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
31 July 2003
Shire announces strong second quarter results and outcome of strategic review
Basingstoke, UK - 31 July 2003 - Shire Pharmaceuticals Group plc (LSE: SHP,
NASDAQ: SHPGY, TSX: SHQ) announces results for the second quarter ended 30 June
2003.
Second Quarter 2003 Unaudited US GAAP Results Highlights
- ------------------------------------------------------------ ----------------- ------------------ ----------------
Q2 2003 Q2 2002 % Growth
$M $M
- ------------------------------------------------------------ ----------------- ------------------ ----------------
- ------------------------------------------------------------ ----------------- ------------------ ----------------
Total revenues 299.0 248.1 +21%
Operating income 94.2 75.1 +25%
Income from continuing operations before income taxes and
equity in (losses) / earnings of equity method investees 92.1 77.2 +19%
Net income 65.5 59.3 +10%
Diluted Earnings Per Share (EPS):
Per common share 12.8c 11.6c +10%
Per American Depository Share (ADS) 38.4c 34.8c +10%
- ------------------------------------------------------------ ----------------- ------------------ ----------------
(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 from continuing
operations exclude the OTC business, while 2002 net income and EPS figures
include the OTC results.
(2) Average exchange rates for Q2 2003 and 2002 were $1.62: (pound)1.00 and
$1.47: (pound)1.00 respectively.
Matthew Emmens, Chief Executive, said:
"Strong financial performance continued in the second quarter.
"Since joining Shire in March, I have led a detailed strategic review. Shire has
robust franchises in its core areas and has a successful track record in
marketing to specialist physicians. With that in mind, we have now made some
important decisions that will shape our future.
"Our goal is to become the leading company in meeting the needs of the
specialist physician. With the right products, small sales forces can deliver
impressive sales. This is our core competency. By replicating this success in
other `specialty arms' we believe we can achieve our growth aspirations.
"This commercial platform has implications for both our R&D and business
development efforts. Our R&D focus will shift to fewer, later stage (lower risk)
projects and center on areas where we have commercial presence. Business
development efforts will intensify and we will use our considerable cash
reserves to enhance our product line and specialty reach.
"Several immediate actions will be taken as a result of the strategic review. We
intend to spin out the vaccines business as an independent company. Our early
stage research (lead optimisation) unit will be closed. As a result of exiting
oncology and anti-infectives research, we will seek to out-license TROXATYL and
partner SPD754. Furthermore, we will significantly enhance our M&A effort -
targeting acquisitions in the US, including larger scale transactions. In
addition to these actions, I have initiated projects that will better integrate,
coordinate and rationalize our global business activities.
1
"Concentrating our business in a more focused way will create a stronger Shire
and position us for continued growth. Our strategy is aimed at achieving growth,
on average, in the mid-teens range beyond 2003."
New R&D focus - later stage, lower risk
The exit from the Vaccines business will remove several promising but early
stage projects from the portfolio. Shire will increasingly focus investment in
R&D onto lower risk, later stage opportunities which can be fully funded and
which will have the highest probability of reaching the market in the shortest
time. Shire's short-term growth will come from the launch of products from its
own pipeline, from M&A and from in-licensing.
The early stage research lead optimisation research group, based in Laval Canada
will be closed down with the loss of approximately 120 jobs. A re-structuring
provision of approximately $12 million will be booked mainly in Q3 2003.
Re-structuring costs, net of savings, for the full year 2003 are estimated to be
around $7 million, with the major element being non-cash asset write-downs.
Ongoing savings from 2004 are estimated to be approximately $15 million per
annum.
Oncology and anti-infectives will no longer be therapeutic areas of focus in R&D
for the Company. Shire will seek to out-license TROXATYL (for the treatment of
acute myeloid leukaemia and pancreatic cancer). Shire will continue to develop
the anti-infectives project SPD754 (for HIV treatment) while seeking partnership
opportunities to more effectively leverage this asset.
Vaccines
Shire intends to spin off the vaccines business, given its earlier stage of
development and the different dynamics in the vaccine market. Shire anticipates
concluding this process by the end of H1 2004. In the first six months of 2003,
this business had an operating loss of $14.5 million including R&D expenditure
of $7.8 million. This is currently a Canadian commercial business, which
comprises the NEISVAC-C vaccine for meningitis C and the FLUVIRAL flu vaccine,
which is also in development for markets outside Canada (SPD707). The R&D
portfolio comprises SPD701 for influenza, SPD703 for pneumonia, SPD704 for
meningitis and SPD705 for opportunistic infections all in phase I.
Second Quarter 2003 and Recent Events Highlights
o Q2 2003 revenues up 21% to $299.0 million, diluted earnings per ADS up
10% to 38.4c.
o ADDERALL XR(R) sales up 35% on the same period last year, totalling
$102.4 million; the ADDERALL(R) brand has remained the leading ADHD
brand in the US with 26%(6) prescription share in Q2 2003.
o Strong growth in 3TC sales and positive foreign exchange movements (up
22% to $37.5 million) were major contributors to an overall increase
in royalties in Q2 2003, up 28% to $51.8 million.
o Shire received positive Committee for Proprietary Medicinal Products
(CPMP) opinion for XAGRID(R) in Europe.
o Continued dialogue with the US Food and Drug Administration (FDA) with
regard to FOSRENOL(R); pre-approval data remains on course for
submission in the US and EU.
o Rights acquired to five products from DRAXIS Health for the Canadian
market in July 2003.
New Non Executive Director
Shire has announced the appointment of Robin Buchanan as Non Executive Board
Director. Mr Buchanan is the Senior Partner of the London office of business
consultants, Bain & Company
2
and a member of Bain's worldwide management committee; he is a British citizen
and lives in the UK.
Future prospects
Shire remains comfortable with previous FY 2003 guidance, provided at Q1 2003
results, of mid to high teens revenue growth, operating margins of circa 30% and
high single digit to low double digit EPS growth. This excludes a potential 3
cents negative impact in relation to the closure of the Lead Optimisation
business.
- 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)
Clea Rosenfeld - Investor Relations +44 1256 894 160
Jessica Mann - Media +1 859 669 8905
US & Canada
Gordon Ngan - Investor Relations +1 859 669 8918
Michele Roy - Media +1 450 978 7938
Notes to editors
Shire Pharmaceuticals Group plc
Shire Pharmaceuticals Group plc (Shire) is a global specialty pharmaceutical
company with a strategic focus on meeting the needs of the specialist physician
and currently has a range of projects and products in the areas of central
nervous system (CNS), gastrointestinal (GI), and renal. Shire has operations in
the world's key pharmaceutical markets (US, Canada, UK, France, Italy, Spain and
Germany) as well as a specialist drug delivery unit in the US.
For further information on Shire, please visit the Company's website:
WWW.SHIRE.COM
3
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)
FLUVIRAL(R) S/F (split-virion influenza vaccine)
FOSRENOL(R) (lanthanum carbonate)
METHYPATCH(R) (methylphenidate)
PROAMATINE(R) (midodrine hydrochloride)
TROXATYL(R) (troxacitabine)
XAGRID(R) (anagrelide hydrochloride)
The following are trade marks of third parties.
3TC (lamivudine) (trade mark of GlaxoSmithKline (GSK))
NEISVAC-C (trade mark of Baxter International Inc.)
PENTASA (mesalamine) (trade mark of Ferring)
REMINYL (galantamine hydrobromide) (trade mark of Johnson & Johnson)
ZEFFIX (lamivudine) (trade mark of GSK)
Data sources.
(1) IMS Prescription Data - ADHD market
(2) IMS Prescription Data - extended release carbamazepine market
(3) IMS Prescription Data - AGRYLIN, Hydrea, generic hydroxyurea market
(4) IMS Prescription Data - mesalamine / olsalazine market
(5) IMS Prescription Data - PROAMATINE and fludrocortisone acetate market
(6) IMS Prescription Data - Product specific
(7) GSK
4
OVERVIEW OF US GAAP FINANCIAL RESULTS
Introduction
The results for the second quarter ended 30 June 2002 have been restated to
reflect the disposal of our OTC business, accounted for as a discontinued
operation in accordance with generally accepted accounting principles in the
United States of America (US GAAP). In accordance with US GAAP guidelines, 2002
figures from revenues down to income from continuing operations exclude the
results of the OTC business, while 2002 net income and earnings per share
include the results of the OTC business.
Revenues from continuing operations for the second quarter ended 30 June 2003
increased by 21% to $299.0 million (Q2 2002: $248.1 million).
The Company recorded net income of $65.5 million, an increase of 10% compared to
the three months ended 30 June 2002. Diluted earnings per common share were 12.8
cents, or 38.4 cents per ADS, an increase of 10% over Q2 2002.
Operations generated cash inflows from operating activities of $1.8 million
during the second quarter of 2003. This was primarily due to an increase of
$55.7 million in accounts receivable resulting from the phasing of wholesaler
buying and a decrease of other liabilities of $16.9 million as a result of
periodic tax payments.
The Company initiated a share re-purchase programme during the quarter, buying
back 7.6 million common shares at a total cost of $52.4 million.
Cash, cash equivalents and marketable securities at 30 June 2003 amounted to
$1,185.2 million (31 December 2002: $1,213.8 million). After deduction of
borrowings, this translates to a net cash position of $806.5 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 30 June 2003, product sales increased $39.6 million to
$246.5 million (Q2 2002: $206.9 million) and represented 82% of total revenues.
During the early part of Q2 2003, Shire experienced aggressive wholesaler
de-stocking, significantly beyond the stock-build of $15 million announced in Q1
2003. This significant de-stocking below normal levels was corrected later in
the quarter following the initiation of a wholesaler promotional campaign
intended to normalise inventory levels. The Company estimates that Q2 2003
product revenues approximated prescription-based demand for the quarter except
for sales of ADDERALL ($5 million) and PROAMATINE ($5 million). ADDERALL
benefited from a promotional campaign intended to decrease inventories of
short-dated product, while PROAMATINE benefited from increased sales due to the
timing of order flow. The combined amount of Q2 revenues in excess of demand was
approximately $10 million which, in combination with the wholesaler stocking
reported in Q1 2003, is expected to reverse prior to year end.
Second Quarter 2003 Product Highlights
- ------------------------------ ------------------- ------------------- ------------------ ---------------------------
Sales US Rx(6) Q2 2003(6)
Product Sales Growth Growth US Market Share
$M % % %
- ------------------------------ ------------------- ------------------- ------------------ ---------------------------
- ------------------------------ ------------------- ------------------- ------------------ ---------------------------
ADDERALL XR 102.4 + 35% + 62% 23%(1)
ADDERALL 19.2 - 32% - 59% 3%(1)
- ------------------------------ ------------------- ------------------- ------------------ ---------------------------
- ------------------------------ ------------------- ------------------- ------------------ ---------------------------
Total ADDERALL 121.6 + 17% + 16% 26%(1)
============================== =================== =================== ================== ===========================
AGRYLIN 36.6 + 24% + 8% 27%(3)
PENTASA 24.8 + 15% - 3% 11%(4)
PROAMATINE 18.3 + 68% + 12% 27%(5)
CARBATROL 13.9 + 11% + 1% 38%(2)
- ------------------------------ ------------------- ------------------- ------------------ ---------------------------
5
CNS Franchise
ADDERALL XR and ADDERALL
Total ADDERALL franchise sales in Q2 2003 were $121.6 million, an increase of
17% over Q2 2002 ($104.1 million). Over the same period, total ADDERALL
franchise prescriptions grew by approximately 16%(6), despite the entry of
generic versions of ADDERALL last year, as well as increased competition within
the ADHD market overall.
Sales of ADDERALL XR in Q2 2003 were $102.4 million, an increase of 35% over Q2
2002 ($75.8 million). ADDERALL XR prescriptions increased 62%(6) between
periods driven by successful conversion of ADDERALL business to the improved
ADDERALL XR formulation and overall market growth. The difference between
reported growth and prescription growth is largely due to a strong Q2 2002 that
included launch stock related to new strengths of ADDERALL XR. Revenues of
ADDERALL XR in Q2 2003 were broadly in line with underlying prescription demand.
Increased competitor activity has had a positive impact on the US ADHD market
growth, which reached 18%(6) for Q2 2003 over the prior year period.
Notwithstanding this increase in competition, ADHD physicians have continued to
recognise the strengths of the ADDERALL brand, which maintained its leading
position in the ADHD market with a 26%(6) prescription share during Q2 2003.
Sales of ADDERALL were $19.2 million in Q2 2003, down 32% from Q2 2002 ($28.3
million). Overall prescriptions were down approximately 59%(6) between periods.
In Q2 2003, Shire offered wholesalers short-dated product on a non-returnable
basis. The Company estimates that this offer increased ADDERALL revenues by $5
million over normal Q2 wholesaler buying patterns.
CARBATROL
CARBATROL sales increased by $1.3 million or 11%, year on year, versus a 1%(6)
increase in prescriptions. Q2 2003 sales benefited from a price increase
implemented in April 2003. The Company believes that wholesaler inventory levels
are fully adjusted to reflect current demand levels.
Following recommencement of promotional efforts in Q1 2003, Shire has grown
CARBATROL's share of the extended release carbamazepine market from 36%(6) in Q2
2002 to 38%(6) in Q2 2003. Total prescription volume for carbamazepine products
has remained stable between Q1 2003 and Q2 2003, and Shire will continue to
monitor progress in this area.
The FDA website indicates that a generic company has filed an abbreviated new
drug application for CARBATROL 300mg. Shire has no further information at this
time.
Other Franchises
AGRYLIN
AGRYLIN sales growth of 24% in Q2 2003 was supported by 8%(6) US prescription
growth, and strong growth in sales from outside the US. While Q2 2003 revenues
were in line with underlying prescription demand, wholesaler inventories remain
somewhat above normal levels and the Company expects wholesaler de-stocking to
adversely impact sales trends in Q3 or Q4 2003.
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. The expected launch of
XAGRID (the trade name of AGRYLIN used in the EU) will continue to drive growth
from markets outside the US.
6
PENTASA
The 15% growth in PENTASA sales revenue compared to Q2 2002, versus a 3%(6) fall
in prescription demand for the same period, is largely related to wholesaler
stocking movements in Q2 2002 and the favourable impact of an April 2003 price
increase. While Q2 2003 revenues were in line with underlying prescription
demand, wholesaler inventories remain somewhat above normal levels and the
Company expects wholesaler de-stocking to adversely impact sales trends in Q3 or
Q4 2003.
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 12%(6) prescription growth, the remainder of PROAMATINE's total 68%
growth during the quarter is attributable to wholesaler buying patterns. The
Company estimates that wholesalers stocked approximately $5 million of product
in excess of underlying prescription demand. The impact of wholesaler
de-stocking prior to year-end and/or the onset of generic competition could
adversely impact comparative sales trends in Q3 or Q4 2003.
While PROAMATINE grew its share of the PROAMATINE and fludrocortisone acetate
market from 24%(6) in Q2 2002 to 27%(6) in Q2 2003, its Orphan Drug Status will
expire in September 2003, allowing the entry of potential generic competition.
Royalties
Royalty revenue increased 28% to $51.8 million for Q2 2003 (Q2 2002: $40.5
million) as a result of strong sales and positive foreign exchange movements.
Second Quarter 2003 Royalty Highlights
- ----------------------- -------------- ----------------------- ------------------- ------------------------------------
Product Royalties Royalty CER(7) Worldwide in-market sales by
to Shire $M growth growth licensee in Q2 2003(7)
% % $M
- ----------------------- -------------- ----------------------- ------------------- ------------------------------------
- ----------------------- -------------- ----------------------- ------------------- ------------------------------------
3TC 37.5 + 22% + 10% 281
- ----------------------- -------------- ----------------------- ------------------- ------------------------------------
- ----------------------- -------------- ----------------------- ------------------- ------------------------------------
ZEFFIX 5.7 + 27% + 15% 52
- ----------------------- -------------- ----------------------- ------------------- ------------------------------------
- ----------------------- -------------- ----------------------- ------------------- ------------------------------------
Other 8.6 + 62% 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 nucleoside analogue market for HIV has continued to exhibit solid
double-digit growth in recent months. This growth is supported by increases in
the number of individuals living with HIV, as well as reduced mortality due to
more effective treatment regimens.
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 the majority 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.
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
7
For the second quarter ended 30 June 2003, cost of product sales amounted to 16%
of product sales (Q2 2002: 14%). The increase over the prior year period is
primarily driven by the sales mix in the quarter. The cost of product sales is
15% of product sales for the six months ended 30 June 2003 (2002: 14%).
Research and development (R&D)
R&D expenditure increased to $50.1 million in Q2 2003 from $46.8 million in Q2
2002, representing an increase of 7%. Expressed as a percentage of total
revenues, R&D expenditure for the quarter was 17% (Q2 2002: 19%).
Selling, general and administrative (SG&A)
SG&A expenses increased from $84.3 million in Q2 2002 to $102.6 million in Q2
2003, an increase of 22%. As a percentage of product sales, these expenses were
42% (2002: 41%).
Q2 2003 SG&A expenses included continued additional promotional spend for
ADDERALL XR in relation to sustained competitor activity, as well as for the
ongoing relaunch of CARBATROL. As the benefit of this promotional spend is
realised, this high level of spend is expected to moderate over the remainder of
the year.
Depreciation and amortisation
The depreciation charge for Q2 2003 was $4.0 million, an increase of $0.7
million compared to 2002. Amortisation charges were $9.1 million, an increase of
$0.3 million compared to Q2 2002.
Interest income and expense
For the three months ended 30 June 2003, the Company received interest income of
$4.3 million (Q2 2002: $4.8 million). Interest expense increased from $1.8
million in Q2 2002 to $2.7 million in 2003, primarily relating to costs
associated with partial buy back of the convertible notes.
Other (expense)/income, net
For the three months ended 30 June 2003, other expense totalled $3.7 million (Q2
2002: $0.9 million). The expense is primarily attributable to investment
write-downs for other than temporary impairment of $4.5 million.
Taxation
For Q2 2003 income taxes increased $4.2 million to $25.5 million from $21.3
million for Q2 2002. Our effective tax rate was 28% for Q2 2003 (2002: 27%). We
have net deferred tax assets of $58.9 million at 30 June 2003. Realisation is
dependent upon generating sufficient taxable income to utilise such assets.
Although realisation of these assets is not assured, management believes it is
more likely than not that the deferred tax assets will be realised.
Equity in (losses)/earnings of equity method investees
We received $0.9 million representing our 50% share of earnings from our
antiviral commercialisation partnership with GSK in Canada (Q2 2002: $1.9
million) and we incurred a loss of $2.1 million representing our 50% share of
the losses of our commercialisation partnership with Qualia Computing Inc (Q2
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.
8
The OTC business contributed net income of $1.6 million for the three months
ended 30 June 2002, which is included in the reported net income number for
2002.
R&D OVERVIEW
As part of its strategic review Shire will refocus its portfolio onto lower
risk, later stage opportunities and to build its franchise in CNS, GI and in
renal, but the refocus and prioritisation will enable Shire to alter the risk
balance profile of the portfolio to improve the likely return on this
investment.
R&D Activities from May to July 2003
RENAL
FOSRENOL
Additional data collection and analysis is underway and Shire will update as
soon as further new information is available.
HAEMATOLOGY
XAGRID
XAGRID (anagrelide hydrochloride) received a positive opinion from the European
Committee for Proprietary Medicinal Products (CPMP) for XAGRID to be used in the
treatment of Essential Thrombocythemia (ET).
Once marketing approval is received, pricing and reimbursement negotiations will
commence with individual national authorities prior to launch. The drug is
already marketed by Shire in the US and a range of other territories under the
trademark AGRYLIN. Total sales of AGRYLIN in 2002 were $119.2 million, up 39% on
2001. It is estimated by Shire that 40,000 patients suffering from ET across the
European Union (EU) member states would be eligible for treatment with XAGRID.
There is currently no other platelet-reducing treatment approved for the
treatment of ET across the EU.
Essential Thrombocythemia is a condition arising from a chronic disorder of bone
marrow, which leads to an increased production of blood platelets. Excessive
platelet production can result in abnormal blood clot formation and bleeding,
thereby increasing the risk of stroke, heart attack and gastrointestinal
bleeding.
CENTRAL NERVOUS SYSTEM (cns)
METHYPATCH
At the end of February 2003, Shire announced the acquisition from Noven
Pharmaceuticals, Inc. (Noven) of the worldwide sales and marketing rights to
METHYPATCH, a supplemental product for Shire's ADHD franchise. As previously
announced on 28 April 2003, Noven has received a not approvable letter for
METHYPATCH. Noven have an ongoing dialogue with the FDA and Shire is working
with Noven to resolve the issues.
ADDERALL XR
Shire submitted an sNDA for ADDERALL XR in the treatment of adult ADHD on 19
December 2002. The review with the FDA is underway with an expected Prescription
Drug User Fee Act date at the end of October 2003. Shire estimates adult ADHD
treatment rates to be around 5% in the US, thus there is a significant
opportunity for ADDERALL XR in the approximately 8 million adult ADHD patient
population.
GASTROINTESTINAL
As announced previously, SPD476 for the treatment of Ulcerative Colitis
continues to show promising results. Phase III trials are on schedule to begin
during the second half of 2003.
9
ANTI-INFECTIVES
SPD754
SPD754 is a cytidine analogue nucleoside reverse transcriptase inhibitor (NRTI)
in development for the treatment of HIV, including HIV resistant to other
NRTI's. The first phase II study with SPD754 was recently presented at the 2nd
International AIDS Society (IAS) meeting in Paris (July 2003).
This randomised, double blind trial evaluated the anti-viral activity and safety
of 4 doses of SPD754 versus placebo in 63, treatment-naive, HIV infected
subjects. SPD754 was shown to have potent anti-viral activity and to be well
tolerated with an adverse event profile similar to that of placebo.
After 7 and 10 days' monotherapy, SPD754 reduced the mean Viral Load (VL) by up
to 1.44 and 1.65 log respectively. Up to 92% of subjects achieved >1 log drop in
their VL. All active doses were statistically significantly superior to placebo.
SPD754 did not select for known NRTI-resistant mutations in this setting.
Overall, the drug was well tolerated, with no indication of dose-limiting
adverse events.
Shire is excited at the prospect of this compound and is keen to evaluate
potential development and marketing partnerships to ensure the product can be
rapidly made available to patients.
ONCOLOGY
As a result of the strategic review, Shire has decided to out-license TROXATYL.
10
US GAAP Results
Consolidated Balance Sheets
(Unaudited)
30 June 31 December
2003 2002
$'000 $'000
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents 967,480 897,718
Marketable securities 217,677 316,126
Accounts receivable, net 194,908 138,397
Inventories 54,405 49,216
Deferred tax asset 36,759 34,849
Prepaid expenses and other current assets 35,355 30,790
----------- -----------
Total current assets 1,506,584 1,467,096
Investments 79,117 71,962
Property, plant and equipment, net 167,014 135,234
Goodwill, net 209,134 203,767
Other intangible assets, net 313,898 301,084
Deferred tax asset 22,101 6,216
Other non-current assets 22,630 23,264
----------- -----------
Total assets 2,320,478 2,208,623
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current instalments of long-term debt 1,024 888
Accounts payable and accrued expenses 186,083 184,107
Other current liabilities 30,701 15,492
----------- -----------
Total current liabilities from continuing operations 217,808 200,487
Current liabilities from discontinued operations - 12,784
----------- -----------
Total current liabilities 217,808 213,271
Long-term debt, excluding current instalments 377,592 407,302
Other long-term liabilities 11,913 14,884
----------- -----------
Total liabilities 607,313 635,457
----------- -----------
Shareholders' equity:
Common stock of 5p par value; 800,000,000 shares authorised; and
477,292,144 (December 31, 2002: 484,344,412) shares issued and
outstanding 39,469 40,051
Exchangeable shares; 5,840,110 (December 31, 2002: 5,874,112) shares
issued and outstanding 270,698 272,523
Additional paid-in capital 979,744 1,027,499
Accumulated other comprehensive income/(loss) 20,179 (41,431)
Retained earnings 403,075 274,524
----------- -----------
Total shareholders' equity 1,713,165 1,573,166
----------- -----------
Total liabilities and shareholders' equity 2,320,478 2,208,623
----------- -----------
11
US GAAP Results
Unaudited Consolidated Statements of Operations
3 months to 30 3 months to 6 months to 30 6 months to 30
June 2003 30 June 2002 June 2003 June 2002
$'000 $'000 $'000 $'000
---------- ---------- ---------- ----------
Total revenues 298,988 248,084 603,505 485,066
Cost of revenues (38,993) (29,721) (77,638) (54,741)
---------- ---------- ---------- ----------
Gross profit 259,995 218,363 525,867 430,325
Operating expenses (165,778) (143,254) (342,458) (284,923)
---------- ---------- ---------- ----------
Operating income 94,217 75,109 183,409 145,402
Interest income 4,298 4,820 9,411 9,551
Interest expense (2,689) (1,796) (5,337) (3,773)
Other (expense)/income, net (3,679) (910) (7,295) 231
---------- ---------- ---------- ----------
Total other (expense)/income, net (2,070) 2,114 (3,221) 6,009
---------- ---------- ---------- ----------
Income from continuing operations before income taxes
and equity in (losses)/earnings of equity method 92,147 77,223 180,188 151,411
investees
Income taxes (25,457) (21,323) (49,983) (41,080)
Equity in (losses)/earnings of equity method investees (1,205) 1,855 (1,654) 2,599
---------- ---------- ---------- ----------
Income from continuing operations 65,485 57,755 128,551 112,930
Income from discontinued operations (net of income tax
expense of $nil, $912, $nil and $1,868 respectively) - 1,552 - 3,179
---------- ---------- ---------- ----------
Net income 65,485 59,307 128,551 116,109
---------- ----------- ---------- ----------
Earnings per share:
Basic
Continuing operations 13.1c 11.5c 25.6c 22.6c
Discontinued operations - 0.4c - 0.6c
---------- ---------- ---------- ----------
Net income 13.1c 11.9c 25.6c 23.2c
---------- ---------- ---------- ----------
Diluted
Continuing operations 12.8c 11.3c 25.1c 22.0c
Discontinued operations - 0.3c - 0.6c
---------- ---------- ---------- ----------
Net income 12.8c 11.6c 25.1c 22.6c
---------- ---------- ---------- ----------
Weighted average number of shares:
Basic 501,504,962 500,365,947 501,746,083 500,147,383
Diluted 522,559,387 523,990,414 522,652,319 525,324,877
----------- ----------- ----------- -----------
The results for the 3 and 6 months ended 30 June 2002 have been restated to
reflect the disposal of our OTC business that has been accounted for as a
discontinued operation.
12
US GAAP Results
Unaudited Consolidated Statements of Cash Flows
3 months to 3 months to 30 6 months to 6 months to 30
30 June 2003 June 30 June 2003 June
$'000 2002 $'000 2002
$'000 $'000
----------- ----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income from continuing operations 65,485 57,755 128,551 112,930
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortisation 9,800 9,139 21,461 17,812
Stock option compensation - 152 (24) (150)
Tax benefit of stock option compensation,
charged directly to equity - 99 - 689
Increase in deferred tax asset (6,625) (1,791) (17,795) (4,695)
Non cash exchange gains and losses 4,142 2,465 5,937 1,672
Equity in losses/(earnings) of equity method
investees 1,205 (1,855) 1,654 (2,599)
Write-down of long term investments 4,500 - 8,472 2,500
Write-down of intangible assets 3,287 3,000 3,287 4,500
Loss on sale of fixed assets - 116 - 116
Changes in operating assets and liabilities, net of acquisitions:
(Increase)/decrease in accounts receivable (55,699) (109) (56,511) 53,404
Increase in inventory (2,644) (247) (5,189) (9,409)
(Increase)/decrease in prepayments and other
current assets (4,058) (8,049) (4,565) 4,328
(Increase)/decrease in other assets (684) 1,835 634 569
(Decrease)/increase in accounts and notes
payable and other liabilities (16,921) (54,128) 1,431 (52,417)
Decrease in unearned income - - - (17,409)
----------- ----------- ----------- -----------
Net cash provided by operating activities 1,788 8,382 87,343 111,841
----------- ------------ ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in short-term deposits 33,750 11,223 98,449 498,021
Purchase of long-term investments - - (1,475) (1,017)
Purchase of intangible assets (25,500) (18,510) (25,500) (18,510)
Purchase of property, plant and equipment (13,988) (4,518) (27,601) (7,648)
----------- ----------- ----------- -----------
Net cash (used in)/provided by investing activities (5,738) (11,805) 43,873 470,846
----------- ------------ ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase/payments on long-term debt, capital leases and
notes (29,816) (2,583) (29,879) (2,583)
Proceeds from exercise of options 1,343 2,774 2,254 3,552
Payments for the redemption of common stock (52,392) - (52,392) -
----------- ----------- ----------- -----------
Net cash (used in)/provided by financing activities (80,865) 191 (80,017) 969
----------- ------------ ----------- ------------
Effect of foreign exchange rate changes on cash and cash
equivalents 10,827 9,587 18,563 9,489
----------- ----------- ----------- -----------
Net (decrease)/increase in cash and cash equivalents (73,988) 6,355 69,762 593,145
Cash flows provided by discontinued operations - 1,711 - 3,338
----------- ----------- ----------- -----------
Net (decrease)/increase in cash and cash equivalents (73,988) 8,066 69,762 596,483
Cash and cash equivalents at beginning of period 1,041,468 706,457 897,718 118,040
----------- ----------- ----------- -----------
Cash and cash equivalents at end of period 967,480 714,523 967,480 714,523
----------- ------------ ----------- -----------
13
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 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 to 30 June 2003 US International Biologics Corporate R&D Total
$'000 $'000 $'000 $'000 $'000 $'000
-------- -------- -------- -------- -------- --------
Product sales 209,607 36,056 787 - - 246,450
Licensing and development 702 - - - - 702
Royalties 14 2,725 - 49,097 - 51,836
-------- -------- -------- -------- -------- --------
Total revenues 210,323 38,781 787 49,097 - 298,988
-------- -------- -------- -------- -------- --------
Cost of product sales 26,887 11,450 656 38,993
- -
Research and development - - - - 50,097 50,097
Selling, general and administrative 65,941 19,084 2,364 15,205 - 102,594
Depreciation and amortisation 8,728 2,379 1,121 859 - 13,087
-------- -------- -------- -------- -------- --------
Total operating expenses 101,556 32,913 4,141 16,064 50,097 204,771
-------- -------- -------- -------- -------- --------
Operating income/(loss) 108,767 5,868 (3,354) 33,033 (50,097) 94,217
-------- -------- -------- -------- -------- --------
3 months to 30 June 2002 US International Biologics Corporate R&D Total
$'000 $'000 $'000 $'000 $'000 $'000
-------- -------- -------- -------- -------- --------
Product sales 173,895 32,511 455 - - 206,861
Licensing and development 662 261 - - - 923
Royalties 7 1,280 - 39,225 - 40,512
Other revenues - (31) (181) - - (212)
-------- -------- -------- -------- -------- --------
Total revenues 174,564 34,021 274 39,225 - 248,084
-------- -------- -------- -------- -------- --------
Cost of product sales 15,286 14,088 347 - 29,721
-
Research and development - - - - 46,802 46,802
Selling, general and administrative 55,269 17,719 2,206 9,119 - 84,313
Depreciation and amortisation 7,534 2,415 1,139 1,051 - 12,139
-------- -------- -------- -------- -------- --------
Total operating expenses 78,089 34,222 3,692 10,170 46,802 172,975
-------- -------- -------- -------- -------- --------
Operating income/(loss) 96,475 (201) (3,418) 29,055 (46,802) 75,109
-------- -------- -------- -------- -------- --------
14
Selected Notes to the Unaudited US GAAP Financial Statements (continued)
(1) Analysis of revenues, operating income and reportable segments (continued)
6 months to 30 June 2003 US International Biologics Corporate R&D Total
$'000 $'000 $'000 $'000 $'000 $'000
-------- -------- -------- -------- -------- --------
Product sales 429,570 71,747 1,486 - - 502,803
Licensing and development 1,096 - - - - 1,096
Royalties 14 4,924 - 94,661 - 99,599
Other revenues 7 - - - - 7
-------- -------- -------- -------- -------- --------
Total revenues 430,687 76,671 1,486 94,661 - 603,505
-------- -------- -------- -------- -------- --------
Cost of product sales 53,259 23,096 1,283 77,638
- -
Research and development - - - - 104,695 104,695
Selling, general and administrative 135,626 38,241 4,616 34,532 - 213,015
Depreciation and amortisation 16,053 4,744 2,270 1,681 - 24,748
-------- -------- -------- -------- -------- --------
Total operating expenses 204,938 66,081 8,169 36,213 104,695 420,096
-------- -------- -------- -------- -------- --------
Operating income/(loss) 225,749 10,590 (6,683) 58,448 (104,695) 183,409
-------- -------- -------- -------- -------- --------
6 months to 30 June 2002 US International Biologics Corporate R&D Total
$'000 $'000 $'000 $'000 $'000 $'000
-------- -------- -------- -------- -------- --------
Product sales 341,208 61,563 597 - - 403,368
Licensing and development 1,203 402 - - - 1,605
Royalties 221 3,040 - 76,827 - 80,088
Other revenues - 5 - - - 5
-------- -------- -------- -------- -------- --------
Total revenues 342,632 65,010 597 76,827 - 485,066
-------- -------- -------- -------- -------- --------
Cost of product sales 29,975 24,007 759 - 54,741
-
Research and development - - - - 96,531 96,531
Selling, general and administrative 109,583 32,118 3,969 20,410 - 166,080
Depreciation and amortisation 13,479 4,698 2,185 1,950 - 22,312
-------- -------- -------- -------- -------- --------
Total operating expenses 153,037 60,823 6,913 22,360 96,531 339,664
-------- -------- -------- -------- -------- --------
Operating income/(loss) 189,595 4,187 (6,316) 54,467 (96,531) 145,402
-------- -------- -------- -------- -------- --------
Included within the selling, general and administrative costs in the corporate
segment for the 6 months to 30 June 2003 is $7.2 million in respect of the
former Chief Executive's departure.
15
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 to 30 3 months to 30 6 months to 30 6 months to 30
June 2003 June 2002 June 2003 June
$'000 $'000 $'000 2002
$'000
---------- ---------- ---------- ----------
Numerator for basic earnings per share 65,485 59,307 128,551 116,109
Interest charged on convertible debt, net of tax 1,342 1,411 2,723 2,808
---------- ---------- ---------- ----------
Numerator for diluted earnings per share 66,827 60,718 131,274 118,917
---------- ---------- ---------- ----------
Number of shares Number of shares Number of shares Number of shares
---------------- ---------------- ---------------- ----------------
Weighted average number of shares:
Basic 501,504,962 500,365,947 501,746,083 500,147,383
Effect of dilutive shares:
Stock options 2,030,976 2,357,078 1,470,870 3,910,105
Warrants - 1,144,179 - 1,144,179
Convertible debt 19,023,449 20,123,210 19,435,366 20,123,210
----------- ----------- ----------- -----------
Diluted 522,559,387 523,990,414 522,652,319 525,324,877
----------- ----------- ----------- -----------
Basic earnings per share 13.1c 11.9c 25.6c 23.2c
----------- ---------- ---------- ----------
Diluted earnings per share 12.8c 11.6c 25.1c 22.6c
----------- ---------- ---------- ----------
Warrants to purchase approximately 1.4 million common shares for the 3 and 6
months ended 30 June 2003 were anti-dilutive and were therefore excluded from
the computation of diluted earnings per share.
Stock options to purchase approximately 18.1 million and 18.0 million common
shares for the 3 months and 6 months ended June 30, 2003 respectively, were
anti-dilutive and were therefore excluded from the computation of diluted
earnings per share.
16
Selected Notes to the Unaudited US GAAP Financial Statements (continued)
(3) Analysis of revenues
3 months to 3 months to 3 months to 3 months to
30 June 2003 30 June 2002 30 June 2003 30 June 2003
$'000 $'000 % change % of total
-------- -------- -------- ------
Net product sales:
ADDERALL XR 102,429 75,821 +35% 34%
ADDERALL 19,191 28,321 -32% 7%
AGRYLIN 36,551 29,435 +24% 12%
PENTASA 24,754 21,479 +15% 8%
PROAMATINE 18,301 10,868 +68% 6%
CARBATROL 13,915 12,574 +11% 5%
Calciums 6,359 5,703 +12% 2%
Others 24,950 22,660 +10% 8%
-------- -------- -------- -------
246,450 206,861 +19% 82%
-------- -------- -------- -------
Royalty income:
3TC 37,540 30,720 +22% 13%
ZEFFIX 5,721 4,510 +27% 2%
Others 8,575 5,282 +62% 3%
-------- -------- -------- -------
51,836 40,512 +28% 18%
-------- -------- -------- -------
Licensing 702 923 -24% -
Other - (212) - -
-------- -------- -------- -------
Total revenues 298,988 248,084 +21% 100%
-------- -------- -------- -------
6 months to 6 months to 6 months to 6 months to
30 June 2003 30 June 2002 30 June 2003 30 June 2003
$'000 $'000 % change % of total
-------- -------- -------- ------
Net product sales:
ADDERALL XR 217,592 137,696 +58% 36%
ADDERALL 38,090 74,491 -49% 6%
AGRYLIN 76,225 52,871 +44% 13%
PENTASA 54,473 39,026 +40% 9%
PROAMATINE 32,136 20,441 +57% 5%
CARBATROL 23,336 24,146 -3% 4%
Calciums 12,467 10,402 +20% 2%
Others 48,484 44,295 +9% 8%
-------- -------- -------- -------
502,803 403,368 +25% 83%
-------- -------- -------- -------
Royalty income:
3TC 71,679 61,356 +17% 12%
ZEFFIX 12,120 9,803 +24% 2%
Others 15,800 8,929 +77% 3%
-------- -------- -------- -------
99,599 80,088 +24% 17%
-------- -------- -------- -------
Licensing 1,096 1,605 -32% -
Other 7 5 +35% -
-------- -------- -------- -------
Total revenues 603,505 485,066 +24% 100%
-------- -------- -------- -------
17
UK GAAP Results
Unaudited and Unreviewed Consolidated Profit and Loss Account
(Audited)
3 months to 3 months to 6 months to 6 months to Year
30 June 30 June 30 June 30 June to
2003 2002 2003 2002 31 Dec
(pound)'000 (pound)'000 (pound)'000 (pound)'000 2002
(pound)'000
-------- -------- -------- -------- --------
Turnover: group and share of joint venture 186,628 171,825 378,638 341,070 697,314
Less: share of joint venture's turnover (810) - (1,536) - (762)
-------- -------- -------- -------- --------
Group turnover on continuing operations
185,818 171,825 377,102 341,070 696,552
Discontinued operations - 4,128 - 8,520 15,975
-------- -------- -------- -------- --------
Group turnover 185,818 175,953 377,102 349,590 712,527
Cost of sales (27,162) (21,974) (49,496) (41,415) (95,042)
-------- -------- -------- -------- --------
Gross profit 158,656 153,979 327,606 308,175 617,485
Net operating expenses (130,065) (134,199) (274,014) (271,084) (1,150,630)
-------- -------- -------- -------- --------
Operating profit/(loss): 28,591 19,780 53,592 37,091 (533,145)
- ------------------------------------------- -------------- -------------- --------------- -------------- --------------
- ------------------------------------------- -------------- -------------- --------------- -------------- --------------
Continuing operations - Group 28,591 18,100 53,592 33,585 (541,603)
Discontinued operations - 1,680 - 3,506 8,458
-------- -------- -------- -------- --------
28,591 19,780 53,592 37,091 (533,145)
- ------------------------------------------- -------------- -------------- --------------- -------------- --------------
- ------------------------------------------- -------------- -------------- --------------- -------------- --------------
Share of joint venture's operating loss (1,263) - (1,991) - (559)
Finance charges, net 1,492 3,401 3,177 795 6,931
-------- -------- -------- -------- --------
Profit/(loss) on ordinary activities
before taxation 28,820 23,181 54,778 37,886 (526,773)
Tax on profit/(loss) on ordinary
activities (15,628) (15,121) (30,815) (29,372) (61,626)
-------- -------- -------- -------- --------
Retained profit/(loss) for the period
transferred to/(from) reserves 13,192 8,060 23,963 8,514 (588,399)
-------- -------- -------- -------- --------
Earnings/(loss) per share
Basic 2.6p 1.6p 4.8p 1.7p (117.5p)
Diluted 2.6p 1.6p 4.8p 1.7p (117.5p)
Unaudited and Unreviewed Consolidated Statement of Total Recognised Gains and Losses
(Audited)
3 months to 3 months to 6 months to 6 months to Year
30 June 30 June 30 June 30 June to
2003 2002 2003 2002 31 Dec
(pound)'000 (pound)'000 (pound)'000 (pound)'000 2002
(pound)'000
-------- -------- -------- -------- --------
Profit/(loss) for the period 13,192 8,060 23,963 8,514 (588,399)
Translation of the financial statements
of overseas subsidiaries (20,039) (36,865) 8,834 (15,757) (62,739)
-------- -------- -------- -------- --------
Total recognised gains and losses relating
to the period (6,847) (28,805) 32,797 (7,243) (651,138)
-------- -------- -------- -------- --------
18
UK GAAP Results
Unaudited and Unreviewed Consolidated Balance Sheet
(Audited)
30 June 31 Dec 30 June
2003 2002 2002
(pound)'000 (pound)'000 (pound)'000
-------- -------- --------
Fixed assets
Intangible assets - intellectual property 186,541 183,404 252,272
Intangible assets - goodwill 1,847,076 1,900,896 2,577,186
Tangible assets 101,209 84,001 77,191
Fixed asset investments 37,411 37,345 43,829
Investment in joint ventures
Share of gross assets 3,850 5,082 -
Share of gross liabilities (523) (342) -
-------- -------- --------
2,175,564 2,210,386 2,950,478
-------- -------- --------
Current assets
Stocks 32,969 30,571 37,913
Debtors
- - due within one year excluding deferred tax 136,073 106,125 121,296
- - due within one year - deferred tax 22,275 21,646 17,589
- - due after more than one year excluding deferred tax 13,713 9,535 11,194
- - due after more than one year - deferred tax 13,393 3,861 6,512
Current asset investments 206,386 196,364 252,267
Cash at bank and in hand 513,548 558,432 365,413
-------- -------- --------
938,357 926,534 812,184
Creditors: Amounts falling due within one year
Convertible debt - - (984)
Other creditors (132,601) (131,885) (106,789)
-------- -------- --------
(132,601) (131,885) (107,773)
-------- -------- --------
Net current assets 805,756 794,649 704,411
-------- -------- --------
Total assets less current liabilities 2,981,320 3,005,035 3,654,889
Creditors: amounts falling due after more than one year
Convertible debt (219,544) (243,547) (256,078)
Other creditors (11,683) (13,782) (9,715)
-------- -------- --------
(231,227) (257,329) (265,793)
-------- -------- --------
Net assets 2,750,093 2,747,706 3,389,096
-------- -------- --------
Capital and reserves
Called-up share capital 23,866 24,217 24,153
Share premium 3,217,006 3,214,512 3,211,842
Exchangeable shares 190,442 191,552 191,781
Capital reserve 2,755 2,755 2,755
Capital redemption reserve 380 - -
Other reserves 24,247 24,247 24,247
Profit and loss account (708,603) (709,577) (65,682)
-------- -------- --------
Equity shareholders' funds 2,750,093 2,747,706 3,389,096
-------- -------- --------
19
UK GAAP Results
Unaudited and Unreviewed Consolidated cash flow statement
6 months to 6 months to
30 June 30 June
2003 2002
(pound)'000 (pound)'000
-------- --------
Net cash inflow from operating activities (note 2a) 98,224 127,987
Returns on investments and servicing of finance:
Interest received 7,303 6,632
Interest paid (4,126) (2,592)
-------- --------
Net cash inflow from returns on investments and servicing of
finance 3,177 4,040
-------- --------
Taxation:
Overseas corporation tax paid (46,605) (47,890)
-------- --------
Capital expenditure and financial investments:
Purchase of long term investment (912) (2,400)
Purchase of intangible fixed assets (14,568) (12,900)
Purchase of tangible fixed assets (16,992) (4,175)
-------- --------
Net cash outflow for capital expenditure and financial investments (32,472) (19,475)
-------- --------
Cash inflow before management of liquid resources and financing 22,324 64,662
-------- --------
Management of liquid resources:
(Decrease)/increase in cash placed on short-term deposit (6,235) 238,983
Financing:
Payments for redemption of share capital (31,822) -
Exercise of share options 1,412 2,433
Net decrease in debt during the year (18,475) (1,725)
-------- --------
Net cash (outflow)/inflow from financing (48,885) 708
-------- --------
(Decrease)/increase in cash in the year (32,796) 304,353
-------- --------
20
Selected Notes to the Unaudited and Unreviewed 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.
The warrants to purchase approximately 1.4 million common shares for the 3 and 6
months ended 30 June 2003 were anti-dilutive and were therefore excluded from
the computation of diluted earnings per share.
(Audited)
3 months to 3 months to 6 months to 6 months to Year to
30 June 30 June 30 June 30 June 31 Dec
2003 2002 2003 2002 2002
(pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
---------- ---------- ---------- ---------- ----------
Profit for the period (for basic and
diluted EPS) 13,192 8,060 23,963 8,514 (588,399)
---------- ---------- ---------- ---------- ----------
Number of Number of Number of Number of Number of
shares shares shares shares shares
---------- ---------- ---------- ---------- ----------
Weighted average number of shares:
Basic 501,504,962 500,365,947 501,746,083 500,147,383 500,687,594
Conversion of convertible debt - 276,033 - 276,033 -
Exercise of share options 2,030,976 2,357,078 1,470,870 3,910,104 -
Exercise of warrants - 1,144,179 - 1,144,179 -
---------- ---------- ---------- ---------- ----------
Fully diluted 503,535,938 504,143,237 503,216,953 505,477,699 500,687,594
---------- ----------- ----------- ----------- ----------
21
Selected Notes to the Unaudited and Unreviewed UK GAAP Financial Statements
(continued)
(2) Notes to the consolidated cash flow statement
(a) Reconciliation of operating profit to net cash inflow from operating
activities
6 months to 6 months to
30 June 2003 30 June 2002
(pound)'000 (pound)'000
---------- ----------
Group operating profit 53,592 37,091
Exchange loss 2,298 5,671
Depreciation 4,734 4,527
Amortisation of intangible fixed assets 62,630 75,302
Write-down of fixed asset investments 5,251 1,853
Write-down on intangible fixed assets 1,996 3,124
Increase in stocks (2,398) (5,833)
(Increase)/decrease in debtors (26,494) 50,082
Decrease in creditors (3,385) (43,830)
---------- ---------
Net cash inflow from operating activities 98,224 127,987
---------- ----------
(b) Analysis and reconciliation of net funds
Start of Cash Exchange movement End of
6 months to 30 June 2003 period flow (pound)'000 period
(pound)'000 (pound)'000 (pound)'000
-------- -------- -------- --------
Cash at bank and in hand 558,432 (32,796) (12,088) 513,548
Debt due within one year (389) (1) (52) (442)
Finance leases (162) (19) 2 (179)
-------- -------- -------- --------
557,881 (32,816) (12,138) 512,927
Debt due after one year (244,325) 18,408 5,490 (220,427)
Finance leases (3,757) 87 89 (3,581)
-------- -------- -------- --------
309,799 (14,321) (6,559) 288,919
Current asset investments 196,364 6,235 3,787 206,386
-------- -------- -------- --------
506,163 (8,086) (2,772) 495,305
-------- -------- -------- --------
Start of Cash Exchange movement End of
6 months to 30 June 2002 period flow (pound)'000 period
(pound)'000 (pound)'000 (pound)'000
-------- -------- -------- --------
Cash at bank and in hand 81,434 304,356 (20,377) 365,413
Debt due within one year (3,008) 1,599 (2) (1,411)
-------- -------- -------- --------
78,426 305,955 (20,379) 364,002
Debt due after one year (269,883) 126 12,397 (257,360)
-------- -------- -------- --------
(191,457) 306,081 (7,982) 106,642
Current asset investments 497,397 (238,983) (6,147) 252,267
-------- -------- -------- --------
305,940 67,098 (14,129) 358,909
-------- -------- -------- --------
22
Selected Notes to the Unaudited and Unreviewed UK GAAP Financial Statements
(continued)
(c) Reconciliation of net funds
6 months to 6 months to 30
30 June 2003 June
(pound)'000 2002
(pound)'000
---------- ----------
(Decrease)/increase in cash in the period (32,796) 304,356
Cash outflow from increase in debt and lease financing 18,475 1,725
Cash outflow/(inflow) from increases/(decreases) in liquid resources 6,235 (238,983)
---------- ----------
Change in net funds resulting from cash flows (8,086) 67,098
Translation difference (2,772) (14,129)
---------- ----------
Movement in net funds in period (10,858) 52,969
Net funds at start of period 506,163 305,940
---------- ----------
Net funds at end of period 495,305 358,909
---------- ----------
(2) Basis of preparation
The Group has applied consistent accounting policies throughout both periods.
The results for the 3 and 6 months ended 30 June 2003 have not been audited or
reviewed and do not constitute statutory accounts within the meaning of Section
240 of the Companies Act 1985.
The UK interim financial statements were approved by the Board on 30 July 2003.
23