DUBLIN, February 19, 2010 /PRNewswire-FirstCall/ -- Shire plc (LSE: SHP, NASDAQ: SHPGY) the global specialty biopharmaceutical company, announces results for the year to December 31, 2009.
Financial Highlights Full Year 2009(1) Q4 2009(1) Product sales $2,694 million -2% $777 million +10% Product sales from core products(2) $2,067 million +25% $585 million +36% Total revenues $3,008 million 0% $893 million +17% Non GAAP operating income $889 million -7% $313 million +30% US GAAP operating income $620 million +51% $268 million +39% Non GAAP diluted earnings per ADS $3.49 -10% $1.11 +9% US GAAP diluted earnings per ADS $2.69 +214% $0.94 +20%
These results include the effect of a change in best estimate of the Medicaid rebate liability for ADDERALL XR, which increased fourth quarter product sales by $98 million, and fourth quarter Non GAAP diluted earnings per American Depositary Share ("ADS") by 32 cents. Product sales excluding this change in best estimate would have been $2,596 million for the year to December 31, 2009 and $679 million for the fourth quarter. Non GAAP diluted earnings per ADS excluding this change in best estimate would have been $3.17 for the year to December 31, 2009 and 79 cents for the fourth quarter. For further details see pages 9 to 10 and 26.
(1) Percentages compare to equivalent 2008 periods.
(2) Core products represent Shire's products excluding ADDERALL XR.
Angus Russell, Chief Executive Officer, commented:
"In this challenging and transformational year for Shire, I believe these excellent results reflect the success of our focused strategy and business model.
Strong fourth quarter sales growth of 36% from our core product portfolio, supported by our increasing international reach, has contributed significantly to our full year Non GAAP diluted earnings per ADS of $3.49. Our recent decision to lower our best estimate of the Medicaid sales rebates for ADDERALL XR contributed 32 cents to these earnings, which was not previously anticipated in our guidance framework.
Our growth prospects remain excellent and our core product portfolio currently has robust exclusivity protection. We have launched INTUNIV successfully in the US, we plan to launch velaglucerase alfa (VPRIV) imminently, and there is also an opportunity for REPLAGAL to enter the US market. We have already seen encouraging signs for the future success of these three products. REPLAGAL has increased its share in ex-US markets and we expect this momentum to increase.
VYVANSE, our leading ADHD treatment with a current monthly US ADHD market share of 13.6%, continues to grow and build strong brand recognition in the US and has recently been launched in Canada. ADDERALL XR continues to generate value from both product sales and a considerable royalty stream.
We have also demonstrated a pro-active approach to cost management in 2009 as promised, and have the opportunity to leverage our existing infrastructure to deliver expanding margins in the future. We enter 2010 with a strong balance sheet and excellent cash generation. This will allow us to continue to expand our international presence and consider potential acquisitions and in-licensing opportunities that fit our strategy.
We look forward to growing revenues and earnings in 2010 and re-iterate our aspirational target of mid-teen revenue growth on average between 2009 and 2015."
FINANCIAL SUMMARY Full Year 2009 Unaudited Results Full Year 2009 Full Year 2008 Non Non US GAAP Adjustments GAAP US GAAP Adjustments GAAP $M $M $M $M $M $M Revenues 3,008 - 3,008 3,022 - 3,022 Operating income 620 269 889 412 546 958 Diluted earnings per ADS $2.69 $0.80 $3.49 $0.86 $3.00 $3.86
These results include the effect of a change in best estimate of the Medicaid rebate liability for ADDERALL XR, which increased product sales by $98 million, and Non GAAP diluted earnings per ADS by 32 cents. Revenues and Non GAAP diluted earnings per ADS excluding this change in best estimate for the year to December 31, 2009 would have been $2,910 million and $3.17 respectively. For further details see pages 9-10 and 26.
The Non GAAP financial measures included in the tables above are explained on pages 27 and 28, and are reconciled to the most directly comparable financial measures prepared in accordance with US GAAP on pages 22 to 23 and 26 (full year) and pages 24 to 26 (Q4).
- Product sales from core products were up 25% to $2,067 million (2008: $1,653 million). On a constant exchange rate ("CER") basis, which is a Non GAAP measure, core product sales were up 28% driven by continued strong growth from: - VYVANSE(R) (up 58% to $505 million, CER: up 58%); - LIALDA(R) / MEZAVANT(R) (up 68% to $236 million, CER: up 69%); - ELAPRASE(R) (up 16% to $353 million, CER: up 20%); and - REPLAGAL(R) (up 10% to $194 million, CER: up 16%). - Product sales including ADDERALL XR(R) were down 2% to $2,694 million (CER: 0%), due to the expected decline in ADDERALL XR product sales ($627 million, down 43% on 2008) following the launch of authorized generic versions by Teva Pharmaceuticals USA Inc. ("Teva") in April 2009 and Impax Laboratories Inc. ("Impax") in October 2009, with the strong performance from Shire's core products (up 25%) offsetting the decrease in ADDERALL XR product sales. - Revenues for the year to December 31, 2009 decreased marginally to $3,008 million (2008: $3,022 million), as the 25% increase in core product sales and royalty income received on Teva and Impax's sales of authorized generic ADDERALL XR offset the decline in ADDERALL XR product sales. - Non GAAP operating income decreased by 7%, or $69 million, to $889 million as a result of the marginally lower revenues and Shire's increased investment in research and development in 2009, which were partially offset by lower selling, general and administrative costs from Shire's continued focus on cost management. On a US GAAP basis, operating income in 2009 was $620 million, compared to $412 million in 2008, an increase of 51% (2008 included in-process R&D ("IPR&D") charges of $263 million related to the acquisitions of Jerini AG ("Jerini") and METAZYM). - Non GAAP diluted earnings per ADS were down 10% to $3.49 (2008: $3.86). On a US GAAP basis diluted earnings per ADS increased to $2.69 compared to $0.86 in 2008, up 214% (earnings in 2008 were impacted by interest charges on the Transkaryotic Therapies Inc. ("TKT") appraisal rights settlement, IPR&D and other impairment charges, all of which reduced US GAAP diluted earnings per ADS in 2008). - Cash generation, which is a Non GAAP measure, in 2009 was $921 million (2008: $1,231 million), a decrease of $310 million. Cash generation was lower in 2009 due to lower net sales receipts following the genericization of ADDERALL XR. Cash generation in 2008 also included cash inflows from forward exchange contracts which were not repeated in 2009.
We enter 2010 with good momentum driven by the growth of our core product portfolio. 2010 will also benefit from the change in best estimate for ADDERALL XR rebates implemented in the fourth quarter of 2009 against a background of further erosion of the brand and the impact of adverse business mix trends.
In the first quarter of 2010 we expect our total revenues and Non GAAP diluted earnings per ADS to be lower than the same period in 2009, which was the last quarter before ADDERALL XR faced generic competition. For the balance of the year Shire expects to generate both total revenue growth and Non GAAP diluted earnings per ADS growth compared to 2009.
During 2010 we expect to see gross margins as a percentage of product sales at a similar level to 2009. We will further increase our focused investment in R&D and targeted investment will increase SG&A year on year. We expect a Non GAAP effective tax rate in 2010 at a similar level to 2009.
We look forward to growing both total revenues and reported Non GAAP diluted earnings per ADS in the full year 2010 compared to the excellent 2009 Non GAAP results and re-iterate our aspirational target of mid-teen revenue growth on average between 2009 and 2015.
Subject to obtaining the relevant regulatory/governmental approvals, product launches in 2010 will include:
- VPRIV(TM) for the treatment of Gaucher disease in the US and EU; - REPLAGAL for the treatment of Fabry disease in the US; - MEZAVANT for the treatment of ulcerative colitis in certain EU and RoW countries; - FIRAZYR(R) for the symptomatic treatment of acute attacks of hereditary angiodema in certain European and Latin American countries; - EQUASYM(R) for the treatment of ADHD in certain EU countries; and - VYVANSE for the treatment of ADHD in Canada. Fourth Quarter 2009 Unaudited Results Q4 2009 Q4 2008 Non Non US GAAP Adjustments GAAP US GAAP Adjustments GAAP $M $M $M $M $M $M Revenues 893 - 893 766 - 766 Operating income 268 45 313 193 48 241 Diluted earnings per ADS $0.94 $0.17 $1.11 $0.78 $0.23 $1.01
These results include the effect of a change in best estimate of the Medicaid rebate liability for ADDERALL XR, which increased product sales by $98 million, and Non GAAP diluted earnings per ADS by 32 cents. Revenues and Non GAAP diluted earnings per ADS excluding this change in best estimate for the fourth quarter would have been $795 million and 79 cents respectively. For further details see pages 9 to 10 and 26.
The Non GAAP financial measures included above are explained on pages 27 and 28, and are reconciled to the most directly comparable financial measures prepared in accordance with US GAAP on pages 24 to 26.
- Product sales from core products were up 36% (CER: up 32%) to $585 million (2008: $429 million) following continued growth from VYVANSE, LIALDA/MEZAVANT, ELAPRASE and REPLAGAL. - Product sales including ADDERALL XR, increased by 10% to $777 million (CER: up 8%). In Q4 2009 ADDERALL XR sales included the effect of a change in best estimate of the amount of Medicaid rebate payable on sales of ADDERALL XR. The effect of this change in best estimate increased ADDERALL XR net product sales for Q4 2009 by $98 million, of which $74 million related to product sales recognized in Q1 - Q3 2009. Q4 product sales, excluding the effect of the change in best estimate relating to product sales recognized in Q1 - Q3 2009, declined marginally to $703 million (2008: $704 million). - Revenues in Q4 2009 increased by 17% to $893 million (2008: $766 million). The decline in ADDERALL XR product sales following genericization was more than offset by strong core product sales growth and royalty income on Impax's sales of authorized generic ADDERALL XR. - Non GAAP operating income increased by 30%, or $72 million, to $313 million as the higher product sales and royalty income were only partially offset by increased investment in research and development. On a US GAAP basis operating income in Q4 2009 increased 39%, or $75 million to $268 million (2008: $193 million). - Non GAAP diluted earnings per ADS for Q4 2009 were up 9% to $1.11 (Q4 2008: $1.01). On a US GAAP basis diluted earnings per ADS were up 20% to $0.94 (2008: $0.78). FOURTH QUARTER 2009 AND RECENT PRODUCT AND PIPELINE DEVELOPMENTS Products VYVANSE - for the treatment of ADHD - On February 1, 2010 Shire announced the Canadian availability of VYVANSE (lisdexamfetamine dimesylate capsule), the first and only prodrug therapy approved for ADHD treatment in Canada. INTUNIV - for the treatment of ADHD in children and adolescents in the US - Once-daily INTUNIV became available in US pharmacies on November 9, 2009 and comes in four dosage strengths (1 mg, 2 mg, 3 mg, and 4 mg). INTUNIV is marketed in the US by the existing Shire ADHD sales team of nearly 600 representatives. - Revenue on the launch shipments of INTUNIV has been deferred and is being recognised in line with prescription demand. On this basis, INTUNIV achieved sales of $5.4 million from launch through December 31, 2009. DAYTRANA - for the treatment of ADHD in adolescents in the US - On December 4, 2009 and on January 29, 2010 Shire issued a voluntary recall of certain lots of DAYTRANA because some of the patches do not meet, or in future may not meet, their release liner removal specification, and as a result, patients and caregivers could have difficulty removing the liners. This action was not due to any safety issues and no interruption in product supply is anticipated. Pipeline VPRIV - for the treatment of Type 1 Gaucher disease - On November 24, 2009 Shire submitted a marketing authorization application to the European Medicines Agency ("EMEA") for VPRIV, Shire's enzyme replacement therapy in development for the treatment of Type 1 Gaucher disease. The submission has been granted an accelerated review by EMEA. Submissions have also been made in the US on September 1, 2009 and Canada on October 20, 2009. In the U.S., the application is being reviewed by the US Food and Drug Administration ("FDA") under Priority Review with a Prescription Drug User Fee Act action date of February 28, 2010. The FDA recently completed pre-approval inspections of Shire's Massachusetts facilities for the manufacturing and testing of VPRIV. These inspections were an important milestone in the review and approval process for the VPRIV New Drug Application. - VPRIV is available ahead of its commercial launch in the US via an FDA-accepted treatment protocol and elsewhere on a pre-approval basis using the fastest mechanisms available in each country, in response to the ongoing shortage of a currently marketed treatment for Type 1 Gaucher disease. - Pending FDA approval, Shire intends to price the VPRIV 400 Unit vial at a wholesale acquisition cost ("WAC") of $1,350 in the US. - We are pleased to announce enhancements to our OnePathSM Access program. In addition to our existing patient assistance programs and our support of patient associations, Shire will provide direct co-pay assistance, covering the first 3 months of out-of-pocket prescription costs for eligible US patients this year. In 2011, we also plan to cap the out-of-pocket prescription costs for these patients at $500. This new program will be effective March 1, 2010 for eligible ELAPRASE patients and VPRIV patients pending FDA approval. VYVANSE - for the treatment of ADHD - On December 21, 2009 a supplemental New Drug Submission for VYVANSE was submitted in Canada for the extension of the indication to adolescents and adults with ADHD. - On January 14, 2010 a supplemental New Drug Application for VYVANSE was submitted to the FDA for the extension of the indication to adolescents aged 13 to 17 years with ADHD. REPLAGAL - for the treatment of Fabry disease - On December 22, 2009 Shire submitted a Biologics License Application to the FDA for REPLAGAL, its enzyme replacement therapy for Fabry disease. Shire has worked closely with the FDA to establish an early access program in response to the ongoing shortage of the currently marketed treatment for Fabry disease in the US. REPLAGAL is currently available to Fabry patients in the US under an FDA-approved treatment protocol, and Shire is also supporting emergency Investigational New Drug requests. REPLAGAL first received marketing authorization in the European Union in 2001, and is approved for the treatment of Fabry disease in 45 countries. Shire expects its REPLAGAL supply to be adequate to meet anticipated global demand. OTHER FOURTH QUARTER AND RECENT DEVELOPMENTS - On December 23, 2009 Shire completed the purchase of the remaining Jerini shares from the minority shareholders, and now owns 100% of Jerini. - On February 24, 2009 Actavis Elizabeth LLC brought a lawsuit against the FDA seeking to overturn the FDA's decision granting new chemical entity exclusivity to VYVANSE. Shire has intervened in the lawsuit. On October 23, 2009, following a period for public comment, the FDA issued a letter setting forth its analysis of the legal and regulatory issues and reaffirming its decision that VYVANSE is entitled to new chemical entity exclusivity. A hearing on cross-motions for summary judgment was held on February 17, 2010. No rulings on the cross-motions were made at the hearing. - On December 2, 2009 Shire announced that it had settled the litigation with Teva over Shire's supply to Teva of an authorized generic version of ADDERALL XR. Shire has been supplying Teva with authorized generic ADDERALL XR since April 1, 2009. Shire's ability to supply the product had been limited by restrictions that the US Drug Enforcement Administration ("DEA") places on amphetamine, which is the product's active ingredient. Teva filed suit claiming that Shire was in breach of its supply contract. After the lawsuit was filed, the DEA granted Shire additional quota for 2009, allowing Shire to supply Teva with additional product. Teva dismissed its lawsuit, including its claims for monetary damages, specific performance and other equitable relief. No consideration was exchanged by the parties as part of the settlement.
For the six months to December 31, 2009 the Board has resolved to pay an interim dividend of 9.250 US cents per ordinary share (2008: 7.761 US cents per ordinary share).
Dividend payments will be made in Pounds Sterling to ordinary shareholders and in US Dollars to holders of American Depository Shares. A dividend of 5.910 pence per ordinary share (2008: 5.469 pence) and 27.750 US cents per ADS (2008: 23.283 US cents) will be paid on April 14, 2010 to persons whose names appear on the register of members of the Company at the close of business on March 12, 2010.
Together with the first interim payment of 2.147 US cents per ordinary share (2008: 2.147 US cents per ordinary share), this represents total dividends for 2009 of 11.397 US cents per ordinary share (2008: 9.908 US cents per ordinary share), an increase of 15% in US Dollar terms over 2008.
On December 23, 2009 Dr Michael Rosenblatt stepped down from the Shire Board as a non-executive director, following Dr Rosenblatt's appointment as Executive Vice President and Chief Medical Officer at Merck & Co., Inc. Matt Emmens, Chairman of Shire said "On behalf of the Shire Board, I would like to thank Michael for his contributions and we wish him well in his new position".
Dr Barry Price retired from the Shire Board as a non-executive director upon the completion of his term of office on January 24, 2010. Matt Emmens, Chairman of Shire said "On behalf of the Shire Board, I would like to thank Barry for his significant contributions over the past 14 years. Barry brought a wealth of expertise and experience to the Board and we wish him well for the future".
ADDITIONAL INFORMATION The following additional information is included in this press release: Page Overview of Full Year Financial 8 Results Financial Information 13 Notes to Editors 27 Safe Harbor Statement 27 Explanation of Non GAAP Measures 27 Trademarks 28
Dial in details for the live conference call for investors 14:00 GMT/09:00 EST on February 19, 2010:
UK dial in: 0844-800-3850 or 01296-311-600 US dial in: 1-866-8048688 or 1-718-3541175 International dial +44(0)1296-311-600 in: Password/Conf ID: 587 261# Live Webcast: http://www.shire.com/shireplc/en/investors OVERVIEW OF FULL YEAR FINANCIAL RESULTS 1. Product sales
For the year to December 31, 2009 product sales decreased by 2% to $2,693.7 million (2008: $2,754.2 million) and represented 90% of total revenues (2008: 91%). On a CER basis product sales were flat compared to 2008.
Sales of core products increased by 25% to $2,067.2 million (2008: $1,652.5 million), up 28% on a CER basis.
Product Highlights Exit Market Year on year growth Share(1) Product Sales $M Sales CER US Rx(1) VYVANSE 504.7 58% 58% 65% 13% ELAPRASE 353.1 16% 20% n/a(3) n/a(3) LIALDA / MEZAVANT 235.9 68% 69% 43% 18% PENTASA(R) 214.8 16% 16% -2% 16% REPLAGAL 193.8 10% 16% n/a(2) n/a(2) FOSRENOL 184.4 19% 23% -2% 8% FIRAZYR 6.1 n/a(4) n/a(4) n/a(2) n/a(2) INTUNIV 5.4 n/a n/a n/a(2) 1% VPRIV(5) 2.5 n/a n/a n/a(2) n/a(2) OTHER 366.5 -1% n/a n/a(2) n/a(2) Core product sales 2,067.2 25% 28% ADDERALL XR 626.5 -43% -43% -42% 8% Total product sales 2,693.7 -2% 0%
(1) TRx data provided by IMS Health ("IMS") National Prescription Audit. Exit market share represents the US market share in the last week of December 2009.
(2) Not sold in the US in 2009, or awaiting approval in the US. (3) IMS Data not available. (4) Product launched Q3 2008. FY 2008 sales totaled $0.5 million. (5) Not yet approved. Sales achieved under early access programs. Core Products VYVANSE - ADHD
The increase in VYVANSE product sales was driven by higher US prescription demand versus 2008, 9% growth in the US ADHD market and price increases. Product sales growth was lower than prescription growth due to lower stocking in 2009 compared to 2008.
ELAPRASE - Hunter syndrome
The growth in sales of ELAPRASE was driven by increased volumes across all regions where ELAPRASE is sold. On a CER basis sales grew by 20% (66% of ELAPRASE sales are made outside of the US).
LIALDA/MEZAVANT - Ulcerative colitis
Strong product sales of LIALDA/MEZAVANT continued in the year to December 31, 2009 driven by an increase in market share over 2008, growth in the US oral mesalamine market and price increases taken during 2009.
PENTASA - Ulcerative colitis
Product sales of PENTASA continued to grow despite a decrease in US prescription demand in 2009 compared to 2008 due to the impact of price increases taken during 2009.
REPLAGAL - Fabry disease
The growth in REPLAGAL product sales in 2009 over 2008 was driven by a significant increase in demand in the fourth quarter of 2009 due to an acceleration of patients switching to REPLAGAL in the EU, attributable in part to supply shortages of a competitor product. Sales increased 16% on a CER basis (REPLAGAL is sold primarily in Euros and Pounds sterling).
FOSRENOL - Hyperphosphatemia
Product sales increased as FOSRENOL entered new countries and grew in existing markets outside the US. In the US, FOSRENOL sales grew despite lower prescriptions due to a price increase in 2009.
INTUNIV - ADHD
INTUNIV was launched in the US in November 2009. In line with Shire's revenue recognition policy for launch shipments, initial stocking shipments have been deferred and are being recognised into revenue in line with end-user prescription demand. At December 31, 2009 deferred revenues on the balance sheet represented gross sales of $38.8 million.
ADDERALL XR - ADHD
The launch by Teva and Impax of their authorised generic versions of ADDERALL XR led to the expected decline in 2009 of branded ADDERALL XR prescription demand, and resulted in higher US sales deductions in 2009 compared to 2008. These factors more than offset the positive impacts of price increases taken since the fourth quarter of 2008, and the inclusion in product sales of shipments of authorized generic ADDERALL XR to Teva and Impax in 2009.
Sales deductions represented 47% of branded ADDERALL XR gross sales in the year to December 31, 2009 compared to 25% in the same period in 2008, following higher Medicaid and Managed Care rebates subsequent to the authorized generic launches.
There are potentially different interpretations as to how shipments of authorized generic ADDERALL XR to Teva and Impax should be included in the Medicaid rebate calculation pursuant to Medicaid rebate legislation, including the Deficit Reduction Act of 2005 ("Medicaid rebate legislation"). As a result more than one unit rebate amount ("URA") is calculable for the purpose of determining Shire's Medicaid rebate liability to States after the authorized generic launch. During 2009 Shire highlighted the different interpretations to the Centers for Medicare and Medicaid Services, ("CMS") and submitted data to the CMS for the purpose of computing the URA, based on Shire's reasonable interpretation of the Medicaid rebate legislation and related guidance. The State Medicaid agencies have invoiced Shire for Medicaid rebates, and Shire has paid these Medicaid rebate invoices, based on this URA. Despite this CMS has the ability to subsequently challenge Shire's interpretation of the Medicaid rebate legislation, and require an alternative interpretation to be applied (both retrospectively and prospectively), which could result in a significantly higher Medicaid liability.
Throughout 2009 Shire's management has recorded its accrual for Medicaid rebates based on its best estimate of the rebate payable. For the first three quarters of 2009, Shire's management based this best estimate on an amount that Shire could pay were CMS to challenge Shire's interpretation and require an alternative interpretation of the Medicaid rebate legislation to be applied. In the fourth quarter of 2009, Shire's management lowered its best estimate of the Medicaid rebate payable down to be consistent with (i) Shire's interpretation of the Medicaid rebate legislation, (ii) Shire's repeated and consistent submission of price reporting to CMS using Shire's interpretation of the Medicaid rebate legislation, (iii) CMS calculating the URA based on that interpretation, (iv) States submitting Medicaid rebate invoices using this URA, and (v) Shire paying these invoices. This change of estimate increased ADDERALL XR product sales by $97.7 million in the fourth quarter of 2009 (of which $73.6 million related to ADDERALL XR product sales recognized in Q1-Q3 2009).
In determining its best estimate of the Medicaid rebate liability at December 31, 2009 Shire's management has considered a number of factors taken in combination (including the receipt of a further quarter's invoices from the States with a URA based on Shire's interpretation of the Medicaid rebate legislation and related guidance, and Shire's likely response were CMS to employ an alternative interpretation of the Medicaid rebate legislation). Any future change in Shire's interpretation which results in a change of estimate could significantly decrease sales of ADDERALL XR in the period of any such change in estimate.
Shire strongly believes that its interpretation of the Medicaid rebate legislation is reasonable and correct. However, CMS could disagree with Shire's interpretation, and require Shire to apply an alternative interpretation of the Medicaid rebate legislation and pay up to $210 million above the recorded liability. This would represent a URA substantially in excess of the unit sales price of ADDERALL XR and accordingly be in excess of the approximate amount of the full cost to the States of reimbursement for Medicaid prescriptions of ADDERALL XR. Should CMS take such an approach, Shire could seek to limit any additional payments to a level approximating the full, un-rebated cost to the States of ADDERALL XR, or $98 million above the recorded liability. Further, Shire believes it has a strong legal basis supporting its interpretation of the Medicaid rebate legislation, and that there would be a strong basis to initiate litigation to recover any amount paid in excess of its recorded liability. The result of any such litigation cannot be predicted and could result in additional rebate liability above Shire's current best estimate.
2. Royalties Product Royalties to Shire $M Year on year change CER 3TC(R) and Zeffix(R) 164.0 -9% -6% ADDERALL XR 68.0 n/a n/a Other 60.5 -7% -3% Total 292.5 +19% +22%
Shire receives royalties from GlaxoSmithKline ("GSK") on worldwide sales of 3TC and ZEFFIX which have decreased mainly due to competition from other treatments.
Royalties were received on Teva's sales of an authorized generic version of ADDERALL XR between April and September 2009, and on Impax's sales of its authorized generic version of ADDERALL XR from October 2009.
Other royalties are received primarily on worldwide (excluding UK and Republic of Ireland) sales of REMINYL(R) and REMINYL(R) XL (known as RAZADYNE(R) and RAZADYNE(R) ER in the US). Royalties on sales of these products decreased in 2009 to $47.7 million (2008: $63.5 million) due to generic competition in the US from August 2008.
3. Financial details Cost of product sales % of % of 2009 product 2008 product $M sales $M sales Cost of product sales 388.0 14% 408.0 15% Accelerated depreciation on transfer of manufacturing from Owings Mills (12.0) - Fair value adjustment for acquired inventories (1.9) - DYNEPO exit costs - (48.8) Depreciation (9.8) (16.2) Non GAAP cost of product 364.3 14% 343.0 12% sales
Non GAAP cost of product sales as a percentage of product sales increased in 2009 due to changes to the product mix following the launch of authorized generic versions of ADDERALL XR by Teva and Impax. Higher deductions on Shire's sales of branded ADDERALL XR, together with lower margins on sales of the authorized generic version to Teva and Impax have both depressed gross margins.
Research and development ("R&D") % of % of 2009 product 2008 product $M sales $M sales R&D 638.3 24% 494.3 18% INTUNIV license payment (36.9) - Women's Health exit costs (62.9) - DYNEPO exit costs - (6.5) Depreciation (15.5) (12.5) Non GAAP R&D 523.0 19% 475.3 17%
Non GAAP R&D increased 10% in 2009 compared to 2008 as Shire has continued to increase investment in R&D programs, due in part to an acceleration of investment in VPRIV and REPLAGAL in the US.
Selling, general and administrative ("SG&A") % of % of 2009 product 2008 product $M sales $M sales SG&A 1,342.6 50% 1,455.2 53% Intangible asset (136.9) (126.2) amortization Impairment of intangible - (97.1) assets New holding company costs - (14.8) Depreciation (67.7) (48.5) Non GAAP SG&A 1,138.0 42% 1,168.6 42%
Non GAAP SG&A decreased in absolute terms by 3% due to Shire's continued focus on cost management.
Gain on sale of product rights
For the year to December 31, 2009 Shire recorded gains of $6.3 million (2008: $20.7 million) from the sale of non-core products to Laboratorios Almirall S.A. in 2007. These gains had been deferred since 2007 pending obtaining the relevant consents to transfer certain assets.
For the year to December 31, 2009, Shire recorded IPR&D charges of $1.6 million (2008: $128.1 million) relating to FIRAZYR in markets outside of the EU. In 2008 IPR&D also included a charge of $135.0 million relating to the acquisition of METAZYM from Zymenex A/S.
For the year to December 31, 2009 Shire recorded reorganization costs of $12.7 million (2008: $nil) relating to the transfer of manufacturing from its Owings Mills facility.
Integration and acquisition costs
For the year to December 31, 2009 Shire recorded integration and acquisition costs of $10.6 million (2008: $10.3 million), primarily relating to the integration of Jerini.
For the year to December 31, 2009 Shire received interest income of $1.9 million (2008: $25.5 million), primarily earned on cash and cash equivalents. Interest income for the year to December 31, 2009 is lower than the same period in 2008 due to significantly lower interest rates in 2009 compared to 2008, and lower average cash and cash equivalent balances throughout the year.
Interest expense 2009 2008 $M $M Interest expense 39.8 139.0 Additional interest on settlement of TKT appraisal rights - (73.0) litigation Non GAAP interest expense 39.8 66.0
For the year to December 31, 2009 Shire incurred interest expense of $39.8 million (2008: $139.0 million), including interest expense on Shire's convertible bond of $33.6 million (2008: $33.6 million). Interest expense in 2008 was higher than 2009 due to interest expense of $87.3 million recorded in respect of the TKT appraisal rights litigation, of which $73.0 million was additional interest arising from the settlement of the litigation in November 2008.
Other income/(expense), net 2009 2008 $M $M Other income/(expense), net 60.7 (32.9) Gain on sale of investment in Virochem Pharma Inc. (55.2) - Gain on sale of investment in Questcor Pharmaceuticals Inc. - (9.4) Other than temporary impairment of available for sale securities (including $44.3 million for Renovo Group plc) - 58.0 Non GAAP other income, net 5.5 15.7
Non GAAP other income, net in 2009 included a gain of $5.7 million on substantial modification of a property lease. In 2008 Non GAAP other income, net primarily related to foreign exchange gains.
The effective rate of tax for the year to December 31, 2009 was 22% (2008: 37%). Excluding the impact of IPR&D charges of $263.1 million in 2008, which are either not tax deductable or for which no tax benefit is currently recognised, the effective rate of tax for 2008 was 19%. The effective tax rate on Non GAAP income is 25% (2008: 23%).
The Non GAAP effective rate of tax in 2009 is higher than 2008 due to increased profits in higher tax territories, together with the recognition of valuation allowances against certain EU and US deferred tax assets. These factors more than offset reductions to the Non GAAP effective rate of tax from the decrease in valuation allowances held in respect of US State tax credits and losses. In addition, the effect of the change in best estimate of ADDERALL XR Medicaid rebates increased the Non GAAP effective rate of tax by one percentage point in 2009.
The loss from discontinued operations for the year to December 31, 2009 was $12.4 million (2008: $17.6 million), relating to net losses on discontinued Jerini businesses which were either divested or closed during 2009.
FINANCIAL INFORMATION TABLE OF CONTENTS Page Unaudited US GAAP Statement of Financial Position 14 Unaudited US GAAP Consolidated Statements of Operations 15 Unaudited US GAAP Consolidated Statements of Cash Flows 17 Selected Notes to the Unaudited US GAAP Financial Statements (1) Earnings per share 19 (2) Analysis of revenues 20 Non GAAP reconciliation 22 Unaudited US GAAP financial position as of December 31, 2009 Consolidated Balance Sheets Restated(1) December 31, December 31, 2009 2008 $M $M ASSETS Current assets: Cash and cash equivalents 498.9 218.2 Restricted cash 33.1 29.2 Accounts receivable, net 597.5 395.0 Inventories 189.7 154.5 Assets held for sale 1.7 16.6 Deferred tax asset 135.8 89.5 Prepaid expenses and other current assets 113.5 141.4 Total current assets 1,570.2 1,044.4 Non-current assets: Investments 105.7 42.9 Property, plant and equipment, net 676.8 534.2 Goodwill 384.7 350.8 Other intangible assets, net 1,790.7 1,824.9 Deferred tax asset 79.0 118.1 Other non-current assets 10.4 18.4 Total assets 4,617.5 3,933.7 LIABILITIES AND EQUITY Current liabilities: Accounts payable and accrued expenses 929.1 708.6 Deferred tax liability 2.9 10.9 Other current liabilities 88.0 104.3 Total current liabilities 1,020.0 823.8 Non-current liabilities: Convertible bonds 1,100.0 1,100.0 Other long-term debt 43.6 43.1 Deferred tax liability 294.3 348.0 Other non-current liabilities 247.1 291.3 Total liabilities 2,705.0 2,606.2 Shareholders' equity: Common stock of 5p par value; 1,000 million shares authorized; and 561.5 million shares issued and outstanding (2008: 1,000 million shares authorized; and 560.2 million shares issued and outstanding) 55.6 55.5 Additional paid-in capital 2,677.6 2,594.6 Treasury stock: 17.8 million shares (2008: 20.7 million) (347.4) (397.2) Accumulated other comprehensive income 149.1 97.0 Accumulated deficit (622.4) (1,022.7) Total Shire plc shareholders' equity 1,912.5 1,327.2 Noncontrolling interest in subsidiaries - 0.3 Total equity 1,912.5 1,327.5 Total liabilities and equity 4,617.5 3,933.7 (1) See page 28 for details.
Unaudited US GAAP results for the three months and year to December 31, 2009 Consolidated Statements of Operations
12 months 12 months 3 months to 3 months to to to December 31, December 31, December 31, December 31 2009 2008 2009 2008 $M $M $M $M Revenues: Product sales 776.9 704.3 2,693.7 2,754.2 Royalties 114.7 54.8 292.5 245.5 Other revenues 1.7 6.7 21.5 22.5 Total revenues 893.3 765.8 3,007.7 3,022.2 Costs and expenses: Cost of product sales(1) 103.1 90.6 388.0 408.0 Research and development(2) 145.8 125.9 638.3
|SOURCE Shire Pharmaceutical|
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