BASINGSTOKE, England and PHILADELPHIA, July 31 /PRNewswire-FirstCall/ -- Shire Limited (LSE: SHP, NASDAQ: SHPGY) the global specialty biopharmaceutical company announces results for the three months to June 30, 2008.
Angus Russell, Chief Executive Officer, commented:
"Shire continues to deliver strong growth and broaden its business in specialty biopharmaceuticals. Our product sales for the quarter were up 40% on Q2 2007 with sales of new products now comprising 34% of total product sales. At $409m, product sales excluding ADDERALL XR were up 64% reflecting the success of our strategy to build a pipeline and portfolio for Shire's future growth.
"We are pleased with the performance of ELAPRASE, FOSRENOL, LIALDA, REPLAGAL and VYVANSE and are looking forward to the continued growth of VYVANSE in the US supplemented by the recent launch of the adult indication, the additional dosage strengths and the back-to-school season.
"We have decided to commence a phased discontinuation of DYNEPO. Resources supporting this product will be re-directed to faster growing, profitable core global products.
"The proposed acquisition of Jerini AG in Germany, which we expect to complete in Q3, is an excellent match for our business and we expect to benefit from both its near term revenues and long term growth. The recent EU approval of Jerini's orphan drug FIRAZYR(R) reinforces our confidence in this product.
In addition to FIRAZYR, we have acquired seven new products since the start of 2007 which supports delivery of our long term strategy. Shire is in line to deliver another set of excellent results for 2008 and is upgrading its full year guidance for total revenue growth from the mid to high teens to at least 20%."
2008 Financial Outlook
Apart from the updates below, we reiterate the guidance given as part of the first quarter 2008 results, including confirmation that we expect VYVANSE sales to be at the lower end of a range of $350 to $400 million. In combination, the updates constitute upgraded guidance following a strong performance in the first half of 2008. This guidance excludes revenues and costs associated with the proposed acquisition of Jerini AG ("Jerini"):
The following items are excluded from net (loss)/income in calculating Non GAAP earnings, all of which are excluded from our financial outlook:
In addition depreciation, which is included in cost of product sales, R&D costs and selling, general and administrative costs in our GAAP results, has been separately disclosed for the presentation of non GAAP earnings (see pages 25 to 28).
Proposed acquisition of Jerini
On July 3, 2008 Shire announced that it was launching a voluntary public takeover offer for all shares in Jerini for an equity purchase price of EUR328 million. Shire has also invested approximately EUR21 million in return for the subscription of newly issued Jerini shares, equating to approximately 9% of the increased share capital. Jerini's Supervisory and Management Boards unanimously support the transaction and will recommend acceptance of the offer to its shareholders. Subject to completion of certain sale and purchase agreements, Shire has rights to approximately 76% of Jerini's share capital before the receipt of any takeover offer acceptances. Once the offer document is posted, it is anticipated that the offer will be open for acceptance by the remaining shareholders until the end of Q3 2008 and is contingent upon the fulfilment of certain customary terms and conditions, including approval by relevant merger control authorities.
The proposed acquisition will add Jerini's hereditary angioedema ("HAE") product, FIRAZYR(R) (icatibant), (expected to be launched in the EU in H2 2008) to Shire's Human Genetic Therapies ("HGT") portfolio.
On July 15, 2008 Shire announced that the European Commission had granted Jerini marketing authorization for FIRAZYR in the treatment of acute attacks of HAE which allows Jerini to market FIRAZYR in the European Union's 27 member states, making it the first product to be approved in all EU countries for the treatment of HAE.
On July 17, 2008 the German Federal Cartel Office issued confirmation of merger clearance.
For further details see Shire's press releases of July 3 and July 15, 2008.
The Company has today announced that it has decided to stop the commercialization of DYNEPO. Changes in the external environment including the launch of several bio-similars at lower prices have proved challenging for DYNEPO, a gene-activated erythropoietin indicated for use in treating anemia associated with kidney disease, making it an uneconomic product for Shire. Product sales will wind down over the second half of 2008 as all patients are transferred off DYNEPO by the end of the year.
Shire has recorded charges of $150.3 million in the quarter ended June 30, 2008 to cover intangible asset impairment, inventory write-down and other exit costs. The cash effect of these exit costs is approximately $20 million.
New Product Launches - subject to obtaining relevant regulatory/governmental approvals, product launches planned over the next two years include:
VYVANSE(TM) (lisdexamfetamine dimesylate) - Attention Deficit and Hyperactivity Disorder ("ADHD")
In respect of the six months ended June 30, 2008, the Board resolved to pay an interim dividend of 2.147 US cents per ordinary share (2007: 2.147 US cents per share).
Dividend payments will be made in Pounds Sterling to Ordinary shareholders and in US Dollars to holders of American Depository Shares ("ADSs"). A dividend of 1.085 pence per ordinary share (2007: 1.048 pence) and 6.441 US cents per ADS (2007: 6.441 US cents) will be paid on October 9, 2008 to persons whose names appear on the register of members of the Company at the close of business on September 12, 2008.
As previously disclosed Shire intends to put in place Income Access Share arrangements enabling shareholders to choose whether they receive their dividends from a company resident for tax purposes in the Republic of Ireland or from a company resident for tax purposes in the United Kingdom. The arrangements will be in place for the interim dividend. In accordance with the Shire ADS Deposit Agreement, the ADS Depositary will make an election on behalf of all holders of ADSs to receive UK sourced dividends. Details of the Income Access Share arrangements can be found in the Scheme Circular issued on April 16, 2008, which is available on the Company's website http://www.shire.com.
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Notes to editors
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 and 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 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 including, but not limited to, the establishment in the market of VYVANSE(TM) (lisdexamfetamine dimesylate) (Attention Deficit and Hyperactivity Disorder ("ADHD")); the impact of competitive products, including, but not limited to, the impact of those on the Company's ADHD franchise; patents, including but not limited to, legal challenges relating to the Company's ADHD franchise; government regulation and approval, including but not limited to the expected product approval date of INTUNIV(TM) (guanfacine extended release) (ADHD); the Company's ability to secure new products for commercialization and/or development; the Company's proposed offer for Jerini AG, including but not limited to, the Company's ability to successfully complete the offer and integrate Jerini AG, as well as realize the anticipated benefits of the acquisition; and other risks and uncertainties detailed from time to time in the Company's filings with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for the year ended December 31, 2007.
Non GAAP Measures
This press release contains financial measures not prepared in accordance with US GAAP. These measures are referred to as "non GAAP" measures and include Non GAAP operating income, Non GAAP net income, Non GAAP diluted earnings per ordinary share, Non GAAP diluted earnings per ADS and effective tax rate on Non GAAP income. These non GAAP measures exclude the effect of certain cash and non-cash items, both recurring and non-recurring, that Shire's management believes are not related to the core performance of Shire's business.
These non GAAP financial measures are used by Shire's management to make operating decisions because they facilitate internal comparisons of the Company's performance to historical results and to competitors' results. These measures are also considered by Shire's Remuneration Committee in assessing the performance and compensation of employees, including its executive directors.
The non GAAP measures are presented in this press release as the Company's management believe that they will provide investors with a means of evaluating, and an understanding of how Shire's management evaluates, the Company's performance and results on a comparable basis that is not otherwise apparent on a US GAAP basis, since many one-time, infrequent or non-cash items that the Company's management believe are not indicative of the core performance of the business may not be excluded when preparing financial measures under US GAAP.
These non GAAP measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with US GAAP.
The following are trademarks either owned or licensed by Shire Limited or companies within the Shire group which are the subject of trademark registrations in certain territories, or which are owned by third parties as indicated and referred to in this press release:
Revenues from operations for the three months to June 30, 2008 increased by 35% to $775.6 million (2007: $574.9 million).
The operating loss for the three months to June 30, 2008 was $67.3 million (2007 loss: $1,775.1 million). The loss in the second quarter of 2008 was due to the $135.0 million write-off of in-process research and development in respect of the acquisition of METAZYM, and the intangible asset impairment charge, inventory write-down and exit costs ($150.3 million) in respect of DYNEPO, which Shire has decided to stop commercialising. The operating loss in the second quarter of 2007 was due to the $1,896.0 million write-off of in-process research and development acquired as part of the $2.6 billion acquisition of New River Pharmaceuticals Inc. ("New River").
Cash inflow from operating activities for the three months to June 30, 2008 decreased by 1% to $180.4 million (2007: $183.0 million), as a result of the payment of $135.0 million in respect of the acquisition of METAZYM offset by strong cash generation from underlying operations.
Cash, cash equivalents and restricted cash at June 30, 2008 totaled $835.5 million (December 31, 2007: $802.0 million). The increase of $33.5 million was less than the cash inflow from operating activities primarily due to the purchase of property, plant and equipment, payments to acquire shares by the ESOT and the dividend payment.
2. Product sales
Shire's average quarterly market share of the US ADHD market rose to 32.3% in the three months to June 30, 2008 (2007: 28.6%), driven by the introduction of VYVANSE in July 2007. The overall US ADHD market grew by 7% in the same period. Shire has the leading portfolio of products in the US ADHD market.
ADDERALL XR - ADHD
As a result of the launch of VYVANSE in July 2007, ADDERALL XR's average quarterly market share of the US ADHD market for Q2 2008 fell to 23.1% (2007: 26.3%), a decrease of 12% compared to Q2 07. US prescriptions for ADDERALL XR for the period to June 30, 2008 decreased by 6% compared to the same period in 2007 due to the 12% decrease in average market share offset by 7% growth in the US ADHD market.
Sales of ADDERALL XR for the three months to June 30, 2008 were $296.4 million, an increase of 16% compared to the same period in 2007 (2007: $255.1 million). Product sales grew despite the decline in US prescriptions primarily due to price increases in October 2007 and April 2008.
Litigation proceedings concerning Shire's ADDERALL XR patents are ongoing. Further information on this litigation can be found in our filings with the US Securities and Exchange Commission ("SEC"), including our Annual Report on Form 10-K for the year to December 31, 2007.
VYVANSE - ADHD
VYVANSE was launched in the US market in July 2007. Product sales for the three months to June 30, 2008 were $65.2 million (2007: $nil) representing a 20% increase compared to sales of $54.4 million in Q1 2008.
Product sales growth was driven by a 15% increase in prescription demand compared to Q1 2008 together with a price increase in May 2008. For the three months to June 30, 2008 VYVANSE's average quarterly market share was 7.4% (Q1 08: 6.1%) of the US ADHD market.
By July 18, 2008 VYVANSE had achieved a US ADHD average weekly market share of 8.2% based on weekly prescription volumes.
DAYTRANA - ADHD
Product sales for the three months to June 30, 2008 were $22.6 million (2007: $19.9 million). Prescriptions declined by 11% from the same period last year due to a reduction in DAYTRANA's average quarterly market share of the US ADHD market to 1.8% (2007: 2.2%).
Despite the decrease in prescriptions compared to 2007, sales of DAYTRANA grew 14% due to higher market growth, lower sales deductions and a price increase in January 2008.
On June 9, 2008 Shire announced a voluntary recall of a limited portion of DAYTRANA patches because certain patches did not meet their release liner removal specifications which may have resulted in some patients and caregivers having difficulties removing the liners. The voluntary recall was not due to safety issues. Shire and Noven Pharmaceuticals Inc. (the manufacturer of DAYTRANA) continue to pursue enhancements to the product and to work closely with the FDA to implement changes that may improve the usability of DAYTRANA. No interruption in the production of DAYTRANA is anticipated.
US oral mesalamine market share
Shire's average quarterly market share of the US oral mesalamine market rose to 27.6% in the three months to June 30, 2008 (2007: 19.9%), driven by the introduction of LIALDA in March 2007. The overall US oral mesalamine market grew by 1% in the same period.
LIALDA/MEZAVANT - Ulcerative colitis
Shire launched LIALDA in the US oral mesalamine market in March 2007, and during the three months to June 30, 2008 LIALDA had reached an average quarterly market share of 10.8%. LIALDA's product sales in the US for the three months to June 30, 2008 were $30.9 million (2007: $5.0 million). This compares to sales of $26.7 million and an average quarterly market share of 9.1% in Q1 2008.
Sales of MEZAVANT outside the US for the three months ended June 30, 2008 were $1.1 million (2007: $nil). The product was launched as MEZAVANT XL in the UK in November 2007 and as MEZAVANT in Canada and Germany in January and February 2008 respectively. Shire launched MEZAVANT XL in Ireland in April 2008 and further launches are planned in certain other EU countries during 2008, subject to the successful conclusion of pricing and reimbursement negotiations.
PENTASA - Ulcerative colitis
Sales of PENTASA for the three months to June 30, 2008 were $44.8 million, an increase of 11% compared to the same period in 2007 (2007: $40.2 million). Sales grew despite a decrease in prescriptions due to the impact of price increases in August 2007 and April 2008.
US prescriptions for the three months to June 30, 2008 were down 2% compared to the same period in 2007 primarily due to a 3% decrease in PENTASA's US average quarterly market share from 17.3% in 2007 to 16.8% in 2008, offset by a 1% increase in the US oral mesalamine market.
FOSRENOL - Hyperphosphatemia
FOSRENOL has been launched in 29 countries and global sales totaled $42.4 million for the three months to June 30, 2008 (2007: $24.5 million). Sales of FOSRENOL outside the US for the three months ended June 30, 2008 were $19.3 million (2007: $9.0 million).
US sales of FOSRENOL for the three months to June 30, 2008 were up 49% to $23.1 million compared to the same period in 2007 (2007: $15.5 million).
FOSRENOL's average quarterly prescription share of the US phosphate binder retail market decreased to 8.2% for the three months to June 30, 2008 (2007: 8.5%). Contributing to product sales increase were price increases in October 2007 and February 2008. As a consequence of focusing on specialist physicians, clinics and dialysis centers, FOSRENOL's dollar share of the non-retail market has increased to 17.2% in June 2008 compared to 12.3% in June 2007.
Effective April 16, 2008 Shire and Abbott Laboratories Inc. mutually agreed to terminate their Co-Promotion Agreement for FOSRENOL in the United States. Shire will continue to promote FOSRENOL on its own in the United States and throughout Europe.
XAGRID - Thrombocythemia
Sales for the three months to June 30, 2008 were $20.6 million, an increase of 20% compared to the same period in 2007 (2007: $17.1 million). Expressed in transaction currencies (XAGRID is primarily sold in Euros and Pounds Sterling), sales increased by 10% due to growth in many of Shire's existing markets, with exchange rate movements against the US dollar accounting for the remaining 10% increase.
Human Genetic Therapies
ELAPRASE - Hunter syndrome
Sales for the three months to June 30, 2008 were $80.8 million, an increase of 89% compared to the same period in 2007 (2007: $42.7 million). The sales growth was primarily driven by increased unit sales in North America, EU, Latin America, and Asia Pacific. The product is now approved for marketing and commercial distribution in 40 countries. Exchange rate movements against the US dollar contributed 12% to the growth compared to the prior year.
REPLAGAL - Fabry disease
Sales for the three months to June 30, 2008 were $44.7 million, an increase of 40% compared to the same period in 2007 (2007: $31.9 million). The sales growth was primarily driven by increased unit sales in the EU and Latin America. The product is now approved for marketing and commercial distribution in 42 countries. Exchange rate movements against the US dollar contributed 11% to the growth compared to the prior year.
3TC - HIV infection and AIDS
Shire receives royalties from GSK on worldwide 3TC sales. Royalties from sales of 3TC for the three months to June 30, 2008 were $35.6 million, (2007: $39.0 million). Excluding favorable foreign exchange movements of 7%, there has been a decline of 16% compared to the same period in 2007. While the nucleoside analogue market for HIV has continued to grow, competitive pressures from new products and entrants to the market have increased, leading to a decline in 3TC sales.
ZEFFIX - Chronic hepatitis B infection
Shire receives royalties from GSK on worldwide ZEFFIX sales. Royalties from sales of ZEFFIX for the three months to June 30, 2008 were $10.8 million, an increase of 4% (2007: $10.4 million). The impact of foreign exchange movements has contributed 13% to the reported growth; excluding favorable foreign exchange movements there has been a decrease of 9% compared to the same period in 2007.
Other royalties are primarily in respect of REMINYL and REMINYL XL (known as RAZADYNE and RAZADYNE ER in the US), a product marketed worldwide (excluding the UK and the Republic of Ireland) by Janssen Pharmaceutical N.V. ("Janssen"), an affiliate of Johnson & Johnson. Shire has exclusive marketing rights in the UK and the Republic of Ireland.
Sales of the REMINYL/RAZADYNE range, for the symptomatic treatment of mild to moderately severe dementia of the Alzheimer's type, continue to grow.
Litigation proceedings relating to 3TC, COMBIVIR, EPIVIR, EPZICOM, RAZADYNE, RAZADYNE ER, REMINYL, REMINYL XL and ZEFFIX are ongoing. Further information on these litigations can be found in our filings with the SEC, including our Annual Report on Form 10-K for the year to December 31, 2007.
The cost of product sales increased to $142.9 million for the three months to June 30, 2008 (20% of product sales), up from $74.0 million in the corresponding period in 2007 (2007: 15% of product sales).
For the three months to June 30, 2008 cost of product sales included charges of $53.4 million (8% of product sales) (2007: $nil) relating to the write-down of inventory and other exit costs for DYNEPO, which the Company has decided to stop commercialising, and $3.0 million of depreciation (2007: $2.9 million). Excluding these charges, cost of product sales decreased as a percentage of product sales to 12% (2007: 14% of product sales).
R&D expenditure increased to $145.3 million for the three months to June 30, 2008 (21% of product sales), up from $103.1 million in the corresponding period in 2007 (20% of product sales).
Excluding costs relating to the exiting of post-approval marketing commitments for DYNEPO, which the Company has decided to stop commercialising , and depreciation (see reconciliation table above), R&D expenditure increased by $41.6 million over the same period in 2007, remaining consistent as a percentage of product sales at 19% (2007: 19% of product sales). Contributing to the increased R&D expenditure in the second quarter of 2008 over 2007 were costs associated with projects in-licensed and acquired since the second half of 2007 including PLICERA, SPD550, AMIGAL, JUVISTA and METAZYM together with Phase 3(b) and Phase 4 studies to support new product launches.
SG&A expenses increased to $428.8 million for the three months to June 30, 2008 from $280.6 million in the corresponding period in 2007. Excluding an intangible asset impairment charge of $90.4 million in respect of DYNEPO, amortization of intangible assets (increased due to VYVANSE, launched July 2007), costs associated with the introduction of the new holding company and depreciation costs (see reconciliation table above), SG&A expenditure increased by $36.5 million to $289.6 million.
Excluding these items, SG&A decreased as a percentage of product sales to 41% (2007: 50%) reflecting the sales impact in the three months to June 30, 2008 of the successful launches of VYVANSE, LIALDA/MEZAVANT and ELAPRASE.
Other increases in SG&A expenses mainly relate to the increase in advertising, promotional and marketing spend to support VYVANSE and LIALDA/MEZAVANT.
Gain on sale of product rights
For the three months to June 30, 2008 Shire recognized gains of $9.1 million (2007: $5.0 million) arising from product divestments in 2007, including $8.6 million from the sale of non-core products to Almirall.
These gains were deferred at December 31, 2007 pending the transfer of the relevant consents.
In process R&D charge
During the three months to June 30, 2008 the Company recorded an in-process R&D charge of $135.0 million in respect of the acquisition of the global rights to the clinical candidate arylsulfatase-A currently known as METAZYM (HGT-1111), from Zymenex.
During the three months to June 30, 2007 Shire expensed the portion of the New River purchase price allocated to in-process R&D totaling $1,896.0 million. This amount represented the value of those acquired development projects which, at the acquisition date, had not been approved by the FDA or other regulatory authorities, including the adult indication of VYVANSE.
For the three months to June 30, 2008 Shire received interest income of $6.5 million (2007: $14.9 million). Interest income primarily relates to interest received on cash and cash equivalents. Interest income for the three months to June 30, 2008 is lower than the same period in 2007 due to lower average cash and cash equivalent balances and lower average US Dollar interest rates.
For the three months to June 30, 2008 the Company incurred interest expense of $16.8 million (2007: $28.0 million). In the three months to June 30, 2007 interest expense included a $7.9 million write-off of deferred financing charges on repayment of term loans used to fund the acquisition of New River following the issue of the $1.1 billion convertible bonds in May 2007.
In both three month periods to June 30, 2008 and 2007 interest expense includes a provision for interest, which may be awarded by the Court in respect of amounts due to those ex-Transkaryotic Therapies, Inc. ("TKT") shareholders who have requested appraisal of the acquisition consideration payable for their TKT shares. A trial date of December 10, 2008 has been set. Further information on this litigation can be found in our filings with the SEC, including our Annual Report on Form 10-K for the year to December 31, 2007.
The effective rate of tax for the three months to June 30, 2008 was -0.3% (2007: -1%). Excluding the tax effect of items excluded from non GAAP income as outlined on pages 25-26, the effective rate of tax on non GAAP income is 20% (2007: 24%). The effective rate of tax on non GAAP income in the three months to June 30, 2008 was 4% lower than the corresponding period in 2007 principally due to a permanent tax benefit arising on the debtor substitution of the Company's convertible bond on the Scheme of Arrangement in May 2008.
Equity in earnings of equity method investees
Net losses of equity method investees of $1.9 million were recorded for the three months to June 30, 2008 (2007: earnings $0.7 million). This comprised earnings of $1.5 million from the 50% share of the anti-viral commercialization partnership with GSK in Canada (2007: $3.1 million) offset by losses of $3.4 million being the Company's share of losses in the GeneChem, AgeChem and EGS Funds (2007: loss $2.4 million).
The share equivalents not included in the above calculation of the diluted weighted average number of shares are shown below:
SOURCE Shire Ltd