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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 |
DUBLIN, October 24, 2014 /PRNewswire/ --
- Increases Non GAAP diluted earnings per ADS growth guidance to the high thirty percent range for the full year (2014).
Shire (LSE: SHP, NASDAQ: SHPG) announces unaudited results for the three months to September 30, 2014.
Financial Highlights Q3 2014 Growth[1] $1,552 Product sales million +33%[2] $1,597 Total revenues million +32% Non GAAP operating income $717 million +60% US GAAP operating income from continuing operations $572 million +49% Non GAAP EBITDA margin (excluding royalties & other revenues)[3] 46% n/a US GAAP net income margin[4] 30% n/a Non GAAP diluted earnings per ADS $2.93 +60% US GAAP diluted earnings per ADS $2.43 +66% Non GAAP cash generation $612 million +27% Non GAAP free cash flow $575 million +48% US GAAP net cash provided by operating activities $593 million +37%
[1] Percentages compare to equivalent 2013 period. The 2013 comparatives in this release have been recast to exclude the DERMAGRAFT® business from continuing operations following its divestment on January 17, 2014.
[2]Product sales from continuing operations, including ViroPharma Incorporated ("ViroPharma") acquired January 24, 2014, and excluding the DERMAGRAFT business. Product sales excluding products acquired with ViroPharma were up 19% in Q3 2014.
[3] Non GAAP earnings before interest, tax, depreciation and amortization ("EBITDA") as a percentage of product sales, excluding royalties and other revenues.
[4] US GAAP net income as a percentage of total revenues.
The Non GAAP financial measures included within this release are explained on page 27, and are reconciled to the most directly comparable financial measures prepared in accordance with US GAAP on pages 20 - 25.
Susan Kilsby, Shire's Chairman, commented:
"Shire is well-positioned for future growth as we implement our plan to double product sales to $10 billion by 2020. I am confident that Shire, as an independent company, will deliver long-term value to our shareholders and improved outcomes for patients. On behalf of the Board of Directors, I would like to thank the Shire management team and employees for the achievement of outstanding financial results during the third quarter."
Flemming Ornskov, M.D., Shire's Chief Executive Officer, commented:
"Our third quarter results demonstrate our exceptional track record of delivering value and growth. We continue to implement our clear and focused strategy, as we:
"These results are a testament to our ability to drive top line growth and our continued emphasis on operational discipline.
"We have seen strong sales performance across our portfolio with all of our top ten products delivering double digit growth in the quarter. Rare Diseases, our largest business unit, grew by 66%, aided by our acquisition of ViroPharma. In our Hereditary Angioedema portfolio, CINRYZE performed strongly with quarterly sales of $145 million and FIRAZYR was up 57%.
"Our Neuroscience and Gastrointestinal business units also contributed to the record quarter with VYVANSE sales up 19% and LIALDA up 24%.
"We continue to build our international presence and our expansion into the Japanese market with the approval of VPRIV and AGRYLIN.
"Our early and late stage pipeline continues to be strengthened, both internally, and through business development providing us with new investments in Ophthalmology (BIKAM) and Rare Diseases (ArmaGen). The US Food and Drug Administration accepted with priority review our supplemental new drug application for VYVANSE as a treatment for adults with binge eating disorder and we expect to learn about the potential expanded indication in February 2015.
"Our strong momentum and performance this quarter is evidence of our ability to deliver growth, efficiency and innovation through our commitment to addressing significant unmet need in Rare Diseases and high-value specialty conditions. As a result, I am pleased to once again increase our guidance for 2014. We now expect to deliver Non GAAP diluted earnings per ADS growth in the high thirty percent range in 2014."
FINANCIAL SUMMARY
Third Quarter 2014 Unaudited Results
Q3 2014 Q3 2013 US GAAP Adjustments Non GAAP US GAAP Adjustments Non GAAP $M $M $M $M $M $M Total revenues 1,597 - 1,597 1,213 - 1,213 Operating income 572 145 717 383 66 449 Diluted earnings per ADS $2.43 $0.50 $2.93 $1.46 $0.37 $1.83
Product sales grew 19% excluding products acquired with ViroPharma. Growth was generated across our portfolio but primarily driven by VYVANSE®[1] (up 19% to $355 million), LIALDA®/MEZAVANT® (up 24% to $177 million), ELAPRASE® (up 31% to $169 million) and REPLAGAL® (up 25% to $136 million). Sales of ELAPRASE and REPLAGAL in the quarter benefitted from several large orders from customers who order less frequently. In 2013 comparable orders were recorded in the fourth quarter.
On a US GAAP basis, cash and cash equivalents were $468 million at September 30, 2014 (December 31, 2013: $2,239 million).
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1. ) Lisdexamfetamine dimesylate ("LDX") currently marketed as VYVANSE in the US and Canada, VENVANSE® in Latin America and ELVANSE® in certain territories in the EU for the treatment of ADHD.
2. ) EBITDA as a percentage of product sales, excluding royalties and other revenues.
OUTLOOK
We've delivered a very strong performance so far this year, and as a result we are increasing our guidance. We now expect to deliver Non GAAP earnings per ADS growth in the high thirty percent range in 2014 (previous guidance: low-to-mid thirty percent growth).
Following our strong product sales performance in the year to date, we now expect product sales growth for the full year 2014 in the low twenty percent range (previous guidance: high teens growth).
We anticipate product sales growth in the fourth quarter to be lower than we've delivered so far this year, as the third quarter benefited from Rare Diseases sales to customers who order less frequently, and as we lap against stronger comparatives in the fourth quarter.
We expect royalties and other revenues for 2014 to be 0-5% lower than in 2013, as we now anticipate recognizing additional milestone income in the fourth quarter of 2014.
We continue to anticipate that our Non GAAP gross margin will be approximately 1 percentage point lower than in 2013.
We continue to expect Combined Non GAAP R&D and SG&A to grow by 2-4% compared to 2013. We expect slightly higher operating costs in the fourth quarter than seen in the third quarter, as we continue to invest behind our innovative and exciting pipeline. The fourth quarter will also see an increase in commercial spending on Binge Eating Disorder disease awareness ahead of anticipated launch.
We continue to expect Non GAAP net interest expense to be approximately $10 million lower than in 2013.
Our core effective tax rate on Non GAAP income is still expected to be in the range of 17-19%.
Our current assumption of the diluted number of ordinary shares for full year 2014 is approximately 590 million.
Taken together, we now expect to deliver Non GAAP earnings per ADS growth in the high thirty percent range in 2014 (previous guidance: low-to-mid thirty percent growth).
THIRD QUARTER 2014 AND RECENT PRODUCT AND PIPELINE DEVELOPMENTS
Products
We continue to make progress building our business in Japan:
VYVANSE - for the treatment of Binge Eating Disorder ("BED") in adults
Pipeline
SHP607 - for the prevention of retinopathy of prematurity ("ROP")
SHP465 - for the treatment of ADHD in adults
SHP620 (maribavir) for the treatment of cytomegalovirus infection ("CMV") in transplant patients
[1] Currently marketed as XAGRID® in the EU for the treatment of essential thrombocythaemia.
EXECUTIVE COMMITTEE CHANGES
OTHER DEVELOPMENTS
Termination of AbbVie's offer for Shire
Divestment of non-core product rights
During the third quarter Shire divested rights to three non-core products for total cash consideration of $65 million.
Strategic licensing and collaboration agreement with ArmaGen Technologies, Inc. ("ArmaGen")
Strategic acquisition of BIKAM Pharmaceuticals Inc. ("BIKAM")
Legal Proceedings
Shire reaches final agreement with US Government relating to previously disclosed civil investigation
ADDITIONAL INFORMATION
The following additional information is included in this press release:
Page Overview of Third Quarter 2014 Financial Results 7 Financial Information 11 Non GAAP Reconciliation 20 Notes to Editors 25 Safe Harbor Statement 26 Explanation of Non GAAP Measures 27 Trade Marks 28
Dial in details for the live conference call for investors at 14:00 BST / 09:00 EDT on October 24, 2014:
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: Click here
Password/Conf ID: 40489933#
Live Webcast: Click here
The quarterly earnings presentation will be available today at 13:00 BST / 08:00 EDT on:
- Shire.com Investors section
- Shire's IR Briefcase in the iTunes Store
Shire R&D day
Shire will hold an R&D day on December 10, 2014 in New York City. For further details please contact the Shire Investor Relations team.
OVERVIEW OF THIRD QUARTER 2014 FINANCIAL RESULTS
1. Product sales
For the three months to September 30, 2014 product sales increased by 33%[1] to $1,552 million (Q3 2013: $1,171 million) and represented 97% of total revenues (Q3 2013: 97%).
US Exit Market Year on year growth Share[3] Non GAAP Product sales[1] Sales $M Sales CER [2] US Rx [3] VYVANSE 354.9 +19% +19% +5% 16% LIALDA/MEZAVANT 176.6 +24% +24% +22% 32% ELAPRASE 168.8 +31% +33% n/a[5] n/a[5] CINRYZE[4] 145.1 n/a n/a n/a[5] n/a[5] REPLAGAL 135.9 +25% +27% n/a[6] n/a[6] FIRAZYR 98.4 +57% +57% n/a[5] n/a[5] INTUNIV 96.7 +20% +20% +0% 4% VPRIV 96.4 +10% +10% n/a[5] n/a[5] ADDERALL XR 95.3 +17% +17% +12% 5% PENTASA 78.3 +11% +11% -5% 13% OTHER 105.6 -3% -5% n/a n/a Total 1,552.0 +33% +33%
VYVANSE - ADHD
VYVANSE product sales grew strongly in Q3 2014 (up 19% compared to Q3 2013) due to a price increase taken since Q3 2013 and to a lesser extent higher US prescription demand and growth in international markets.
LIALDA/MEZAVANT - Ulcerative Colitis
Product sales for LIALDA/MEZAVANT in Q3 2014 were up 24%, primarily due to higher US prescription demand (up 22%) and to a lesser extent a price increase taken since Q3 2013. Q3 2014 also benefited from higher stocking than seen in Q2 2014.
ELAPRASE- Hunter syndrome
ELAPRASE product sales in Q3 2014 were up 31% compared to Q3 2013 driven by continued growth in the number of treated patients, especially in emerging markets. Growth in Q3 2014 also benefited from the timing of large shipments to certain markets which order less frequently. Many of these comparable orders in 2013 were made in the fourth quarter and therefore we expect ELAPRASE year-on-year sales growth to moderate in Q4 2014.
CINRYZE - for the prophylactic treatment of Hereditary Angioedema ("HAE")
Shire acquired CINRYZE through its acquisition of ViroPharma in Q1 2014. CINRYZE sales were $145.1 million in Q3 2014, growing 36% on Q3 2013[(1)]primarily driven by more patients on therapy, inventory build at specialty pharmacies favourably impacting sales and to a lesser extent, a price increase in the US.
[1] Q3 2013 recorded by ViroPharma, prior to the acquisition of ViroPharma by Shire.
REPLAGAL - Fabry disease
REPLAGAL sales were up 25% compared to Q3 2013 as we continue to see good growth in emerging markets and to a lesser extent higher volume demand in Europe. Q3 2014 also benefited from larger orders for certain markets which order less frequently. A comparable order in 2013 was made in the fourth quarter and therefore we expect REPLAGAL year-on-year sales growth to moderate in Q4 2014.
FIRAZYR - for the treatment of acute HAE attacks
FIRAZYR's strong product sales growth (up 57%) was primarily due to growth in patients on therapy and the effect of a price increase in the US market.
INTUNIV - ADHD
The growth in INTUNIV product sales (up 20%) in Q3 2014 was driven by price increases taken since Q3 2013, partially offset by destocking in Q3 2014 as compared to stocking in Q3 2013. We expect generic competition to enter the market starting in December 2014, which would impact US sales of INTUNIV.
VPRIV - Gaucher disease
VPRIV product sales in Q3 2014 were up 10% compared to Q3 2013 as we continue to add naïve patients and gain patients switching from other therapies.
ADDERALL XR - ADHD
ADDERALL XR product sales increased (up 17%) in Q3 2014, primarily due to increased prescription demand, and lower sales deductions as a percentage of product sales in Q3 2014 as compared to Q3 2013.
PENTASA - Ulcerative Colitis
PENTASA product sales increased in Q3 2014 (up 11%) driven by price increases taken since Q3 2013 and a slight increase in stocking.
2. Royalties
Year on year growth Royalties to Product Shire $M Royalties CER FOSRENOL(R) 14.6 +6% +6% ADDERALL XR 9.5 +53% +53% 3TC(R) and ZEFFIX(R) 8.8 -13% -13% Other 7.0 -7% -7% Total 39.9 +6% +6%
3. Financial details
Cost of product sales
% of % of product product Q3 2014 sales Q3 2013 sales $M $M Cost of product sales (US GAAP) 254.3 16% 180.5 15% Unwind of ViroPharma inventory fair value step-up (18.1) - Depreciation (16.9) (10.2) Cost of product sales (Non GAAP) 219.3 14% 170.3 15%
Non GAAP cost of product sales as a percentage of product sales decreased marginally in Q3 2014 as compared with Q3 2013.
US GAAP cost of product sales as a percentage of product sales increased marginally in 2014 as Q3 2014 included charges on the unwind of the fair value adjustment on acquired ViroPharma inventories.
R&D
% of % of product product Q3 2014 sales Q3 2013 sales $M $M R&D (US GAAP) 228.6 15% 226.2 19% Payments in respect of in-licensed and acquired products (12.5) - Depreciation (6.1) (6.3) R&D (Non GAAP) 210.0 14% 219.9 19%
Non GAAP R&D decreased by $9.9 million, or 5% in Q3 2014, following the completion of several large Phase 3 programs since Q3 2013 including new uses for LDX and the effect of portfolio prioritization decisions taken during 2013. These decreases were partially offset by the inclusion of programs acquired through business development in 2014.
US GAAP R&D increased by $2.4 million, or 1% as compared to Q3 2013.
SG&A
% of % of product product Q3 2014 sales Q3 2013 sales $M $M SG&A (US GAAP) 522.9 34% 396.3 34% Intangible asset amortization (62.9) (34.5) Legal and litigation costs (3.3) (4.7) Costs incurred in connection with AbbVie's terminated offer for Shire (28.4) - Depreciation (20.7) (15.9) SG&A (Non GAAP) 407.6 26% 341.2 29%
Non GAAP SG&A increased by $66.4 million, or 19%. The inclusion of ViroPharma SG&A in Q3 2014 and commercial spending in advance of anticipated product launches for certain products offset lower ongoing overheads following the One Shire reorganization. Non GAAP SG&A as a percentage of product sales was 3 percentage points lower than Q3 2013 as we continue to see benefits from the One Shire reorganization and the focus on operational discipline in Q3 2014.
US GAAP SG&A increased by $126.6 million, or 32%, as it also includes higher amortization of intangible assets acquired with ViroPharma, and costs incurred in connection with AbbVie's terminated offer for Shire.
Gain on sale of product rights
For the three months to September 30, 2014 Shire recorded a net gain on sale of non-core product rights of $46.0 million (2013: $3.6 million) following the divestment of VANCOCIN, ESTRACE and EXPUTEX. The gain on sale of product rights also included the gain on re-measurement of the contingent consideration receivable relating to the divestment of DAYTRANA.
Reorganization costs
For the three months to September 30, 2014 Shire recorded reorganization costs of $28.2 million (Q3 2013: $12.0 million) related to the One Shire reorganization as we continue the implementation of our new operating structure.
Integration and acquisition costs
For the three months to September 30, 2014 Shire recorded integration and acquisition costs of $37.1 million, comprising a $4.9 million charge relating to the change in fair value of contingent consideration liabilities and costs of $32.2 million primarily related to the acquisition and integration of ViroPharma.
In Q3 2013 integration and acquisition costs ($18.4 million) primarily related to the change in fair values of contingent consideration liabilities and the cost of integrating SARcode BioSciences Inc. ("SARcode") and Premacure AB ("Premacure").
Interest expense
For the three months to September 30, 2014 Shire incurred interest expense of $6.8 million (Q3 2013: $9.2 million). Interest expense in Q3 2014 primarily related to interest and the amortization of issue costs incurred on borrowings to fund the ViroPharma acquisition. Interest expense in Q3 2013 principally related to the coupon and amortization of costs on Shire's convertible bonds which were fully redeemed or converted in Q4 2013.
Taxation
The effective rate of tax on Non GAAP income in Q3 2014 was 18% (Q3 2013: 20%), and on a US GAAP basis the effective rate of tax was 11% (Q3 2013: 20%).
The effective rate of tax in Q3 2014 on Non GAAP income from continuing operations is lower than the same period in 2013 primarily due to changes in profit mix.
The effective rate of tax in Q3 2014 on US GAAP income from continuing operations is lower than the same period in 2013 primarily due to changes in profit mix and the recognition of a further tax credit of $27.7 million related to the settlement of an additional position with the Canadian revenue authorities in Q3 2014.
Discontinued operations
The loss from discontinued operations for the three months to September 30, 2014 was $36.1 million net of tax (2013: $22.9 million) relating to costs associated with the divestment of the DERMAGRAFT business, including a loss on re-measurement of contingent consideration receivable from Organogenesis to its fair value.
FINANCIAL INFORMATION
TABLE OF CONTENTS
Page Unaudited US GAAP Consolidated Balance Sheets 12 Unaudited US GAAP Consolidated Statements of Income 13 Unaudited US GAAP Consolidated Statements of Cash Flows 15 Selected Notes to the Unaudited US GAAP Financial Statements (1) Earnings per share 17 (2) Analysis of revenues 18 Non GAAP reconciliation 20
Unaudited US GAAP financial position as of September 30, 2014
Consolidated Balance Sheets
September 30, December 31, 2014 2013 $M $M ASSETS Current assets: Cash and cash equivalents 467.7 2,239.4 Restricted cash 54.5 22.2 Accounts receivable, net 1,079.3 961.2 Inventories 548.9 455.3 Assets held for sale - 31.6 Deferred tax asset 315.3 315.6 Prepaid expenses and other current assets 402.4 263.0 Total current assets 2,868.1 4,288.3 Non-current assets: Investments 46.8 31.8 Property, plant and equipment ("PP&E"), net 845.6 891.8 Goodwill 2,373.7 624.6 Other intangible assets, net 5,227.4 2,312.6 Deferred tax asset 136.7 141.1 Other non-current assets 42.2 32.8 Total assets 11,540.5 8,323.0 LIABILITIES AND EQUITY Current liabilities: Accounts payable and accrued expenses 1,725.8 1,688.4 Other current liabilities 276.6 119.5 Total current liabilities 2,002.4 1,807.9 Non-current liabilities: Long term borrowings 850.0 - Deferred tax liability 1,378.2 560.6 Other non-current liabilities 771.6 588.5 Total liabilities 5,002.2 2,957.0 Equity: Common stock of 5p par value; 1,000 million shares authorized; and 598.6 million shares issued and outstanding (2013: 1,000 million shares authorized; and 597.5 million shares issued and outstanding) 58.7 58.6 Additional paid-in capital 4,302.0 4,186.3 Treasury stock: 10.8 million shares (2013: 13.4 million) (350.8) (450.6) Accumulated other comprehensive income 30.8 110.2 Retained earnings 2,497.6 1,461.5 Total equity 6,538.3 5,366.0 Total liabilities and equity 11,540.5 8,323.0
Unaudited US GAAP results for the three months and nine months to September 30, 2014
Consolidated Statements of Income
3 months to September 30, 9 months to September 30, 2014 2013 2014 2013 $M $M $M $M Revenues: Product sales 1,552.0 1,171.0 4,329.7 3,477.1 Royalties 39.9 37.6 101.4 112.4 Other revenues 5.2 4.1 14.9 18.8 Total revenues 1,597.1 1,212.7 4,446.0 3,608.3 Costs and expenses: Cost of product sales 254.3 180.5 760.8 492.2 R&D[1] 228.6 226.2 826.0 703.3 SG&A[1] 522.9 396.3 1,449.4 1,198.0 Goodwill impairment charge - - - 7.1 Gain on sale of product rights (46.0) (3.6) (86.2) (14.6) Reorganization costs 28.2 12.0 123.4 47.2 Integration and acquisition costs 37.1 18.4 155.8 39.9 Total operating expenses 1,025.1 829.8 3,229.2 2,473.1 Operating income from continuing operations 572.0 382.9 1,216.8 1,135.2 Interest income 3.6 0.4 22.8 1.6 Interest expense (6.8) (9.2) (25.7) (27.5) Other income/(expense), net 6.8 0.7 14.8 (1.6) Total other income/(expense), net 3.6 (8.1) 11.9 (27.5) Income from continuing operations before income taxes and equity in earnings/(losses) of equity method investees 575.6 374.8 1,228.7 1,107.7 Income taxes (61.2) (73.4) 64.7 (235.3) Equity in earnings/(losses) of equity method investees, net of taxes 1.4 (0.3) 3.8 0.6 Income from continuing operations, net of tax 515.8 301.1 1,297.2 873.0 Loss from discontinued operations, net of taxes (36.1) (22.9) (64.0) (271.9) Net income 479.7 278.2 1,233.2 601.1
Unaudited US GAAP results for the three months and nine months to September 30, 2014
Consolidated Statements of Income (continued)
3 months to September 30, 9 months to September 30, 2014 2013 2014 2013 Earnings per Ordinary Share - basic Earnings from continuing operations 87.8c 54.9c 221.3c 158.8c Loss from discontinued operations (6.1c) (4.2c) (10.9c) (49.5c) Earnings per Ordinary Share - basic 81.7c 50.7c 210.4c 109.3c Earnings per ADS - basic 245.1c 152.1c 631.2c 327.9c Earnings per Ordinary Share - diluted Earnings from continuing operations 87.0c 52.7c 219.1c 152.5c Loss from discontinued operations (6.1c) (3.9c) (10.8c) (46.3c) Earnings per Ordinary Share - diluted 80.9c 48.8c 208.3c 106.2c Earnings per ADS - diluted 242.7c 146.4c 624.9c 318.6c Weighted average number of shares: Millions Millions Millions Millions Basic 587.6 548.4 586.1 549.8 Diluted 592.6 585.7 592.1 587.5
Unaudited US GAAP results for the three months and nine months to September 30, 2014
Consolidated Statements of Cash Flows
3 months to 9 months to September 30, September 30, 2014 2013 2014 2013 $M $M $M $M CASH FLOWS FROM OPERATING ACTIVITIES: Net income 479.7 278.2 1,233.2 601.1 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 106.6 78.2 307.1 229.4 Share based compensation 22.6 18.8 78.3 55.2 Change in fair value of contingent consideration 4.9 14.7 26.3 28.4 Impairment of intangible assets - - 188.0 19.9 Goodwill impairment charge - - - 198.9 Write down of assets 1.0 - 14.0 8.3 Gain on sale of product rights (12.4) (3.6) (52.6) (14.6) Unwind of ViroPharma inventory fair value step-up 18.1 - 90.6 - Other, net (1.9) (2.8) 16.5 (3.9) Movement in deferred taxes 37.8 (5.1) 63.1 16.1 Equity in (earnings)/losses of equity method investees (1.4) 0.3 (3.8) (0.6) Changes in operating assets and liabilities: Increase in accounts receivable (54.8) (112.6) (92.1) (215.2) (Decrease)/increase in sales deduction accrual (77.8) 68.7 28.2 108.7 (Increase)/decrease in inventory (4.1) 14.0 (15.8) (39.9) Decrease/(increase) in prepayments and other assets 22.8 (4.4) (114.7) (70.9) Increase/(decrease) in accounts payable and other liabilities 52.3 89.3 (92.8) (71.4) Returns on investment from joint venture - - - 3.2 Net cash provided by operating activities[A] 593.4 433.7 1,673.5 852.7
CASH FLOWS FROM INVESTING ACTIVITIES: Movements in restricted cash (20.4) 1.0 (32.3) 0.5 Purchases of subsidiary undertakings and businesses, net of cash acquired (86.1) - (4,104.4) (227.8) Purchases of non-current investments (19.7) (3.1) (22.8) (9.9) Purchases of PP&E (30.7) (45.3) (49.8) (110.3) Proceeds from short-term investments 1.5 - 57.8 - Proceeds from disposal of non-current investments 13.3 0.9 21.3 8.6 Proceeds received on sale of product rights 69.9 4.7 122.7 15.0 Other, net 4.1 0.1 1.3 2.9 Net cash used in investing activities[B] (68.1) (41.7) (4,006.2) (321.0)
Unaudited US GAAP results for the three months and nine months to September 30, 2014
Consolidated Statements of Cash Flows (continued)
3 months to September 9 months to September 30, 30, 2014 2013 2014 2013 $M $M $M $M CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from revolving line of credit, long term and short term borrowings - - 2,310.8 - Repayment of revolving line of credit and short term borrowings (210.2) - (1,461.8) - Repayment of debt acquired through business combinations - - (551.5) - Proceeds from ViroPharma call options - - 346.7 - Payment of dividend - - (99.6) (79.2) Payments to acquire shares by the Employee Benefit Trust ("EBT") - - - (50.3) Payments to acquire shares under the share buy-back program - (12.8) - (190.5) Excess tax benefit associated with exercise of stock options 8.3 3.4 37.4 9.5 Contingent consideration payments (2.5) (2.5) (12.8) (11.3) Other, net (1.7) 1.7 (2.0) (5.5) Net cash (used in)/provided by financing activities[C] (206.1) (10.2) 567.2 (327.3) Effect of foreign exchange rate changes on cash and cash equivalents [D] (5.1) 2.4 (6.2) (0.5) Net increase/(decrease) in cash and cash equivalents[(A) +(B) +(C) +(D)] 314.1 384.2 (1,771.7) 203.9 Cash and cash equivalents at beginning of period 153.6 1,301.9 2,239.4 1,482.2 Cash and cash equivalents at end of period 467.7 1,686.1 467.7 1,686.1
Unaudited US GAAP results for the three months and nine months to September 30, 2014
Selected Notes to the Financial Statements
(1) Earnings Per Share ("EPS")
3 months to September 30, 9 months to September 30, 2014 2013 2014 2013 $M $M $M $M Income from continuing operations 515.8 301.1 1,297.2 873.0 Loss from discontinued operations (36.1) (22.9) (64.0) (271.9) Numerator for basic EPS 479.7 278.2 1,233.2 601.1 Interest on convertible bonds, net of tax - 7.6 - 22.7 Numerator for diluted EPS 479.7 285.8 1,233.2 623.8 Weighted average number of shares: Millions Millions Millions Millions Basic[1] 587.6 548.4 586.1 549.8 Effect of dilutive shares: Share based awards to employees[2] 5.0 3.5 6.0 3.9 Convertible bonds[3] - 33.8 - 33.8 Diluted 592.6 585.7 592.1 587.5
The share equivalents not included in the calculation of the diluted weighted average number of shares are shown below:
3 months to September 30, 9 months to September 30, 2014 2013 2014 2013 Millions Millions Millions Millions Share based awards to employees[1] 0.3 0.5 0.3 4.5
Unaudited US GAAP results for the three months to September 30, 2014
Selected Notes to the Financial Statements
(2) Analysis of revenues
3 months to September 30, 2014 2013 2014 2014 % % of total $M $M change revenue Net product sales: VYVANSE 354.9 299.2 19% 22% LIALDA/MEZAVANT 176.6 141.9 24% 11% ELAPRASE 168.8 129.1 31% 11% CINRYZE 145.1 - n/a 9% REPLAGAL 135.9 108.5 25% 9% FIRAZYR 98.4 62.6 57% 6% INTUNIV 96.7 80.8 20% 6% VPRIV 96.4 87.8 10% 6% ADDERALL XR 95.3 81.4 17% 6% PENTASA 78.3 70.6 11% 5% FOSRENOL 48.1 51.9 -7% 3% XAGRID 27.1 24.2 12% 2% Other product sales 30.4 33.0 -8% 2% Total product sales 1,552.0 1,171.0 33% 97% Royalties: FOSRENOL 14.6 13.8 6% <1% ADDERALL XR 9.5 6.2 53% <1% 3TC and ZEFFIX 8.8 10.1 -13% <1% Other 7.0 7.5 -7% <1% Total royalties 39.9 37.6 6% 2% Other revenues 5.2 4.1 27% <1% Total revenues 1,597.1 1,212.7 32% 100%
Unaudited US GAAP results for the nine months to September 30, 2014
Selected Notes to the Financial Statements
(2) Analysis of revenues
9 months to September 30, 2014 2013 2014 2014 % % of total $M $M change revenue Net product sales: VYVANSE 1,065.6 897.9 19% 24% LIALDA/MEZAVANT 449.1 379.9 18% 10% ELAPRASE 449.5 392.6 14% 10% CINRYZE 360.6 - n/a 8% REPLAGAL 380.7 336.6 13% 9% FIRAZYR 262.3 153.8 71% 6% INTUNIV 279.0 248.9 12% 6% VPRIV 273.0 251.9 8% 6% ADDERALL XR 280.2 293.5 -5% 6% PENTASA 213.8 215.2 -1% 5% FOSRENOL 136.2 136.3 0% 3% XAGRID 82.1 74.1 11% 2% Other product sales 97.6 96.4 1% 2% Total product sales 4,329.7 3,477.1 25% 97% Royalties: FOSRENOL 36.8 33.6 10% 1% ADDERALL XR 23.0 19.2 20% <1% 3TC and ZEFFIX 24.6 33.9 -27% 1% Other 17.0 25.7 -34% <1% Total royalties 101.4 112.4 -10% 2% Other revenues 14.9 18.8 -21% <1% Total revenues 4,446.0 3,608.3 23% 100%
Unaudited results for the three months to September 30, 2014
Non GAAP reconciliation
3 months to September 30, 2014 US GAAP Adjustments Non GAAP (a) (b) (c) (d) (e) (f) $M $M $M $M $M $M $M $M Total revenues 1,597.1 - - - - - - 1,597.1 Costs and expenses: Cost of product sales 254.3 - (18.1) - - - (16.9) 219.3 R&D 228.6 - (12.5) - - - (6.1) 210.0 SG&A 522.9 (62.9) - - (3.3) (28.4) (20.7) 407.6 Gain on sale of product rights (46.0) - - 46.0 - - - - Reorganization costs 28.2 - - (28.2) - - - - Integration and acquisition costs 37.1 - (37.1) - - - - - Depreciation - - - - - - 43.7 43.7 Total operating expenses 1,025.1 (62.9) (67.7) 17.8 (3.3) (28.4) - 880.6 Operating income 572.0 62.9 67.7 (17.8) 3.3 28.4 - 716.5 Interest income 3.6 - - - - (2.8) - 0.8 Interest expense (6.8) - - - - - - (6.8) Other expense, net 6.8 - (4.7) (10.8) - - - (8.7) Total other income/(expense), net 3.6 - (4.7) (10.8) - (2.8) - (14.7) Income before income taxes and equity in earnings of equity method investees 575.6 62.9 63.0 (28.6) 3.3 25.6 - 701.8 Income taxes (61.2) (29.5) (17.9) 13.9 (1.2) (27.7) - (123.6) Equity in earnings of equity method investees, net of tax 1.4 - - - - - - 1.4 Net income from continuing operations 515.8 33.4 45.1 (14.7) 2.1 (2.1) - 579.6 Loss from discontinued operations, net of tax (36.1) - - 36.1 - - - - Net income 479.7 33.4 45.1 21.4 2.1 (2.1) - 579.6 Weighted average number of shares (millions) - diluted 592.6 - - - - - - 592.6 Diluted earnings per ADS 242.7c 16.9c 22.9c 10.9c 1.2c (1.2c) - 293.4c
The following items are included in Adjustments:
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 1,212.7 - - - - - 1,212.7 Costs and expenses: Cost of product sales 180.5 - - - - (10.2) 170.3 R&D 226.2 - - - - (6.3) 219.9 SG&A 396.3 (34.5) - - (4.7) (15.9) 341.2 Gain on sale of product rights (3.6) - - 3.6 - - - Reorganization costs 12.0 - - (12.0) - - - Integration and acquisition costs 18.4 - (18.4) - - - - Depreciation - - - - - 32.4 32.4 Total operating expenses 829.8 (34.5) (18.4) (8.4) (4.7) - 763.8 Operating income 382.9 34.5 18.4 8.4 4.7 - 448.9 Interest income 0.4 - - - - - 0.4 Interest expense (9.2) - - - - - (9.2) Other expense, net 0.7 - - - - - 0.7 Total other expense, net (8.1) - - - - - (8.1) Income before income taxes and equity in losses of equity method investees 374.8 34.5 18.4 8.4 4.7 - 440.8 Income taxes (73.4) (10.5) (1.0) (3.6) (1.8) - (90.3) Equity in losses of equity method investees, net of tax (0.3) - - - - - (0.3) Income from continuing operations 301.1 24.0 17.4 4.8 2.9 - 350.2 Loss from discontinued operations, net of tax (22.9) - - 22.9 - - - Net income 278.2 24.0 17.4 27.7 2.9 - 350.2 Impact of convertible debt, net of tax 7.6 - - - - - 7.6 Numerator for diluted EPS 285.8 24.0 17.4 27.7 2.9 - 357.8 Weighted average number of shares (millions) - diluted 585.7 - - - - - 585.7 Diluted earnings per ADS 146.4c 12.3c 8.9c 14.2c 1.5c - 183.3c
The following items are included in Adjustments:
Unaudited results for the nine months to September 30, 2014
Non GAAP reconciliation
9 months to September 30, 2014 US GAAP Adjustments Non GAAP (a) (b) (c) (d) (e) (f) $M $M $M $M $M $M $M $M Total revenues 4,446.0 - - - - - - 4,446.0 Costs and expenses: Cost of product sales 760.8 - (90.6) - - - (44.9) 625.3 R&D 826.0 (188.0) (12.5) - - - (17.7) 607.8 SG&A 1,449.4 (181.9) - - (7.2) (47.5) (62.6) 1,150.2 Gain on sale of product rights (86.2) - - 86.2 - - - - Reorganization costs 123.4 - - (123.4) - - - - Integration and acquisition costs 155.8 - (155.8) - - - - - Depreciation - - - - - - 125.2 125.2 Total operating expenses 3,229.2 (369.9) (258.9) (37.2) (7.2) (47.5) - 2,508.5 Operating income 1,216.8 369.9 258.9 37.2 7.2 47.5 - 1,937.5 Interest income 22.8 - - - - (21.4) - 1.4 Interest expense (25.7) - - - - - - (25.7) Other income/(expense), net 14.8 - (4.7) (15.8) - - - (5.7) Total other income/(expense), net 11.9 - (4.7) (15.8) - (21.4) - (30.0) Income before income taxes and equity in earnings of equity method investees 1,228.7 369.9 254.2 21.4 7.2 26.1 - 1,907.5 Income taxes 64.7 (105.5) (43.4) (11.5) (2.6) (243.7) - (342.0) Equity in earnings of equity method investees, net of tax 3.8 - - - - - - 3.8 Income from continuing operations 1,297.2 264.4 210.8 9.9 4.6 (217.6) - 1,569.3 Loss from discontinued operations, net of tax (64.0) - - 64.0 - - - - Net income 1,233.2 264.4 210.8 73.9 4.6 (217.6) - 1,569.3 Weighted average number of shares (millions) - diluted 592.1 - - - - - - 592.1 Diluted earnings per ADS 624.9c 134.0c 106.7c 37.4c 2.4c (110.4c) - 795.0c
The following items are included in Adjustments:
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 3,608.3 - - - - - 3,608.3 Costs and expenses: Cost of product sales 492.2 - - - - (26.5) 465.7 R&D 703.3 (19.9) - - - (15.2) 668.2 SG&A 1,198.0 (106.5) - - (8.1) (47.6) 1,035.8 Goodwill impairment charge 7.1 (7.1) - - - - - Gain on sale of product rights (14.6) - - 14.6 - - - Reorganization costs 47.2 - - (47.2) - - - Integration and acquisition costs 39.9 - (39.9) - - - - Depreciation - - - - - 89.3 89.3 Total operating expenses 2,473.1 (133.5) (39.9) (32.6) (8.1) - 2,259.0 Operating income 1,135.2 133.5 39.9 32.6 8.1 - 1,349.3 Interest income 1.6 - - - - - 1.6 Interest expense (27.5) - - - - - (27.5) Other expense, net (1.6) - - - - - (1.6) Total other expense, net (27.5) - - - - - (27.5) Income before income taxes and equity in earnings of equity method investees 1,107.7 133.5 39.9 32.6 8.1 - 1,321.8 Income taxes (235.3) (32.4) (3.1) (9.4) (3.1) - (283.3) Equity in earnings of equity method investees, net of tax 0.6 - - - - - 0.6 Income from continuing operations 873.0 101.1 36.8 23.2 5.0 - 1,039.1 Loss from discontinued operations, net of tax (271.9) - - 271.9 - - - Net income 601.1 101.1 36.8 295.1 5.0 - 1,039.1 Impact of convertible debt, net of tax 22.7 - - - - - 22.7 Numerator for diluted EPS 623.8 101.1 36.8 295.1 5.0 - 1,061.8 Weighted average number of shares (millions) - diluted 587.5 - - - - - 587.5 Diluted earnings per ADS 318.6c 51.6c 18.8c 150.6c 2.5c - 542.1c
The following items are included in Adjustments:
Unaudited results for the three months and nine months to September 30, 2014
Non GAAP reconciliation
The following table reconciles US GAAP net income to Non GAAP EBITDA:
3 months to September 30, 9 months to September 30, 2014 2013 2014 2013 $M $M $M $M US GAAP Net Income 479.7 278.2 1,233.2 601.1 (Deduct) / add back: Loss from discontinued operations, net of tax 36.1 22.9 64.0 271.9 Equity in (earnings)/losses of equity method investees, net of taxes (1.4) 0.3 (3.8) (0.6) Income taxes 61.2 73.4 (64.7) 235.3 Other expense/ (income), net (6.8) (0.7) (14.8) 1.6 Interest expense 6.8 9.2 25.7 27.5 Interest income (3.6) (0.4) (22.8) (1.6) US GAAP Operating income from continuing operations 572.0 382.9 1,216.8 1,135.2 Amortization 62.9 34.5 181.9 106.5 Depreciation 43.7 32.4 125.2 89.3 Asset impairments - - 188.0 27.0 Acquisition and integration activities 67.7 18.4 258.9 39.9 Divestments, reorganizations and discontinued operations (17.8) 8.4 37.2 32.6 Legal and litigation costs 3.3 4.7 7.2 8.1 Other 28.4 - 47.5 - Non GAAP EBITDA 760.2 481.3 2,062.7 1,438.6 Depreciation (43.7) (32.4) (125.2) (89.3) Non GAAP Operating income from continuing operations 716.5 448.9 1,937.5 1,349.3 Net income margin[1] 30% 23% 28% 17% Non GAAP EBITDA margin[2] 46% 38% 45% 38% [1] Net income margin as a percentage of total revenues [2] Non GAAP EBITDA margin as a percentage of product sales, excluding royalties and other revenues
Unaudited results for the three months and nine months to September 30, 2014
Non GAAP reconciliation
The following table reconciles US GAAP net cash provided by operating activities to Non GAAP cash generation:
3 months to September 30, 9 months to September 30, 2014 2013 2014 2013 $M $M $M $M Net cash provided by operating activities 593.4 433.7 1,673.5 852.7 Tax and interest payments, net 5.9 48.1 163.7 260.6 Receipt from the Canadian revenue authorities - - (248.0) - Up-front payments in respect of in-licensed and acquired products 12.5 - 12.5 - Non GAAP cash generation 611.8 481.8 1,601.7 1,113.3
The following table reconciles US GAAP net cash provided by operating activities to Non GAAP free cash flow:
3 months to September 30, 9 months to September 30, 2014 2013 2014 2013 $M $M $M $M Net cash provided by operating activities 593.4 433.7 1,673.5 852.7 Up-front payments in respect of in-licensed and acquired products 12.5 - 12.5 - Capital expenditure (30.7) (45.3) (49.8) (110.3) Non GAAP free cash flow 575.2 388.4 1,636.2 742.4
Non GAAP net (debt)/cash comprises:
September 30, December 31, 2014 2013 $M $M Cash and cash equivalents 467.7 2,239.4 Long term borrowings (850.0) - Other debt (14.0) (8.9) Non GAAP net (debt)/cash (396.3) 2,230.5
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 focus on providing treatments in Neuroscience, Rare Diseases, Gastrointestinal, and Internal Medicine and we are developing treatments for symptomatic conditions treated by specialist physicians in other targeted therapeutic areas, such as Ophthalmology.
http://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:
and other risks and uncertainties detailed from time to time in Shire's filings with the US 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; effectivetax 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 R&D; Non GAAP SG&A; Non GAAP other income/(expense); Non GAAP interest income; Non GAAP cash generation; Non GAAP free cash flow, Non GAAP net cash/(debt), Non GAAP EBITDA and Non GAAP EBITDA margin (excluding royalties and other revenues)[1]. 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 director.
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 2014 and 2013, and from our Outlook:
Amortization and asset impairments:
Acquisitions and integration activities:
Divestments, reorganizations and discontinued operations:
Legal and litigation costs:
Other:
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 2014 and 2013 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.
[1] EBITDA as a percentage of product sales, excluding royalties and other revenues.
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 20 to 25.
Growth at CER, which is a Non GAAP measure, is computed by restating 2014 results using average 2013 foreign exchange rates for the relevant period.
Average exchange rates used by Shire for the nine months to September 30, 2014 were $1.67:£1.00 and $1.36:€1.00 (2013: $1.55:£1.00 and $1.31:€1.00). Average exchange rates used by Shire for Q3 2014 were $1.69:£1.00 and $1.34:€1.00 (2013: $1.53:£1.00 and $1.32:€1.00).
TRADE MARKS
All trade marks designated ® and ™ 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, DERMAGRAFT® which is a trade mark of Organogenesis, Inc., PENTASA® which is a registered trade mark of FERRING B.V., LIALDA® and MEZAVANT® which are trade marks of Nogra Pharma Limited, ESTRACE® which is a trade mark of Trimel, VANCOCIN® which is a trade mark of ANI Pharmaceuticals Inc., EXPUTEX® which is a trade mark of Phoenix Labs 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, 2013 and the Quarterly Report on Form 10-Q for the three months and six months ended June 30, 2014.
For further information please contact:
Investor Relations - Jeff Poulton jpoulton@shire.com +1-781-482-0945 - Sarah Elton-Farr seltonfarr@shire.com +44-1256-894-157 Media - Stephanie Fagan sfagan@shire.com +1-781-482-0460 - Gwen Fisher gfisher@shire.com +1-484-595-9836
Copyright 2014 PR Newswire
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