Shire Delivers Strong Revenue Growth And Cash Generation; 20% Increase In Non GAAP Earnings Per ADS

   
     Financial Highlights                                        Q1 2015   Growth(1)  CER(2)
  
    Product sales                                        $1,423 million      +9%    +13%
    Total revenues                                       $1,488 million     +11%    +15%
     Non GAAP operating income                              $683 million     +16%    +19%
     US GAAP operating income from continuing operations    $475 million     +55%
    Non GAAP EBITDA margin (excluding royalties & other
     revenues)(3)                                                    46%    +1pps(4)
     US GAAP net income margin(5)                                    28%   +11pps
     Non GAAP diluted earnings per ADS                             $2.84     +20%    +24%
     US GAAP diluted earnings per ADS                              $2.08     +77%
     Non GAAP cash generation                               $516 million     +56%
     Non GAAP free cash flow                                $542 million    +135%
     US GAAP net cash provided by operating activities      $562 million    +128%

   
                                        Q1 2015                          Q1 2014
                           US GAAP   Adjustments  Non GAAP   US GAAP  Adjustments Non GAAP
                                $M            $M        $M        $M          $M        $M

    Total revenues           1,488             -     1,488     1,347           -     1,347
    Operating income           475           208       683       307         284       591

    Diluted earnings per ADS $2.08         $0.76     $2.84     $1.17       $1.19     $2.36

• Product sales in Q1 2015 were up 9% (up 13% on a CER basis) to $1,423 million (Q1 2014: $1,308 million) even after the effect of significantly lower INTUNIV^® sales (down 79% to $17 million) following the introduction of generic competition in December 2014.

Excluding INTUNIV^®, product sales were up 15%. This growth was primarily driven by VYVANSE⁽¹⁾ (up 19% to $417 million), CINRYZE⁽²⁾ (up 73% on a reported basis to $148 million), LIALDA/MEZAVANT (up 15% to $148 million) and FIRAZYR (up 23% to $92 million).

As expected, product sales growth in Q1 2015 was held back 4 percentage points by foreign exchange headwinds from the strengthening US dollar, primarily affecting sales of ELAPRASE^®, REPLAGAL^® and VPRIV^®.

• Total revenues were up 11% to $1,488 million (Q1 2014: $1,347 million), as Q1 2015 benefited from higher royalties and other revenues, principally INTUNIV royalties and the inclusion of SENSIPAR^® royalties acquired with NPS.
  
• On a Non GAAP basis:

Operating income grew strongly in Q1 2015, up 16% to $683 million (Q1 2014: $591 million) as combined R&D and SG&A costs increased at a lower rate (up 6%) than total revenues (up 11%). R&D costs decreased by 2% compared to Q1 2014. SG&A costs increased by 10%, primarily due to increased sales and marketing ("S&M") spend in relation to new product launches and the first time inclusion of NPS costs.

Non GAAP EBITDA margin (excluding royalties and other revenues)was 46%, up 1 percentage point compared to Q1 2014 (Q1 2014: 45%).

On a US GAAP basis (from continuing operations):

Operating income was up 55% to $475 million (Q1 2014: $307 million), with growth benefiting from comparison against Q1 2014 which included an IPR&D intangible asset impairment charge of $166 million (Q1 2015: $nil).

• Non GAAP diluted earnings per American Depository Share ("ADS") increased 20% to $2.84 (2014: $2.36) primarily due to the higher Non GAAP operating income and a lower effective tax rate on Non GAAP income.

On a US GAAP basis diluted earnings per ADS increased 77% to $2.08 (Q1 2014: $1.17) primarily due to higher US GAAP operating income and a lower effective tax rate on US GAAP income.

• Cash generation, a Non GAAP measure, was 56% higher at $516 million (Q1 2014: $331 million), due to strong cash receipts from higher sales and the benefit in Q1 2015 from the timing of rebate payments.

Free cash flow, also a Non GAAP measure, was up 135% to $542 million (2014: $231 million), due to higher cash generation and the benefit of a net cash tax repayment in Q1 2015, due to the recovery of an over-payment of tax and favourable timing of cash tax payments for 2015.

On a US GAAP basis, net cash provided by operating activities was up 128% to $562 million (2014: $246 million).

• Net debt (a Non GAAP measure) at March 31, 2015 was $2,588 million (December 31, 2014: Net cash of $2,119 million) reflecting the use of cash and cash equivalents and borrowings incurred to fund the acquisition of NPS.

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(1) Lisadexamfetamine dimesylate ("LDX") currently marketed as VYVANSE in the US & Canada, VENVANSE® in Latin America and ELVANSE® in certain territories in the EU for the treatment of Attention Deficit Hyperactivity Disorder ("ADHD") and in the US for the treatment of moderate to severe Binge Eating Disorder in adults.

(2) CINRYZE sales recorded in Q1 2014 are from January 24, 2014, following the acquisition of ViroPharma by Shire. On a pro-forma basis, CINRYZE sales grew 28% in Q1 2015.

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On a US GAAP basis, cash and cash equivalents were $74 million at March 31, 2015 (December 31, 2014: $2,982 million).

OUTLOOK

We've made a strong start to 2015, and remain confident in delivering Non GAAP diluted earnings per ADS growth in the mid-single digits in 2015.

On a Constant Exchange Rate basis we continue to expect product sales growth in the mid-to-high single digits. When excluding INTUNIV, we anticipate low double digit product sales growth on a CER basis.

Based on current exchange rates we anticipate low-to-mid single digit product sales growth in 2015, as we expect growth to be held back three to four percentage points by foreign exchange headwinds which particularly impact ELAPRASE, REPLAGAL and VPRIV sales. We expect to see a lower rate of product sales growth through the remainder of 2015 than we've delivered in the first quarter, principally due to stronger comparatives.

Royalties and other revenues are expected to increase by 30-40% in 2015, as we include NPS's royalty streams for the first time.

Our Non GAAP gross margin is expected to be in line with 2014 (2014: 85.8%).

We continue to expect combined Non GAAP R&D and SG&A to increase in the high single digits. We anticipate higher operating costs in the remaining quarters of 2015 than incurred in the first quarter as we include NPS's operating costs for the balance of the year, invest behind our pipeline and increase our commercial spending, particularly on VYVANSE for BED and in preparation for the anticipated launch of Lifitegrast.

We expect our Non GAAP net interest and other expense to be in line with 2014 levels.

For 2015, we expect our effective tax rate on Non GAAP income to be in the range of 15-17%, before reverting to the 17-19% range in 2016 and beyond.

Taken together, we reiterate our guidance for the full year 2015, and remain confident in delivering Non GAAP diluted earnings per ADS growth in the mid-single digits in 2015 (high single digit growth on a CER basis).

FIRST QUARTER 2015 AND RECENT PRODUCT AND PIPELINE DEVELOPMENTS

Products

We have made good progress with our product portfolio in the quarter, launching VYVANSE in an important new indication, approval of NATPARA was achieved and we extended the range of doses available for VYVANSE.

VYVANSE- for the treatment of moderate to severe Binge Eating Disorder ("BED") in adults

• On January 30, 2015 Shire launched VYVANSE for the treatment of adults with moderate to severe BED.

NATPARA - for the treatment of hypoparathyroidism

• On January 23, 2015 it was announced that the FDA had approved NATPARA as an adjunct to calcium and vitamin D to control hypocalcemia in patients with hypoparathyroidism. Hypoparathyroidism is a rare endocrine disorder characterized by insufficient levels of parathyroid hormone, or PTH. NATPARA is a bioengineered replica of human PTH. NATPARA was launched on April 1, 2015.

VYVANSE- for the treatment of ADHD

• On March 23, 2015 Shire announced VYVANSE was available in a 10mg strength capsule. This new titration dose, which was approved by the U.S. Food and Drug Administration ("FDA") on October 30, 2014, is the seventh VYVANSE dosage strength available in addition to the 20mg, 30mg, 40mg, 50mg, 60mg, and 70mg capsule strengths. On April 7, 2015 Health Canada approved the 10mg dose strength for incremental titration adjustments.

Pipeline

We have progressed the pipeline, the most significant developments of which are gaining Priority Review for lifitegrast and gaining agreement with FDA on the regulatory path for SHP465. Shire now has its broadest and deepest pipeline in its history.

SHP606 (lifitegrast) - for the treatment of the signs and symptoms of Dry Eye Disease

• On April 9, 2015 Shire announced that the FDA accepted the New Drug Application for lifitegrast and granted a Priority Review designation. The FDA has set an action date of October 25, 2015, based on the Prescription Drug User Fee Act V.

SHP609 - for the treatment of Hunter syndrome with CNS symptoms

• On January 26, 2015 Shire announced that the FDA has granted Fast Track designation for SHP609 for the treatment of neurocognitive decline associated with Hunter syndrome (mucopolysaccharidosis II).

SHP465 - for the treatment of adults with ADHD

• On April 7, 2015 Shire announced that it had reached an agreement with the FDA on a clear regulatory path for SHP465 (triple-bead mixed amphetamine salts), an investigational oral stimulant medication being evaluated as a potential treatment for ADHD in adults.

SHP611 - for the treatment of the late infantile form of MLD

• SHP611 is in development as recombinant human arylsulfatase A (rASA) delivered intrathecally every other week for the treatment of the late infantile form of MLD. This product has been granted orphan drug designation in the US and the EU. The Company initiated a 24 patient Phase 1/2 clinical trial in August 2012. The primary endpoint of this trial is to determine the safety of ascending doses (10mg, 30mg, and 100 mg) of rASA over 40 weeks. Secondary and exploratory endpoints focused on efficacy and include decline in motor function as defined by change in baseline Gross Motor Function Measure (GMFM-88). Based upon interim data for the first 18 patients, SHP611 was safe and well tolerated at all doses. In addition, while not statistically significant and despite a decline in GMFM-88 score across all doses, the 100mg dose caused a slower decline over the 40 week study period compared to the other two treatment groups, most notably for those patients with GMFM-88 > 40-50 at baseline. Analysis of other exploratory efficacy measures were also encouraging. We will continue to analyze these interim results and determine an optimal path forward in this development program.

SHP625 - for the treatment of cholestatic liver disease

• On April 9, 2015 Shire announced that the small 13-week Phase 2 IMAGO trial of its investigational compound SHP625 did not meet the primary or secondary endpoints in the study of 20 pediatric patients with Alagille syndrome. Given the topline results from the IMAGO study of SHP625 in pediatric patients with Alagille syndrome, we plan to analyze the totality of data to better understand the mixed results we have seen. Data for this and other indications will be important to fully understand the safety and efficacy of SHP625 in patients with cholestatic liver disease.

OTHER DEVELOPMENTS

NPS acquisition

• On February 21, 2015 Shire completed the acquisition of NPS. Shire plans to accelerate the growth of NPS's innovative portfolio through its market expertise in gastrointestinal ("GI") disorders, core capabilities in rare disease patient management, and global footprint. The integration is progressing according to plan.

Meritage acquisition

• On February 24, 2015 Shire announced that it had acquired Meritage Pharma, Inc., a privately-held company, for an upfront payment of $75 million and additional contingent payments based on the achievement of development and regulatory milestones. With the acquisition, Shire has acquired the global rights to Meritage's Phase 3-ready compound, Oral Budesonide Suspension (SHP621), for the treatment of adolescents and adults with eosinophilic esophagitis, a rare, chronic inflammatory GI disease. This acquisition further enhances Shire's late-stage pipeline and leverages the Company's rare disease and GI commercial infrastructure and expertise.

BOARD AND COMMITTEE CHANGES

Jeff Poulton has been appointed Chief Financial Officer ("CFO") and member of the Executive Committee. Jeff will additionally join the Shire Board of Directors. Both appointments are effective immediately.

Jeff has served as Interim CFO since December 2014, while overseeing Investor Relations. An experienced pharmaceuticals and biotechnology executive, Jeff has extensive experience across financial, commercial and strategic leadership roles. He joined Shire in 2003. (See separate press release for more detail).

OVERVIEW OF FIRST QUARTER 2015 FINANCIAL RESULTS

1. Product sales

For the three months to March 31, 2015 product sales increased by 9% to $1,423 million (Q1 2014: $1,308 million) and represented 96% of total revenues (Q1 2014: 97%).

   
                                          Year on year growth                          
                                                                        US Exit
                                              Non GAAP                  Market
    Product sales        Sales $M   Sales      CER(1)     US Rx(2)     Share(2)

    VYVANSE                 416.8    +19%       +20%        +6%          17%
    LIALDA/MEZAVANT         148.5    +15%       +17%       +12%          34%
    CINRYZE                 148.1    +73%       +74%       n/a(3)       n/a(3)
    ELAPRASE                125.0     -3%        +7%       n/a(3)       n/a(3)
    REPLAGAL                 97.5    -15%        -3%       n/a(4)       n/a(4)
    ADDERALL XR(R)           95.7    +12%       +14%       +15%          5%
    FIRAZYR                  92.5    +23%       +26%       n/a(3)       n/a(3)
    VPRIV                    86.4     -1%        +6%       n/a(3)       n/a(3)
    PENTASA(R)               78.7     +9%        +9%       -7%          13%
    INTUNIV                  17.4    -79%       -78%      -64%           1%
    GATTEX/REVESTIVE(R)      14.9     n/a        n/a       n/a(3)       n/a(3)
    OTHER                   101.7     +4%       +14%       n/a          n/a
    Total                 1,423.2     +9%       +13%

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(1) On a Constant Exchange Rate ("CER") basis, which is a Non GAAP measure.

(2) Data provided by IMS Health National Prescription Audit ("IMS NPA"). Exit market share represents the average US market share in the month ended March 31, 2015.

(3) IMS NPA Data not available.

(4) Not sold in the US in Q1 2015.

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VYVANSE - ADHD and BED

VYVANSE product sales grew strongly (up 19%) in Q1 2015 compared to Q1 2014 due to the benefit of a price increase taken since Q1 2014 and higher prescription demand. To a lesser extent product sales growth in Q1 2015 benefited from lower destocking in Q1 2015 compared to Q1 2014, and growth in ex-US product sales. VYVANSE was launched in mid-February for moderate to severe BED in adults and we have been pleased with the overall increase in VYVANSE prescriptions since the product became available for that indication.

To read full press release, please click here.

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