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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Shire Ads Rep 3 | LSE:0L60 | London | Ordinary Share | SHIRE ADR REPRESENTING 3 ORD SHS |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 168.95 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
Hot Features
Premium
TIDMSHP
Shire reports 8% pro forma product sales and strong earnings growth
resulting in record operating cash flow for full year 2017
Strong growth driven by Immunology, recently launched products, and
global expansion
Improved operating margin and operating cash flow of $4.3 billion
enabled achievement of debt target
Significantly advanced innovative pipeline with 15 programs in
late-stage development
February 14, 2018 - Shire plc (Shire) (LSE: SHP, NASDAQ: SHPG) announces
unaudited results for the twelve months ended December 31, 2017.
Flemming Ornskov, M.D., M.P.H., Shire Chief Executive Officer,
commented:
"Shire delivered 8% pro forma product sales growth to $14.4 billion in
2017, an increase of over $1 billion. Of particular note are the strong
performance of our Immunology franchise and the significant contribution
from recently launched products, as well as growth in international
markets. We increased Non GAAP diluted earnings per ADS by 16%,
realizing cost synergies ahead of plan.
"2018 is a year of continued focus on commercial execution and targeted
investment in our manufacturing infrastructure, new product launches,
and pipeline to drive future growth. We expect to deliver mid-single
digit product sales growth in 2018 after absorbing the anticipated
impact of generics.
"The mid-term outlook for growth is positive driven by our Immunology
franchise, multiple near-term launches, and international markets. We
are committed to achieving our projected revenue target of $17 - $18
billion in 2020.
"Based on current assumptions, we expect Non GAAP diluted earnings per
ADS growth to be lower than top line growth in 2018, mainly due to costs
incurred from the start-up of our new U.S. plasma manufacturing site,
intensifying genericization, and lower royalties. With the already
disclosed manufacturing and SG&A cost reduction initiatives, we are on
track to achieve mid-forties Non GAAP EBITDA margin by 2020."
Product and Pipeline Highlights
Regulatory updates
-- Accelerated international expansion and growth, including 126 product
approvals globally and 50 product launches at the country level.
-- Received two FDA Fast Track Designations, two Orphan Drug Designations,
and one Breakthrough Therapy Designation.
-- Filed for FDA approval of a new plasma manufacturing facility near
Covington, Georgia to support our growing Immunology franchise, and
received FDA approval for the technology transfer of the CINRYZE drug
product manufacturing process to Vienna, Austria.
Clinical and business development updates
-- Advanced pipeline including nine Phase 3 studies completed in 2017 with
several key readouts expected in 2018.
-- Entered into agreements with Novimmune, MicroHealth and Rani Therapeutics
focused on advancing innovation for patients suffering from hemophilia.
Parion Sciences focused on Dry Eye Disease and with AB Biosciences
focused on autoimmune disorders.
Financial Highlights
Full Year 2017(1) Growth(1) Non GAAP CER(1)(2)
Product sales(3) $14,449 million +33% +33%
Product sales excluding
legacy Baxalta $7,461 million +7% +6%
Total revenues $15,161 million +33%
Non GAAP total revenues(4) $15,086 million +32% +32%
Operating income from
continuing operations $2,455 million +155%
Non GAAP operating income(2) $5,997 million +36% +36%
Net income margin(5)(6) 28% 25ppc
Non GAAP EBITDA margin(2)(6) 43% 2ppc
Net income $4,272 million +1,205%
Non GAAP net income(2) $4,604 million +36%
Diluted earnings per ADS(7) $14.05 +1,006%
Non GAAP diluted earnings
per ADS(2)(7) $15.15 +16% +16%
Net cash provided by
operating activities $4,257 million +60%
Non GAAP free cash flow(2) $3,431 million +63%
(1) Results include Baxalta Inc. (Baxalta) (acquired on June 3, 2016)
and Dyax Corp. (Dyax) (acquired on January 22, 2016), unless otherwise
noted. Percentages compare to equivalent 2016 period.
(2) The Non GAAP financial measures included within this release are
explained on pages 29 - 30, and are reconciled to the most directly
comparable financial measures prepared in accordance with U.S. GAAP on
pages 22 - 25.
(3) For 2017 reporting (including comparative information), HAE sales
have been reclassified to the Immunology franchise from Genetic
Diseases.
(4) Non GAAP total revenues excludes the receipt of an upfront license
fee.
(5) U.S. GAAP net income as a percentage of total revenues.
(6) Percentage point change (ppc).
(7) Diluted weighted average number of ordinary shares of 912 million.
Product sales growth
-- Delivered reported product sales growth of 33%, with the inclusion of a
full year of legacy Baxalta sales.
-- Achieved combined pro forma product sales growth of 8%; legacy Shire
product sales growth of 7% and legacy Baxalta pro forma product sales
growth of 9%.
-- Strong demand for our Immunology products delivered 14% pro forma product
sales growth; significant contribution from our subcutaneous
immunoglobulin portfolio; CINRYZE supply stabilized in Q4 2017.
-- Continued product sales growth for GATTEX and NATPARA; strong
contribution from XIIDRA with script growth of 12% since Q3 2017;
successful launch of MYDAYIS.
Earnings growth
-- Generated Non GAAP diluted earnings per ADS of $15.15, up 16%,
underscoring continued focus on commercial excellence and operating
efficiency.
-- Reported Non GAAP EBITDA margin of 43%, driven by realization of
operating expense synergies.
Strong cash flow
-- Achieved year-end debt target through record operating cash flow, which
enabled a $3,370 million reduction in Non GAAP net debt since December
31, 2016.
FINANCIAL SUMMARY - FULL YEAR 2017 COMPARED TO FULL YEAR 2016
Revenues
-- Product sales increased 33% to $14,449 million (2016: $10,886 million),
primarily driven by the inclusion of a full year of legacy Baxalta
product sales of $6,988 million, with strong sales from our
immunoglobulin therapies and bio therapeutics.
-- Product sales, excluding legacy Baxalta, increased 7% as growth from our
hereditary angioedema (HAE) therapies and Neuroscience franchise, up 9%
and 7%, respectively, was partially offset by the launch of generic
competition for LIALDA, which negatively impacted our Internal Medicine
franchise, with product sales down 5%. Our Ophthalmics franchise
generated sales of $259 million in 2017 (2016: $54 million).
-- Royalties and other revenues increased 39% to $712 million, primarily due
to the receipt of an upfront license fee and a full year of contract
manufacturing revenue acquired with Baxalta.
-- Non GAAP total revenues of $15,086 million, up 32%, excludes the receipt
of an upfront license fee.
Operating results
-- Operating income increased 155% to $2,455 million (2016: $963 million),
primarily due to the inclusion of a full year of legacy Baxalta operating
income and lower expense relating to the unwind of inventory fair value
adjustments, partially offset by higher amortization of acquired
intangible assets.
-- Non GAAP operating income increased 36% to $5,997 million (2016: $4,417
million), primarily due to the inclusion of a full year of legacy Baxalta
Non GAAP operating income and higher revenues from legacy Shire
products.
-- Non GAAP EBITDA margin as a percentage of Non GAAP total revenues
increased to 43% (2016: 41%), primarily due to higher Non GAAP total
revenues and lower Non GAAP research and development (R&D) and selling,
general and administrative (SG&A) expenditures as a percentage of Non
GAAP total revenues, partially offset by a lower Non GAAP gross margin,
driven by the inclusion of a full year of lower margin products acquired
with Baxalta.
Earnings per share (EPS)
-- Diluted earnings per American Depositary Share (ADS) increased to $14.05
(2016: $1.27). The increase is primarily due to a higher tax benefit in
2017 driven by U.S. tax reform, higher operating income as noted above,
combined with lower discontinued operations losses relating to the
divested DERMAGRAFT business.
-- Non GAAP diluted earnings per ADS increased 16% to $15.15 (2016: $13.10),
primarily due to the inclusion of a full year of legacy Baxalta net
income and the realization of operating expense synergies relating to
Baxalta, partially offset by a higher average number of shares for full
year 2017.
Cash flows
-- Net cash provided by operating activities increased 60% to $4,257 million
(2016: $2,659 million), primarily due to the inclusion of a full year of
legacy Baxalta operating cash flows and strong cash receipts from higher
legacy Shire sales and operating profitability, partially offset by a
payment associated with the settlement of the DERMAGRAFT litigation and
higher interest payments. Also, 2016 net cash provided by operating
activities was negatively impacted by a payment associated with the
termination of a biosimilar collaboration acquired with Baxalta.
-- Non GAAP free cash flow increased 63% to $3,431 million (2016: $2,103
million), driven by the growth in net cash provided by operating
activities, partially offset by an increase in capital expenditures of
$152 million.
Debt
-- Non GAAP net debt as of December 31, 2017 decreased $3,370 million since
December 31, 2016, to $19,069 million (December 31, 2016: $22,439
million). The decrease was primarily due to a $3,445 million net cash
repayment of debt utilizing Shire's Non GAAP free cash flow, partially
offset by a lower cash balance. Non GAAP net debt represents aggregate
long and short term borrowings of $19,192 million, and capital leases of
$349 million, partially offset by cash and cash equivalents of $472
million.
OUTLOOK
2018 is a year of continued focus on commercial execution and targeted
investment in our manufacturing infrastructure, new product launches,
and pipeline to drive future growth. We expect to deliver mid-single
digit product sales growth in 2018 after absorbing the anticipated
impact of generics.
The mid-term outlook for growth is positive driven by our Immunology
franchise, multiple near-term launches, and international markets. We
are committed to achieving our projected revenue target of $17 - $18
billion in 2020.
Based on current assumptions, we expect Non GAAP diluted earnings per
ADS growth to be lower than top line growth in 2018, mainly due to costs
incurred from the start-up of our new US plasma manufacturing site,
intensifying genericization, and lower royalties. With the already
disclosed manufacturing and SG&A cost reduction initiatives, we are on
track to achieve mid-forties Non GAAP EBITDA margin by 2020.
Following the update to the strategic review on January 8, 2018, Shire
is well underway in creating two divisions, one focused on rare diseases,
the other on neuroscience. Alongside this, we are already active in
optimizing our portfolio within each division, and we anticipate that
this may lead to some opportunities for disposals.
While recognizing our commitment to continue delevering as previously
announced, any surplus capital released from such disposals would be
evaluated by the Board for return to shareholders. Assessing Shire's
overall capital structure and appropriate mid / long term debt level
will be a key initial assignment for the new CFO, who is expected to
join on March 19, 2018.
In addition to the detailed guidance in the table below, we are
providing depreciation and capital expenditures guidance. We expect
depreciation to be between $575 - $625 million and capital expenditure
to be between $800 - $900 million, as we continue to invest in a larger
footprint to support our growth aspirations.
The Non GAAP diluted earnings per ADS forecast assumes a weighted
average number of 915 million fully diluted ordinary shares outstanding
in 2018.
Our US GAAP diluted earnings per ADS outlook reflects anticipated
amortization and integration costs.
Full Year 2018 U.S. GAAP Outlook Non GAAP Outlook(1)
Total product sales $14.9 - $15.3 billion $14.9 - $15.3 billion
Royalties & other revenues $500 - $600 million $500 - $600 million
Gross margin as a percentage of
total revenue(2) 71.0% - 73.0% 73.5% - 75.5%
Combined R&D and SG&A $5.2 - $5.4 billion $4.9 - $5.1 billion
Net interest/other $450 - $550 million $450 - $550 million
Effective tax rate 15% - 17% 16% - 18%
Diluted earnings per ADS(3) $7.30 - $7.90 $14.90 - $15.50
(1) For a list of items excluded from Non GAAP Outlook, refer to pages
29 - 30 of this release.
(2) Gross margin as a percentage of total revenues excludes amortization
of acquired intangible assets.
(3) See page 25 for a reconciliation between U.S. GAAP diluted earnings
per ADS and Non GAAP diluted earnings per ADS.
FINANCIAL SUMMARY - FOURTH QUARTER 2017 COMPARED TO FOURTH QUARTER 2016
Financial Highlights Q4 2017 Growth Non GAAP CER
Product sales(1) $3,911 million +8% +7%
Total revenues $4,145 million +9%
Non GAAP total revenues $4,070 million +7% +6%
Operating income from continuing
operations $850 million +17%
Non GAAP operating income $1,553 million +11% +10%
Net income margin 75% 63ppc
Non GAAP EBITDA margin 41% 1ppc
Net income $3,105 million +579%
Non GAAP net income $1,209 million +18%
Diluted earnings per ADS $10.22 +577%
Non GAAP diluted earnings per ADS $3.98 +18% +17%
Net cash provided by operating
activities $1,520 million +32%
Non GAAP free cash flow $1,219 million +35%
(1) For 2017 reporting (including comparative information), HAE sales
have been reclassified to the Immunology franchise from Genetic
Diseases.
Revenues
-- Product sales increased 8% to $3,911 million (Q4 2016: $3,621 million),
primarily due to strong growth from our Immunology franchise, up 15%, and
our Neuroscience franchise, up 16%. Our Ophthalmics and Oncology
franchises reported sales of $86 million and $72 million, respectively.
Growth was impacted by generic competition for LIALDA, which impacted our
Internal Medicine franchise.
-- Royalties and other revenues increased 26% to $234 million (Q4 2016: $185
million), primarily due to the receipt of a $75 million upfront license
fee.
-- Non GAAP total revenues of $4,070 million, up 7%, excludes the impact of
a receipt of an upfront license fee.
Operating results
-- Operating income increased 17% to $850 million (Q4 2016: $729 million),
primarily due to higher revenues and the realization of Baxalta operating
expense synergies, partially offset by higher acquisition and integration
costs.
-- Non GAAP operating income increased 11% to $1,553 million (Q4 2016:
$1,395 million), primarily due to higher Non GAAP total revenues and
lower expenses as a percentage of Non GAAP total revenues, driven by
operating efficiencies and synergies.
-- Non GAAP EBITDA margin increased to 41% (Q4 2016: 40%), primarily due to
higher Non GAAP total revenues and lower Non GAAP R&D and SG&A
expenditures as a percentage of Non GAAP total revenues, driven by
realized operating synergies from the acquisition of Baxalta, partially
offset by a lower Non GAAP gross margin.
Earnings per share (EPS)
-- Diluted earnings per ADS increased 577% to $10.22 (Q4 2016: $1.51),
primarily due to a tax benefit in 2017 driven by U.S. tax reform, higher
total revenues and the realization of operating synergies, partially
offset by the impact of higher acquisition and integration costs.
-- Non GAAP diluted earnings per ADS increased 18% to $3.98 (Q4 2016: $3.37),
primarily due to higher Non GAAP operating income related to higher Non
GAAP total revenues and the realization of SG&A expense synergies from
the acquisition of Baxalta, partially offset by a lower Non GAAP gross
margin.
Cash flows
-- Net cash provided by operating activities increased 32% to $1,520 million
(Q4 2016: $1,153 million), primarily due to strong cash receipts from
higher total revenues, increased operating profitability and a net cash
receipt of license fees.
-- Non GAAP free cash flow, increased 35% to $1,219 million (Q4 2016: $906
million), primarily due to the increase in net cash provided by operating
activities, excluding the net cash impact of licensing fees as noted
above, and a decrease in capital expenditures of $14 million.
RECENT DEVELOPMENTS
Corporate Strategy
-- On January 8, 2018, Shire announced that it completed the first stage of
its strategic review of its Neuroscience business. The Board concluded
that the Neuroscience business warrants additional focus and investment
and that there is a strong business rationale for creating two distinct
business divisions within Shire: a Rare Disease division and a
Neuroscience division.
Shire expects to report the operational performance metrics of each
division separately beginning with the first quarter of 2018. The second
stage of the review will continue to evaluate all strategic alternatives,
including the merits of an independent listing for each of the two
divisions.
Business Development
License agreement with AB Biosciences
-- On January 30, 2018, Shire entered into a licensing agreement with AB
Biosciences. The license grants Shire exclusive worldwide rights to
develop and commercialize a recombinant immunoglobulin product candidate.
Collaboration with Rani Therapeutics
-- On December 5, 2017, Shire and Rani Therapeutics announced a
collaboration to conduct research on the use of the RANI PILL technology
for oral delivery of Factor VIII therapy for patients with hemophilia A.
Products
ADYNOVI for the treatment of hemophilia A
-- On January 15, 2018, Shire announced that the European Commission (EC)
granted Marketing Authorization for ADYNOVI, an extended half-life
recombinant Factor VIII treatment, for on-demand and prophylactic use in
patients 12 years and older living with hemophilia A.
XIIDRA for the treatment of dry eye disease (DED)
-- On January 3, 2018, Shire announced XIIDRA had been approved in Canada,
marking the first approval for the treatment outside of the U.S. XIIDRA
will be available for patients in Canada in early 2018.
myPKFiT software for ADVATE
-- On December 19, 2017, Shire announced that the FDA granted 510(k)
marketing clearance to myPKFiT for ADVATE, a free web-based software for
hemophilia A patients 16 years and older weighing at least 45 kilograms
treated with ADVATE.
ONCASPAR for the treatment of acute lymphoblastic leukemia (ALL)
-- On December 13, 2017, Shire announced that the EC granted marketing
authorization for lyophilized ONCASPAR as a component of antineoplastic
combination therapy in ALL for all ages. Shire expects lyophilized
ONCASPAR to be available in European markets beginning in the first half
of 2018.
Pipeline
SHP620 for the treatment of cytomegalovirus (CMV) infection in
transplant patients
-- On January 4, 2018, Shire announced that the FDA granted breakthrough
therapy designation for SHP620, a Phase 3 investigational treatment for
CMV infection and disease in transplant patients resistant or refractory
to prior therapy.
SHP609 for the treatment of Hunter syndrome
-- On December 19, 2017, Shire announced that the Phase 2/3 clinical trial,
evaluating SHP609 for the potential treatment of pediatric patients with
Hunter syndrome and cognitive impairment, did not meet its primary nor
key secondary endpoints.
SHP647 for the treatment of ulcerative colitis (UC)
-- On November 30, 2017, Shire announced that the FDA granted Orphan Drug
Designation to Shire's investigational anti-MAdCAM-1 antibody, SHP647,
for the treatment of pediatric patients with moderately to severely
active UC.
Facilities
-- On January 24, 2018, Shire announced that the FDA has granted approval
for the technology transfer of CINRYZE drug product manufacturing process
to its Vienna, Austria manufacturing site. Shire will begin commercial
manufacturing of CINRYZE drug product in Vienna in the first quarter of
2018.
-- On December 27, 2017, Shire announced that it had filed its first
submission to the FDA for a new plasma manufacturing facility near
Covington, Georgia. The facility is expected to add approximately 30%
capacity to Shire's internal network once fully operational. Commercial
production is expected to begin in 2018.
Board and Senior Management Changes
On November 20, 2017, Shire announced that Thomas Dittrich will join
Shire as Chief Financial Officer, and will become a member of the
Executive Committee and an Executive member of the Board of Directors.
Mr. Dittrich is expected to assume his roles at Shire on March 19, 2018.
Effective December 31, 2017, Jeff Poulton stepped down from the Board of
Directors and resigned as Shire's Chief Financial Officer.
On January 1, 2018, John Miller, Shire's Senior Vice President of
Finance, was appointed Interim Chief Financial Officer. Mr. Miller will
hold this position until Mr. Dittrich commences his employment with
Shire.
On January 1, 2018, Andreas Busch, PhD, joined Shire as Head of Research
and Development and Chief Scientific Officer, and became a member of
Shire's Executive Committee.
On August 3, 2017, Shire announced that David Ginsburg, Chairman of the
Science & Technology Committee, would retire following the 2018 Annual
General Meeting (AGM). Subsequently, the Board resolved that David would
continue for the near term as a Non-Executive Director and Chairman of
the Science and Technology Committee. Today, the Board announces that
Dominic Blakemore, having been appointed Group Chief Executive Officer
of Compass Group PLC on January 1, 2018, decided to step down as a
Non-Executive Director of Shire immediately following the 2018 AGM. The
Board has begun a search for two new non-executive director appointees
who can provide the knowledge, insight, and experience that both David
and Dominic currently bring to Shire. The Board also announces today
that, following the departure of William Burns from the Board of
Directors after the 2018 AGM, Olivier Bohuon will be appointed Senior
Independent Director of the Board.
Dividend
For the six months ended December 31, 2017, the Board resolved to pay an
interim dividend of 29.79 U.S. cents per Ordinary Share (2016: 25.70
U.S. cents per Ordinary Share).
Dividend payments will be made in Pounds Sterling to holders of Ordinary
Shares and in U.S. Dollars to holders of ADSs. A dividend of 21.46(1)
pence per Ordinary Share (2016: 20.64 pence) and 89.37 U.S. cents per
ADS (2016: 77.10 U.S. cents) will be paid on April 24, 2018 to
shareholders on the register as at the close of business on March 9,
2018.
Together with the first interim payment of 5.09 U.S. cents per Ordinary
Share (2016: 4.63 U.S. cents per Ordinary Share), this represents total
dividends for 2017 of 34.88 U.S. cents per Ordinary Share (2016: 30.33
U.S. cents per Ordinary Share), an increase of 15% in U.S. Dollar terms.
Holders of Ordinary Shares are notified that, in order to receive UK
sourced dividends via Shire's Income Access Share arrangements (IAS
Arrangements), they need to submit a valid IAS Arrangements election
form to Shire's Registrar, Equiniti, no later than 5pm (GMT) on March
23, 2018. Holders of Ordinary Shares are advised that:
-- any previous elections made using versions of the IAS Arrangements
election form in use prior to February 16, 2016, and any elections deemed
to have been made prior to April 28, 2016, are no longer valid; and
-- if they do not elect, or have not elected using the newly formatted IAS
Arrangements election forms published on or after February 16, 2016, to
receive UK sourced dividends via Shire's IAS Arrangements, their
dividends will be Irish sourced and therefore incur Irish dividend
withholding tax, subject to applicable exemptions.
Internet links to the newly formatted IAS Arrangements election forms
can be found at:
http://investors.shire.com/shareholder-resources/shareholder-forms.aspx
(1) Translated using a GBP:USD exchange rate of 1.3881.
ADDITIONAL INFORMATION
The following additional information is included in this press release:
Page
Overview of Full Year 2017 Financial Results 9
Financial Information 14
Non GAAP Reconciliations 22
Notes to Editors 26
Forward-Looking Statements 27
Non GAAP Measures 29
Trademarks 30
For further information please contact:
Investor Relations
Christoph Brackmann christoph.brackmann@shire.com +41 795 432 359
Sun Kim sun.kim@shire.com +1 617 588 8175
Robert Coates rcoates@shire.com +44 203 549 0874
Media
Lisa Adler lisa.adler@shire.com +1 617 588 8607
Katie Joyce kjoyce@shire.com +1 781 482 2779
Dial in details for the live conference call for investors at 14:00 GMT
/ 9:00 EST on February 14, 2018:
UK dial in: 0800 358 9473 or +44 333 300 0804
US dial in: 1 855 857 0686 or 1 631 913 1422
International Click here:
Access http://events.arkadin.com/ev/docs/NE_W2_TF_Events_International_A
Numbers: ccess_List.pdf
Password/Conf 76960651#
ID:
Live Webcast: Click here
http://investors.shire.com/presentations-and-reports/quarterly-re
sults-and-presentations
The quarterly earnings presentation will be available today at 13:00 GMT
/ 8:00 EST on:
- Shire.com Investors section
http://investors.shire.com/presentations-and-reports/quarterly-results-and-presentations
- Shire's IR Briefcase in the iTunes Store
https://itunes.apple.com/us/app/shire-ir-briefcase/id529486874?mt=8
OVERVIEW OF FULL YEAR 2017 FINANCIAL RESULTS COMPARED TO FULL YEAR 2016
1. Product sales
Product sales increased 33% to $14,449 million (2016: $10,886 million),
primarily due to the inclusion of a full year of legacy Baxalta sales in
2017. Excluding legacy Baxalta, product sales increased 7%. For 2017
reporting (including comparative information), HAE sales have been
reclassified to the Immunology franchise from Genetic Diseases.
Total Sales
(in millions) Year on year growth
Product sales by U.S. International Total
franchise Sales Sales Sales Reported Non GAAP CER
IMMUNOGLOBULIN
THERAPIES $1,788.9 $ 447.7 $ 2,236.6 N/M N/M
HEREDITARY
ANGIOEDEMA 1,305.2 124.4 1,429.6 +9% +9%
BIO THERAPEUTICS 315.9 388.2 704.1 N/M N/M
Immunology 3,410.0 960.3 4,370.3 N/M N/M
HEMOPHILIA 1,477.9 1,479.4 2,957.3 N/M N/M
INHIBITOR
THERAPIES 279.4 548.9 828.3 N/M N/M
Hematology 1,757.3 2,028.3 3,785.6 N/M N/M
VYVANSE 1,917.3 243.8 2,161.1 +7% +7%
ADDERALL XR 327.7 20.3 348.0 -4% -4%
MYDAYIS 21.6 - 21.6 N/A N/A
Other Neuroscience 17.3 116.1 133.4 +18% +19%
Neuroscience 2,283.9 380.2 2,664.1 +7% +7%
LIALDA/MEZAVANT 473.1 96.3 569.4 -28% -28%
GATTEX/REVESTIVE 287.5 48.0 335.5 +53% +53%
PENTASA 313.2 - 313.2 +1% +1%
NATPARA/NATPAR 146.1 1.3 147.4 +73% +73%
Other Internal
Medicine 82.4 222.4 304.8 -13% -13%
Internal Medicine 1,302.3 368.0 1,670.3 -5% -5%
ELAPRASE 162.5 453.2 615.7 +5% +3%
REPLAGAL - 472.1 472.1 +4% +4%
VPRIV 150.3 199.6 349.9 +1% +1%
Genetic Diseases 312.8 1,124.9 1,437.7 +4% +3%
Oncology 185.2 76.5 261.7 N/M N/M
Ophthalmics 259.2 - 259.2 N/M N/M
Total product
sales $9,510.7 $ 4,938.2 $14,448.9 +33% +33%
Immunology
Immunology product sales, which now include HAE product sales, were
$4,370 million in 2017. HAE product sales reported growth was 9%. Our
immunoglobulin therapies and bio therapeutics, acquired with Baxalta in
June 2016, performed well, up 18% and 14%, respectively, on a pro forma
basis.
HAE growth was primarily driven by FIRAZYR, up 15% to $663 million, and
CINRYZE, up 3% to $699 million. CINRYZE growth was held back by supply
constraints in 2017. CINRYZE supply stabilized during Q4 2017 and Shire
will begin production of CINRYZE drug product in-house in Q1 2018.
Pro forma growth for legacy Baxalta products was driven by U.S. demand
growth for GAMMAGARD liquid and increasing demand for our subcutaneous
portfolio. Strong international performance was driven by growth across
most regions.
Hematology
Hematology, acquired with Baxalta in June 2016, reported product sales
of $3,786 million in 2017, with growth in both our hemophilia and
inhibitor therapies products on a pro forma basis.
Pro forma growth across the portfolio was primarily driven by increased
demand for our rFVIII products and the impact of stocking in the U.S.,
combined with international growth, particularly for our inhibitor
therapies.
Neuroscience
Neuroscience product sales increased 7%, primarily driven by VYVANSE and
the launch of MYDAYIS.
VYVANSE sales increased 7%, primarily due to the benefit of a price
increase taken since 2016, increased demand resulting from growth in the
U.S. ADHD market and strong performance in our international markets,
partially offset by lower U.S. stocking.
MYDAYIS, which was made available to patients on August 28, 2017,
contributed $22 million of product sales in 2017.
Internal Medicine
Internal Medicine product sales decreased 5%, driven by the impact of
LIALDA generic competition, partially offset by growth from
GATTEX/REVESTIVE and NATPARA. Excluding LIALDA, Internal Medicine
product sales increased 14%.
LIALDA/MEZAVANT sales decreased 28%, due to the impact of generic
competition in 2017.
GATTEX/REVESTIVE and NATPARA continued to perform well with sales
increasing 53% and 73%, respectively, primarily due to an increase in
the number of patients on therapy, and to a lesser extent, the benefit
of price increases taken since 2016.
Genetic Diseases
Genetic Diseases, which now excludes HAE product sales, increased 4%,
primarily due to ELAPRASE and REPLAGAL. Both products benefited from an
increase in the number of patients on therapy.
Oncology
Oncology, acquired with Baxalta in June 2016, contributed $262 million
of product sales in 2017. Pro forma growth of 22% was driven by sales of
ONCASPAR and ONIVYDE, the latter of which was approved in the EU on
October 18, 2016.
Ophthalmics
Ophthalmics contributed product sales of $259 million in 2017. Sales
relate to XIIDRA, which was made available to patients starting on
August 29, 2016, with 12% prescription growth since Q3 2017.
Legacy Baxalta pro forma product sales growth
The table presents 2017 reported legacy Baxalta product sales compared
with 2016 pro forma legacy Baxalta sales.
Pro forma
(in millions) Year on year growth
U.S. International Total
Product sales Sales Sales Sales Reported Non GAAP CER
HEMOPHILIA $1,477.9 $ 1,479.4 $2,957.3 +3% +3%
IMMUNOGLOBULIN
THERAPIES 1,788.9 447.7 2,236.6 +18% +19%
INHIBITOR
THERAPIES 279.4 548.9 828.3 +2% +2%
BIO THERAPEUTICS 315.9 388.2 704.1 +14% +14%
ONCOLOGY 185.2 76.5 261.7 +22% +21%
Total $4,047.3 $ 2,940.7 $6,988.0 +9% +9%
1. Royalties and other revenues
(in millions)
Revenue Year on year reported growth
Royalties $448.4 +17%
Other revenues 263.3 +105%
Royalties and other revenues
(U.S. GAAP) 711.7 +39%
Revenue from upfront license
fee (74.6) N/A
Non GAAP royalties and other
revenues $637.1 +25%
Royalties and other revenues increased 39%, primarily due to an upfront
license fee received and a full year of contract manufacturing revenue
acquired with Baxalta.
Non GAAP royalties and other revenues increased 25%, primarily due to a
full year of contract manufacturing revenue acquired with Baxalta, an
increase in SENSIPAR royalties and an increase in royalty streams
acquired with Dyax.
1. Financial details
Cost of sales
(in millions) 2017 2016
Cost of sales (U.S. GAAP) $4,700.8 $3,816.5
Expense related to the unwind of inventory fair value
adjustments (747.8) (1,118.0)
Inventory write-down relating to the closure of a
facility - (18.9)
One-time employee related costs - (10.0)
Depreciation (276.1) (160.8)
Non GAAP cost of sales $3,676.9 $2,508.8
U.S. GAAP Cost of sales as a percentage of total
revenues 31% 33%
Non GAAP cost of sales as a percentage of Non GAAP
total revenues 24% 22%
Cost of sales as a percentage of total revenues decreased by 2% to 31%
due to the impact of lower expense related to the unwind of inventory
fair value adjustments, being partially offset by the inclusion of a
full year of lower margin product franchises acquired with Baxalta.
Non GAAP cost of sales as a percentage of Non GAAP total revenues
increased by 2% to 24%, primarily due to the impact of a full year of
lower margin product franchises acquired with Baxalta.
R&D
(in millions) 2017 2016
R&D (U.S. GAAP) $1,763.3 $1,439.8
Impairment of IPR&D intangible assets (20.0) (8.9)
Costs relating to license arrangements (131.2) (110.0)
Depreciation (47.2) (34.1)
Non GAAP R&D $1,564.9 $1,286.8
U.S. GAAP R&D as a percentage of total
revenues 12% 13%
Non GAAP R&D as a percentage of Non GAAP
total revenues 10% 11%
R&D expenditure increased by $324 million, or 22%, primarily due to the
inclusion of a full year of legacy Baxalta costs.
Non GAAP R&D expenditure increased by $278 million, or 22%, primarily
due to the inclusion of a full year of legacy Baxalta costs. Non GAAP
R&D as a percentage of Non GAAP total revenues decreased 1% as we began
to realize synergies from the acquisition of Baxalta.
SG&A
(in millions) 2017 2016
SG&A (U.S. GAAP) $3,530.9 $3,015.2
Legal and litigation costs (10.6) (16.3)
One-time employee related costs 4.0 (10.0)
Depreciation (172.5) (98.0)
Non GAAP SG&A $3,351.8 $2,890.9
U.S. GAAP SG&A as a percentage of total
revenues 23% 26%
Non GAAP SG&A as a percentage of Non GAAP
total revenues 22% 25%
SG&A expenditure increased by $516 million, or 17%, primarily due to the
inclusion of a full year of legacy Baxalta costs.
Non GAAP SG&A expenditure increased by $461 million, or 16%, primarily
due to the inclusion of a full year of legacy Baxalta costs. Non GAAP
SG&A as a percentage of Non GAAP total revenues decreased 3% due to the
realization of operating synergies from the acquisition of Baxalta.
Amortization of acquired intangible assets
In 2017, Shire recorded amortization of acquired intangible assets of
$1,768 million (2016: $1,173 million), primarily related to a full year
of amortization of intangible assets acquired with Baxalta and the
acceleration of CINRYZE amortization following positive SHP643 Phase 3
results.
Integration and acquisition costs
In 2017, Shire recorded integration and acquisition costs of $895
million, primarily relating to the Baxalta transaction. Costs included
asset impairment charges, employee severance, the acceleration of stock
compensation, third-party professional fees and expenses associated with
facility consolidations.
In 2016, Shire recorded integration and acquisition costs of $884
million, primarily relating to the Baxalta and Dyax transactions. Costs
included employee severance, the acceleration of stock compensation,
third-party professional fees, contract terminations and other
transaction-related fees.
Reorganization costs
In 2017, Shire recorded reorganization costs of $48 million, primarily
related to the closure of the Basingstoke, U.K. office. In 2016, Shire
recorded reorganization costs of $121 million, primarily related to the
closure of a facility at the Los Angeles, U.S. manufacturing site.
Other expense, net
(in millions) 2017 2016
Other expense, net (U.S. GAAP) $(561.8) $(476.8)
Amortization of one-time upfront borrowing costs for
Baxalta and Dyax 6.1 93.6
(Gain)/loss on sale of long term investments (28.7) 6.0
Fair value adjustment for joint venture net written
option 15.0 -
Non GAAP other expense, net $(569.4) $(377.2)
Other expense, net increased by $85 million, primarily due to a full
year of interest expense incurred on borrowings used to fund the
acquisition of Baxalta, reduced by repayments of borrowings, and
partially offset by lower amortization of one-time upfront borrowing
costs for Baxalta and Dyax in 2017.
Non GAAP other expense, net increased by $192 million, primarily due to
higher interest expense as noted above.
Taxation
(in millions) 2017 2016
Income tax benefit (U.S. GAAP) $2,357.6 $ 126.1
U.S. tax reform Non GAAP tax adjustment (2,378.3) -
Other Non GAAP tax adjustments (804.9) (766.9)
Non GAAP Income tax expense $ (825.6) $(640.8)
U.S. GAAP effective tax rate (125)% (26)%
Non GAAP effective tax rate 15% 16%
The effective tax rate on U.S. GAAP income in 2017 was a tax credit of
125% (2016: tax credit of 26%) and on a Non GAAP basis, was a tax charge
of 15% (2016: tax charge of 16%).
The effective tax rate in 2017 on U.S. GAAP income from continuing
operations is lower due to the enactment of the Tax Cuts and Jobs Act
(P.L. 115-97) (Tax Act), which was signed into law on December 22, 2017.
Among the changes is a permanent reduction in the federal U.S. corporate
income tax rate from 35% to 21% effective January 1, 2018.
As a result of the reduction in the U.S. corporate income tax rate,
Shire revalued its net deferred tax positions for the year ended
December 31, 2017. This resulted in a decrease to the net deferred tax
liability of approximately $2.5 billion, which was recorded as reduction
to income tax expense for the fourth quarter of 2017. In addition, Shire
has estimated an income tax liability of $620 million related to the
transition tax which is applicable to certain non U.S. earnings
previously untaxed in the U.S. Shire recorded a $90 million income tax
expense related to the transition tax and reclassified a deferred tax
liability which had been accrued for prior years' unremitted earnings to
income tax payable for the remaining amount. Shire continues to analyze
the Tax Act to determine the full effects the new law will have on its
financial statements and all amounts recorded in the 2017 financial
statements are provisional in nature.
Excluding the consideration for the U.S. tax reform net income tax
benefit, Shire's U.S. GAAP effective tax rate for the year ended
December 31, 2017 would have been approximately 1%. The amount is higher
than the prior year, as the prior year effective tax included
significant integration costs, primarily related to the Baxalta
acquisition, which were expensed in higher tax jurisdictions.
Discontinued operations
The gain from discontinued operations in 2017 was $18 million, net of
taxes. The loss in 2016 was $276 million, net of tax benefit of $99
million, primarily due to the establishment of legal contingencies
related to the divested DERMAGRAFT business.
FINANCIAL INFORMATION
TABLE OF CONTENTS
Page
Unaudited U.S. GAAP Consolidated Balance Sheets 15
Unaudited U.S. GAAP Consolidated Statements of Operations 16
Unaudited U.S. GAAP Consolidated Statements of Cash
Flows 18
Selected Notes to the Unaudited U.S. GAAP Financial
Statements
(1) Earnings per share 20
(2) Analysis of revenues 21
Non GAAP reconciliations 22
Unaudited U.S. GAAP Consolidated Balance Sheets
(in millions, except par value of shares)
December December 31,
31, 2017 2016
ASSETS
Current assets:
Cash and cash equivalents $ 472.4 $ 528.8
Restricted cash 39.4 25.6
Accounts receivable, net 3,009.8 2,616.5
Inventories 3,291.5 3,562.3
Prepaid expenses and other current assets 795.3 806.3
Total current assets 7,608.4 7,539.5
Non-current assets:
Investments 241.1 191.6
Property, plant and equipment (PP&E), net 6,635.4 6,469.6
Goodwill 19,831.7 17,888.2
Intangible assets, net 33,046.1 34,697.5
Deferred tax asset 188.8 96.7
Other non-current assets 205.4 152.3
Total assets $67,756.9 $67,035.4
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 4,184.5 $ 4,312.4
Short term borrowings and capital leases 2,788.7 3,068.0
Other current liabilities 908.8 362.9
Total current liabilities 7,882.0 7,743.3
Non-current liabilities:
Long term borrowings and capital leases 16,752.4 19,899.8
Deferred tax liability 4,748.2 8,322.7
Other non-current liabilities 2,197.9 2,121.6
Total liabilities 31,580.5 38,087.4
Equity:
Common stock of 5p par value; 1,500 shares authorized;
and 917.1 shares issued and outstanding (2016: 1,500
shares authorized; and 912.2 shares issued and outstanding) 81.6 81.3
Additional paid-in capital 25,082.2 24,740.9
Treasury stock: 8.4 shares (2016: 9.1 shares) (283.0) (301.9)
Accumulated other comprehensive income/(loss) 1,375.0 (1,497.6)
Retained earnings 9,920.6 5,925.3
Total equity 36,176.4 28,948.0
Total liabilities and equity $67,756.9 $67,035.4
Unaudited U.S. GAAP Consolidated Statements of Operations
(in millions)
3 months ended December 12 months ended December
31, 31,
2017 2016 2017 2016
Revenues:
Product sales $3,911.0 $3,621.0 $14,448.9 $10,885.8
Royalties and other revenues 233.9 185.1 711.7 510.8
Total revenues 4,144.9 3,806.1 15,160.6 11,396.6
Costs and expenses:
Cost of sales 1,263.5 1,053.6 4,700.8 3,816.5
Research and development 438.8 416.8 1,763.3 1,439.8
Selling, general and administrative 883.2 989.4 3,530.9 3,015.2
Amortization of acquired intangible assets 487.9 470.9 1,768.4 1,173.4
Integration and acquisition costs 197.8 145.3 894.5 883.9
Reorganization costs 23.4 5.7 47.9 121.4
Gain on sale of product rights - (4.3) (0.4) (16.5)
Total operating expenses 3,294.6 3,077.4 12,705.4 10,433.7
Operating income from continuing operations 850.3 728.7 2,455.2 962.9
Interest income 4.0 6.5 9.7 18.4
Interest expense (153.5) (150.8) (578.9) (469.6)
Other income/(expense), net 0.6 (9.4) 7.4 (25.6)
Total other expense, net (148.9) (153.7) (561.8) (476.8)
Income from continuing operations before income taxes
and equity in earnings/(losses) of equity method investees 701.4 575.0 1,893.4 486.1
Income taxes 2,402.2 (92.3) 2,357.6 126.1
Equity in earnings/(losses) of equity method investees,
net of taxes 2.4 (6.8) 2.5 (8.7)
Income from continuing operations, net of taxes 3,106.0 475.9 4,253.5 603.5
Gain/(loss) from discontinued operations, net of taxes (0.6) (18.6) 18.0 (276.1)
Net income $3,105.4 $ 457.3 $ 4,271.5 $ 327.4
Unaudited U.S. GAAP Consolidated Statements of Operations (continued)
(in millions, except per share amounts)
3 months ended December 12 months ended December
31, 31,
2017 2016 2017 2016
Earnings per
Ordinary Share -
basic
Earnings from
continuing
operations $ 3.42 $ 0.53 $ 4.69 $ 0.78
Earnings/(loss)
from
discontinued
operations 0.00 (0.02) 0.02 (0.35)
Earnings per
Ordinary Share
- basic $ 3.42 $ 0.51 $ 4.71 $ 0.43
Earnings per ADS
- basic $ 10.26 $ 1.52 $ 14.14 $ 1.28
Earnings per
Ordinary Share -
diluted
Earnings from
continuing
operations $ 3.41 $ 0.52 $ 4.66 $ 0.77
Earnings/(loss)
from
discontinued
operations 0.00 (0.02) 0.02 (0.35)
Earnings per
Ordinary Share
- diluted $ 3.41 $ 0.50 $ 4.68 $ 0.42
Earnings per ADS
- diluted $ 10.22 $ 1.51 $ 14.05 $ 1.27
Weighted average
number of
shares:
Basic 908.2 902.7 906.5 770.1
Diluted 911.9 911.1 912.0 776.2
Unaudited U.S. GAAP Consolidated Statements of Cash Flows
(in millions)
3 months ended December
31, 12 months ended December 31,
2017 2016 2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $3,105.4 $ 457.3 $4,271.5 $ 327.4
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 620.2 588.5 2,264.2 1,466.3
Share based compensation 15.2 48.9 174.9 318.5
Amortization of deferred financing fees 1.9 3.8 12.8 125.5
Expense related to the unwind of inventory fair value
adjustments 59.1 20.7 747.8 1,118.0
Change in deferred taxes (2,524.0) (47.7) (2,916.4) (594.6)
Change in fair value of contingent consideration (23.6) 45.9 120.7 11.1
Impairment of PP&E and intangible assets 122.3 3.2 289.9 101.3
Other, net (32.7) (3.9) 55.6 31.4
Changes in operating assets and liabilities:
Increase in accounts receivable (186.1) (290.5) (487.6) (701.7)
Increase in sales deduction accrual 220.1 180.1 314.1 288.3
(Increase)/decrease in inventory 100.1 (27.8) (145.1) (255.8)
Decrease/(increase) in prepayments and other assets 10.7 (132.0) 81.1 (198.4)
(Decrease)/increase in accounts payable and other
liabilities 31.0 306.4 (526.8) 621.6
Net cash provided by operating activities 1,519.6 1,152.9 4,256.7 2,658.9
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of PP&E (233.3) (246.2) (798.8) (648.7)
Purchases of businesses, net of cash acquired - - - (17,476.2)
Proceeds from sale of investments 40.5 0.3 88.6 0.9
Movements in restricted cash (5.1) (5.5) (13.7) 62.8
Other, net (11.8) (29.5) 23.0 (31.0)
Net cash used in investing activities (209.7) (280.9) (700.9) (18,092.2)
Unaudited U.S. GAAP Consolidated Statements of Cash Flows (continued)
(in millions)
12 months ended December
3 months ended December 31, 31,
2017 2016 2017 2016
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving line of credit, long term
and short term borrowings 975.1 701.1 4,236.7 32,443.4
Repayment of revolving line of credit, long term and
short term borrowings (2,016.9) (1,771.4) (7,681.4) (16,404.3)
Payment of dividend (46.6) (41.1) (281.3) (171.3)
Debt issuance costs - (1.3) - (172.3)
Proceeds from issuance of stock for share-based compensation
arrangements 41.9 32.0 134.1 169.2
Other, net (1.2) 5.9 (27.4) (38.9)
Net cash (used in)/provided by financing activities (1,047.7) (1,074.8) (3,619.3) 15,825.8
Effect of foreign exchange rate changes on cash and
cash equivalents 0.9 3.0 7.1 0.8
Net (decrease)/increase in cash and cash equivalents 263.1 (199.8) (56.4) 393.3
Cash and cash equivalents at beginning of period 209.3 728.6 528.8 135.5
Cash and cash equivalents at end of period $ 472.4 $ 528.8 $ 472.4 $ 528.8
Selected Notes to the Unaudited U.S. GAAP Financial Statements
1. Earnings Per Share (EPS)
(in millions)
3 months ended December 12 months ended December
31, 31,
2017 2016 2017 2016
Income from
continuing
operations $3,106.0 $ 475.9 $ 4,253.5 $ 603.5
Gain/(loss)
from
discontinued
operations (0.6) (18.6) 18.0 (276.1)
Numerator for
EPS $3,105.4 $ 457.3 $ 4,271.5 $ 327.4
Weighted
average
number of
shares:
Basic 908.2 902.7 906.5 770.1
Effect of
dilutive
shares:
Share based
awards to
employees 3.7 8.4 5.5 6.1
Diluted 911.9 911.1 912.0 776.2
The share equivalents not included in the calculation of the diluted
weighted average number of shares are shown below:
Share based awards to employees 16.4 4.1 15.2 4.1
Selected Notes to the Unaudited U.S. GAAP Financial Statements
(2) Analysis of revenues
(in millions)
3 months ended 12 months ended
December 31, December 31,
2017 2016 2017 2016
Product sales by
franchise
IMMUNOGLOBULIN
THERAPIES $ 622.7 $ 533.2 $ 2,236.6 $ 1,143.9
HEREDITARY
ANGIOEDEMA (1) 461.2 357.8 1,429.6 1,310.9
BIO THERAPEUTICS 157.4 186.9 704.1 372.2
Immunology 1,241.3 1,077.9 4,370.3 2,827.0
HEMOPHILIA 837.7 811.0 2,957.3 1,789.0
INHIBITOR
THERAPIES 196.4 196.1 828.3 451.8
Hematology 1,034.1 1,007.1 3,785.6 2,240.8
VYVANSE 540.8 474.4 2,161.1 2,013.9
ADDERALL XR 105.7 82.7 348.0 363.8
MYDAYIS (4.3) - 21.6 -
Other
Neuroscience 42.1 31.6 133.4 112.8
Neuroscience 684.3 588.7 2,664.1 2,490.5
LIALDA/MEZAVANT 99.8 221.8 569.4 792.1
GATTEX/REVESTIVE 106.3 65.1 335.5 219.4
PENTASA 88.7 87.1 313.2 309.4
NATPARA/NATPAR 44.1 26.5 147.4 85.3
Other Internal
Medicine 77.3 88.7 304.8 349.3
Internal Medicine 416.2 489.2 1,670.3 1,755.5
ELAPRASE 161.2 164.7 615.7 589.0
REPLAGAL 123.1 111.9 472.1 452.4
VPRIV 92.6 86.4 349.9 345.7
Genetic Diseases 376.9 363.0 1,437.7 1,387.1
Oncology 72.4 54.8 261.7 130.5
Ophthalmics 85.8 40.3 259.2 54.4
Total product
sales 3,911.0 3,621.0 14,448.9 10,885.8
Royalties and
other revenues
Royalties 118.7 128.5 448.4 382.6
Other revenues 115.2 56.6 263.3 128.2
Total royalties
and other
revenues 233.9 185.1 711.7 510.8
Total revenues $4,144.9 $3,806.1 $15,160.6 $11,396.6
(1) For 2017 reporting (including comparative information), HAE sales
have been reclassified to the Immunology franchise from Genetic
Diseases.
Non GAAP reconciliations
(in millions)
Reconciliation of U.S. GAAP total revenues to Non GAAP total revenues:
3 months ended
December 31, 12 months ended December 31,
2017 2016 2017 2016
U.S. GAAP
total
revenues $ 4,144.9 $3,806.1 $ 15,160.6 $11,396.6
Revenue
from
upfront
license
fee (74.6) - (74.6) -
Non GAAP
total
revenues $ 4,070.3 $3,806.1 $ 15,086.0 $11,396.6
Reconciliation of U.S. GAAP net income to Non GAAP EBITDA and Non GAAP
operating income:
3 months ended December 12 months ended December
31, 31,
2017 2016 2017 2016
U.S. GAAP net income $3,105.4 $ 457.3 $4,271.5 $ 327.4
Add back/(deduct):
(Gain)/loss from discontinued operations, net of taxes 0.6 18.6 (18.0) 276.1
Equity in (earnings)/losses of equity method investees,
net of taxes (2.4) 6.8 (2.5) 8.7
Income taxes (2,402.2) 92.3 (2,357.6) (126.1)
Other expense, net 148.9 153.7 561.8 476.8
U.S. GAAP operating income from continuing operations 850.3 728.7 2,455.2 962.9
Add back/(deduct) Non GAAP adjustments:
Revenue from upfront license fee (74.6) - (74.6) -
Expense related to the unwind of inventory fair value
adjustments 59.1 20.7 747.8 1,118.0
Inventory write down related to U.S. manufacturing
site closure - 7.3 - 18.9
One-time employee related costs - 20.0 (4.0) 20.0
Impairment of acquired intangible assets - - 20.0 8.9
Costs relating to license arrangements 7.5 - 131.2 110.0
Legal and litigation costs 2.0 0.2 10.6 16.3
Amortization of acquired intangible assets 487.9 470.9 1,768.4 1,173.4
Integration and acquisition costs 197.8 145.3 894.5 883.9
Reorganization costs 23.4 5.7 47.9 121.4
Gain on sale of product rights - (4.3) (0.4) (16.5)
Depreciation 132.3 117.6 495.8 292.9
Non GAAP EBITDA 1,685.7 1,512.1 6,492.4 4,710.1
Depreciation (132.3) (117.6) (495.8) (292.9)
Non GAAP operating income $1,553.4 $1,394.5 $5,996.6 $4,417.2
Net income margin(1) 75% 12% 28% 3%
Non GAAP EBITDA margin(2) 41% 40% 43% 41%
(1) Net income as a percentage of total revenues.
(2) Non GAAP EBITDA as a percentage of Non GAAP total
revenues.
Reconciliation of U.S. GAAP gross margin to Non GAAP gross margin:
3 months ended December
31, 12 months ended December 31,
2017 2016 2017 2016
U.S. GAAP total revenues $4,144.9 $3,806.1 $15,160.6 $11,396.6
Cost of sales (U.S. GAAP) (1,263.5) (1,053.6) (4,700.8) (3,816.5)
U.S. GAAP gross margin(1) 2,881.4 2,752.5 10,459.8 7,580.1
Add back/(deduct) Non GAAP adjustments:
Revenue from upfront license fee (74.6) - (74.6) -
Expense related to the unwind of inventory fair value
adjustments 59.1 20.7 747.8 1,118.0
Inventory write-down relating to the closure of a
facility - 7.3 - 18.9
One-time employee related costs - 10 - 10.0
Depreciation 66.9 75.6 276.1 160.8
Non GAAP gross margin $2,932.8 $2,866.1 $11,409.1 $ 8,887.8
U.S. GAAP gross margin (1)(2) 69.5% 72.3% 69.0% 66.5%
Non GAAP gross margin (2) 72.1% 75.3% 75.6% 78.0%
(1) U.S. GAAP gross margin excludes amortization of
acquired intangible assets.
(2) U.S. GAAP gross margin as a percentage of total
revenues. Non GAAP gross margin as a percentage of
Non GAAP total revenues.
Reconciliation of U.S. GAAP net income to Non GAAP net income:
3 months ended December 12 months ended
31, December 31,
2017 2016 2017 2016
U.S. GAAP net income $3,105.4 $ 457.3 $4,271.5 $ 327.4
Revenue related to license arrangements (74.6) - (74.6) -
Expense related to the unwind of inventory fair value
adjustments 59.1 20.7 747.8 1,118.0
Inventory write-down relating to the closure of a
facility - 7.3 - 18.9
One-time employee related costs - 20.0 (4.0) 20.0
Impairment of acquired intangible assets - - 20.0 8.9
Costs relating to license arrangements 7.5 - 131.2 110.0
Legal and litigation costs 2.0 0.2 10.6 16.3
Amortization of acquired intangible assets 487.9 470.9 1,768.4 1,173.4
Integration and acquisition costs 197.8 145.3 894.5 883.9
Reorganization costs 23.4 5.7 47.9 121.4
Gain on sale of product rights - (4.3) (0.4) (16.5)
Amortization of one-time upfront borrowing costs for
Baxalta and Dyax 0.7 2.1 6.1 93.6
(Gain)/loss on sale of long term investments (19.8) - (28.7) 6.0
(Gain)/loss from discontinued operations 2.8 16.4 (26.9) 375.0
Fair value adjustment for joint venture net written
option 15.0 - 15.0 -
Non GAAP tax adjustments (2,597.9) (117.1) (3,174.3) (865.8)
Non GAAP net income $1,209.3 $1,024.5 $4,604.1 $3,390.5
Non GAAP reconciliations
(in millions, except per ADS amounts)
Reconciliation of U.S. GAAP diluted earnings per ADS to Non GAAP diluted
earnings per ADS:
3 months ended 12 months ended
December 31, December 31,
2017 2016 2017 2016
U.S. GAAP diluted earnings per ADS $10.22 $1.51 $14.05 $ 1.27
Revenue related to license arrangements (0.25) - (0.25) -
Expense related to the unwind of inventory fair value
adjustments 0.19 0.07 2.46 4.32
Inventory write-down relating to the closure of a
facility - 0.02 - 0.07
One-time employee related costs - 0.07 (0.01) 0.08
Impairment of acquired intangible assets - - 0.07 0.03
Costs relating to license arrangements 0.02 - 0.43 0.43
Legal and litigation costs 0.01 0.00 0.03 0.06
Amortization of acquired intangible assets 1.62 1.55 5.82 4.54
Integration and acquisition costs 0.65 0.47 2.94 3.41
Reorganization costs 0.08 0.02 0.16 0.47
Gain on sale of product rights 0.00 (0.01) 0.00 (0.06)
Amortization of one-time upfront borrowing costs for
Baxalta and Dyax - 0.01 0.02 0.36
(Gain)/loss on sale of long term investments (0.07) - (0.09) 0.02
(Gain)/loss from discontinued operations 0.01 0.05 (0.09) 1.45
Fair value adjustment for joint venture net written
option 0.05 - 0.05 -
Non GAAP tax adjustments (8.55) (0.39) (10.44) (3.35)
Non GAAP diluted earnings per ADS $ 3.98 $3.37 $15.15 $13.10
Reconciliation of U.S. GAAP net cash provided by operating activities to
Non GAAP free cash flow:
3 months ended December 12 months ended December
31, 31,
2017 2016 2017 2016
Net cash
provided by
operating
activities $1,519.6 $1,152.9 $4,256.7 $2,658.9
Receipts
relating to
license
arrangements (74.6) - (74.6) -
Capital
expenditures (233.3) (246.8) (798.8) (646.4)
Payments
relating to
license
arrangements 7.5 - 47.5 90.0
Non GAAP free
cash flow $1,219.2 $ 906.1 $3,430.8 $2,102.5
Non GAAP net debt comprises:
December 31, 2017 December 31, 2016
Cash and cash equivalents $ 472.4 $ 528.8
Long term borrowings
(excluding capital leases) (16,410.7) (19,552.6)
Short term borrowings
(excluding capital leases) (2,781.2) (3,061.6)
Capital leases (349.2) (353.6)
Non GAAP net debt $ (19,068.7) $ (22,439.0)
Non GAAP reconciliations
(in millions, except per ADS amounts)
Reconciliation of full year 2018 U.S. GAAP diluted earnings per ADS
Outlook to Non GAAP diluted earnings per ADS Outlook:
Full Year 2018 Outlook
Min Max
U.S. GAAP diluted earnings per ADS $ 7.30 $ 7.90
Expense related to the unwind of inventory fair value
adjustments 0.12
Legal and litigation costs 0.05
Amortization of acquired intangible assets 6.60
Integration and acquisition costs 2.30
Reorganization costs 0.03
Costs relating to license arrangements 0.10
Non GAAP tax adjustments (1.60)
Non GAAP diluted earnings per ADS $14.90 $15.50
NOTES TO EDITORS
Stephen Williams, Deputy Company Secretary, is responsible for arranging
the release of this announcement.
Inside Information
This announcement contains inside information.
About Shire
Shire is the global leader in serving patients with rare diseases. We
strive to develop best-in-class therapies across a core of rare disease
areas including hematology, immunology, genetic diseases, neuroscience,
and internal medicine with growing therapeutic areas in ophthalmics and
oncology. Our diversified capabilities enable us to reach patients in
more than 100 countries who are struggling to live their lives to the
fullest.
We feel a strong sense of urgency to address unmet medical needs and
work tirelessly to improve people's lives with medicines that have a
meaningful impact on patients and all who support them on their journey.
www.shire.com
THE "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995
Statements included herein that are not historical facts, including
without limitation statements concerning future strategy, plans,
objectives, expectations and intentions, projected revenues, the
anticipated timing of clinical trials and approvals for, and the
commercial potential of, inline or pipeline products, are
forward-looking statements. Such forward-looking statements involve a
number of risks and uncertainties and are subject to change at any time.
In the event such risks or uncertainties materialize, Shire's results
could be materially adversely affected. The risks and uncertainties
include, but are not limited to, the following:
-- Shire's products may not be a commercial success;
-- increased pricing pressures and limits on patient access as a result
of governmental regulations and market developments may affect Shire's
future revenues, financial condition and results of operations;
-- Shire depends on third parties to supply certain inputs and services
critical to its operations including certain inputs, services and
ingredients critical to its manufacturing processes. Any disruption to
the supply chain for any of Shire's 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 for some
period of time;
-- the manufacture of Shire's products is subject to extensive
oversight by various regulatory agencies. Regulatory approvals or
interventions associated with changes to manufacturing sites,
ingredients or manufacturing processes could lead to, among other things,
significant delays, an increase in operating costs, lost product sales,
an interruption of research activities or the delay of new product
launches;
-- the nature of producing plasma-based therapies may prevent Shire
from timely responding to market forces and effectively managing its
production capacity;
-- Shire has a portfolio of products in various stages of research and
development. The successful development of these products is highly
uncertain and requires significant expenditures and time, and there is
no guarantee that these products will receive regulatory approval;
-- the actions of certain customers could affect Shire's ability to
sell or market products profitably. Fluctuations in buying or
distribution patterns by such customers can adversely affect Shire's
revenues, financial conditions or results of operations;
-- failure to comply with laws and regulations governing the sales and
marketing of its products could materially impact Shire's revenues and
profitability;
-- Shire's products and product candidates face substantial competition
in the product markets in which it operates, including competition from
generics;
-- Shire's patented products are subject to significant competition
from generics;
-- adverse outcomes in legal matters, tax audits and other disputes,
including Shire's ability to enforce and defend patents and other
intellectual property rights required for its business, could have a
material adverse effect on the Shire's revenues, financial condition or
results of operations;
-- Shire may fail to obtain, maintain, enforce or defend the
intellectual property rights required to conduct its business;
-- Shire faces intense competition for highly qualified personnel from
other companies and organizations;
-- failure to successfully execute or attain strategic objectives from
Shire's acquisitions and growth strategy may adversely affect the
Shire's financial condition and results of operations;
-- Shire's growth strategy depends in part upon its ability to expand
its product portfolio through external collaborations, which, if
unsuccessful, may adversely affect the development and sale of its
products;
-- a slowdown of global economic growth, or economic instability of
countries in which Shire does business, could have negative consequences
for Shire's business and increase the risk of non-payment by Shire's
customers;
-- changes in foreign currency exchange rates and interest rates could
have a material adverse effect on Shire's operating results and
liquidity;
-- Shire is subject to evolving and complex tax laws, which may result
in additional liabilities that may adversely affect the Shire's
financial condition or results of operations;
-- if a marketed product fails to work effectively or causes adverse
side effects, this could result in damage to Shire's reputation, the
withdrawal of the product and legal action against Shire;
-- Shire is dependent on information technology and its systems and
infrastructure face certain risks, including from service disruptions,
the loss of sensitive or confidential information, cyber-attacks and
other security breaches or data leakages that could have a material
adverse effect on Shire's revenues, financial condition or results of
operations;
-- Shire faces risks relating to the expected exit of the United
Kingdom from the European Union;
-- Shire incurred substantial additional indebtedness to finance the
Baxalta acquisition, which has increased its borrowing costs and may
decrease its business flexibility;
-- Shire's ongoing strategic review of its Neuroscience franchise may
distract management and employees and may not lead to improved operating
performance or financial results; there can be no guarantee that, once
completed, Shire's strategic review will result in any additional
strategic changes beyond those that have already been announced; and
a further list and description of risks, uncertainties and other matters
can be found in Shire's most recent Annual Report on Form 10-K and in
Shire's subsequent Quarterly Reports on Form 10-Q, in each case
including those risks outlined in "ITEM 1A: Risk Factors", and in
subsequent reports on Form 8-K and other Securities and Exchange
Commission filings, all of which are available on Shire's website.
All forward-looking statements attributable to us or any person acting
on our behalf are expressly qualified in their entirety by this
cautionary statement. Readers are cautioned not to place undue reliance
on these forward-looking statements that speak only as of the date
hereof. Except to the extent otherwise required by applicable law, we do
not undertake any obligation to update or revise forward-looking
statements, whether as a result of new information, future events or
otherwise.
NON GAAP MEASURES
This press release contains financial measures not prepared in
accordance with U.S. GAAP. These measures are referred to as "Non GAAP"
measures and include: Non GAAP total revenues; Non GAAP operating
income; Non GAAP income tax expense; Non GAAP net income; Non GAAP
diluted earnings per ADS; Non GAAP effective tax rate; Non GAAP CER; Non
GAAP cost of sales; Non GAAP gross margin; Non GAAP R&D; Non GAAP SG&A;
Non GAAP other expense; Non GAAP free cash flow, Non GAAP net debt, Non
GAAP EBITDA and Non GAAP EBITDA margin.
The Non GAAP measures exclude the impact of certain specified items that
are highly variable, difficult to predict and of a size that may
substantially impact Shire's operations. Upfront and milestone payments
related to in-licensing and acquired products that have been expensed as
R&D are also excluded as specified items as they are generally uncertain
and often result in a different payment and expense recognition pattern
than ongoing internal R&D activities. Intangible asset amortization has
been excluded from certain measures to facilitate an evaluation of
current and past operating performance, particularly in terms of cash
returns, and is similar to how management internally assesses
performance. The Non GAAP financial measures are presented in this press
release as Shire's management believes that they will provide investors
with an additional analysis of Shire's results of operations,
particularly in evaluating performance from one period to another.
Shire's management uses Non GAAP financial measures to make operating
decisions as they facilitate additional internal comparisons of Shire's
performance to historical results and to competitors' results, and
provides them to investors as a supplement to Shire's reported results
to provide additional insight into Shire's operating performance.
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 financial measures used by Shire may be calculated
differently from, and therefore may not be comparable to, similarly
titled measures used by other companies - refer to the section "Non GAAP
Financial Measure Descriptions" below for additional information. In
addition, these Non GAAP financial measures should not be considered in
isolation as a substitute for, or as superior to, financial measures
calculated in accordance with U.S. GAAP, and Shire's financial results
calculated in accordance with U.S. GAAP and reconciliations to those
financial statements should be carefully evaluated.
Non GAAP Financial Measure Descriptions
Where applicable, the following items, including their tax effect, have
been excluded when calculating Non GAAP earnings and from our Non GAAP
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
-- Non-controlling 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).
Additionally, in any given period Shire may have significant, unusual or
non-recurring gains or losses, which it may exclude from its Non GAAP
earnings for that period. When applicable, these items would be fully
disclosed and incorporated into the required reconciliations from U.S.
GAAP to Non GAAP measures.
Depreciation, which is included in Cost of sales, R&D and SG&A costs in
our U.S. GAAP results, has been separately disclosed for presentational
purposes.
Free cash flow represents net cash provided by operating activities,
excluding up-front and milestone payments, or receipts, for in-licensed
and acquired products, but including capital expenditure in the ordinary
course of business.
Non GAAP net debt represents cash and cash equivalents less short and
long term borrowings, capital leases and other debt.
A reconciliation of Non GAAP financial measures to the most directly
comparable measure under U.S. GAAP is presented on pages 22 to 25.
Non GAAP CER growth is computed by restating 2017 results using average
2016 foreign exchange rates for the relevant period.
Average exchange rates used by Shire for the three months ended December
31, 2017 were $1.34:GBP1.00 and $1.18:EUR1.00 (2016: $1.26:GBP1.00 and
$1.09:EUR1.00). Average exchange rates used by Shire for the twelve
months ended December 31, 2017 were $1.29:GBP1.00 and $1.13:EUR1.00
(2016: $1.36:GBP1.00 and $1.11:EUR1.00).
A reconciliation of 2020 Non GAAP EBITDA to US GAAP net income cannot be
provided because we are unable to forecast with reasonable certainty
many of the items necessary to calculate such comparable GAAP measures,
including asset impairments, acquisitions and integration related
expenses, divestments, reorganizations and discontinued operations
related expenses, legal settlement costs, as well as other unusual or
non-recurring gains or losses. These items are uncertain, depend on
various factors, and could be material to our results computed in
accordance with GAAP. We believe the inherent uncertainties in
reconciling Non GAAP measures for periods after 2018 to the most
comparable GAAP measures would make the forecasted comparable GAAP
measures nearly impossible to predict with reasonable certainty and
therefore inherently unreliable.
TRADEMARKS
We own or have rights to trademarks, service marks or trade names that
we use in connection with the operation of our business. In addition,
our names, logos and website names and addresses are owned by us or
licensed by us. We also own or have the rights to copyrights that
protect the content of our solutions. Solely for convenience, the
trademarks, service marks, trade names and copyrights referred to in
this press release are listed without the (c), (R) and (TM) symbols, but
we will assert, to the fullest extent under applicable law, our rights
or the rights of the applicable licensors to these trademarks, service
marks, trade names and copyrights. In addition, this press release may
include trademarks, service marks or trade names of other companies. Our
use or display of other parties' trademarks, service marks, trade names
or products is not intended to, and does not imply a relationship with,
or endorsement or sponsorship of us by, the trademark, service mark or
trade name.
This announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the information
contained therein.
Source: Shire plc via Globenewswire
(END) Dow Jones Newswires
February 14, 2018 07:00 ET (12:00 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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