BASINGSTOKE, England, September 13 /PRNewswire-FirstCall/ -- In order to meet its obligations under the Listing Rules of the Financial Services Authority, Shire plc (“Shire”) is publishing today its interim results for the six months ended 30 June 2007 in accordance with International Financial Reporting Standards (IFRS).
It should be noted that on 26 July 2007, Shire announced its results in respect of the same period in accordance with US GAAP.
Notes to Editors
Shire plc
Shire’s strategic goal is to become the leading specialty pharmaceutical company that focuses on meeting the needs of the specialist physician. Shire focuses its business on attention deficit and hyperactivity disorder (ADHD), human genetic therapies (HGT), gastrointestinal (GI) and renal diseases. The structure is sufficiently flexible to allow Shire to target new therapeutic areas to the extent opportunities arise through acquisitions. Shire’s in-licensing, merger and acquisition efforts are focused on products in niche markets with strong intellectual property protection either in the US or Europe. Shire believes that a carefully selected portfolio of products with a strategically aligned and relatively small-scale sales force will deliver strong results.
For further information on Shire, please visit the Company’s website: http://www.shire.com.
Should any shareholder wish to receive a hard copy of the Interim Report, please email Investor Relations on investorrelations@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, Shire results could be materially affected. The risks and uncertainties include, but are not limited to, risks associated with: the inherent uncertainty of pharmaceutical research, product development, manufacturing and commercialization; the impact of competitive products, including, but not limited to the impact of those on Shire’s Attention Deficit and Hyperactivity Disorder (“ADHD”) franchise; patents, including but not limited to, legal challenges relating to Shire’s ADHD franchise; government regulation and approval, including but not limited to the expected product approval date of INTUNIV(TM) (guanfacine) extended release (ADHD); Shire’s ability to secure new products for commercialization and/or development; Shire’s ability to benefit from its acquisition of New River Pharmaceuticals Inc.; the successful development of JUVISTA(R) (Human TGFb3) and other risks and uncertainties detailed from time to time in Shire plc’s filings with the Securities and Exchange Commission, particularly Shire plc’s Annual Report on Form 10-K for the year ended December 31, 2006.
The following are trade marks of Shire plc or companies within the Shire Group, which are the subject of trade mark registrations in certain territories.
ADDERALL XR(R) (mixed salts of a single entity amphetamine) ADDERALL(R) (mixed salts of a single entity amphetamine) CALCICHEW(R) range (calcium carbonate with or without vitamin D3) CARBATROL(R) (carbamazepine extended-release capsules) DAYTRANA(TM) (methylphenidate transdermal system) ELAPRASE(TM) (idursulfase) FOSRENOL(R) (lanthanum carbonate) GENE-ACTIVATED(TM) INTUNIV(TM) (guanfacine extended release) LIALDA(TM) (mesalamine) MEZAVANT(R) (mesalazine) REMINYL(R) (galantamine hydrobromide) (UK and Republic of Ireland) REMINYL XL(TM) (galantamine hydrobromide) (UK and Republic of Ireland) REPLAGAL(R) (agalsidase alfa) VYVANSE(TM) (lisdexamfetamine dimesylate) XAGRID(R) (anagrelide hydrochloride) The following are trade marks of third parties referred to in this filing. 3TC (trademark of GlaxoSmithKline (“GSK”)) DYNEPO (trademark of Sanofi-Aventis) JUVISTA (trademark of Renovo) PENTASA (trademark of Ferring) RAZADYNE (trademark of Johnson & Johnson) REMINYL (trademark of Johnson & Johnson, excluding UK and Republic of Ireland) SEASONIQUE (trademark of Barr Laboratories, Inc.) ZEFFIX (trademark of GSK) SHIRE PLC RESULTS OF OPERATIONS FOR THE SIX MONTHS TO JUNE 30, 2007 AND 2006 UNDER IFRS Total revenues The following table provides an analysis of Shire’s total revenues by source: 6 months to 6 months to June 30, June 30, 2007 2006 Change $'M $'M % Product sales 965.7 722.0 +34 Royalties 123.5 121.4 +2 Other 13.9 6.7 +107 Total 1,103.1 850.1 +30 Product sales The following table provides an analysis of Shire’s key product sales: 6 months to 6 months to US June 30, June 30, Product sales prescription growth growth 2007 2006 $'M $'M % % Specialty Pharmaceuticals ADHD ADDERALL XR 504.2 426.8 +18 +7 ADDERALL - 18.9 N/A N/A DAYTRANA 31.8 - N/A N/A GI PENTASA 84.0 62.6 +34 +6 LIALDA 5.0 - N/A N/A RENAL FOSRENOL 47.3 13.9 N/A +12 DYNEPO 1.9 - N/A N/A 1.1.1.1.6GP CALCICHEW 25.6 22.1 +16 N/A CARBATROL 33.4 30.3 +10 -5 REMINYL/REMINYL XL 14.6 9.3 +57 N/A XAGRID 31.6 26.2 +21 N/A Other product sales 52.6 57.8 -9 __________ __________ __________ 832.0 667.9 +25 __________ __________ __________ Human Genetic Therapies REPLAGAL 64.4 54.1 +19 N/A ELAPRASE 69.3 - N/A N/A __________ __________ __________ 133.7 54.1 N/A __________ __________ __________ Total product sales 965.7 722.0 +34 __________ __________ __________
The following discussion includes references to prescription and market share data for Shire’s key products. The source of this data is IMS Health, June 2007. IMS Health is a leading global provider of business intelligence for the pharmaceutical and healthcare industries.
ADDERALL XR
ADDERALL XR is the leading brand in the US ADHD market with an average market share of 26% during the six months to June 30, 2007 (2006: 26%). US ADHD market growth of 6% resulted in a 7% increase in US prescriptions for ADDERALL XR for the six months to June 30, 2007 compared to the same period in 2006.
Sales of ADDERALL XR for the six months to June 30, 2007 were $504.2 million, an increase of 18% compared to the same period in 2006 (2006: $426.8 million). Product sales growth was higher than prescription growth due primarily to a price increase in January 2007.
As previously disclosed, the United States Federal Trade Commission (“FTC”) informed Shire on October 3, 2006 that it was reviewing the ADDERALL XR patent litigation settlement agreement between Shire and Barr Laboratories, Inc. (“Barr”). On June 22, 2007, Shire received a civil investigative demand requesting that it provide information to the FTC relating to its settlement with Barr and its earlier settlement with Impax Laboratories, Inc. Shire is cooperating fully with this investigation and believes that the settlements are in compliance with all applicable laws.
VYVANSE
VYVANSE was launched in the US in June 2007. Launch stocks of $55.9 million (before sales deductions) were shipped to wholesalers during June 2007. In accordance with IFRS, sales of these launch stocks have been deferred pending satisfaction of revenue recognition criteria. All launch stocks are expected to be recognized into revenue by the end of 2007.
DAYTRANA
Following its launch in June 2006, DAYTRANA achieved an average market share during the six months to June 30, 2007 of 2%. Net sales for the six months to June 30, 2007 were $31.8 million.
The DAYTRANA and ADDERALL XR market share has helped Shire grow its total share of the US ADHD market to 28% at June 30, 2007 compared to 27% at June 30, 2006 (which included a 1% share relating to ADDERALL which Shire has subsequently divested).
PENTASA
PENTASA’s average share of the US oral mesalamine prescription market remained stable at 17% for the six months to June 30, 2007 compared to the same period in 2006. US prescriptions for the six months to June 30, 2007 were up 6% compared to the same period in 2006 due to increased prescriptions generated by the GI sales force and a 4% increase in the US oral mesalamine prescription market.
Sales of PENTASA for the six months to June 30, 2007 were $84.0 million, an increase of 34% compared to the same period in 2006 (2006: $62.6 million). Sales growth is higher than prescription growth due to an increasing shift to the 500mg strength units and the impact of a price increase in November 2006.
LIALDA
LIALDA’s average market share of the US oral mesalamine market from the launch of LIALDA in March 2007 through to June 30, 2007 was 2.5%. Net sales of $5.0 million for the six months to June 30, 2007 were impacted by $2.1 million in sales deductions, primarily stocking discounts and coupons.
The initial launch stock of $34.3 million (before sales deductions) continues to be worked through the wholesaler pipeline. In accordance with IFRS, sales of LIALDA are being recognized as the conditions for revenue recognition are met. All launch stock is expected to be recognized into revenue by the end of the year.
FOSRENOL
In Europe, FOSRENOL has now been launched in Germany, France, UK, Italy and a number of other countries. Launches will continue throughout 2007 in the EU, including Spain, subject to finalization of national marketing authorizations and the conclusion of pricing and reimbursement negotiations. European sales of FOSRENOL for the six months to June 30, 2007 were $15.6 million (2006: $0.9 million).
US sales of FOSRENOL for the six months to June 30, 2007 were $31.7 million (2006: $13.0 million) giving worldwide FOSRENOL sales of $47.3 million for the period (2006: $13.9 million). US IMS Retail Audit prescriptions for the six months to June 30, 2007 were up 12% compared to the same period in 2006 due to FOSRENOL increasing its average market share to 8.6% during the six months to June 30, 2007 (2006: 8.1%) and market growth of 5% over the same period. The increase in net sales is significantly higher than retail audit prescription growth due to a combination of a price increase in July 2006, growth in use of the higher strengths (launched in early 2006), lower sales deductions, wholesaler de-stocking in 2006 of initial launch stocks and the growth of non-retail business.
CARBATROL
US prescriptions of CARBATROL for the six months ending June 30, 2007 were down 5% compared to the same period in 2006. This was primarily due to a comparable decline in the US extended release carbamazepine prescription market.
Sales of CARBATROL for the six months to June 30, 2007 were $33.4 million, an increase of 10% compared to the same period in 2006 (2006: $30.3 million). Although there was a decrease in US prescriptions, sales rose due to price increases in July 2006 and April 2007.
XAGRID
Sales for the six months to June 30, 2007 were $31.6 million, an increase of 21% compared to the same period in 2006 (2006: $26.2 million). Expressed in transaction currencies (XAGRID is primarily sold in Euros), sales increased by 11% due to growth in many of Shire’s markets. In addition there was a 10% benefit from favorable exchange rate movements against the US dollar.
REPLAGAL
Sales for the six months to June 30, 2007 were $64.4 million (2006: $54.1 million). This increase of 19% is primarily due to higher unit sales in Europe and Canada, with 8% accounted by the impact of favorable exchange rates.
ELAPRASE
ELAPRASE was launched in the US in August 2006 and in Canada and several major European markets during the first half of 2007. ELAPRASE is now sold in 25 countries. Sales for the six months to June 30, 2007 were $69.3 million.
Foreign exchange effect
As many of Shire’s sales revenues are denominated in currencies other than US dollars (primarily Canadian dollars, Euros and Pounds sterling), revenue growth reported in US dollars includes the impact of translating the sales made in a local currency into US dollars. The table below shows the effect of foreign exchange translations on the revenue growth of the key affected products as well as the underlying performance of three key products in their local currency:
6 months to June 30, 6 months to 2007 sales June 30, 6 months to growth in 2007 sales Impact of June 30, local growth in translation 2007 sales currency US dollars to US $'M % % dollars ___________ ___________ ___________ __________ XAGRID sales in Euros 20.0 +17 +27 +10 REPLAGAL sales in Euros 32.1 +5 +13 +8 XAGRID sales in Pounds sterling 11.6 +2 +11 +9 CALCICHEW sales in Pounds sterling 23.0 +5 +16 +11 REMINYL and REMINYL XL sales in Pounds sterling 13.3 +44 +58 +14 REPLAGAL sales in Pounds sterling 6.0 +2 +9 +7 ___________ ___________ ___________ __________
Royalties
Royalty revenue increased by 2% to $123.5 million for the six months to June 30, 2007 (2006: $121.4 million). The following table provides an analysis of Shire’s royalty income:
6 months to 6 months to June 30, June 30, 2007 2006 change $'M $'M % ________ ___________ ___________ 3TC 74.5 77.8 -4 ZEFFIX 19.4 16.1 +20 Others 29.6 27.5 +8 ________ ____________ ___________ Total 123.5 121.4 +2 ________ ____________ ___________
3TC
Royalties from sales of 3TC for the six months to June 30, 2007 were $74.5 million (2006: $77.8 million), a decrease of 4% compared to the same period in 2006. The impact of foreign exchange movements has contributed 4% to the reported growth. Excluding foreign exchange movements the royalty income has declined 8% compared to the same period in 2006.
Shire receives royalties from GSK on worldwide 3TC sales. GSK’s worldwide sales of 3TC for the six months to June 30, 2007 were $554 million, a decrease of 7% compared to the same period in 2006 (2006: $595 million). The nucleoside analogue market for HIV has continued to grow, however competitive pressures within the market have increased, leading to a decline in 3TC sales.
ZEFFIX
Royalties from sales of ZEFFIX for the six months to June 30, 2007 were $19.4 million (2006: $16.1 million), an increase of 20% compared to the same period in 2006. The impact of foreign exchange movements has contributed 10% to the reported growth. Excluding foreign exchange movements there has been an increase of 10% compared to the same period in 2006.
Shire receives royalties from GSK on worldwide ZEFFIX sales. GSK’s worldwide sales of ZEFFIX for the six months to June 30, 2007 were $167 million, an increase of 19% compared to the same period in 2006 (2006: $140 million). This increase was primarily due to strong growth in the Chinese, Japanese and Korean markets.
Other
Other royalties are primarily in respect of REMINYL and REMINYL XL (marketed as RAZADYNE and RAZADYNE ER in the US), a product marketed worldwide by Janssen, an affiliate of Johnson and Johnson, with the exception of the United Kingdom and the Republic of Ireland where Shire has the exclusive marketing rights.
Sales of the REMINYL/RAZADYNE range, for the symptomatic treatment of mild to moderately severe dementia of the Alzheimer’s type, continue to grow in the Alzheimer’s market.
Barr and other companies have filed an Abbreviated New Drug Application (“ANDA”) with the US Food and Drug Administration (“FDA”) for generic versions of RAZADYNE and Janssen and Synaptech have filed lawsuits against some of those ANDA filers. A trial was held during the week of May 21, 2007. No decision from the court has been issued at this time.
In June 2006 Janssen and Synaptech filed a lawsuit against Barr for infringement of their patent rights relating to RAZADYNE ER as a result of Barr filing an ANDA with the FDA for a generic version of RAZADYNE ER. Janssen and Synaptech also filed suit against Sandoz Inc. in May 2007. No court date has been set in either proceedings.
Cost of product sales
For the six months to June 30, 2007 the cost of product sales was 14% of product sales (2006: 17%). The cost of product sales for REPLAGAL in 2006 included a $40.3 million adjustment in respect of inventories acquired through the acquisition of Transkaryotic Therapies Inc. (“TKT”). This fair value adjustment increased Shire’s cost of product sales as a percentage of product sales for the six months to June 30, 2006 by 5%. Excluding the impact of this fair value adjustment in 2006, cost of product sales as a percentage of product sales in the six months to June 30, 2007 was 2% higher than for the six months to June 30, 2006 due to changes in the product sales mix and inventory write-offs.
For the six months to June 30, 2007 the cost of product sales included a charge of $1.8 million for share based compensation under IFRS 2, Share Based Payments, (2006: $1.5 million).
Research and development (R&D)
R&D expenditure increased from $150.0 million in the six months to June 30, 2006 to $277.1 million in the six months to June 30, 2007.
The increase in R&D expenditure during the six months to June 2007 primarily results from a non-cash charge of $100.0 million recognized on the effective settlement of Shire’s pre-existing relationship with New River. This charge represents the write-off of capitalized up-front and milestone payments made by Shire prior to the acquisition of New River. This charge is presented within R&D as at the time of the New River acquisition VYVANSE, although approved by the FDA, had not yet received the final scheduling classification from the Drug Enforcement Agency (“DEA”) and was therefore not available for commercial sale. Further details in respect of this charge are included in Note 3 to these IFRS interim financial statements.
Excluding this charge of $100 million on the effective settlement of the pre-existing relationship with New River, R&D expenditure in the six months to June 30, 2007 was $177.1 million, (2006: $150.0 million), an increase of $27.1 million, (18%). In 2007, R&D expenditure includes costs associated with Phase 3(b) and Phase 4 studies to support new product launches and the continuation of Phase 3 trials on GA-GCB, the development of the Women’s Health and the New River franchises, pre-clinical development of three HGT projects, two new Phase 1 projects and two further pre-clinical projects.
For the six months to June 30, 2007 R&D expenditure included a charge of $5.4 million (2006: $2.8 million) in respect of share based compensation.
Selling, general and administrative (SG&A) expenses
SG&A expenses increased from $435.2 million in the six months to June 30, 2006 to $633.6 million in the six months to June 30, 2007, an increase of 46%. As a percentage of product sales, SG&A expenses were 66% (2006: 60%).
6 months to June 30, 2007 2006(1) Change $'M $'M % ____________ ____________ ___________ Sales costs 154.2 108.5 +42 Marketing costs 195.6 175.4 +12 Other SG&A costs 122.3 103.1 +19 ____________ ____________ ___________ 472.1 387.0 +22 Depreciation, amortization and goodwill impairment(2) 161.5 48.2 n/a ____________ ____________ ___________ Total SG&A costs 633.6 435.2 +46 ____________ ____________ ___________ (1) 2006 amounts have been reclassified to conform to the 2007 presentation. (2) Excludes depreciation from manufacturing plants of $2.6 million (2006: $2.2 million) which is included in cost of product sales.
The increase in sales and marketing costs included the impact of the following:
- An increase in the ADHD sales force to promote VYVANSE;
- The cost of the new GI sales force in the US; and
- The launches of DYNEPO, LIALDA and VYVANSE.
For the six months to June 30, 2007 SG&A expenses included a charge of $15.2 million in respect of share based compensation (2006: $12.4 million), representing 2% of product sales (2006: 2%).
Depreciation, amortization and goodwill impairment (included in selling, general and administrative expenses)
The depreciation charge for the six months to June 30, 2007 was $22.2 million (2006: $16.3 million). The increase in depreciation follows investment in Shire’s infrastructure to support the continuing growth of Shire.
Amortization charges, including the amortization on acquired products, were $58.4 million for the six months to June 30, 2007 (2006: $31.9 million) including intangible asset impairment charges of $0.4m (2006: $0.1 million). The increase in amortization is primarily due to the commencement of amortization of capitalized intangibles for DAYTRANA, ELAPRASE and DYNEPO following their launches in June 2006, July 2006 and March 2007 respectively. The intangible asset impairment charge arose as a result of the economic value and strategic worth of the product concerned being less than its carrying value.
The goodwill impairment charge for the six months to June 30, 2007 was $80.9 million, (2006: $nil). The impairment charge on goodwill arising on the acquisition of BioChem Pharma Inc, primarily reflects the after tax value of 3TC and Zeffix royalty income received over the six months ended June 30, 2007.
Integration costs (included in selling, general and administrative expenses)
For the six months to June 30, 2007 Shire incurred $2.7 million of costs associated with the integration of the New River business (2006: $3.9 million relating to the TKT acquisition). New River is now fully integrated and no further integration costs are anticipated.
Gain on sale of product rights
For the six months to June 30, 2007 Shire recognized a gain on the disposal of certain non-core product rights of $5.0 million (2006: $nil).
Investment revenue
For the six months to June 30, 2007 Shire received investment revenue of $34.7 million (2006: $24.2 million). Investment revenue primarily related to interest received on cash balances. Investment revenue for the six months to June 30, 2007 is significantly higher than for the six months ending June 30, 2006 due to increases in the US dollar interest rate and higher average cash balances.
Finance costs
For the six months to June 30, 2007 Shire incurred finance costs of $42.0 million (2006: $12.2 million). The increase in finance costs in 2007 over 2006 follows the acquisition of New River which was partly funded by $1.3 billion of term loans, utilized under Shire’s $2.3 billion banking facility. These term loans were subsequently partially repaid using the proceeds from Shire’s 2.75% convertible bond issued in May 2007. The remaining $200 million of the term loans was also repaid during the six months to June 30, 2007. Finance costs for the six months to June 30, 2007 include a $7.9 million write-off of deferred financing costs following the repayment of these term loans. Finance costs relating to the convertible bonds, representing interest expense, amortized discount and issue costs totaled $10.8 million for the six months to June 30, 2007.
In the six months to June 30, 2007 and 2006 finance costs included a provision for interest, which may be awarded by the Court in respect of amounts due to those ex-TKT shareholders who have requested appraisal of the acquisition consideration payable for their TKT shares. The original trial date for the appraisal rights litigation was set for April 23, 2007, but this trial date has since been postponed to May 2008.
Share of post tax profits from associates and joint ventures
Profits of $1.2 million were recorded for the six months to June 30, 2007 (2006: $4.3 million). This comprised profits of $3.1 million from the 50% share of the antiviral commercialization partnership with GSK in Canada (2006: $3.2 million), offset by losses of $1.9 million being Shire’s share of losses in the GeneChem and EGS Healthcare Funds (2006: profit of $1.1 million).
Taxation
The effective rate of tax for the six months to June 30, 2007 was 77% (2006: 32%). The effective rate of tax in the six months to June 30, 2007 has increased over the six months to June 30, 2006 as a result of the inclusion in 2007 of non-deductible goodwill impairment charges totaling $80.9 million (2006: $nil). Excluding goodwill impairment charges, the effective rate of tax for the six months to June 30, 2007 was 33% (2006: 32%).
At June 30, 2007 net deferred tax liabilities of $1,163.9 million were recognized (December 31, 2006: $27.2 million). The increase in net deferred tax liabilities at June 30, 2007 as compared to December 31, 2006 has primarily resulted from the recognition of net deferred tax liabilities totaling $1,150.7 million following the acquisition of New River.
Principal Differences: IFRS and US GAAP Net Income for the six months to June 30, 2007 and 2006.
The principal differences between IFRS net income and the US GAAP net loss for the six months ending June 30, 2007 resulted from the acquisition of New River. The primary differences arising from the New River acquisition relate to:
(a) In-process research and development (“IPR&D”)
IPR&D totaling $1,943.3 million in respect of VYVANSE indicated for non-pediatric patients in the US and VYVANSE in the rest of the world (“RoW”) has been capitalized as an intangible asset under IFRS. As required under US GAAP the value ascribed to these IPR&D assets ($1,896.0 million) has been charged to research and development expense as of the acquisition date.
(b) Effective settlement of pre-existing relationship with New River
Prior to the acquisition of New River Shire had entered into a collaboration agreement with New River which governed the development, manufacture and commercialization of VYVANSE in the US and RoW territories. As a result of the existence of this collaboration agreement, Shire’s acquisition of New River has been accounted for as a multiple element transaction under both IFRS and US GAAP, with one element being the business combination and the other element being the effective settlement of the pre-existing relationship.
Under both US GAAP and IFRS the pre-existing relationship was effectively settled at no incremental cost to Shire. No charge has been recognized on the effective settlement of the pre-existing relationship under US GAAP, however under IFRS a pre-tax charge of $100.0 million, together with related tax effects of $32.7 million, has been recognized as of the acquisition date.
A charge has arisen under IFRS as up-front and milestone payments made in 2005 and 2006 in respect of the collaboration totaling $100.0 million were classified as intangible assets: these assets have been written-off on effective settlement of the pre-existing relationship. Under US GAAP these up-front and milestone payments had, prior to the acquisition of New River, been expensed by Shire as research and development costs. Accordingly no charge on effective settlement of the pre-existing relationship has been recorded under US GAAP.
Other significant differences between net income under IFRS and the net (loss) / income as reported under US GAAP for the six months ended June 30, 2007 and 2006 related to:
Goodwill Impairment
An impairment under IFRS of the goodwill that arose on the acquisition of Biochem Pharma Inc. of $80.9 million (2006: $nil). The US GAAP treatment of the combination as a pooling of interests resulted in no goodwill arising and therefore no impairment charge is recorded under US GAAP.
Capitalisation of product milestone payments
Product milestone payments of $5.9 million (2006: $50.0 million) were capitalized as intangible assets under IFRS but expensed as research and development costs under US GAAP. Capitalized milestone payments in 2006 related to a milestone paid in respect of the New River collaboration.
Finance costs in respect of convertible bonds
Finance costs recognized in respect of the $1,100.0 million 2.75% convertible bonds due 2014 are $5.9 million (2006: $nil) higher under IFRS as compared to US GAAP.
Under both US GAAP and IFRS finance costs include the stated coupon on the bonds, together with amortization of the direct costs of issue. However, under IFRS, finance costs also include amortization of the discount arising from separate accounting for the equity conversion feature at inception: this equity conversion feature is not separately a
