DUBLIN, August 1, 2012 /PRNewswire/ --
On Track to Deliver Double Digit Full Year Earnings Growth
Shire (LSE: SHP, NASDAQ: SHPG) announces results for the three months to June 30, 2012.
Financial Highlights Q2 2012(1)
Product sales $1,148 million +16%
Total revenues $1,208 million +14%
Non GAAP operating income $420 million +23%
US GAAP operating income $302 million +7%
Non GAAP diluted earnings per ADS $1.68 +26%
US GAAP diluted earnings per ADS $1.24 +15%
Non GAAP cash generation $520 million +18%
Non GAAP free cash flow $433 million +84%
US GAAP net cash provided by operating
activities $466 million +64%
(1) Percentages compare to equivalent 2011 period.
The Non GAAP financial measures included within this release are explained on page 25, and are reconciled to the most directly comparable financial measures prepared in accordance with US GAAP on pages 20 - 24.
Angus Russell, Chief Executive Officer, commented:
"Shire delivered strong results in the second quarter, with product sales up 16% and Non GAAP operating income up 23%.
The ADHD market in the US is maintaining healthy growth; our lead products VYVANSE and INTUNIV both increased share and we're advancing our plans for the continued international rollout of both these products. Although of decreasing importance in our ADHD portfolio, we believe that branded ADDERALL XR will remain competitive in the US marketplace despite the approval of a new generic product.
We are delighted with the continued adoption of FIRAZYR by patients in the US, which is driving strong sales growth. We also continue to see new patient demand for all our enzyme replacement therapies ELAPRASE, REPLAGAL and VPRIV.
We benefited from sales of DERMAGRAFT in the quarter, compared to the same period last year, and we have announced our plans to invest in a new campus in the San Diego area, including a second manufacturing facility for our Regenerative Medicine business.
Our diversified and increasingly international business generated higher cash flow during the quarter and we're continuing our disciplined approach to invest in a growing range of exciting late stage opportunities in our pipeline, as well as business development opportunities, to bring further valuable treatments to patients. We're building on our lead positions in our main franchise areas of behavioral health, gastro-intestinal, HGT and regenerative medicine as well as forging alliances and investing in novel technology platforms. We look forward to continued growth across our business.
Based on the market dynamics we are anticipating and the actions we have taken, Shire is on track to deliver double digit full year earnings growth in 2012. Our objective is to deliver sound earnings growth in 2013, and increased growth beyond that, driven by our young and diversified product portfolio and the significant market opportunities we have identified."
FINANCIAL SUMMARY
Second Quarter 2012 Unaudited Results
Q2 2012 Q2 2011
Non Non
US GAAP Adjustments GAAP US GAAP Adjustments GAAP
$M $M $M $M $M $M
Total
revenues 1,208 - 1,208 1,063 - 1,063
Operating
income 302 118 420 283 59 342
Diluted
earnings
per ADS $1.24 $0.44 $1.68 $1.08 $0.25 $1.33
- Product sales were up 16% to $1,148 million (Q2 2011: $993 million). The growth in product sales was driven by VYVANSE® (up 43% to $266 million), VPRIV® (up 31% to $83 million), INTUNIV® (up 16% to $69 million) and FIRAZYR® (up to $32 million from $6 million in Q2 2011). On a constant exchange rate ("CER") basis, which is a Non GAAP measure, product sales were up 18%.
Q2 2012 also included $52 million of DERMAGRAFT® sales (Q2 2011: $2 million). Excluding sales of DERMAGRAFT, which was acquired with Advanced BioHealing Inc. ("ABH") in late Q2 2011, product sales were up 11%.
- Total revenues were up 14%, to $1,208 million (Q2 2011: $1,063 million), as the growth in product sales was partially offset by lower royalties and other revenues.
- On a Non GAAP basis:
Operating income was up 23% to $420 million (Q2 2011: $342 million), as total revenues increased at a higher rate than total operating expenses. Research and development ("R&D") costs increased 20% and selling, general and administrative ("SG&A") costs increased by 5% compared to Q2 2011. The increase in R&D in Q2 2012 reflects our increased investment in VYVANSE for the treatment of Major Depressive Disorder ("MDD"), costs on the new programs acquired with FerroKin Biosciences, Inc. ("FerroKin") and from Pervasis Therapeutics, Inc. ("Pervasis") and the inclusion of a full quarter's R&D costs for ABH. The impact of foreign exchange was slightly negative for operating income, as the adverse impact of weaker European currencies on reported product sales was only partially offset by a corresponding benefit for reported costs.
On a US GAAP basis:
Operating income was up 7% to $302 million (Q2 2011: $283 million), as Q2 2012 included impairment charges in respect of certain in-process research and development ("IPR&D") assets and costs related to the settlement of litigation, which were not incurred in Q2 2011.
- Non GAAP diluted earnings per American Depository Share ("ADS") were up 26% to $1.68 (Q2 2011: $1.33), due to the higher Non GAAP operating income and a lower Non GAAP effective tax rate of 20% (Q2 2011: 23%).
US GAAP diluted earnings per ADS were up 15% to $1.24 (Q2 2011: $1.08) due to higher US GAAP operating income and a lower US GAAP effective tax rate of 18% (Q2 2011: 25%).
- Cash generation, a Non GAAP measure, was up 18% to $520 million (Q2 2011: $440 million) as higher cash receipts from product sales, including significant cash receipts from government-supported healthcare providers in Spain in Q2 2012, more than offset increased payments for operating expenses and sales deductions.
Free cash flow, also a Non GAAP measure, was up 84% to $433 million (Q2 2011: $235 million), due to higher cash generation and lower cash tax payments in Q2 2012 compared to Q2 2011.
On a US GAAP basis, net cash provided by operating activities was up 64% to $466 million (Q2 2011: $284 million).
- Reflecting our strong cash generation, net cash at June 30, 2012 was $18 million (December 31, 2011: net debt of $468 million).
OUTLOOK
We have made a strong start to the year and Shire is on track to deliver double digit full year earnings growth in 2012, while continuing to invest in our business to support sustained future growth from the significant market opportunities that we have identified.
For the full year we now expect product sales growth to be in the low teens. This reflects the fact that foreign exchange movements are impacting the reported growth of some of our products, but also our expectation that ADDERALL XR® will remain competitive in the US market following the approval of a generic competitor.
Full year royalties and other revenues are now expected to be 25% to 35% lower year on year, a change from previous guidance as a result of lower royalties from Impax Laboratories Inc.
Taken together, we expect that total revenues will still show double digit growth in 2012.
We still anticipate marginal dilution of Non GAAP gross margins in the full year.
We will continue to invest in the longer term growth prospects of the business but we are reducing the 2012 rate of year on year growth of combined Non GAAP R&D and SG&A expenditure to between 10% and 12%.
Influenced by changing profit mix, we now expect our full year Non GAAP effective tax rate to be in the range of 18% to 20% in 2012. We believe this now represents a good planning range for our core effective tax rate until at least the end of 2014.
Overall, we are on track to deliver double digit full year earnings growth in 2012.
In 2013, the total revenues from ADDERALL XR will reduce following the recent launch of a generic competitor. We are monitoring the impact of this and other dynamics, prioritizing our investments and carefully managing our cost base. Our objective is to deliver sound earnings growth in 2013, and increased growth beyond that, driven by our young and diversified product portfolio and the significant market opportunities we have identified.
SECOND QUARTER 2012 AND RECENT PRODUCT AND PIPELINE DEVELOPMENTS
Products
ADDERALL XR - for the treatment of Attention Deficit Hyperactivity Disorder ("ADHD")
- On June 22, 2012 the US Food and Drug Administration ("FDA") responded to Shire's ADDERALL XR citizen petition. The FDA's response requires that all abbreviated new drug applications ("ANDAs") must establish bioequivalence using partial area under the curve measurements at five hours and beyond five hours, for both d- and l- amphetamine.
The FDA also approved the ANDA for generic ADDERALL XR filed by Actavis Elizabeth LLC ("Actavis"). Shire is not aware of the FDA having approved any other ADDERALL XR ANDAs.
The approval of Actavis' ANDA has resulted in a significant reduction to the royalty rate payable on sales of authorized generic ADDERALL XR by Impax Laboratories Inc. ("Impax"). This reduction will be partially offset by a small royalty payable by Actavis, and Shire now expects lower ADDERALL XR royalty income in future periods. There are other variables which could also affect the future revenue stream from ADDERALL XR, including, but not limited to, the amount of finished product each party can manufacture (as determined by the US Drug Enforcement Agency), any increase or decrease in market share and / or product discounts on branded and non-branded versions of ADDERALL XR. Whilst there is one generic entrant Shire believes that it will remain competitive in the ADDERALL XR marketplace through the distribution of branded ADDERALL XR and through its two authorized generic partners, Teva Pharmaceuticals Industries Ltd and Impax.
VPRIV - for the treatment of Type 1 Gaucher disease
- Shire has received a complete response letter from the FDA regarding production of VPRIV drug substance at Lexington. Shire continues to work closely with the FDA to address their questions and resolve any outstanding issues to their satisfaction.
Notwithstanding the ongoing discussions with the FDA, Shire continues to supply VPRIV to US patients through its existing approved US manufacturing facilities and has the capacity to meet the anticipated demand for VPRIV from existing and new patients both in the US and globally.
Pipeline
Lisdexamfetamine dimesylate ("LDX") for the treatment of ADHD (currently marketed as VYVANSE in the US for the treatment of ADHD)
- On May 23, 2012 Shire presented results of a Phase 3 study which demonstrated the long-term maintenance of efficacy of LDX in children and adolescents aged 6 to 17 years with ADHD. Results showed maintenance of efficacy in children and adolescents who continued to receive LDX, as demonstrated by a significantly lower proportion of ADHD treatment failures (13.5%) in this group, compared with placebo (65.8%). The majority of placebo-treated subjects who met protocol-defined ADHD symptom relapse criteria did so within two weeks following randomisation. Long-term maintenance therapy plays an important role in the treatment of ADHD. There are however, few long-term controlled studies in children and adolescents assessing the maintenance of efficacy and long-term safety of stimulant medication versus placebo. The study is a central element to the EU submission package for LDX. A European Marketing Authorisation Application for LDX was accepted for review in January 2012.
OTHER DEVELOPMENTS
Regenerative Medicine campus
- On June 11, 2012 Shire announced that its Regenerative Medicine business had entered into a lease agreement with BioMed Realty Trust, Inc. for a new campus site in Sorrento Mesa, CA, which will provide increased capacity for DERMAGRAFT and additional space and infrastructure to manufacture new regenerative medicine products. Shire expects to begin construction of the new campus in 2013, with initial occupancy targeted for 2014. Shire plans to maintain its current DERMAGRAFT manufacturing facility in La Jolla, CA.
Legal Proceedings
- On June 29, 2012 Shire and GlaxoSmithKline ("GSK") settled the litigation relating to Shire's termination of the co-promotion agreement for VYVANSE. The terms of the settlement are confidential.
DIVIDEND
In respect of the six months ended June 30, 2012 the Board resolved to pay an interim dividend of 2.73 US cents per Ordinary Share (2011: 2.48 US cents per Ordinary share).
Dividend payments will be made in Pounds Sterling to ordinary shareholders and in US Dollars to holders of ADSs. A dividend of 1.74 pence per ordinary share (an increase of 14% compared to 2011: 1.52 pence) and 8.19 US cents per ADSs (an increase of 10% compared to 2011: 7.44 US cents) will be paid on October 4, 2012 to shareholders on the register as at the close of business on September 7, 2012.
ADDITIONAL INFORMATION
The following additional information is included in this press release:
Page
Overview of Second Quarter 2012 Financial
Results 7
Financial Information 11
Non GAAP Reconciliations 20
Notes to Editors 25
Safe Harbor Statement 25
Explanation of Non GAAP Measures 25
Trademarks 26
Dial in details for the live conference call for investors 14:00 BST/9:00 EDT on August 1, 2012:
UK dial in: 0808 237 0030
US dial in: 1 866 928 7517 or 1 718 873 9077
International dial in: +44 203 139 4830
Password/Conf ID: 16001010#
Live Webcast: http://www.shire.com/shireplc/en/investors
OVERVIEW OF SECOND QUARTER 2012 FINANCIAL RESULTS
1. Product sales
For the three months to June 30, 2012 product sales increased by 16% to $1,148 million (Q2 2011: $993 million) and represented 95% of total revenues (Q2 2011: 93%).
US Exit
Market
Product Highlights Year on year growth Share(1)
Product Sales $M Sales CER US Rx(1)
VYVANSE 266.2 +43% +43% +19% 16%
ADDERALL XR 133.9 -9% -9% -13% 6%
REPLAGAL(R) 123.2 +3% +11% n/a(3) n/a(3)
ELAPRASE(R) 122.2 -4% +2% n/a(2) n/a(2)
LIALDA/MEZAVANT(R) 94.1 -5% -4% +6% 22%
VPRIV 82.7 +31% +35% n/a(2) n/a(2)
INTUNIV 69.1 +16% +16% +39% 5%
PENTASA(R) 63.9 -3% -3% -5% 14%
DERMAGRAFT 52.4 n/a n/a n/a(2) n/a(2)
FOSRENOL(R) 43.2 -5% -1% -19% 5%
FIRAZYR 31.7 +466% +482% n/a(2) n/a(2)
OTHER 65.1 -10% -4% n/a n/a
Total product sales 1,147.7 +16% +18%
(1) Data provided by IMS Health National Prescription Audit ("IMS NPA"). Exit market share
represents the average monthly US market share in the month ended June 30, 2012.
(2) IMS NPA Data not available.
(3) Not sold in the US in Q2 2012.
VYVANSE - ADHD
VYVANSE product sales grew strongly in Q2 2012, up 43% compared to Q2 2011, as a result of higher prescription demand (up 19% compared to Q2 2011) due to an increase in VYVANSE's market share and growth in the US ADHD market, the effect of a price increase taken since Q2 2011 and lower sales deductions as a percentage of gross product sales in Q2 2012.
ADDERALL XR - ADHD
ADDERALL XR product sales decreased by 9% due to the effect of lower prescription demand and destocking in Q2 2012 compared to stocking in Q2 2011. These negative factors were partially offset by lower sales deductions as a percentage of gross product sales in Q2 2012 compared to Q2 2011.
REPLAGAL - Fabry disease
REPLAGAL product sales growth was driven by the treatment of new patients, being both naïve patients and switches from FABRAZYME®. Reported REPLAGAL sales were impacted by unfavorable foreign exchange, due to the stronger US dollar in Q2 2012 compared to Q2 2011.
The reduction in REPLAGAL product sales between Q1 2012 and Q2 2012 was driven by the timing of certain large orders from markets which order less frequently.
ELAPRASE - Hunter syndrome
Reported ELAPRASE sales in Q2 2012 were impacted by unfavorable foreign exchange and also the timing of shipments, in Q2 2011 and Q1 2012, to markets which order less frequently. On a CER basis ELAPRASE product sales increased and patients on therapy continue to grow across all regions in which ELAPRASE is sold.
LIALDA/MEZAVANT - Ulcerative colitis
Product sales for LIALDA/MEZAVANT decreased in Q2 2012 as the effects of higher US prescription demand and a price increase taken since Q2 2011 were more than offset by destocking in Q2 2012 compared to stocking in the US market in Q2 2011, and the effect of lower priced imports into certain European markets.
VPRIV - Gaucher disease
VPRIV product sales growth was driven by the treatment of new patients, being both naïve patients and switches from CEREZYME®. Reported VPRIV sales were also impacted by unfavorable foreign exchange.
INTUNIV - ADHD
INTUNIV product sales were up 16% compared to Q2 2011, primarily driven by significant growth in US prescription demand, due to an increase in INTUNIV's market share and growth in the US ADHD market, and the effect of a price increase taken since Q2 2011. These positive factors were partially offset by higher sales deductions in Q2 2012 and the effect of destocking in Q2 2012 compared to stocking in Q2 2011.
PENTASA - Ulcerative colitis
Product sales of PENTASA decreased as the benefit of price increases taken since Q2 2011 was more than offset by lower US prescription demand in Q2 2012 and the effect of destocking in Q2 2012 compared to stocking in Q2 2011.
DERMAGRAFT - Diabetic Foot Ulcers ("DFU")
DERMAGRAFT product sales were up 14% compared to Q2 2011(1) due to the effect of price increases taken since Q2 2011 and growth in the number of patients treated. Product sales in Q2 2012 were up 7% compared to Q1 2012, a lower rate of growth than compared to Q2 2011, due to the effect of an on-going restructuring of the sales and marketing organization. The restructuring is expected to position DERMAGRAFT for future sales growth.
(1)Shire acquired DERMAGRAFT through its acquisition of ABH on June 28, 2011 and reported revenues from DERMAGRAFT of $2 million relating to the post acquisition period in Q2 2011.
FOSRENOL - Hyperphosphatemia
Product sales for FOSRENOL decreased by 5% as the benefits of a price increase taken since Q2 2011 and lower sales deductions in Q2 2012 were more than offset by lower US prescription demand. Product sales of FOSRENOL outside the US were lower than Q2 2011 primarily due to the effect of unfavorable foreign exchange.
FIRAZYR - Hereditary Angioedema
FIRAZYR sales growth was driven by the US market, following the launch in Q4 2011, where we continue to see both good growth in new patients starting treatment and promising levels of repeat usage by existing patients. The more established markets in Europe also continue to grow following the approval of self administration in Q1 2011.
2. Royalties
Year on year growth
Royalties to
Product Shire $M Royalties CER
ADDERALL XR 1.00 25.7 -5% -5%
FOSRENOL 1.00 13.0 5% 5%
3TC(R) and ZEFFIX(R) 1.00 10.6 -6% -7%
Other 1.00 7.0 -45% -42%
Total 1.00 56.3 -11% -11%
3. Financial details
Cost of product sales
% of % of
product product
Q2 2012 sales Q2 2011 sales
$M $M
Cost of product sales (US GAAP) 152.5 13% 143.7 14%
Transfer of manufacturing
from Owings Mills - (2.8)
Depreciation (7.0) (8.3)
Cost of product sales (Non GAAP) 145.5 13% 132.6 13%
Non GAAP cost of product sales as a percentage of product sales remained constant as the effect of slightly higher gross margins from our Behavioral Health ("BH") products were marginally diluted by the addition of lower margin DERMAGRAFT following the acquisition of ABH in Q2 2011.
R&D
% of % of
product product
Q2 2012 sales Q2 2011 sales
$M $M
R&D (US GAAP) 238.6 21% 176.9 18%
Impairment of intangible assets (27.0) -
Depreciation (6.4) (6.1)
R&D (Non GAAP) 205.2 18% 170.8 17%
Non GAAP R&D grew by $34.4 million, or 20%, due to increased investment in a number of targeted R&D programs including the VYVANSE MDD program, new programs acquired with FerroKin and from Pervasis, and the inclusion of a full quarter's R&D costs for ABH. On a CER basis Non GAAP R&D increased by approximately 25% as Q2 2012 benefited from favorable foreign exchange compared to Q2 2011.
US GAAP R&D increased by $61.7 million, or 35%, as Q2 2012 included impairment charges relating to certain IPR&D intangible assets.
SG&A
% of % of
product product
Q2 2012 sales Q2 2011 sales
$M $M
SG&A (US GAAP) 511.0 45% 440.3 44%
Intangible asset amortization (51.0) (36.7)
Legal and litigation costs (35.9) -
Depreciation (14.5) (15.1)
SG&A (Non GAAP) 409.6 36% 388.5 39%
Non GAAP SG&A increased by $21.1 million, or 5%, principally due to the inclusion of a full quarter's SG&A costs for ABH in Q2 2012. On a CER basis Non GAAP SG&A costs grew by approximately 8%.
During Q2 2012 Shire amended its Non GAAP policy to exclude costs related to the settlement of litigation, government investigations and other disputes, together with related external legal costs. Comparative Non GAAP SG&A in Q2 2011 has not been restated as the amounts incurred in that period were not significant.
US GAAP SG&A increased by $70.7 million, or 16%, as Q2 2012 included the settlement of litigation and external legal costs, together with higher intangible asset amortization.
Interest expense
For the three months to June 30, 2012 Shire incurred interest expense of $9.6 million (Q2 2011: $9.9 million). Interest expense in Q2 2012 principally relates to the coupon on Shire's $1,100 million 2.75% convertible bonds due 2014.
Taxation
The effective rate of tax on Non GAAP income for the three months to June 30, 2012 was 20% (Q2 2011: 23%), and on a US GAAP basis the effective rate of tax was 18% (Q2 2011: 25%). The effective rate of tax in Q2 2012 on both a Non GAAP and US GAAP basis is lower than the same period in 2011 due primarily to favorable changes in profit mix.
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 June 30, 2012
Consolidated Balance Sheets
June 30, December 31,
2012 2011
$M $M
ASSETS
Current assets:
Cash and cash equivalents 1,112.7 620.0
Restricted cash 14.4 20.6
Accounts receivable, net 815.4 845.0
Inventories 411.8 340.1
Deferred tax asset 214.1 207.6
Prepaid expenses and other current assets 135.1 174.9
Total current assets 2,703.5 2,208.2
Non-current assets:
Investments 34.6 29.9
Property, plant and equipment ("PP&E"), net 925.7 932.1
Goodwill 636.0 592.6
Other intangible assets, net 2,625.6 2,493.0
Deferred tax asset 44.7 50.7
Other non-current assets 70.9 73.7
Total assets 7,041.0 6,380.2
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued expenses 1,415.3 1,370.5
Convertible bonds - 1,100.0
Other current liabilities 105.5 63.8
Total current liabilities 1,520.8 2,534.3
Non-current liabilities:
Convertible bonds 1,100.0 -
Deferred tax liability 538.3 516.6
Other non-current liabilities 264.8 144.3
Total liabilities 3,423.9 3,195.2
Equity:
Common stock of 5p par value; 1,000 million
shares authorized; and 562.5 million shares
issued and outstanding (2011: 1,000 million
shares authorized; and 562.5 million shares
issued and outstanding) 55.7 55.7
Additional paid-in capital 2,932.9 2,853.3
Treasury stock: 6.8 million shares (2011:
11.8 million) (188.8) (287.2)
Accumulated other comprehensive income 48.6 60.3
Retained earnings 768.7 502.9
Total equity 3,617.1 3,185.0
Total liabilities and equity 7,041.0 6,380.2
Unaudited US GAAP results for the three months and six months to June 30, 2012
Consolidated Statements of Income
3 months to 3 months to 6 months to 6 months to
June 30, June 30, June 30, June 30,
2012 2011 2012 2011
$M $M $M $M
Revenues:
Product sales 1,147.7 993.3 2,254.6 1,882.6
Royalties 56.3 63.4 112.6 137.0
Other revenues 3.8 6.2 12.4 15.5
Total revenues 1,207.8 1,062.9 2,379.6 2,035.1
Costs and expenses:
Cost of product
sales(1) 152.5 143.7 310.9 268.2
R&D(1) 238.6 176.9 458.9 354.8
SG&A(1) 511.0 440.3 1,011.0 843.2
(Gain)/loss on sale of
product rights (3.6) 2.2 (10.8) 3.5
Reorganization costs - 7.5 - 13.0
Integration and
acquisition costs 7.1 9.0 12.4 2.6
Total operating
expenses 905.6 779.6 1,782.4 1,485.3
Operating income 302.2 283.3 597.2 549.8
Interest income 0.6 0.6 1.4 1.2
Interest expense (9.6) (9.9) (19.8) (19.1)
Other (expense)/income, net (1.8) - 0.1 0.3
Total other expense, net (10.8) (9.3) (18.3) (17.6)
Income before income
taxes and equity in
(losses)/earnings of
equity method investees 291.4 274.0 578.9 532.2
Income taxes (53.0) (69.7) (103.0) (117.8)
Equity in (losses)/earnings
of equity method
investees, net of taxes (0.6) 1.2 0.3 2.4
Net income 237.8 205.5 476.2 416.8
- Cost of product sales includes amortization of intangible assets relating to favorable manufacturing contracts of $0.5 million for the three months to June 30, 2012 (2011: $0.4 million) and $0.7 million for the six months to June 30, 2012 (2011: $0.9 million). R&D includes intangible asset impairment charges of $27.0 million for the three and six months to June 30, 2012 (2011: $nil). SG&A costs include amortization of intangible assets relating to intellectual property rights acquired of $51.0 million for the three months to June 30, 2012 (2011: $36.7 million) and $96.6 million for the six months to June 30, 2012 (2011: $72.7 million).
Unaudited US GAAP results for the three months and six months to June 30, 2012
Consolidated Statements of Income (continued)
3 months to 3 months to 6 months to 6 months to
June 30, June 30, June 30, June 30,
2012 2011 2012 2011
Earnings per ordinary
share - basic 42.7c 37.2c 85.8c 75.7c
Earnings per ADS - basic 128.1c 111.6c 257.4c 227.1c
Earnings per ordinary
share - diluted 41.3c 35.9c 82.8c 72.9c
Earnings per ADS - diluted 123.9c 107.7c 248.4c 218.7c
Weighted average
number of shares:
Millions Millions Millions Millions
Basic 557.0 552.3 555.2 551.1
Diluted 594.9 595.1 594.8 594.8
Unaudited US GAAP results for the three months and six months to June 30, 2012
Consolidated Statements of Cash Flows
3 months to June 30, 6 months to June 30,
2012 2011 2012 2011
$M $M $M $M
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income 237.8 205.5 476.2 416.8
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 79.4 68.8 152.4 132.3
Share based compensation 21.5 19.2 43.4 34.9
Impairment of intangible assets 27.0 - 27.0 -
Other (0.9) 3.3 (6.5) (2.2)
Movement in deferred taxes (3.3) (24.5) (24.1) 17.7
Equity in losses/(earnings) of
equity method investees 0.6 (1.2) (0.3) (2.4)
Changes in operating assets and
liabilities:
Decrease/(increase) in
accounts receivable 87.6 18.6 22.4 (56.2)
(Decrease)/increase in
sales deduction accrual (26.9) 34.9 27.6 66.1
Increase in inventory (42.0) (17.9) (67.0) (30.6)
Decrease/(increase) in
prepayments and other assets 15.0 (18.8) 32.1 (13.8)
Increase/(decrease) in accounts
payable and other liabilities 65.1 (4.3) 34.7 (77.1)
Returns on investment from joint
venture 4.9 - 4.9 -
Net cash provided by operating
activities(A) 465.8 283.6 722.8 485.5
CASH FLOWS FROM INVESTING ACTIVITIES:
Movements in restricted cash 0.5 8.9 6.2 4.8
Purchases of subsidiary undertakings
and businesses, net of cash acquired (97.0) (719.7) (97.0) (719.7)
Purchases of non-current investments (0.6) (2.0) (4.7) (4.5)
Purchases of PP&E (32.7) (48.5) (64.4) (95.0)
Purchases of intangible assets (21.5) - (43.5) -
Proceeds from disposal of non-current
investments and PP&E 0.8 - 4.6 -
Proceeds from capital
expenditure grants - - 8.4 -
Proceeds received on sale
of product rights 4.8 6.8 10.4 6.9
Returns of equity investments and
proceeds from short term investments - 0.5 0.1 1.6
Net cash used in investing
activities(B) (145.7) (754.0) (179.9) (805.9)
Unaudited US GAAP results for the three months and six months to June 30, 2012
Consolidated Statements of Cash Flows (continued)
3 months to June 30, 6 months to June 30,
2012 2011 2012 2011
$M $M $M $M
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from drawing of
revolving credit facility - 30.0 - 30.0
Repayment of debt acquired
through business combinations (3.0) (13.1) (3.0) (13.1)
Excess tax benefit associated
with exercise of stock options 0.4 9.8 35.2 18.8
Payment of dividend (70.7) (60.5) (70.7) (60.5)
Payments to acquire shares by
Employee Benefit Trust ("EBT") (10.7) (63.9) (10.7) (63.9)
Other - 0.4 0.6 0.4
Net cash used in financing
activities(C) (84.0) (97.3) (48.6) (88.3)
Effect of foreign exchange rate
changes on cash and cash
equivalents(D) (2.8) 0.3 (1.6) 2.7
Net increase/(decrease) in cash and
cash equivalents(A)+(B)+(C)+(D) 233.3 (567.4) 492.7 (406.0)
Cash and cash equivalents at
beginning of period 879.4 712.0 620.0 550.6
Cash and cash equivalents at
end of period 1,112.7 144.6 1,112.7 144.6
Unaudited US GAAP results for the three months and six months to June 30, 2012
Selected Notes to the Financial Statements
(1) Earnings Per Share ("EPS")
3 months to 3 months to 6 months to 6 months to
June 30, June 30, June 30, June 30,
2012 2011 2012 2011
$M $M $M $M
Numerator for basic EPS 237.8 205.5 476.2 416.8
Interest on convertible bonds,
net of tax 7.8 8.4 16.2 16.8
Numerator for diluted EPS 245.6 213.9 492.4 433.6
Weighted average number
of shares:
Millions Millions Millions Millions
Basic(1) 557.0 552.3 555.2 551.1
Effect of dilutive shares:
Share based awards to employees(2) 4.4 9.3 6.1 10.3
Convertible bonds 2.75% due 2014(3) 33.5 33.5 33.5 33.4
Diluted 594.9 595.1 594.8 594.8
- Excludes shares purchased by the EBT and presented by Shire as treasury stock.
- Calculated using the treasury stock method.
- Calculated using the "if converted" method.
The share equivalents not included in the calculation of the diluted weighted average number of shares are shown below:
3 months to 3 months to 6 months to 6 months to
June 30, June 30, June 30, June 30,
2012 2011 2012 2011
Millions Millions Millions Millions
Share based awards to employees(1) 6.3 2.9 4.5 3.8
- Certain stock options have been excluded from the calculation of diluted EPS because (a) their exercise prices exceeded Shire's average share price during the calculation period or (b) the required performance conditions were not satisfied as at the balance sheet date.
Unaudited US GAAP results for the three months to June 30, 2012
Selected Notes to the Financial Statements
(2) Analysis of revenues
3 months to June 30, 2012 2011 2012 2012
% % of total
$M $M change revenue
Net product sales:
Specialty Pharmaceuticals ("SP")
BH
VYVANSE 266.2 185.9 43% 22%
ADDERALL XR 133.9 146.9 -9% 11%
INTUNIV 69.1 59.6 16% 6%
EQUASYM(R) 8.6 5.9 46% 1%
477.8 398.3 20% 40%
Gastro Intestinal ("GI")
LIALDA/MEZAVANT 94.1 99.2 -5% 8%
PENTASA 63.9 65.8 -3% 5%
RESOLOR 3.1 1.6 94% <1%
161.1 166.6 -3% 13%
General products
FOSRENOL 43.2 45.3 -5% 4%
XAGRID(R) 25.5 23.2 10% 2%
68.7 68.5 <1% 6%
Other product sales 27.9 41.3 -32% 2%
Total SP product sales 735.5 674.7 9% 61%
Human Genetic Therapies ("HGT")
REPLAGAL 123.2 119.9 3% 10%
ELAPRASE 122.2 127.8 -4% 10%
VPRIV 82.7 63.3 31% 7%
FIRAZYR 31.7 5.6 466% 3%
Total HGT product sales 359.8 316.6 14% 30%
Regenerative Medicine ("RM")
DERMAGRAFT 52.4 2.0 n/a 4%
Total RM product sales 52.4 2.0 n/a 4%
Total product sales 1,147.7 993.3 16% 95%
Royalties:
ADDERALL XR 25.7 26.9 -5% 2%
FOSRENOL 13.0 12.4 5% 1%
3TC and ZEFFIX 10.6 11.3 -6% 1%
Other 7.0 12.8 -45% <1%
Total royalties 56.3 63.4 -11% 5%
Other revenues 3.8 6.2 -39% <1%
Total revenues 1,207.8 1,062.9 14% 100%
Unaudited US GAAP results for the six months to June 30, 2012
Selected Notes to the Financial Statements
(2) Analysis of revenues
6 months to June 30, 2012 2011 2012 2012
% % of total
$M $M change revenue
Net product sales:
SP
BH
VYVANSE 526.2 388.2 36% 22%
ADDERALL XR 245.3 258.1 -5% 10%
INTUNIV 137.6 101.5 36% 6%
EQUASYM 15.8 10.5 50% <1%
924.9 758.3 22% 39%
GI
LIALDA/MEZAVANT 184.1 186.3 -1% 8%
PENTASA 129.7 130.3 <1% 5%
RESOLOR 5.5 2.5 120% <1%
319.3 319.1 <1% 13%
General products
FOSRENOL 88.7 86.5 3% 4%
XAGRID 48.7 45.9 6% 2%
137.4 132.4 4% 6%
Other product sales 60.6 81.0 -25% 3%
Total SP product sales 1,442.2 1,290.8 12% 61%
HGT
REPLAGAL 257.6 225.3 14% 11%
ELAPRASE 247.8 231.3 7% 10%
VPRIV 154.4 122.3 26% 7%
FIRAZYR 51.4 10.9 372% 2%
Total HGT product sales 711.2 589.8 21% 30%
RM
DERMAGRAFT 101.2 2.0 n/a 4%
Total RM product sales 101.2 2.0 n/a 4%
Total product sales 2,254.6 1,882.6 20% 95%
Royalties:
ADDERALL XR 51.0 43.7 17% 2%
3TC and ZEFFIX 24.2 46.8 -48% 1%
FOSRENOL 23.0 20.5 12% 1%
Other 14.4 26.0 -45% <1%
Total royalties 112.6 137.0 -18% 5%
Other revenues 12.4 15.5 -20% <1%
Total revenues 2,379.6 2,035.1 17% 100%
Unaudited results for the three months to June 30, 2012
Non GAAP reconciliation
3 months to June 30,
2012 US GAAP Adjustments Non GAAP
(a) (b) (c) (d) (e)
$M $M $M $M $M $M $M
Total revenues 1,207.8 - - - - - 1,207.8
Costs and expenses:
Cost of product sales 152.5 - - - - (7.0) 145.5
R&D 238.6 (27.0) - - - (6.4) 205.2
SG&A 511.0 (51.0) - - (35.9) (14.5) 409.6
Gain on sale of
product rights (3.6) - - 3.6 - - -
Integration and
acquisition costs 7.1 - (7.1) - - - -
Depreciation - - - - - 27.9 27.9
Total operating
expenses 905.6 (78.0) (7.1) 3.6 (35.9) - 788.2
Operating income 302.2 78.0 7.1 (3.6) 35.9 - 419.6
Interest income 0.6 - - - - - 0.6
Interest expense (9.6) - - - - - (9.6)
Other expense, net (1.8) - - - - - (1.8)
Total other expense,
net (10.8) - - - - - (10.8)
Income before income
taxes and equity in
losses of equity
method investees 291.4 78.0 7.1 (3.6) 35.9 - 408.8
Income taxes (53.0) (14.5) (2.4) - (13.0) - (82.9)
Equity in losses of
equity method
investees, net of tax (0.6) - - - - - (0.6)
Net income 237.8 63.5 4.7 (3.6) 22.9 - 325.3
Impact of convertible
debt, net of tax 7.8 - - - - - 7.8
Numerator for diluted
EPS 245.6 63.5 4.7 (3.6) 22.9 - 333.1
Weighted average
number of shares
(millions) - diluted 594.9 - - - - - 594.9
Diluted earnings per
ADS 123.9c 32.1c 2.4c (1.8c) 11.4c - 168.0c
The following items are included in Adjustments:
(a) Amortization and asset impairments: Impairment of certain IPR&D intangible assets
($27.0 million), amortization of intangible assets relating to intellectual property
rights acquired ($51.0 million), and tax effect of adjustments;
(b) Acquisition and integration activities: Costs associated with the acquisition of
FerroKin and the integration of ABH ($5.0 million), charges related to the change in
fair value of deferred contingent consideration ($2.1 million), and tax effect of
adjustments;
(c) Divestments, reorganizations and discontinued operations: Re-measurement of DAYTRANA
contingent consideration to fair value ($3.6 million);
(d) Legal and litigation costs: Costs related to the settlement of litigation and
external legal costs ($35.9 million), and tax effect of adjustments; and
(e) Depreciation reclassification: Depreciation of $27.9 million included in Cost of
product sales, R&D costs and SG&A costs for US GAAP separately disclosed for the
presentation of Non GAAP earnings.
Unaudited results for the three months to June 30, 2011
Non GAAP reconciliation
3 months to June 30, 2011 US GAAP Adjustments Non GAAP
(a) (b) (c) (d)
$M $M $M $M $M $M
Total revenues 1,062.9 - - - - 1,062.9
Costs and expenses:
Cost of product sales 143.7 - - (2.8) (8.3) 132.6
R&D 176.9 - - - (6.1) 170.8
SG&A 440.3 (36.7) - - (15.1) 388.5
Loss on sale of product
rights 2.2 - - (2.2) - -
Reorganization costs 7.5 - - (7.5) - -
Integration and acquisition
costs 9.0 - (9.0) - - -
Depreciation - - - - 29.5 29.5
Total operating expenses 779.6 (36.7) (9.0) (12.5) - 721.4
Operating income 283.3 36.7 9.0 12.5 - 341.5
Interest income 0.6 - - - - 0.6
Interest expense (9.9) - - - - (9.9)
Total other expense, net (9.3) - - - - (9.3)
Income before income taxes
and equity in earnings of
equity method investees 274.0 36.7 9.0 12.5 - 332.2
Income taxes (69.7) (3.9) (1.1) (2.4) - (77.1)
Equity in earnings of equity
method investees, net of tax 1.2 - - - - 1.2
Net income 205.5 32.8 7.9 10.1 - 256.3
Impact of convertible debt,
net of tax 8.4 - - - - 8.4
Numerator for diluted EPS 213.9 32.8 7.9 10.1 - 264.7
Weighted average number of
shares (millions) - diluted 595.1 - - - - 595.1
Diluted earnings per ADS 107.7c 16.5c 4.1c 5.1c - 133.4c
The following items are included in Adjustments:
(a) Amortization and asset impairments: Amortization of intangible assets relating to
intellectual property rights acquired ($36.7 million), and tax effect of adjustment;
(b) Acquisition and Integration activities: Costs associated with the acquisition of ABH
($6.9 million) and integration of Movetis ($2.1 million), and tax effect of
adjustments;
(c) Divestments, reorganizations and discontinued operations: Accelerated depreciation
($2.2 million) and dual running costs ($0.6 million) on the transfer of manufacturing
from Owings Mills to a third party, re-measurement of DAYTRANA contingent
consideration to fair value ($2.2 million), reorganization costs ($7.5 million) on the
transfer of manufacturing from Owings Mills to a third party and establishment of an
international commercial hub in Switzerland, and tax effect of adjustments; and
(d) Depreciation reclassification: Depreciation of $29.5 million included in Cost of
product sales, R&D costs and SG&A costs for US GAAP separately disclosed for the
presentation of Non GAAP earnings.
Unaudited results for the six months to June 30, 2012
Non GAAP reconciliation
6 months to June 30, US Non
2012 GAAP Adjustments GAAP
(a) (b) (c) (d) (e)
$M $M $M $M $M $M $M
Total revenues 2,379.6 - - - - - 2,379.6
Costs and expenses:
Cost of product
sales 310.9 - - - - (14.2) 296.7
R&D 458.9 (27.0) (23.0) - - (12.8) 396.1
SG&A 1,011.0 (96.6) - - (35.9) (28.1) 850.4
Gain on sale of
product rights (10.8) - - 10.8 - - -
Integration and
acquisition costs 12.4 - (12.4) - - - -
Depreciation - - - - - 55.1 55.1
Total operating
expenses 1,782.4 (123.6) (35.4) 10.8 (35.9) - 1,598.3
Operating income 597.2 123.6 35.4 (10.8) 35.9 - 781.3
Interest income 1.4 - - - - - 1.4
Interest expense (19.8) - - - - - (19.8)
Other income, net 0.1 - - - - - 0.1
Total other expense,
net (18.3) - - - - - (18.3)
Income before income
taxes and equity in
earnings of equity
method investees 578.9 123.6 35.4 (10.8) 35.9 - 763.0
Income taxes (103.0) (27.7) (9.0) - (13.0) - (152.7)
Equity in earnings
of equity method
investees, net of
tax 0.3 - - - - - 0.3
Net income 476.2 95.9 26.4 (10.8) 22.9 - 610.6
Impact of
convertible debt,
net of tax 16.2 - - - - - 16.2
Numerator for
diluted EPS 492.4 95.9 26.4 (10.8) 22.9 - 626.8
Weighted average
number of shares
(millions) - diluted 594.8 - - - - - 594.8
Diluted earnings per
ADS 248.4c 48.3c 13.2c (5.4c) 11.7c - 316.2c
The following items are included in Adjustments:
(a) Amortization and asset impairments: Impairment of certain IPR&D intangible assets
($27.0 million), amortization of intangible assets relating to intellectual property
rights acquired ($96.6 million), and tax effect of adjustments;
(b) Acquisitions and integration activities: Up-front payments made to Sangamo Biosciences
Inc. and for the acquisition of the US rights to prucalopride (marketed in certain
countries in Europe as RESOLOR) ($23.0 million), costs associated with acquisition of
FerroKin and the integration of ABH ($10.3 million), charges related to the change in
fair value of deferred contingent consideration ($2.1 million), and tax effect of
adjustments;
(c) Divestments, reorganizations and discontinued operations: Re-measurement of DAYTRANA
contingent consideration to fair value ($10.8 million);
(d) Legal and litigation costs: Costs related to the settlement of litigation and external
legal costs ($35.9 million), and tax effect of adjustments; and
(e) Depreciation reclassification: Depreciation of $55.1 million included in Cost of
product sales, R&D costs and SG&A costs for US GAAP separately disclosed for the
presentation of Non GAAP earnings.
Unaudited results for the six months to June 30, 2011
Non GAAP reconciliation
6 months to June 30, 2011 US GAAP Adjustments Non GAAP
(a) (b) (c) (d)
$M $M $M $M $M $M
Total revenues 2,035.1 - - - - 2,035.1
Costs and expenses:
Cost of product sales 268.2 - - (5.6) (13.8) 248.8
R&D 354.8 - - - (10.8) 344.0
SG&A 843.2 (72.7) - - (29.7) 740.8
Loss on sale of product
rights 3.5 - - (3.5) - -
Reorganization costs 13.0 - - (13.0) - -
Integration and acquisition
costs 2.6 - (2.6) - - -
Depreciation - - - - 54.3 54.3
Total operating expenses 1,485.3 (72.7) (2.6) (22.1) - 1,387.9
Operating income 549.8 72.7 2.6 22.1 - 647.2
Interest income 1.2 - - - - 1.2
Interest expense (19.1) - - - - (19.1)
Other income, net 0.3 2.4 - - - 2.7
Total other expense, net (17.6) 2.4 - - - (15.2)
Income before income taxes
and equity in earnings of
equity method investees 532.2 75.1 2.6 22.1 - 632.0
Income taxes (117.8) (15.8) (4.9) (4.4) - (142.9)
Equity in earnings of
equity method investees,
net of tax 2.4 - - - - 2.4
Net income 416.8 59.3 (2.3) 17.7 - 491.5
Impact of convertible debt,
net of tax 16.8 - - - - 16.8
Numerator for diluted EPS 433.6 59.3 (2.3) 17.7 - 508.3
Weighted average number of
shares (millions) - diluted 594.8 - - - - 594.8
Diluted earnings per ADS 218.7c 29.9c (1.1c) 8.9c - 256.4c
The following items are included in Adjustments:
(a) Amortization and asset impairments: Amortization of intangible assets relating to
intellectual property rights acquired ($72.7 million), impairment of available for
sale securities ($2.4 million), and tax effect of adjustments;
(b) Acquisitions and integration activities: Costs associated with acquisition and
integration of ABH ($6.9 million) and integration of Movetis ($3.9 million),
adjustment to contingent consideration payable for EQUASYM ($8.2 million), and tax
effect of adjustments;
(c) Divestments, reorganizations and discontinued operations: Accelerated depreciation
($4.4 million) and dual running costs ($1.2 million) on the transfer of manufacturing
from Owings Mills to a third party, re-measurement of DAYTRANA contingent
consideration to fair value ($3.5 million), reorganization costs ($13.0 million) on
the transfer of manufacturing from Owings Mills to a third party and the
establishment of an international commercial hub in Switzerland, and tax effect of
adjustments; and
(d) Depreciation reclassification: Depreciation of $54.3 million included in Cost of
product sales, R&D costs and SG&A costs for US GAAP separately disclosed for the
presentation of Non GAAP earnings.
Unaudited results for the three months and six months to June 30, 2012
Non GAAP reconciliation
The following table reconciles US GAAP net cash provided by operating activities to Non GAAP cash generation:
3 months to June 30, 6 months to June 30,
2012 2011 2012 2011
$M $M $M $M
Net cash provided by
operating activities 465.8 283.6 722.8 485.5
Tax and interest payments,
net 54.4 156.4 84.2 162.8
Up-front payments in
respect of in-licensed and
acquired products - - 23.0 -
Non GAAP cash generation 520.2 440.0 830.0 648.3
The following table reconciles US GAAP net cash provided by operating activities to Non GAAP free cash flow:
3 months to June 30, 6 months to June 30,
2012 2011 2012 2011
$M $M $M $M
Net cash provided by
operating activities 465.8 283.6 722.8 485.5
Up-front payments in
respect of in-licensed and
acquired products - - 23.0 -
Capital expenditure (32.7) (48.5) (64.4) (95.0)
Non GAAP free cash flow 433.1 235.1 681.4 390.5
Non GAAP net cash/(debt) comprises:
June 30, December 31,
2012 2011
$M $M
Cash and cash equivalents 1,112.7 620.0
Restricted cash 14.4 20.6
Convertible bonds (1,100.0) (1,100.0)
Other (9.5) (8.2)
Non GAAP net cash/(debt) 17.6 (467.6)
NOTES TO EDITORS
Shire enables people with life-altering conditions to lead better lives.
Through our deep understanding of patients' needs, we develop and provide healthcare in the areas of:
- Behavioral Health and Gastro Intestinal conditions
- Rare Diseases
- Regenerative Medicine
as well as other symptomatic conditions treated by specialist physicians.
We aspire to imagine and lead the future of healthcare, creating value for patients, physicians, policymakers, payors and our shareholders.
THE "SAFEHARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Statements included herein that are not historical facts are forward-looking statements. Such forward-looking statements involve a number of risks and uncertainties and are subject to change at any time. In the event such risks or uncertainties materialize, Shire's results could be materially adversely affected. The risks and uncertainties include, but are not limited to, risks associated with: the inherent uncertainty of research, development, approval, reimbursement, manufacturing and commercialization of Shire's Specialty Pharmaceuticals, Human Genetic Therapies and Regenerative Medicine products, as well as the ability to secure new products for commercialization and/or development; government regulation of Shire's products; Shire's ability to manufacture its products in sufficient quantities to meet demand; the impact of competitive therapies on Shire's products; Shire's ability to register, maintain and enforce patents and other intellectual property rights relating to its products; Shire's ability to obtain and maintain government and other third-party reimbursement for its products; and other risks and uncertainties detailed from time to time in Shire's filings with the Securities and Exchange Commission.
Non GAAP Measures
This press release contains financial measures not prepared in accordance with US GAAP. These measures are referred to as "Non GAAP" measures and include: Non GAAP operating income; Non GAAP net income; Non GAAP diluted earnings per ADS; effectivetax rate on Non GAAP income before income taxes and earnings/(losses) of equity method investees ("Effective tax rate on Non GAAP income"); Non GAAP cost of product sales; Non GAAP research and development; Non GAAP selling, general and administrative; Non GAAP other income/expense; Non GAAP cash generation; Non GAAP free cash flow and Non GAAP net cash/(debt). These Non GAAP measures exclude the effect of certain cash and non-cash items, that Shire's management believes are not related to the core performance of Shire's business.
These Non GAAP financial measures are used by Shire's management to make operating decisions because they facilitate internal comparisons of Shire's performance to historical results and to competitors' results. Shire's Remuneration Committee uses certain key Non GAAP measures when assessing the performance and compensation of employees, including Shire's executive directors.
The Non GAAP measures are presented in this press release as Shire's management believe that they will provide investors with a means of evaluating, and an understanding of how Shire's management evaluates, Shire's performance and results on a comparable basis that is not otherwise apparent on a US GAAP basis, since many non-recurring, infrequent or non-cash items that Shire's management believe are not indicative of the core performance of the business may not be excluded when preparing financial measures under US GAAP.
These Non GAAP measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with US GAAP.
Where applicable the following items, including their tax effect, have been excluded when calculating Non GAAP earnings from both 2012 and 2011, and from our Outlook:
Amortization and asset impairments:
- Intangible asset amortization and impairment charges; and
- Other than temporary impairment of investments.
Acquisitions and integration activities:
- Up-front payments and milestones in respect of in-licensed and acquired products;
- Costs associated with acquisitions, including transaction costs, fair value adjustments on contingent consideration and acquired inventory;
- Costs associated with the integration of companies; and
- Noncontrolling interests in consolidated variable interest entities.
Divestments, re-organizations and discontinued operations:
- Gains and losses on the sale of non-core assets;
- Costs associated with restructuring and re-organization activities;
- Termination costs; and
- Income/(losses) from discontinued operations.
Legal and litigation costs:
- Net legal costs related to the settlement of litigation, government investigations and other disputes (excluding internal legal team costs).
Depreciation, which is included in Cost of product sales, R&D and SG&A costs in our US GAAP results, has been separately disclosed for the presentation of 2011 and 2012 Non GAAP earnings.
Cash generation represents net cash provided by operating activities, excluding up-front and milestone payments for in-licensed and acquired products, tax and interest payments.
Free cash flow represents net cash provided by operating activities, excluding up-front and milestone payments for in-licensed and acquired products, but including capital expenditure in the ordinary course of business.
A reconciliation of Non GAAP financial measures to the most directly comparable measure under US GAAP is presented on pages 20 to 24.
Sales growth at CER, which is a Non GAAP measure, is computed by restating 2012 results using average 2011 foreign exchange rates for the relevant period.
Average exchange rates for the six months to June 30, 2012 were $1.58:£1.00 and $1.31:€1.00 (2011: $1.62:£1.00 and $1.40:€1.00). Average exchange rates for Q2 2012 were $1.59:£1.00 and $1.30:€1.00 (2011: $1.63:£1.00 and $1.44:€1.00).
TRADEMARKS
All trademarks designated ® and ™ used in this press release are trademarks of Shire plc or companies within the Shire group except for 3TC® and ZEFFIX® which are trademarks of GSK, PENTASA® which is a registered trademark of FERRING B.V., FABRAZYME® and CEREZYME® which are trademarks of Genzyme Corporation, LIALDA® and MEZAVANT® which are trademarks of Giuliani International Limited and DAYTRANA® which is a trade mark of Noven Pharmaceuticals Inc. Certain trademarks of Shire plc or companies within the Shire group are set out in Shire's Annual Report on Form 10-K for the year ended December 31, 2011 and the Quarterly Report on Form 10-Q for the three months ended March 31, 2012.
For further information please contact:
Investor Relations
Eric Rojas
erojas@shire.com
+1-781-482-0999
Sarah Elton-Farr
seltonfarr@shire.com
+44-1256-894-157
Media
Jessica Mann (Corporate)
jmann@shire.com
+44-1256-894-280
Gwen Fisher (Specialty Pharma)
gfisher@shire.com
+1-484-595-9836
Jessica Cotrone (Human Genetic Therapies)
jcotrone@shire.com
+1-781-482-9538
Lindsey Hart (Regenerative Medicine)
lhart@shire.com
+1-615-250-3311
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