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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Shire | LSE:SHP | London | Ordinary Share | JE00B2QKY057 | ORD 5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 4,690.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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Strong third quarter and increased Non GAAP earnings expectations
October 24, 2013 - Shire (LSE: SHP, NASDAQ: SHPG) announces results for the
three months to September 30, 2013.
Financial Highlights Q3 2013 Growth(1)
Product sales $1,195 million +13%
Total revenues $1,237 million +12%
Non GAAP operating income $422 million +30%
US GAAP operating income $341 million +25%
Non GAAP diluted earnings per ADS $1.77 +30%
US GAAP diluted earnings per ADS $1.46 +23%
Non GAAP cash generation $482 million +36%
Non GAAP free cash flow $388 million +49%
US GAAP net cash provided by operating activities $434 million +50%
(1)Percentages compare to equivalent 2012 period.
The Non GAAP financial measures included within this release are explained on
page 24, and are reconciled to the most directly comparable financial measures
prepared in accordance with US GAAP on pages 19 - 23.
STRONG RESULTS DEMONSTRATING GOOD PROGRESS
- Product sales +13% - with eight of our products delivering double digit growth
in the quarter - including VYVANSE® (+21%), LIALDA®/MEZAVANT® (+36%) and
FIRAZYR®(+107%)
- Non GAAP operating income +30% reflecting strong operating leverage
- Non GAAP earnings per ADS +30%
- Non GAAP cash generation +36%
- Guidance increased to mid-to-high teens Non GAAP earnings growth for the full
year in 2013
STRATEGY EXECUTION
Focused on growth: excellence in commercial execution and investment in newly
prioritized pipeline
'One Shire' reorganization well underway driving greater efficiencies and
resetting cost base to deliver sustainable improved operating leverage
Revenue growth and effective cost management underpins increased guidance for
2013
Flemming Ornskov, M.D., Chief Executive Officer, commented:
"This has been a strong quarter with good growth in revenues, earnings and cash
generation.
We're demonstrating execution of our strategy, which is putting Shire on a path
of sustainable growth. Our focus on commercial excellence is improving product
sales and we're excited about the opportunities in our pipeline.
We're confident in our prospects for the longer term as we continue to execute
on commercial delivery, progress our prioritized pipeline and focus on targeted
M&A. The benefits of our 'One Shire' reorganization are already evident in our
year to date performance, we have a simpler, more efficient business and now
expect Non GAAP R&D and SG&A spend to be lower than current consensus
expectations for this year and in 2014 and 20151.
I am delighted to be increasing our 2013 full year earnings guidance to
delivering mid-to-high teens Non GAAP earnings growth and guiding to continuing
operating leverage for 2014 and 20151. This strong performance has been
overseen by a management team with long term tenure at Shire, supplemented by
some recent new senior appointments."
1 For full guidance, refer to Outlook statement on page 3.
FINANCIAL SUMMARY
Third Quarter 2013 Unaudited Results
Q3 2013 Q3 2012
US GAAP Adjustments Non GAAP US GAAP Adjustments Non GAAP
$M $M $M $M $M $M
Total revenues 1,237 - 1,237 1,100 - 1,100
Operating income 341 81 422 273 52 325
Diluted earnings per $1.46 $0.31 $1.77 $1.19 $0.17 $1.36
ADS
Product sales in Q3 2013 grew strongly (up 13% to $1,195 million). On a
Constant Exchange Rate ("CER") basis, which is a Non GAAP measure, product
sales were up 13%.
Eight of our products delivered double digit growth including VYVANSE(up 21% to
$299 million), LIALDA/MEZAVANT (up 36% to $142 million), ELAPRASE® (up 17% to
$129 million), VPRIV® (up 17% to $88 million), INTUNIV® (up 17% to $81 million)
and FIRAZYR (up 107% to $63 million). LIALDA/MEZAVANTsales in Q3 2013 were
particularly strong, primarily due to growth in US market share.
Growth in total product sales was moderated by DERMAGRAFT® (down 29% to $24
million), ADDERALL XR® (down 20% to $81 million) and REPLAGAL® (down 11% to
$109 million). REPLAGAL product sales continue to be impacted by the return of
competition to the Fabry market.
Total revenues were up 12% to $1,237 million (Q3 2012: $1,100 million) as the
growth in product sales was partially offset by lower royalties.
On a Non GAAP basis:
Operating income was up 30% to $422 million (Q3 2012: $325 million), as total
operating costs in Q3 2013 increased at a lower rate (up 5%) than total
revenues (up 12%) demonstrating our focus on delivering efficient growth.
Research and Development expenditure was up 2% and Selling, General and
Administrative expenditure was up 1%.
On a US GAAP basis:
Operating income was up 25% to $341 million (Q3 2012: $273 million), a lower
rate of increase than on a Non GAAP basis as Q3 2013 included higher
acquisition and integration costs as compared to Q3 2012 and reorganization
costs of $14 million not incurred in Q3 2012. Research and Development
expenditure was up 2% and Selling, General and Administrative expenditure was
up 1%.
Non GAAP diluted earnings per American Depository Share ("ADS") increased 30%
to $1.77 (Q3 2012: $1.36) primarily due to higher Non GAAP operating income.
On a US GAAP basis, diluted earnings per ADS increased 23% to $1.46 (Q3 2012:
$1.19), primarily due to higher US GAAP operating income.
Cash generation, a Non GAAP measure, increased by 36% to $482 million (Q3 2012:
$355 million) due to both higher cash receipts from product sales and lower
operating expense payments in Q3 2013 as compared to Q3 2012. Cash generation
partially benefited from the timing of some receipts from large distributors in
the US.
Free cash flow, also a Non GAAP measure, increased by 49% to $388 million (Q3
2012: $261 million) primarily due to higher cash generation and lower tax
payments, partially offset by higher capital expenditure payments in Q3 2013 as
compared to Q3 2012.
On a US GAAP basis, net cash provided by operating activities was up 50% to
$434 million (Q3 2012: $288 million).
Net cash, which is a Non GAAP measure, was $577 million at September 30, 2013
(December 31, 2012: $373 million).
On a US GAAP basis, cash and cash equivalents were $1,686 million at September
30, 2013 (December 31, 2012: $1,482 million).
STRATEGIC EXECUTION
Shire continues to focus on its strategic priorities of growing sales of the
existing portfolio, bringing new innovative treatments to market through both R
&D and business development, while driving greater efficiency and increased
operating leverage.
The business has been simplified. Prior to May 2013 Shire had three autonomous
divisions, each with their own R&D, supply chain, technical operations and
commercial infrastructures. These three divisions have been reorganized so they
are now one business, with much reduced overlap.
Shire now has greater collaboration and focus in its commercial operations and
this is showing positive results, as evident in the increased product sales.
With a single R&D organization now in place, Shire has a more effective process
to evaluate holistically all pipeline opportunities as well as business
development prospects. Our pipeline has been prioritized to focus on
development programs that have the best chance of clinical and commercial
success together with early stage research in rare diseases. We believe that
these measures will ensure Shire is optimally positioned to enable the
continued development of products that serve unmet patient need and to sustain
the track record of high growth.
OUTLOOK
We are increasing our guidance to mid-to-high teens Non GAAP earnings growth
for the full year in 2013 (previous guidance: double digit Non GAAP earnings
growth) as we continue to see operating costs benefit from our reorganization
efforts.
We anticipate a similar level of product sales growth in the fourth quarter as
we delivered in the third quarter, and continue to expect full year product
sales growth in the mid-to-high single digits.
We continue to expect royalties and other revenues to be 35-40% lower than
2012.
Our Non GAAP gross margin for the full year is expected to remain at a similar
level to 2012.
With investment prioritized behind our promising pipeline and our late stage
clinical trials, we now expect Non GAAP R&D to be 5-7% higher for the full year
than in 2012 (previous guidance: growth in the low double digits).
Non GAAP SG&A for the full year is now anticipated to be 5-7% lower than 2012
(previous guidance: 2-4% lower). Non GAAP SG&A in the fourth quarter is
expected to be slightly higher than in the third quarter as we provide targeted
support to our commercial team to invest behind our key products.
As a result, we now expect combined Non GAAP R&D and SG&A to be 1-3% lower than
2012 (previous guidance: only marginally higher). This translates to a reduced
spend of $250 million compared with our guidance forecasts in February 20131.
Our core effective tax rate on Non GAAP income is anticipated to remain in the
range of 18-20%.
Taken together, we are increasing our guidance to reflect our expectation of
delivering mid-to-high teens Non GAAP earnings growth for the full year in 2013
(previous guidance: double digit Non GAAP earnings growth).
Looking forward, we anticipate continuing operating leverage in 2014 and 2015,
from reduced combined Non GAAP R&D and SG&A. We expect this to be around $250
million lower than current consensus in 2014 and $300 million lower than
current consensus in 20152.
1 Improvements of approximately $250 million for full year 2013, based on the
difference between initial guidance for full year 2013 of high single digit
growth in combined Non GAAP R&D and SG&A (guidance provided February 14, 2013)
and current guidance expectations of combined Non GAAP R&D and SG&A to be 1-3%
lower than 2012.
2 Based on the most recent consensus estimates compiled by Consensus Forecast
Ltd, as of the date of this release, of combined Non GAAP R&D and SG&A of
$2,662 million and $2,683 million for the years ending December 31, 2014 and
2015 respectively, available on Shire's website (http://www.shire.com/shireplc/
en/investors/forecasts).
THIRD QUARTER 2013 AND RECENT PIPELINE DEVELOPMENTS
Pipeline
ABH001 - for the treatment of Epidermolysis Bullosa
- This program has been discontinued as part of the prioritization of Shire's pipeline.
OTHER DEVELOPMENTS
Decision to discontinue the construction of the new manufacturing facility in San Diego
On October 22, 2013 Shire announced that it had decided to discontinue the
construction of its new manufacturing facility in San Diego. Shire will
continue to manufacture DERMAGRAFT in its existing facility in La Jolla, and
Shire's ability to meet expected future demand for DERMAGRAFT is not impacted
by this decision. Shire is currently assessing possible disposal opportunities
in relation to this facility.
Share Buy-Back Program
In Q4 2012 Shire commenced a share buy-back program, for the purpose of
returning funds to shareholders, of up to $500 million, through both direct
purchases of Ordinary Shares and through the purchase of Ordinary Shares
underlying American Depositary Receipts. As of October 22, 2013 Shire had made
on-market repurchases totaling 9,807,835 Ordinary Shares at a cost of $299
million (excluding transaction costs).
BOARD AND COMMITTEE CHANGES
On October 23, 2013 Shire announced that Dominic Blakemore will join the Shire
Board of Directors effective January 1, 2014. On joining the Board, Dominic
will become a member of the Shire Audit, Compliance & Risk Committee. Dominic's
career experience includes finance and strategy roles with global
corporations. He is currently Group Finance Director of Compass Group plc.
ADDITIONAL INFORMATION
The following additional information is included in this press release:
Page
Overview of Third Quarter 2013 Financial Results 6
Financial Information 10
Non GAAP Reconciliation 19
Notes to Editors 23
Safe Harbor Statement 24
Explanation of Non GAAP Measures 24
Trade Marks 25
For further information please contact:
Investor Relations
- Eric Rojas erojas@shire.com +1 781 482 0999
- Sarah Elton-Farr seltonfarr@shire.com +44 1256 894 157
Media
- Jessica Mann jmann@shire.com +44 1256 894 280
- Gwen Fisher gfisher@shire.com +1 484 595 9836
- Jessica Cotrone jcotrone@shire.com +1 781 482 9538
Dial in details for the live conference call for investors at 14:00 BST / 09:00
EDT on October 24, 2013:
UK dial in: 0808 237 0030 or 0203
139 4830
US dial in: 1 866 928 7517 or 1 718
873 9077
International Access
Numbers: http://wpc.1726.planetstream.net/001726/FEL_Events_International_Access_List.pdf
Password/Conf ID: 71566006#
Live Webcast: http://www.shire.com/shireplc/en/investors
The quarterly earnings presentation will be available today at 13:00 BST / 08:
00 EDT on:
- Shire's IR Briefcase in the iTunes Store
- Shire.com Investors section
OVERVIEW OF THIRD QUARTER 2013 FINANCIAL RESULTS
1. Product sales
For the three months to September 30, 2013 product sales increased by 13% to
$1,195 million (Q3 2012: $1,055 million) and represented 97% of total revenues
(Q3 2012: 96%).
Year on year growth
US Exit
Non GAAP Market
Product sales Sales $M Sales CER US Rx(1) Share(1)
VYVANSE(2) 299.2 +21% +21% +7% 17%
LIALDA/MEZAVANT 141.9 +36% +36% +23% 27%
ELAPRASE 129.1 +17% +17% n/a(3) n/a(3)
REPLAGAL 108.5 -11% -10% n/a(4) n/a(4)
VPRIV 87.8 +17% +17% n/a(3) n/a(3)
ADDERALL XR 81.4 -20% -20% -2% 5%
INTUNIV 80.8 +17% +17% +8% 4%
PENTASA® 70.6 +5% +5% +1% 14%
FIRAZYR 62.6 +107% +106% n/a(3) n/a(3)
DERMAGRAFT 23.9 -29% -29% n/a(3) n/a(3)
OTHER 109.1 +16% +15% n/a n/a
Total 1,194.9 +13% +13%
Data provided by IMS Health National Prescription Audit ("IMS NPA") relates
solely to US-based prescriptions. Exit market share represents the average
monthly US market share in the month ended September 30, 2013.
Lisdexamfetamine ("LDX") currently marketed as VYVANSE in the US & Canada,
VENVANSE® in Latin America and ELVANSE® in certain territories in the EU.
IMS NPA Data not available.
Not sold in the US in Q3 2013.
VYVANSE - ADHD
VYVANSE product sales showed strong growth (up 21%) in Q3 2013 compared to Q3
2012 due to higher prescription demand, which was up 7% in the quarter in
addition to the benefit of price increases taken since Q3 2012.
LIALDA/MEZAVANT - Ulcerative Colitis
Product sales for LIALDA/MEZAVANT in Q3 2013 were up 36% primarily due to
higher prescription demand (up 23%) and stocking in Q3 2013 compared to a
slight destocking in Q3 2012, the benefit of which was partially offset by
higher sales deductions in Q3 2013 as compared to Q3 2012.
ELAPRASE - Hunter syndrome
ELAPRASE product sales in Q3 2013 were up 17% compared to Q3 2012 driven
primarily by continued growth in the number of patients and higher utilization.
Quarterly sales of ELAPRASE can be volatile due to the timings of large orders
to certain markets which order less frequently. This accounts for the decline
in sales from Q2 2013 to Q3 2013. The underlying number of patients being
treated with ELAPRASE continues to grow.
REPLAGAL - Fabry disease
REPLAGAL sales were down 11% as compared to Q3 2012 primarily due to lower
volume in Europe due to the return of competition to the Fabry market and the
timing of large orders in Q3 2012 from markets that order less frequently.
VPRIV - Gaucher disease
VPRIV product sales were up 17% in Q3 2013 compared to Q3 2012 as the number of
patients on therapy continues to grow.
ADDERALL XR - ADHD
ADDERALL XR product sales decreased (down 20%) in Q3 2013 primarily due to
higher sales deductions as a percentage of sales in Q3 2013 as compared to Q3
2012.
INTUNIV - ADHD
The strong growth in INTUNIV product sales (up 17%) in Q3 2013 was driven by a
combination of increased US prescription demand (up 8%) and the effect of price
increases taken since Q3 2012. The benefit of these increases was partially
offset by higher sales deductions in Q3 2013 as compared to Q3 2012.
PENTASA - Ulcerative Colitis
PENTASA product sales (up 5%) benefited from price increases taken since Q3
2012 partially offset by higher sales deductions in Q3 2013 as compared to Q3
2012.
FIRAZYR - Hereditary Angioedema
FIRAZYR product sales growth (up 107%) was primarily driven by the US market,
where the number of new patients on therapy continues to grow strongly.
DERMAGRAFT -Diabetic Foot Ulcers
DERMAGRAFT product sales were down 29% compared to Q3 2012.
2. Royalties
Year on year growth
Royalties to
Product Shire $M Royalties CER
FOSRENOL® 13.8 -1% -2%
3TC® and ZEFFIX® 10.1 -5% -5%
ADDERALL XR 6.2 -45% -45%
Other 7.5 +25% +23%
Total 37.6 -10% -10%
3. Financial details
Cost of product sales
Q3 2013 % of Q3 2012 % of
product product
$M sales $M sales
Cost of product sales (US GAAP) 197.1 16% 167.9 16%
Depreciation (11.0) (9.4)
Cost of product sales (Non GAAP) 186.1 16% 158.5 15%
Cost of product sales as a percentage of product sales remained broadly
constant in Q3 2013 as compared to Q3 2012.
Research and Development ("R&D")
Q3 2013 % of Q3 2012 % of
product product
$M sales $M sales
R&D (US GAAP) 229.1 19% 224.7 21%
Depreciation (6.3) (5.5)
R&D (Non GAAP) 222.8 19% 219.2 21%
Non GAAP R&D increased by $3.6 million, or 2%1, due to the continued investment
in our R&D pipeline, primarily on non-ADHD programs for LDX, on SHP602
(formerly known as SPD602) for iron overload and on development programs
acquired through business development in 2013, including Lifitegrast. This
growth was offset by reduced costs in relation to programs which have been
discontinued following our pipeline prioritization review.
US GAAP R&D increased by $4.4 million, or 2%, as compared to Q3 2012.
Selling, General and Administrative ("SG&A")
2013 % of 2012 % of
product product
$M sales $M sales
SG&A (US GAAP) 441.1 37% 437.4 41%
Intangible asset amortization (44.4) (50.0)
Legal and litigation costs (8.5) (4.5)
Depreciation (16.5) (14.2)
SG&A (Non GAAP) 371.7 31% 368.7 35%
Non GAAP SG&A increased by $3.0 million, or 1%, a slower rate than the increase
in product sales as we continue to focus on simplifying our business and
delivering efficient growth.
US GAAP SG&A increased by $3.7 million, or 1%, as compared to Q3 2013.
For the nine months to September 30, 2013 Non GAAP SG&A decreased by $85.1
million, or 7%1; US GAAP SG&A decreased by $111.0 million, or 8%.
1 For the full year guidance, refer to Outlook statement on page 3.
Gain on sale of product rights
For the three months to September 30, 2013 Shire recorded a gain on sale of
product rights of $3.6 million (2012: $5.7 million) following re-measurement of
the contingent consideration receivable from the divestment of DAYTRANA®.
Reorganization costs
For the three months to September 30, 2013 Shire recorded reorganization costs
of $13.7 million (Q3 2012: $nil) primarily relating to the "One Shire"
reorganization as we transition to a new operating structure.
Integration and acquisition costs
For the three months to September 30, 2013 Shire recorded integration and
acquisition costs of $18.4 million primarily related to the change in fair
value of contingent consideration and the costs of integrating SARcode
Biosciences Inc. ("SARcode") and Premacure AB ("Premacure"). In Q3 2012
integration and acquisition costs ($2.7 million) primarily related to the
acquisition of FerroKin Biosciences, Inc. ("FerroKin") and the integration of
Advanced BioHealing Inc. ("ABH").
Interest expense
For the three months to September 30, 2013 Shire incurred interest expense of
$9.0 million (Q3 2012: $9.2 million), which principally relates to the coupon
on Shire's $1,100 million 2.75% convertible bonds due May 2014.
Taxation
The effective rate of tax on Non GAAP income in Q3 2013 was 19% (Q3 2012: 18%),
and on a US GAAP basis the effective rate of tax was 16% (Q3 2012: 15%).
The effective rate of tax in Q3 2013 on both a Non GAAP and a US GAAP basis is
higher than the same period in 2012 due primarily to adverse changes in profit
mix and changes in provisions for uncertain tax positions, partially offset by
changes in estimates of the amount of certain tax liabilities following the
finalisation of various tax returns.
FINANCIAL INFORMATION
TABLE OF CONTENTS
Page
Unaudited US GAAP Consolidated Balance Sheets 11
Unaudited US GAAP Consolidated Statements of Income 12
Unaudited US GAAP Consolidated Statements of Cash Flows 14
Selected Notes to the Unaudited US GAAP Financial Statements
(1) Earnings per share 16
(2) Analysis of revenues 17
Non GAAP reconciliation 19
Unaudited US GAAP financial position as of September 30, 2013
Consolidated Balance Sheets
September December
30, 31,
2013 2012
$M $M
ASSETS
Current assets:
Cash and cash equivalents 1,686.1 1,482.2
Restricted cash 16.6 17.1
Accounts receivable, net 1,037.8 824.2
Inventories 480.5 436.9
Deferred tax asset 210.6 229.9
Prepaid expenses and other current assets 282.3 221.8
Total current assets 3,713.9 3,212.1
Non-current assets:
Investments 36.7 38.7
Property, plant and equipment ("PP&E"), net 965.1 955.8
Goodwill 621.3 644.5
Other intangible assets, net 2,976.0 2,388.1
Deferred tax asset 40.4 46.5
Other non-current assets 34.5 31.5
Total assets 8,387.9 7,317.2
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued expenses 1,581.6 1,501.5
Convertible bonds 1,100.0 -
Other current liabilities 163.2 144.1
Total current liabilities 2,844.8 1,645.6
Non-current liabilities:
Convertible bonds - 1,100.0
Deferred tax liability 722.0 520.8
Other non-current liabilities 652.3 241.6
Total liabilities 4,219.1 3,508.0
Equity:
Common stock of 5p par value; 1,000 million shares
authorized; and 562.9 million shares issued and outstanding
(2012: 1,000 million shares authorized; and 562.5 million
shares issued and outstanding) 55.8 55.7
Additional paid-in capital 3,045.6 2,981.5
Treasury stock: 14.5 million shares (2012: 10.7 million) (466.6) (310.4)
Accumulated other comprehensive income 101.3 86.9
Retained earnings 1,432.7 995.5
Total equity 4,168.8 3,809.2
Total liabilities and equity 8,387.9 7,317.2
Unaudited US GAAP results for the three months and nine months to September 30,
2013
Consolidated Statements of Income
3 months 3 months 9 months 9 months
to to to to
September September September September
30, 30, 30, 30,
2013 2012 2013 2012
$M $M $M $M
Revenues:
Product sales 1,194.9 1,054.5 3,541.8 3,309.1
Royalties 37.6 41.8 112.4 154.4
Other revenues 4.1 4.1 18.8 16.5
Total revenues 1,236.6 1,100.4 3,673.0 3,480.0
Costs and expenses:
Cost of product sales 197.1 167.9 528.7 478.8
R&D(1) 229.1 224.7 713.4 683.6
SG&A(1) 441.1 437.4 1,337.4 1,448.4
Goodwill impairment charge - - 198.9 -
Gain on sale of product rights (3.6) (5.7) (14.6) (16.5)
Reorganization costs 13.7 - 57.6 -
Integration and acquisition costs 18.4 2.7 39.9 15.1
Total operating expenses 895.8 827.0 2,861.3 2,609.4
Operating income 340.8 273.4 811.7 870.6
Interest income 0.4 0.9 1.6 2.3
Interest expense (9.0) (9.2) (27.0) (29.0)
Other income/(expense), net 0.6 3.5 (1.9) 3.6
Total other expense, net (8.0) (4.8) (27.3) (23.1)
Income before income taxes and equity
in (losses)/earnings of equity method
investees 332.8 268.6 784.4 847.5
Income taxes (54.3) (41.6) (183.9) (144.6)
Equity in (losses)/earnings of equity
method investees, net of taxes (0.3) 0.2 0.6 0.5
Net income 278.2 227.2 601.1 703.4
R&D includes intangible asset impairment charges of $19.9 million for the nine
months to September 30, 2013 (2012: $27.0 million). SG&A costs include
amortization and impairment charges of intangible assets relating to
intellectual property rights acquired of $44.4 million for the three months to
September 30, 2013 (2012: $50.0 million) and $136.1 million for the nine months
to September 30, 2013 (2012: $146.6 million).
Unaudited US GAAP results for the three months and nine months to September 30,
2013
Consolidated Statements of Income (continued)
3 months to 3 months to 9 months to 9 months to
September September September September
30, 30, 30, 30,
2013 2012 2013 2012
Earnings per ordinary share -
basic
Earnings per Ordinary Share -
basic 50.7c 40.9c 109.3c 126.6c
Earnings per ADS - basic 152.1c 122.7c 327.9c 379.8c
Earnings per Ordinary Share -
diluted 48.8c 39.6c 106.2c 122.4c
Earnings per ADS - diluted 146.4c 118.8c 318.6c 367.2c
Weighted average number of
shares:
Millions Millions Millions Millions
Basic 548.4 555.9 549.8 555.5
Diluted 585.7 593.1 587.5 594.0
Unaudited US GAAP results for the three months and nine months to September 30,
2013
Consolidated Statements of Cash Flows
3 months to 9 months to
September 30, September 30,
2013 2012 2013 2012
$M $M $M $M
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 278.2 227.2 601.1 703.4
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 78.2 79.1 229.4 231.5
Share based compensation 18.8 21.6 55.2 65.0
Change in fair value of contingent
consideration 14.7 1.2 28.4 3.3
Impairment of intangible assets - - 19.9 27.0
Goodwill impairment charge - - 198.9 -
Gain on sale of product rights (3.6) (5.7) (14.6) (16.5)
Other, net (2.8) (0.7) 4.4 1.8
Movement in deferred taxes (5.1) (6.3) 16.1 (30.4)
Equity in losses/(earnings) of equity
method investees 0.3 (0.2) (0.6) (0.5)
Changes in operating assets and
liabilities:
Increase in accounts receivable (112.6) (45.4) (215.2) (23.0)
Increase in sales deduction accrual 68.7 8.5 108.7 36.1
Decrease/(increase) in inventory 14.0 (14.9) (39.9) (81.9)
(Increase)/decrease in prepayments and
other assets (4.4) (14.3) (70.9) 17.8
Increase/(decrease) in accounts payable
and other liabilities 89.3 38.3 (71.4) 72.7
Returns on investment from joint venture - - 3.2 4.9
Net cash provided by operating activities
(A) 433.7 288.4 852.7 1,011.2
CASH FLOWS FROM INVESTING ACTIVITIES:
Movements in restricted cash 1.0 (4.5) 0.5 1.7
Purchases of subsidiary undertakings and
businesses, net of cash acquired - - (227.8) (97.0)
Purchases of non-current investments (3.1) (7.4) (9.9) (12.1)
Purchases of PP&E (45.3) (27.2) (110.3) (91.6)
Purchases of intangible assets - - - (43.5)
Proceeds received on sale of product rights 4.7 3.3 15.0 13.7
Other, net 1.0 0.1 11.5 13.2
Net cash used in investing activities(B) (41.7) (35.7) (321.0) (215.6)
Unaudited US GAAP results for the three months and nine months to September 30,
2013
Consolidated Statements of Cash Flows (continued)
3 months to 9 months to
September 30, September 30,
2013 2012 2013 2012
$M $M $M $M
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments to acquire shares under the
share buy-back program (12.8) - (190.5) -
Payment of dividend - - (79.2) (70.7)
Payments to acquire shares by the
Employee Benefit Trust ("EBT") - (40.2) (50.3) (50.9)
Excess tax benefit associated with
exercise of stock options 3.4 3.5 9.5 38.6
Contingent consideration payments (2.5) (3.0) (11.3) (3.0)
Other, net 1.7 (0.3) (5.5) (2.6)
Net cash used in financing activities
(C) (10.2) (40.0) (327.3) (88.6)
Effect of foreign exchange rate changes
on cash and cash equivalents (D) 2.4 (3.5) (0.5) (5.1)
Net increase in cash and cash
equivalents(A) +(B) +(C) +(D) 384.2 209.2 203.9 701.9
Cash and cash equivalents at beginning
of period 1,301.9 1,112.7 1,482.2 620.0
Cash and cash equivalents at end of
period 1,686.1 1,321.9 1,686.1 1,321.9
Unaudited US GAAP results for the three months and nine months to September 30,
2013
Selected Notes to the Financial Statements
(1) Earnings Per Share ("EPS")
3 months to 3 months to 9 months to 9 months to
September September September September
30, 30, 30, 30,
2013 2012 2013 2012
$M $M $M $M
Numerator for basic EPS 278.2 227.2 601.1 703.4
Interest on convertible bonds,
net of tax 7.6 7.5 22.7 23.7
Numerator for diluted EPS 285.8 234.7 623.8 727.1
Weighted average number of
shares:
Millions Millions Millions Millions
Basic(1) 548.4 555.9 549.8 555.5
Effect of dilutive shares:
Share based awards to employees
(2) 3.5 3.7 3.9 5.0
Convertible bonds 2.75% due 2014
(3) 33.8 33.5 33.8 33.5
Diluted 585.7 593.1 587.5 594.0
Excludes shares purchased by the EBT and under the share buy-back program and
presented by Shire as treasury stock.
Calculated using the treasury stock method.
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 9 months to 9 months to
September September September September
30, 30, 30, 30,
2013 2012 2013 2012
Millions Millions Millions Millions
Share based awards to
employees(1) 0.5 6.6 4.5 4.9
Certain stock options have been excluded from the calculation of diluted EPS
because (a) their exercise prices exceeded Shire's average share price during
the calculation period or (b) the required performance conditions were not
satisfied as at the balance sheet date.
Unaudited US GAAP results for the three months to September 30, 2013
Selected Notes to the Financial Statements
(2) Analysis of revenues
3 months to September 30, 2013 2012 2013 2013
% % of total
$M $M change revenue
Net product sales:
VYVANSE 299.2 247.1 21% 24%
LIALDA/MEZAVANT 141.9 104.4 36% 11%
ELAPRASE 129.1 110.5 17% 10%
REPLAGAL 108.5 121.7 -11% 9%
VPRIV 87.8 74.9 17% 7%
ADDERALL XR 81.4 102.2 -20% 7%
INTUNIV 80.8 69.0 17% 7%
PENTASA 70.6 67.0 5% 6%
FIRAZYR 62.6 30.3 107% 5%
FOSRENOL 51.9 38.1 36% 4%
XAGRID® 24.2 22.0 10% 2%
DERMAGRAFT 23.9 33.7 -29% 2%
Other product sales 33.0 33.6 -2% 3%
Total product sales 1,194.9 1,054.5 13% 97%
Royalties:
FOSRENOL 13.8 14.0 -1% 1%
3TC and ZEFFIX 10.1 10.6 -5% 1%
ADDERALL XR 6.2 11.2 -45% <1%
Other 7.5 6.0 25% 1%
Total royalties 37.6 41.8 -10% 3%
Other revenues 4.1 4.1 0% <1%
Total revenues 1,236.6 1,100.4 12% 100%
Unaudited US GAAP results for the nine months to September 30, 2013
Selected Notes to the Financial Statements
(2) Analysis of revenues
9 months to September 30, 2013 2012 2013 2013
% % of total
$M $M change revenue
Net product sales:
VYVANSE 897.9 773.3 16% 24%
LIALDA/MEZAVANT 379.9 288.5 32% 10%
ELAPRASE 392.6 358.3 10% 11%
REPLAGAL 336.6 379.3 -11% 9%
VPRIV 251.9 229.3 10% 7%
ADDERALL XR 293.5 347.5 -16% 8%
INTUNIV 248.9 206.6 20% 7%
PENTASA 215.2 196.7 9% 6%
FIRAZYR 153.8 81.7 88% 4%
FOSRENOL 136.3 126.8 7% 4%
XAGRID 74.1 70.7 5% 2%
DERMAGRAFT 64.7 134.9 -52% 2%
Other product sales 96.4 115.5 -17% 2%
Total product sales 3,541.8 3,309.1 7% 96%
Royalties:
FOSRENOL 33.6 37.0 -9% 1%
3TC and ZEFFIX 33.9 34.8 -3% 1%
ADDERALL XR 19.2 62.2 -69% <1%
Other 25.7 20.4 26% 1%
Total royalties 112.4 154.4 -27% 3%
Other revenues 18.8 16.5 14% 1%
Total revenues 3,673.0 3,480.0 6% 100%
Unaudited results for the three months to September 30, 2013
Non GAAP reconciliation
3 months to September 30,
2013 US GAAP Adjustments Non GAAP
(a) (b) (c) (d) (e)
$M $M $M $M $M $M $M
Total revenues 1,236.6 - - - - - 1,236.6
Costs and expenses:
Cost of product sales 197.1 - - - - (11.0) 186.1
R&D 229.1 - - - - (6.3) 222.8
SG&A 441.1 (44.4) - - (8.5) (16.5) 371.7
Gain on sale of product
rights (3.6) - - 3.6 - - -
Reorganization costs 13.7 - - (13.7) - - -
Integration and acquisition
costs 18.4 - (18.4) - - - -
Depreciation - - - - - 33.8 33.8
Total operating expenses 895.8 (44.4) (18.4) (10.1) (8.5) - 814.4
Operating income 340.8 44.4 18.4 10.1 8.5 - 422.2
Interest income 0.4 - - - - - 0.4
Interest expense (9.0) - - - - - (9.0)
Other income, net 0.6 - - - - - 0.6
Total other expense, net (8.0) - - - - - (8.0)
Income before income taxes
and equity in losses of
equity method investees 332.8 44.4 18.4 10.1 8.5 - 414.2
Income taxes (54.3) (14.1) (1.0) (4.2) (3.1) - (76.7)
Equity in losses of equity
method investees, net of
tax (0.3) - - - - - (0.3)
Net income 278.2 30.3 17.4 5.9 5.4 - 337.2
Impact of convertible debt,
net of tax 7.6 - - - - - 7.6
Numerator for diluted EPS 285.8 30.3 17.4 5.9 5.4 - 344.8
Weighted average number of
shares (millions) - diluted 585.7 - - - - - 585.7
Diluted earnings per ADS 146.4c 15.6c 9.0c 3.0c 2.7c - 176.7c
The following items are included in Adjustments:
Amortization and asset impairments: Amortization of intangible assets relating
to intellectual property rights acquired ($44.4 million), and tax effect of
adjustments;
Acquisition and integration activities: Costs primarily associated with the
integration of SARcode and Premacure ($3.7 million), charges related to the
change in fair value of contingent consideration ($14.7 million), and tax
effect of adjustments;
Divestments, reorganizations and discontinued operations: Re-measurement of
DAYTRANA contingent consideration to higher fair value ($3.6 million), costs
relating to the "One Shire" reorganization announced at Q1 2013 and the
collective dismissal and closure of Shire's facility at Turnhout, Belgium
($13.7 million), and tax effect of adjustments;
Legal and litigation costs: Costs related to litigation, government
investigations, other disputes and external legal costs ($8.5 million), and tax
effect of adjustments; and
Depreciation reclassification: Depreciation of $33.8 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 September 30, 2012
Non GAAP reconciliation
3 months to September 30,
2012 US GAAP Adjustments Non GAAP
(a) (b) (c) (d) (e)
$M $M $M $M $M $M $M
Total revenues 1,100.4 - - - - - 1,100.4
Costs and expenses:
Cost of product sales 167.9 - - - - (9.4) 158.5
R&D 224.7 - - - - (5.5) 219.2
SG&A 437.4 (50.0) - - (4.5) (14.2) 368.7
Gain on sale of product
rights (5.7) - - 5.7 - - -
Integration and acquisition
costs 2.7 - (2.7) - - - -
Depreciation - - - - - 29.1 29.1
Total operating expenses 827.0 (50.0) (2.7) 5.7 (4.5) - 775.5
Operating income 273.4 50.0 2.7 (5.7) 4.5 - 324.9
Interest income 0.9 - - - - - 0.9
Interest expense (9.2) - - - - - (9.2)
Other income, net 3.5 - - - - - 3.5
Total other expense, net (4.8) - - - - - (4.8)
Income before income taxes
and equity in earnings of
equity method investees 268.6 50.0 2.7 (5.7) 4.5 - 320.1
Income taxes (41.6) (14.3) (1.1) - (1.5) - (58.5)
Equity in earnings of equity
method investees, net of tax 0.2 - - - - - 0.2
Net income 227.2 35.7 1.6 (5.7) 3.0 - 261.8
Impact of convertible debt,
net of tax 7.5 - - - - - 7.5
Numerator for diluted EPS 234.7 35.7 1.6 (5.7) 3.0 - 269.3
Weighted average number of
shares (millions) - diluted 593.1 - - - - - 593.1
Diluted earnings per ADS 118.8c 18.0c 0.9c (3.0c) 1.5c - 136.2c
The following items are included in Adjustments:
Amortization and asset impairments: Amortization of intangible assets relating
to intellectual property rights acquired ($50.0 million), and tax effect of
adjustments;
Acquisition and integration activities: Costs associated with the acquisition
of FerroKin and the integration of ABH ($1.5 million), charges related to the
change in fair value of contingent consideration ($1.2 million), and tax effect
of adjustments;
Divestments, reorganizations and discontinued operations: Re-measurement of
DAYTRANA contingent consideration to higher fair value ($5.7 million);
Legal and litigation costs: Costs related to litigation, government
investigations, other disputes and external legal costs ($4.5 million), and tax
effect of adjustments; and
Depreciation reclassification: Depreciation of $29.1 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 nine months to September 30, 2013
Non GAAP reconciliation
9 months to September
30, 2013 US GAAP Adjustments Non GAAP
(a) (b) (c) (d) (e)
$M $M $M $M $M $M $M
Total revenues 3,673.0 - - - - - 3,673.0
Costs and expenses:
Cost of product sales 528.7 - - - - (28.8) 499.9
R&D 713.4 (19.9) - - - (15.2) 678.3
SG&A 1,337.4 (136.1) - - (18.0) (49.3) 1,134.0
Goodwill impairment
charge 198.9 (198.9) - - - - -
Gain on sale of product
rights (14.6) - - 14.6 - - -
Reorganization costs 57.6 - - (57.6) - - -
Integration and
acquisition costs 39.9 - (39.9) - - - -
Depreciation - - - - - 93.3 93.3
Total operating expenses 2,861.3 (354.9) (39.9) (43.0) (18.0) - 2,405.5
Operating income 811.7 354.9 39.9 43.0 18.0 - 1,267.5
Interest income 1.6 - - - - - 1.6
Interest expense (27.0) - - - - - (27.0)
Other expense, net (1.9) - - - - - (1.9)
Total other expense, net (27.3) - - - - - (27.3)
Income before income
taxes and equity in
earnings of equity method
investees 784.4 354.9 39.9 43.0 18.0 - 1,240.2
Income taxes (183.9) (43.2) (3.1) (13.1) (6.5) - (249.8)
Equity in earnings of
equity method investees,
net of tax 0.6 - - - - - 0.6
Net income 601.1 311.7 36.8 29.9 11.5 - 991.0
Impact of convertible
debt, net of tax 22.7 - - - - - 22.7
Numerator for diluted EPS 623.8 311.7 36.8 29.9 11.5 - 1,013.7
Weighted average number
of shares (millions) -
diluted 587.5 - - - - - 587.5
Diluted earnings per ADS 318.6c 159.1c 18.7c 15.1c 6.0c - 517.5c
The following items are included in Adjustments:
Amortization and asset impairments: Impairment of IPR&D intangible assets
acquired with Movetis ($19.9 million), impairment of goodwill relating to
Shire's Regenerative Medicine Business ($198.9 million), amortization of
intangible assets relating to intellectual property rights acquired ($136.1
million), and tax effect of adjustments;
Acquisitions and integration activities: Costs primarily associated with
acquisition of SARcode, Lotus and Premacure ($11.5 million), charges related to
the change in fair value of contingent consideration ($28.4 million), and tax
effect of adjustments;
Divestments, reorganizations and discontinued operations: Re-measurement of
DAYTRANA contingent consideration to higher fair value ($14.6 million), costs
relating to the "One Shire" reorganization announced at Q1 2013 and the
collective dismissal and closure of Shire's facility at Turnhout, Belgium
($57.6 million), and tax effect of adjustments;
Legal and litigation costs: Costs related to litigation, government
investigations, other disputes and external legal costs ($18.0 million), and
tax effect of adjustments; and
Depreciation reclassification: Depreciation of $93.3 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 nine months to September 30, 2012
Non GAAP reconciliation
9 months to September 30,
2012 US GAAP Adjustments Non GAAP
(a) (b) (c) (d) (e)
$M $M $M $M $M $M $M
Total revenues 3,480.0 - - - - - 3,480.0
Costs and expenses:
Cost of product sales 478.8 - - - - (23.6) 455.2
R&D 683.6 (27.0) (23.0) - - (18.3) 615.3
SG&A 1,448.4 (146.6) - - (40.4) (42.3) 1,219.1
Gain on sale of product
rights (16.5) - - 16.5 - - -
Integration and
acquisition costs 15.1 - (15.1) - - - -
Depreciation - - - - - 84.2 84.2
Total operating expenses 2,609.4 (173.6) (38.1) 16.5 (40.4) - 2,373.8
Operating income 870.6 173.6 38.1 (16.5) 40.4 - 1,106.2
Interest income 2.3 - - - - - 2.3
Interest expense (29.0) - - - - - (29.0)
Other income, net 3.6 - - - - - 3.6
Total other expense, net (23.1) - - - - - (23.1)
Income before income
taxes and equity in
earnings of equity method
investees 847.5 173.6 38.1 (16.5) 40.4 - 1,083.1
Income taxes (144.6) (42.0) (10.1) - (14.5) - (211.2)
Equity in earnings of
equity method investees,
net of tax 0.5 - - - - - 0.5
Net income 703.4 131.6 28.0 (16.5) 25.9 - 872.4
Impact of convertible
debt, net of tax 23.7 - - - - - 23.7
Numerator for diluted EPS 727.1 131.6 28.0 (16.5) 25.9 - 896.1
Weighted average number
of shares (millions) -
diluted 594.0 - - - - - 594.0
Diluted earnings per ADS 367.2c 66.6c 14.1c (8.4c) 13.2c - 452.7c
The following items are included in Adjustments:
Amortization and asset impairments: Impairment of IPR&D intangible assets for
RESOLOR ($27.0 million), amortization of intangible assets relating to
intellectual property rights acquired ($146.6 million), and tax effect of
adjustments;
Acquisitions and integration activities:Up-front payments made to Sangamo
Biosciences Inc. and for the acquisition of the US rights to prucalopride
(marketed in certain countries in Europe as RESOLOR) ($23.0 million), costs
associated with acquisition of FerroKin and the integration of ABH ($11.8
million), charges related to the change in fair value of contingent
consideration ($3.3 million), and tax effect of adjustments;
Divestments, reorganizations and discontinued operations: Re-measurement of
DAYTRANA contingent consideration to fair value ($16.5 million);
Legal and litigation costs: Costs related to the litigation, government
investigations, other disputes and external legal costs ($40.4 million), and
tax effect of adjustments; and
Depreciation reclassification: Depreciation of $84.2 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 nine months to September 30, 2013
Non GAAP reconciliation
The following table reconciles US GAAP net cash provided by operating
activities to Non GAAP cash generation:
3 months to 9 months to
September 30, September 30,
2013 2012 2013 2012
$M $M $M $M
Net cash provided by operating
activities 433.7 288.4 852.7 1,011.2
Tax and interest payments, net 48.1 66.8 260.6 150.9
Up-front payments in respect of
in-licensed and acquired products - - - 23.0
Non GAAP cash generation 481.8 355.2 1,113.3 1,185.1
The following table reconciles US GAAP net cash provided by operating
activities to Non GAAP free cash flow:
3 months to 9 months to
September 30, September 30,
2013 2012 2013 2012
$M $M $M $M
Net cash provided by operating
activities 433.7 288.4 852.7 1,011.2
Up-front payments in respect of
in-licensed and acquired products - - - 23.0
Capital expenditure (45.3) (27.2) (110.3) (91.6)
Non GAAP free cash flow 388.4 261.2 742.4 942.6
Non GAAP net cash comprises:
September 30, December 31,
2013 2012
$M $M
Cash and cash equivalents 1,686.1 1,482.2
Convertible bonds (1,100.0) (1,100.0)
Other debt (8.9) (9.3)
Non GAAP net cash 577.2 372.9
NOTES TO EDITORS
Shire enables people with life-altering conditions to lead better lives.
Our strategy is to focus on developing and marketing innovative specialty
medicines to meet significant unmet patient needs.
We provide treatments in Neuroscience, Rare Diseases, Gastrointestinal,
Internal Medicine and Regenerative Medicine and we are developing treatments
for symptomatic conditions treated by specialist physicians in other targeted
therapeutic areas.
www.shire.com
FORWARD - LOOKING STATEMENTS - "SAFE HARBOR" STATEMENT UNDER THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
Statements included in this announcement that are not historical facts are
forward-looking statements. 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, that:
Shire's products may not be a commercial success;
revenues from ADDERALL XR are subject to generic erosion;
the failure to obtain and maintain reimbursement, or an adequate level of
reimbursement, by third-party payors in a timely manner for Shire's products
may impact future revenues and earnings;
Shire relies on a single source for manufacture of certain of its products and
a disruption to the supply chain for those products may result in Shire being
unable to continue marketing or developing a product or may result in Shire
being unable to do so on a commercially viable basis;
Shire uses third party manufacturers to manufacture many of its products and is
reliant upon third party contractors for certain goods and services, and any
inability of these third party manufacturers to manufacture products, or any
failure of these third party contractors to provide these goods and services,
in each case in accordance with its respective contractual obligations, could
adversely affect Shire's ability to manage its manufacturing processes or to
operate its business;
the development, approval and manufacturing of Shire's products is subject to
extensive oversight by various regulatory agencies and regulatory approvals or
interventions associated with changes to manufacturing sites, ingredients or
manufacturing processes could lead to significant delays, increase in operating
costs, lost product sales, an interruption of research activities or the delay
of new product launches;
the actions of certain customers could affect Shire's ability to sell or market
products profitably and fluctuations in buying or distribution patterns by such
customers could adversely impact Shire's revenues, financial conditions or
results of operations;
investigations or enforcement action by regulatory authorities or law
enforcement agencies relating to Shire's activities in the highly regulated
markets in which it operates may result in the distraction of senior
management, significant legal costs and the payment of substantial compensation
or fines;
adverse outcomes in legal matters and other disputes, including Shire's ability
to obtain, maintain, enforce and defend patents and other intellectual property
rights required for its business, could have a material adverse effect on
Shire's revenues, financial condition or results of operations;
and other risks and uncertainties detailed from time to time in Shire's filings
with the U.S. Securities and Exchange Commission, including its most recent
Annual Report on Form 10-K.
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;
effective tax rate on Non GAAP income before income taxes and earnings/(losses)
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/expense; Non GAAP cash
generation; Non GAAP free cash flow and Non GAAP net cash/(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 when calculating Non GAAP earnings for both 2013 and 2012, and from
our Outlook:
Amortization and asset impairments:
Intangible asset amortization and impairment charges; and
Other than temporary impairment of investments.
Acquisitions and integration activities:
Up-front 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 interests in consolidated variable interest entities.
Divestments, reorganizations and discontinued operations:
Gains and losses on the sale of non-core assets;
Costs associated with restructuring and reorganization activities;
Termination costs; and
Income/(losses) from discontinued operations.
Legal and litigation costs:
Net legal costs related to the settlement of litigation, government
investigations and other disputes (excluding internal legal team costs).
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 2013
and 2012 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 cash flow 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 19 to 23.
Growth at CER, which is a Non GAAP measure, is computed by restating 2013
results using average 2012 foreign exchange rates for the relevant period.
Average exchange rates for the nine months to September 30, 2013 were $1.55:GBP
1.00 and $1.31:EUR1.00 (2012: $1.58:GBP1.00 and $1.29:EUR1.00). Average exchange
rates for Q3 2013 were $1.53:GBP1.00 and $1.32:EUR1.00 (2012: $1.58:GBP1.00 and
$1.25:EUR1.00).
TRADE MARKS
All trade marks designated ® and tm used in this press release are trade marks
of Shire plc or companies within the Shire group except for 3TC® and ZEFFIX®
which are trade marks of GlaxoSmithKline, PENTASA® which is a registered trade
mark of FERRING B.V., LIALDA® and MEZAVANT® which are trade marks of Nogra
Pharma Limited, and DAYTRANA® which is a trade mark of Noven Therapeutics, LLC.
Certain trade marks 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, 2012
and the Quarterly Report on Form 10-Q for the three months and six months ended
June 30, 2013.
END
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