Document And Entity Information
Document And Entity Information (USD $) | |||
In Millions, except Share data | 9 Months Ended
Sep. 30, 2009 | Oct. 30, 2009
| Jun. 30, 2008
|
Document Information | |||
Document Type | 10-Q | ||
Document Period End Date | 2009-09-30 | ||
Amendment Flag | false | ||
Entity Information | |||
Entity Registrant Name | Shire plc | ||
Entity Central Index Key | 0000936402 | ||
Entity Current Reporting Status | Yes | ||
Entity Voluntary Filers | No | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Common Stock, Shares Outstanding | 561,053,621 | ||
Entity Public Float | $9,173 |
Unaudited Consolidated Balance
Unaudited Consolidated Balance Sheets (USD $) | ||
In Millions | Sep. 30, 2009
| Dec. 31, 2008
|
Current assets: | ||
Cash and cash equivalents | 332.7 | 218.2 |
Restricted cash | 39.3 | 29.2 |
Accounts receivable, net | 539.2 | 395 |
Inventories | 173.3 | 154.5 |
Assets held for sale | 1.7 | 16.6 |
Deferred tax asset | 99.8 | 89.5 |
Prepaid expenses and other current assets | 149.2 | 141.4 |
Total current assets | 1335.2 | 1044.4 |
Non-current assets: | ||
Investments | 95.2 | 42.9 |
Property, plant and equipment, net | 630 | 534.2 |
Goodwill | 385.9 | 350.8 |
Other intangible assets, net | 1832.9 | 1824.9 |
Deferred tax asset | 136.7 | 118.1 |
Other non-current assets | 11.6 | 18.4 |
Total assets | 4427.5 | 3933.7 |
Current liabilities: | ||
Accounts payable and accrued expenses | 938.9 | 708.6 |
Deferred tax liability | 10.9 | 10.9 |
Other current liabilities | 124.6 | 104.3 |
Total current liabilities | 1074.4 | 823.8 |
Non-current liabilities | ||
Convertible bonds | 1,100 | 1,100 |
Other long-term debt | 43.7 | 43.1 |
Deferred tax liability | 315.5 | 377 |
Other non-current liabilities | 219.5 | 291.3 |
Total liabilities | 2753.1 | 2635.2 |
Shareholders' equity: | ||
Common stock of 5p par value; 1,000 million shares authorized; and 561.0 million shares issued and outstanding (2008: 1,000 million shares authorized; and 560.2 million shares issued and outstanding) | 55.6 | 55.5 |
Additional paid-in capital | 2,645 | 2594.6 |
Treasury stock: 19.2 million shares (2008 : 20.7 million shares) | -375.5 | -397.2 |
Accumulated other comprehensive income | 146.6 | 97 |
Accumulated deficit | -797.7 | -1051.7 |
Total Shire plc shareholders' equity | 1,674 | 1298.2 |
Noncontrolling interest in subsidiaries | 0.4 | 0.3 |
Total equity | 1674.4 | 1298.5 |
Total liabilities and equity | 4427.5 | 3933.7 |
1_Unaudited Consolidated Balanc
Unaudited Consolidated Balance Sheets (Parentheticals) (USD $) | ||
Share data in Millions | Sep. 30, 2009
| Dec. 31, 2008
|
CONSOLIDATED BALANCE SHEETS (Paranthetical) | ||
Common stock, shares authorized | 1,000 | 1,000 |
Common stock, shares issued | 561 | 560.2 |
Common stock, shares outstanding | 561 | 560.2 |
Treasury stock, shares | 19.2 | 20.7 |
2_Unaudited Consolidated Balanc
Unaudited Consolidated Balance Sheets (Parentheticals in GBP) (Common shares par value, GBP £) | ||
Sep. 30, 2009
| Dec. 31, 2008
| |
Common share par value in GBP | ||
Common stock, par value | 0.05 | 0.05 |
Unaudited Consolidated Statemen
Unaudited Consolidated Statements of Income (USD $) | |||||||||||||||||||
In Millions, except Per Share data | 3 Months Ended
Sep. 30, 2009 | 3 Months Ended
Sep. 30, 2008 | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 | |||||||||||||||
Revenues: | |||||||||||||||||||
Product sales | 602.5 | 712.5 | 1916.8 | 2049.9 | |||||||||||||||
Royalties | 60.3 | 60.8 | 177.8 | 190.7 | |||||||||||||||
Other revenues | 4.2 | 5.3 | 19.8 | 15.8 | |||||||||||||||
Total revenues | 667 | 778.6 | 2114.4 | 2256.4 | |||||||||||||||
Costs and expenses: | |||||||||||||||||||
Cost of product sales | 104.9 | [1] | 84.2 | [1] | 284.9 | [1] | 317.4 | [1] | |||||||||||
Research and development | 147.8 | 120.2 | [2] | 492.5 | 368.4 | [2] | |||||||||||||
Selling, general and administrative | 320.6 | [1] | 327.3 | [1],[2] | 973.8 | [1] | 1109.7 | [1],[2] | |||||||||||
In-process R&D charge | 0 | 120.5 | 0 | 255.5 | |||||||||||||||
Gain on sale of product rights | -6.3 | (4) | -6.3 | -20.7 | |||||||||||||||
Reorganization costs | 2 | 0 | 7.1 | 0 | |||||||||||||||
Integration and acquisition costs | 6.2 | 7.5 | 10 | 7.5 | |||||||||||||||
Total operating expenses | 575.2 | 655.7 | 1,762 | 2037.8 | |||||||||||||||
Operating income | 91.8 | 122.9 | 352.4 | 218.6 | |||||||||||||||
Interest income | 0.2 | 3.8 | 1.5 | 23 | |||||||||||||||
Interest expense | -9.4 | -92.9 | -30.6 | (127) | |||||||||||||||
Other income/(expenses), net | 7 | (52) | 61.9 | -38.6 | |||||||||||||||
Total other (expenses)/income, net | -2.2 | -141.1 | 32.8 | -142.6 | |||||||||||||||
Income/(loss) from continuing operations before income taxes and equity in earnings of equity method investees | 89.6 | -18.2 | 385.2 | 76 | |||||||||||||||
Income taxes | -30.6 | -18.7 | -56.7 | (63) | |||||||||||||||
Equity in earnings of equity method investees, net of taxes | 0.6 | 1.6 | 1 | 1.3 | |||||||||||||||
Income/(loss) from continuing operations, net of tax | 59.6 | -35.3 | 329.5 | 14.3 | |||||||||||||||
Loss from discontinued operations | 0 | -0.9 | -12.4 | -0.9 | |||||||||||||||
Net income/(loss) | 59.6 | -36.2 | 317.1 | 13.4 | |||||||||||||||
Add: Net loss attributable to the noncontrolling interest in subsidiaries | 0 | 1.3 | 0.2 | 1.3 | |||||||||||||||
Net Income/(Loss) Attributable to Shire plc | 59.6 | -34.9 | 317.3 | 14.7 | |||||||||||||||
Earnings/(loss) per ordinary share - basic | |||||||||||||||||||
Earnings/(loss) from continuing operations attributable to Shire plc shareholders | 0.11 | -0.063 | 0.611 | 0.029 | |||||||||||||||
Loss from discontinued operations attributable to Shire plc shareholders | $0 | -0.002 | -0.023 | -0.002 | |||||||||||||||
Earnings/(loss) per ordinary share attributable to Shire plc shareholders - basic | 0.11 | -0.065 | 0.588 | 0.027 | |||||||||||||||
Earnings/(loss) per ordinary share - diluted | |||||||||||||||||||
Earnings/(loss) from continuing operations attributable to Shire plc shareholders | 0.109 | -0.063 | 0.603 | 0.029 | |||||||||||||||
Loss from discontinued operations attributable to Shire plc shareholders | $0 | -0.002 | -0.023 | -0.002 | |||||||||||||||
Earnings/(loss) per ordinary share attributable to Shire plc shareholders - diluted | 0.109 | -0.065 | 0.58 | 0.027 | |||||||||||||||
Weighted average number of shares (millions): | |||||||||||||||||||
Basic | 540.6 | 540.3 | 540 | 542.6 | |||||||||||||||
Diluted | 548.3 | 540.3 | 547.1 | 545.3 | |||||||||||||||
Amounts attributable to Shire plc shareholders | |||||||||||||||||||
Income/(loss) from continuing operations, net of taxes | 59.6 | (34) | 329.7 | 15.6 | |||||||||||||||
Loss from discontinued operations, net of taxes | 0 | -0.9 | -12.4 | -0.9 | |||||||||||||||
Net Income/(Loss) Attributable to Shire plc | 59.6 | -34.9 | 317.3 | 14.7 | |||||||||||||||
[1]Cost of product sales includes amortization of intangible assets relating to favorable manufacturing contracts of $0.4 million for the three months to September 30, 2009 (2008: $0.4 million) and $1.3 million for the nine months to September 30, 2009 (2008: $1.3 million). Selling, general and administrative costs include amortization and impairment charges of intangible assets relating to intellectual property rights acquired of $34.8 million for the three months to September 30, 2009 (2008: $29.7 million) and $101.6 million for the nine months to September 30, 2009 (2008: $181.9 million). | |||||||||||||||||||
[2]Costs of $6.9 million and $26.0 million, predominantly relating to certain Medical affairs costs related to promotional and marketing activities, have been reclassified from Research and development costs to Selling, general and administrative costs for the three and nine months to September 30, 2008 respectively. |
3_Unaudited Consolidated Statem
Unaudited Consolidated Statements of Income (Parentheticals) (USD $) | ||||
In Millions | 3 Months Ended
Sep. 30, 2009 | 3 Months Ended
Sep. 30, 2008 | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 |
CONSOLIDATED STATEMENTS OF INCOME (Paranthetical) | ||||
Tax effect of Discontinued Operation | $0 | $0 | $0 | $0 |
4_Unaudited Consolidated Statem
Unaudited Consolidated Statement of Changes in Shareholders' Equity (USD $) | |||||||||||||||||||
In Millions | Common stock
| Common stock units
| Additional paid-in capital
| Treasury stock
| Accumulated other comprehensive income
| Accumulated deficit
| Non-controlling interest in subsidiaries
| Total
| |||||||||||
Total equity, Beginning Balance at Dec. 31, 2008 | 55.5 | 560.2 | 2594.6 | -397.2 | $97 | -1051.7 | 0.3 | 1298.5 | |||||||||||
Net income/(loss) for the period | 0 | 317.3 | -0.2 | 317.1 | |||||||||||||||
Foreign currency translation | 0 | 39.8 | 0 | 39.8 | |||||||||||||||
Options exercised | 0.1 | 0.3 | 0 | 0.4 | |||||||||||||||
Options exercised, shares | 0.8 | ||||||||||||||||||
Share-based compensation | 0 | 50.1 | 0 | 50.1 | |||||||||||||||
Shares purchased by the Employee Share Ownership Trust ("ESOT") | 0 | (1) | 0 | (1) | |||||||||||||||
Shares released by Employee Share Ownership Trust ("ESOT") to satisfy exercise of stock options | 0 | 22.7 | 0 | -20.3 | 0 | 2.4 | |||||||||||||
Unrealized holding (loss)/gain on available-for-sale securities | 0 | 9 | 0 | 9 | |||||||||||||||
Other than temporary impairment of available-for-sale securities | 0 | 0.8 | 0 | 0.8 | |||||||||||||||
Capital contribution attributable to noncontrolling interest in Jerini AG ("Jerini") | 0 | 0.3 | 0.3 | ||||||||||||||||
Dividends | 0 | (43) | [1] | 0 | (43) | ||||||||||||||
Total equity, Ending Balance at Sep. 30, 2009 | 55.6 | $561 | $2,645 | -375.5 | 146.6 | -797.7 | 0.4 | 1674.4 | |||||||||||
[1]Dividends per share During the nine months to September 30, 2009 Shire plc paid a dividend of 7.76 US cents per ordinary share (equivalent to 23.28 US cents per American Depositary Share) totaling $43.0 million |
5_Unaudited Consolidated Statem
Unaudited Consolidated Statements of Comprehensive Income (USD $) | ||||
In Millions | 3 Months Ended
Sep. 30, 2009 | 3 Months Ended
Sep. 30, 2008 | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 |
Comprehensive income/(loss) | ||||
Net income/(loss) for the period | 59.6 | -36.2 | 317.1 | 13.4 |
Other comprehensive income: | ||||
Foreign currency translation adjustments | 28.4 | 28.1 | 39.8 | 20.7 |
Unrealized holding (loss)/gain on available-for-sale securities | -2.3 | -10.8 | 9 | -39.5 |
Other than temporary impairment of available-for-sale securities | 0.8 | 54.1 | 0.8 | 54.1 |
Realized gain on available-for-sale securities | 0 | 0 | 0 | -5.4 |
Comprehensive income | 86.5 | 35.2 | 366.7 | 43.3 |
Add: Comprehensive loss attributable to the noncontrolling interest in subsidiaries | 0 | 1.3 | 0.2 | 1.3 |
Comprehensive income attributable to Shire plc | 86.5 | 36.5 | 366.9 | 44.6 |
Unaudited Components of Accumul
Unaudited Components of Accumulated Other Comprehensive Income (USD $) | ||
In Millions | Sep. 30, 2009
| Dec. 31, 2008
|
Components of accumulated other comprehensive income | ||
Foreign currency translation adjustments | 141.3 | 101.5 |
Unrealized holding gain/(loss) on available-for-sale securities, net of taxes | 5.3 | -4.5 |
Accumulated other comprehensive income | 146.6 | $97 |
6_Unaudited Consolidated Statem
Unaudited Consolidated Statements of Comprehensive Income (Parentheticals) (USD $) | ||||
In Millions | 3 Months Ended
Sep. 30, 2009 | 3 Months Ended
Sep. 30, 2008 | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (parentheticals) | ||||
Unrealized holding (loss)/gain on available-for-sale securities, taxes | $0 | $0 | $0 | $0 |
Other than temporary impairment of available-for-sale securities, taxes | 0 | 0 | 0 | 0 |
Realized gain on available-for-sale securities, taxes | $0 | $0 | $0 | $4 |
7_Unaudited Consolidated Statem
Unaudited Consolidated Statements of Cash Flows (USD $) | ||
In Millions | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net Income | 317.1 | 13.4 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Loss from discontinued operations | 12.4 | 0.9 |
Depreciation and amortization | 177.4 | 145.4 |
Share-based compensation | 50.1 | 52 |
In process R&D charge | 0 | 120.5 |
Impairment of intangible assets | 0 | 90.4 |
Impairment of available-for-sale securities | 0.8 | 54.1 |
Gain on sale of non-current investments | -55.2 | -9.4 |
Gain on sale of product rights | -6.3 | -20.7 |
Other | 10.7 | 6.4 |
Movement in deferred taxes | -87.5 | 13.9 |
Equity in earnings of equity method investees | (1) | -1.3 |
Change in operating assets and liabilities | ||
Increase in accounts receivable | -156.4 | -40.7 |
Increase in sales deduction accrual | 212.2 | 36.9 |
(Increase)/decrease in inventory | -24.2 | 39.6 |
Increase in prepayments and other current assets | -8.1 | -0.2 |
Decrease/(increase) in other assets | 5.3 | -53.5 |
(Decrease)/increase in accounts and notes payable and other liabilities | -56.3 | 70.7 |
Returns on investment from joint venture | 4.9 | 7.1 |
Cash flows used in discontinued operations | -5.9 | 0 |
Net cash provided by operating activities (A) | 390 | 525.5 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Movement in restricted cash | -10.1 | 7.7 |
Purchases of subsidiary undertakings and businesses, net of cash acquired | -75.5 | -462.5 |
Purchase of non-current investments | 0 | -1.3 |
Purchase of property, plant and equipment | -169.4 | -166.5 |
Purchase of intangible assets | (7) | (25) |
Proceeds from disposal of non-current investments | 19.2 | 10.3 |
Proceeds from disposal of property, plant and equipment | 0.5 | 1.8 |
Proceeds/deposits received from sale of product rights | 0 | 5 |
Proceeds received from disposal of subsidiary undertaking | 6.7 | 0 |
Returns of equity investments | 0.2 | 0.4 |
Net cash used in investing activities (B) | -235.4 | -630.1 |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Payment under building financing obligation | -3.9 | -1.3 |
Proceeds from exercise of options | 2.8 | 1.7 |
Costs from issue of common stock | 0 | -2.9 |
Payment of dividends | (43) | -36.4 |
Payments to acquire shares by ESOT | (1) | -140.2 |
Net cash used in financing activities (C) | -45.1 | -179.1 |
Effect of foreign exchange rate changes on cash and cash equivalents (D) | 5 | -5.5 |
Net increase/(decrease) in cash and cash equivalents (A+B+C+D) | 114.5 | -289.2 |
Cash and cash equivalents at beginning of period | 218.2 | 762.5 |
Cash and cash equivalents at end of period | 332.7 | 473.3 |
Supplemental information: | ||
Interest paid | -17.4 | -25.1 |
Income taxes paid | -205.2 | -106.2 |
Non cash activities: | ||
Equity in Vertex Pharmaceuticals, Inc. ("Vertex") received as consideration for disposal of non-current investment | 50.8 | 0 |
Building financing obligation | 7.1 | 0 |
Equity in Avexa Ltd received as proceeds from product out licensing | $0 | $5 |
Organisation Consolidation and
Organisation Consolidation and Presentation of Financial Statements Disclosure | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | |
Organization, Consolidation, and Presentation of Financial Statements Disclosure | 1.Summary of Significant Accounting Policies(a) Basis of PresentationThese interim financial statements of Shire plc and its subsidiaries (collectively Shire or the Company) and other financial information included in this Form 10-Q, are unaudited. They have been prepared in accordance with generally accepted accounting principles in the United States of America (US GAAP) and US Securities and Exchange Commission (SEC) regulations for interim reporting.The December 31, 2008 balance sheet was derived from audited financial statements but does not include all disclosures required by US GAAP. However, the Company believes that the disclosures are adequate to make the information presented not misleading.These interim financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Companys Annual Report on Form 10-K for the year to December 31, 2008.Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted from these interim financial statements. However, these interim financial statements include all adjustments, which are, in the opinion of management, necessary to fairly state the results of the interim period. Interim results are not necessarily indicative of results to be expected for the full year.(b) Use of estimates in interim financial statementsThe 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.(c) Accounting pronouncements adopted during the periodThe Financial Accounting Standards Board (FASB) Accounting Standards CodificationTM (the Codification)On July 1, 2009 the FASB established the Codification as the single source of authoritative US GAAP recognized by the FASB to be applied by nongovernmental entities. The Codification is effective prospectively from July 1, 2009 and has superseded all existing non-SEC accounting and reporting standards. From July 1, 2009 the FASB has issued new guidance in the form of Accounting Standards Updates (Updates). The Codification did not impact the Companys financial position or results of operations.Subsequent EventsOn April 1, 2009 the Company adopted new guidance issued by the FASB on subsequent events. This guidance establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Specifically, this guidance provides: the period after the balance sheet date during which management should evaluate events or transactions th |
Business combinations
Business combinations | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | |
Business combinations | 2.Business combinationsEQUASYM IR and XLOn March 31, 2009 the Company acquired the worldwide rights (excluding the US, Canada and Barbados) to EQUASYM IR and XL for the treatment of attention deficit and hyperactivity disorder (ADHD) from UCB Pharma Limited (UCB) for cash consideration of $72.8 million. Included within the recognized purchase price for the acquisition is further consideration of $18.2 million, which may become payable in 2009 and 2010 if certain sales targets are met. This acquisition has broadened the scope of Shires ADHD portfolio and facilitated immediate access to the European ADHD market as well as providing Shire the opportunity to enter additional markets around the world.The acquisition of EQUASYM IR and XL has been accounted for as a business combination. The purchase price has been allocated on a preliminary basis to the currently marketed products acquired ($73.0 million), IPRD ($5.5 million), other liabilities ($0.7 million) and goodwill ($13.2 million). The goodwill has been assigned to the Specialty Pharmaceuticals segment.Jerini acquisitionDuring the third quarter of 2008, the Company launched a voluntary public takeover offer for all outstanding shares in Jerini, a German corporation, at a price of 6.25 per share. By December 31, 2008 the Company had acquired rights to 98.6% of the voting interests in Jerini for a cash consideration of $556.5 million, by (i) subscribing for new Jerini shares; (ii) acquiring voting interests through the completion of sale and purchase agreements entered into with institutional shareholders and certain members of Jerinis Management and Supervisory Boards; and (iii) acquiring voting interests through market purchases. The acquisition added Jerinis hereditary angioedema (HAE) product FIRAZYR to Shires portfolio.During the nine months to September 30, 2009 through on-market purchases the Company acquired additional voting interests totaling 0.2% of Jerinis issued share capital, for a cash consideration including direct acquisition costs of $2.7 million. These additional voting interests have been accounted for as step-acquisitions using the purchase method of accounting. In respect of the step acquisitions made in 2009, the Company has recognized additional goodwill of $1.7 million, intangible assets in respect of the currently marketed product of $0.7 million, and IPRD of $0.3 million. By September 30, 2009 Shire had acquired rights to a 98.8% voting interest in Jerini for a total consideration of $559.2 million.Shire and Jerini continue to follow procedures under German law to effect the acquisition of the remaining shares. On April 24, 2009 Shire (through its wholly owned subsidiary, Shire Deutschland Investments GmbH) informed the Supervisory Board and Management Board of Jerini that it would offer 7.53 per share for the remaining shares. On June 16, 2009 the shareholders meeting of Jerini approved the transfer of all shares of the minority shareholders in Jerini to Shire Deutschland Investments GmbH against a cash compensation of 7.53 per share ('squeeze out' resolution). One shareholder has challenged the squeeze out resolution by filing a rescission proceeding in the Berl |
Termination costs
Termination costs | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | |
Termination costs | 3.Termination costsIn August 2006, Shire and Duramed Pharmaceuticals, Inc. (Duramed), a subsidiary of Teva Pharmaceutical Industries Ltd, entered into an agreement related to SEASONIQUE, a number of products using Durameds transvaginal ring technology and other oral products (the Collaboration Products). Under this agreement, Shire was required to reimburse Duramed for US development expenses incurred on Collaboration Products up to a maximum of $140 million over eight years from September 2006, and Shire had the right to commercialize these products in a number of markets outside of North America, including the larger European markets.On February 24, 2009 Shire and Duramed amended this agreement so that it will now terminate on December 31, 2009. Pursuant to this amendment, Shire agreed to return to Duramed its rights under the agreement effective February 24, 2009. Shire also agreed to reimburse Duramed for incurred US development expenditures in 2009 up to a maximum of $30.0 million. Shire has no rights with respect to the products on which such development expenditures are incurred. In addition, Shire agreed to a one-time payment to Duramed of $10.0 million, (which was paid during the first quarter of 2009), and to forego royalties receivable from Barr (a subsidiary of Teva Pharmaceutical Industries Ltd) and cost of goods otherwise payable by Barr to Shire in 2009 under the License Agreement between the parties for the supply of authorized generic ADDERALL XR, up to a maximum of $25.0 million. During the nine months to September 30, 2009 the Company recorded a charge of $65.0 million to research and development to reflect the cash payment made in the first quarter of 2009 and other termination related costs.A reconciliation of the contract termination liability is presented below: Nine months to September 30, 2009 Amount charged to RD Amount paid Utilization of reserve Closing liability $M $M $M $M ______________________ _________________ _____________________ _______________ Contract termination costs 65.0 (20.8) (25.0) 19.2 ______________________ _________________ _____________________ _______________ The charge of $65.0 million has been included within the Specialty Pharmaceuticals segment in the Companys segmental analysis, see Note 23. |
In-process R and D charge
In-process R and D charge | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | |
In-process R&D charge | 4.IPRD charge On June 4, 2008 Shire completed the acquisition of the global rights to METAZYM from Zymenex A/S (Zymenex) for $135.0 million in cash, and recognized an IPRD charge of $135.0 million during the second quarter of 2008 for the acquired development project. In the three months to September 30, 2008 the Company recognized an IPRD charge of $120.5 million for FIRAZYR in markets outside of the EU, which Shire acquired through the acquisition of Jerini, see Note 2. |
Gain on sale of product rights
Gain on sale of product rights | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | |
Gain on sale of product rights (Disclosure) | 5.Gain on sale of product rights Following receipt of the relevant regulatory or other consents in the three months and nine months to September 30, 2009 the Company recognized $6.3 million of gains deferred since the relevant non-core product was disposed of during the 2007 financial year, see Note 11.In the three months and nine months to September 30, 2008 the Company recognized $4.0 million and $15.7 million, respectively, of gains deferred since the disposal of the relevant non-core products during the 2007 financial year. In the nine months to September 30, 2008 the Company also received cash consideration of $5.0 million in respect of the divestment of the Beta range of hormone replacement products to Meda AB, realizing a gain of $5.0 million. |
Reorganization costs
Reorganization costs | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | |
Reorganisation costs | 6.Reorganization costsOwings MillsIn March 2009 the Companys management approved and initiated plans to phase out operations and close the Companys Specialty Pharmaceuticals manufacturing facility at Owings Mills, Maryland. Over the next three years, all products currently manufactured by Shire at this site will transition to DSM Pharmaceutical Products, and operations and employee numbers at the site will wind down over this period. During the three and nine months to September 30, 2009 the Company incurred reorganization costs of $2.0 million and $7.1 million respectively which relate to employee involuntary termination benefits, impairment charges for property, plant and equipment and other costs.As a result of the decision to transfer manufacturing from the Owings Mills site the company has revised the life of property, plant and equipment in the facility, and in the three and nine months to September 30, 2009 has incurred accelerated depreciation of $4.5 million and $7.5 million respectively, which has been charged to Cost of product sales. Consequently, the Company estimates an annual accelerated depreciation charge of $18.0 million and $3.5 million in 2010 and 2011 respectively. The reorganization costs and accelerated depreciation have been recorded within the Specialty Pharmaceuticals operating segment.Jerini non-core operationsIn the second quarter of 2009 as outlined in Note 2, the operations of JOI and certain other non-core pre-clinical operations acquired with Jerini were closed down. On closure of these operations the Company recorded a liability for costs associated with these closures of $9.1 million, relating to employee involuntary termination benefits and other closure costs. This liability has been recorded within accounts payable and accrued expenses with a corresponding increase to goodwill arising on the acquisition.The aggregate liability for reorganization costs arising on the Owing Mills and Jerini closures at September 30, 2009 is as follows: Assumed Amount liability through charged to re- business Closing organization combinations Paid liability at Nine months to September 30, 2009 $'M $'M $'M $'M ____________ ___________ ___________ ___________ Involuntary termination benefits 3.9 5.5 (5.7) 3.7 Contract termination costs - 3.6 (0.1) 3.5 Other termination costs 0.6 - (0.6) - ____________ ___________ ___________ ___________ 4.5 9.1 (6.4) 7.2 Impairment charges 2.6 ___________ ___________ ___________ ____________ Reorganization costs for the nine months to September 30, 2009 7.1 ____________ At September 30, 2009 the closing reorganization cost liability was recorded within Accounts payable and accrued expenses of $5.7 million and $1.5 million within Other non-current liabilities. |
Intergration and Acquisition co
Intergration and Acquisition costs | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | |
Intergration and Acquisition costs | 7.Integration and acquisition costsIntegration costs of $5.5 million (2008: $7.5 million) and $7.7 million (2008: $7.5 million), primarily relating to the integration of Jerini into Shire, were incurred in the three and nine months to September 30, 2009 respectively.Acquisition costs of $0.7 million (2008: $nil) and $2.3 million (2008: $nil), primarily relating to direct acquisition costs and changes in the fair value of contingent consideration recognized on the acquisition of EQUASYM, were incurred in the three and nine months to September 30, 2009 respectively. |
Other income
Other income (expenses), net | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | |
Other income/(expenses) net | 8.Other income/(expense), netOther income, net of $7.0 million (2008: Other expenses, net of $52.0 million) and $61.9 million (2008: Other expenses, net of $38.6 million) was recognized in the three and nine months to September 30, 2009 respectively.Other income, net in the three months to September 30, 2009 principally related to a gain of $5.7 million on substantial modification of the building finance obligation for leased properties (see Note 17). In the nine months to September 30, 2009 the Company also recorded a gain of $55.2 million arising on the disposal of its cost investment in Virochem Pharma Inc (Virochem) (see Note 13).In the three months to September 30, 2008 the company recorded an other-than-temporary impairment charge of $54.1 million in respect of its available-for-sale securities, of which $43.7 million related to the Companys investment in Renovo Group plc. In the nine months to September 30, 2008 the Company also recorded a gain of $9.4 million from the sale of its available-for-sale investment in Questor Pharmaceuticals, Inc. |
Accounts receivable, net
Accounts receivable, net | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | |
Accounts receivable, net | 9.Accounts receivable, net Accounts receivable at September 30, 2009 of $539.2 million (December 31, 2008: $395.0 million), are stated net of a provision for discounts and doubtful accounts of $14.5 million (December 31, 2008: $20.2 million).Provision for discounts and doubtful accounts: 2009 2008 $M $M _____________ _____________ As at January 1 20.2 9.8 Provision charged to operations 85.4 64.8 Provision utilization (82.8) (59.2) Reclassification (8.3) - _____________ _____________ As at September 30 14.5 15.4 _____________ _____________ During the nine months to September 30, 2009 the Company reclassified its provision for Tricare Health Care Program rebates of $8.3 million at January 1, 2009 from provisions for discounts and doubtful accounts to accounts payable and accrued expenses. |
Inventories
Inventories | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | |
Inventories | 10.InventoriesInventories are stated at the lower of cost or market and are analyzed as follows: September 30, December 31, 2009 2008 $M $M ____________ ____________ Finished goods 52.4 41.4 Work-in-process 82.4 78.7 Raw materials 38.5 34.4 ____________ ____________ 173.3 154.5 ____________ ____________ At September 30, 2009 inventories included $13.5million (December 31, 2008: $11.5 million) of costs capitalized prior to the regulatory approval of the relevant product. |
Assets held for sale and discon
Assets held for sale and discontinued operations | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | |
Assets held for sale and discontinued operations | 11.Assets held for sale and discontinued operationsAt September 30, 2009 assets held for sale had a carrying value of $1.7 million (December 31, 2008: $16.6 million), represented by intangible assets and attributed goodwill for certain products divested to Laboratories Almirall S.A. (Almirall) in 2007. The recognition of the gains arising on the disposal of these products and the de-recognition of the related assets have been deferred pending the completion of the transfer of the relevant regulatory and other consents to the acquirer. These assets divested to Almirall form part of the Specialty Pharmaceuticals operating segment.At December 31, 2008 assets held for sale also included $14.9 million for the operations of JOI and Jerini Peptide Technologies GmbH, (JPT), which were acquired through the Jerini acquisition but were deemed non-strategic to the combined business. From the acquisition of Jerini until the second quarter of 2009 the Company classified JOI and JPT as disposal groups held for sale and as discontinued operations. In May 2009, JPT was divested for cash consideration of $6.7 million, and a loss on disposal of $0.5 million has been recognized within discontinued operations for the nine months to September 30, 2009.During the second quarter of 2009 it was determined that JOI was no longer going to be divested, and its assets were reclassified as held-and-used, resulting in a re-measurement adjustment of $5.9 million being recognized to record these assets at the lower of their fair value and carrying value. The Company subsequently closed JOI during the second quarter of 2009 and JOI was reclassified as a discontinued operation. The re-measurement adjustment has accordingly been presented within discontinued operations for the nine months to September 30, 2009.The Company has presented JOI and JPT as discontinued operations, recording a net loss from these operations of $nil and $12.4 million in the three and nine months to September 30, 2009 (2008: $0.9 million and $0.9 million). Revenues from discontinued operations for the three and nine months to September 30, 2009 were $nil and $2.3 million (2008: $1.4 million and $1.4 million), and the pre-tax loss from discontinued operations for the three and nine months to September 30, 2009 were $nil and $12.4 million (2008: $0.9 million and $0.9 million) respectively. |
Prepaid expenses and other curr
Prepaid expenses and other current assets | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | |
Prepaid expenses and other current assets | 12.Prepaid expenses and other current assets September 30, December 31, 2009 2008 $M $M ______________ ____________ Prepaid expenses 49.8 47.6 Income tax receivable 35.4 33.2 Value added taxes receivable 28.1 19.3 Other current assets 35.9 41.3 ______________ ____________ 149.2 141.4 ______________ ____________ |
Investments
Investments | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | |
Investments | 13.Investments September 30, December 31, 2009 2008 $M $M ____________ ____________ Investments in private companies 3.9 19.3 Available-for-sale securities 76.2 6.1 Equity method investments 15.1 17.5 ____________ ____________ 95.2 42.9 ____________ ____________ On March 12, 2009 the Company completed the disposal of its minority equity investment in Virochem to Vertex in a cash and stock transaction. The disposal was part of a transaction entered into by all the shareholders of Virochem with Vertex. The carrying amount of the Companys minority equity investment in Virochem on March 12, 2009 was $14.8 million. Shire received total consideration of $19.2 million in cash and two million Vertex shares (valued at $50.8 million) from the disposal, recognizing a gain on disposal of $55.2 million which has been recognized in Other income/(expenses), net during the nine months to September 30, 2009. Additional consideration of $2.0 million in cash and 0.2 million Vertex shares is being held in escrow until March 11, 2010 pending any warranty claims and breaches of representations made by Virochem and by all selling shareholders, including Shire. The escrow conditions are considered substantive and hence a gain has not been recognized relating to these amounts in the nine months to September 30, 2009. The Vertex stock received has been accounted for as an available-for-sale investment and included within non-current investments. |
Other intangible assets, net
Other intangible assets, net | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | |
Other intangible assets, net | 14.Other intangible assets, net September 30, December 31, 2009 2008 $M $M ________________ ________________ Intellectual property rights acquired Currently marketed products 2,368.3 2,253.2 IPRD 6.1 - Favorable manufacturing contracts 8.7 8.7 ________________ ________________ 2,383.1 2,261.9 Less: Accumulated amortization (550.2) (437.0) ________________ ________________ 1,832.9 1,824.9 ________________ ________________ Intellectual property rights relate to currently marketed products and IPRD for those acquired products which have not yet obtained regulatory approval. At September 30, 2009 the net book value of these intellectual property rights allocated to the Specialty Pharmaceuticals operating segment was $1,267.2 million (December 31, 2008: $1,244.9 million) and in the Human Genetic Therapies operating segment was $564.9 million (December 31, 2008: $579.3 million).The increase in the net book value of other intangible assets for the nine months to September 30, 2009 is shown in the table below: Other intangible assets $M As at January 1, 2009 1,824.9 Acquisitions 80.2 Amortization charged (102.9) Foreign currency translation 30.7 ________________ As at September 30, 2009 1,832.9 ________________ During the nine months to September 30, 2009 the Company acquired intangible assets totaling $80.2 million, principally relating to $78.5 million for EQUASYM IR and XL for the treatment of ADHD ($73.0 million for currently marketed products and $5.5 million for IPRD). The weighted average amortization period for acquired currently marketed products is 13 years. The FASB issued new guidance applicable for business combinations completed from January 1, 2009 relating to IPRD acquired in a business combination. Following the issuance of this guidance, IPRD is now capitalized and considered to be an indefinite lived intangible asset until the completion or abandonment of the associated research and development (RD) efforts. Once the RD efforts are completed the useful life of the relevant assets will be determined. Management estimates that the annual amortization charge in respect of intangible assets held at September 30, 2009 will be approximately $125 million for each of the five years to September 30, 2014. Estimated amortization expense can be affected by various factors including future acquisitions, disposals of product rights, regulatory approval and subsequent amortization of the acquired IPRD projects, foreign exchange movements and the technological advancement and regulatory approval of competitor products. |
Accounts payable and accrued ex
Accounts payable and accrued expenses | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | |
Accounts payable and accrued expenses | 15.Accounts payable and accrued expenses September 30, December 31, 2009 2008 $M $M ________________ ________________ Trade accounts payable 59.0 102.4 Accrued rebates Medicaid 272.9 162.6 Accrued rebates Managed care 155.7 59.9 Sales return reserve 53.1 47.1 Accrued bonuses 51.6 62.0 Accrued employee compensation and benefits payable 45.2 36.7 Accrued coupons 4.9 4.0 Research and development accruals 30.7 29.3 Marketing accruals 39.9 22.1 Deferred revenue 15.7 9.6 Other accrued expenses 210.2 172.9 ________________ ________________ 938.9 708.6 ________________ ________________ Accrued Medicaid rebates have increased by $110.3 million to $272.9 million at September 30, 2009 (2008: $162.6 million). The higher rebate liability has principally resulted from increased accrued rebates on ADDERALL XR following shipment of authorized generic versions of ADDERALL XR to Teva in April 2009 and to Impax Laboratories Inc (Impax) in September 2009. This higher rebate liability for ADDERALL XR is due to the accrual for Medicaid rebates being based on a higher unit rebate amount (URA) subsequent to authorized generic launch.How shipments of authorized generic ADDERALL XR by the Company to Teva and Impax should be included in the Medicaid rebate calculation pursuant to the Deficit Reduction Act of 2005 (the DRA) has introduced additional uncertainty into the Companys estimation of its Medicaid liability for ADDERALL XR. As a result of this uncertainty, a range of reasonably possible rebate levels are calculable under the Medicaid rebate legislation. The Company considers that the low end of this reasonably possible range is the correct interpretation of the DRA and related guidance. The State Medicaid agencies have invoiced Shire for second quarter Medicaid rebates based on a URA at the low end of this range and the Company has paid the Medicaid rebates based on this URA. However, given the uncertainties, the Centers for Medicare and Medicaid Services (CMS) could employ an alternative interpretation of the DRA. In determining the Medicaid liability to be recorded at September 30, 2009 the Companys management has applied its current best estimate of the rebate payable. That current best estimate 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 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 Companys actual obligation). As a result, the Company recorded a Medicaid liability for ADDERALL XR of $194.2 million, near the mid point of the range of reasonably possible rebate levels.In future periods the Companys management may need to revise its current best estimate of its ADDERALL XR Medicaid liability, (by revising the best estimate of the rebate payable, as well as any changes to expected Medicaid utilization and the level of ADDERALL XR in the distribution channel), which could significantly increase or decrease the Companys results of operations in the pe |
Other current liabilities
Other current liabilities | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | |
Other current liabilities | 16.Other current liabilities September 30, December 31, 2009 2008 $M $M _____________ _____________ Income taxes payable 80.2 25.8 Value added taxes 11.7 4.4 Derivative financial instruments 2.1 46.9 Other accrued liabilities 30.6 27.2 _____________ _____________ 124.6 104.3 _____________ _____________ The Company has reclassified $61 million of its provision for unrecognized tax benefits and related interest from other non-current liabilities to other current liabilities in the three months to September 30, 2009.The Company believes that it is reasonably possible that its provision for unrecognized tax benefits and related interest could decrease by up to $80 million in the next twelve months. |
Other long term debt
Other long term debt | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | |
Other long-term debt | 17.Other long-term debtDuring 2009 Shire entered into certain multi-year leases for its HGT business unit at North Reading and Lexington, Massachusetts. As Shire is considered, in substance, the owner of these properties over their construction period, an asset of $7.1 million (being the fair value of the building element at inception of the relevant lease) has been recorded within Property, Plant and Equipment Assets under construction and the corresponding building financing obligation has been recorded within other long term debt. The land element of these leases has been accounted for as an operating lease.Concurrent with entering into the new Lexington lease, Shire extended the term of certain other existing leases at its Lexington site, such that the terms of these existing leases become co-terminus with the expiration of the new Lexington lease. This lease extension has been accounted for as a substantial modification of the existing building finance obligation, whereby the existing liability ($45.1 million) was derecognized and a building financing obligation based on the fair value of the liability under the revised lease terms ($39.4 million) was recorded in its place. This substantial modification resulted in a non-cash gain of $5.7 million in the three and nine months to September 30, 2009 which has been recorded within Other income/(expense), net. |
Other non-current liabilities
Other non-current liabilities | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | |
Other non-current liabilities | 18.Other non-current liabilities September 30, December 31, 2009 2008 $M $M ____________ ____________ Income taxes payable 142.9 220.4 Deferred revenue 19.9 29.5 Deferred rent 14.9 16.1 Insurance provisions 24.3 18.1 Other accrued liabilities 17.5 7.2 ____________ ____________ 219.5 291.3 ____________ ____________ |
Commitments and contingencies
Commitments and contingencies | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | |
Commitments and contingencies | 19.Commitments and contingencies(a) LeasesFuture minimum lease payments under operating leases at September 30, 2009 are presented below: Operating leases $M _____________ 2009 8.8 2010 33.0 2011 25.5 2012 18.2 2013 16.5 2014 16.3 Thereafter 52.0 _____________ 170.3 _____________ (i) Operating leasesThe Company leases land, facilities, motor vehicles and certain equipment under operating leases expiring through 2027. Lease and rental expense amounted to $27.0 million for the nine months to September 30, 2009, which is predominately included in Selling, general and administrative expenses in the accompanying statements of operations (2008: $24.5 million).(b) Letters of credit and guaranteesAt September 30, 2009 the Company had irrevocable standby letters of credit with various banks, in the amount of $8.2 million, providing security on the recoverability of insurance claims. The Company has restricted cash of $8.2 million, as required by these letters of credit.(c) Collaborative arrangementsShire enters into collaborative arrangements to develop and commercialize drug candidates. These collaborative arrangements often require either up-front, milestone, royalty or profit share payments, or a combination of these, with payments often contingent upon the success of the related development and commercialization efforts. Collaboration agreements entered into by Shire may also include expense reimbursements or other such payments to the collaborative partner.Shire reports costs incurred and revenue generated from transactions with third parties as well as payments between parties to collaborative arrangements either on a gross or net basis, depending on the characteristics of the collaborative relationship.Further details of significant collaborative arrangements are included below.In-licensing arrangements(i) Research Collaboration with Santaris Pharma A/S (Santaris) on Locked Nucleic Acid (LNA) Drug PlatformOn 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.In the three and nine months to September 30, 2009 Shire made an upfront payment of $6.5 million to Santaris, for technology access and RD funding, which has been expensed to RD. Shire has remaining obligations to pay Santaris a further $13.5 million subject to certain success criteria, and development and sales milestones up to a maximum of $72 million for each indication. Shire will also pay single or double digit tiered royalties on net sales of the product.Shire and Santaris have formed a joint research committee to monitor RD activities through preclinical Lead Candidate selection at which point all development |
Derivative instruments
Derivative instruments | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | |
Derivative instruments | 20.Derivative instrumentsTreasury policies and organizationThe Companys principal treasury operations are coordinated by its corporate treasury function. All treasury operations are conducted within a framework of policies and procedures approved annually by the Board of Directors. As a matter of policy, the Company does not undertake speculative transactions that would increase its currency or interest rate exposure.Interest rate riskThe Company is exposed to interest rate risk on restricted cash, cash and cash equivalents and on foreign exchange contracts on which interest is at floating rates. This exposure is primarily to US dollar, Euro and Canadian dollar interest rates. As the Company maintains all of its investments and foreign exchange contracts on a short term basis for liquidity purposes, this risk is not actively managed. The largest proportion of investments was in US dollar money market and liquidity funds.Shires financing arrangements at September 30, 2009 comprise Shire plcs $1,100 million in principal amount of 2.75% convertible bonds, due 2014 which were issued in May 2007. Shire has also recognized a liability for building financing obligations of $46.5 million in respect of several leases entered into between August 2007 and July 2009, where Shire is in substance the owner of the property during the construction phase and therefore records the asset and corresponding financing obligation. The Company incurs interest at a fixed rate on both the convertible bonds and on the building financing obligations.No derivative instruments were entered into during the nine months to September 30, 2009 to manage interest rate exposure.The Company continues to review its interest rate risk and the policies in place to manage the risk.Market risk of investmentsAs at September 30, 2009 the Company has $95.2 million of investments comprising available-for-sale investments in publicly quoted companies ($76.2 million), equity method investments ($15.1 million) and cost method investments in private companies ($3.9 million). The investments in public quoted companies and equity method investments, for certain investment funds which contain a mixed portfolio of public and private investments, are exposed to market risk. No financial instruments or derivatives have been employed to hedge this risk.Credit riskCash is invested in short-term money market instruments, including money market and liquidity funds and bank term deposits. The money market and liquidity funds in which Shire invests are all triple A rated by major credit rating agencies.The Company is exposed to the credit risk of the counterparties with which it enters into derivative contracts. The Company aims to limit this exposure through a system of internal credit limits which require counterparties to have a long term credit rating of A / A2 or better from the major rating agencies. The internal credit limits are approved by the Board of Directors and exposure against these limits is monitored by the corporate treasury function. The counterparties to the derivative contracts are major international financial institutions.The Company has entered into many agreements with third p |
Fair value measurement
Fair value measurement | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | |
Fair value measurement | 21.Fair value measurement Assets and liabilities that are measured at fair value on a recurring basisThe following financial assets and liabilities are measured at fair value on a recurring basis using quoted prices in active markets for identical assets (Level 1); significant other observable inputs (Level 2); and significant unobservable inputs (Level 3). Carrying Fair value value Total Level 1 Level 2 Level 3 $'M $'M $'M $'M $'M ____________ ____________ ___________ ___________ ___________ Financial assets: Available-for-sale securities (1) 76.2 76.2 76.2 - - Equity method investments (1) 5.8 5.8 - 5.8 - Foreign exchange contracts 0.9 0.9 - 0.9 - Financial liabilities: Foreign exchange contracts 2.1 2.1 - 2.1 - ____________ ____________ ___________ ___________ ___________ (1) Available-for-sale securities and equity method investments are included within Investments in the unaudited consolidated balance sheet.Certain estimates and judgments were required to develop the fair value amounts. The fair value amounts shown above are not necessarily indicative of the amounts that the Company would realize upon disposition, nor do they indicate the Companys intent or ability to dispose of the financial instrument.The following methods and assumptions were used to estimate the fair value of each material class of financial instrument: Available-for-sale securities the fair values of available-for-sale investments are estimated based on quoted market prices for those investments. Equity method investments the Companys equity method investments comprise unquoted investment funds which hold a portfolio of quoted and unquoted investments. The fair values of quoted investments within the funds are estimated based on quoted market prices for those investments. For unquoted investments within the funds, the fair value is estimated using directly observable inputs other than quoted prices. Foreign exchange contracts the fair value of the swap and forward foreign exchange contracts has been determined using an income approach based on current market expectations about the future cash flows.Assets and liabilities that have been measured at fair value on a non-recurring basis (after initial recognition)As outlined in Note 17, the building financing obligation for leased property in Lexington, Massachusetts was substantially modified in the nine months to September 30, 2009, by extension of the term of the relevant underlying lease on July 31, 2009. The existing liability of $45.1 million was derecognized, and a building financing obligation of $39.4 million was recorded, such liability measured using the fair value of the liability under the revised terms. This extension of the term of the building finance obligation was treated as a substantial modification resulting in a gain of $5.7 million, which has been recorded within Other income/(expenses), net.The fair value of the building financing obligation was estimated based on the present value of the contractual cash flows under the revised lease and the estimated residual value of the property at the end of the lease term, such payments being discounte |
Earnings per share
Earnings per share | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | |
Earnings per share | 22.Earnings per shareThe following table reconciles the net income/(loss) from operations and the weighted average ordinary shares outstanding for basic and diluted earnings per share for the periods presented: 3 months to 3 months to 9 months to 9 months to September 30, September 30, September 30, September 30, 2009 2008 2009 2008 Amounts attributable to Shire plc shareholders $M $M $M $M _________________ _________________ _________________ _________________ Income/(loss) from continuing operations 59.6 (35.3) 329.5 14.3 Loss from discontinued operations - (0.9) (12.4) (0.9) Noncontrolling interest in subsidiaries - 1.3 0.2 1.3 _________________ _________________ _________________ _________________ Numerator for basic and diluted earnings per share (1) 59.6 (34.9) 317.3 14.7 _________________ _________________ _________________ _________________ Weighted average number of shares: Millions Millions Millions Millions _________________ _________________ _________________ _________________ Basic (2) 540.6 540.3 540.0 542.6 Effect of dilutive shares: Stock based awards to employees (3) 7.7 - 7.1 2.7 Convertible bonds 2.75% due 2014 (4) - - - - _________________ _________________ _________________ _________________ Diluted 548.3 540.3 547.1 545.3 _________________ _________________ _________________ _________________ (1) For the all periods presented interest on the convertible bonds has not been added back as the effect would be anti-dilutive.(2) Excludes shares purchased by the ESOT and presented by the Company as treasury stock.(3) Calculated using the treasury stock method.The share equivalents not included in the calculation of the diluted weighted average number of shares are shown below: 3 months to 3 months to 9 months to 9 months to September 30, September 30, September 30, September 30, 2009 (1) (2) 2008 (3) 2009 (1) (2) 2008 (1) (2) No. of shares No. of shares No. of shares No. of shares Millions Millions Millions Millions _________________ _________________ _________________ _________________ Stock options in the money - 1.2 - - Stock options out of the money 16.8 17.0 18.0 17.0 Convertible bonds 2.75% due 2014 33.2 32.7 33.1 32.7 _________________ _________________ _________________ _________________ (1) For the three and nine month periods ended September 30, 2009 and the nine month period ended September 30, 2008, certain stock options have been excluded from the calculation of diluted EPS because their exercise prices exceeded Shire plcs average share price during the calculation period.(2) For the three and nine month periods ended September 30, 2009 and the nine month period ended September 30, 2008, the ordinary shares underlying the convertible bonds have not been included in the calculation of the diluted weighted average number of shares, because the effect of their inclusion would be anti-dilutive.(3) For the three month period ended September 30, 2008 no share options or ordinary shares underlying the convertible bonds have been included in the calculation of the diluted weighted average number |
Segmental reporting
Segmental reporting | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | |
Segmental reporting | 23.Segmental reportingShires internal financial reporting is in line with its business unit and management reporting structure based on two segments: Specialty Pharmaceuticals and HGT. The Specialty Pharmaceuticals and HGT operating segments represent the Companys revenues and costs in respect of currently promoted and sold products, together with the costs of developing projects for future commercialization. All Other has been included in the table below in order to reconcile the two operating segments to the total consolidated figures.The Company evaluates performance based on revenue and operating income. The Company does not have inter-segment transactions. Assets that are directly attributable to the segments have been separately disclosed. Specialty Pharmaceuticals HGT All Other Total 3 months to September 30, 2009 $M $M $M $M ___________ ___________ ___________ ___________ Product sales 461.5 141.0 - 602.5 Royalties 6.2 - 54.1 60.3 Other revenues 1.6 0.4 2.2 4.2 ___________ ____________ ___________ ___________ Total revenues 469.3 141.4 56.3 667.0 ___________ ____________ ___________ ___________ Cost of product sales (1) (2) 71.6 29.2 4.1 104.9 Research and development (1) (2) 75.6 70.9 1.3 147.8 Selling, general and administrative (1) (2) 239.4 46.3 34.9 320.6 Gain on sale of product rights (6.3) - - (6.3) Reorganization costs 2.0 - - 2.0 Integration and acquisition costs 0.7 5.5 - 6.2 _____________ ____________ ___________ ___________ Total operating expenses 383.0 151.9 40.3 575.2 _____________ ____________ ___________ ___________ Operating income/(loss) 86.3 (10.5) 16.0 91.8 _____________ ____________ ___________ ___________ Total assets 2,216.3 1,351.3 859.9 4,427.5 Long-lived assets (3) 203.7 374.8 55.4 633.9 Capital expenditure on long-lived assets (3) 11.4 53.1 2.6 67.1 _____________ ___________ ___________ ___________ (1) Stock-based compensation of $16.9 million is included in: Cost of product sales ($1.0 million), Research and development ($5.2 million) and Selling, general and administrative ($10.7 million).(2) Depreciation from manufacturing plants ($5.3 million) and amortization of favorable manufacturing contracts ($0.4 million) is included in Cost of product sales; depreciation of research and development assets ($3.6 million) is included in Research and development; and all other depreciation and intangible asset amortization ($53.3 million) is included in Selling, general and administrative.(3) Long-lived assets comprise all non-current assets, (excluding goodwill and other intangible assets, deferred tax assets, investments, income tax receivable and financial instruments). Specialty Pharmaceuticals HGT All Other Total 3 months to September 30, 2008 $M $M $M $M ___________ ___________ ___________ ___________ Product sales 589.5 123.0 - 712.5 Royalties 0.3 - 60.5 60.8 Other revenues 1.3 1.5 2.5 5.3 ___________ ____________ ___________ ___________ Total revenues 591.1 124.5 63.0 778.6 ___________ ____________ ___________ ___________ Cost of product sales (1) (2) 66.0 17.1 1.1 84.2 Research and development (1) (2) 66.1 |