BASINGSTOKE, England, September 18 /PRNewswire/ -- In order to meet its obligations under the Listing Rules of the Financial Services Authority, Shire plc ("Shire") (LSE: SHP, NASDAQ: SHPGY, TSX: SHQ) is publishing today its interim results for the six months ended 30 June 2006 in accordance with International Financial Reporting Standards (IFRS).
It should be noted that on 28 July 2006, Shire announced its results in respect of the same period in accordance with US GAAP.
Notes to Editors
Shire plc
Shire's strategic goal is to become the leading specialty pharmaceutical company that focuses on meeting the needs of the specialist physician. Shire focuses its business on attention deficit and hyperactivity disorder (ADHD), human genetic therapies (HGT), gastrointestinal (GI) and renal diseases. The structure is sufficiently flexible to allow Shire to target new therapeutic areas to the extent opportunities arise through acquisitions. Shire believes that a carefully selected portfolio of products with a strategically aligned and relatively small-scale sales force will deliver strong results.
Shire's focused strategy is to develop and market products for specialty physicians. Shire's in-licensing, merger and acquisition efforts are focused on products in niche markets with strong intellectual property protection either in the US or Europe.
For further information on Shire, please visit the Company's website: www.shire.com.
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 materialize, 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 commercialization; the impact of competitive products, including, but not limited to the impact of those on Shire's Attention Deficit and 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 dates of CONNEXYN (SPD503) (ADHD), SPD465 (ADHD), MESAVANCE (mesalamine) with MMX technology (SPD 476) (ulcerative colitis), and NRP104 (ADHD), including its scheduling classification by the Drug Enforcement Administration in the United States; Shire's ability to secure new products for commercialization and/or development; and other risks and uncertainties detailed from time to time in Shire's and its predecessor registrant Shire Pharmaceuticals Group plc's filings with the Securities and Exchange Commission, particularly Shire plc's Annual Report on Form 10-K for the year ended December 31, 2005.
The following are trademarks of Shire plc or companies within the Shire Group, which are the subject of trademark registrations in certain countries.
ADDERALL XR(R) (mixed salts of a single-entity amphetamine)
ADDERALL(R) (mixed salts of a single-entity amphetamine)
AGRYLIN(R) (anagrelide hydrochloride)
CALCICHEW(R) range (calcium carbonate with or without vitamin D3)
CARBATROL(R) (carbamazepine extended-release capsules)
COLAZIDE(R) (balsalazide)
CONNEXYN(R) (guanfacine extended-release)
DAYTRANA(TM) (methylphenidate transdermal system)
ELAPRASE(TM) (idursulfase)
FOSRENOL(R) (lanthanum carbonate)
LODINE(R) (etodolac)
MESAVANCE(TM) (mesalamine)
REMINYL(R) (galantamine hydrobromide)(UK and Republic of Ireland)
REMINYL XL(TM) (galantamine hydrobromide)(UK and Republic of Ireland)
REPLAGAL(R) (agalsidase alfa)
SOLARAZE(R) (3% diclofenac sodium (3%w/w))
VANIQA(R) (eflornithine hydrochloride)
XAGRID(R) (anagrelide hydrochloride)
The following are trademarks of third parties referred to in this filing.
3TC (trademark of GlaxoSmithKline (GSK))
DYNEPO (trademark of Aventis Pharma Holding GmbH)
MMX Multi Matrix
Systems (trademark of Cosmo Technologies Limited)
PENTASA (trademark of Ferring AS)
RAZADYNE (trademark of Johnson & Johnson)
RAZADYNE ER (trademark of Johnson & Johnson)
(trademark of Johnson & Johnson, excluding UK and
REMINYL XL Republic of Ireland)
(trademark of Johnson & Johnson, excluding UK and
REMINYL Republic of Ireland)
ZEFFIX (trademark of GSK)
SHIRE PLC
RESULTS OF OPERATIONS FOR THE SIX MONTHS TO JUNE 30, 2006 AND
2005 UNDER IFRS
Total revenues
The following table provides an analysis of the Group's total
revenues by source:
6 months 6 months
to to
June 30, June 30,
Change
2006 2005
US$m US$m %
__________ __________ __________
Product sales 722.0 621.0 +16
Royalties 121.4 120.9 -
Other 6.7 16.4 -59
__________ __________ __________
Total 850.1 758.3 +12
__________ __________ __________
Product sales
The following table provides an analysis of the Group's key
product sales:
6 months to 6 months to US
June 30, June 30, Product sales prescrip-
2006 2005 growth tion
$M $M % growth
%
1.1.1.1.1CNS
ADDERALL XR 426.8 351.0 +22 +9
ADDERALL 18.9 21.4 -12 -21
CARBATROL 30.3 38.7 -22 -12
1.1.1.1.2GI
PENTASA 62.6 57.2 +9 -3
COLAZIDE 4.6 4.2 +10 n/a
1.1.1.1.3GP
AGRYLIN/XAGRID
NORTH AMERICA 3.4 37.1 -91 -90
ROW 26.2 24.5 +7 n/a
FOSRENOL 13.9 14.8 -6 +62
CALCICHEW 22.1 18.2 +21 n/a
REMINYL/REMINYL
XL 9.3 6.1 +52 n/a
SOLARAZE 6.9 5.4 +28 n/a
VANIQA 4.0 2.5 +60 n/a
LODINE 6.4 6.3 +2 n/a
HGT
REPLAGAL [x] 54.1 - n/a n/a
Other product
sales
32.5 33.6 -4 n/a
__________________ __________________ __________________
Total product
sales
722.0 621.0 +16
__________________ __________________ __________________
[x] REPLAGAL was acquired upon the acquisition of TKT which completed
on July 27, 2005.
The following discussion includes references to prescription
and market share data for the Group's key products. The source of this data
is IMS Health, June 2006. IMS Health is a leading global provider of business
intelligence for the pharmaceutical and healthcare industries.
ADDERALL XR
ADDERALL XR is the leading brand in the US ADHD market with a
market share of 26% in June 2006 (2005: 24%). The US ADHD market grew 3% for
the six months to June, 2006 compared to the same period in 2005. These
factors contributed to a 9% growth in US prescriptions for ADDERALL XR for
the six months to June 30, 2006 compared to the same period in 2005.
Sales of ADDERALL XR for the six months to June 30, 2006 were
$426.8 million, an increase of 22% compared to the same period in 2005 (2005:
$351.0 million). Product sales growth was higher than prescription growth due
mainly to the impact of price increases in August 2005 and April 2006.
During October 2005 Shire filed a Citizen Petition with the
FDA requesting that the FDA require more rigorous bioequivalence testing or
additional clinical testing for generic or follow-on drug products that
reference ADDERALL XR before they can be approved. Shire believes that these
requested criteria will ensure that generic formulations of ADDERALL XR or
follow-on drug products will be clinically effective and safe. In January
2006 Shire chose to file a supplemental amendment to its original Citizen
Petition, which included additional clinical data in support of the original
filing. On April 20, 2006 Shire received correspondence from the FDA
informing Shire that the FDA has not yet resolved the issues raised in
Shire's pending ADDERALL XR Citizen Petition. The correspondence states that,
due to the complex issues raised requiring extensive review and analysis by
the FDA's officials, a decision cannot be reached at this time. The FDA's
interim response is in accordance with FDA regulations concerning Citizen
Petitions.
Two FDA advisory committees met in February and March 2006 to
discuss cardiovascular and psychiatric adverse events associated with ADHD
medicines. In May 2006, the FDA sent revised labels to manufacturers of ADHD
stimulant medicines, changing on a class basis the safety warnings related to
cardiovascular and psychiatric events. The FDA did not make changes to or add
black box warnings to the medicines. Shire has revised the labels on all its
ADHD medicines (ADDERALL XR, ADDERALL and DAYTRANA) to include these class
warnings.
On August 14, 2006, Shire and Barr announced that all pending
litigation in connection with Barr's ANDA and its attempt to market generic
versions of Shire's ADDERALL XR had been settled. As part of the settlement,
Barr entered into consent judgments and agreed to permanent injunctions
confirming the validity and enforceability of Shire's '819, '300 and '768
Patents. Barr has also admitted that any generic product made under its ANDA
would infringe the '768 patent.
Under the terms of the settlement, Barr will not be permitted
to market a generic version of ADDERALL XR in the United States until April
1, 2009, except for certain limited circumstances, such as the launch of
another party's generic version of ADDERALL XR. No payments to Barr are
involved in the settlement agreement.
Shire's lawsuit against Teva, which was filed in the Eastern
District of Pennsylvania on March 2, 2006, continues. Shire alleges that all
of Teva's generic ANDA products infringe Shire's '819 and '300 patents.
CARBATROL
US prescriptions for the six months to June 30, 2006 were down
12% compared to the same period in 2005. This was primarily due to a 6%
decrease in the US extended release carbamazepine prescription market, and
limited promotion of the product during 2006 leading to a 1% decrease in
Shire's market share of the total US extended release carbamazepine
prescription market to 42% in June 2006 (2005: 43%).
Sales of CARBATROL for the six months to June 30, 2006 were
$30.3 million, a decrease of 22% compared to the same period in 2005 (2005:
$38.7 million). The difference between the decreases in sales and
prescriptions is due to the lower levels of pipeline stocking compared with
2005, being only partially offset by a price increase in October 2005.
In July 2006 Impax deployed a sales force to begin promotion
of CARBATROL under a promotional services agreement for the US market signed
in January 2006.
Patent litigation proceedings with Nostrum relating to the
300mg strength of CARBATROL are ongoing. No trial date has been set.
Nostrum's 30-month stay under the Hatch-Waxman Act expired on February 6,
2006. Accordingly, the FDA may approve Nostrum's ANDA, once it meets all
regulatory requirements.
On March 30, 2006 the Company was notified that Corepharma had
filed an ANDA under the Hatch-Waxman Act seeking permission to market its
generic version of carbamazepine extended release products in 100mg, 200mg
and 300mg strengths. Shire filed suit against Corepharma for the infringement
of the '013 patent and the '570 patent in the District Court of New Jersey on
May 17, 2006.
PENTASA
PENTASA had a 17% share of the total US oral mesalamine
prescription market in June 2006 (June 2005: 19%), a market that grew 3%
compared with the same period in 2005. US prescriptions for the six months to
June 30, 2006 were down 3% compared to the same period in 2005, due to
reduced promotional activity in Q2 2006.
Sales of PENTASA for the six months to June 30, 2006 were
$62.6 million, an increase of 9% compared to the same period in 2005 (2005:
$57.2 million). The difference between sales growth and the lower levels of
prescriptions is due to the impact of the January 2006 price increase, a
change in the product sales mix from the 250mg to 500mg dose strength and
higher levels of pipeline stocking following production shortages last year.
REPLAGAL
REPLAGAL was acquired by Shire as part of the TKT acquisition,
which completed on July 27, 2005. Product sales for the six months to June
30, 2006 were $54.1 million, the majority of which were in Europe.
Pre-acquisition sales for the six months to June 30, 2005 were $45.1 million.
The increase in sales of 20% is primarily due to greater European coverage by
an increased number of sales representatives, and strong growth in the Rest
of the World market (all sales outside Europe and the US).
AGRYLIN and XAGRID
AGRYLIN/XAGRID sales worldwide for the six months to June 30,
2006 were $29.6 million, down 52% compared to the same period in 2005 (2005:
$61.6 million).
North American sales were $3.4 million (2005: $37.1 million).
This reduction was expected following the approval of generic versions of
AGRYLIN in the US market in April 2005.
For the Rest of the World (all sales outside North America)
sales were up 7% to $26.2 million, (2005: $24.5 million). Sales increased by
12% as expressed in the transaction currencies (XAGRID is primarily sold in
Euros), due mainly to strong growth in France and Spain, offset by
unfavourable exchange rate movements of 5%.
FOSRENOL
US prescriptions for the six months to June 30, 2006 were up
62% compared to the same period in 2005. FOSRENOL was launched in the US in
January 2005, and its share of the total US phosphate binding market in June
2006 was 8% (2005: 7.8%).
Sales of FOSRENOL for the six months to June 30, 2006 were
$13.9 million, a decrease of 6% compared to the same period in 2005 (2005:
$14.8 million). Although prescription growth continued, sales revenue is down
due to a combination of pipeline de-stocking in 2006 (as the new higher dose
strengths launch stocks shipped to wholesalers in December 2005 were sold in
Q1 2006), pipeline stocking in H1 2005 and higher sales deductions.
FOSRENOL was launched in Austria, Ireland, Sweden and Denmark
in December 2005 and in South Korea in June 2006. On July 11, 2006, Shire
received confirmation that FOSRENOL had been recommended for approval through
the Mutual Recognition Procedure in Eleven markets in Europe (the UK,
Germany, Spain, Norway, Hungary, Estonia, Lithuania, Malta, Latvia, Slovenia
and Slovakia). FOSRENOL is already approved in all other European Union
countries (Sweden, Portugal, Italy, Poland, Austria, Finland, Czech Republic,
Denmark, France, Belgium, Cyprus, Greece, Luxembourg, Netherlands, Ireland)
and Iceland.
Foreign exchange effect
As many of the Company's sales revenues are earned in
currencies other than US dollars (primarily Canadian Dollars, Pounds
Sterling, Swedish Kronor and Euros), revenue growth reported in US dollars
includes the impact of translating the sales made in a local currency, into
US dollars. The table below shows the effect of foreign exchange translations
on the revenue growth of the key affected products as well as the underlying
performance of key products in their local currency:
6 months to
June 30,
6 months to 2006 sales 6 months to
June 30, growth in June 30,
2006 sales local 2006 sales
in US currency growth in
dollars Impact of US dollars
% translation
$M to US %
dollars
%
___________ ___________ ___________ ___________
AGRYLIN/XAGRID sales in
Euros 15.8 +15 -5 +10
AGRYLIN/XAGRID sales in
Pounds sterling 10.4 +8 -4 +4
CALCICHEW sales in Pounds
sterling 19.9 +26 -6 +20
REMINYL and REMINYL XL
sales in Pounds sterling 8.4 +66 -7 +59
___________ ___________ ___________ ___________
Notes
Revenue growth analysis does not include sales of:
- ADDERALL XR sales of $3.7 million in Canadian Dollars due to
the fact that sales of ADDERALL XR in Canada were suspended for most of 2005,
affecting comparative data; and
- REPLAGAL sales of $49.8 million in Euros and Swedish Kronor.
There is no comparative data for REPLAGAL as it was acquired with TKT in July
2005.
Royalties
Royalty revenue remained stable at $121.4 million for the six
months to June 30, 2006 (2005: $120.9 million). The following table provides
an analysis of Shire's royalty income:
6 months to 6 months to
June 30, June 30,
2006 2005 change
$M $M %
____________ ___________ ___________
3TC 77.8 79.9 -3
ZEFFIX 16.1 14.2 +13
Others 27.5 26.8 +3
____________ ____________ __________
Total 121.4 120.9 -
____________ ____________ __________
3TC
Royalties from sales of 3TC for the six months to June 30, 2006 were $77.8 million (2005: $79.9 million).
Shire receives royalties from GSK on worldwide 3TC sales. GSK's worldwide sales of 3TC for the six months to June 30, 2006 were $595 million, a decrease of 2% compared to the same period in 2005 (2005: $606 million). The nucleoside analogue market for HIV has continued to grow, however competitive pressures within the market have increased.
ZEFFIX
Royalties from sales of ZEFFIX for the six months to June 30, 2006 were $16.1 million (2005: $14.2 million).
Shire receives royalties from GSK on worldwide ZEFFIX sales. GSK's worldwide sales of ZEFFIX for the six months to June 30, 2006 were $140 million, an increase of 13% compared to the same period in 2005 (2005: $124 million). This increase was primarily due to strong growth in the Chinese, Japanese and Korean markets.
Other
Other royalties are primarily in respect of REMINYL and REMINYL XL (now marketed as RAZADYNE and RAZADYNE ER in the US), a product marketed worldwide by Janssen Pharmaceutical N.V. (Janssen), an affiliate of Johnson and Johnson, with the exception of the United Kingdom and the Republic of Ireland where Shire has the exclusive marketing rights.
Sales of the REMINYL/RAZADYNE range, for the symptomatic treatment of mild to moderately severe dementia of the Alzheimer's type continue to grow in the Alzheimer's market.
In June 2006 Janssen and Synaptech, Inc. filed suit against Barr for infringement of their patent rights relating to RAZADYNE ER as a result of Barr filing an ANDA with the FDA for its generic version of RAZADYNE ER. No court date has been set. Barr and other generics have filed ANDAs with the FDA as regards RAZADYNE and Janssen and Synaptech have filed suit against some of those ANDA filers. The court date for these proceedings is June 2007.
Cost of product sales
For the six months to June 30, 2006 the cost of product sales amounted to 17% of product sales (2005: 12%). The decrease in gross margin is primarily due to the addition of REPLAGAL to Shire's product portfolio following the acquisition of TKT. REPLAGAL's cost of product sales includes acquired inventories, which in accordance with IFRS were valued at fair value as part of the TKT purchase price allocation. Accordingly, lower margins will be reflected for REPLAGAL sales until all inventory has been sold (anticipated Q3 2006). For the six months to June 30, 2006 the cost of product sales for REPLAGAL included a $40.3 million adjustment in respect of the acquired inventory. This acquired inventory increased Shire's cost of product sales by 6%.
Research and development (R&D)
R&D expenditure increased from $127.0 million in the six months to June 30, 2005 to $150.0 million for the six months to June 30, 2006. The increase was primarily due to the addition of two significant R&D projects following the acquisition of TKT (ELAPRASE and GA-GCB).
Expressed as a percentage of total revenues, R&D expenditure was 18% for the six months to June 30, 2006 (2005: 17%).
Selling, general and administrative (SG&A) expenses
SG&A expenses increased from $326.2 million in the six months to June 30, 2005 to $387.0 million in the six months to June 30, 2006, an increase of 19%. This increase is primarily related to the promotion and launch of DAYTRANA (including an increase in the ADHD sales force) and the recruitment of new US sales forces for GI (to launch MESAVANCE) and HGT (to launch Elaprase).
6 months to June 30, 2006 2005 Change
$M $M %
____________ ___________ ___________
Sales costs 105.0 97.5 +8
Marketing costs 161.9 130.8 +24
Other SG&A costs 120.1 97.9 +23
____________ ___________ ___________
387.0 326.2 +19
Depreciation and amortization(1) 48.2 36.0 +34
____________ ___________ ___________
Total SG&A costs 435.2 362.2 +20
____________ ___________ ___________
(1) Excludes depreciation from manufacturing plants of $2.2 million
(2005: $1.7 million) which is included in cost of product sales.
Depreciation and amortization (included in Selling, general and
administrative costs)
The depreciation charge for the six months to June 30, 2006
was $16.3 million (2005: $11.2 million including a write-down of property,
plant and equipment of $5.9 million). Amortization charges, including the
amortization on acquired products, were $31.9 million for the six months to
June 30, 2006 (2005: $24.8 million). The increase in both depreciation and
amortization is primarily due to the increase in the asset base as a result
of the TKT acquisition.
The $50 million payment made to Noven on approval of DAYTRANA
has been capitalized, and together with the upfront payment of $25 million,
will be amortized over a 10-year period from the June 29, 2006 launch date.
The $50 million payment made to New River in February 2006
following the FDA's acceptance of the filing of NRP104 has been capitalized,
and together with the upfront payment of $50 million made in 2005 will be
amortized over its useful economic life.
Intangible asset impairment (included in Selling, general and
administrative costs)
The intangible asset impairment charge for the six months to
June 30, 2006 was $0.1m (2005: $3.0m). The intangible impairment charge arose
as a result of the economic value and strategic worth of the product
concerned being less than its carrying value.
Integration costs (included in Selling, general and administrative
costs)
For the six months to June 30, 2006 the Company incurred $3.9
million of costs associated with the integration of the TKT business into
Shire (2005: $nil). This included retention payments for key staff of $2.0
million, IT costs of $0.8 million and other costs of $1.1 million.
Investment revenue
For the six months to June 30, 2006 the Company received
investment revenue of $24.2 million (2005: $21.0 million).
In the six months to June 30, 2005 investment revenue
primarily related to interest received on Shire's cash balances. In the six
months to June 30, 2006 investment revenue comprised $17.7 million of
interest received on cash balances together with $6.5 million of interest
recognized following the repayment by IDB of a $70.6 million loan (of the
$8.1 million of interest received from IDB in 2006, $1.6 million was
recognized in previous periods). Interest received on cash balances is lower
than in the six months to June 30, 2005 due to the interest foregone on net
TKT acquisition payments of $1.1 billion being partially offset by higher
interest rates in the six months to June 30, 2006.
Interest expense
For the six months to June 30, 2006 the Company incurred
interest expense of $12.2 million (2005: $1.4 million). In 2006, this expense
primarily relates to a provision for interest, which may be awarded by the
Court in respect of amounts due to those ex-TKT shareholders who have
requested appraisal of the acquisition consideration payable for their TKT
shares. The trial date for the appraisal rights litigation has been set for
April 23, 2007.
For the six months to June 30, 2005 the expense primarily
related to a bridging loan to finance the TKT acquisition.
Share of post tax profit from associates and joint ventures
Profits of $4.3 million were recorded for the six months to
June 30, 2006 (2005: $0.7 million). This comprised profits of $3.2 million
from the 50% share of the antiviral commercialization partnership with GSK in
Canada (2005: $2.7 million), and $1.1 million being the Company's share of
profits in the GeneChem and EGS Healthcare Funds (2005: loss of $2.0
million).
Taxation
The effective rate of tax for the six months to June 30, 2006
was 32% (2005: (11)%). The negative effective rate of tax in the six months
to June 30, 2005 was a result of the recognition of tax benefits relating to
intangibles in the UK.
At June 30, 2006 net deferred tax liabilities of $174.5
million were recognized (December 31, 2005: $152.4 million). Deferred tax
assets for deductible timing differences are recognized to the extent that it
is probable that taxable profit will be available against which the
deductible temporary difference can be utilized.
Discontinued operations
During the six months to June 30, 2006, IDB repaid $70.6
million, being the injectable flu development tranche of the $100.0 million
development loan facility provided to IDB as part of their acquisition of
Shire's vaccine business. The repayment followed GSK's acquisition of IDB,
after which IDB was provided with resources by GSK to fund the early
repayment of the injectable flu tranche. The $29.4 million pipeline
development tranche of the loan facility is still outstanding.
At the time of the disposal, a provision of $70.0 million was
charged to discontinued operations on the basis that there was no certainty
of recovery of this amount. The $70.0 million provision was allocated against
all of the pipeline development tranche ($29.4 million) and against $40.6
million of the $70.6 million injectable flu development tranche. Accordingly,
a gain on disposition of discontinued operations of $40.6 million (2005: $3.1
million) was recognized on repayment of the loan by IDB.
The repayment of the $70.6 million injectable flu tranche had
no tax effect.
Principal Differences: IFRS and US GAAP Net Income for the six
months to June 30, 2006 and 2005.
Shire prepares its financial results in accordance with US
GAAP and also under IFRS in accordance with the Listing Rules of the
Financial Services Authority.
The primary difference between net income as reported under US
GAAP and that reported under IFRS for the six months to June 30, 2006 related
to the $50 million payment to New River in February 2006, which was expensed
as a research and development cost under US GAAP together with the
recognition of a related deferred tax asset. Under IFRS this payment was
capitalised as an intangible asset, with no related tax effect.
In the six months to June 30, 2005 the primary differences
between US GAAP and IFRS net income related to a payment to New River of $50
million in January 2005, expensed as a research and development cost under US
GAAP and capitalised under IFRS, and the recognition under IFRS of deferred
tax on certain intangible asset transfers between group companies.
INTERIM IFRS CONSOLIDATED INCOME STATEMENT
(UNAUDITED)
6 months to 6 months to
June 30, June 30,
2006 2005
Notes $M $M
___________ ___________
Continuing operations:
Revenue 850.1 758.3
Cost of sales (123.6) (75.3)
___________ ___________
Gross profit 726.5 683.0
Research and development expenses (150.0) (127.0)
Selling, general and administrative expenses (435.2) (362.2)
___________ ___________
Operating profit 141.3 193.8
Investment revenue 24.2 21.0
Interest expense (12.2) (1.4)
Other (expense)/income (0.8) 0.8
Share of post tax profits from associates and
joint ventures 4.3 0.7
___________ ___________
Profit before taxation 156.8 214.9
Taxation 4 (49.9) 23.7
___________ ___________
Profit for the period from continuing
operations 106.9 238.6
Discontinued operations:
Gain on disposal of discontinued operations,
net of tax 40.6 3.1
___________ ___________
Profit for the period 147.5 241.7
___________ ___________
Earnings per share (cents per ordinary
share) 5
Basic 29.3c 48.4c
Diluted 28.9c 48.0c
Earnings per share from continuing operations
(cents per ordinary share)
Basic 21.2c 47.8c
Diluted 21.0c 47.4c
___________ ___________
Dividends
Paid 8 22.6 19.1
____________ ___________
The profit for the period is all attributable to the equity
holders of the Parent.
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
INTERIM IFRS CONSOLIDATED STATEMENT OF RECOGNIZED INCOME AND EXPENSE
(UNAUDITED)
6 months 6 months
to June 30 to June 30
2006 2005
____________ ____________
Profit for the period 147.5 241.7
Exchange differences on translation
of foreign operations 86.7 (8.9)
Unrealized holding loss on
available-for-sale securities (1.4) (27.1)
____________ ____________
Net profit/(loss) recognized
directly in equity 85.3 (36.0)
____________ ____________
____________ ____________
Total recognized income for the period 232.8 205.7
____________ ____________
The total recognized income for the period is all
attributable to the equity holders of the Parent.
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
INTERIM IFRS CONSOLIDATED BALANCE SHEET
(UNAUDITED)
Restated (1)
June 30, December 31, June 30,
2006 2005 2005
$M $M $M
______________ _________________ ______________
ASSETS
Non-current assets
Goodwill 2,136.2 2,078.5 2,243.5
Other Intangible 1,721.3 1,624.8 356.1
assets
Property, plant and 233.1 218.2 137.7
equipment
Deferred tax assets 85.9 70.4 158.4
Investments 29.3 23.0 29.3
accounted for using
equity method
Available for sale 33.5 27.1 27.5
investments
Other receivables 10.1 42.9 39.6
______________ _________________ _________________
4,249.4 4,084.9 2,992.1
Current assets
Inventories 123.5 136.1 47.7
Trade and other 370.8 394.3 311.9
receivables
Current tax assets 2.2 28.0 -
Trading investments 1.5 6.9 76.5
Cash and cash 885.1 656.5 1,502.2
equivalents
Restricted cash 29.5 30.6 21.9
______________ _________________ _________________
1,412.6 1,252.4 1,960.2
______________ _________________ _________________
Total assets 5,662.0 5,337.3 4,952.3
______________ _________________ _________________
LIABILITIES AND
SHAREHOLDERS' EQUITY
Non-current
liabilities
Borrowings 5.9 4.7 4.5
Trade and other 12.3 18.0 16.2
payables
Deferred tax 260.4 222.8 -
liabilities
Long-term provisions 25.1 25.4 23.2
__________________ _________________ _____________
303.7 270.9 43.9
Current liabilities
Borrowings 3.3 2.7 2.7
Trade and other 472.4 451.9 331.3
payables
Liability to 439.2 427.6 -
dissenting
shareholders
Current tax 117.8 94.4 86.7
liabilities
Provisions 1.8 8.5 13.2
__________________ _________________ _________________
1,034.5 985.1 433.9
__________________ _________________ _________________
Total liabilities 1,338.2 1,256.0 477.8
__________________ _________________ _________________
(1) Restated to reflect the allocation of the cost of the
acquisition of TKT. See note 3.
The accompanying notes are an integral part of these
unaudited consolidated financial statements.
INTERIM IFRS CONSOLIDATED BALANCE SHEET (CONTINUED)
(UNAUDITED)
Restated (1)
June 30, December 31, June 30,
2006 2005 2005
Notes $M $M $M
_____________ _____________ ______________ ____________
Shareholders'
equity
Share capital 43.0 42.7 36.7
Share premium 36.8 3.0 4,985.7
Treasury shares (4.7) (2.8) (0.2)
Exchangeable 84.8 101.2 111.2
shares
Capital 2,946.5 2,946.5 -
reduction
reserve
Capital reserve - - 4.7
Other reserve 2,099.7 2,099.7 36.1
Retained (882.3) (1,109.0) (699.7)
earnings
______________ ______________ ___________
Total 6 4,323.8 4,081.3 4,474.5
shareholders'
equity
______________ ______________ ___________
Total 5,662.0 5,337.3 4,952.3
liabilities and
shareholders'
equity
_____________ ______________ ___________
(1) Restated to reflect the allocation of the cost of the
acquisition of TKT. See note 3.
The accompanying notes are an integral part of these
consolidated financial statements
INTERIM IFRS CONSOLIDATED CASH FLOW STATEMENT
(UNAUDITED)
6 months to 6 months to
June 30, 2006 June 30, 2005
Notes $m $m
____________ ______________ ______________
NET CASH FLOWS FROM OPERATING 7 296.2 219.4
ACTIVITIES
Cash flows from investing
activities
Movement in restricted cash 1.1 (0.3)
Loan repaid by/(made) to ID 70.6 (29.9)
Biomedical Corporation (IDB)
Purchase of subsidiary (0.8) -
undertaking, net of cash
acquired
Purchases of property, plant (34.8) (27.2)
and equipment
Purchases of intangible assets (120.7) (89.1)
Purchases of financial assets (9.4) (7.5)
Net increase in current 5.5 244.0
financial assets
Proceeds from sale of property, 2.2 0.2
plant and equipment
Proceeds from sale of a - 62.3
discontinued business
Interest received 18.0 21.0
Dividends received from 0.3 2.4
associates
______________ ______________
Net cash (used in)/generated (68.0) 175.9
from investing activities
______________ ______________
Cash flows from financing
activities
Proceeds from exercise of share 17.7 18.5
options
Purchase of treasury shares (2.0) -
Repayments of guaranteed (0.1) -
convertible loan notes
Movement in finance lease 2.0 0.5
obligations
Dividends paid (22.6) (19.1)
______________ ______________
Net cash used in financing (5.0) (0.1)
activities
______________ ______________
Net increase in cash and cash 223.2 395.2
equivalents
Cash and cash equivalents at 656.5 1,111.5
beginning of the period
Effect of foreign currency 5.4 (4.5)
translation
______________ _____________
Cash and cash equivalents at 885.1 1,502.2
end of the period
______________ _____________
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
NOTES TO THE INTERIM IFRS CONSOLIDATED FINANCIAL STATEMENTS
1. General Information
Shire plc (the "Company") and its subsidiaries (together the
"Group" or "Shire") researches, develops and markets prescription medicines.
The Company is a public limited company incorporated under the Companies Act,
1985 and domiciled in the United Kingdom. The address of its registered
office is Hampshire International Business Park, Chineham, Basingstoke,
Hampshire, United Kingdom.
The Company has its primary listing on the London Stock
Exchange and its secondary listing on the NASDAQ National Market in the
United States of America.
These accounts are presented in US Dollars as this is the
currency of the primary economic environment in which the Group operates.
2. Accounting Presentation and Policies
These unaudited interim financial statements for the six
months to June 30, 2006 have been prepared in accordance with International
Accounting Standards and International Financial Reporting Standards ("IFRS")
as adopted by the EU. The accounting policies adopted are consistent with
those followed in the preparation of the Group's Annual Report for the year
ended December 31, 2005. Certain amounts reported in previous periods have
been reclassified to conform to the 2006 presentation. The balance sheet at
December 31, 2005 (adjusted for the allocation of the cost of business
combinations as outlined in note 3) has been derived from the full Group
accounts published in the Annual Report for the year ended December 31, 2005,
which have been delivered to the Registrar of Companies and on which the
report of the independent auditors was unqualified and did not contain a
statement under either section 237(2) or 237(3) of the Companies Act 1985.
The financial information for the year ended 31 December 2005 does not
constitute statutory accounts as defined in section 240 of the Companies Act
1985.
3. Business Combinations
During the six months to June 30, 2006 the Company finalized
the allocation of the costs of the acquisition of TKT, which completed on
July 27, 2005.
As a result, goodwill in respect of the TKT acquisition
decreased by $136.9 million following the recognition of the $232.0 million
tax amortization benefit on the valuation of intangible assets and in-process
research and development and certain contingent assets and liabilities whose
fair value is now determinable, net of related deferred tax liabilities and
assets.
In accordance with IFRS 3, Business Combinations, the results
for the year to December 31, 2005 and the balance sheet at December 31, 2005
have been restated to reflect the allocation of the cost of the acquisition
of TKT as if the accounting for the combination was computed as of the
acquisition date.
An additional charge of $1.8m was recognized in the year to
December 31, 2005 relating to amortization charged on the tax amortization
benefit recognized in the valuation of intangible assets (as outlined above).
4. Taxation
Taxation for the interim period to June 30, 2006 consists of
UK tax expense of $11.0 million (2005: $5.0 million expense) and overseas tax
expense of $38.9 million (2005: $28.7 million income).
5. Earnings per share (EPS)
Basic EPS is based upon the profit for the period divided by
the weighted average number of ordinary shares outstanding during the period,
excluding those held in the employee share trusts (which are treated as
cancelled).
Diluted EPS is based upon the profit for the period divided by
the weighted-average number of ordinary shares outstanding during the period
and adjusted for the effect of all dilutive potential ordinary shares.
6 months to 6 months to
June 30, 2006 June 30, 2005
$M $M
_______________ _______________
Profit for the period from continuing
operations (numerator for EPS from
continuing operations) 106.9 238.6
Gain from discontinued operations, net
of tax 40.6 3.1
______________ _______________
Profit for the period (numerator for
basic and diluted EPS) 147.5 241.7
______________ _______________
Number of Number of
shares (M) shares (M)
_______________ _______________
Weighted average number of shares:
Basic 503.7 499.3
Effect of dilutive shares:
Share options 5.5 4.3
Warrants 0.6 0.2
______________ _______________
Diluted 509.8 503.8
_______________ _______________
The share options not included within the calculation of the
diluted weighted average number of shares, because the exercise prices
exceeded the Company's average share price during the calculation period, are
shown below:
6 months to June 6 months to June 30,
30, 2006 2005
Number of shares Number of shares
(M) (M)
__________________ __________________
Share options 2.9 6.9
__________________ __________________
6. Condensed statement of changes in shareholders' equity
2006 2005
$M $M
_______________ __________
Shareholders' equity at December 31,
2005 and December 31, 2004 4,083.1 4,244.9
Adjustment on adoption of IAS 32
and IAS 39 - 13.1
Prior year adjustment in respect of
finalizing the allocation
of the cost of the TKT acquisition. (1.8) -
______________ __________
Shareholders' equity at January 1, 4,081.3 4,258.0
Foreign currency translation differences 86.7 (8.9)
Unrealized loss on available-for-sale
securities (1.4) (27.1)
Profit for the period 147.5 241.7
Dividends (22.6) (19.1)
Employee share option scheme:
- value of employee services 16.6 11.3
- proceeds from shares issued 17.7 18.5
(Purchase)/re-issuance of treasury shares (2.0) 0.1
______________ __________
Shareholders' equity at June 30, 4,323.8 4,474.5
_______________ __________
7. Notes to the consolidated cash flow statement
Reconciliation of profit for the period to net cash inflow from operating
activities:
6 months to 6 months to
June 30, June 30,
2006 2005
$M $M
____________ ___________
Operating profit 141.3 193.8
Depreciation of property, plant and equipment 18.5 7.1
Amortization of intangibles 31.9 24.8
Impairment of property, plant and equipment - 5.9
Impairment of intangibles 0.1 3.0
Movement in financial assets 1.8 1.6
Profit on disposal of non financial assets (0.1) -
Share based compensation 16.6 11.3
_______ _______
Operating cashflows before movements in working
capital 210.1 248.3
Changes in working capital:
Decrease/(increase) in inventories 8.3 (6.5)
Decrease/(increase) in trade and other
receivables 58.7 (12.1)
Decrease/(increase) in other assets 2.8 (0.7)
(Decrease)/increase in trade and other payables (13.2) 10.5
Increase/(decrease) in deferred income 6.1 (7.8)
Cash outflow from discontinued operations - (0.4)
_______ _______
Cash generated from operations 272.8 231.3
Interest paid (0.4) (1.4)
Income tax received/(paid) 23.8 (10.5)
____________ ___________
Cash generated from operating activities 296.2 219.4
____________ ___________
8. Dividends
During the six months to June 30, 2006 the Company declared
and paid dividends totalling 4.419 US cents per ordinary share, equivalent to
13.257 US cents per American Depositary Share, and 15.222 Canadian cents per
exchangeable share.
9. Related party transactions
BioChem contributed cash of $8.1 million (CAN$ 5.0 million in
April 2006, and CAN$ 4.0 million in June 2006) to ViroChem Pharma in return
for an additional equity interest. Dr Bellini, a non-executive director of
BioChem, had an indirect substantial interest in a company, which is a
co-investor of ViroChem Pharma.
10. Post balance sheet events
Settlement of Barr Litigation and New Product Development and
License Agreement
On August 14, 2006, Shire and Barr announced that all pending
litigation in connection with Barr's ANDA and its attempt to market generic
versions of Shire's ADDERALL XR had been settled. As part of the settlement
agreement, Barr entered into consent judgments and agreed to permanent
injunctions confirming the validity and enforceability of Shire's '819, '300
and '768 Patents. Barr has also admitted that any generic product made under
its ANDA would infringe the '768 patent. Under the terms of the settlement,
Barr will not be permitted to market a generic version of ADDERALL XR in the
United States until April 1, 2009, except for certain limited circumstances,
such as the launch of another party's generic version of ADDERALL XR. No
payments to Barr are involved in the settlement agreement.
Shire and Duramed, a subsidiary of Barr have entered into an
agreement related to Duramed's transvaginal ring technology that will be
applied to at least five women's health products, as well as a license to
Duramed's currently marketed oral contraceptive, Seasonique (
levonorgestrel/ethinyl estradiol tablets 0.15 mg/0.03 mg and ethinyl
estradiol tablets 0.01 mg) (the product development and license agreement).
Under this agreement, Shire made an initial payment of $25 million to Duramed
on September 13, 2006 for previously incurred product development expenses,
and will reimburse Duramed for development expenses incurred going forward up
to a maximum of $140 million over eight years. Shire will have the exclusive
rights to market these products in the five major European markets of the UK,
Germany, France, Italy and Spain and other areas, excluding North America and
to market and sell these products on a royalty free basis.
Shire submitted the settlement agreement and the product
development and license agreement, along with an agreement to sell Shire's
ADDERALL product to Duramed to the FTC and the DOJ as required by law on
August 28, 2006 and the agreements are currently subject to review by those
agencies. The settlement agreement and the product development and license
agreement became effective upon the Courts signing the last of the consent
judgments for the litigations on September 5, 2006.
Duramed has also agreed to purchase Shire's ADDERALL
(immediate-release mixed amphetamine salts) product for $63 million. Shire
reported the transaction to the FTC and the DOJ under the HSR Act on August
28, 2006. The HSR Act's 30-day waiting period, which must run before the
parties can complete the transaction, will expire on September 27, 2006.
Troxatyl
On August 28, 2006, SGX Pharmaceuticals Inc, (SGX), announced
that it had halted its phase 2/3 trials for Troxatyl after the independent
Data and Safety Monitoring Board determination that the response rates to
Troxatyl were unlikely to prove its benefit as a third line treatment for
patients with acute myelogenous leukemia. In July 2004, SGX had licenced the
worldwide rights to Troxatyl from Shire Biochem Inc, a wholly owned
subsidiary of Shire. Shire is considering the impact of this announcement on
the carrying value of goodwill created on the acquisition of Biochem Pharma
Inc, which includes $42 million related to its Troxatyl licence agreement.
Any resulting impairment of the $42 million asset would be recognised in the
second half of 2006.
INDEPENDENT REVIEW REPORT TO SHIRE PLC
Introduction
We have been instructed by the Company to review the IFRS
financial information on pages 3 to 18 for the six months ended June 30,
2006, which comprise the income statement, the balance sheet, the statement
of recognized income and expense, the cash flow statement and related notes 1
to 10. We have read the other information contained in the interim report and
considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
This report is made solely to the company in accordance with
Bulletin 1999/4 issued by the Auditing Practices Board. Our work has been
undertaken so that we might state to the company those matters we are
required to state to them in an independent review report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company, for our review work, for
this report, or for the conclusions we have formed.
Directors' responsibilities
The interim report, including the financial information
contained therein, is the responsibility of, and has been approved by, the
directors. The directors are responsible for preparing the interim report in
accordance with the Listing Rules of the Financial Services Authority
(Listing Rules) which require that the accounting policies and presentation
applied to the interim figures are consistent with those applied in preparing
the preceding annual accounts except where any changes, and the reasons for
them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance
contained in Bulletin 1999/4 issued by the Auditing Practices Board for use
in the United Kingdom. A review consists principally of making enquiries of
group management and applying analytical procedures to the financial
information and underlying financial data and, based thereon, assessing
whether the accounting policies and presentation have been consistently
applied unless otherwise disclosed. A review excludes audit procedures such
as tests of controls and verification of assets, liabilities and
transactions. It is substantially less in scope than an audit performed in
accordance with International Standards on Auditing (UK and Ireland) and
therefore provides a lower level of assurance than an audit. Accordingly, we
do not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material
modifications that should be made to the IFRS financial information on pages
3 to 18 as presented for the six months ended June 30, 2006.
Deloitte & Touche LLP
Chartered Accountants
Reading, UK
September 15, 2006
Notes: Neither an audit nor a review provides assurance on the
maintenance and integrity of the website, including controls used to achieve
this, and in particular whether any changes may have occurred to the
financial information since first published. These matters are the
responsibility of the directors but no control procedures can provide
absolute assurance in this area.
Legislation in the United Kingdom governing the preparation
and dissemination of financial information differs from legislation in other
jurisdictions.
