Shire's Quarterly Revenues Grow by 25% to $1 Billion for the First Time
DUBLIN, July 28, 2011 /PRNewswire/ --
Shire plc (LSE: SHP, NASDAQ: SHPGY), the global specialty biopharmaceutical company, announces results for the three months to June 30, 2011.
Financial Highlights Q2 2011(1)
Product sales $993 million +30%
Total revenues $1,063 million +25%
Non GAAP operating income $342 million +26%
US GAAP operating income $283 million +26%
Non GAAP diluted earnings per ADS $1.33 +29%
US GAAP diluted earnings per ADS $1.08 +26%
Non GAAP cash generation $440 million +7%
Non GAAP free cash flow $235 million -1%
US GAAP net cash provided by operating activities $284 million 0%
(1) Percentages compare to equivalent period in 2010.
The Non GAAP financial measures included within this release are explained on page 25, and are reconciled to the most directly comparable financial measures prepared in accordance with US GAAP on pages 20 - 24.
Angus Russell, Chief Executive Officer, commented:
"It's been another strong quarter with Shire continuing to perform very well. Total revenues were up 25% and for the first time exceeded $1billion for the quarter and we have reported a 29% increase in Non GAAP diluted earnings per ADS.
Product sales increased by 30%. Our rare disease treatments are performing well around the world; the FDA Advisory Committee recommended approval and self administration of FIRAZYR for acute attacks of Hereditary Angioedema and we're now preparing for a US launch, in anticipation of what we hope will be an FDA approval in August. We're very pleased that the European Medicines Agency has approved the purification of REPLAGAL for Fabry disease at our new facility in Massachusetts, giving us increased manufacturing flexibility.
Sales of our ADHD products increased significantly in the US market, driven by increasing market share and further strong market growth. In our GI franchise, LIALDA performed well and we were pleased to receive US approval for maintenance of remission in patients with ulcerative colitis.
As well as growing our existing business, we're continuing to invest in our portfolio for the future. In our pipeline we're generating data for new indications and new markets, in addition to developing new proprietary technology platforms. During the quarter, we also completed our acquisition of Advanced BioHealing bringing us DERMAGRAFT, a US marketed product and the opportunity to build an important business in the promising field of regenerative medicine.
During the year we have seen market consensus for 2011 earnings increase. Our performance in the first six months of the year has further underpinned our confidence in meeting these increased expectations for 2011. We anticipate that this will be another very good year for Shire as we deliver strong sales and continue our investment for sustained future growth."
FINANCIAL SUMMARY
Second Quarter 2011 Unaudited Results
Q2 2011 Q2 2010
Non Non
US GAAP Adjustments GAAP US GAAP Adjustments GAAP
$M $M $M $M $M $M
Total
revenues 1,063 - 1,063 849 - 849
Operating
income 283 59 342 224 46 270
Diluted
earnings
per ADS $1.08 $0.25 $1.33 $0.86 $0.17 $1.03
- Product sales were up 30% to $993 million (Q2 2010: $764 million) as strong growth continued through the second quarter, assisted in part by favorable foreign exchange. On a constant exchange rate ("CER") basis, which is a Non GAAP measure, product sales were up 26%.
- Product sales excluding ADDERALL XR® increased by $163 million (up 24%) compared to Q2 2010, particularly driven by VYVANSE® (up 26% to $186 million), LIALDA®/MEZAVANT® (up 43% to $99 million), REPLAGAL® (up 46% to $120 million) and VPRIV® (up 121% to $63 million).
- Product sales in Q2 2011 benefited from an exceptionally strong quarterly performance from ADDERALL XR, up $67 million (or 83%), to $147 million, principally due to significantly lower sales rebates (as a percentage of sales) in Q2 2011 compared to Q2 2010, primarily driven by the mix of customer sales.
- Non GAAP operating income was up 26% to $342 million (Q2 2010: $270 million). As expected Non GAAP operating expenses increased as we continue to invest in our targeted research and development ("R&D") programs and incur higher selling, general and administrative ("SG&A") expenditure to support our continued growth and planned product launches. On a US GAAP basis, operating income was up 26% to $283 million (Q2 2010: $224 million).
- Non GAAP diluted earnings per American Depositary Share ("ADS") were up 29% to $1.33 (Q2 2010: $1.03), due to the higher Non GAAP operating income and a lower quarterly Non GAAP effective tax rate of 23% (Q2 2010: 25%). On a US GAAP basis, diluted earnings per ADS were up 26% to $1.08 (Q2 2010: $0.86).
- Cash generation, a Non GAAP measure, was up 7% to $440 million (Q2 2010: $411 million). Higher cash receipts from gross product sales were partially offset by significantly higher sales deduction payments in Q2 2011, due to higher rebate levels in 2011 and timing delays for rebate payments in 2010 following US Healthcare Reform, together with higher payments on operating expenditure.
- Free cash flow, also a Non GAAP measure, was down 1% to $235 million (Q2 2010: $239 million) as higher cash generation was offset by higher capital expenditure and cash tax payments in Q2 2011 compared to Q2 2010.
- On a US GAAP basis, net cash provided by operating activities was $284 million (Q2 2010: $284 million).
- Non GAAP net debt at June 30, 2011 was $972 million (December 31, 2010: $531 million), an increase of $441 million, as the net cash provided by operating activities in H1 2011 and existing cash resources were used to fund the acquisition of Advanced BioHealing Inc. ("ABH"), other capital expenditure, the dividend payment and the purchase of shares by the Employee Share Ownership Trust ("ESOT").
2011 OUTLOOK
The strong first half performance has further underpinned our confidence in meeting increased market consensus for 2011 earnings. This includes absorbing the marginal dilution of the acquisition of ABH.
For the full year we expect to see strong product sales growth, and royalty and other revenues combined to be down 10% compared to 2010. Taken together, year on year growth of total revenues in the second half is expected to be marginally lower than the rate of 22% seen in the first half.
Gross margins are expected to be marginally diluted in the second half as a result of the inclusion of ABH, although gross margins for the full year should still be in line with those recorded in 2010.
As we have previously indicated, we have identified significant opportunities for future growth by advancing our pipeline and continuing the international expansion of our portfolio. Combined R&D and SG&A, which was set to increase by 13% is now expected to increase in the full year by around 20% year on year. This reflects the inclusion of ABH's cost base (representing an increase in our 2011 full year cost guidance of 5%) and our view of the likely impact of foreign exchange movements on our R&D and SG&A plans in 2011.
We continue to expect our Non GAAP effective tax rate to be between 22 and 24%.
Overall, the operational leverage we expect to achieve for the full year will drive good earnings growth in 2011 and we reiterate our aspirational growth targets.
PLANNED PRODUCT LAUNCHES
Subject to obtaining the requisite regulatory/governmental approvals, planned product launches over the next 12 months include:
- EQUASYM® for the treatment of ADHD in certain European countries;
- RESOLOR® in certain European countries, for the symptomatic treatment of chronic constipation in women for whom laxatives fail to provide adequate relief;
- DERMAGRAFT® for the treatment of Diabetic Foot Ulcers ("DFU") in Canada;
- VPRIV for the treatment of Type 1 Gaucher disease in certain European and Latin American countries; and
- FIRAZYR® for the symptomatic treatment of acute attacks of hereditary angioedema ("HAE") in the US and certain European and Latin American countries.
SECOND QUARTER 2011 AND RECENT PRODUCT AND PIPELINE DEVELOPMENTS
Products
FIRAZYR - for the treatment of HAE
- On June 23, 2011 Shire announced that the Pulmonary-Allergy Drugs Advisory Committee to the U.S. Food and Drug Administration ("FDA") recommended, by a vote of twelve to one, that the efficacy and safety data for FIRAZYR provides substantial evidence to support approval of FIRAZYR for the treatment of acute attacks of HAE in patients 18 years and older. In addition, by a vote of eleven to one, with one abstention, the Committee recommended self-administration of the drug by patients. Shire has been assigned an action date of August 25, 2011 under the Prescription Drug User Fee Act.
REPLAGAL - for the treatment of Fabry disease
- On June 24, 2011 Shire announced that the European Medicines Agency has approved the purification of REPLAGAL drug substance at its new manufacturing facility in Lexington, MA. REPLAGAL is the first product that will be made available to patients from the new facility. With this approval, Shire now has two approved facilities for the production of Human Genetic Therapies ("HGT") products - Alewife, which is located in Cambridge, MA, and the new Lexington facility. This provides increased manufacturing flexibility for REPLAGAL.
VPRIV - for the treatment of Type 1 Gaucher disease
- Shire's continuing priority is to ensure long-term, uninterrupted treatment for patients with Type I Gaucher disease with VPRIV at the approved dose and frequency prescribed by their physician. Shire continues to meet all requested demand for VPRIV globally and continues to supply the product to new patients - either naïve to therapy or those switching from different therapies. Shire can continue to meet all anticipated demand for VPRIV globally. We are working to obtain approval of the new manufacturing facility in Lexington for VPRIV which will provide substantial additional manufacturing capacity. Process validation runs are currently ongoing.
INTUNIV® - for the treatment of ADHD
- On April 4, 2011, following approval by the FDA on February 28, 2011, Shire launched once-daily INTUNIV extended-release tablets as adjunctive therapy to stimulants for the treatment of ADHD in children and adolescents aged 6 to 17 as part of a total treatment program.
MEZAVANT - for the treatment of ulcerative colitis
- On June 7, 2011 following approval by Health Canada on February 10, 2011 Shire announced the launch of MEZAVANT for the new expanded indication to include maintenance of clinical and endoscopic remission (mucosal healing) in patients with ulcerative colitis. MEZAVANT is the first and only once-daily treatment indicated in Canada for this expanded indication, which was approved following MEZAVANT's demonstrated efficacy and long-term safety profile during maintenance clinical trials of up to 12 months.
LIALDA - for the treatment of ulcerative colitis
- On July 14, 2011 the FDA approved LIALDA for the maintenance of remission in patients with ulcerative colitis. This approval is based on results from a six-month study demonstrating the safety and effectiveness of LIALDA in maintaining endoscopic remission in adult patients. This approval follows the previous indication of LIALDA approved by the FDA in 2007 for the induction of remission in patients with active, mild to moderate ulcerative colitis.
DERMAGRAFT - for the treatment of DFU
- On March 21, 2011, prior to acquisition by Shire, ABH filed a Class IV Medical Device Application to Health Canada to seek approval for DERMAGRAFT for the treatment of DFU.
Pipeline
DERMAGRAFT - for the treatment of Venous Leg Ulcers ("VLU")
- A pivotal Phase 3 clinical trial to assess the efficacy and safety of DERMAGRAFT in treating VLU is ongoing.
Guanfacine Carrier Wave, for the treatment of various Central Nervous System ("CNS") disorders
- An improved lead candidate has been selected for development and a Phase 1 program has been initiated to determine safety and tolerability of this compound. The ongoing Phase 1 program will be supportive of potentially three different CNS-related indications: ADHD, hyperactivity in Autism Spectrum Disorder and Paediatric Anxiety.
OTHER SECOND QUARTER DEVELOPMENTS
Acquisition of ABH
- On June 28, 2011 Shire announced that it had completed the acquisition of ABH for a cash purchase price of $739 million. A strong strategic fit for Shire, the ABH business becomes part of Shire's Specialty Pharmaceuticals ("SP") business. This acquisition combines ABH's experience and commercial capability in regenerative medicine with Shire's strengths and expertise in human cell biological manufacturing. It also creates a new strategic platform based on tissue regeneration using cell-based therapies and adds DERMAGRAFT, a leading US marketed product for DFU, to Shire's portfolio. There are also further growth prospects for DERMAGRAFT through a potential expanded indication for VLU.
Legal Proceedings
VYVANSE - for the treatment of ADHD
- In May and June 2011, Shire was notified that six separate Abbreviated New Drug Applications ("ANDAs") were submitted under the Hatch-Waxman Act seeking permission to market generic versions of all approved strengths of VYVANSE. The notices were from Sandoz, Inc.; Amneal Pharmaceuticals LLC; Watson Laboratories, Inc.; Roxane Laboratories, Inc.; Mylan Pharmaceuticals, Inc.; and Actavis Elizabeth LLC and Actavis Inc. Within the requisite 45 day period, Shire filed lawsuits for infringement of certain of Shire's VYVANSE patents against all the ANDA filers. The filing of the lawsuits triggered a stay of approval of all six ANDAs for up to 30 months.
BOARD CHANGES
On July 27, 2011, Shire announced that Susan Kilsby will join the Shire Board of Directors from September 1, 2011. On joining the Board Susan will become a member of the Company's Audit, Compliance and Risk Committee. Susan has a distinguished global career in investment banking, most recently with Credit Suisse, where she was Chairman of the EMEA Mergers & Acquisitions team.
In addition, current Board Directors Bill Burns and David Stout will join the Nomination Committee and Remuneration Committee respectively with immediate effect.
DIVIDEND
In respect of the six months ended June 30, 2011, the Board resolved to pay an interim dividend of 2.48 US cents per Ordinary Share (2010: 2.25 US cents per Ordinary share).
Dividend payments will be made in Pounds Sterling to ordinary shareholders and in US Dollars to holders of ADSs. A dividend of 1.52 pence per ordinary share (an increase of 8% compared to 2010: 1.41 pence) and 7.44 US cents per ADSs (an increase of 10% compared to 2010: 6.75 US cents) will be paid on October 6, 2011 to persons whose names appear on the register of members of Shire at the close of business on September 9, 2011.
ADDITIONAL INFORMATION
The following additional information is included in this press release:
Page
Overview of Second Quarter 2011 Financial Results 7
Financial Information 11
Non GAAP Reconciliations 20
Safe Harbor Statement 24
Explanation of Non GAAP Measures 25
Trademarks 26
Dial in details for the live conference call for investors 14:00 BST/9:00 EDT on July 28, 2011:
UK dial in: 0800-077-8492 or 0844-335-0351
US dial in: 1-866-8048688 or 1-718-3541175
International dial in: +44-208-974-7900
Password/Conf ID: 818608
Live Webcast: http://www.shire.com/shireplc/en/investors
OVERVIEW OF SECOND QUARTER 2011 FINANCIAL RESULTS
1. Product sales
For the three months to June 30, 2011 product sales increased by 30% to $993.3 million (Q2 2010: $764.3 million) and represented 93% of total revenues (Q2 2010: 90%).
Product Highlights
US Exit
Market
Year on year growth Share(1)
Product Sales $M Sales CER US Rx(1)
VYVANSE 185.9 +26% +25% +21% 15%
ADDERALL XR 146.9 +83% +82% +16% 8%
ELAPRASE(R) 127.8 +28% +20% n/a(2) n/a(2)
REPLAGAL 119.9 +46% +32% n/a(3) n/a(3)
LIALDA / MEZAVANT 99.2 +43% +41% +8% 20%
PENTASA(R) 65.8 +9% +9% -3% 15%
VPRIV 63.3 +121% +110% n/a(2) n/a(2)
INTUNIV 59.6 +16% +16% +88% 4%
FOSRENOL(R) 45.3 +0% -5% -13% 6%
FIRAZYR 5.6 +115% +89% n/a(3) n/a(3)
DERMAGRAFT 2.0 n/a n/a n/a n/a
RESOLOR 1.6 n/a n/a n/a(3) n/a(3)
OTHER 70.4 -27% -32% n/a n/a
Total product sales 993.3 +30% +26%
(1) Data provided by IMS Health National Prescription Audit ("IMS NPA"). Exit market share represents the average monthly US market share in the month ended June 30, 2011.
(2) IMS NPA Data not available.
(3) Not sold in the US in Q2 2011.
VYVANSE - ADHD
The growth in VYVANSE product sales resulted from higher prescription demand, due to growth in the US ADHD market and increases to VYVANSE's share of that market, in addition to the effect of price increases taken since Q2 2010. These positive factors were partially offset by higher sales deductions in Q2 2011 compared to Q2 2010, primarily due to a change in the estimate of VYVANSE inventory in the US retail pipeline, which increased sales rebates in the quarter.
ADDERALL XR - ADHD
Product sales grew at a faster rate than US prescription demand due to the effect of significantly lower sales deductions as a percentage of branded gross sales together with the effect of a price increase taken since Q2 2010. Sales deductions were at 59% in Q2 2011 compared to 74% in Q2 2010, which was notably above the average sales deduction levels experienced in other quarters in 2010.
Sales deductions as a percentage of gross product sales decreased in Q2 2011 primarily due to the mix of customer sales affecting the rebate calculation. We expect ADDERALL XR's sales deductions to be closer to the 65-70% range for the remainder of the year.
ELAPRASE- Hunter syndrome
The growth in sales of ELAPRASE was driven by increased volumes across all regions in which ELAPRASE is sold and the timing of large orders from certain markets which order less frequently falling in Q2 2011 rather than Q1 2011. Reported ELAPRASE sales also benefited from favorable foreign exchange, due to the weaker US dollar in Q2 2011 compared to Q2 2010.
REPLAGAL - Fabry disease
The growth in REPLAGAL product sales was driven by the treatment of new patients, being both naïve patients and switches from the competing enzyme replacement therapy product. Reported REPLAGAL sales also benefited from favourable foreign exchange, due to the weaker US dollar in Q2 2011 compared to Q2 2010.
LIALDA/MEZAVANT - Ulcerative colitis
LIALDA/MEZAVANT product sales continued to grow in Q2 2011, driven primarily by increased US prescription demand due to higher US market share, the effect of price increases taken since Q2 2010 and stocking in Q2 2011 compared to destocking in Q2 2010.
VPRIV - Gaucher disease
VPRIV has seen significant growth since its approval in the US in Q1 2010 and in Europe in Q3 2010. Growth in patients being treated with VPRIV continues and we are progressing with our launch plans in countries across Europe. Reported VPRIV sales also benefited from favourable foreign exchange, due to the weaker US dollar in Q2 2011 compared to Q2 2010.
INTUNIV - ADHD
INTUNIV prescription demand continues to grow strongly, up 88% compared to Q2 2010. The growth in product sales was less than US prescription demand due to higher sales deductions in Q2 2011 compared to Q2 2010, and the inclusion in Q2 2010 product sales of previously deferred revenues relating to launch stocking shipments made in 2009.
FOSRENOL - Hyperphosphatemia
Product sales of FOSRENOL were flat as the effect of price increases taken since Q2 2010 and positive foreign exchange offset lower US prescription demand due to a fall in market share. On a CER basis sales were down quarter on quarter by 5%.
2. Royalties
Year on year growth
Royalties to
Product Shire $M Royalties CER
ADDERALL XR 1.00 26.9 -2% -2%
FOSRENOL 1.00 12.4 107% 107%
3TC(R) and Zeffix(R) 1.00 11.3 -70% -70%
Other 1.00 12.8 15% 5%
Total 1.00 63.4 -23% -25%
Royalty income decreased in Q2 2011 compared to Q2 2010 as higher royalties on FOSRENOL were more than offset by lower royalties from 3TC and Zeffix.
Royalty income from 3TC and Zeffix continues to be adversely impacted by increased competition from other products. Additionally, for certain territories in the second quarter of 2011 Shire did not recognise 3TC royalties for the current quarter, and reversed 3TC royalty income recognised in the prior two quarters, due to a difference of opinion between GlaxoSmithKline ("GSK") and Shire about how the relevant royalty rate should be applied given the expiry dates of certain patents. GSK and Shire are holding discussions in order to clarify this discrepancy.
FOSRENOL royalties increased in Q2 2011 due to higher demand for the product by Shire's Japanese partner given supply issues of a competitor resulting from the Japanese earthquakes earlier in 2011.
3. Financial details
Cost of product sales
% of % of
product product
Q2 2011 sales Q2 2010 sales
$M $M
Cost of product sales (US
GAAP) 143.7 14% 119.1 16%
Transfer of manufacturing
from Owings Mills (2.8) (7.4)
Depreciation (8.3) (3.8)
Cost of product sales (Non
GAAP) 132.6 13% 107.9 14%
Cost of product sales as a percentage of product sales decreased in Q2 2011 compared to the same period in 2010, due to product sales growth from higher margin products and improved margins from Shire's ADHD products.
R&D
% of % of
product product
Q2 2011 sales Q2 2010 sales
$M $M
R&D (US GAAP) 176.9 18% 147.0 19%
Depreciation (6.1) (3.5)
R&D (Non GAAP) 170.8 17% 143.5 19%
Non GAAP R&D costs increased by $27.3 million, or 19%, due to continued increased investment in a number of targeted R&D programs, including Sanfilippo A and other early stage development programs, continued investment in new uses for VYVANSE and the inclusion of a full quarter's spend on RESOLOR which was not incurred in Q2 2010. Non GAAP R&D costs in Q2 2011 were also impacted by adverse foreign exchange compared to 2010 of approximately $7 million. On a CER basis Non GAAP R&D costs increased by approximately 15%.
On a US GAAP basis, R&D costs in Q2 2011 increased by $29.9 million, or 20% compared to Q2 2010.
SG&A
% of % of
product product
Q2 2011 sales Q2 2010 sales
$M $M
SG&A (US GAAP) 440.3 44% 354.4 46%
Intangible asset
amortization (36.7) (33.8)
Depreciation (15.1) (16.6)
SG&A (Non GAAP) 388.5 39% 304.0 40%
Non GAAP SG&A increased by $84.5 million, or 28%, as we support our continued growth and planned product launches. Additionally, Non GAAP SG&A increased in Q2 2011 due to the inclusion of costs for Movetis and our international commercial hub in Switzerland which were not incurred in Q2 2010. Non GAAP SG&A costs in Q2 2011 were also impacted by adverse foreign exchange compared to 2010 of approximately $20 million. On a CER basis Non GAAP SG&A increased by approximately 21%.
On a US GAAP basis, SG&A costs in Q2 2011 increased by $85.9 million, or 24%, compared to Q2 2010.
Reorganization costs
For the three months to June 30, 2011 Shire recorded reorganization costs of $7.5 million (Q2 2010: $8.6 million) relating to the transfer of manufacturing from its Owings Mills facility and the establishment of an international commercial hub in Switzerland.
Integration and acquisition costs
For the three months to June 30, 2011 Shire recorded integration and acquisition costs of $9.0 million (Q2 2010: $nil), relating to the acquisition and integration of ABH ($6.9 million) and the integration of Movetis ($2.1 million).
Interest expense
For the three months to June 30, 2011 the Company incurred interest expense of $9.9 million (Q2 2010: $8.3 million). Interest expense principally relates to the coupon and amortization of issue costs on Shire's $1,100 million 2.75% convertible bonds due 2014.
Taxation
The effective rate of tax for the three months to June 30, 2011 was 25% (Q2 2010: 25%), and the effective rate of tax on Non GAAP income was 23% (Q2 2010: 25%).
The Non GAAP effective tax rate in Q2 2011 is lower than Q2 2010 due to favourable changes in profit mix, an increase in US tax incentives (notably the domestic production deduction), and the effect of changes to the estimated effective US State tax rate on existing US deferred tax assets following the acquisition of ABH in the quarter.
FINANCIAL INFORMATION
Unaudited US GAAP financial position as of June 30, 2011
Consolidated Balance Sheets
June 30, December 31,
2011 2010
$M $M
ASSETS
Current assets:
Cash and cash equivalents 144.6 550.6
Restricted cash 21.9 26.8
Accounts receivable, net 797.2 692.5
Inventories 336.3 260.0
Deferred tax asset 166.9 182.0
Prepaid expenses and other current assets 198.6 168.4
Total current assets 1,665.5 1,880.3
Non-current assets:
Investments 125.7 101.6
Property, plant and equipment, net 905.8 853.4
Goodwill 612.9 402.5
Other intangible assets, net 2,679.4 1,978.9
Deferred tax asset 128.3 110.4
Other non-current assets 48.0 60.5
Total assets 6,165.6 5,387.6
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued expenses 1,317.5 1,239.3
Convertible bonds 1,100.0 -
Deferred tax liability 4.4 4.4
Other current liabilities 75.5 49.6
Total current liabilities 2,497.4 1,293.3
Non-current liabilities:
Convertible bonds - 1,100.0
Deferred tax liability 579.0 352.1
Other non-current liabilities 173.6 190.8
Total liabilities 3,250.0 2,936.2
Equity:
Common stock of 5p par value; 1,000 million
shares authorized; and 562.3 million shares
issued and outstanding (2010: 1,000 million
shares authorized; and 562.2 million shares
issued and outstanding) 55.7 55.7
Additional paid-in capital 2,799.6 2,746.4
Treasury stock: 11.5 million shares (2010: 14.0
million) (253.4) (276.1)
Accumulated other comprehensive income 204.3 85.7
Retained earnings / (accumulated deficit) 109.4 (160.3)
Total equity 2,915.6 2,451.4
Total liabilities and equity 6,165.6 5,387.6
Unaudited US GAAP results for the three months and six months to June 30, 2011
Consolidated Statements of Income
3 months to 3 months to 6 months to 6 months to
June 30, June 30, June 30, June 30,
2011 2010 2011 2010
$M $M $M $M
Revenues:
Product sales 993.3 764.3 1,882.6 1,482.4
Royalties 63.4 82.7 137.0 178.0
Other revenues 6.2 2.4 15.5 5.1
Total revenues 1,062.9 849.4 2,035.1 1,665.5
Costs and expenses:
Cost of product
sales(1) 143.7 119.1 268.2 221.0
Research and
development 176.9 147.0 354.8 278.0
Selling, general and
administrative(1) 440.3 354.4 843.2 714.3
Loss/(gain) on sale of
product rights 2.2 (4.1) 3.5 (4.1)
Reorganization costs 7.5 8.6 13.0 13.6
Integration and
acquisition costs 9.0 - 2.6 0.6
Total operating
expenses 779.6 625.0 1,485.3 1,223.4
Operating income 283.3 224.4 549.8 442.1
Interest income 0.6 0.5 1.2 0.8
Interest expense (9.9) (8.3) (19.1) (17.3)
Other (expense)/income,
net - (2.6) 0.3 8.2
Total other expense,
net (9.3) (10.4) (17.6) (8.3)
Income before income
taxes and equity in
earnings of equity
method investees 274.0 214.0 532.2 433.8
Income taxes (69.7) (54.5) (117.8) (108.1)
Equity in earnings of
equity method
investees, net of taxes 1.2 1.0 2.4 0.5
Net income 205.5 160.5 416.8 326.2
(1)Cost of product sales includes amortization of intangible assets relating to favorable manufacturing contracts of $0.4 million for the three months to June 30, 2011 (2010: $0.4 million) and $0.9 million for the six months to June 30, 2011 (2010: $0.9 million). SG&A costs include amortization of intangible assets relating to intellectual property rights acquired of $36.7 million for the three months to June 30, 2011 (2010: $33.8 million) and $72.7 million for the six months to June 30, 2011 (2010: $68.4 million).
Unaudited US GAAP results for the three months and six months to June 30, 2011
Consolidated Statements of Income (continued)
3 months to 3 months to 6 months to 6 months to
June 30, June 30, June 30, June 30,
2011 2010 2011 2010
Earnings per ordinary
share - basic 37.2c 29.4c 75.7c 59.8c
Earnings per ADS -
basic 111.6c 88.2c 227.1c 179.4c
Earnings per ordinary
share - diluted 35.9c 28.6c 72.9c 58.2c
Earnings per ADS -
diluted 107.7c 85.8c 218.7c 174.6c
Weighted average
number of shares:
Millions Millions Millions Millions
Basic 552.3 546.6 551.1 545.7
Diluted 595.1 590.0 594.8 589.1
Unaudited US GAAP results for the three months and six months to June 30, 2011
Consolidated Statements of Cash Flows
3 months 3 months 6 months 6 months
to to to to
June 30, June 30, June 30, June 30,
2011 2010 2011 2010
$M $M $M $M
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income 205.5 160.5 416.8 326.2
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and
amortization 68.8 64.9 132.3 129.1
Share based
compensation 19.2 12.6 34.9 26.7
Gain on sale of
non-current investments - - - (11.1)
Loss/(gain) on sale of
product rights 2.2 (4.1) 3.5 (4.1)
Other 1.1 5.7 (5.7) 11.0
Movement in deferred taxes (24.5) 6.5 17.7 58.8
Equity in earnings of equity
method investees (1.2) (1.0) (2.4) (0.5)
Changes in operating assets
and liabilities:
Decrease/(increase) in
accounts receivable 18.6 (33.1) (56.2) (43.9)
Increase in sales
deduction accrual 34.9 89.3 66.1 154.3
Increase in inventory (17.9) (25.8) (30.6) (50.1)
Increase in prepayments
and other assets (18.8) (64.5) (13.8) (83.3)
(Decrease)/increase in
accounts payable and
other liabilities (4.3) 72.8 (77.1) (43.2)
Net cash provided by operating
activities(A) 283.6 283.8 485.5 469.9
Unaudited US GAAP results for the three months and six months to June 30, 2011
Consolidated Statements of Cash Flows (continued)
3 months to 3 months to 6 months to 6 months to
June 30, June 30, June 30, June 30,
2011 2010 2011 2010
$M $M $M $M
CASH FLOWS FROM
INVESTING ACTIVITIES:
Movements in restricted
cash 8.9 (0.3) 4.8 6.0
Purchases of subsidiary
undertakings, net of
cash acquired (719.7) - (719.7) -
Purchases of
non-current investments (2.0) - (4.5) -
Purchases of property,
plant and equipment
("PP&E") (48.5) (164.6) (95.0) (208.1)
Purchases of intangible
assets - (2.7) - (2.7)
Proceeds from disposal
of non-current
investments, PP&E and
product rights 6.8 - 6.9 2.1
Returns of equity
investments and
proceeds from short
term investments 0.5 - 1.6 -
Net cash used in
investing activities(B) (754.0) (167.6) (805.9) (202.7)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from drawing
of revolving credit
facility 30.0 - 30.0 -
Repayment of debt
acquired with ABH (13.1) - (13.1) -
Payment under building
finance obligation (0.2) (0.7) (0.4) (1.3)
Extinguishment of
building finance
obligation - (43.1) - (43.1)
Tax benefit of stock
based compensation 9.8 (0.4) 18.8 4.4
Proceeds from exercise
of options 0.6 0.4 0.8 1.8
Payment of dividend (60.5) (49.8) (60.5) (49.8)
Payments to acquire
shares by ESOT (63.9) (1.7) (63.9) (1.7)
Net cash used in
financing activities(C) (97.3) (95.3) (88.3) (89.7)
Effect of foreign
exchange rate changes
on cash and cash
equivalents (D) 0.3 4.1 2.7 6.1
Net (decrease)/increase
in cash and cash
equivalents(A) +(B)
+(C) +(D) (567.4) 25.0 (406.0) 183.6
Cash and cash
equivalents at
beginning of period 712.0 657.5 550.6 498.9
Cash and cash
equivalents at end of
period 144.6 682.5 144.6 682.5
Unaudited US GAAP results for the three months and six months to June 30, 2011
Selected Notes to the Financial Statements
(1) Earnings per share
3 months to 3 months to 6 months to 6 months to
June 30, June 30, June 30, June 30,
2011 2010 2011 2010
$M $M $M $M
Numerator for basic EPS 205.5 160.5 416.8 326.2
Interest on convertible
bonds, net of tax 8.4 8.4 16.8 16.8
Numerator for diluted
EPS 213.9 168.9 433.6 343.0
Weighted average number
of shares:
Millions Millions Millions Millions
Basic(1) 552.3 546.6 551.1 545.7
Effect of dilutive
shares:
Stock options(2) 9.3 10.2 10.3 10.2
Convertible bonds 2.75%
due 2014(3) 33.5 33.2 33.4 33.2
Diluted 595.1 590.0 594.8 589.1
(1) Excludes shares purchased by ESOT and presented by Shire as treasury stock.
(2)Calculated using the treasury stock method.
(3) Calculated using the "if converted" method.
The share equivalents not included in the calculation of the diluted weighted average number of shares are shown below:
3 months to 3 months to 6 months to 6 months to
June 30, June 30, June 30, June 30,
2011 2010 2011 2010
Millions Millions Millions Millions
Share awards(1) 2.9 8.1 3.8 8.1
(1)Certain stock options have been excluded from the calculation of diluted EPS because (a) their exercise prices exceeded Shire plc's average share price during the calculation period or (b) satisfaction of the required performance/market conditions cannot be measured until the conclusion of the performance period.
Unaudited US GAAP results for the three months to June 30, 2011
Selected Notes to the Financial Statements
(2) Analysis of revenues
3 months to June 30, 2011 2010 2011 2011
% % of total
$M $M change revenue
Net product sales:
SP
ADHD
VYVANSE 185.9 148.0 26% 17%
ADDERALL XR 146.9 80.4 83% 14%
INTUNIV 59.6 51.2 16% 6%
EQUASYM 5.9 8.2 -28% <1%
DAYTRANA - 16.3 n/a n/a
398.3 304.1 31% 37%
GI
LIALDA/MEZAVANT 99.2 69.6 43% 9%
PENTASA 65.8 60.6 9% 6%
RESOLOR 1.6 - n/a <1%
166.6 130.2 28% 16%
Regenerative Medicine
DERMAGRAFT 2.0 - n/a <1%
2.0 - n/a <1%
General products
FOSRENOL 45.3 45.1 - 4%
XAGRID(R) 23.2 21.6 7% 2%
CARBATROL(R) 16.7 23.0 -27% 2%
85.2 89.7 -5% 8%
Other product sales 24.6 27.3 -10% 2%
Total SP product sales 676.7 551.3 23% 64%
HGT
ELAPRASE 127.8 99.8 28% 12%
REPLAGAL 119.9 81.9 46% 11%
VPRIV 63.3 28.7 121% 6%
FIRAZYR 5.6 2.6 115% <1%
Total HGT product sales 316.6 213.0 49% 29%
Total product sales 993.3 764.3 30% 93%
Royalties:
ADDERALL XR 26.9 27.5 -2% 3%
FOSRENOL 12.4 6.0 107% 1%
3TC and ZEFFIX 11.3 38.1 -70% 1%
Other 12.8 11.1 15% 1%
Total royalties 63.4 82.7 -23% 6%
Other revenues 6.2 2.4 158% 1%
Total Revenues 1,062.9 849.4 25% 100%
Unaudited US GAAP results for the six months to June 30, 2011
Selected Notes to the Financial Statements
(2) Analysis of revenues
6 months to June 30, 2011 2010 2011 2011
% % of total
$M $M change revenue
Net product sales:
SP
ADHD
VYVANSE 388.2 302.4 28% 19%
ADDERALL XR 258.1 172.2 50% 13%
INTUNIV 101.5 85.7 18% 5%
EQUASYM 10.5 10.6 -1% <1%
DAYTRANA - 34.7 n/a n/a
758.3 605.6 25% 37%
GI
LIALDA/MEZAVANT 186.3 133.2 40% 9%
PENTASA 130.3 118.8 10% 6%
RESOLOR 2.5 - n/a <1%
319.1 252.0 27% 16%
Regenerative Medicine
DERMAGRAFT 2.0 - n/a <1%
2.0 - n/a <1%
General products
FOSRENOL 86.5 92.1 -6% 4%
XAGRID 45.9 45.0 2% 2%
CARBATROL 33.3 43.1 -23% 2%
165.7 180.2 -8% 8%
Other product sales 47.7 54.8 -13% 2%
Total SP product sales 1,292.8 1,092.6 18% 64%
HGT
ELAPRASE 231.3 200.6 15% 11%
REPLAGAL 225.3 149.9 50% 11%
VPRIV 122.3 34.5 254% 6%
FIRAZYR 10.9 4.8 127% <1%
Total HGT product sales 589.8 389.8 51% 29%
Total product sales 1,882.6 1,482.4 27% 93%
Royalties:
3TC and ZEFFIX 46.8 74.7 -37% 2%
ADDERALL XR 43.7 68.3 -36% 2%
FOSRENOL 20.5 11.1 85% 1%
Other 26.0 23.9 9% 1%
Total royalties 137.0 178.0 -23% 6%
Other revenues 15.5 5.1 204% 1%
Total Revenues 2,035.1 1,665.5 22% 100%
Unaudited results for the three months to June 30, 2011
Non GAAP reconciliation
US GAAP Adjustments
Acquisitions Divestments,
Amortization & reorganizations
& asset integration & discontinued
3 months to, June 30, impairments activities operations
2011
(a) (b) (c)
$M $M $M $M
Total revenues 1,062.9 - - -
Costs and expenses:
Cost of product
sales 143.7 - - (2.8)
Research and
development 176.9 - - -
Selling, general and
administrative 440.3 (36.7) - -
Loss on sale of
product rights 2.2 - - (2.2)
Reorganization costs 7.5 - - (7.5)
Integration and
acquisition costs 9.0 - (9.0) -
Depreciation - - - -
Total operating
expenses 779.6 (36.7) (9.0) (12.5)
Operating income 283.3 36.7 9.0 12.5
Interest income 0.6 - - -
Interest expense (9.9) - - -
Total other expense,
net (9.3) - - -
Income before income
taxes and equity in
earnings of equity
method investees 274.0 36.7 9.0 12.5
Income taxes (69.7) (3.9) (1.1) (2.4)
Equity in earnings
of equity method
investees, net of
tax 1.2 - - -
Net income 205.5 32.8 7.9 10.1
Impact of
convertible debt,
net of tax 8.4 - - -
Numerator for
diluted EPS 213.9 32.8 7.9 10.1
Weighted average
number of shares
(millions) - diluted 595.1 - - -
Diluted earnings per
ADS 107.7c 16.5c 4.1c 5.1c
(Continued)
Adjustments Non GAAP
Reclassify
3 months to, depreciation June 30,
2011
(d)
$M $M
Total revenues - 1,062.9
Costs and expenses:
Cost of product
sales (8.3) 132.6
Research and
development (6.1) 170.8
Selling, general and
administrative (15.1) 388.5
Loss on sale of
product rights - -
Reorganization costs - -
Integration and
acquisition costs - -
Depreciation 29.5 29.5
Total operating
expenses - 721.4
Operating income - 341.5
Interest income - 0.6
Interest expense - (9.9)
Total other expense,
net - (9.3)
Income before income
taxes and equity in
earnings of equity
method investees - 332.2
Income taxes (77.1)
Equity in earnings
of equity method
investees, net of
tax - 1.2
Net income - 256.3
Impact of
convertible debt,
net of tax - 8.4
Numerator for
diluted EPS - 264.7
Weighted average
number of shares
(millions) - diluted - 595.1
Diluted earnings per
ADS 133.4c
The following items are included in Adjustments:
- Amortization and asset impairments: Amortization of intangible assets relating to intellectual property rights acquired ($36.7 million), and tax effect of adjustments;
- Acquisition and integration activities: Costs associated with the acquisition and integration of ABH ($6.9 million) and integration of Movetis ($2.1 million), and tax effect of adjustments;
- Divestments, reorganizations and discontinued operations: Accelerated depreciation ($2.2 million) and dual running costs ($0.6 million) on the transfer of manufacturing from Owings Mills to a third party, re-measurement of DAYTRANA contingent consideration to fair value ($2.2 million), reorganization costs ($7.5 million) on the transfer of manufacturing from Owings Mills to a third party and establishment of an international commercial hub in Switzerland, and tax effect of adjustments; and
- Depreciation: Depreciation of $29.5 million included in Cost of product sales, R&D costs and SG&A costs for US GAAP separately disclosed for the presentation of Non GAAP earnings.
Unaudited results for the three months to June 30, 2010
Non GAAP reconciliation
US GAAP Adjustments
Divestments,
Amortization reorganizations
& asset & discontinued
3 months to, June 30, impairments operations
2010
(a) (b)
$M $M $M
Total revenues 849.4 - -
Costs and expenses:
Cost of product sales 119.1 - (7.4)
Research and
development 147.0 - -
Selling, general and
administrative 354.4 (33.8) -
Gain on sale of product
rights (4.1) - 4.1
Reorganization costs 8.6 - (8.6)
Depreciation - - -
Total operating
expenses 625.0 (33.8) (11.9)
Operating income 224.4 33.8 11.9
Interest income 0.5 - -
Interest expense (8.3) - -
Other expense, net (2.6) - -
Total other expense,
net (10.4) - -
Income before income
taxes and equity in
earnings of equity
method investees 214.0 33.8 11.9
Income taxes (54.5) (9.6) (1.9)
Equity in earnings of
equity method
investees, net of tax 1.0 - -
Net income 160.5 24.2 10.0
Impact of convertible
debt, net of tax 8.4 - -
Numerator for diluted
EPS 168.9 24.2 10.0
Weighted average number
of shares (millions) -
diluted 590.0 - -
Diluted earnings per
ADS 85.8c 12.3c 5.1c
(Continued)
Adjustments Non GAAP
Reclassify
3 months to, depreciation June 30,
2010
(c)
$M $M
Total revenues - 849.4
Costs and expenses:
Cost of product sales (3.8) 107.9
Research and
development (3.5) 143.5
Selling, general and
administrative (16.6) 304.0
Gain on sale of product
rights - -
Reorganization costs - -
Depreciation 23.9 23.9
Total operating
expenses - 579.3
Operating income - 270.1
Interest income - 0.5
Interest expense - (8.3)
Other expense, net - (2.6)
Total other expense,
net - (10.4)
Income before income
taxes and equity in
earnings of equity
method investees - 259.7
Income taxes - (66.0)
Equity in earnings of
equity method
investees, net of tax - 1.0
Net income - 194.7
Impact of convertible
debt, net of tax - 8.4
Numerator for diluted
EPS - 203.1
Weighted average number
of shares (millions) -
diluted - 590.0
Diluted earnings per
ADS - 103.2c
The following items are included in Adjustments:
- Amortization and asset impairments: Amortization of intangible assets relating to intellectual property rights acquired ($33.8 million), and tax effect of adjustment;
- Divestments, reorganizations and discontinued operations: Accelerated depreciation ($6.0 million), dual running costs ($1.4 million) on the transfer of manufacturing from Owings Mills, gain on sale of products rights relating to the disposal of non core products to Laboratorios Almirall S.A. ($4.1 million) and reorganization costs ($8.6 million) on the transfer of manufacturing from Owings Mills and establishment of an international commercial hub in Switzerland, and tax effect of adjustments; and
- Depreciation: Depreciation of $23.9 million included in Cost of product sales, R&D costs and SG&A costs for US GAAP separately disclosed for the presentation of Non GAAP earnings.
Unaudited results for the six months to June 30, 2011
Non GAAP reconciliation
US GAAP Adjustments
Acquisitions Divestments,
Amortization & reorganizations
& asset integration & discontinued
6 months to, June 30, impairments activities operations
2011
(a) (b) (c)
$M $M $M $M
Total revenues 2,035.1 - - -
Costs and expenses:
Cost of product
sales 268.2 - - (5.6)
Research and
development 354.8 - - -
Selling, general and
administrative 843.2 (72.7) - -
Loss on sale of
product rights 3.5 - - (3.5)
Reorganization costs 13.0 - - (13.0)
Integration &
acquisition costs 2.6 - (2.6) -
Depreciation - - - -
Total operating
expenses 1,485.3 (72.7) (2.6) (22.1)
Operating income 549.8 72.7 2.6 22.1
Interest income 1.2 - - -
Interest expense (19.1) - - -
Other income, net 0.3 2.4 - -
Total other expense,
net (17.6) 2.4 - -
Income before income
taxes and equity in
earnings of equity
method investees 532.2 75.1 2.6 22.1
Income taxes (117.8) (15.8) (4.9) (4.4)
Equity in earnings
of equity method
investees, net of
tax 2.4 - - -
Net income 416.8 59.3 (2.3) 17.7
Impact of
convertible debt,
net of tax 16.8 - - -
Numerator for
diluted EPS 433.6 59.3 (2.3) 17.7
Weighted average
number of shares
(millions) - diluted 594.8 - - -
Diluted earnings per
ADS 218.7c 29.9c (1.1c) 8.9c
(Continued)
Adjustments Non GAAP
Reclassify
6 months to, depreciation June 30,
2011
(d)
$M $M
Total revenues - 2,035.1
Costs and expenses:
Cost of product
sales (13.8) 248.8
Research and
development (10.8) 344.0
Selling, general and
administrative (29.7) 740.8
Loss on sale of
product rights - -
Reorganization costs - -
Integration &
acquisition costs - -
Depreciation 54.3 54.3
Total operating
expenses - 1,387.9
Operating income - 647.2
Interest income - 1.2
Interest expense - (19.1)
Other income, net - 2.7
Total other expense,
net - (15.2)
Income before income
taxes and equity in
earnings of equity
method investees - 632.0
Income taxes (142.9)
Equity in earnings
of equity method
investees, net of
tax - 2.4
Net income - 491.5
Impact of
convertible debt,
net of tax - 16.8
Numerator for
diluted EPS - 508.3
Weighted average
number of shares
(millions) - diluted - 594.8
Diluted earnings per
ADS - 256.4c
The following items are included in Adjustments:
- Amortization and asset impairments: Amortization of intangible assets relating to intellectual property rights acquired ($72.7 million), impairment of available for sale securities ($2.4 million), and tax effect of adjustments;
- Acquisitions and integration activities: Costs associated with acquisition and integration of ABH ($6.9 million) and integration of Movetis ($3.9 million), adjustment to contingent consideration payable for EQUASYM ($8.2 million), and tax effect of adjustments;
- Divestments, reorganizations and discontinued operations: Accelerated depreciation ($4.4 million) and dual running costs ($1.2 million) on the transfer of manufacturing from Owings Mills to a third party, re-measurement of DAYTRANA contingent consideration to fair value ($3.5 million), reorganization costs ($13.0 million) on the transfer of manufacturing from Owings Mills to a third party and the establishment of an international commercial hub in Switzerland, and tax effect of adjustments; and
- Depreciation: Depreciation of $54.3 million included in Cost of product sales, R&D costs and SG&A costs for US GAAP separately disclosed for the presentation of Non GAAP earnings.
Unaudited results for the six months to June 30, 2010
Non GAAP reconciliation
US GAAP Adjustments
Acquisitions Divestments,
Amortization & reorganizations
& asset integration & discontinued
6 months to, June 30, impairments activities operations
2010
(a) (b) (c)
$M $M $M $M
Total revenues 1,665.5 - - -
Costs and expenses:
Cost of product sales 221.0 - - (14.7)
Research and
development 278.0 - - -
Selling, general and
administrative 714.3 (68.4) - -
Gain on sale of product
rights (4.1) - - 4.1
Reorganization costs 13.6 - - (13.6)
Integration and
acquisition costs 0.6 - (0.6) -
Depreciation - - - -
Total operating
expenses 1,223.4 (68.4) (0.6) (24.2)
Operating income 442.1 68.4 0.6 24.2
Interest income 0.8 - - -
Interest expense (17.3) - - -
Other income/(expense),
net 8.2 - - (11.1)
Total other expense,
net (8.3) - - (11.1)
Income before income
taxes and equity in
earnings of equity
method investees 433.8 68.4 0.6 13.1
Income taxes (108.1) (19.3) (0.1) (5.0)
Equity in earnings of
equity method
investees, net of tax 0.5 - - -
Net income 326.2 49.1 0.5 8.1
Impact of convertible
debt, net of tax 16.8 - - -
Numerator for diluted
EPS 343.0 49.1 0.5 8.1
Weighted average number
of shares (millions) -
diluted 589.1 - - -
Diluted earnings per
ADS 174.6c 25.0c 0.3c 4.1c
(Continued)
Adjustments Non GAAP
Reclassify
6 months to, depreciation June 30,
2010
(d)
$M $M
Total revenues - 1,665.5
Costs and expenses:
Cost of product sales (6.3) 200.0
Research and development (7.2) 270.8
Selling, general and
administrative (32.9) 613.0
Gain on sale of product
rights - -
Reorganization costs - -
Integration and
acquisition costs - -
Depreciation 46.4 46.4
Total operating expenses - 1,130.2
Operating income - 535.3
Interest income - 0.8
Interest expense - (17.3)
Other income/(expense),
net - (2.9)
Total other expense, net - (19.4)
Income before income
taxes and equity in
earnings of equity
method investees - 515.9
Income taxes - (132.5)
Equity in earnings of
equity method investees,
net of tax - 0.5
Net income - 383.9
Impact of convertible
debt, net of tax - 16.8
Numerator for diluted
EPS - 400.7
Weighted average number
of shares (millions) -
diluted - 589.1
Diluted earnings per ADS - 204.0c
The following items are included in Adjustments:
(a) Amortization and asset impairments: Amortization of intangible assets relating to intellectual property rights acquired ($68.4 million), and tax effect of adjustment;
(b) Acquisitions and integration activities: Costs associated with the acquisition of EQUASYM ($0.6 million), and tax effect of adjustments;
(c) Divestments, reorganizations and discontinued operations: Accelerated depreciation ($12.1 million) and dual running costs ($2.6 million) on the transfer of manufacturing from Owings Mills, gain on sale of product rights relating to the disposal of non core products to Laboratorios Almirall S.A. ($4.1 million), reorganization costs ($13.6m) on the transfer of manufacturing from Owings Mills and the establishment of an international commercial hub in Switzerland, gain on disposal of the investment in Virochem ($11.1 million), and tax effect of adjustments; and
(d) Depreciation: Depreciation of $46.4 million included in Cost of product sales, R&D costs and SG&A costs for US GAAP separately disclosed for the presentation of Non GAAP earnings.
Unaudited results for the three months and six months to June 30, 2011
Non GAAP reconciliation
The following table reconciles US GAAP net cash provided by operating activities to Non GAAP cash generation:
3 months to June 30, 6 months to June 30,
2011 2010 2011 2010
$M $M $M $M
Net cash provided by
operating activities 283.6 283.8 485.5 469.9
Tax and interest payments,
net 156.4 127.6 162.8 217.7
Non GAAP cash generation 440.0 411.4 648.3 687.6
The following table reconciles US GAAP net cash provided by operating activities to Non GAAP free cashflow:
3 months to June 30, 6 months to June 30,
2011 2010 2011 2010
$M $M $M $M
Net cash provided by
operating activities 283.6 283.8 485.5 469.9
Capital expenditure (1) (48.5) (45.3) (95.0) (88.9)
Non GAAP free cash flow 235.1 238.5 390.5 381.0
(1) Capital expenditure for the three months and six months ended June 30, 2010 excludes capital expenditure relating to the acquisition of Lexington Technology Park.
Non GAAP net debt comprises:
June 30, December 31,
2011 2010
$M $M
Cash and cash equivalents 144.6 550.6
Restricted cash 21.9 26.8
Convertible bonds (1,100.0) (1,100.0)
Revolving credit facility (30.0) -
Building finance obligation (8.4) (8.4)
Non GAAP net debt (971.9) (531.0)
NOTES TO EDITORS
THE "SAFEHARBOR" 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 materialize, Shire's results could be materially adversely affected. The risks and uncertainties include, but are not limited to, risks associated with: the inherent uncertainty of research, development, approval, reimbursement, manufacturing and commercialization of Shire's Specialty Pharmaceuticals and Human Genetic Therapies products, as well as the ability to secure new products for commercialization and/or development; government regulation of Shire's products; Shire's ability to manufacture its products in sufficient quantities to meet demand; the impact of competitive therapies on Shire's products; Shire's ability to register, maintain and enforce patents and other intellectual property rights relating to its products; Shire's ability to obtain and maintain government and other third-party reimbursement for its products; and other risks and uncertainties detailed from time to time in Shire's filings with the Securities and Exchange Commission.
Non GAAP Measures
This press release contains financial measures not prepared in accordance with US GAAP. These measures are referred to as "Non GAAP" measures and include: Non GAAP operating income; Non GAAP net income; Non GAAP diluted earnings per ADS; effectivetax rate on Non GAAP income before income taxes and earnings of equity method investees ("Effective tax rate on Non GAAP income"); Non GAAP cost of product sales; Non GAAP research and development; Non GAAP selling, general and administrative; Non GAAP other income; Non GAAP cash generation; Non GAAP free cashflow and Non GAAP net debt. These Non GAAP measures exclude the effect of certain cash and non-cash items, that Shire's management believes are not related to the core performance of Shire's business.
These Non GAAP financial measures are used by Shire's management to make operating decisions because they facilitate internal comparisons of Shire's performance to historical results and to competitors' results. Shire's Remuneration Committee uses certain key Non GAAP measures when assessing the performance and compensation of employees, including Shire's executive directors.
The Non GAAP measures are presented in this press release as Shire's management believe that they will provide investors with a means of evaluating, and an understanding of how Shire's management evaluates, Shire's performance and results on a comparable basis that is not otherwise apparent on a US GAAP basis, since many non-recurring, infrequent or non-cash items that Shire's management believe are not indicative of the core performance of the business may not be excluded when preparing financial measures under US GAAP.
These Non GAAP measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with US GAAP.
Where applicable the following items, including their tax effect, have been excluded from both 2011 and 2010 Non GAAP earnings, and from our 2011 Outlook:
Amortization and asset impairments:
- Intangible asset amortization and impairment charges; and
- Other than temporary impairment of investments.
Acquisitions and integration activities:
- Upfront payments and milestones in respect of in-licensed and acquired products;
- Costs associated with acquisitions, including transaction costs, fair value adjustments on contingent consideration and acquired inventory;
- Costs associated with the integration of companies; and
- Noncontrolling interest in consolidated variable interest entities.
Divestments, re-organizations and discontinued operations:
- Gains and losses on the sale of non-core assets;
- Costs associated with restructuring and re-organization activities;
- Termination costs; and
- Income / (losses) from discontinued operations.
Depreciation, which is included in Cost of product sales, R&D and SG&A costs in our US GAAP results, has been separately disclosed for the presentation of 2010 and 2011 Non GAAP earnings.
Cash generation represents net cash provided by operating activities, excluding up-front and milestone payments for in-licensed and acquired products, tax and interest payments.
Free cashflow represents net cash provided by operating activities, excluding up-front and milestone payments for in-licensed and acquired products, but including capital expenditure in the ordinary course of business.
A reconciliation of Non GAAP financial measures to the most directly comparable measure under US GAAP is presented on pages 20 to 24.
Sales growth at CER, which is a Non GAAP measure, is computed by restating 2011 results using average 2010 foreign exchange rates for the relevant period.
Average exchange rates for the six months to June 30, 2011 were $1.62:£1.00 and $1.40:€1.00 (2010: $1.53:£1.00 and $1.33:€1.00). Average exchange rates for Q2 2011 were $1.63:£1.00 and $1.44:€1.00 (2010: $1.49:£1.00 and $1.27:€1.00).
TRADEMARKS
All trademarks designated ® and ™ used in this press release are trademarks of Shire plc or companies within the Shire group except for 3TC® and ZEFFIX® which are trademarks of GSK and PENTASA® which is a registered trademark of Ferring B.V. Certain trademarks of Shire plc or companies within the Shire group are set out in Shire's Annual Report on Form 10-K for the year ended December 31, 2010 and the Quarterly Report on Form 10-Q for the three months ended March 31, 2011.
For further information please contact:
Investor Relations
Eric Rojas ([email protected]) +1-781-482-0999
Sarah Elton-Farr ([email protected]) +44(0)1256-894-157
Media
Jessica Mann ([email protected]) +44(0)1256-894-280
Jessica Cotrone ([email protected]) +1-781-482-9538
SOURCE Shire plc
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