DUBLIN, March 25 /PRNewswire-FirstCall/ -- Shire plc , the global specialty biopharmaceutical company, announces that its Annual Report and Accounts in respect of the year ended December 31, 2008 has been published on its website. Shire has previously announced unaudited full year 2008 results, prepared in accordance with US generally accepted accounting principles, in its full year earnings announcement on February 19, 2009.
Copies of the Annual Report and Accounts, Notice of Annual General Meeting and Proxy Card will be submitted to the UK Listing Authority on or about March 27, 2009 and will shortly thereafter be available for inspection at the UK Listing Authority’s Document Viewing Facility, which is situated at:
In accordance with the requirements of Rule 4.1 of the Disclosure and Transparency Rules which applies in respect of accounting periods commencing after January 20, 2007, Appendix to this announcement contains a description of principal risks and uncertainties, business review for the year ended December 31, 2008 and the directors’ responsibility statement.
Shire’s strategic goal is to become the leading specialty biopharmaceutical company that focuses on meeting the needs of the specialist physician. Shire focuses its business on attention deficit hyperactivity disorder (ADHD), human genetic therapies (HGT) and gastrointestinal (GI) diseases as well as opportunities in other therapeutic areas to the extent they arise through acquisitions. Shire’s in-licensing, merger and acquisition efforts are focused on products in specialist markets with strong intellectual property protection and global rights. Shire believes that a carefully selected and balanced portfolio of products with strategically aligned and relatively small-scale sales forces will deliver strong results.
For further information on Shire, please visit the Company’s website: http://www.shire.com.
THE “SAFE HARBOR” 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, the Company’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 the Company’s Specialty Pharmaceutical and Human Genetic Therapies products, as well as the ability to secure and integrate new products for commercialization and/or development; government regulation of the Company’s products; the Company’s ability to manufacture its products in sufficient quantities to meet demand; the impact of competitive therapies on the Company’s products; the Company’s ability to register, maintain and enforce patents and other intellectual property rights relating to its products; the Company’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 the Company’s filings with the Securities and Exchange Commission.
Shire has launched a number of new products in the last four years, including key new products ELAPRASE, VYVANSE, LIALDA, FIRAZYR and FOSRENOL (Rest of World (‘ROW’)). The commercial success of these new products, as well as other new products that the Group may launch in the future, will depend on their approval and acceptance by physicians, patients and other key decision-makers, as well as the timing of the receipt of marketing approvals, the scope of marketing approvals as reflected in the product’s label, the countries in which such approvals are obtained, the authorization of price and reimbursement in those countries where price and reimbursement is negotiated, and safety, efficacy, convenience and cost-effectiveness of the product as compared to competitive products.
The Group may not be able to grow revenues in its new products as quickly as anticipated if any or all of the following occur:
If the Group is unable to commercialize ELAPRASE, VYVANSE, LIALDA, FIRAZYR, FOSRENOL (ROW) or any of its new products successfully, there may be a material adverse effect on the Group’s revenues, financial condition and results of operations.
Any decrease in the combined sales of VYVANSE and ADDERALL XR will significantly reduce revenues and earnings
In 2008, the combined sales of VYVANSE and ADDERALL XR were $1,420.6 million, representing approximately 47% of the Group’s total revenues. Sales of ADDERALL XR are expected to decrease significantly due to generic competition that is anticipated to commence on April 1, 2009. Any factors that decrease the sales of ADDERALL XR more significantly than expected could have a material adverse effect on the Group’s financial condition and results of operations. In addition, the entrance of generic competitors for ADDERALL XR or other leading attention deficit and hyperactivity disorder (‘ADHD’) medications could impact the sales of VYVANSE. Other factors that could impact the sales of VYVANSE or ADDERALL XR include, but are not limited to:
Any decrease in the sales of 3TC could significantly reduce earnings
The Group receives royalties from GlaxoSmithKline (‘GSK’) on the worldwide sales of 3TC. In 2008, the Group’s royalty income relating to 3TC sales was $140.2 million (2007: $145.3 million). This royalty income stream generates a larger proportion of net income relative to the Group’s own product sales as there are minimal costs associated with its generation.
Any factors that decrease sales of 3TC by GSK could significantly reduce the Group’s earnings. These include:
The failure to obtain and maintain reimbursement, or an adequate level of reimbursement, by third-party payers in a timely manner for certain of the Group’s products and parallel importation may impact future revenues and earnings
The Group’s revenues are partly dependent on the level of reimbursement provided to the Group by governmental reimbursement schemes for pharmaceutical products. Changes to governmental policy or practices could adversely affect the Group’s sales, financial condition and results of operations. In addition, the cost of treatment established by health care providers, private health insurers and other organizations, such as health maintenance organizations and managed care organizations are under downward pressure and this, in turn, could impact on the prices at which the Group can sell its products.
The market for pharmaceutical products could be significantly influenced by the following, which could result in lower prices for the Group’s products and/or a reduced demand for the Group’s products:
The prices for certain of the Group’s products when commercialized, in particular products for the treatment of rare genetic diseases such as REPLAGAL and ELAPRASE, may be high compared to other pharmaceutical products. The Group may encounter particular difficulty in obtaining satisfactory pricing and reimbursement for its products, including those that are likely to have a high annual cost of therapy. The failure to obtain and maintain pricing and reimbursement at satisfactory levels for such products may adversely affect revenues and earnings.
Parallel importation occurs when an importer finds a cheaper price for a product or equivalent product on the world market and imports that product from the lower price jurisdiction to the higher price jurisdiction. If the parallel importation of lower priced drugs is permitted in the US, it could have the effect of reducing sales of equivalent drugs in the US. To the extent that parallel importation increases, the Group may receive less revenue and earnings from its commercialized products. The parallel importation of prescription drugs is relatively common within the EU.
A disruption to the product supply chain may result in the Group being unable to continue marketing or developing a product or may result in the Group being unable to do so on a commercially viable basis
The Group sources its products from third party contract manufacturers, and for certain products has its own manufacturing capability. In the event of either the Group’s failure or the failure of any third party contract manufacturer to comply with mandatory manufacturing standards (often referred to as ‘Current Good Manufacturing Standards’ or cGMP) in the countries in which the Group intends to sell or have its products sold, the Group may experience a delay in supply or be unable to market or develop its products.
The Group dual-sources certain key products and/or active ingredients. However, the Group currently relies on a single source for production of the final drug product for each of DAYTRANA, FIRAZYR, LIALDA, PENTASA, REMINYL and XAGRID and relies on a single active ingredient source for each of ELAPRASE, FIRAZYR, FOSRENOL, REMINYL, REPLAGAL and XAGRID.
In the event of financial failure of a third party contract manufacturer, the Group may experience a delay in supply or be unable to market or develop its products. This could have a material adverse affect on the Group’s financial condition and results of operations.
There is no assurance that suppliers will continue to supply on commercially viable terms, or be able to supply components that meet regulatory requirements. The Group is also subject to the risk that suppliers will not be able to meet the quantities needed to meet market requirements
The development and approval of the Group’s products depends on the ability to procure active ingredients and special packaging materials from sources approved by regulatory authorities. As the marketing approval process requires manufacturers to specify their own proposed suppliers of active ingredients and special packaging materials in their applications, regulatory approval of a new supplier would be required if active ingredients or such packaging materials were no longer available from the supplier specified in the marketing approval. The need to qualify a new supplier could delay the Group’s development and commercialization efforts.
The Group uses bovine-derived serum sourced from New Zealand and North America in the manufacturing processes for REPLAGAL and ELAPRASE. The discovery of additional cattle in North America or the discovery of cattle in New Zealand with bovine spongiform encephalopathy, or mad cow disease, could cause the regulatory agencies in some countries to impose restrictions on these products, or prohibit the Group from using these products at all in such countries.
The actions of certain customers can affect the Group’s ability to sell or market products profitably, as well as impact net sales and growth comparisons
A small number of large wholesale distributors control a significant share of the US and European markets. In 2008, for example, approximately 56% of the Group’s product sales were attributable to two customers; McKesson Corp. and Cardinal Health, Inc. In the event of financial failure of any of these customers, the Group may suffer financial loss and a decline in revenues and earnings. In addition, the number of independent drug stores and small chains has decreased as retail pharmacy consolidation has occurred. Consolidation or financial difficulties could cause customers to reduce their inventory levels, or otherwise reduce purchases of the Group’s products. Such actions could have an adverse effect on the Group’s revenues, financial condition and results of operations. A significant portion of the Group’s Specialty Pharmaceuticals product sales are made to major pharmaceutical wholesale distributors as well as to large pharmacies in both the US and Europe. Consequently, product sales and growth comparisons may be affected by fluctuations in the buying patterns of major distributors and other trade buyers. These fluctuations may result from seasonality, pricing, wholesaler buying decisions, or other factors. In addition, a significant portion of the Group’s revenues for certain products for treatment of rare genetic diseases are concentrated with a small number of customers. Changes in the buying patterns of those customers may have an adverse effect on the Group’s financial condition and results of operations.
The outsourcing of services can create a significant dependency on third parties, the failure of whom can affect the ability to operate the Group’s business and to develop and market products
The Group has entered into many agreements with third parties for the provision of services to enable it to operate its business. If the third party can no longer provide the service on the agreed basis, the Group may not be able to continue the development or commercialization of its products as planned or on a commercial basis. Additionally, it may not be able to establish or maintain good relationships with the suppliers.
The Group has also entered into licensing and co-development agreements with a number of parties. There is a risk that, upon expiration or termination of a third party agreement, the Group may not be able to renew or extend the agreement with the third party as commercial interests may no longer coincide. In such circumstances, the Group may be unable to continue to develop or market its products as planned and could be required to abandon or divest a product line.
In the event of breakdown, failure or breach of security on any of the Group’s IT systems, the Group may be unable to maintain its business operations
The Group operates several complex information systems upon which it is dependent. The Group has back-up procedures and disaster recovery plans in place to enable the business to continue its normal operations and to mitigate any loss in the event of a failure. However, in the event of breakdown, failure or breach of security of any of these systems or the associated suppliers, the Group may be unable to maintain its business operations.
This could lead to loss of revenue and delay in product development. In addition, the Group is in the process of installing enterprise-wide information systems in its operations throughout the world. Any failure in the operation of these systems could have an adverse effect on the Group’s business operations.
The Group may incur unexpected expenditure in order to comply with US environmental laws
The Group’s manufacturing sites are situated in the US and are subject to national, state and local environmental laws. Compliance with environmental laws requires ongoing expenditure and any spillage or contamination found to be caused by the Group may result in clean up costs and financial penalties for the Group which could adversely affect the Group’s revenues, financial condition and results of operations.
Contracts are used in all areas of operation of the business. They may contain provisions that do not protect the Group’s position or with which it cannot comply
Contracts form the basis of agreement in many key activities such as mergers and acquisitions, arrangements with suppliers, outsourcing, product licensing and marketing. These contracts may contain provisions that impose duties on the parties involved or may fail to contain adequate conditions to protect the Group’s position. The Group may be unable to meet its obligations under a contract or may be unable to require other parties to comply with their obligations and, therefore, may suffer financial loss or penalty.
RISK FACTORS RELATED TO THE PHARMACEUTICAL INDUSTRY IN GENERAL
The actions of governments, industry regulators and the economic environments in which the Group operates may adversely affect its ability to develop and market its products profitably
Changes to laws or regulations impacting the pharmaceutical industry, in any country in which the Group conducts its business, may adversely impact the Group’s sales, financial condition and results of operations. In particular, changes to the regulations relating to orphan drug status may affect the exclusivity granted to products with such designation. Changes in the general economic conditions in any of the Group’s major markets may also affect the Group’s sales, financial condition and results of operations.
The introduction of new products by competitors may impact future revenues
The manufacture and sale of pharmaceuticals is highly competitive. Many of the Group’s competitors are large, well-known pharmaceutical, biotechnology, chemical and healthcare companies with considerable resources. Companies with more resources and larger R&D expenditures have a greater ability to fund clinical trials and other development work necessary for regulatory applications. They may also be more successful than the Group in acquiring or licensing new products for development and commercialization. If any product that competes with one of the Group’s principal drugs is approved, the Group’s sales of that drug could fall.
The pharmaceutical and biotechnology industries are also characterized by continuous product development and technological change. The Group’s products could, therefore, be rendered obsolete or uneconomic, through the development of new products, technological advances in manufacturing or production by its competitors.
If the Group’s projects or clinical trials for the development of products are unsuccessful, its products will not receive authorization for manufacture and sale
Due to the complexity of the formulation and development of pharmaceuticals, the Group cannot be certain that it or its collaborative partners will successfully complete the development of new products, or, if successful, that such products will be commercially viable.
Before obtaining regulatory approvals for the commercial sale of each product under development, the Group or its collaborative partners must demonstrate through clinical and other studies that the product is of appropriate quality and is safe and effective for the claimed use. Clinical trials of any product under development may not demonstrate the quality, safety and efficacy required to result in an approvable or a marketable product. Failure to demonstrate adequately the quality, safety and efficacy of a therapeutic drug under development would delay or prevent regulatory approval of the product. In addition, regulatory authorities in Europe, the US, Canada and other countries may require additional studies, which could result in (a) increased costs and significant development delays, or (b) termination of a project if it would no longer be economically viable. The completion rate of clinical trials is dependent upon, among other factors, obtaining adequate clinical supplies and recruiting patients. Delays in patient enrolment in clinical trials may also result in increased costs and program delays. Additional delays can occur in instances in which the Group shares control over the planning and execution of product development with collaborative partners. The Group cannot be certain that, if clinical trials are completed, either the Group or its collaborative partners will file for, or receive, required authorizations to manufacture and/or market potential products (including a marketing authorization application or Abbreviated New Drug applications (‘ANDA’)) or that such application will be reviewed and approved by the regulatory authorities in a timely manner, if at all.
If the Group is unable to meet the requirements of regulators in relation to a particular product, it may be unable to develop the product or obtain or retain the necessary marketing approvals
Drug companies are required to obtain regulatory approval before manufacturing and marketing most drug products. Regulatory approval is generally based on the results of:
The clinical development, manufacture, marketing and sale of pharmaceutical products is subject to extensive regulation, including separate regulation by each member state of the European Union (‘EU’), the European Medicines Agency (‘EMEA’) itself and federal, state and local regulation in the US. Unanticipated legislative and other regulatory actions and developments concerning various aspects of the Group’s operations and products may restrict its ability to sell one or more of its products or to sell those products at a profit. The generation of data is regulated and any generated data is susceptible to varying interpretations that could delay, limit or prevent regulatory approval. Required regulatory approvals may not be obtained in a timely manner, if at all. In addition, other regulatory requirements for any such proposed products may not be met.
Even if the Group obtains regulatory approvals, the terms of any product approval, including labeling, may be more restrictive than desired and could affect the marketability of its products. Regulatory authorities also have the power amongst other things, to:
Such delays or actions could affect the Group’s ability to manufacture and sell its products.
The failure of a strategic partner to develop and commercialize products could result in delays in approval or loss of revenue
The Group enters into strategic partnerships with other companies in areas such as product development and sales and marketing. In these partnerships, the Group is dependent on its partner to deliver results. While these partnerships are supported by contracts, the Group does not exercise direct control. If a partner fails to perform or experiences financial difficulties, the Group may suffer a delay in the development, a delay in the approval or a reduction in sales or royalties of a product.
The failure to secure new products or compounds for development, either through in-licensing, acquisition or internal research and development efforts, may have an adverse impact on the Group’s future results
The Group’s future results will depend, to a significant extent, upon its ability to in-license, acquire or develop new products or compounds. The Group also expends significant resources on research and development. The failure to in-license or acquire new products or compounds, on a commercially viable basis, could have a material adverse effect on the Group’s financial position. The failure of these efforts to result in the development of products appropriate for testing in human clinical trials could have a material adverse effect on the Group’s revenues, financial condition and results of operations.
The Group may fail to obtain, maintain, enforce or defend the intellectual property rights required to conduct its business
The Group’s success depends upon its ability and the ability of its partners and licensors to protect their intellectual property rights. Where possible, the Group’s strategy is to register intellectual property rights, such as patents and trademarks. The Group also relies variously on trade secrets, unpatented know-how and technological innovations and contractual arrangements with third parties to maintain its competitive position.
Patents and patent applications covering a number of the technologies and processes owned or licensed to the Group have been granted, or are pending in various countries, including the US, Canada, major European countries and Japan. The Group intends to enforce vigorously its patent rights and believes that its partners intend to enforce vigorously patent rights they have licensed to the Group. However, patent rights may not prevent other entities from developing, using or commercializing products that are similar or functionally equivalent to the Group’s products or technologies or processes for formulating or manufacturing similar or functionally equivalent products. The Group’s patent rights may be successfully challenged in the future or laws providing such rights may be changed or withdrawn. The Group cannot assure investors that its patents and patent applications or those of its third party manufacturers will provide valid patent protection sufficiently broad to protect the Group’s products and technology or that such patents will not be challenged, revoked, invalidated, infringed or circumvented by third parties. In the regular course of business, the Group is party to litigation or other proceedings relating to intellectual property rights.
Additionally, the Group’s products, or the technologies or processes used to formulate or manufacture those products may now, or in the future, infringe the patent rights of third parties. It is also possible that third parties will obtain patent or other proprietary rights that might be necessary or useful for the development, manufacture or sale of the Group’s products. If third parties are the first to invent a particular product or technology, it is possible that those parties will obtain patent rights that will be sufficiently broad to prevent the Group or its strategic partners from developing, manufacturing or selling its products. The Group may need to obtain licenses for intellectual property rights from others to develop, manufacture and market commercially viable products and may not be able to obtain these licenses on commercially reasonable terms, if at all. In addition, any licensed patents or proprietary rights may not be valid and enforceable.
The Group also relies on trade secrets and other un-patented proprietary information, which it generally seeks to protect by confidentiality and nondisclosure agreements with its employees, consultants, advisors and partners. These agreements may not effectively prevent disclosure of confidential information and may not provide the Group with an adequate remedy in the event of unauthorized disclosure of such information. If the Group’s employees, scientific consultants or partners develop inventions or processes that may be applicable to the Group’s products under development, such inventions and processes will not necessarily become the Group’s property, but may remain the property of those persons or their employers. Protracted and costly litigation could be necessary to enforce and determine the scope of the Group’s proprietary rights. The failure to obtain or maintain patent and trade secret protection, for any reason, could allow other companies to make competing products and reduce the Group’s product sales.
The Group has filed applications to register various trademarks for use in connection with its products in various countries including the US and countries in Europe and Latin America and intends to trademark new product names as new products are developed. In addition, with respect to certain products, the Group relies on the trademarks of third parties. These trademarks may not afford adequate protection or the Group or the third parties may not have the financial resources to enforce any rights under any of these trademarks. The Group’s inability or the inability of these third parties to protect their trademarks because of successful third party claims to those trademarks could allow others to use the Group’s trademarks and dilute their value.
If a marketed product fails to work effectively or causes adverse side effects, this could result in damage to the Group’s reputation, the withdrawal of the product and legal action against the Group
Unanticipated side effects or unfavorable publicity concerning any of the Group’s products, or those of its competitors, could have an adverse effect on the Group’s ability to obtain or maintain regulatory approvals or successfully market its products. The testing, manufacturing, marketing and sales of pharmaceutical products entails a risk of product liability claims, product recalls, litigation and associated adverse publicity. The cost of defending against such claims is expensive even when the claims are not merited. A successful product liability claim against the Group could require the Group to pay a substantial monetary award. If, in the absence of adequate insurance coverage, the Group does not have sufficient financial resources to satisfy a liability resulting from such a claim or to fund the legal defense of such a claim, it could become insolvent. Product liability insurance coverage is expensive, difficult to obtain and may not be available in the future on acceptable terms. Although the Group carries product liability insurance, this coverage may not be adequate. In addition, it cannot be certain that insurance coverage for present or future products will be available. Moreover, an adverse judgment in a product liability suit, even if insured or eventually overturned on appeal, could generate substantial negative publicity about the Group’s products and business and inhibit or prevent commercialization of other products.
Investigations or enforcement action by regulatory authorities or law enforcement agencies relating to the Group’s activities in the highly regulated markets in which it operates may result in the distraction of senior management, significant legal costs and the payment of substantial compensation or fines
The Group engages in various marketing, promotional and educational activities pertaining to, as well as the sale of, pharmaceutical products in a number of jurisdictions around the world. The promotion, marketing and sale of pharmaceutical products is highly regulated and the operations of market participants, such as the Group, are closely supervised by regulatory authorities and law enforcement agencies, including the US Food and Drug Administration (‘FDA’), the US Department of Justice and the DEA in the US. Any inquiries or investigations into the operations of, or enforcement or other regulatory action against, the Group by such regulatory authorities could result in the distraction of senior management for prolonged periods of time, significant defense costs and substantial monetary penalties.
Loss of highly qualified management and scientific personnel could cause the Group subsequent financial loss
The Group faces intense competition for highly qualified management and scientific personnel from other companies, academic institutions, government entities and other organizations. It may not be able to successfully attract and retain such personnel. The Group has agreements with a number of its key scientific and management personnel for periods of one year or less. The loss of such personnel, or the inability to attract and retain the additional, highly skilled employees required for its activities could have an adverse effect on the Group’s business.
2. Business Review
Chief Executive Officer’s review
Risks-wisely measured and judiciously taken-are part and parcel of every successful company, and certainly we’ve taken our fair share at Shire. In our brightest moments we have stood at a critical juncture, made defining, not-always-obvious decisions, and redefined the future not just for ourselves, but for the physicians and patients we serve.
Since succeeding Matt Emmens as Chief Executive Officer (‘CEO’) in June, I have been particularly keen on staying true to those aspects of our culture that brought us to our present state as one of the most effective biopharmaceutical companies in the world: the willingness to take measured risks; the courage to challenge one another; and the unyielding commitment to the patients, physicians, and communities we serve. We spent the time, in 2008, to look around and to project forward-to set the targets that will enable us to emerge, by 2015, as one of the most valuable specialty biopharmaceutical companies in the world. We committed to the underlying thesis that now forms the core of our corporate brand -that we strive to be as brave as the people we help.
Of course, achieving our mission demands quite a lot of Shire’s pipeline as well as its marketed portfolio, and I am very pleased with the steps that we have taken to further leverage
