Angus Russell, Chief Executive Officer, commented:
"This was another excellent quarter with strong performance from core product sales, up 39%, driving increases in operating income and earnings per ADS. Shire is performing well on all fronts.
In ADHD, sales of VYVANSE are up 30% and clinical trial enrolment has progressed for the European program and for the new indication proof of concept studies. Marketing authorization was recently given for VYVANSE in Brazil, our first approval for this product outside North America, and the launch is being planned for mid 2011. INTUNIV continues to build share with child and adolescent psychiatrists and we recently filed an sNDA for its adjunctive use with long-acting oral stimulants for the treatment of ADHD.
Sales of our Fabry treatment, REPLAGAL are up 84%, and we've seen very rapid uptake of VPRIV in the Gaucher market place with approximately 850 patients now treated globally. We received a positive opinion for VPRIV from the Committee for Medicinal Products for Human Use and although we already have sales on a preapproved basis, the anticipated European Commission decision later this year will enable the product's commercial roll out.
LIALDA for ulcerative colitis is also performing well with sales up 27% and a US market share approaching 19%. Phase 3 clinical trials investigating the use of the product for the treatment of diverticular disease are progressing.
With cash generation of $416 million during the quarter and excellent growth prospects ahead, we continue to invest in our marketed products, our pipeline and our international presence.
This year, the pharmaceutical sector has faced the challenges of US healthcare reform, European pricing pressures and fluctuating foreign exchange levels. Shire is, however, well placed to absorb these macro factors. Our strong performance in the second quarter reinforces our confidence in growing both revenue and earnings in the full year 2010 compared to 2009 and we now see Non GAAP earnings trending towards $4.00 per ADS for the full year. This includes the financial effect of the proposed acquisition of Movetis NV. We also re-iterate our aspirational target of mid-teens sales growth on average between 2009 and 2015."
The Non GAAP financial measures included within this release are explained on page 25, and are reconciled to the most directly comparable financial measures prepared in accordance with US GAAP on pages 20 - 23.
- Product sales were up 37% to $764 million (2009: $558 million) with growth from both core products (up 39% to $684 million) and ADDERALL XR(R)(up 19% to $80 million). On a constant exchange rate ("CER") basis, which is a Non GAAP measure, core product sales were up 42%.
- The continued growth in core product sales was the result of strong performance across the portfolio:
- VYVANSE(R) (up 30% to $148 million, CER: up 29%); - ELAPRASE(R) (up 17% to $100 million, CER: up 20%); - REPLAGAL(R) (up 84% to $82 million, CER: up 93%); - LIALDA(R)/MEZAVANT(R) (up 27% to $70 million, CER: up 27%); and
- Recently launched INTUNIV(R) ($51 million) and VPRIV(R) ($29 million).
- Total revenues were up 35% (CER: up 37%) to $849 million (2009: $630 million), as a result of both increased product sales and higher royalties (up 24% due to higher royalty income on sales of authorized generic ADDERALL XR).
- Non GAAP operating income increased by $154 million, or 134%, to $270 million (2009: $116 million) due to the higher total revenues and improved operating expense ratios compared to 2009, despite increased investment in research and development ("R&D") programs and selling, general and administrative ("SG&A") costs in support of recent growth. On a US GAAP basis, operating income increased by $189 million, or 547%, to $224 million (2009: $35 million).
- Cash generation, which is a Non GAAP measure, increased by $224 million to $416 million (2009: $192 million) following higher cash receipts from product sales and royalties, cash inflows from forward foreign exchange contracts in 2010 compared to outflows in 2009, partially offset by higher cash payments on the increased investment in R&D and SG&A.
- Net debt at June 30, 2010 was $398 million (December 31, 2009: $615 million), a reduction of $217 million in 2010. The reduction in net debt was driven by strong cash generation of $694 million in the first half of 2010, which was partially used in the acquisition of and construction at Lexington Technology Park, cash taxes and the dividend payment.
DIVIDEND
Dividend payments will be made in Pounds Sterling to Ordinary shareholders and in US Dollars to holders of American Depositary Shares ("ADS"). A dividend of 1.410 pence per ordinary share (an increase of 8% compared to 2009: 1.302 pence) and 6.750 US cents per ADS (an increase of 5% compared to 2009: 6.441 US cents) will be paid on October 7, 2010 to persons whose names appear on the register of members of the Company at the close of business on September 10, 2010.
2010 OUTLOOK
Given our strong performance in the second quarter, we now see Non GAAP earnings trending towards $4.00 per ADS, a 15% increase on 2009. This includes the financial effect of the proposed acquisition of Movetis NV.
The accelerated growth in the first half has increased our confidence in growing both revenues and earnings for the full year 2010 compared to 2009, despite the backdrop of the cumulative impact of US healthcare reform, pressure on European pricing and increasingly adverse foreign exchange rates.
Our core portfolio will continue to deliver strong year on year growth in 2010. The relative growth rate in the second half will start to moderate as we compare against tougher comparatives in 2009 and the rate of sales growth of REPLAGAL will also moderate as the continuing increase in patients being treated by REPLAGAL will be supported, in part, by product shipped in the second quarter.
Revenues both from ADDERALL XR product sales and from total royalties are anticipated to be lower in the last two quarters of 2010 compared to their very strong performance in the first half.
Given the strong performance in the first half and our confidence in our outlook, we will continue to make targeted increases in 2010 and beyond in investment in our international infrastructure, our recent product launches and in progressing our pipeline to support longer term growth. As a result, combined R&D and SG&A spending in 2010 will be at the top end of our previous guidance of 5-10% growth year on year.
PRODUCT LAUNCHES
Subject to obtaining the relevant regulatory/governmental approvals, future product launches in the next 12 months include:
- VPRIV for the treatment of Type 1 Gaucher disease in the European Union ("EU");
- 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 ("HAE") in certain European and Latin American countries;
- EQUASYM(R) for the treatment of Attention Deficit Hyperactivity Disorder ("ADHD") in certain EU countries; and
- VYVANSE (VENVANSE) for the treatment of ADHD in children in Brazil.
PRODUCT AND PIPELINE DEVELOPMENTS
Products
VYVANSE - for the treatment of ADHD
- On May 4, 2010 the US Food and Drug Administration ("FDA") approved a change to the prescribing information for the once-daily ADHD treatment VYVANSE to include supplemental data demonstrating significant improvement in attention in adults with ADHD across all six assessments conducted at 2, 4, 8, 10, 12 and 14 hours after administration as measured by average Permanent Product Measure of Performance total scores, as well as at each time point measured. VYVANSE is now the first and only oral ADHD long-acting stimulant treatment to have efficacy data at 14 hours post-dose for adult patients included in its product labeling.
- On July 5, 2010 ANVISA, the Brazilian health authority, granted approval of the Marketing Authorization Application for the product under the trade name VENVANSE for the treatment of ADHD in children aged 6 to 12. This represents the first approval of lisdexamfetamine dimesylate in Latin America.
LIALDA/MEZAVANT - for the treatment of ulcerative colitis
- On July 8, 2010 Shire announced that it had filed a lawsuit in the U.S. District Court for the District of Delaware against Cadila Healthcare Limited, doing business as Zydus Cadila and Zydus Pharmaceuticals (USA), Inc. (collectively, "Zydus") for the infringement of U.S. Patent No. 6,773,720 (the '720 patent). The lawsuit was filed as a result of an Abbreviated New Drug Application ("ANDA") filed by Zydus seeking FDA approval to market and sell generic versions of LIALDA prior to the expiration of the '720 patent.
DAYTRANA - for the treatment of ADHD
- On July 6, 2010 Shire announced the FDA approval of DAYTRANA for the treatment of ADHD in adolescents aged 13 to 17 years. DAYTRANA, the first and only transdermal ADHD patch, is already an FDA-approved ADHD treatment for children aged 6 to 12 years.
REPLAGAL - for the treatment of Fabry disease
- REPLAGAL is experiencing significant demand globally and is now the market leader in many key regions, due principally to a competitor's ongoing supply disruption. Currently there are approximately 2,000 patients worldwide being treated with REPLAGAL and Shire has capacity to add 150-250 more patients in 2010. Shire anticipates that it could add 250-350 more patients phased throughout 2011. Shire's continuing priority is to ensure the long term, uninterrupted supply to patients currently being treated with REPLAGAL and we will continue to monitor demand and manage supply carefully.
- Shire initiated a rolling submission of a REPLAGAL Biologics License Application ("BLA") in March 2010. On August 3, 2010 Shire informed the FDA that it would not complete the rolling submission and withdrew its BLA in order to consider updating the submission with additional clinical data.
VPRIV - for the treatment of Type 1 Gaucher disease
- On June 25, 2010 Shire received a positive opinion from the Committee for Medicinal Products for Human Use ("CHMP") of the European Medicines Agency ("EMA") on the marketing authorization for VPRIV, its enzyme replacement therapy ("ERT") for the Treatment of Type 1 Gaucher Disease in the EU. The CHMP positive opinion will now be forwarded to the European Commission for ratification. In addition to the CHMP positive opinion, VPRIV has received orphan drug designation from the Committee for Orphan Medicinal Products. In many European countries patients have been receiving VPRIV on an early access basis, developed in partnership with national and regional authorities.
With the accelerated adoption of VPRIV worldwide, and the earlier than anticipated US approval and EU positive opinion, Shire expects continued high demand and currently has approximately 850 patients on therapy, with capacity to support approximately 1,000 patients in 2010. As a result, Shire is now implementing a program with physicians and patients to monitor demand and manage requests from new patients carefully in order to ensure long-term, uninterrupted treatment with VPRIV.
Pipeline HGT-1410 for Sanfilippo Syndrome
- HGT-1410 is in development as an ERT for the treatment of Sanfilippo Syndrome, a lysosomal storage disorder. The product has been granted orphan drug designation in the US and in the EU. Shire initiated a Phase 1/2 clinical trial in August 2010.
Guanfacine CarrierWave (GCW; SPD 547)
- SPD 547 is in early stage development for the treatment of ADHD. A feasibility study in humans using microdosing has been completed and results indicate characteristics suitable for entering formal Phase 1 trials. The Phase 1 program is expected to be initiated in Q3 2010 with results throughout 2011. GCW could potentially improve on the current guanfacine profile to minimize known food, gastrointestinal ("GI") and sedation effects.
OTHER SECOND QUARTER AND RECENT DEVELOPMENTS
Proposed acquisition of Movetis NV
- On August 3, 2010 Shire announced that it was launching a voluntary public takeover offer for all the shares in Movetis NV ("Movetis"), the Belgium-based European specialty GI company, for a fully diluted equity purchase price of EUR428 million. Movetis' board unanimously supports the transaction and Institutional shareholders holding 38.9% of Movetis' shares have unconditionally agreed to accept the offer. It is anticipated that the takeover offer, which is contingent upon the fulfilment of certain conditions, will open for acceptance in September.
This proposed acquisition will significantly broaden Shire's global GI portfolio and adds growing revenues from RESOLOR(R) (prucalopride), a new chemical entity indicated for the symptomatic treatment of chronic constipation in women in whom laxatives fail to provide adequate relief. Movetis has the rights to RESOLOR in the EU, Iceland, Lichtenstein, Norway and Switzerland and is entitled to royalties on sales of RESOLOR outside of Europe from Johnson & Johnson.
The acquisition also brings to Shire world-class research and development talent and a promising GI pipeline.
Purchase of Lexington Technology Park
- On June 30, 2010 Shire purchased Lexington Technology Park in Lexington, Massachusetts for a cash purchase price of $165 million. The purchase underlines our investment in the growth of Shire's Human Genetic Therapies business, and gives Shire the ownership of an additional 570,000 square feet of expansion potential available under the current permit, including 170,000 square feet already under construction.
BOARD CHANGES
On June 16, 2010 Dr David Ginsburg and Ms Anne Minto OBE were appointed to Shire's Board of Directors with immediate effect. Dr Ginsburg was also appointed to Shire's Science & Technology Committee. Ms Minto was appointed to Shire's Remuneration Committee and assumed the Chair of that Committee on the retirement of Ms Kate Nealon from the Shire Board at the end of Ms Nealon's term of office on July 26, 2010.
