to maintain remission in patients who have ulcerative colitis were initiated in 2006 and are continuing. The product was given this indication on approval in the EU.
LIALDA/MEZAVANT for the treatment of diverticulitis
Phase 3 worldwide clinical trials investigating the use of the product for the treatment of diverticulitis were initiated in 2007 and are continuing.
JUVISTA for the improvement of scar appearance
Renovo initiated its first pivotal European Phase 3 trial in scar revision in the fourth quarter of 2008 to support the filing of a European regulatory dossier. If the outcome from Renovo’s multi centre, EU Phase 3 study is suitably positive, the data will be used to inform the strategy and design of Shire’s US development plan and to strengthen the chances of regulatory and commercial success in the US.
FIRAZYR for HAE in the US
Prior to Shire’s acquisition, in April 2008 Jerini received a not approvable letter for FIRAZYR for use in the US from the FDA. In December 2008 Jerini met with the FDA to discuss the development of FIRAZYR. It was agreed that an additional clinical study would be required before approval could be considered and that a complete response to the not approvable letter would be filed after completion of this study.
In June 2009 Shire initiated a Phase 3 study in patients with acute attacks of HAE, known as the FAST-3 trial, which is designed to support filing of a NDA for FIRAZYR in the US.
Phase 2
VYVANSE for the treatment of non ADHD indications in adults
Shire is conducting Phase 2 pilot clinical trials to assess the efficacy and safety of VYVANSE as adjunctive therapy in depression, for the treatment of negative symptoms and cognitive impairment in schizophrenia, and for the treatment of cognitive impairment in depression.
HGT-1111 / METAZYM
Shire has an ongoing enzyme replacement therapy program for the treatment of metachromatic leukodystrophy (“MLD”), which is a lysosomal storage disorder that results from a deficiency in the enzyme arylsulfatase-A (“ASA”). In June 2008 Shire completed its acquisition from Zymenex of the global rights to a clinical candidate ASA, known as METAZYM (HGT-1111). METAZYM has completed a Phase 1b clinical trial in twelve MLD patients in Europe and an extension to this study is ongoing. The product has been granted orphan drug designation in the US and in the EU. Shire had planned to initiate a Phase 2/3 clinical trial in the fourth quarter of 2009; this timeline is subject to resolution of supply issues at the contract manufacturer and clinical trial design discussions with the FDA.
Phase 1
SPD 535 for the treatment of arteriovenous grafts in hemodialysis patients
SPD 535 is in development as a novel molecule with platelet lowering ability and without phosphodiesterase type III inhibition. The initial proof-of-concept program will target prevention of thrombotic complications associated with arteriovenous grafts in hemodialysis patients. Phase 1 development was initiated in the third quarter of 2009.
HGT-2310 - - Hunter syndrome with central nervous system symptoms, idursulfase-IT
Following the acceptance by the FDA in January 2008 of Shire’s IND for idursulfase-IT (HGT-2310 - formerly referred to as ELAPRASE for Hunter syndrome patients with significant central nervous system symptoms) the Company plans to initiate a Phase 1 clinical trial in the fourth quarter of 2009. This product has been granted orphan designation in the US.
Products in pre-clinical development as at September 30, 2009
HGT-1410 for Sanfilippo Syndrome (Mucopolysaccharidosis IIIA)
HGT-1410 is in development as an enzyme replacement therapy for the treatment of Sanfilippo Syndrome (Mucopolysaccharidosis IIIA), a lysosomal storage disorder. The product has been granted orphan drug designation in the US and in the EU. Pre-clinical development for this product is continuing.
HGT-2610 for the treatment of Krabbe Disease (Globoid Cell Leukodystrophy)
In November 2008 Shire announced that an enzyme replacement therapy was being developed for the treatment of Krabbe Disease, a lysosomal storage disorder. This program is in early development and preclinical studies.
Other pre-clinical development projects
A number of additional projects are underway in the early stages of development for the Specialty Pharmaceutical and HGT businesses. Included are potential programs leveraging CarrierWave technology primarily focused in the areas of pain and ADHD. More data on these latter programs is expected in the first half of 2010.
Development projects abandoned during 2009
During 2009 the Company abandoned the following development projects disclosed within “Research & Development” in its previous Form 10-K and Form 10-Q fillings:
AMIGAL (HGT-3310) for the treatment Fabry disease
Amicus met with the FDA and the European Medicines Agency to discuss the AMIGAL development program during 2008 and 2009, and discussions are now complete. Shire has been considering the impact of this feedback on the global development strategy. On October 29, 2009, Shire and Amicus mutually agreed to terminate the collaboration, with all rights returned to Amicus. Shire had rights to AMIGAL in markets outside the US.
PLICERA (HGT-3410) for the treatment of Gaucher Disease
During 2009, an additional Phase 2 randomized open-label trial to assess the safety, tolerability and efficacy of PLICERA in naïve patients was ongoing. In September 2009, Amicus announced that preliminary data from this trial did not support advancement of PLICERA into Phase 3. On October 29, 2009, Shire and Amicus mutually agreed to terminate the collaboration, with all rights returned to Amicus. Shire had rights to PLICERA in markets outside the US.
HGT – 3510 for the treatment of Pompe disease
In September 2008 Amicus initiated a Phase 2 clinical trial of HGT-3510, an orally administered, small molecule pharmacological chaperone being jointly developed for the treatment of Pompe disease by Shire and Amicus. This trial was placed on clinical hold in February 2009 in response to reports of two serious adverse events that were unexpected and probably related to treatment with HGT-3510. In September 2009 the FDA agreed to convert the trial to a partial clinical hold to allow the initiation of a Phase 1 trial in healthy volunteers. On October 29, 2009, Shire and Amicus mutually agreed to terminate the collaboration, with all rights returned to Amicus. Shire had rights to HGT-3510 in markets outside the US.
Alba collaboration for the development of SPD 550
In December, 2007 Shire acquired rights to SPD 550 in markets outside of the US and Japan. On October 16, 2009 and following review of Phase 2 data, Shire informed Alba of its intention to terminate the collaboration. Effective November 15, 2009 Shire will return to Alba all rights to SPD 550 (larazotide cetate for celiac disease), also known as AT-1001.
DAYTRANA for ADHD in the EU
On March 11, 2009 Shire withdrew the European Marketing Authorization Application (“MAA”) for DAYTRANA for the treatment of ADHD. The withdrawal of the European MAA does not impact Shire’s commitment to DAYTRANA in the US where the product has been used as a pediatric treatment for ADHD since 2006.
Results of operations for the three months to September 30, 2009 and 2008
Total revenues
The following table provides an analysis of the Company’s total revenues by source:
| | | 3 months to | | | 3 months to | | | | |
| | | September 30, | | | September 30, | | | | |
| | | 2009 | | | 2008 | | | change | |
| | | $'M | | | $'M | | | % | |
| Product sales | | | 602.5 | | | | 712.5 | | | | -15 | |
| Royalties | | | 60.3 | | | | 60.8 | | | | -1 | |
| Other revenues | | | 4.2 | | | | 5.3 | | | | -21 | |
| Total | | | 667.0 | | | | 778.6 | | | | -14 | |
Product sales
The following table provides an analysis of the Company’s key product sales:
| | | 3 months to | | | 3 months to | | | | | | | |
| | | September 30, | | | September 30, | | | Product sales | | | US prescription | |
| | | 2009 | | | 2008 | | | growth | | | growth | |
| | | $'M | | | $'M | | | % | | | % | |
| Specialty Pharmaceuticals | | | | | | | | | | | | |
| ADHD | | | | | | | | | | | | |
| VYVANSE | | | 129.0 | | | | 96.0 | | | | 34 | | | | 57 | |
| ADDERALL XR | | | 70.9 | | | | 268.7 | | | | -74 | | | | -59 | |
| DAYTRANA | | | 17.4 | | | | 18.1 | | | | -4 | | | | -12 | |
| EQUASYM | | | 9.2 | | | | - | | | | n/a | | | | n/a | |
| | | | | | | | | | | | | | | | | |
| GI | | | | | | | | | | | | | | | | |
| PENTASA | | | 51.3 | | | | 49.2 | | | | 4 | | | | -3 | |
| LIALDA / MEZAVANT | | | 65.4 | | | | 40.4 | | | | 62 | | | | 34 | |
| | | | | | | | | | | | | | | | | |
| General Products | | | | | | | | | | | | | | | | |
| FOSRENOL | | | 47.7 | | | | 43.0 | | | | 11 | | | | -3 | |
| CALCICHEW | | | 12.4 | | | | 13.3 | | | | -7 | | | | n/a | |
| CARBATROL | | | 20.8 | | | | 21.6 | | | | -4 | | | | -4 | |
| REMINYL/REMINYL XL | | | 10.5 | | | | 9.6 | | | | 9 | | | | n/a | |
| XAGRID | | | 21.5 | | | | 19.4 | | | | 11 | | | | n/a | |
| Other product sales | | | 5.4 | | | | 10.2 | | | | -47 | | | | | |
| | | | 461.5 | | | | 589.5 | | | | -22 | | | | | |
| Human Genetic Therapies | | | | | | | | | | | | | | | | |
| ELAPRASE | | | 90.9 | | | | 78.2 | | | | 16 | | | | n/a | |
| REPLAGAL | | | 48.3 | | | | 44.6 | | | | 8 | | | | n/a | |
| FIRAZYR | | | 1.8 | | | | 0.2 | | | | n/a | | | | n/a | |
| | | | 141.0 | | | | 123.0 | | | | 15 | | | | | |
| Total product sales | | | 602.5 | | | | 712.5 | | | | -15 | | | | | |
The following discussion includes references to prescription and market share data for the Company’s key products. The source of this data is IMS Health, September 2009. IMS Health is a leading global provider of business intelligence for the pharmaceutical and healthcare industries.
US ADHD market share
Shire’s share of the total US ADHD market for the three months to September 30, 2009 was 22% (2008: 33%). Shire continues to have the leading portfolio of branded products in the US ADHD market.
VYVANSE – ADHD
Product sales of VYVANSE for the three months to September 30, 2009 increased by 34% to $129.0 million (2008: $96.0 million), with VYVANSE’s average share of the US ADHD market for the three months to September 30, 2009 increasing to 13% (2008: 9%). Product sales growth was driven by a 57% increase in US prescription demand in the three months to September 30, 2009 over the same period in 2008 and 10% growth in the US ADHD market. Product sales growth was less than prescription growth due to the stocking benefits from new dosage strengths of VYVANSE in the third quarter of 2008.
ADDERALL XR – ADHD
Product sales of ADDERALL XR for the three months to September 30, 2009 were $70.9 million, a decrease of 74% (2008: $268.7 million), following the launch by Teva in April 2009 of its authorized generic version of ADDERALL XR. The launch of the authorized generic version led to a 59% decline in ADDERALL XR US prescription demand and higher US sales deductions in the third quarter of 2009 compared to the same period in 2008.
Sales deductions represented 73% of branded ADDERALL XR gross sales in the third quarter of 2009 compared to 26% in the same period in 2008, following higher Medicaid and Managed Care rebates subsequent to authorized generic launch. These factors more than offset the positive impacts of price increases taken since the third quarter of 2008, and the inclusion in product sales of shipments of authorized generic ADDERALL XR to Teva and Impax in the third quarter of 2009.
As outlined in ITEM 1, Note 15, and the Critical Accounting Estimates section of this ITEM 2, there is considerable uncertainty as to how shipments of authorized generic ADDERALL XR to Teva and Impax should be included in the Medicaid rebate calculation pursuant to the DRA, and as a result a range of reasonably possible rebate amounts are calculable under the Medicaid rebate legislation. For the three months to September 30, 2009 the Company’s management has recorded an accrual based on its current best estimate of the rebate payable. That current best estimate is the amount that could be paid by the Company were the CMS to employ an alternative interpretation of the DRA (notwithstanding the fact that, following payment, either the Company or CMS would have the right to challenge the amount paid, and that the result of any such challenge could affect whether or not the estimated accrued rebate amount ultimately reflects the Company’s actual obligation). In future periods the Company’s management may need to revise its current best estimate of the amount of Medicaid rebate that could be paid by the Company, which could significantly increase or decrease the sales of ADDERALL XR recorded in the period of any such change of estimate.
DAYTRANA – ADHD
Product sales of DAYTRANA for the three months to September 30, 2009 decreased by 4% to $17.4 million (2008: $18.1 million). Product sales declined due to a 12% reduction in US prescription demand, resulting in a decline in DAYTRANA’s average share of the US ADHD market to 1% (2008: 2%), although these declines were partially offset by price increases taken since the third quarter of 2008.
EQUASYM – ADHD
Following the acquisition of EQUASYM from UCB Pharma Limited (“UCB”) on March 31, 2009 the Company has recorded product sales of EQUASYM for the three months to September 30, 2009 of $9.2 million (2008: $nil).
US oral mesalamine market share
Shire’s average market share of the US oral mesalamine market rose to 33% for the three months to September 30, 2009 (2008: 29%).
LIALDA/MEZAVANT – Ulcerative colitis
Product sales of LIALDA/MEZAVANT for the three months to September 30, 2009 increased by 62% to $65.4 million (2008: $40.4 million), with LIALDA’s average share of the US oral mesalamine market increasing to 17% (2008: 13%). Product sales growth was driven by a 34% increase in US prescription demand and price increases.
By September 30, 2009 MEZAVANT was available in eight countries outside the US, and further launches are planned in other countries throughout 2009 and 2010, subject to the successful conclusion of pricing and reimbursement negotiations.
PENTASA – Ulcerative colitis
Product sales of PENTASA for the three months to September 30, 2009 were $51.3 million, an increase of 4% compared to the same period in 2008 (2008: $49.2 million), with PENTASA’s average share of the US oral mesalamine market falling by 1% to 16% (2008: 17%). Sales grew despite a 3% decrease in prescriptions primarily due to the impact of price increases.
FOSRENOL – Hyperphosphatemia
Product sales of FOSRENOL for the three months to September 30, 2009 were up 11% to $47.7 million (2008: $43.0 million). Expressed in transaction currencies sales were up 14%. In markets outside the US FOSRENOL sales increased as the product entered new countries, and continued to grow in countries entered in the last two years. In the US, FOSRENOL’s average share of the phosphate binder market remained constant at 8% (2008: 8%).
Litigation proceedings regarding Shire’s FOSRENOL patents are ongoing. Further information about this litigation can be found in ITEM 1 of this Form 10-Q.
XAGRID – Thrombocythemia
Product sales of XAGRID for the three months to September 30, 2009 were $21.5 million (2008: $19.4 million). Expressed in transaction currencies sales increased by 18% (XAGRID is primarily sold in Euros and Pounds Sterling).
Human Genetic Therapies
ELAPRASE – Hunter syndrome
Product sales for the three months to September 30, 2009 were $90.9 million, an increase of 16% (2008: $78.2 million). Expressed in transaction currencies sales increased by 20% (ELAPRASE is primarily sold in US dollars and Euros). The product sales growth was driven by increased volumes across all regions where ELAPRASE is sold.
REPLAGAL – Fabry disease
Product sales for the three months to September 30, 2009 were $48.3 million, an increase of 8% (2008: $44.6 million). Expressed in transaction currencies sales increased by 15% (REPLAGAL is primarily sold in Euros and Pounds Sterling). The sales growth in transaction currencies was driven by increased volumes in Europe and Asia Pacific.
FIRAZYR – HAE
Product sales for the three months to September 30, 2009 were $1.8 million (2008: $0.2 million). With a third quarter launch in Italy, FIRAZYR is now marketed in the five largest European countries. FIRAZYR is the first new product for HAE in Europe in 30 years and has orphan exclusivity in the EU until 2018.
Foreign exchange effect
As many of the Company’s sales revenues are earned in currencies other than US dollars (primarily Euros and Pounds Sterling), revenue growth reported in US dollars includes the impact of translating the sales made in a local currency, into US dollars. The table below shows the effect of foreign exchange translations on the revenue growth of the key affected products as well as the underlying performance of key products in their local currency:
| | | | | | | | | | | | | |
| | | $'M | | | local currency | | | dollars | | | US dollars | |
| FOSRENOL | | | | | | | | | | | | |
| - sales in Euros | | | 15.8 | | | | +23% | | | | +17% | | | | -6% | |
| - sales in Pounds Sterling | | | 2.8 | | | | -29% | | | | -39% | | | | -10% | |
| | | | | | | | | | | | | | | | | |
| XAGRID | | | | | | | | | | | | | | | | |
| - sales in Euros | | | 16.7 | | | | +41% | | | | +33% | | | | -8% | |
| - sales in Pounds Sterling | | | 4.4 | | | | -26% | | | | -36% | | | | -10% | |
| | | | | | | | | | | | | | | | | |
| REPLAGAL | | | | | | | | | | | | | | | | |
| - sales in Euros | | | 27.7 | | | | +14% | | | | +8% | | | | -6% | |
| - sales in Pounds Sterling | | | 5.0 | | | | -11% | | | | -23% | | | | -12% | |
| | | | | | | | | | | | | | | | | |
| ELAPRASE | | | | | | | | | | | | | | | | |
| - sales in Euros | | | 36.3 | | | | +3% | | | | -3% | | | | -6% | |
| - sales in Pounds Sterling | | | 6.7 | | | | +6% | | | | -9% | | | | -15% | |
| | | | | | | | | | | | | | | | | |
| CALCICHEW sales in Pounds Sterling | | | 11.4 | | | | +11% | | | | -4% | | | | -15% | |
| | | | | | | | | | | | | | | | | |
| REMINYL and REMINYL XL sales in Pounds Sterling | | | 10.0 | | | | +28% | | | | +11% | | | | -17% | |
Royalties
Royalty revenue decreased by 1% to $60.3 million for the three months to September 30, 2009 (2008: $60.8 million). The following table provides an analysis of Shire’s royalty income:
| | | 3 months to | | | 3 months to | | | | |
| | | September 30, | | | September 30, | | | | |
| | | 2009 | | | 2008 | | | Change | |
| | | $'M | | | $'M | | | % | |
| 3TC and ZEFFIX | | | 42.0 | | | | 44.5 | | | | -6 | |
| ADDERALL XR | | | 2.2 | | | | - | | | | n/a | |
| Others | | | 16.1 | | | | 16.3 | | | | -1 | |
| Total | | | 60.3 | | | | 60.8 | | | | -1 | |
3TC (HIV infection and AIDS) and ZEFFIX (Chronic hepatitis B infection)
Shire receives royalties from GlaxoSmithKline (“GSK”) on worldwide 3TC and ZEFFIX sales. Royalties from sales of 3TC and ZEFFIX for the three months to September 30, 2009 were $42.0 million (2008: $44.5 million). Royalties have decreased by 6% compared to the same period in 2008 mainly due to competition from other HIV and hepatitis B treatments.
ADDERALL XR – ADHD
Royalties from Teva’s sales of authorized generic ADDERALL XR for the three months to September 30, 2009 were $2.2 million (2008: $nil). Receipt of this royalty began with Teva’s sale of an authorized generic version of ADDERALL XR in April 2009, and ceased in September 2009. From the fourth quarter of 2009 Shire will receive royalties on Impax sales of its authorised generic version of ADDERALL XR.
Other
Other royalties are primarily in respect of REMINYL and REMINYL XL (known as RAZADYNE and RAZADYNE ER in the US), for the symptomatic treatment of mild to moderately severe dementia of the Alzheimer’s type. The range of REMINYL products is marketed worldwide (excluding the UK and the Republic of Ireland where Shire has exclusive marketing rights) by Janssen Pharmaceutical N.V., an affiliate of Johnson & Johnson. Sales of the REMINYL/RAZADYNE range continue to grow in most countries; however the entry of generic versions of RAZADYNE and RAZADYNE ER into the US market in the third quarter of 2008 has significantly decreased sales in that region. Information on the RAZADYNE and RAZADYNE ER patent litigation (which is ongoing) can be found in our Annual Report on Form 10-K for the year to December 31, 2008.
Cost of product sales
Cost of product sales increased to $104.9 million for the three months to September 30, 2009 (17% of product sales), up from $84.2 million in the corresponding period in 2008 (2008: 12% of product sales). This increase in cost of product sales as a percentage of product sales has primarily resulted from changes in product mix following the launch by Teva of its authorized generic version of ADDERALL XR in April 2009. Higher sales deductions on Shire’s sales of branded ADDERALL XR, together with lower margin sales of the authorized generic version of ADDERALL XR to Teva and Impax have both depressed gross margin for that product.
For the three months to September 30, 2009 cost of product sales included depreciation of $5.3 million (2008: $3.2 million). The increase in depreciation has resulted from accelerated depreciation of $4.5 million in 2009 following a change in the estimate of the useful lives of the property, plant and equipment at Shire’s Owings Mills facility as a result of the anticipated closure of the facility in 2011.
Research and development (“R&D”)
R&D expenditure increased to $147.8 million for the three months to September 30, 2009 (25% of product sales), up from $120.2 million in the corresponding period in 2008 (17% of product sales). The Company has continued to increase investment in R&D programs, including an up-front payment of $6.5 million to Santaris for technology access and R&D funding in August 2009. For the three months to September 30, 2009 R&D included depreciation of $3.6 million (2008: $3.4 million).
Selling, general and administrative (“SG&A”)
SG&A expenses decreased to $320.6 million (53% of product sales) for the three months to September 30, 2009 from $327.3 million (46% of product sales) in the corresponding period in 2008. The decrease was due to the Company’s continued focus on cost management. However, SG&A increased as a percentage of product sales due to lower product sales following the genericisation of ADDERALL XR. For the three months to September 30, 2009 SG&A included depreciation of $18.5 million (2008: $12.0 million) and amortization of $34.8 million (2008: $29.7 million).
In-process R&D (“IPR&D”) charge
During the three months to September 30, 2008 the Company recorded an IPR&D charge of $120.5 million (2009: $nil) in respect of FIRAZYR in markets outside of the EU which, at the time of the acquisition of Jerini, had not been approved by relevant regulatory authorities.
Gain on sale of product rights
For the three months to September 30, 2009 Shire recorded gains of $6.3 million (2008: $4.0 million) arising from the sale of non-core products to Laboratorios Almirall S.A. (“Almirall”) in 2007. These gains had been deferred since 2007 pending transfer of the relevant consents to the acquirer.
Reorganization costs
For the three months to September 30, 2009 Shire recorded reorganization costs of $2.0 million (2008: $nil) relating to the transfer of manufacturing from its Owings Mills facility.
Integration and acquisition costs
For the three months to September 30, 2009 Shire recorded integration and acquisition costs of $6.2 million (2008: $7.5 million) primarily relating to the integration of Jerini AG (“Jerini”).
Interest income
For the three months to September 30, 2009 Shire received interest income of $0.2 million (2008: $3.8 million), primarily earned on cash and cash equivalents. Interest income for the three months to September 30, 2009 is lower than the same period in 2008 due to significantly lower interest rates in 2009 compared to 2008 and lower average cash and cash equivalent balances.
Interest expense
For the three months to September 30, 2009 the Company incurred interest expense of $9.4 million (2008: $92.9 million). Interest expense in 2008 was higher than 2009 due to accrued interest expense of $77.0 million recorded in respect of the Transkaryotic Therapies, Inc. (“TKT”) appraisal rights litigation: of the $77.0 million, $73.0 million was additional interest arising from the settlement of the litigation in November 2008.
Other income, net
For the three months to September 30, 2009 the Company recognized Other income, net of $7.0 million (2008: $52.0 million), which includes other-than-temporary impairment charges for available-for-sale securities of $0.8 million (2008: $54.1 million) and a gain of $5.7 million (2008: $nil) following the substantial modification of a property lease.
Taxation
For interim reporting purposes, the Company determines the best estimate of its annual effective tax rate and applies that rate in providing for income taxes on a year-to-date basis. The Company has calculated an expected annual effective tax rate, excluding significant, unusual or extraordinary items, for ordinary income associated with operations for which the Company currently expects to have annual taxable income.
In the three months to September 30, 2009 the effective tax rate was 34% (2008: -103%). The negative effective rate in the three months to September 30, 2008 primarily arose due to the recognition of an IPR&D charge in respect of FIRAZYR in non-EU markets which is not deductible for tax. Excluding this IPR&D charge, the effective rate of tax in the third quarter of 2008 was 18%.
Excluding the impact of the IPR&D charge in 2008, the effective rate of tax was 16 percentage points higher in the three months to September 30, 2009 compared to the same period in 2008. The higher effective rate of tax principally resulted from the recognition of valuation allowances against certain European deferred tax assets, increases to accrued interest on tax contingencies recognized and an increase in the estimated annual effective tax rate predominately due to a revision in managements determination of the recoverability of certain deferred tax assets. The adverse rate impact of these items was partially offset by a tax benefit recorded for a change in tax law impacting the carrying value of certain prior year European tax loss carryforwards, together with the benefit of tax return to provision adjustments following the submission of various tax returns in the third quarter of 2009.
Equity in earnings of equity method investees
Net earnings of equity method investees of $0.6 million were recorded for the three months to September 30, 2009 (2008: $1.6 million). This comprised earnings of $1.4 million from the 50% share of the anti-viral commercialization partnership with GSK in Canada (2008: $1.6 million) and losses of $0.8 million, being the Company’s share of losses in the GeneChem, AgeChem and EGS Funds (2008: $nil).
Results of operations for the nine months to September 30, 2009 and 2008
Total revenues
The following table provides an analysis of the Company’s total revenues by source:
| | | 9 months to | | | 9 months to | | | | |
| | | September 30, | | | September 30, | | | | |
| | | 2009 | | | 2008 | | | change | |
| | | $'M | | | $'M | | | % | |
| Product sales | | | 1,916.8 | | | | 2,049.9 | | | | -6 | |
| Royalties | | | 177.8 | | | | 190.7 | | | | -7 | |
| Other | | | 19.8 | | | | 15.8 | | | | 25 | |
| Total | | | 2,114.4 | | | | 2,256.4 | | | | -6 | |
Product sales
The following table provides an analysis of the Company’s key product sales:
| | | 9 months to | | | 9 months to | | | | | | | |
| | | September 30, | | | September 30, | | | Product sales | | | US prescription | |
| | | 2009 | | | 2008 | | | growth | | | growth | |
| | | $'M | | | $'M | | | % | | | % | |
| Specialty Pharmaceuticals | | | | | | | | | | | | |
| ADHD | | | | | | | | | | | | |
| VYVANSE | | | 359.7 | | | | 215.6 | | | | 67 | | | | 77 | |
| ADDERALL XR | | | 434.2 | | | | 826.6 | | | | -47 | | | | -36 | |
| DAYTRANA | | | 52.2 | | | | 61.0 | | | | -14 | | | | -13 | |
| EQUASYM | | | 14.1 | | | | - | | | | n/a | | | | n/a | |
| | | | | | | | | | | | | | | | | |
| GI | | | | | | | | | | | | | | | | |
| PENTASA | | | 156.5 | | | | 138.2 | | | | 13 | | | | -2 | |
| LIALDA / MEZAVANT | | | 169.4 | | | | 99.6 | | | | 70 | | | | 50 | |
| | | | | | | | | | | | | | | | | |
General Products | | | | | | | | | | | | | | | | |
| FOSRENOL | | | 137.2 | | | | 121.6 | | | | 13 | | | | -3 | |
| CALCICHEW | | | 32.8 | | | | 40.8 | | | | -20 | | | | n/a | |
| CARBATROL | | | 59.7 | | | | 55.7 | | | | 7 | | | | -4 | |
| REMINYL/REMINYL XL | | | 28.8 | | | | 26.6 | | | | 8 | | | | n/a | |
| XAGRID | | | 62.3 | | | | 58.7 | | | | 6 | | | | n/a | |
| Other product sales | | | 14.3 | | | | 43.0 | | | | -67 | | | | n/a | |
| | | | 1,521.2 | | | | 1,687.4 | | | | -10 | | | | | |
| Human Genetic Therapies | | | | | | | | | | | | | | | | |
| ELAPRASE | | | 258.9 | | | | 230.5 | | | | 12 | | | | n/a | |
| REPLAGAL | | | 132.9 | | | | 131.8 | | | | 1 | | | | n/a | |
| FIRAZYR | | | 3.8 | | | | 0.2 | | | | n/a | | | | n/a | |
| | | | 395.6 | | | | 362.5 | | | | 9 | | | | | |
| Total product sales | | | 1,916.8 | | | | 2,049.9 | | | | -6 | | | | | |
The following discussion includes references to prescription and market share data for the Company’s key products. The source of this data is IMS Health, September 2009. IMS Health is a leading global provider of business intelligence for the pharmaceutical and healthcare industries.
VYVANSE – ADHD
Product sales of VYVANSE for the nine months to September 30, 2009 increased by 67% to $359.7 million (2008: $215.6 million), with VYVANSE’s average share of the US ADHD market to September 30, 2009 increasing to 12% (2008: 7%). Product sales growth was driven by a 77% increase in US prescriptions of VYVANSE in the nine months to September 30, 2009 over the same period in 2008 and 9% growth in the US ADHD market. Sales growth was less than prescription growth due to the stocking benefits from new dosage strengths of VYVANSE in 2008.
ADDERALL XR – ADHD
Product sales of ADDERALL XR for the nine months to September 30, 2009 were $434.2 million, a decrease of 47% compared to the same period in 2008 (2008: $826.6 million), resulting from the launch by Teva in April 2009 of its authorized generic version of ADDERALL XR. The launch of the generic version has contributed to a 36% decline in ADDERALL XR US prescription demand and higher US sales deductions in the nine months to September 30, 2009 compared to 2008, together with significant de-stocking (equivalent to gross sales of $78 million) by wholesalers and retail pharmacies in the nine months to September 30, 2009.
Sales deductions expense represented 53% of branded ADDERALL XR gross sales in the nine months to September 30, 2009 (2008: 24%). The increase primarily resulted from higher sales deductions for Managed Care and Medicaid rebates subsequent to generic launch. These factors were partially offset by the positive impact of price increases taken since September 30, 2008, and the inclusion within product sales of shipments of authorized generic ADDERALL XR to Teva and Impax in the nine months to September 30, 2009.
As outlined in ITEM 1, Note 15, and the Critical Accounting Estimates section of this ITEM 2, there is considerable uncertainty as to how shipments of authorized generic ADDERALL XR to Teva and Impax should be included in the Medicaid rebate calculation pursuant to the DRA, and as a result a range of reasonably possible rebate amounts are calculable under the Medicaid rebate legislation. For the nine months to September 30, 2009 the Company’s management has recorded an accrual based on its current best estimate of the rebate payable. That current best estimate is the amount that could be paid by the Company were the CMS to employ an alternative interpretation of the DRA (notwithstanding the fact that, following payment, either the Company or CMS would have the right to challenge the amount paid, and that the result of any such challenge could affect whether or not the estimated accrued rebate amount ultimately reflects the Company’s actual obligation). In future periods the Company’s management may need to revise its current best estimate of the amount of Medicaid rebate that could be paid by the Company, which could significantly increase or decrease the sales of ADDERALL XR recorded in the period of any such change of estimate.
Product sales of DAYTRANA for the nine months to September 30, 2009 decreased by 14% to $52.2 million (2008: $61.0 million). US prescription demand reduced by 13% in 2009 compared to the same period in 2008 resulting in a reduction in DAYTRANA’s average share of the US ADHD market in the nine months to September 30, 2009 to 1% (2008: 2%).
EQUASYM – ADHD
Following the acquisition of EQUASYM from UCB on March 31, 2009, the Company has recorded product sales of EQUASYM for the nine months to September 30, 2009 of $14.1 million (2008: $nil).
LIALDA/MEZAVANT – Ulcerative colitis
Product sales of LIALDA/MEZAVANT for the nine months to September 30, 2009 increased by 70% to $169.4 million (2008: $99.6 million), with LIALDA’s average share of the oral mesalamine market increasing to 16% (2008: 11%). Product sales growth was driven by a by 50% increase in US prescription demand due to underlying growth in the US oral mesalamine market of 3% and the benefit of price increase taken since September 30, 2008.
As of September 30, 2009 MEZAVANT was available in eight countries outside the US, and further launches are planned in other countries throughout 2009 and 2010, subject to the successful conclusion of pricing and reimbursement negotiations.
PENTASA – Ulcerative colitis
Product sales of PENTASA for the nine months to September 30, 2009 were $156.5 million, an increase of 13% compared to the same period in 2008 (2008: $138.2 million), with a PENTASA’s average share of the US oral mesalamine market falling by 1% to 16% (2008: 17%). Sales grew despite a 2% decrease in prescriptions primarily due to the impact of price increases.
FOSRENOL – Hyperphosphatemia
Product sales of FOSRENOL for the nine months to September 30, 2009 were up 13% to $137.2 million (2008: $121.6 million). Expressed in transaction currencies, sales were up 25%. In markets outside the US FOSRENOL sales increased as the product entered new countries, and continued to grow in countries entered in the last two years. FOSRENOL’s average share of the US phosphate binder market appeared stable to 8% (2008: 8%) despite 3% decrease in prescriptions. US product sales grew 14% as price increases offset the prescription decline.
XAGRID – Thrombocythemia
Product sales for the nine months to September 30, 2009 were $62.3 million, an increase of 6% compared to the same period in 2008 (2008: $58.7 million). Expressed in transaction currencies (XAGRID is primarily sold in Euros and Pounds Sterling) sales increased by 20%.
Human Genetic Therapies
ELAPRASE – Hunter syndrome
Product sales for the nine months to September 30, 2009 were $258.9 million, an increase of 12% compared to the same period in 2008 (2008: $230.5 million). Expressed in transaction currencies sales increased by 21% (ELAPRASE is primarily sold in US dollars and Euros). The sales growth was driven by increased volumes across all regions where ELAPRASE is sold.
REPLAGAL – Fabry disease
Product sales for the nine months to September 30, 2009 were $132.9 million, an increase of 1% compared to the same period in 2008 (2008: $131.8 million). Expressed in transaction currencies sales increased by 12% (REPLAGAL is primarily sold in Euros and Pounds Sterling). The sales growth was primarily driven by increased volumes in Europe and Asia Pacific.
FIRAZYR – HAE
Product sales for the nine months to September 30, 2009 were $3.8 million (2008: $0.2 million). With a third quarter launch in Italy, FIRAZYR is now launched in the five largest European countries. FIRAZYR is the first new product for HAE in Europe in 30 years and has orphan exclusivity in the EU until 2018.
Foreign exchange effect
As many of the Company’s sales revenues are earned in currencies other than US dollars (primarily Euros and Pounds Sterling), revenue growth reported in US dollars includes the impact of translating the sales made in a local currency, into US dollars. The table below shows the effect of foreign exchange translations on the revenue growth of the key affected products as well as the underlying performance of key products in their local currency:
| | | | | | | | | | | | | |
| | | $'M | | | local currency | | | dollars | | | US dollars | |
| FOSRENOL | | | | | | | | | | | | |
| - sales in Euros | | | 44.7 | | | | +30% | | | | +17% | | | | -13% | |
| - sales in Pounds Sterling | | | 11.4 | | | | +0% | | | | -21% | | | | -21% | |
| | | | | | | | | | | | | | | | | |
| XAGRID | | | | | | | | | | | | | | | | |
| - sales in Euros | | | 48.0 | | | | +41% | | | | +26% | | | | -15% | |
| - sales in Pounds Sterling | | | 13.1 | | | | -20% | | | | -37% | | | | -17% | |
| | | | | | | | | | | | | | | | | |
| REPLAGAL | | | | | | | | | | | | | | | | |
| - sales in Euros | | | 80.6 | | | | +16% | | | | +4% | | | | -12% | |
| - sales in Pounds Sterling | | | 14.6 | | | | -5% | | | | -24% | | | | -19% | |
| | | | | | | | | | | | | | | | | |
| ELAPRASE | | | | | | | | | | | | | | | | |
| - sales in Euros | | | 111.6 | | | | +18% | | | | +6% | | | | -12% | |
| - sales in Pounds Sterling | | | 18.8 | | | | +9% | | | | -14% | | | | -23% | |
| | | | | | | | | | | | | | | | | |
| CALCICHEW sales in Pounds Sterling | | | 29.7 | | | | +1% | | | | -20% | | | | -21% | |
| | | | | | | | | | | | | | | | | |
| REMINYL and REMINYL XL sales in Pounds Sterling | | | 27.2 | | | | +37% | | | | +10% | | | | -27% | |
Royalties
Royalty revenue decreased by 7% to $177.8 million for the nine months to September 30, 2009 (2008: $190.7 million). The following table provides an analysis of Shire’s royalty income:
| | | 9 months to | | | 9 months to | | | | |
| | | September 30, | | | September 30, | | | | |
| | | 2009 | | | 2008 | | | Change | |
| | | $'M | | | $'M | | | % | |
| 3TC and ZEFFIX | | | 120.3 | | | | 138.6 | | | | -13 | |
| ADDERALL XR | | | 15.8 | | | | - | | | | n/a | |
| Others | | | 41.7 | | | | 52.1 | | | | -20 | |
| Total | | | 177.8 | | | | 190.7 | | | | -7 | |
3TC (HIV infection and AIDS) and ZEFFIX (Chronic hepatitis B infection)
Royalties from sales of 3TC and ZEFFIX for the nine months to September 30, 2009 were $120.3 million, a decrease of 13% compared to the same period in 2008 (2008: $138.6 million). Shire receives royalties from GSK on worldwide 3TC and ZEFFIX sales, and GSK’s sales. Royalties declined by 13% compared to the same period in 2008 mainly due to competition from other HIV and hepatitis B treatments.
ADDERALL XR – ADHD
Royalties from Teva’s sales of authorized generic ADDERALL XR for the nine months to September 30, 2009 were $15.8 million (2008: $nil). Receipt of this royalty began with Teva’s sales of an authorized generic version of ADDERALL XR in April 2009, and ceased in September 2009. From the fourth quarter of 2009 Shire will receive royalties on Impax’s sales of its authorised generic version of ADDERALL XR.
Other
Other royalties includes royalties for REMINYL and REMINYL XL (known as RAZADYNE and RAZADYNE ER in the US), for the symptomatic treatment of mild to moderately severe dementia of the Alzheimer’s type. The range of REMINYL products is marketed worldwide (excluding the UK and the Republic of Ireland where Shire has exclusive marketing rights) by Janssen Pharmaceutical N.V., an affiliate of Johnson & Johnson. Sales of the REMINYL/RAZADYNE range continue to grow in most countries, however the entry of generic versions of RAZADYNE and RAZADYNE ER into the US market in the third quarter of 2008 has significantly decreased sales in that region. Information on the RAZADYNE and RAZADYNE ER patent litigation (which is ongoing) can be found in our Annual Report on Form 10-K for the year to December 31, 2008.
Cost of product sales
Cost of product sales decreased to $284.9 million for the nine months to September 30, 2009 (15% of product sales), down from $317.4 million in the corresponding period in 2008 (2008: 15% of product sales). Cost of product sales in 2008 included charges of $53.4 million (3% of product sales) related to the write down of inventory and other exit costs following the decision to cease the commercialization of DYNEPO. Excluding these charges, cost of product sales as a percentage of product sales increased by three percentage points in 2009 over 2008, principally due to changes in product mix following the launch of an authorized generic version of ADDERALL XR. Higher sales deductions on Shire’s sales of branded ADDERALL XR, together with lower margin sales of the authorized generic version of ADDERALL XR to Teva and Impax have both depressed gross margin for that product.
For the nine months to September 30, 2009 cost of product sales included depreciation of $16.9 million (2008: $8.8 million) and amortization of $1.3 million (2008: $1.3 million). Depreciation increased due to the inclusion in 2009 of $7.5 million of the accelerated depreciation on transfer of manufacturing from Owings Mills (2008: $nil).
R&D
R&D expenditure increased to $492.5 million for the nine months to September 30, 2009 (26% of product sales), up from $368.4 million in the corresponding period in 2008 (18% of product sales). R&D costs in the nine months to September 30, 2009 included a charge of $36.9 million (2% of product sales) related to the payment to amend an INTUNIV in-license agreement and $65.0 million (3% of product sales) following the agreement with Duramed to terminate development of the Women’s Health products. R&D in 2008 included $6.5 million of costs for exiting post-approval marketing commitments for DYNEPO. Excluding these charges, R&D increased by $28.7 million in 2009 over 2008 as an increase in investment in R&D programs (including the up-front payment to Santaris) has been partially offset by the benefits of foreign exchange rates in 2009 over 2008, and the cessation of certain non-core programs during 2008. For the nine months to September 30, 2009 R&D included depreciation of $11.3 million (2008: $9.4 million).
SG&A
SG&A expenses decreased to $973.8 million (51% of product sales) for the nine months to September 30, 2009 from $1,109.7 million (54% of product sales) in the corresponding period in 2008. SG&A in 2008 included impairment charges of $90.4 million in respect of the Company’s DYNEPO intangible asset and costs of $14.2 million in respect of the introduction of the new holding company. SG&A has further decreased in 2009 over 2008 as a result of the Company’s combined focus on cost management and favorable exchange rates in the first half of 2009. For the nine months to September 30, 2009 SG&A included depreciation of $49.2 million (2008: $33.9 million) and amortization of $101.7 million (2008: $91.6 million).
IPR&D charge
For the nine months to September 30, 2008 the Company recorded an in-process R&D charge of $255.5 million, relating to FIRAZYR in markets outside of the EU acquired through the Jerini acquisition ($120.5 million) and the acquisition of METAZYM from Zymenex A/S ($135.0 million).
Gain on sale of product rights
For the nine months to September 30, 2009 Shire recorded gains of $6.3 million (2008: $20.7 million) arising from the sale of non-core products to Almirall in 2007. These gains had been deferred since 2007 pending transfer of the relevant consents to the acquirer. In the nine months to September 30, 2008 Shire realized a gain of $20.7 million from the sale of non-core products.
Reorganization costs
For the nine months to September 30, 2009 Shire recorded reorganization costs of $7.1 million (2008: $nil) relating to costs associated with the transfer of manufacturing from its Owings Mills facility.
Integration and acquisition costs
For the nine months to September 30, 2009 Shire recorded integration and acquisition costs of $10.0 million (2008: $7.5 million) relating to the integration of Jerini and charges associated with the acquisition of EQUASYM. In the nine months to September 30, 2008 integration and acquisition costs represented acquisition related costs incurred by Jerini.
Interest income
For the nine months to September 30, 2009 Shire received interest income of $1.5 million (2008: $23.0 million), primarily earned on cash and cash equivalents. Interest income for the nine months to September 30, 2009 is lower than the same period in 2008 due to significantly lower interest rates in 2009 compared to 2008 and lower average cash and cash equivalent balances.
Interest expense
For the nine months to September 30, 2009 the Company incurred interest expense of $30.6 million (2008: $127.0 million). Interest expense in 2008 was higher than 2009 due to the accrued interest expense of $87.3 million recorded in respect of the TKT appraisal rights litigation: of the $87.3 million, $73.0 million was additional interest arising from the settlement of the litigation in November 2008.
Other income, net
For the nine months to September 30, 2009 the Company recognized Other income, net of $61.9 million (2008: Other expense, net of $38.6 million), which includes other-than-temporary impairment charges on available-for-sale securities of $0.8 million (2008: $54.1 million), gains of $55.2 million on disposal of Shire’s cost investment in Virochem (2008: $9.4 million on disposal of minority equity investment in Questor Pharmaceutical Inc) and a gain of $5.7 million (2008: $nil) following substantial modification of a property lease.
Taxation
For interim reporting purposes, the Company determine the best estimate of its annual effective tax rate and then applies that rate in providing for income taxes on a year-to-date basis. The Company has calculated an expected annual effective tax rate, excluding significant, unusual or extraordinary items, for ordinary income associated with operations for which the Company currently expects to have annual taxable income.
In the nine months to September 30, 2009 the effective tax rate was 15% (2008: 83%). The high effective rate of tax in the nine months to September 30, 2008 primarily arose due to the recognition of IPR&D charges in respect of FIRAZYR in non-EU markets and METAZYM acquired from Zymenex. Excluding these IPR&D charges, the effective rate of tax in 2008 was 19%.
The lower effective rate of tax in the nine months to September 30, 2009 has primarily resulted from the favorable rate impact of the recognition of tax attributes following State tax changes in Massachusetts in the second quarter of 2009. These State tax law changes enabled the Company to reverse valuation allowances in respect of State tax credits and loss carry-forwards. The effective rate of tax in 2009 also benefited from tax credits and the effect of the change in the effective State tax rate on the net State deferred tax balance. Additional benefits to the effective rate of tax in 2009 arose from expenses in relation to the termination of the Women’s Health development agreement and the amendment to an INTUNIV in-licence, both of which have been tax effected at rates in excess of the annual effective tax rate.
Equity in earnings of equity method investees
Earnings of equity method investees of $1.0 million were recorded for the nine months to September 30, 2009 (2008: $1.3 million). This comprised earnings of $2.5 million from the 50% share of the anti-viral commercialization partnership with GSK in Canada (2008: $4.4 million earnings) and losses of $1.5 million, being the Company’s share of losses in the GeneChem, AgeChem and EGS Funds (2008: $3.1 million loss).
Discontinued operations
Losses from discontinued operations for the nine months to September 30, 2009 were $12.4 million (2008: $0.9) related to net losses on discontinued Jerini businesses which were either divested or closed during the second quarter of 2009, the loss on disposal of JPT of $0.5 million, and the re-measurement adjustment of $5.9 million to record assets previously classified as held for sale at fair value less costs to sell.
Liquidity and capital resources
General
The Company’s funding requirements depend on a number of factors, including the timing and number of its development programs; corporate, business and product acquisitions; the level of resources required for the expansion of manufacturing and marketing capabilities as the product base expands; increases in accounts receivable and inventory which may arise with any increase in product sales; competitive and technological developments; the timing and cost of obtaining required regulatory approvals for new products; the timing and quantum of milestone payments on collaborative projects; the timing and quantum of tax and dividend payments; the timing and quantum of purchases by the Employee Share Ownership Trust (“ESOT”) of Shire shares in the market to satisfy option exercises; the timing and quantum of any amount that could be paid by the Company if CMS were to employ an alternative interpretation of the DRA in respect of ADDERALL XR Medicaid rebates; and the continuing cash generated from sales of Shire’s product royalty receipts.
An important part of Shire’s business strategy is to protect its products and technologies through the use of patents, proprietary technologies and trademarks, to the extent available. The Company intends to defend its intellectual property and as a result may need cash for funding the cost of litigation.
The Company finances its activities through cash generated from operating activities; credit facilities; private and public offerings of equity and debt securities; and the proceeds of asset or investment disposals.
Shire’s balance sheet includes $332.7 million of cash and cash equivalents at September 30, 2009. Shire has no debt maturing in the next two years and substantially all of Shire’s debt relates to its $1,100 million 2.75% convertible bond which matures in 2014, although these bonds include a put option which could require repayment of the bonds in 2012. In addition, Shire has a committed facility until 2012 of $1,200 million, which is currently undrawn. The current financial situation affecting the banking system and financial markets, together with the current uncertainty in global economic conditions, has resulted in tighter credit markets and a lower level of liquidity in many financial markets. As a result, the Company may not be able to access new equity or debt finance at the same level or cost as it has done previously.
Financing
Shire’s current financing arrangements comprise of $1,100 million in principal amount of 2.75% convertible bonds due 2014 and a $1,200 million revolving credit facility. Long term debt includes building finance obligations totaling $43.7 million for certain leased properties in the HGT business.
Shire anticipates that its operating cash flow together with available cash, cash equivalents and short-term investments and the above mentioned revolving credit facility will be sufficient to meet its anticipated future operating expenses, capital expenditures, interest payments and lease obligations as they become due over the next twelve months.
If the Company decides to acquire other businesses, it expects to fund these acquisitions from existing cash resources, the revolving credit facility discussed above and possibly through new borrowings and the issue of new equity if necessary.
Sources and uses of cash
The following table provides an analysis of the Company’s gross and net debt (excluding restricted cash), as at September 30, 2009 and December 31, 2008:
| | | September 30, | | | December 31, | |
| | | 2009 | | | 2008 | |
| | | | $’M | | | | $’M | |
| Cash and cash equivalents | | | 332.7 | | | | 218.2 | |
| Convertible debt | | | (1,100.0) | | | | (1,100.0) | |
| Building financing obligation | | | (46.5) | | | | (45.6) | |
| Total debt | | | (1,146.5) | | | | (1,145.6) | |
| Net debt | | | (813.8) | | | | (927.4) | |
Cash flow activity
Net cash provided by operating activities for the nine months to September 30, 2009 decreased by 26% to $390.0 million compared to $525.5 million for the nine months to September 30, 2008, a decrease of $135.5 million. Net cash provided by operating activities was lower in 2009 compared to 2008 as lower sales receipts and higher cash tax payments were only partially offset by lower upfront payments for in-licensed development projects and operating expenditure in 2009. Also, operating cash flow in 2008 benefited from cash inflows on forward exchange contracts in 2008 compared to cash outflows in 2009.
Net cash used in investing activities was $235.4 million in the nine months to September 30, 2009. This included the cash cost of purchasing EQUASYM of $72.8 million and expenditure on property, plant and equipment of $169.4 million. These cash outflows were partially offset by receipts of $19.2 million from the sale of non-current investments. Capital expenditure on property, plant and equipment included $127.0 million on construction work at the HGT campus in Lexington, Massachusetts, $18.4 million on construction work at the UK office in Basingstoke, Hampshire, and $19.9 million on infrastructure and capital management projects in the US.
Net cash used in investing activities was $630.1 million in the nine months to September 30, 2008. This included the cash cost of purchasing a majority voting interest in Jerini ($462.5 million, net of cash acquired), expenditure on purchases of property, plant and equipment of $166.5 million, the final sales milestone payment of $25.0 million for DAYTRANA to Noven and long-term investments of $1.3 million, which were partially offset by receipts of $10.3 million from the sale of long term assets and $5.0 million received from the sale of product rights. Capital expenditure on property, plant and equipment included $96.5 million on construction work at Shire’s office and manufacturing facilities in Lexington, Massachusetts and $4.7 million on construction work at the Basingstoke, UK Office.
Net cash used in financing activities was $45.1 million for the nine months to September 30, 2009 of which $43.0 million related to the dividend payment.
Net cash used in financing activities was $179.1 million for the nine months to September 30, 2008 of which $140.2 million related to payments to acquire shares by the ESOT and $36.4 million to the dividend payment.
Obligations and commitments
During the nine months to September 30, 2009 Shire entered into certain multi-year land and property leases at North Reading and Lexington, Massachusetts. Concurrent with entering into these leases, Shire extended the term of certain of its existing leased properties in Lexington, Massachusetts such that these leases became co-terminus with the expiry of new Lexington lease.
The contractual obligations for building financing obligations at September 30, 2009 are as follows:
| | | Payments due by period | |
| | | | | | Less than 1 | | | | | | | | | More than 5 | |
| | | Total | | | year | | | 1-3 years | | | 3-5years | | | years | |
| | | | $’M | | | | $’M | | | | $’M | | | | $’M | | | | $’M | |
| Building financing obligations | | | 131.1 | | | | 3.6 | | | | 9.4 | | | | 15.2 | | | | 102.9 | |
With the exception of the building financing obligation, there have been no material changes outside the ordinary course of the Company’s business to the contractual obligations previously disclosed in the Company’s Annual report on Form 10-K for the year ended December 31, 2008. See ITEM 1, Note 17 for further details of the Company’s contractual obligations.
Critical Accounting Estimates
The preparation of interim financial statements, in conformity with US GAAP and SEC regulations for interim reporting, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates and assumptions are primarily made in relation to the valuation of intangible assets, sales deductions, the valuation of equity investments, income taxes and provisions for litigation. Critical accounting estimates are discussed in Shire’s Annual Report on Form 10-K for the year to December 31, 2008. Material updates to those estimates discussed in Shire’s Annual Report on Form 10-K are discussed below.
Medicaid and Managed Care Rebates
Statutory rebates to state Medicaid agencies and contractual rebates to Managed Care Organizations (“MCO”) under managed care programs are based on statutory or negotiated discounts to the selling price. Medicaid rebates generally increase as a percentage of the selling price over the life of the product (if prices increase faster than inflation).
As it can take up to six months for information to reach the Company on actual usage of the Company’s products in managed care and Medicaid programs and on the total rebates to be reimbursed, the Company maintains reserves for amounts payable under these programs relating to sold products.
The amount of the reserve is based on historical experience of rebates, the timing of payments, the level of reimbursement claims, changes in prices (both normal selling prices and statutory or negotiated prices), changes in prescription demand patterns, projected product returns and the levels of inventory in the distribution channel. Adjustments are made for known changes in these factors, such as the effect of the launch of the authorized generic version of ADDERALL XR in April 2009.
Shire’s estimates of the level of inventory in the distribution channel are based on product-by-product inventory data provided by wholesalers; results of independently commissioned retail inventory surveys and third-party prescription data (such as IMS Health National Prescription Audit data).
Revisions or clarification of guidelines from CMS related to state Medicaid and other government program reimbursement practices with retroactive application can result in changes to management’s estimates of the rebates reported in prior periods.
The accrual estimation process for Medicaid and Managed Care rebates involves in each case a number of interrelating assumptions, which vary for each combination of product and Medicaid agency or MCO. Accordingly it would not be meaningful to quantify the sensitivity to change for any individual assumption or uncertainty. However, with the exception of rebates for ADDERALL XR (see below), Shire does not believe that the effect of these uncertainties, as a whole, significantly impacts the Company’s financial condition or results of operations.
The launch of authorized generic ADDERALL XR from April 2009 has introduced additional uncertainties into management’s estimates of Medicaid and Managed Care rebates for ADDERALL XR. Specifically, historical experience of ADDERALL XR is no longer a reliable indicator of both the level and mix of future sales, and particularly Medicaid and Managed Care usage rates for the product (key factors used in estimating rebate accruals), as it was before the launch of the authorized generic. As a result, the Company has also used historical experience of other products at a similar lifecycle stage¸ together with experience of actual Medicaid and Managed Care utilization after two quarter’s market share erosion following authorized generic launch, to estimate these key factors. In addition, because there is uncertainty as to how shipments of authorized generic ADDERALL XR by the Company should be included in the Medicaid rebate calculation pursuant to the DRA, there is a range of reasonably possible rebate levels calculable under the Medicaid rebate legislation.
Shire considers that the three significant assumptions affecting its estimate of the Medicaid and Managed Care rebate liability for ADDERALL XR at September 30, 2009 are: the expected Medicaid and Managed Care utilization for the product; the level of inventory in the distribution channel at September 30, 2009; and the determination of the amount of rebate that could be paid under Medicaid, and specifically the way in which sales of authorized generic ADDERALL XR by the Company are included in the Medicaid unit rebate calculation. Shire has recorded its accrual based on its current best estimate within the range of reasonably possible outcomes for Medicaid and MCO usage of ADDERALL XR; the level of inventory estimated to be in the wholesaler and retail pipeline at September 30, 2009; and the amount of rebate payable. The current best estimate of the Medicaid rebate is the amount that could be paid by the Company were CMS to employ an alternative interpretation of the DRA (notwithstanding the fact that, following payment, either the Company or the CMS would have the right to challenge the amount paid, and that the result of any such challenge could affect whether or not the estimated accrued rebate amounts ultimately reflect the Company’s actual obligation).
Reasonably possible changes to these assumptions taken in combination, but particularly the amount of Medicaid rebate payable, could significantly increase or decrease reported ADDERALL XR product sales, and as a result the Company’s results of operations and financial condition, in future periods (not withstanding the fact that, following payment, either the Company or CMS would have the right to challenge the amount paid and that the result of any such challenge would affect whether or not the estimated accrued rebate amounts ultimately reflects the Company’s actual obligation). The Company estimates that the aggregate approximate range of reasonably possible Medicaid and MCO rebate liability, (i.e., a range based on the upper and lower estimate for each significant assumption which the Company considers has more than a remote chance of occurrence), for ADDERALL XR at September 30, 2009 is between $200-435 million, and the Company had recorded a liability of $302.5 million.
At the balance sheet date, aggregate accruals for Medicaid and MCO rebates were $428.6 million. These accruals at December 31, 2008, 2007 and 2006 were $222.5 million, $146.6 million and $126.4 million, or 8%, 7%, and 8%, respectively, of net product sales. Historically, with the exception of ADDERALL XR noted above, actual rebates have not varied significantly from the reserves provided.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 1, Note 20 of this Form 10-Q and ITEM 7A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 contains a discussion of the Company’s exposure to market and other risks. The Company’s assets which are principally exposed to market and credit risk consist of cash, accounts receivable and investments in public quoted companies and equity method investments and these have increased by $114.5 million, $144.2 million and $67.7 million respectively in the nine months to September 30, 2009.
The global financial crisis has increased the Company’s credit risk exposure. The Company continues to operate its financial management in accordance with the policies set out in ITEM 7A of the Company’s Form 10-K for the year ended December 31, 2008. There has been no significant deterioration in the value of assets held by the Company as a result of credit risk and the Company has not suffered any material losses as a result of the global financial crisis.
As at September 30, 2009 the Company, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, had performed an evaluation of the effectiveness of the Company’s disclosure controls and procedures, including those with respect to the Income Access Share (“IAS”) Trust. The Company’s management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which by their nature can provide only reasonable assurance regarding management’s control objectives. Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures, including those with respect to the IAS Trust, are effective at the reasonable level of assurance for gathering, analyzing and disclosing the information the Company is required to disclose in the reports it files under the Securities Exchange Act of 1934, within the time periods specified in the SEC’s rules and forms.
There has been no change in the Company’s internal control over financial reporting that occurred during the period covered by this quarterly report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II. OTHER INFORMATION
The information required by this Item is incorporated herein by reference to Note 19(vii), “Commitments and Contingencies, Legal proceedings” in our notes to the condensed consolidated financial statements listed under ITEM 1 of Part I of this Quarterly Report on Form 10-Q.
There have been no material changes from the risk factors set forth in the Company’s Form 10-K for the year ended December 31, 2008.
None.
None.
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
Exhibits
| 2.01 | Agreement and Plan of Merger by and among Shire Pharmaceuticals Group plc, Transkaryotic Therapies, Inc. and Sparta Acquisition Corporation, dated as of April 21, 2005.(1) |
| 2.02 | Agreement of Merger dated as of February 20, 2007 among Shire plc, Shuttle Corporation and New River Pharmaceuticals, Inc.(2) |
| 2.03 | Business Combination Agreement dated as of July 3, 2008 between Maia Elfte Vermögensverwaltungs GmbH and Jerini AG. (3) |
| 3.01 | Form of Amended Memorandum and Articles of Association of Shire plc as adopted by special resolution passed on April 10, 2008 and amended by special resolution on September 24, 2008.(4) |
| 4.01 | Form of Assignment and Novation Agreement between Shire Limited, Shire plc, JPMorgan Chase Bank, N.A. dated April 16, 2008 relating to the Deposit Agreement among Shire plc, JPMorgan Chase Bank, N.A. as depositary and all holders from time to time of ADRs issued thereunder dated November 21, 2005.(5) |
| 4.02 | Form of Deposit Agreement among Shire plc, JPMorgan Chase Bank, N.A. as depositary and all holders from time to time of ADRs issued thereunder dated November 21, 2005. (6) |
| 4.03 | Form of Ordinary Share Certificate of Shire Limited. (7) |
| 4.04 | Form of American Depositary Receipt Certificate of Shire Limited. (8) |
| 4.05 | Trust Deed for the New Shire Income Access Trust, dated August 29, 2008. (9) |
| 10.01 | Tender and Support Agreement dated as of February 20, 2007 among Shire plc, Mr. Randal J. Kirk and the other parties named therein. (10) |
| 10.02 | Multicurrency Term and Revolving Facilities Agreement as of February 20, 2007 by and among Shire plc, ABN AMRO Bank N.V., Barclays Capital, Citigroup Global Markets Limited, The Royal Bank of Scotland plc, and Barclays Bank plc. (11) |
| 10.03 | Accession and Amendment Deed dated April 15, 2008 between Shire Limited, Shire plc, certain subsidiaries of Shire plc and Barclays Bank PLC as Facility Agent relating to a US $1,200,000,000 facility agreement dated February 20, 2007 (as amended by a syndication and amendment agreement dated July 19, 2007). (12) |
| 10.04 | Subscription Agreement dated May 2, 2007 relating to the 2.75% Convertible Bonds due 2014 between Shire plc and ABN AMRO Bank N.V. and NM Rothschild & Sons Limited (trading together as ABN AMRO Rothschild, an unincorporated equity capital markets joint venture) and Barclays Bank PLC and Citigroup Global Markets Limited and Goldman Sachs International and Morgan Stanley & Co. International plc and others. (13) |
| 10.05 | Amending Subscription Agreement dated May 8, 2007 relating to the 2.75% Convertible Bonds due 2014 between Shire plc and ABN AMRO Bank N.V. and NM Rothschild & Sons Limited (trading together as ABN AMRO Rothschild, an unincorporated equity capital markets joint venture) and Barclays Bank PLC and Citigroup Global Markets Limited and Goldman Sachs International and Morgan Stanley & Co. International plc and others. (14) |
| 10.06 | Trust Deed dated May 9, 2007 relating to the 2.75% Convertible Bonds due 2014 between Shire plc and BNY Corporate Trustee Services Limited. (15) |
| 10.07 | Supplemental Trust Deed dated April 15, 2008 between Shire Limited, Shire plc and BNY Corporate Trustee Services Limited relating to a trust deed dated May 9, 2007 relating to US $1,100,000,000 2.75% Convertible Bonds due 2014. (16) |
| 10.08 | Accession and Amendment Agreement dated April 15, 2008 between Shire Limited, Shire plc, BNY Corporate Trustee Services Limited and The Bank of New York relating to a paying and conversion agency agreement dated May 9, 2007 relating to US $1,100,000,000 2.75% Convertible Bonds due 2014. (17) |
| 10.09* | Revised and Restated Master License Agreement dated November 20, 1995 among Shire BioChem Inc (f/k/a BioChem Pharma Inc.), Glaxo Group Limited, Glaxo Wellcome Inc. (formerly Glaxo Canada Inc.), Glaxo Wellcome Inc. (formerly Glaxo Inc.), Tanaud Holdings (Barbados) Limited, Tanaud International B.V. and Tanaud LLC. (18) |
| 10.10* | Settlement Agreement, dated August 14, 2006 by and between Shire Laboratories Inc. and Barr Laboratories, Inc. (19) |
| 10.11* | Product Development and License Agreement, dated August 14, 2006 by and between Shire LLC and Duramed Pharmaceuticals, Inc. (20) |
| 10.12* | Product Acquisition and License Agreement, dated August 14, 2006 by and among Shire LLC, Shire plc and Duramed Pharmaceuticals, Inc. (21) |
| 10.13 | Service Agreement between Shire plc and Mr Angus Russell, dated March 10, 2004. (22) |
| 10.14 | Novation Agreement dated November 21, 2005 relating to the Employment Agreement of Angus Russell dated March 10, 2004. (23) |
| 10.15 | Novation Agreement dated April 11, 2008 relating to the Employment Agreement of Angus Russell dated March 10, 2004, as previously novated on November 21, 2005. (24) |
| 10.16 | Form of Amended and Restated Employment Agreement between Shire plc and Mr Matthew Emmens, dated March 12, 2004. (25) |
| 10.17 | Amendment Agreement dated November 21, 2005 relating to the Amended and Restated Employment Agreement of Matthew Emmens dated March 12, 2004. (26) |
| 10.18 | Ratification and Guaranty dated November 21, 2005 relating to the Amended and Restated Employment Agreement of Matthew Emmens dated March 12, 2004. (27) |
| 10.19 | Amendment Agreement dated May 20, 2008 relating to the Amended and Restated Employment Agreement of Matthew Emmens dated March 12, 2004, as amended on November 21, 2005. (28) |
| 10.20 | Ratification and Guaranty dated May 20, 2008 relating to the Amended and Restated Employment Agreement of Matthew Emmens dated March 12, 2004. (29) |
| 10.21 | Form of Indemnity Agreement for Directors of Shire Limited. (30) |
| 10.22 | Service Agreement between Shire Limited and Mr Angus Russell, dated July 2, 2008. (31) |
| 10.23 | Service Agreement between Shire Limited and Mr Graham Hetherington, dated July 2, 2008. (32) |
| 10.24 | Form of Settlement Agreement and Mutual Release in re: Transkaryotic Therapies, Inc., by and between Shire Human Genetic Therapies, Inc., Shire plc and the parties set forth therein. (33) |
| 10.25 | Amended Agreement dated February 24, 2009 relating to the Product Development and License Agreement dated August 14, 2006. (34) |
| 21 | List of Subsidiaries. (35) |
| 31.1 | Certification of Angus Russell pursuant to Rule 13a – 14 under The Exchange Act. |
| 31.2 | Certification of Graham Hetherington pursuant to Rule 13a – 14 under The Exchange Act. |
| 32.1 | Certification of Angus Russell and Graham Hetherington pursuant to Section 906 of the Sarbanes – Oxley Act of 2002. |
| * Certain portions of this exhibit have been omitted intentionally, subject to a confidential treatment request. A complete version of this agreement has been filed separately with the Securities and Exchange Commission. |
| (1) | Incorporated by reference to Exhibit 99.02 to Shire’s Form 8-K filed on April 25, 2005. |
| (2) | Incorporated by reference to Exhibit 2.1 to Shire’s Form 8-K filed on February 23, 2007. |
| (3) | Incorporated by reference to Exhibit 2.1 to Shire’s Form 8-K filed on July 10, 2008. |
| (4) | Incorporated by reference to Exhibit 99.02 to Shire’s Form 8-K filed on October 1, 2008. |
| (5) | Incorporated by reference to Exhibit 4.01 to Shire’s Form 8-K filed on May 23, 2008. |
| (6) | Incorporated by reference to Exhibit 4.02 to Shire’s Form 8-K filed on May 23, 2008. |
| (7) | Incorporated by reference to Exhibit 4.03 to Shire’s Form 8-K filed on May 23, 2008. |
| (8) | Incorporated by reference to Exhibit 4.04 to Shire’s Form 8-K filed on May 23, 2008. |
| (9) | Incorporated by reference to Exhibit 4.05 to Shire’s Form 10-K filed on February 27, 2009. |
| (10) | Incorporated by reference to Exhibit 99.1 to Shire’s Form 8-K filed on February 23, 2007. |
| (11) | Incorporated by reference to Exhibit 10.2 to Shire’s Form 10-Q filed on May 1, 2007. |
| (12) | Incorporated by reference to Exhibit 10.01 to Shire’s Form 8-K filed on May 23, 2008. |
| (13) | Incorporated by reference to Exhibit 10.1 to Shire’s Form 10-Q filed on August 2, 2007. |
| (14) | Incorporated by reference to Exhibit 10.2 to Shire’s Form 10-Q filed on August 2, 2007. |
| (15) | Incorporated by reference to Exhibit 10.3 to Shire’s Form 10-Q filed on August 2, 2007. |
| (16) | Incorporated by reference to Exhibit 10.02 to Shire’s Form 8-K filed on May 23, 2008. |
| (17) | Incorporated by reference to Exhibit 10.03 to Shire’s Form 8-K filed on May 23, 2008. |
| (18) | Incorporated by reference to Exhibit 10.09 to Shire’s Form 10-K/A filed on May 30, 2008. |
| (19) | Incorporated by reference to Exhibit 10.1 to Shire’s Form 10-Q filed on November 7, 2006. |
| (20) | Incorporated by reference to Exhibit 10.2 to Shire’s Form 10-Q filed on November 7, 2006. |
| (21) | Incorporated by reference to Exhibit 10.3 to Shire’s Form 10-Q filed on November 7, 2006. |
| (22) | Incorporated by reference to Exhibit 10.11 to Shire’s Form 10-K filed on March 12, 2004. |
| (23) | Incorporated by reference to Exhibit 10.03 to Shire’s Form 8-K filed on November 25, 2005. |
| (24) | Incorporated by reference to Exhibit 10.06 to Shire’s Form 8-K filed on May 23, 2008. |
| (25) | Incorporated by reference to Exhibit 10.13 to Shire’s Form 10-K filed on March 12, 2004. |
| (26) | Incorporated by reference to Exhibit 10.01 to Shire’s Form 8-K filed on November 25, 2005. |
| (27) | Incorporated by reference to Exhibit 10.02 to Shire’s Form 8-K filed on November 25, 2005. |
| (28) | Incorporated by reference to Exhibit 10.04 to Shire’s Form 8-K filed on May 23, 2008. |
| (29) | Incorporated by reference to Exhibit 10.05 to Shire’s Form 8-K filed on May 23, 2008. |
| (30) | Incorporated by reference to Exhibit 10.07 to Shire’s Form 8-K filed on May 23, 2008. |
| (31) | Incorporated by reference to Exhibit 10.22 to Shire’s Form 10-Q filed on November 10, 2008. |
| (32) | Incorporated by reference to Exhibit 10.23 to Shire’s Form 10-Q filed on November 10, 2008. |
| (33) | Incorporated by reference to Exhibit 10.24 to Shire’s Form 10-Q filed on November 10, 2008. |
| (34) | Incorporated by reference to Exhibit 10.25 to Shire’s Form 10-Q filed on May 7, 2009. |
| (35) | Incorporated by reference to Exhibit 21 to Shire’s Form 10-K filed on February 27, 2009. |
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SHIRE PLC
(Registrant)
| Date: | /s/ Angus Russell | |
| November 6, 2009 | By: | Angus Russell | |
| | | Chief Executive Officer | |
| | | | |
| | | | |
| Date: | /s/ Graham Hetherington | |
| November 6, 2009 | By: | Graham Hetherington | |
| | | Chief Financial Officer | |
