October 29, 2010 – Shire plc (LSE: SHP, NASDAQ: SHPGY) the global specialty biopharmaceutical company, announces results for the three months to September 30, 2010.
Angus Russell, Chief Executive Officer, commented:
“We delivered another outstanding set of results this quarter with strong revenue growth and operating leverage driving increases in Non GAAP earnings. This continued excellent performance demonstrates the overall strength of Shire’s business and the sustained execution of our strategy.
In ADHD, VYVANSE sales are up 17% and the number of new physicians prescribing INTUNIV continues to increase.
Sales of REPLAGAL have increased by 91% as we respond to the great need of our Fabry patients; we estimate that our global market share now exceeds 60%. Only seven months into the initial launch of our treatment for Gaucher patients, around 1,000 patients are now on VPRIV, representing a 16% global market share.
We’ve made progress in several significant programs in our research and development pipeline, including investigative uses of VYVANSE for adjunctive therapy in patients with Major Depressive Disorder (“MDD”). We’ve also recently completed our acquisition of Movetis NV, bringing the approved product RESOLOR to our gastro-intestinal (“GI”) portfolio, and announced the in-licence from Acceleron of a Phase 2 orphan drug for Duchenne Muscular Dystrophy.
Alongside delivery of these outstanding quarterly results, we’re building our business for the future. We’re investing to enhance the value of our product pipeline, building our international structure to maximise the global reach of our products and using our strong cash generation to complete value enhancing acquisitions and in-licenses.
We now expect to see Non GAAP earnings of up to $4.20 per ADS for the full year. This includes the financial effect of the Movetis acquisition and the DAYTRANA disposal. Looking ahead, we re-iterate our aspirational target of mid-teens sales growth on average between 2009 and 2015.”
Third Quarter 2010 Unaudited Results
- Product sales were up 32% to $794 million (2009: $603 million) due to growth from both Core Products Sales (up 31% to $694 million) and ADDERALL XR®, (up 41% to $100 million). On a CER basis, which is a Non GAAP measure, Core Product Sales were up 34%.
- Core Products Sales growth was driven by both existing and new products, particularly REPLAGAL®(up 91% to $92 million; CER: up 103%), VYVANSE® (up 17% to $151 million) and recently launched VPRIV® ($50 million) and INTUNIV® ($37 million).
- Total revenues were up 31% (CER: up 34%) to $874 million (2009: $667 million), as a result of higher product sales and higher royalty income on authorized generic sales of ADDERALL XR compared to Q3 2009.
- Non GAAP operating income increased by $164 million, or 123%, to $298 million (2009: $134 million) as the increased investments we are making in our research and development (“R&D”) programs and selling, general and administrative (“SG&A”) activities to support recent growth were more than offset by higher revenues compared to 2009. On a US GAAP basis, operating income increased by $64 million, or 70%, to $156 million (2009: $92 million). US GAAP operating income in Q3 2010 also included an up-front payment of $45 million made to Acceleron Pharma Inc. (“Acceleron”) in relation to the collaboration for activin receptor type IIB (“ActRIIB”) molecules and impairment charges of $43 million following the decision to divest DAYTRANA® to Noven Pharmaceuticals Inc. (“Noven”).
- Cash generation, which is a Non GAAP measure, increased by $51 million to $271 million (2009: $220 million). Higher cash receipts from product sales and royalties were partially offset by higher cash payments on the increased investment in R&D and SG&A, and the timing of sales deduction payments in 2010.
- Net debt at September 30, 2010 was $309 million (December 31, 2009: $615 million), a reduction of $306 million in the year to date. Strong cash generation of $959 million in the nine months to September 30, 2010 has reduced net debt as well as funded the acquisition of and construction at Lexington Technology Park, cash tax payments and the upfront payment made to Acceleron. Excluding restricted cash of $584 million held to pay for the acquisition of Movetis NV (“Movetis”) in the fourth quarter, net debt at September 30, 2010 was $893 million.
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2010 OUTLOOK
Following a stronger than expected third quarter, we have increased our expectations for the full year 2010. We now expect to see Non GAAP earnings per ADS of up to $4.20. This increase includes the financial effect of the Movetis acquisition and the disposal of DAYTRANA on October 1, 2010; it also includes the cumulative impact of US Healthcare Reform, mandated European price cuts and adverse foreign exchange rates.
The strong growth of our core portfolio will continue to drive total revenue growth; however, the rate of growth will reduce in the fourth quarter as we will not benefit from the one off adjustment to ADDERALL XR Medicaid rebates and high level of royalties experienced in the same period last year. The consolidation of Movetis will also mean that combined R&D and SG&A spend for 2010 is likely to grow at marginally above 10% year on year.
Shire has made significant progress in 2010. Growth across our core portfolio, particularly the accelerated growth of our HGT business, has enabled us to increase our expectations of earnings while also making targeted investments in our pipeline and international structure. We expect to see solid earnings growth in 2011, but at a rate that reflects the pull ahead into 2010 of some of HGT’s growth potential.
PRODUCT LAUNCHES
Subject to obtaining the relevant regulatory/governmental approvals, future product launches in the next 12 months include:
- VYVANSE/VENVANSE for the treatment of Attention Deficit Hyperactivity Disorder (“ADHD”) in adolescents in the US and children in Brazil;
- INTUNIV as adjunctive treatment to long acting oral stimulants for the treatment of ADHD in children and adolescents in the US;
- EQUASYM® for the treatment of ADHD in certain European Union (“EU”) countries;
- RESOLOR® in certain EU countries, for the symptomatic treatment of chronic constipation in women for whom laxatives fail to provide adequate relief;
- LIALDA/MEZAVANT for the maintenance of remission of ulcerative colitis in the US and for the treatment of ulcerative colitis in certain countries;
- VPRIV for the treatment of type 1 Gaucher disease in certain European and Latin American countries; and
- FIRAZYR® for the symptomatic treatment of acute attacks of hereditary angioedema (“HAE”) in the US and certain European and Latin American countries.
PRODUCT AND PIPELINE DEVELOPMENTS
Products
PENTASA® – for the treatment of Ulcerative Colitis
- On August 24, 2010 Shire received a ruling from the US Food and Drug Administration (“FDA”) on its Citizen Petition relating to PENTASA. The ruling granted Shire’s request with regard to the requirement that bioequivalence to PENTASA be shown by dissolution testing and further imposed a requirement for rigorous pharmacokinetic data. The ruling denied the request that studies with clinical outcomes endpoints also be required because the FDA concluded that comparative clinical endpoint studies would be less sensitive, accurate and reproducible than pharmacokinetic studies.
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RESOLOR – for the treatment of chronic constipation in women
- Through its acquisition of Movetis, Shire has expanded its GI presence in Europe with the recently launched RESOLOR, a new chemical entity. RESOLOR is approved in the 27 countries of the EU, Switzerland, Iceland, Lichtenstein and Norway.
REPLAGAL – for the treatment of Fabry disease
- REPLAGAL is now the global market leader for the treatment of Fabry disease. Shire’s continuing priority is to ensure long term, uninterrupted supply at the approved dose to patients treated with REPLAGAL. There are over 2,300 patients on REPLAGAL worldwide and Shire anticipates being able to continue to accommodate additional Fabry patients in 2010 while carefully monitoring supply and demand. Shire will be in a position to make REPLAGAL available to at least 300 additional patients in 2011, phased throughout the year, based on current manufacturing capacity. Approval of the new Lexington Manufacturing facility will allow treatment of several hundred more Fabry patients with REPLAGAL, and Shire is working closely with the authorities towards this goal.
VPRIV – for the treatment of Type 1 Gaucher disease
- On August 26, 2010 the European Commission granted Shire marketing authorization for VPRIV, an ERT for the long-term treatment of Type 1 Gaucher disease. VPRIV has been authorized as an orphan medicine through the Centralized Procedure, making it available in 30 countries across Europe.
- Shire has seen rapid adoption of VPRIV worldwide. There are currently over 1,000 Gaucher patients treated with VPRIV and initiation of treatment continues. Based on its current manufacturing capacity, Shire anticipates being able to accommodate approximately 200 additional Gaucher patients until the approval of the Lexington Manufacturing facility provides substantial additional capacity. Shire has an ongoing program to monitor demand and manage requests for VPRIV. Shire’s priority is ensuring long-term, uninterrupted treatment of patients on therapy.
FIRAZYR – for the treatment of HAE
- In October 2010, Shire submitted data to support a change in the label in the EU to include the potential for self-administered subcutaneous injections of FIRAZYR in patients who are experiencing acute attacks of HAE.
Pipeline
This quarter we have made significant developments in our pipeline, including:
Collaboration with Acceleron for ActRIIB molecules
- On September 9, 2010 Shire announced the expansion of its HGT pipeline through the exclusive licence, in markets outside of North America, for the ActRIIB class of molecules being developed by Acceleron. The collaboration will initially investigate ACE-031, Acceleron’s lead ActRIIB drug candidate, which is currently in a Phase 2a trial for the treatment of patients with Duchenne Muscular Dystrophy. ACE-031 and other ActRIIB molecules have the potential to be used in other muscular and neuromuscular disorders with high unmet medical need.
Pipeline obtained through Movetis acquisition
- The acquisition of Movetis brings to Shire a promising GI pipeline, offering additional opportunities that include two projects in early clinical development and several pre-clinical leads as well as the rights to a large library of qualified lead compounds with potential for development in different GI indications.
VYVANSE for the adjunctive therapy in the treatment of inadequate response in MDD
- Today Shire announced positive results from a Phase 2 clinical trial of VYVANSE as adjunctive therapy for patients who have had an inadequate response in their treatment of MDD. Given the encouraging results and the promise to treat a large unmet medical need, Shire will initiate Phase 3 trials of VYVANSE in patients with MDD mid 2011, following health authority meetings to establish the development program parameters. Phase 2 clinical trials in additional non-ADHD indications (treatment of negative symptoms and cognitive impairment in schizophrenia and for the treatment of cognitive impairment in depression) remain ongoing.
SPD535 for the treatment of arteriovenous grafts in hemodialysis patients - SPD535 is a novel platelet reducing agent. Phase 1 development was initiated in the third quarter of 2009 and is ongoing. Data from Phase 1 clinical trials demonstrating positive proof-of-principle have been completed. The initial Phase 2 proof-of-concept program will target prevention of thrombotic complications associated with arteriovenous grafts in hemodialysis patients. Additional Phase 2 proof-of-concept clinical trials will also be initiated to assess opportunities in other indications.
INTUNIV for ADHD in the EU
- A clinical program to support the filing of a Marketing Authorization Approval for INTUNIV for the treatment of ADHD in children aged 6 to 17 in the EU has been initiated. Shire anticipates submission of the regulatory filing for INTUNIV in Europe will occur in 2013.
OTHER THIRD QUARTER AND RECENT DEVELOPMENTS
Acquisition of Movetis
- On September 6, 2010 Shire launched a voluntary public takeover offer for all the shares in Movetis, a Belgium-based speciality GI company, for a fully diluted equity purchase price of €428 million (or €19 per share) in cash, equivalent to $592 million at closing of the transaction.
- On October 12, 2010 the Company’s wholly owned subsidiary, Shire Holdings Luxembourg S.a.r.l. acquired 99.21% of the shares of Movetis as a result of the successful tender offer. Shire is proceeding with a statutory squeeze-out of those shares and warrants not tendered to the offer in accordance with applicable Belgian legislation. An additional tender period opened, on the same terms, on October 12, 2010 and will close on November 2, 2010. Shares and warrants not tendered to the additional offer will transfer to Shire by operation of law on November 8, 2010. Movetis shares will be delisted from Euronext Brussels at close of trading on November 2, 2010.
Divesture of DAYTRANA
- On August 10, 2010 Shire announced the divestiture of DAYTRANA to Noven. The divesture became effective on October 1, 2010. Following the decision to divest DAYTRANA, Shire recognised an impairment charge of $43 million to write-down its DAYTRANA intangible asset to its fair value less costs to sell.
Co-promotion for VYVANSE with Glaxo SmithKline (“GSK”)
- In the third quarter, Shire terminated its co-promotion agreement for VYVANSE with GSK. Under the terms of the agreement, no termination payment or any other payments were made or are due to GSK since agreed upon sales thresholds were not achieved. The Company does not believe that the termination of the co-promotion agreement will impact the future performance of VYVANSE in the United States.
- Following Shire’s termination, GSK filed a lawsuit against Shire in the Philadelphia Court of Common Pleas relating to the co-promotion agreement. GSK is seeking compensation despite the failure to achieve the required sales thresholds. Shire believes that the lawsuit is frivolous and without merit and will vigorously defend itself.
Paragraph IV Notice Letter for INTUNIV
- On October 25, 2010 Shire received a Paragraph IV Notice Letter from Watson Pharmaceuticals, Inc. (“Watson”) advising of the filing of an Abbreviated New Drug Application for a generic version of INTUNIV. Shire is currently reviewing the details of Watson’s Paragraph IV Notice Letter which was directed to all three Orange Book listed patents for INTUNIV.
ADDITIONAL INFORMATION
The following additional information is included in this press release:
Overview of Q3 2010 Financial Results 8 Financial Information 12 Notes to Editors 25 Safe Harbor Statement 25 Explanation of Non GAAP Measures 26 Trademarks 27
For further information please contact:
Investor Relations Eric Rojas (erojas@shire.com) +1 781 482 0999
Media Jessica Mann (jmann@shire.com) +44 1256 894 280 Matthew Cabrey (mcabrey@shire.com) +1 484 595 8248 Jessica Cotrone (jcotrone@shire.com) +1 781 482 9538
Dial in details for the live conference call for investors 14:00 BST/9:00 EDT on October 29, 2010:
UK dial in: 0844 335 0351 US dial in: 1 866 8048688 or 1 718 3541175 International dial in: +44 844 335 0351 Password/Conf ID: 921510 Live Webcast: http://www.shire.com/shireplc/en/investors
