Shire Pharmaceuticals Group plc
Hampshire International Business Park, Chineham, Basingstoke RG24 8EP UK
Tel +44 1256 894000 Fax +44 1256 894708
http://www.shire.com
12 noon BST 7am EDT
Thursday 1 May 2003
Shire announces strong first quarter 2003 results
Basingstoke, UK - 1 May 2003 - Shire Pharmaceuticals Group plc (LSE: SHP,
NASDAQ: SHPGY, TSX: SHQ) announces results for the three months ended 31 March
2003.
First Quarter 2003 Unaudited US GAAP Results Highlights
Q1 2003 Q1 2002 % Growth
$M $M
----------------- ------------------ ----------------
Total revenues 304.5 237.0 +28%
Operating income 89.2 70.3 +27%
Income from continuing operations before income taxes and
equity in (losses) / earnings of equity method investees 88.0 74.2 +19%
Net income 63.1 56.8 +11%
Diluted Earnings Per Share (EPS):
Per common share 12.3c 11.1c +11%
Per American Depository Share (ADS) 36.9c 33.3c +11%
(1) The 2002 US GAAP results have been restated to reflect the disposal of our
`Over-The-Counter' (OTC) business, which has been accounted for as a
discontinued operation. All 2002 figures down to net income exclude the OTC
business, while 2002 net income and EPS figures include the OTC results.
(2) Average exchange rates for Q1 2003 and 2002 were $1.60:(pound)1.00 and
$1.41:(pound)1.00 respectively.
First Quarter 2003 and Recent Events Highlights
o Q1 2003 revenues up 28% to $304.5 million, diluted earnings per ADS up 11%
to 36.9c.
o Operating cash flow in the quarter totalled $82.6 million, resulting in a
net cash position of $895.7 million.
o ADDERALL XR(R) sales continue to perform strongly, totalling $115.2
million, up 86% on Q1 2002; competition from recent entrants to the
Attention Deficit Hyperactivity Disorder (ADHD) market has not had a
significant impact on ADDERALL XR market share.
o Royalties in the first quarter grew to $47.8 million, up 21%.
o Wholesaler buying patterns in advance of anticipated price increases led to
an additional $15 million of revenues in the first quarter (AGRYLIN(R): $5
million, PENTASA(R): $8 million, PROAMATINE(R): $2 million), resulting in
underlying total revenues and product sales growth of 22% and 23%,
respectively.
o Following receipt of US approvable letter for FOSRENOL(R), Shire has
commenced dialogue with the US Food and Drug Administration (FDA), and is
confident that outstanding pre-approval questions can be answered from
existing and ongoing studies.
o Agreement reached with FDA for additional pediatric study of AGRYLIN.
Marketing exclusivity would be extended by 6 months, moving from March 2004
to September 2004.
1
o Results of a Phase II trial for SPD476 indicated a significant improvement
in efficacy over a commonly used alternative treatment in mild to moderate
ulcerative colitis. Progression to Phase III trials is expected in the
second half of this year.
o Reported earnings in Q1 2003 include (pound)4.5 million ($7.2 million) of
general & administrative (G&A) expense related to pension contributions and
contractual termination costs for the former Chief Executive.
o Matthew Emmens was appointed as Chief Executive on 12 March 2003, bringing
significant global pharmaceutical experience and a successful track record.
Future prospects - updated
Shire remains confident that it can deliver good growth in 2003. Revenue growth
is now anticipated to be in the mid to high teens for the year (low to mid teens
previously). The Company is also forecasting a slight increase in operating
expenses and therefore, the Board continues to anticipate operating margins of
circa 30% and high single digit to low double digit EPS growth.
At the Annual General Meeting held in 2002, shareholder approval was given to
repurchase up to 10% of the Company's issued share capital. The Shire Board
continues to plan for a share repurchase program.
Matthew Emmens, Chief Executive, said:
"My first few weeks at Shire have confirmed the views that influenced me to
join. This is a strong international company with a high calibre team, and is
well positioned for further strong growth.
"As Shire's solid Q1 performance shows, the Company exhibits robust sales from
its current portfolio and the clear opportunity to develop new sources of
revenue from its drug pipeline. In addressing our future growth prospects, we
will continue to make asset and portfolio acquisitions, where appropriate, to
support our current market positions whilst taking steps to improve operating
efficiency."
- Ends -
High resolution photographs are available to the media free of charge at
www.newscast.co.uk
[Tel. +44 (0)20 7608 1000].
For further information please contact:
Global (outside US & Canada)
Gordon Ngan - Investor Relations +44 1256 894 160
Jessica Mann - Media +44 1256 894 160
US & Canada
Gordon Ngan - Investor Relations +44 1256 894 160
Michele Roy - Media +1 450 978 7938
Notes to editors
Shire Pharmaceuticals Group plc
Shire Pharmaceuticals Group plc (Shire) is a rapidly growing international
emerging pharmaceutical company with a strategic focus on four therapeutic areas
- - central nervous system disorders (CNS), gastrointestinal (GI), oncology, and
anti-infectives. Shire also has three platform technologies: advanced drug
delivery, lead optimisation for small molecules and Biologics. Shire's core
strategy is based on research and development combined with in-licensing and a
focus on key pharmaceutical markets.
For further information on Shire, please visit the Company's website:
www.shire.com
2
THE "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995
Statements included herein that are not historical facts, are forward-looking
statements. Such forward-looking statements involve a number of risks and
uncertainties and are subject to change at any time. In the event such risks or
uncertainties materialise, Shire's results could be materially affected. The
risks and uncertainties include, but are not limited to, risks associated with
the inherent uncertainty of pharmaceutical research, product development,
manufacturing and commercialisation, the impact of competitive products,
including, but not limited to, the impact on Shire's Attention Deficit
Hyperactivity Disorder (ADHD) franchise, patents, including but not limited to,
legal challenges relating to Shire's ADHD franchise, government regulation and
approval, including but not limited to the expected product approval date of
lanthanum carbonate (FOSRENOL(R)) and METHYPATCH (R) , and other risks and
uncertainties detailed from time to time in our filings, including the Annual
Report filed on Form 10-K by Shire with the Securities and Exchange Commission.
The following are trade marks of Shire or companies within the Shire Group,
which are the subject of trade mark registrations in certain territories.
ADDERALL XR(R) (mixed amphetamine salts)
ADDERALL(R) (mixed amphetamine salts)
AGRYLIN(R) (anagrelide hydrochloride)
CARBATROL(R) (carbamazepine)
FOSRENOL(R) (lanthanum carbonate)
METHYPATCH(R) (methylphenidate)
PENTASA(R) (mesalamine)
PROAMATINE(R) (midodrine hydrochloride)
XAGRID(R) (anagrelide hydrochloride)
The following are trade marks of third parties.
3TC (lamivudine) (trade mark of GlaxoSmithKline (GSK))
ASACOL (mesalamine)(trade mark of Procter & Gamble)
REMINYL (galantamine hydrobromide) (trade markof Johnson & Johnson)
ZEFFIX (lamivudine) (trade mark of GSK)
3
OVERVIEW OF US GAAP FINANCIAL RESULTS
Introduction
The results for the three months ended 31 March 2002 have been restated to
reflect the disposal of our OTC business, accounted for as a discontinued
operation in accordance with US GAAP. In accordance with accounting guidelines,
2002 figures from revenues down to income from continuing operations exclude the
results of the OTC business, while 2002 net income and earnings include the
results of the OTC business.
Revenues from continuing operations for the three months ended 31 March 2003
increased by 28% to $304.5 million (Q1 2002: $237.0 million).
The Company recorded net income of $63.1 million, an increase of 11% compared to
the three months ended 31 March 2002. Diluted earnings per common share were
12.3 cents, or 36.9 cents per ADS, an increase of 11% over Q1 2002. This result
was achieved after charging a cost of $7.2 million in respect of the former
Chief Executive's departure.
Operations generated positive cash flows from operating activities of $82.6
million during the first quarter of 2003, of which $12.3 million funded the
purchase of a new office facility for the Group's UK based R&D function.
Cash, cash equivalents and marketable securities at 31 March 2003 amounted to
$1,290.0 million (31 December 2002: $1,213.8 million). After deduction of
borrowings, this translates to a net cash position of $895.7 million (31
December 2002: $805.7 million). Where appropriate, this may be used to further
enhance our portfolio through product and project acquisitions.
Product sales
For the quarter ended 31 March 2003, product sales increased 30% to $256.4
million
(Q1 2002: $196.5 million) and represented 84% of total revenues. The Company
estimates that approximately $15 million of these revenues are attributable to
wholesaler buying patterns in anticipation of price increases, leaving an
underlying product sales growth rate of 23%. As a matter of policy the Company
does not disclose price increases prior to the effective date of the price
increase.
First Quarter 2003 Product Highlights
Sales US Rx6 Q1 2003
Product Sales Growth Growth US Market Share
$M % % %
------------------- ------------------- ------------------ ---------------------------
ADDERALL XR 115.2 + 86% + 116% 23.0% (1)
ADDERALL 18.9 - 59% - 77% 4.1% (1)
- ------------------------------ ------------------- ------------------- ------------------ ---------------------------
Total ADDERALL 134.1 + 24% - 7% 27.1% (1)
============================== =================== =================== ================== ===========================
CARBATROL 9.4 - 19% - 1% 36.9% (2)
AGRYLIN 39.7 + 69% + 12% 26.5% (3)
PENTASA 29.7 + 69% - 2% 17.2% (4)
PROAMATINE 13.8 + 45% + 14% 26.0% (5)
1 ADHD market
2 extended release carbamazepine market
3 AGRYLIN, Hydrea, generic hydroxyurea market
4 mesalamine / olsalazine market
5 PROAMATINE and fludrocortisone acetate market
6 IMS Prescription Data
4
CNS Franchise
ADDERALL XR and ADDERALL
Total ADDERALL franchise sales in Q1 2003 were $134.1 million, an increase of
24% over Q1 2002. Over the same period, total ADDERALL franchise prescriptions
fell by approximately 7%, reflecting the entry of generic versions of ADDERALL
last year, as well as increased competition within the ADHD market overall.
An estimated two-thirds of the difference between prescription growth and sales
growth is due to stock movements between comparative periods. During Q1 2002,
the Company experienced significant wholesaler de-stocking of ADDERALL as
wholesalers adjusted inventory levels downwards following product launches by a
generic competitor. In addition, wholesalers adjusted down stocking levels of
ADDERALL XR as initial launch orders were satisfied over the first quarter. In
comparison, wholesaler stocking levels of ADDERALL XR have normalized during Q1
2003.
The remaining difference between prescription and sales growth related to
pricing, as ADDERALL XR and ADDERALL continued to benefit from price increases
taken in 2002. An improved pricing structure for ADDERALL XR versus ADDERALL and
lower Medicaid rebate payments for ADDERALL XR in 2003 were offset in part by
allowances recorded in respect of an ADDERALL XR promotional program implemented
in Q1 2003.
The recent introduction of a competitive product in January 2003 has had a
negligible impact on ADDERALL XR market share to date. Although the efforts of
competition have significantly reduced Shire's share of voice in the US ADHD
market, Shire's focused marketing approach and efficient physician targeting
have enabled ADDERALL XR to extend its leading market share position among high
volume prescribing ADHD physicians to 27.84% in February 2003. As importantly,
ADDERALL XR's proven safety and efficacy profile has contributed to minimal
erosion in total market share from 23.7% (27 December 2002) to a current 23.1%
(18 April 2003). Growth of the overall ADHD market has continued, with Q1 2003
prescription growth at 14%, up from 10% in the prior year period. Going forward
this year, the Company will also benefit from price increases for the ADDERALL
franchise, which were subsequently implemented in April 2003.
CARBATROL
CARBATROL sales declined by $2.2 million or 19%, year over year, versus a 1%
decline in prescriptions. The difference between prescription and sales growth
is due to a reduction in wholesaler buying in the first quarter, as wholesalers
adjusted to lower prescription trends for carbamazepine in the epilepsy market.
In the first quarter, Shire recommenced promotional efforts for CARBATROL
following the resolution of supply constraints that negatively impacted product
availability throughout 2002. Although the use of carbamazepine in epilepsy has
slowed in favour of more heavily promoted products, CARBATROL's share of the
extended release carbamazepine market has increased from 36.2% in Q1 2002 to
36.9% in Q1 2003.
Other Franchises
AGRYLIN
AGRYLIN sales growth of 69% in Q1 2003 was supported by 12% US prescription
growth, with 41% coming from sales outside the US. The remaining difference
between prescription and sales growth (estimated to be $5 million) is attributed
to wholesaler advance buying in anticipation of a price increase.
AGRYLIN remains the only product specifically approved for essential
thrombocythemia in the US. The anticipated pediatric extension for AGRYLIN could
extend its orphan drug exclusivity from March 2004 to September 2004, after
which time it is expected to face generic competition.
5
The anticipated approval of XAGRID (tradename of AGRYLIN in the EU) will
continue to drive growth from markets outside the US.
PENTASA
The 69% growth in PENTASA sales revenue compared to Q1 2002, versus a 2% fall in
prescription demand for the same period is largely related to wholesaler
anticipation of an early 2003 price increase which led to significant wholesaler
stocking during Q1 2003, accounting for an estimated $8 million of reported
sales. The decrease in prescription demand is primarily the result of the
reallocation of sales force promotion to other products. In the first quarter,
the Company also continued to benefit from pricing increases taken during 2002
that contributed approximately 12% of the growth.
Although its formal indication is for mild to moderately active ulcerative
colitis, PENTASA continues to see the majority of its use in Crohn's disease.
PROAMATINE
Supported by 14% prescription growth and an estimated 8% pricing benefit, the
remainder of PROAMATINE's total 45% growth during the quarter is attributable to
wholesaler stock movements. Some of the increased wholesaler buying related to
the launch of the new 10mg strength, while the remainder was in anticipation of
a price increase (estimated to be $2 million).
While PROAMATINE grew its share of the PROAMATINE and fludrocortisone acetate
market from 24.4% in Q1 2002 to 26.0% in Q1 2003, its Orphan Drug Status will
expire in September 2003 and is expected to face generic competition from that
date.
Royalties
Royalty revenue increased 21% to $47.8 million for the 3 months ended 31 March
2003 (Q1 2002: $39.6 million).
First Quarter 2003 Royalty Highlights
Product Royalties Royalty CER Worldwide in-market sales by
to Shire $M growth growth licensee in Q1 2003
% % $M
- ----------- ------------- --------------------- ----------------- ---------------------------------
3TC 34.1 +11% +11% 267
ZEFFIX 6.4 +21% +10% 49
Other 7.3 +98% n/a n/a
For the products 3TC and ZEFFIX, treatments for HIV infection and chronic
hepatitis B respectively, Shire receives royalties from GSK on worldwide sales,
with the exception of Canada, where a commercialisation partnership with GSK
exists.
The US nucleoside analogue market for HIV, the largest single market for 3TC,
has continued to exhibit solid double-digit growth in recent months.
Acceleration in the number of treated patients has historically been influenced
by the introduction of new treatment options, which has occurred over the past
number of months. It is expected that market growth will temper over time as the
impact of these launches fade.
With the recent introduction of only the second antiviral agent in the US for
hepatitis B infection, market dynamics in the US are expected to change. This
introduction is not expected to have a dramatic near term impact on royalties,
as over 80% of ZEFFIX sales continue to be made in Asia-Pacific markets.
Royalty revenue is also received in respect of REMINYL from Johnson & Johnson,
and in respect of a number of hormone replacement therapy products from various
licensees.
6
REMINYL is the newest treatment available for the treatment of mild to
moderately severe dementia of the Alzheimer's type. It is currently growing well
in the Alzheimer's market, while progress continues for other indications and
formulations.
Cost of product sales
For the three months ended 31 March 2003, our cost of product sales amounted to
15% of product sales (Q1 2002: 13%). A slightly more favourable mix of the
higher margin products was offset by costs associated with enhancing internal
and external production facility capabilities.
Research and development (R&D)
R&D expenditure increased to $54.6 million in Q1 2003 from $49.7 million in Q1
2002, representing an increase of 10%. Expressed as a percentage of total
revenues, R&D expenditure was 18% (Q1 2002: 21%), in line with the Group's
current target level.
Shire aims to invest between 18% and 20% of total revenues in R&D, although the
actual level of expenditure required each quarter is driven by the development
phase of existing and new projects.
Selling, general and administrative
Selling, general and administrative expenses increased from $81.8 million in Q1
2002 to $110.4 million in Q1 2003, an increase of 35%. As a percentage of
product sales, these expenses were 43% (2002: 42%).
Q1 2003 expenses included the initiation of sales and marketing campaigns for
the year. Specifically, increased expenditures included promotional spend for
ADDERALL XR, given increased competitor activity in the quarter, as well as for
CARBATROL, for which promotion recommenced in the quarter following the
resolution of supply constraints. As the benefit of this promotional spend is
realised, this high level of spend is expected to moderate over the year. In
addition, some costs associated with the expected launch of METHYPATCH were
incurred during the quarter.
General and administrative expenses in Q1 2003 also included pension
contributions and contractual termination costs for the former Chief Executive
of (pound)4.5 million ($7.2 million) bringing the total amount paid to
(pound)5.9 million ($9.3 million). The difference was provided for in the
previous quarter's expenses (Q4 2002). The Board believes that the additional
pension contribution, which was calculated on actuarial advice, is fully
merited.
Depreciation and amortisation
The depreciation charge for Q1 2003 was $3.7 million, an increase of $0.6
million compared to 2002. Amortisation charges were $8.0 million, an increase of
$0.9 million compared to Q1 2002.
Interest income and expense
For the three months ended 31 March 2003, the Company received interest income
of $5.1 million (Q1 2002: $4.7 million). Interest expense increased from $2.0
million in Q1 2002 to $2.6 million in 2003, primarily relating to the
convertible notes.
Other (expense)/income, net
For the three months ended 31 March 2003, other expense totalled $3.6 million
(Q1 2002: income of $1.1 million). The cost is primarily attributable to write
downs of certain balance sheet portfolio investments.
Taxation
The effective rate of tax for Q1 2003 was 28% (Q1 2002: 27%). At 31 March 2003,
net deferred tax assets of $52.2 million were recognised (31 March 2002: $41.1
million). The 2003 effective
7
rate of tax has marginally increased due to a greater proportion of profits
coming from the US business.
Equity in (losses) / earnings of equity method investees
We received $0.7 million representing our 50% share of earnings from our
antiviral commercialisation partnership with GSK in Canada (Q1 2002: $0.7
million) and we incurred a loss of $1.1 million representing our 50% share of
the losses of our commercialisation partnership with Qualia Computing Inc (which
includes our prior investment in CADx) (Q1 2002: $nil).
Discontinued operations
The Company completed the divestment of its OTC portfolio on 27 December 2002.
These products were originally acquired in 1999 as a result of the Company's
merger with Roberts Pharmaceutical Corporation. In accordance with US GAAP the
2002 results have been restated to present the results of these products as a
discontinued operation.
The OTC business contributed net income of $1.6 million for the three months
ended 31 March 2002, which is included in the reported net income number for
2002.
R&D OVERVIEW
Shire has a long-term commitment to annual R&D investment of between 18% and 20%
of its revenues. The benefit of this level of spending is gaining visibility as
the late stage pipeline emerges. The Company currently has a total of 22
projects in full development.
R&D details that are new or updated since Shire's full year 2002 earnings
release appear below.
R&D Activities from February 2003 to April 2003
HYPERPHOSPHATEMIA
FOSRENOL is under regulatory review by the US FDA and a Reference Member State
(RMS) country within the EU.
Status Report on FOSRENOL Regulatory Review - US
Following the receipt of a US approvable letter for FOSRENOL, Shire has
commenced dialogue with the FDA, and is confident that outstanding pre-approval
questions can be answered from existing and ongoing studies. Shire is currently
targeting a US launch towards the end of 2003.
Status Report on FOSRENOL Regulatory Review - Europe
Shire has continued discussions with the EU RMS reviewing FOSRENOL. Shire and
the RMS have agreed on the steps required to progress the review, which include
a further external expert report, as well as additional analysis of existing
data. Shire is targeting a resolution of this process in the second half of
2003.
ATTENTION DEFICIT AND HYPERACTIVITY DISORDER (ADHD)
At the end of February 2003, Shire announced the acquisition from Noven
Pharmaceuticals, Inc. (Noven) of the worldwide sales and marketing rights to
METHYPATCH, an add-on product for Shire's ADHD franchise. As previously
announced on 28 April 2003, Noven has recently received a non-approvable letter
for METHYPATCH. Noven has announced plans to meet with the FDA in order to
understand fully the nature of the FDA's concerns and discuss the next steps for
METHYPATCH. Shire will in turn discuss with Noven the most appropriate way
forward.
8
GASTROINTESTINAL
Phase II results for SPD476 were recently presented at the International
Organization for the Study of Inflammatory Bowel Disease in
Saint-Jean-Cap-Ferrat in April. The multicentre, randomised, double-blind Phase
II trial evaluated the efficacy and safety of SPD476 (1200mg 5-ASA tablets
t.i.d.), versus an Asacol 4g rectal suspension in 79 patients with mild to
moderately active left-sided ulcerative colitis. The results showed a clinical
remission, endoscopic remission, and clinical remission + improvement for SPD476
of 60%, 45%, and 77.5%, respectively, versus 49%, 36%, and 59%, respectively,
for the Asacol arm. The results are particularly notable for a single oral
tablet, taken three times a day, versus a locally acting enema. With these
encouraging results, the Company is planning to progress SPD476 into Phase III
clinical trials in the second half of 2003.
ESSENTIAL THROMBOCYTHEMIA
The Company has also agreed a pediatric program for AGRYLIN, following a Written
Request from the FDA.
Under the pediatric exclusivity provisions of the Food and Drug Modernisation
Act, execution of the clinical program as described in the Written Request and
submission of the study data to the FDA would add six additional months to the
existing marketing exclusivity, therefore extending it from March 2004 to
September 2004.
9
US GAAP Results for the 3 months ended 31 March 2003
Consolidated Balance Sheets
(Unaudited)
31 March 31 December
2003 2002
$'000 $'000
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents 1,041,468 897,718
Marketable securities 248,503 316,126
Accounts receivable, net 139,209 138,397
Inventories 51,761 49,216
Deferred tax asset 38,135 34,849
Prepaid expenses and other current assets 31,297 30,790
----------- -----------
Total current assets 1,550,373 1,467,096
Investments 71,370 71,962
Property, plant and equipment, net 149,237 135,234
Goodwill, net 200,604 203,767
Other intangible assets, net 293,311 301,084
Deferred tax asset 14,100 6,216
Other non-current assets 21,945 23,264
----------- -----------
Total assets 2,300,940 2,208,623
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current instalments of long-term debt 975 888
Accounts payable and accrued expenses 190,810 184,107
Other current liabilities 58,329 15,492
----------- -----------
Total current liabilities from continuing operations 250,114 200,487
Current liabilities from discontinued operations - 12,784
----------- -----------
Total current liabilities 250,114 213,271
Long-term debt, excluding current instalments 393,291 407,302
Other long-term liabilities 10,479 14,884
----------- -----------
Total liabilities 653,884 635,457
----------- -----------
Shareholders' equity:
Common stock of 5p par value; 800,000,000 shares authorised; and
484,523,036 (December 31, 2002: 484,344,412) shares issued and
outstanding 40,065 40,051
Exchangeable shares; 5,874,112 shares issued and outstanding 272,523 272,523
Additional paid-in capital 1,028,372 1,027,499
Accumulated other comprehensive losses (31,494) (41,431)
Retained earnings 337,590 274,524
----------- -----------
Total shareholders' equity 1,647,056 1,573,166
----------- -----------
Total liabilities and shareholders' equity 2,300,940 2,208,623
----------- -----------
10
US GAAP Results for the 3 months ended 31 March 2003
Unaudited Consolidated Statements of Operations
3 months ended 31 March 2003 2002
$'000 $'000
---------- ----------
Total revenues 304,517 236,982
Cost of revenues (38,645) (25,020)
---------- ----------
Gross profit 265,872 211,962
Operating expenses (176,680) (141,669)
---------- ----------
Operating income 89,192 70,293
Interest income 5,113 4,731
Interest expense (2,648) (1,977)
Other (expense)/income, net (3,616) 1,141
---------- ----------
Total other (expense)/income, net (1,151) 3,895
---------- ----------
Income from continuing operations before income taxes and equity in
(losses)/earnings of equity method investees 88,041 74,188
Income taxes (24,526) (19,757)
Equity in (losses)/earnings of equity method investees (449) 744
---------- ----------
Income from continuing operations 63,066 55,175
Income from discontinued operations (net of income tax expense of
$nil and $956,000 respectively) - 1,627
---------- ----------
Net income 63,066 56,802
---------- ----------
Earnings per share:
Basic
Continuing operations 12.6c 11.1c
Discontinued operations - 0.3c
---------- ----------
Net income 12.6c 11.4c
---------- ----------
Diluted
Continuing operations 12.3c 10.8c
Discontinued operations - 0.3c
---------- ----------
Net income 12.3c 11.1c
---------- ----------
Weighted average number of shares:
Basic 501,989,884 499,926,390
Diluted 522,547,153 524,865,259
----------- -----------
The results for the 3 months ended 31 March 2002 have been restated to reflect
the disposal of our OTC business that has been accounted for as a discontinued
operation.
11
US GAAP Results for the 3 months ended 31 March 2003 Unaudited Consolidated
Statements of Cash Flows
3 months ended 31 March 2003 2002
$'000 $'000
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income from continuing operations 63,066 55,175
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortisation 11,661 10,173
Stock option compensation (24) (302)
Tax benefit of stock option compensation, charged directly to equity - 590
Increase in deferred tax asset (11,170) (2,904)
Non cash exchange gains and losses 1,794 (793)
Equity in losses of equity method investees 449 -
Write-down of intangible assets - 2,500
Write-down of long term investments 3,973 -
Mark to market of marketable securities (2,924) -
Changes in operating assets and liabilities, net of acquisitions:
(Increase)/decrease in accounts receivable (812) 53,513
Increase in inventory (2,545) (9,162)
(Increase)/decrease in prepayments and other current assets (507) 12,377
Decrease/(increase) in other assets 1,318 (1,266)
Increase/(decrease) in accounts and notes payable and other liabilities 18,352 (191)
Decrease in unearned income - (15,507)
----------- -----------
Net cash provided by operating activities 82,631 104,203
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Redemption of marketable securities, net 67,623 -
Decrease in short-term deposits - 486,798
Purchase of long-term investments (1,475) (1,761)
Purchase of property, plant and equipment (13,613) (3,130)
----------- -----------
Net cash provided by investing activities 52,535 481,907
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt, capital leases and notes (63) -
Proceeds from exercise of options 911 778
----------- -----------
Net cash provided by financing activities 848 778
----------- -----------
Effect of foreign exchange rate changes on cash and cash equivalents 7,736 (98)
----------- -----------
Net increase in cash and cash equivalents 143,750 586,790
Cash flows provided by discontinued operations - 1,627
----------- -----------
Net increase in cash and cash equivalents 143,750 588,417
Cash and cash equivalents at beginning of period 897,718 118,040
----------- -----------
Cash and cash equivalents at end of period 1,041,468 706,457
----------- -----------
12
US GAAP Results for the 3 months ended 31 March 2003 Selected Notes to the
Unaudited US GAAP Financial Statements
(1) Analysis of revenues, operating income and reportable segments
The Company has disclosed segment information for the individual operating areas
of the business, based on the way in which the business is managed and
controlled. The Company evaluates performance based on operating income or loss
before interest and income taxes.
For Quarter 1 2003 our reporting has been expanded as set out below to provide
more information on the Corporate and International segments. The 2002
reportable segments have been restated on this basis.
3 months ended 31 March 2003 US International Biologics Corporate R&D Total
$'000 $'000 $'000 $'000 $'000 $'000
-------- -------- -------- -------- -------- --------
Product sales 219,963 35,691 699 - - 256,353
Licensing and development 394 - - - - 394
Royalties - 2,199 - 45,564 - 47,763
Other revenues 7 - - - - 7
-------- -------- -------- -------- -------- --------
Total revenues 220,364 37,890 699 45,564 - 304,517
-------- -------- -------- -------- -------- --------
Cost of product sales 26,372 11,646 627 - - 38,645
Research and development - - - - 54,598 54,598
Selling, general and
administrative 69,685 19,157 2,252 19,327 - 110,421
Depreciation and amortisation 7,325 2,365 1,149 822 - 11,661
-------- -------- -------- -------- -------- --------
Total operating expenses 103,382 33,168 4,028 20,149 54,598 215,325
-------- -------- -------- -------- -------- --------
Operating income/(loss) 116,982 4,722 (3,329) 25,415 (54,598) 89,192
-------- -------- -------- -------- -------- --------
3 months ended 31 March 2002 US International Biologics Corporate R&D Total
$'000 $'000 $'000 $'000 $'000 $'000
-------- -------- -------- -------- -------- --------
Product sales 167,313 29,052 142 - - 196,507
Licensing and development 541 141 - - - 682
Royalties 214 1,760 - 37,602 - 39,576
Other revenues - 36 181 - - 217
-------- -------- -------- -------- -------- --------
Total revenues 168,068 30,989 323 37,602 - 236,982
-------- -------- -------- -------- -------- --------
Cost of product sales 14,689 9,919 412 - - 25,020
Research and development - - - - 49,729 49,729
Selling, general and
administrative 54,314 14,399 1,763 11,291 - 81,767
Depreciation and amortisation 5,945 2,283 1,046 899 - 10,173
-------- -------- -------- -------- -------- --------
Total operating expenses 74,948 26,601 3,221 12,190 49,729 166,689
-------- -------- -------- -------- -------- --------
Operating income/(loss) 93,120 4,388 (2,898) 25,412 (49,729) 70,293
-------- -------- -------- -------- -------- --------
Included within the selling, general and administrative costs in the corporate
segment for the 3 months to 31 March 2003 is $7.2 million in respect of the
former Chief Executive's departure.
13
US GAAP Results for the 3 months ended 31 March 2003 Selected Notes to the
Unaudited US GAAP Financial Statements (continued)
(2) Earnings per share
Basic earnings per share is based upon the net income available to common
stockholders divided by the weighted-average number of common shares outstanding
during the period.
Diluted earnings per share is based upon net income available to common
stockholders divided by the weighted-average number of common shares outstanding
during the period and adjusted for the effect of all dilutive potential common
shares that were outstanding during the period.
3 months ended 31 March 2003 2002
$'000 $'000
---------- ----------
Numerator for basic earnings per share 63,066 56,802
Interest charged on convertible debt, net of tax 1,381 1,397
---------- ----------
Numerator for diluted earnings per share 64,447 58,199
---------- ----------
Number of shares Number of shares
---------------- ----------------
Weighted average number of shares:
Basic 501,989,884 499,926,390
Effect of dilutive shares:
Stock options 709,269 3,582,567
Warrants - 1,213,297
Convertible debt 19,848,000 20,143,005
----------- -----------
Diluted 522,547,153 524,865,259
----------- -----------
Basic earnings per share 12.6c 11.4c
---------- ----------
Diluted earnings per share 12.3c 11.1c
---------- ----------
Warrants to purchase approximately 1.4 million common shares for the 3 months
ended 31 March 2003 were not dilutive and were therefore not included in the
computation of diluted earnings per share.
Stock options to purchase approximately 18.6 million common shares for the 3
months ended 31 March 2003 were not dilutive and were therefore not included in
the computation of diluted earnings per share.
14
US GAAP Results for the 3 months ended 31 March 2003 Selected Notes to the
Unaudited US GAAP Financial Statements (continued)
(3) Analysis of revenues
3 months ended 31 March 2003 2002 2003 2003
$'000 $'000 % change % of total
-------- -------- -------- ------
Net product sales:
ADDERALL XR 115,163 61,875 +86% 38%
ADDERALL 18,899 46,170 -59% 6%
AGRYLIN 39,674 23,436 +69% 13%
PENTASA 29,719 17,547 +69% 10%
PROAMATINE 13,835 9,573 +45% 4%
CARBATROL 9,421 11,572 -19% 3%
Calciums 6,108 4,699 +30% 2%
Others 23,534 21,635 +9% 8%
-------- -------- -------- -------
256,353 196,507 +30% 84%
-------- -------- -------- -------
Royalty income:
3TC 34,139 30,636 +11% 11%
ZEFFIX 6,399 5,293 +21% 3%
Others 7,225 3,647 +98% 2%
-------- -------- -------- -------
47,763 39,576 +21% 16%
-------- -------- -------- -------
Licensing 394 682 -42% -
Other 7 217 -97% -
-------- -------- -------- -------
Total revenues 304,517 236,982 +28% 100%
-------- -------- -------- -------
15
UK GAAP Results for the 3 months ended 31 March 2003 Unaudited Consolidated
Profit and Loss Account
3 months to 3 months to Year to
31 March 31 March 31 Dec
2003 2002 2002
(pound)'000 (pound)'000 (pound)'000
----------- ----------- -----------
Turnover: group and share of joint venture 192,010 169,245 697,314
Less: share of joint venture's turnover (726) - (762)
----------- ----------- -----------
Group turnover on continuing operations 191,284 169,245 696,552
Discontinued operations - 4,392 15,975
----------- ----------- -----------
Group turnover 191,284 173,637 712,527
Cost of sales (22,334) (19,441) (95,042)
----------- ----------- -----------
Gross profit 168,950 154,196 617,485
Net operating expenses (143,949) (136,885) (1,150,630)
----------- ----------- -----------
Operating profit/(loss): 25,001 17,311 (533,145)
Continuing operations - Group 25,001 15,485 (541,603)
Discontinued operations - 1,826 8,458
-------- -------- --------
25,001 17,311 (533,145)
Share of joint venture's operating loss (728) - (559)
Finance charges, net 1,685 (2,606) 6,931
-------- -------- --------
Profit/(loss) on ordinary activities before taxation 25,958 14,705 (526,773)
Tax on profit/(loss) on ordinary activities (15,187) (14,251) (61,626)
-------- -------- --------
Retained profit/(loss) for the period transferred
to/(from) reserves 10,771 454 (588,399)
-------- -------- --------
Earnings/(loss) per share
Basic 2.1p 0.0p (117.5p)
Diluted 2.1p 0.0p (117.5p)
Unaudited Consolidated Statement of Total Recognised Gains and Losses
3 months to 3 months to Year to
31 March 31 March 31 Dec
2003 2002 2002
(pound)'000 (pound)'000 (pound)'000
-------- -------- --------
Profit/(loss) for the period 10,771 454 (588,399)
Translation of the financial statements of overseas
subsidiaries 28,873 21,108 (62,739)
-------- -------- --------
Total recognised gains and losses relating to
the period 39,644 21,562 (651,138)
-------- -------- --------
16
UK GAAP Results for the 3 months ended 31 March 2003
Unaudited Consolidated Balance Sheet
31 March 31Dec
2003 2002
(pound)'000 (pound)'000
---------- ----------
Fixed assets
Intangible assets - intellectual property 181,915 183,404
Intangible assets - goodwill 1,873,630 1,900,896
Tangible assets 94,412 84,001
Fixed asset investments 39,381 37,345
Investment in joint ventures
Share of gross assets 4,946 5,082
Share of gross liabilities (613) (342)
--------- ---------
2,193,671 2,210,386
--------- ---------
Current assets
Stocks 32,746 30,571
Debtors
- - due within one year excluding deferred tax 108,994 106,125
- - due within one year - deferred tax 24,125 21,646
- - due after more than one year excluding deferred tax 13,884 14,451
- - due after more than one year - deferred tax 8,920 3,861
Current asset investments 159,060 196,364
Cash at bank and in hand 660,267 558,432
-------- --------
1,007,996 931,450
Creditors: Amounts falling due within one year
Other creditors (158,301) (131,885)
-------- --------
(158,301) (131,885)
-------- --------
Net current assets 849,695 799,565
-------- --------
Total assets less current liabilities 3,043,366 3,009,951
Creditors: amounts falling due after more than one year
Convertible debt (245,047) (248,463)
Other creditors (10,391) (13,782)
-------- --------
(255,438) (262,245)
-------- --------
Net assets 2,787,928 2,747,706
-------- --------
Capital and reserves
Called-up share capital 24,227 24,217
Share premium 3,215,080 3,214,512
Exchangeable shares 191,552 191,552
Capital reserve 2,755 2,755
Other reserves 24,247 24,247
Profit and loss account (669,933) (709,577)
-------- --------
Equity shareholders' funds 2,787,928 2,747,706
-------- --------
17
UK GAAP Results for the 3 months ended 31 March 2003 Selected Notes to the
Unaudited UK GAAP Financial Statements
(1) Earnings per share
Earnings per share has been calculated by dividing the profit on ordinary
activities after taxation for each period by the weighted average number of
shares in issue during those periods.
The weighted average number of shares used in calculating fully diluted earnings
per share has been adjusted for the effects of all dilutive potential ordinary
shares.
The $400 million convertible loan note is excluded from the calculation of
weighted average number of shares for fully diluted earnings per share in 2003
and 2002 as it was not dilutive. The zero coupon convertible loan note included
in 2002 has no impact on the numerator for fully diluted earnings per share.
3 months ended 31 March 2003 2002
(pound)'000 (pound)'000
---------------- ----------------
Profit for the period (for basic and diluted EPS) 10,771 454
---------------- ----------------
Number of shares Number of shares
---------------- ----------------
Weighted average number of shares:
Basic 501,989,884 499,926,390
Conversion of convertible debt - 295,829
Exercise of share options 709,269 3,582,567
Exercise of warrants - 1,213,297
---------------- ----------------
Fully diluted 502,699,153 505,018,083
---------------- ----------------
(2) Basis of preparation
The Group has applied consistent accounting policies throughout both periods.
The results for the quarter ended 31 March 2003 have not been audited and do not
constitute statutory accounts within the meaning of Section 240 of the Companies
Act 1985.
18