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Thursday, 3 August 2017

Shire plc : Shire reports strong Q2 2017 operating results and cash flow

Shire plc    

Published: 13:00 CEST 03-08-2017 /GlobeNewswire /Source: Shire plc / : SHP /ISIN: JE00B2QKY057

Shire plc : Shire reports strong Q2 2017 operating results and cash flow

Shire reports strong Q2 2017 operating results and cash flow; updates full year guidance

 

 

Q2 product sales growth of 7% on a combined pro forma basis; generated $1.2 billion operating cash flow

 

Over-delivered Year 1 Baxalta integration cost synergies, recognizing $400 million vs $300 million target

  

Exploring strategic review of Neuroscience franchise, including potential of independent public listing

 

Significant pipeline progress with SHP643 (lanadelumab); Phase 3 topline data demonstrates potential to change treatment paradigm for patients with HAE; U.S. approval of MYDAYIS for patients with ADHD; September launch planned

 

  

August 3, 2017 - Shire plc (Shire) (LSE: SHP, NASDAQ: SHPG) announces unaudited results for the three months ended June 30, 2017.

 

  

Flemming Ornskov, M.D., M.P.H., Shire Chief Executive Officer, commented:

 

"During the second quarter, we delivered strong top-line growth of 7% on a pro forma basis, generating product sales of $3.6 billion. Our Immunology franchise grew by 18%, and we saw significant contributions across our broad and diverse portfolio. Shire remains ahead of schedule to deliver at least $700 million in cost synergies from the Baxalta integration by Year 3. The Q2 performance resulted in strong operating cash flow of $1.2 billion and enabled us to reduce Non GAAP net debt by $880 million in the quarter.

 

"We also continue to drive the late-stage clinical pipeline. In Q2 we announced positive topline data from our Phase 3 pivotal trial of SHP643 in HAE, and anticipate submission of the BLA in late 2017 or early 2018. MYDAYIS, a once-daily treatment for patients with ADHD, received US FDA approval and will be launched in September.

 

"We are at an exciting inflection point, with both our rare disease and neuroscience businesses performing strongly and each having significant growth potential over the coming years. The strength and scale of our business provides us with the opportunity to further optimize our franchise portfolio - one of our key priorities communicated earlier this year. By year end, we expect to complete a formal evaluation of the full range of strategic options for the neuroscience franchise, including the potential for its independent public listing.

 

"As we enter the second half of 2017, we are focused on generating strong organic growth while continuing to deliver on our key priorities - launching more than 80 products globally by leveraging our expanded commercial platform, progressing our late-stage pipeline, integrating Baxalta, and paying down debt. We have updated our 2017 full year guidance and remain very confident about Shire's long-term prospects."

 

 


Financial Highlights

 

Q2 2017(1)

Growth(1)

Non GAAP CER(1)(2)

Product sales

$3,592 million

+55%

+56%

Product sales excluding legacy Baxalta

$1,882 million

+7%

 

Total revenues

$3,746 million

+54%

+56%

 

 

 

 

Operating income from continuing operations

$399 million

+315%

 

Non GAAP operating income(2)

$1,492 million

+53%

+54%

 

 

 

 

Net income margin(3)(4)

6%

13ppc

 

Non GAAP EBITDA margin(2)(4)

43%

1ppc

 

 

 

 

 

Net income

$240 million

N/M

 

Non GAAP net income(2)

$1,135 million

+47%

 

 

 

 

 

Diluted earnings per ADS(5)

$0.79

N/M

 

Non GAAP diluted earnings per ADS(2)(5)

$3.73

+10%

+11%

 

 

 

 

Net cash provided by operating activities

$1,223 million

+107%

 

Non GAAP free cash flow(2)

$1,064 million

+130%

 

(1) Results include Baxalta Inc. (Baxalta) (acquired on June 3, 2016), unless otherwise noted. Percentages compare to equivalent 2016 period. (2) The Non GAAP financial measures included within this release are explained on pages 28 - 29, and are reconciled to the most directly comparable financial measures prepared in accordance with US GAAP on pages 22 - 24. (3) US GAAP net income as a percentage of total revenues. (4) Percentage point change (ppc). (5) Diluted weighted average number of ordinary shares 913 million.

 

Product sales growth

  • Delivered product sales growth of 55% with the inclusion of legacy Baxalta sales.
  • Achieved combined pro forma product sales growth of 7%; legacy Shire product sales growth of 7% and legacy Baxalta pro forma product sales growth of 8%.
  • Strong demand for our immunology products delivered 18% pro forma sales growth, with significant contributions from our subcutaneous immunoglobulin portfolio as well as GAMMAGARD LIQUID and our albumin products.

 

Earnings growth

·     Generated Non GAAP earnings per ADS of $3.73, underscoring continued focus on commercial excellence and operating efficiency.

·       Continued to progress Baxalta integration, while delivering $400 million in cost synergies in year 1 - exceeding our target of $300 million - which contributed to a Non GAAP EBITDA margin of 43% for the quarter; on-track to achieve at least $700 million in synergies by year 3.

 

Strong cash flow

·       Strong operating cash flow enabled $880 million reduction in Non GAAP net debt since March 31, 2017; remain on-track to achieve our year-end debt target.

 

 

Product and Pipeline Highlights

 

Regulatory updates

·       Received U.S. Food and Drug Administration (FDA) approval of MYDAYIS, a new once-daily treatment option for symptom control in Attention Deficit Hyperactivity Disorder (ADHD) patients 13 years and older.

·       Granted European Union (EU) Conditional Marketing Authorization for NATPAR (Parathyroid Hormone) for the treatment of patients with Chronic Hypoparathyroidism.

·       Received European Medicines Agency (EMA) validation of VEYVONDI [von Willebrand factor (Recombinant)] Marketing Authorization Application for treatment of von Willebrand Disease (VWD).

·       Submitted Investigational New Drug (IND) application to FDA for gene therapy candidate SHP654 for the treatment of hemophilia A.

 

Clinical and business development updates

·     Reported positive topline data for SHP643 (lanadelumab), which was acquired with Dyax Corp. (Dyax), an investigational treatment that reduced Hereditary Angioedema (HAE) monthly attack rate by 87% versus placebo in a Phase 3 26-week pivotal trial.

·     Entered into an agreement with Parion Sciences to develop and commercialize SHP659 (formerly known as P-321), an investigational epithelial sodium channel (ENaC) inhibitor for the potential treatment of Dry Eye Disease in adults.

·       Expanded broad antibody research platform through license agreement with Novimmune S.A. to develop and commercialize an innovative, differentiated bi-specific antibody in pre-clinical development for the treatment of hemophilia A and hemophilia A patients with inhibitors.

 

 


FINANCIAL SUMMARY - SECOND QUARTER 2017 COMPARED TO SECOND QUARTER 2016

 

Revenues

  • Product sales increased 55% to $3,592 million (Q2 2016: $2,322 million), primarily due to the inclusion of a full quarter of legacy Baxalta sales of $1,710 million in Q2 2017.
     
  • Product sales excluding legacy Baxalta increased 7% primarily due to growth from our Internal Medicine franchise, up 15%, as well as sales from our Ophthalmology franchise of $57 million.
     
  • Royalties and other revenues increased 44% to $154 million, as Q2 2017 benefited from a full quarter of additional revenue acquired with Baxalta, primarily related to contract manufacturing activities.

 

Operating results

  • Operating income increased 315% to $399 million (Q2 2016: $96 million), primarily due to the inclusion of a full quarter of Baxalta operating income and higher revenue from our Internal Medicine franchise, partially offset by higher amortization of acquired intangible assets and higher costs relating to licensing arrangements.
     
  • Non GAAP operating income increased 53% to $1,492 million (Q2 2016: $972 million), primarily due to the inclusion of a full quarter of Baxalta operating income and higher revenue from legacy Shire products.
     
  • Non GAAP EBITDA margin as a percentage of total revenues increased to 43% (Q2 2016: 42%), primarily due to lower research and development (R&D) and selling, general and administrative (SG&A) expenditures as a percentage of revenues, partially offset by a lower Non GAAP gross margin, primarily due to the inclusion of a full quarter of lower margin product franchises acquired with Baxalta.

 

Earnings per share (EPS)

  • Diluted earnings per American Depositary Shares (ADS) increased to $0.79 (Q2 2016: diluted losses per ADS of $0.71), primarily due to higher operating income due to the inclusion of a full quarter of Baxalta income and the impact of lower losses from discontinued operations related to the divested Dermagraft business.
     
  • Non GAAP diluted earnings per ADS increased 10% to $3.73 (Q2 2016: $3.38), as higher Non GAAP operating income more than offset the impact of additional shares issued as consideration for the Baxalta transaction.

 

Cash flows

  • Net cash provided by operating activities increased 107% to $1,223 million (Q2 2016: $591 million), primarily due to strong cash receipts from higher sales and operating profitability, partially offset by the timing of payments of accounts payable and other accruals.
     
  • Non GAAP free cash flow increased 130% to $1,064 million (Q2 2016: $463 million), driven by the growth in net cash provided by operating activities noted above, partially offset by an increase of $51 million in capital expenditures, primarily related to our continued investment in manufacturing operations.

 

Debt

  • Non GAAP net debt at June 30, 2017 decreased $1,143 million since December 31, 2016, to $21,296 million (December 31, 2016: $22,439 million). The decrease was primarily due to a $1,416 million net cash repayment of debt, partially offset by a lower cash balance. Non GAAP net debt represents aggregate long and short term borrowings of $21,209 million, and capital leases of $351 million, partially offset by cash and cash equivalents of $264 million.

OUTLOOK

 

Following the strong performance in the first half of the year, we are updating our guidance for 2017.

 

The guidance incorporates accelerated synergy capture as well as an updated view on our product sales, primarily due to a new generic LIALDA competitor. We have also revised our depreciation estimate to be $450 - $500 million, based on updates resulting from the Baxalta integration, and we have lowered our capital expenditure forecast to $800 - $900 million.

 

Non GAAP EPS has been upgraded by raising the midpoint of our guidance range by 10 cents to $15.00, driven by cost discipline and accelerated synergy capture.

 

The diluted earnings per ADS forecast assumes a weighted average number of 914 million fully diluted ordinary shares outstanding for 2017.

 

Our US GAAP diluted earnings per ADS outlook has been updated to reflect ongoing integration activities, which has accelerated the recognition of synergies, and the change in fair value of contingent consideration for SHP643 (lanadelumab) resulting from the positive topline Phase 3 results.

Full Year 2017

US GAAP Outlook

Non GAAP Outlook(1)

Total product sales

$14.3 - $14.6 billion

$14.3 - $14.6 billion

Royalties & other revenues

$600 - $700 million

$600 - $700 million

Gross margin as a percentage of total revenue(2)

67.5% - 69.5%

74.5% - 76.5%

Combined R&D and SG&A

$5.3 - $5.5 billion

$4.9 - $5.1 billion

Net interest/other

$500 - $600 million

$500 - $600 million

Effective tax rate

~7%

16% - 17%

Diluted earnings per ADS(3)

$5.65 - $6.05

$14.80 - $15.20

 

(1) For a list of items excluded from Non GAAP Outlook, refer to pages 28 - 29 of this release.

(2) Gross margin as a percentage of total revenues excludes amortization of acquired intangible assets.

(3) See page 24 for a reconciliation between US GAAP diluted earnings per ADS and Non GAAP diluted earnings per ADS.

 


RECENT DEVELOPMENTS

 

Corporate Strategy

 

Shire to assess strategic options for its Neuroscience franchise

  • With the acquisition and integration of Baxalta, Shire has solidified its leadership position in rare diseases with an unparalleled inline portfolio, innovative pipeline, and global commercial infrastructure. As part of the Board's ongoing commitment to optimize Shire's portfolio and strategic focus, Shire is assessing strategic options for our Neuroscience franchise to derive even greater value from this franchise. These options may include the independent public listing of the Neuroscience franchise. Shire intends to complete this strategic review by year end.

 

Business Development

 

Shire enters into a licensing agreement for Novimmune bi-specific antibody

  • On July 18, 2017, Shire entered into a licensing agreement with Novimmune S.A. The license grants Shire exclusive worldwide rights to develop and commercialize an innovative, bi-specific antibody in pre-clinical development for the treatment of hemophilia A and hemophilia A patients with inhibitors.

 

Products

 

FIRAZYR for the treatment of HAE in Japan

  • On July 6, 2017, Shire submitted a Japanese New Drug Application to the Pharmaceutical and Medical Devices Agency in Japan for the treatment of HAE.

 

VEYVONDI for the treatment of adults affected by VWD

  • On June 22, 2017, Shire announced that the EMA validated the Marketing Authorization Application for VEYVONDI to prevent and treat bleeding episodes and peri-operative bleeding in adults (age 18 and older) diagnosed with VWD.

 

MYDAYIS for the treatment of ADHD

  • On June 20, 2017, Shire announced that the FDA has approved MYDAYIS (mixed salts of a single-entity amphetamine product), a once-daily treatment comprised of three different types of drug-releasing beads for patients aged 13 years and older with ADHD.

 

INTUNIV for the treatment of ADHD in Japan

  • On May 29, 2017, Shire's partner in Japan, Shionogi & Co., Ltd, launched INTUNIV for the treatment of ADHD in children and adolescents from 6 to 17 years old. 

 

Pipeline

 

SHP654 for the treatment of hemophilia A

  • On July 6, 2017, Shire announced the submission of an IND application to the FDA for SHP654, an investigational factor VIII (FVIII) gene therapy for the treatment of hemophilia A.

 

SHP643 for the treatment of HAE

  • On May 18, 2017, Shire announced positive topline Phase 3 results for the HELP Study, which evaluated the efficacy and safety of subcutaneously administered lanadelumab in patients 12 years of age or older with HAE. The study met its primary endpoint and all secondary endpoints.

 

SHP647 for the treatment of ulcerative colitis

  • On May 17, 2017, Shire announced the publication of positive Phase 2 results for the TURANDOT Study. The study met its primary endpoint, demonstrating significantly greater remission rates in patients receiving the anti-MAdCAM antibody. Shire continues to work towards the initiation of a pivotal Phase 3 trial for SHP647 in the second half of 2017.

 

SHP680 for the treatment of multiple neurological conditions

  • Shire is advancing clinical development of SHP680, targeting indications for multiple neurological conditions with high unmet need. SHP680 is a new chemical entity prodrug of d-amphetamine, which has previously been studied in Phase 1 clinical trials, demonstrating a unique PK profile. It belongs to a class of molecules with an established and well understood safety profile.

 

Board Changes

 

In accordance with Shire's normal succession planning, the Company announces that the following Non-Executive Directors will retire from the Board with effect from the conclusion of the 2018 Annual General Meeting ("AGM"):

 

  • William M. Burns, Senior Independent Director
  • David Ginsburg, Chairman of the Science & Technology Committee
  • Anne Minto, Chairman of the Remuneration Committee

 

Al Stroucken, Non-Executive Director, will assume the position of Chairman of the Remuneration Committee effective August 3, 2017. Anne Minto will continue to serve as a member of the Remuneration Committee to enable a period of transition until her retirement from the Board. Anne will fully support Al in the shareholder consultation process ahead of the publication of the new Directors' Remuneration Policy that will be put forward for shareholder approval at the 2018 AGM. The Board, supported by the Nomination & Governance Committee, will continue to evaluate Board and committee membership, including succession plans for the roles of Senior Independent Director and Chairman of the Science & Technology Committee, and will announce further changes once finalized.

 

Dividend

 

In respect of the six months ended June 30, 2017, the Board resolved to pay an interim dividend of 5.09 U.S. cents per Ordinary Share (2016: 4.63 U.S. cents per Ordinary Share).

 

Dividend payments will be made in Pounds Sterling to holders of Ordinary Shares and in U.S. Dollars to holders of ADSs. A dividend of 3.85(1) pence per Ordinary Share (2016: 3.51 pence) and 15.27 U.S. cents per ADS (2016: 13.89 U.S. cents) will be paid on October 20, 2017, to shareholders on the register as of the close of business on September 8, 2017.

 

Holders of Ordinary Shares are notified that, in order to receive UK sourced dividends via Shire's Income Access Share arrangements ("IAS Arrangements"), they need to have submitted a valid IAS Arrangements election form to the Company's Registrar, Equiniti, by no later than 5pm (BST) on September 22, 2017. Holders of Ordinary Shares are advised that:

 

  • any previous elections made using versions of the IAS Arrangements election form in use prior to February 16, 2016, and any elections deemed to have been made prior to April 28, 2016, are no longer valid; and
     
  • if they do not elect, or have not elected using the newly formatted IAS Arrangements election forms published on or after February 16, 2016, to receive UK sourced dividends via Shire's IAS Arrangements, their dividends will be Irish sourced and therefore incur Irish dividend withholding tax, subject to applicable exemptions.

 

Internet links to the newly formatted IAS Arrangements election forms can be found at:

http://investors.shire.com/shareholder-information/shareholder-forms.aspx

 

(1) Translated using a GBP:USD exchange rate of 1.3221.

 


ADDITIONAL INFORMATION

 

The following additional information is included in this press release:

 

 

Page

 

 

Overview of Second Quarter 2017 Financial Results

9

 

 

Financial Information

14

 

 

Non GAAP Reconciliations

22

 

 

Notes to Editors

25

 

 

Forward-Looking Statements

26

 

 

Non GAAP Measures

28

 

 

Trademarks

29

 

 

 

For further information please contact:

Investor Relations

 

 

 

Ian Karp

ikarp@shire.com

+1 781 482 9018

 

Robert Coates

rcoates@shire.com

+44 1256 894874

 

 

 

 

Media

 

 

 

Lisa Adler

lisa.adler@shire.com

+1 617 588 8607

 

Debbi Ford

debbi.ford@shire.com

+1 617 949 9083

 

Dial in details for the live conference call for investors at 14:00 BST / 9:00 EDT on August 3, 2017:

UK dial in:

0808 237 0030 or 020 3139 4830

US dial in:

1 866 928 7517 or 1 718 873 9077

International Access Numbers:

Click here

Password/Conf ID:

96350792#

Live Webcast:

Click here

 

The quarterly earnings presentation will be available today at 13:00 BST / 8:00 EDT on:

 

- Shire.com Investors section

 

- Shire's IR Briefcase in the iTunes Store

 

 


OVERVIEW OF SECOND QUARTER 2017 FINANCIAL RESULTS COMPARED TO SECOND QUARTER 2016

 

  1. Product sales

 

Product sales increased 55% to $3,592 million (Q2 2016: $2,322 million), primarily due to the inclusion of a full quarter of legacy Baxalta sales in Q2 2017. Excluding legacy Baxalta, product sales increased 7%.

(in millions)

 

 

 

 

 

 

 

Total Sales

Year on year growth

Product sales by franchise

 

U.S. Sales

 

International Sales

 

Total Sales

 

Reported

Non GAAP CER

 

 

 

 

 

 

 

 

 

 

HEMOPHILIA

 

$

383.1

 

 

$

360.8

 

 

$

743.9

 

 

N/M

N/M

INHIBITOR THERAPIES

 

76.1

 

 

144.6

 

 

220.7

 

 

N/M

N/M

Hematology total

 

459.2

 

 

505.4

 

 

964.6

 

 

N/M

N/M

 

 

 

 

 

 

 

 

 

 

CINRYZE

 

164.7

 

 

11.2

 

 

175.9

 

 

+2

%

+2

%

ELAPRASE

 

39.8

 

 

121.2

 

 

161.0

 

 

+5

%

+5

%

FIRAZYR

 

118.1

 

 

19.3

 

 

137.4

 

 

+1

%

+1

%

REPLAGAL

 

-

 

 

122.1

 

 

122.1

 

 

+3

%

+6

%

VPRIV

 

37.3

 

 

50.6

 

 

87.9

 

 

-0

%

+2

%

KALBITOR

 

20.6

 

 

-

 

 

20.6

 

 

+16

%

+16

%

Genetic Diseases total

 

380.5

 

 

324.4

 

 

704.9

 

 

+2

%

+3

%

 

 

 

 

 

 

 

 

 

 

IMMUNOGLOBULIN THERAPIES

 

407.9

 

 

102.6

 

 

510.5

 

 

N/M

N/M

BIO THERAPEUTICS

 

75.9

 

 

96.3

 

 

172.2

 

 

N/M

N/M

Immunology total

 

483.8

 

 

198.9

 

 

682.7

 

 

N/M

N/M

 

 

 

 

 

 

 

 

 

 

VYVANSE

 

460.1

 

 

58.1

 

 

518.2

 

 

+0

%

+0

%

ADDERALL XR

 

67.2

 

 

4.2

 

 

71.4

 

 

-30

%

-30

%

MYDAYIS

 

15.7

 

 

-

 

 

15.7

 

 

N/A

N/A

Other Neuroscience

 

5.2

 

 

24.9

 

 

30.1

 

 

-16

%

-12

%

Neuroscience total

 

548.2

 

 

87.2

 

 

635.4

 

 

-3

%

-2

%

 

 

 

 

 

 

 

 

 

 

LIALDA/MEZAVANT

 

187.5

 

 

20.3

 

 

207.8

 

 

+7

%

+8

%

PENTASA

 

83.3

 

 

-

 

 

83.3

 

 

+14

%

+14

%

GATTEX/REVESTIVE

 

63.7

 

 

11.6

 

 

75.3

 

 

+69

%

+70

%

NATPARA

 

34.5

 

 

-

 

 

34.5

 

 

+73

%

+73

%

Other Internal Medicine

 

31.2

 

 

52.2

 

 

83.4

 

 

-6

%

-3

%

Internal Medicine total

 

400.2

 

 

84.1

 

 

484.3

 

 

+15

%

+16

%

 

 

 

 

 

 

 

 

 

 

Oncology total

 

45.8

 

 

16.7

 

 

62.5

 

 

N/M

N/M

 

 

 

 

 

 

 

 

 

 

Ophthalmology total

 

57.4

 

 

-

 

 

57.4

 

 

N/A

N/A

 

 

 

 

 

 

 

 

 

 

Total product sales

 

$

2,375.1

 

 

$

1,216.7

 

 

$

3,591.8

 

 

+55

%

+56

%

 

 

 

 

 

 

 

 

 

 

 

Hematology

Hematology, acquired with Baxalta in June 2016, reported product sales of $965 million. Hematology includes sales of recombinant and plasma-derived hemophilia products (primarily factor VIII and factor IX) and inhibitor therapies. Pro forma Q2 2017 growth in Hematology was approximately 1%. U.S. sales growth in Hemophilia, which benefited from stocking in the quarter, was partially offset by overall hematology performance in our international markets due to the timing of large orders.

 

Genetic Diseases

Genetic Diseases product sales increased 2%. Growth was primarily driven by our lysosomal storage diseases (LSD) portfolio.

 

ELAPRASE sales increased by 5%, while REPLAGAL sales increased by 3%. Both products benefited from an increase in the number of patients on therapy.

 

Immunology

Immunology, acquired with Baxalta in June 2016, reported product sales of $683 million. Immunology includes sales of antibody-replacement immunoglobulin and bio therapeutics therapies. Pro forma Q2 2017 growth in Immunology was approximately 18% (20% at Non GAAP CER) as the franchise benefited from growth in both immunoglobulin therapies and bio therapeutics. The U.S. benefited from growth in demand for our subcutaneous portfolio. International experienced growth across most regions with some benefit due to the timing of large orders.

 

Neuroscience

Neuroscience product sales decreased 3%, primarily driven by ADDERALL XR.

 

ADDERALL XR sales decreased 30%, primarily due to additional generic competition since August 2016. VYVANSE sales growth was impacted by destocking in the second quarter of 2017 compared to stocking in the same period in the prior year.

 

MYDAYIS, approved by the FDA on June 20, 2017, contributed $16 million of product sales related to launch stocking.

 

Internal Medicine

Internal Medicine product sales increased 15%, with strong growth from GATTEX/REVESTIVE and NATPARA.

 

GATTEX/REVESTIVE and NATPARA continued to perform well with sales increasing 69% and 73%, respectively, primarily due to an increase in the numbers of patients on therapy.

 

During Q2 2017, a generic version of LIALDA was approved by the FDA; Shire expects generic competition to negatively impact future LIALDA product sales.

 

Oncology

Oncology, acquired with Baxalta in June 2016, reported sales of $63 million. Oncology includes sales of ONCASPAR and ONIVYDE, the latter of which was approved in the EU on October 18, 2016 and has contributed to international growth in 2017.

 

Ophthalmology

Ophthalmology product sales relate to XIIDRA, which was made available to patients starting on August 29, 2016. XIIDRA contributed $57 million of product sales with 13% prescription growth since Q1 2017.

 

Baxalta pro forma product sales growth

The following table presents Q2 2017 reported legacy Baxalta product sales compared with Q2 2016 pro forma legacy Baxalta sales.

(in millions)

 

 

 

Pro forma

Year on year growth

Product sales by franchise

 

U.S. Sales

 

International Sales

 

Total Sales

 

Reported

Non GAAP CER

 

 

 

 

 

 

 

 

 

 

HEMOPHILIA

 

$

383.1

 

 

$

360.8

 

 

$

743.9

 

 

+3

%

+5

%

INHIBITOR THERAPIES

 

76.1

 

 

144.6

 

 

220.7

 

 

-7

%

-5

%

Hematology total

 

459.2

 

 

505.4

 

 

964.6

 

 

+1

%

+2

%

 

 

 

 

 

 

 

 

 

 

IMMUNOGLOBULIN THERAPIES

 

407.9

 

 

102.6

 

 

510.5

 

 

+19

%

+20

%

BIO THERAPEUTICS

 

75.9

 

 

96.3

 

 

172.2

 

 

+18

%

+20

%

Immunology total

 

483.8

 

 

198.9

 

 

682.7

 

 

+18

%

+20

%

 

 

 

 

 

 

 

 

 

 

Oncology total

 

45.8

 

 

16.7

 

 

62.5

 

 

+18

%

+20

%

 

 

 

 

 

 

 

 

 

 

Total

 

$

988.8

 

 

$

721.0

 

 

$

1,709.8

 

 

+8

%

+9

%

 

 

 

 

 

 

 

 

 

 

 

  1. Royalties and other revenues

(in millions)

 

 

 

Year on year growth

 

 

Revenue

 

Reported

Non GAAP CER

SENSIPAR royalties

 

$

46.4

 

 

+30

%

+31

%

ADDERALL XR royalties

 

13.4

 

 

+158

%

+157

%

FOSRENOL royalties

 

12.1

 

 

+6

%

+7

%

3TC and ZEFFIX royalties

 

8.2

 

 

-32

%

-32

%

Other royalties and revenues

 

73.9

 

 

+73

%

+77

%

Total royalties and other revenues

 

$

154.0

 

 

+44

%

+46

%

 

 

 

 

 

 

 

Royalties and Other Revenues increased 44%, primarily due to the inclusion of a full quarter of contract manufacturing revenue acquired with Baxalta.

 

  1. Financial details

 

Cost of sales

(in millions)

 

Q2 2017

 

% of total revenues

 

Q2 2016

 

% of total revenues

Cost of sales (US GAAP)

 

$

1,108.9

 

 

30

%

 

$

778.1

 

 

32

%

Expense related to the unwind of inventory fair value adjustments

 

(145.0

)

 

 

 

(280.7

)

 

 

Depreciation

 

(67.0

)

 

 

 

(22.4

)

 

 

Non GAAP cost of sales

 

$

896.9

 

 

24

%

 

$

475.0

 

 

20

%

 

 

 

 

 

 

 

 

 

 

Cost of sales as a percentage of total revenues decreased to 30% primarily due to lower expense related to the unwind of inventory fair value adjustments.

 

Non GAAP cost of sales as a percentage of total revenues increased to 24%, primarily due to the impact of a full quarter of lower margin product franchises acquired with Baxalta.

 

R&D

(in millions)

 

Q2 2017

 

% of total revenues

 

Q2 2016

 

% of total revenues

R&D (US GAAP)

 

$

542.4

 

 

14

%

 

$

294.8

 

 

12

%

Impairment of IPR&D intangible assets

 

(20.0

)

 

 

 

(8.9

)

 

 

Costs relating to license arrangements

 

(123.7

)

 

 

 

-

 

 

 

Depreciation

 

(12.8

)

 

 

 

(5.8

)

 

 

Non GAAP R&D

 

$

385.9

 

 

10

%

 

$

280.1

 

 

12

%

 

 

 

 

 

 

 

 

 

 

R&D increased by $248 million, or 84%, primarily due to milestone and upfront payments associated with license arrangements, and the inclusion of a full quarter of Baxalta costs.

 

Non GAAP R&D increased by $106 million, or 38%, primarily due to the inclusion of a full quarter of Baxalta costs. Non GAAP R&D expense as a percentage of total revenues decreased 2 percentage points.

SG&A

(in millions)

 

Q2 2017

 

% of total revenues

 

Q2 2016

 

% of total revenues

SG&A (US GAAP)

 

$

899.1

 

 

24

%

 

$

675.3

 

 

28

%

Legal and litigation costs

 

(7.6

)

 

 

 

(1.6

)

 

 

Depreciation

 

(40.9

)

 

 

 

(19.7

)

 

 

Non GAAP SG&A

 

$

850.6

 

 

23

%

 

$

654.0

 

 

27

%

 

 

 

 

 

 

 

 

 

 

SG&A increased by $224 million, or 33%, primarily due to the inclusion of a full quarter of Baxalta related costs and increased XIIDRA marketing costs.

 

Non GAAP SG&A increased by $197 million, or 30%, primarily due to the inclusion of a full quarter of Baxalta related costs and increased XIIDRA marketing costs. Non GAAP SG&A as a percentage of total revenues decreased 4 percentage points.

 

Amortization of acquired intangible assets

 

Shire recorded amortization of acquired intangible assets of $434 million (Q2 2016: $213 million). The increase is primarily related to amortization on the intangible assets acquired with the Baxalta transaction.

 

Integration and acquisition costs

 

In Q2 2017, Shire recorded integration and acquisition costs of $344 million. Integration costs of $193 million, primarily related to Baxalta, including employee severance and acceleration of stock compensation, third-party professional fees and expenses associated with facility consolidations. Additionally, integration and acquisition costs included a net charge of $151 million, relating to the change in fair value of contingent consideration, primarily related to SHP643 which was acquired from Dyax in 2016.

 

In Q2 2016, Shire recorded integration and acquisition costs of $363 million. Integration and acquisition costs related to the Baxalta and Dyax transactions were $417 million, and included costs relating to investment banking and other transaction-related fees, as well as integration costs related to employee severance and acceleration of stock compensation, and third-party professional fees. These costs were partially offset by a net credit of $58 million relating to the change in fair value of contingent consideration.

 

Other expense, net

(in millions)

 

Q2 2017

 

 

 

Q2 2016

 

 

Other expense, net (US GAAP)

 

$

(137.7

)

 

 

 

$

(79.6

)

 

 

Amortization of one-time upfront borrowing costs for Baxalta and Dyax

 

1.7

 

 

 

 

25.9

 

 

 

Gain on sale of long term investments

 

(13.2

)

 

 

 

-

 

 

 

Non GAAP Other expense, net

 

$

(149.2

)

 

 

 

$

(53.7

)

 

 

 

 

 

 

 

 

 

 

 

 

Other expense, net increased by $58 million, primarily due to higher interest expense incurred on borrowings used to fund the acquisitions of Dyax and Baxalta.

 

Non GAAP Other expense, net increased by $96 million, primarily due to higher interest expense as noted above.

 

Taxation

(in millions)

 

 

 

Effective

tax rate

 

 

 

Effective

tax rate

 

 

Q2 2017

 

Q2 2016

 

Income tax expense (US GAAP)

 

$

(24.3

)

 

9

%

 

$

70.9

 

 

(427

%)

Tax effect of adjustments

 

(187.6

)

 

 

 

(215.8

)

 

 

Non GAAP Income tax expense

 

$

(211.9

)

 

16

%

 

$

(144.9

)

 

16

%

 

 

 

 

 

 

 

 

 

 

The effective tax rate on US GAAP income in Q2 2017 was 9% (Q2 2016: -427%) and on a Non GAAP basis was 16% (Q2 2016: 16%).

 

The effective rate in Q2 2017 on US GAAP income from continuing operations is low primarily due to the combined impact of the relative quantum of profit before tax for the period by jurisdiction and the reversal of deferred tax liabilities from the Baxalta acquisition, as well as acquisition and integration costs in higher tax territories.

 

Discontinued operations

 

The loss from discontinued operations in Q2 2017 was $1 million, net of taxes, associated with the divested DERMAGRAFT business. The loss in Q2 2016 was $249 million, net of taxes of $101 million, primarily due to the establishment of legal contingencies related to the divested DERMAGRAFT business.

 


FINANCIAL INFORMATION

 

TABLE OF CONTENTS

 

Page

 

 

Unaudited US GAAP Consolidated Balance Sheets

15

 

 

Unaudited US GAAP Consolidated Statements of Operations

16

 

 

Unaudited US GAAP Consolidated Statements of Cash Flows

18

 

 

Selected Notes to the Unaudited US GAAP Financial Statements

 

(1) Earnings per share

20

(2) Analysis of revenues

21

 

 

Non GAAP reconciliations

22


Unaudited US GAAP Consolidated Balance Sheets

(in millions, except par value of shares)

 

 

June 30, 2017

 

December 31, 2016

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

263.7

 

 

$

528.8

 

Restricted cash

34.2

 

 

25.6

 

Accounts receivable, net

2,755.2

 

 

2,616.5

 

Inventories

3,325.3

 

 

3,562.3

 

Prepaid expenses and other current assets

778.5

 

 

806.3

 

Total current assets

7,156.9

 

 

7,539.5

 

 

 

 

 

Non-current assets:

 

 

 

Investments

197.0

 

 

191.6

 

Property, plant and equipment (PP&E), net

6,554.5

 

 

6,469.6

 

Goodwill

19,482.1

 

 

17,888.2

 

Intangible assets, net

33,434.3

 

 

34,697.5

 

Deferred tax asset

132.2

 

 

96.7

 

Other non-current assets

233.9

 

 

152.3

 

 

 

 

 

Total assets

$

67,190.9

 

 

$

67,035.4

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable and accrued expenses

$

3,842.0

 

 

$

4,312.4

 

Short term borrowings and capital leases

3,204.9

 

 

3,068.0

 

Other current liabilities

389.6

 

 

362.9

 

Total current liabilities

7,436.5

 

 

7,743.3

 

 

 

 

 

Non-current liabilities:

 

 

 

Long term borrowings and capital leases

18,355.1

 

 

19,899.8

 

Deferred tax liability

7,788.0

 

 

8,322.7

 

Other non-current liabilities

2,346.2

 

 

2,121.6

 

 

 

 

 

Total liabilities

35,925.8

 

 

38,087.4

 

 

 

 

 

Equity:

 

 

 

Common stock of 5p par value; 1,500 shares authorized; and 915.3 shares issued and outstanding (2016: 1,500 shares authorized; and 912.2 shares issued and outstanding)

81.5

 

 

81.3

 

Additional paid-in capital

24,951.2

 

 

24,740.9

 

Treasury stock: 8.4 shares (2016: 9.1 shares)

(283.0

)

 

(301.9

)

Accumulated other comprehensive income/(loss)

200.1

 

 

(1,497.6

)

Retained earnings

6,315.3

 

 

5,925.3

 

Total equity

31,265.1

 

 

28,948.0

 

 

 

 

 

Total liabilities and equity

$

67,190.9

 

 

$

67,035.4

 


Unaudited US GAAP Consolidated Statements of Operations

(in millions)

 

 

3 months ended June 30,

 

6 months ended June 30,

 

2017

 

2016

 

2017

 

2016

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

Product sales

$

3,591.8

 

 

$

2,322.1

 

 

$

7,004.1

 

 

$

3,949.4

 

Royalties & other revenues

154.0

 

 

107.0

 

 

314.0

 

 

189.0

 

Total revenues

3,745.8

 

 

2,429.1

 

 

7,318.1

 

 

4,138.4

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

Cost of sales

1,108.9

 

 

778.1

 

 

2,435.9

 

 

1,026.7

 

Research and development

542.4

 

 

294.8

 

 

921.7

 

 

511.9

 

Selling, general and administrative

899.1

 

 

675.3

 

 

1,788.0

 

 

1,150.2

 

Amortization of acquired intangible assets

434.1

 

 

213.0

 

 

798.1

 

 

347.6

 

Integration and acquisition costs

343.7

 

 

363.0

 

 

459.7

 

 

454.1

 

Reorganization costs

13.6

 

 

11.0

 

 

19.1

 

 

14.3

 

Loss/(gain) on sale of product rights

4.8

 

 

(2.3

)

 

(0.7

)

 

(6.5

)

Total operating expenses

3,346.6

 

 

2,332.9

 

 

6,421.8

 

 

3,498.3

 

 

 

 

 

 

 

 

 

Operating income from continuing operations

399.2

 

 

96.2

 

 

896.3

 

 

640.1

 

 

 

 

 

 

 

 

 

Interest income

1.1

 

 

1.6

 

 

4.2

 

 

2.6

 

Interest expense

(141.3

)

 

(87.2

)

 

(283.6

)

 

(131.9

)

Other income/(expense), net

2.5

 

 

6.0

 

 

7.0

 

 

(2.5

)

Total other expense, net

(137.7

)

 

(79.6

)

 

(272.4

)

 

(131.8

)

 

 

 

 

 

 

 

 

Income from continuing operations before income taxes and equity in earnings/(losses) of equity method investees

261.5

 

 

16.6

 

 

623.9

 

 

508.3

 

Income taxes

(24.3

)

 

70.9

 

 

(31.1

)

 

(11.2

)

Equity in earnings/(losses) of equity method investees, net of taxes

4.3

 

 

(0.9

)

 

3.5

 

 

(1.0

)

Income from continuing operations, net of taxes

241.5

 

 

86.6

 

 

596.3

 

 

496.1

 

 

 

 

 

 

 

 

 

(Loss)/gain from discontinued operations, net of taxes

(1.2

)

 

(248.7

)

 

19.0

 

 

(239.2

)

 

 

 

 

 

 

 

 

Net income/(loss)

$

240.3

 

 

$

(162.1

)

 

$

615.3

 

 

$

256.9

 

 

Unaudited US GAAP Consolidated Statements of Operations (continued)

(in millions, except per share amounts)

 

 

3 months ended June 30,

 

6 months ended June 30,

 

2017

 

2016

 

2017

 

2016

Earnings/(loss) per Ordinary Share - basic

 

 

 

 

 

 

 

Earnings from continuing operations

$

0.27

 

 

$

0.12

 

 

$

0.66

 

 

$

0.78

 

(Loss)/gain from discontinued operations

-

 

 

(0.36

)

 

0.02

 

 

(0.38

)

Earnings/(loss) per Ordinary Share - basic

$

0.27

 

 

$

(0.24

)

 

$

0.68

 

 

$

0.40

 

Earnings/(loss) per ADS - basic

$

0.80

 

 

$

(0.71

)

 

$

2.04

 

 

$

1.21

 

 

 

 

 

 

 

 

 

Earnings/(loss) per Ordinary Share - diluted

 

 

 

 

 

 

 

Earnings from continuing operations

$

0.26

 

 

$

0.12

 

 

$

0.65

 

 

$

0.77

 

(Loss)/earnings from discontinued operations

-

 

 

(0.36

)

 

0.02

 

 

(0.37

)

Earnings/(loss) per Ordinary Share - diluted

$

0.26

 

 

$

(0.24

)

 

$

0.67

 

 

$

0.40

 

Earnings/(loss) per ADS - diluted

$

0.79

 

 

$

(0.71

)

 

$

2.02

 

 

$

1.20

 

 

 

 

 

 

 

 

 

Weighted average number of shares:

 

 

 

 

 

 

 

Basic

906.4

 

 

682.8

 

 

905.3

 

 

637.3

 

Diluted

912.7

 

 

682.8

 

 

912.3

 

 

640.1

 


Unaudited US GAAP Consolidated Statements of Cash Flows

(in millions)

 

 

3 months ended June 30,

 

6 months ended June 30,

 

2017

 

2016

 

2017

 

2016

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net income/(loss)

$

240.3

 

 

$

(162.1

)

 

$

615.3

 

 

$

256.9

 

Adjustments to reconcile net income/(loss) to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

554.8

 

 

260.9

 

 

1,041.7

 

 

429.8

 

Share based compensation

53.7

 

 

176.5

 

 

106.4

 

 

194.8

 

Amortization of deferred financing fees

3.6

 

 

30.1

 

 

6.8

 

 

50.1

 

Expense related to the unwind of inventory fair value adjustments

145.0

 

 

280.7

 

 

625.4

 

 

293.5

 

Change in deferred taxes

(157.8

)

 

(319.1

)

 

(293.3

)

 

(329.2

)

Change in fair value of contingent consideration

151.2

 

 

(56.4

)

 

147.7

 

 

(45.0

)

Impairment of PP&E and intangible assets

53.6

 

 

8.9

 

 

53.6

 

 

8.9

 

Other, net

(12.0

)

 

(3.1

)

 

14.8

 

 

(17.6

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Increase in accounts receivable

(146.2

)

 

(80.1

)

 

(181.5

)

 

(181.0

)

Increase/(decrease) in sales deduction accrual

39.6

 

 

(7.2

)

 

57.1

 

 

66.4

 

Increase in inventory

(19.8

)

 

(84.2

)

 

(171.6

)

 

(116.4

)

Decrease in prepayments and other assets

90.4

 

 

48.7

 

 

104.6

 

 

26.5

 

Increase/(decrease) in accounts payable and other liabilities

226.4

 

 

497.3

 

 

(445.1

)

 

342.7

 

Net cash provided by operating activities

1,222.8

 

 

590.9

 

 

1,681.9

 

 

980.4

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Purchases of PP&E and long term investments

(178.6

)

 

(127.5

)

 

(391.1

)

 

(179.1

)

Purchases of businesses, net of cash acquired

-

 

 

(11,783.4

)

 

-

 

 

(17,476.2

)

Proceeds from sale of investments

40.6

 

 

-

 

 

40.6

 

 

-

 

Movements in restricted cash

(0.1

)

 

2.4

 

 

(8.6

)

 

67.2

 

Other, net

2.0

 

 

(2.2

)

 

3.2

 

 

3.3

 

Net cash used in investing activities

(136.1

)

 

(11,910.7

)

 

(355.9

)

 

(17,584.8

)

 

Unaudited US GAAP Consolidated Statements of Cash Flows (continued)

(in millions)

 

 

3 months ended June 30,

 

6 months ended June 30,

 

2017

 

2016

 

2017

 

2016

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Proceeds from revolving line of credit, long term and short term borrowings

710.0

 

 

12,590.0

 

 

2,111.9

 

 

18,895.0

 

Repayment of revolving line of credit, long term and short term borrowings

(1,702.2

)

 

(505.2

)

 

(3,527.9

)

 

(1,500.3

)

Payment of dividend

(234.7

)

 

(130.2

)

 

(234.7

)

 

(130.2

)

Debt issuance costs

-

 

 

(18.5

)

 

-

 

 

(112.3

)

Proceeds from exercise of options

37.4

 

 

-

 

 

79.5

 

 

0.1

 

Other, net

(3.9

)

 

11.0

 

 

(24.0

)

 

11.9

 

Net cash (used in)/provided by financing activities

(1,193.4

)

 

11,947.1

 

 

(1,595.2

)

 

17,164.2

 

 

 

 

 

 

 

 

 

Effect of foreign exchange rate changes on cash and cash equivalents

1.4

 

 

(2.9

)

 

4.1

 

 

(1.9

)

 

 

 

 

 

 

 

 

Net (decrease)/increase in cash and cash equivalents

(105.3

)

 

624.4

 

 

(265.1

)

 

557.9

 

Cash and cash equivalents at beginning of period

369.0

 

 

69.0

 

 

528.8

 

 

135.5

 

Cash and cash equivalents at end of period

$

263.7

 

 

$

693.4

 

 

$

263.7

 

 

$

693.4

 


Selected Notes to the Unaudited US GAAP Financial Statements

 

  1. Earnings Per Share (EPS)

(in millions)

 

 

3 months ended June 30,

 

6 months ended June 30,

 

2017

 

2016

 

2017

 

2016

Income from continuing operations

$

241.5

 

 

$

86.6

 

 

$

596.3

 

 

$

496.1

 

(Loss)/gain from discontinued operations

(1.2

)

 

(248.7

)

 

19.0

 

 

(239.2

)

Numerator for EPS

$

240.3

 

 

$

(162.1

)

 

$

615.3

 

 

$

256.9

 

 

 

 

 

 

 

 

 

Weighted average number of shares:

 

 

 

 

 

 

 

Basic

906.4

 

 

682.8

 

 

905.3

 

 

637.3

 

Effect of dilutive shares:

 

 

 

 

 

 

 

Share based awards to employees

6.3

 

 

-

 

 

7.0

 

 

2.8

 

Diluted

912.7

 

 

682.8

 

 

912.3

 

 

640.1

 

 

The share equivalents not included in the calculation of the diluted weighted average number of shares are shown below:

Share based awards to employees

13.2

 

 

8.3

 

 

10.3

 

 

4.4

 


Selected Notes to the Unaudited US GAAP Financial Statements

 

(2) Analysis of revenues

(in millions)

 

 

3 months ended June 30,

 

6 months ended June 30,

 

2017

 

2016

 

2017

 

2016

Product sales by franchise

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HEMOPHILIA

$

743.9

 

 

$

275.6

 

 

$

1,394.3

 

 

$

275.6

 

INHIBITOR THERAPIES

220.7

 

 

74.0

 

 

441.2

 

 

74.0

 

Hematology

964.6

 

 

349.6

 

 

1,835.5

 

 

349.6

 

 

 

 

 

 

 

 

 

CINRYZE

175.9

 

 

173.0

 

 

401.8

 

 

337.2

 

ELAPRASE

161.0

 

 

154.0

 

 

301.6

 

 

277.6

 

FIRAZYR

137.4

 

 

136.7

 

 

265.9

 

 

265.0

 

REPLAGAL

122.1

 

 

118.4

 

 

231.8

 

 

221.6

 

VPRIV

87.9

 

 

88.0

 

 

167.7

 

 

171.6

 

KALBITOR

20.6

 

 

17.7

 

 

32.3

 

 

28.1

 

Genetic Diseases

704.9

 

 

687.8

 

 

1,401.1

 

 

1,301.1

 

 

 

 

 

 

 

 

 

IMMUNOGLOBULIN THERAPIES

510.5

 

 

138.2

 

 

1,008.8

 

 

138.2

 

BIO THERAPEUTICS

172.2

 

 

51.3

 

 

350.1

 

 

51.3

 

Immunology

682.7

 

 

189.5

 

 

1,358.9

 

 

189.5

 

 

 

 

 

 

 

 

 

VYVANSE

518.2

 

 

517.7

 

 

1,081.9

 

 

1,026.9

 

ADDERALL XR

71.4

 

 

101.8

 

 

136.3

 

 

200.6

 

MYDAYIS

15.7

 

 

-

 

 

15.7

 

 

-

 

Other Neuroscience

30.1

 

 

35.7

 

 

54.8

 

 

57.8

 

Neuroscience

635.4

 

 

655.2

 

 

1,288.7

 

 

1,285.3

 

 

 

 

 

 

 

 

 

LIALDA/MEZAVANT

207.8

 

 

193.7

 

 

382.9

 

 

361.7

 

PENTASA

83.3

 

 

72.9

 

 

152.4

 

 

136.9

 

GATTEX/REVESTIVE

75.3

 

 

44.5

 

 

144.3

 

 

96.2

 

NATPARA

34.5

 

 

19.9

 

 

64.2

 

 

35.5

 

Other Internal Medicine

83.4

 

 

88.7

 

 

159.3

 

 

173.3

 

Internal Medicine

484.3

 

 

419.7

 

 

903.1

 

 

803.6

 

 

 

 

 

 

 

 

 

Oncology

62.5

 

 

20.3

 

 

120.8

 

 

20.3

 

 

 

 

 

 

 

 

 

Ophthalmology

57.4

 

 

-

 

 

96.0

 

 

-

 

 

 

 

 

 

 

 

 

Total product sales

3,591.8

 

 

2,322.1

 

 

7,004.1

 

 

3,949.4

 

 

 

 

 

 

 

 

 

Royalties and other revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SENSIPAR royalties

46.4

 

 

35.6

 

 

85.3

 

 

73.5

 

ADDERALL XR royalties

13.4

 

 

5.2

 

 

25.9

 

 

11.0

 

FOSRENOL royalties

12.1

 

 

11.4

 

 

20.7

 

 

20.6

 

3TC and ZEFFIX royalties

8.2

 

 

12.1

 

 

22.7

 

 

27.1

 

Other Royalties and revenues

73.9

 

 

42.7

 

 

159.4

 

 

56.8

 

Total royalties and other revenues

154.0

 

 

107.0

 

 

314.0

 

 

189.0

 

 

 

 

 

 

 

 

 

Total revenues

$

3,745.8

 

 

$

2,429.1

 

 

$

7,318.1

 

 

$

4,138.4

 


Non GAAP reconciliations

(in millions)

 

Reconciliation of US GAAP net income to Non GAAP EBITDA and Non GAAP operating income:

 

3 months ended June 30,

 

6 months ended June 30,

 

2017

 

 

2016

 

 

2017

 

 

2016

 

US GAAP net income/(loss)

$

240.3

 

 

$

(162.1

)

 

$

615.3

 

 

$

256.9

 

Add back/(deduct):

 

 

 

 

 

 

 

Loss/(gain) from discontinued operations, net of tax

1.2

 

 

248.7

 

 

(19.0

)

 

239.2

 

Equity in (earnings)/losses of equity method investees, net of taxes

(4.3

)

 

0.9

 

 

(3.5

)

 

1.0

 

Income taxes

24.3

 

 

(70.9

)

 

31.1

 

 

11.2

 

Other expense, net

137.7

 

 

79.6

 

 

272.4

 

 

131.8

 

US GAAP operating income from continuing operations

399.2

 

 

96.2

 

 

896.3

 

 

640.1

 

Add back/(deduct) Non GAAP adjustments:

 

 

 

 

 

 

 

Expense related to the unwind of inventory fair value adjustments

145.0

 

 

280.7

 

 

625.4

 

 

293.5

 

Impairment of acquired intangible assets

20.0

 

 

8.9

 

 

20.0

 

 

8.9

 

Costs relating to license arrangements

123.7

 

 

-

 

 

123.7

 

 

-

 

Legal and litigation costs

7.6

 

 

1.6

 

 

7.6

 

 

16.6

 

Amortization of acquired intangible assets

434.1

 

 

213.0

 

 

798.1

 

 

347.6

 

Integration and acquisition costs

343.7

 

 

363.0

 

 

459.7

 

 

454.1

 

Reorganization costs

13.6

 

 

11.0

 

 

19.1

 

 

14.3

 

Loss/(gain) on sale of product rights

4.8

 

 

(2.3

)

 

(0.7

)

 

(6.5

)

Depreciation

120.7

 

 

47.9

 

 

243.6

 

 

82.2

 

Other Non GAAP adjustments

-

 

 

-

 

 

(4.0

)

 

-

 

Non GAAP EBITDA

1,612.4

 

 

1,020.0

 

 

3,188.8

 

 

1,850.8

 

Depreciation

(120.7

)

 

(47.9

)

 

(243.6

)

 

(82.2

)

Non GAAP operating income

$

1,491.7

 

 

$

972.1

 

 

$

2,945.2

 

 

$

1,768.6

 

 

 

 

 

 

 

 

 

Net income margin(1)

6

%

 

(7

)%

 

8

%

 

6

%

Non GAAP EBITDA margin(2)

43

%

 

42

%

 

44

%

 

45

%

 

 

 

 

 

 

 

 

(1) Net income as a percentage of total revenues.

(2) Non GAAP EBITDA as a percentage of total revenues.

 

Reconciliation of revenues to Non GAAP gross margin:

 

3 months ended June 30,

 

6 months ended June 30,

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Revenues

$

3,745.8

 

 

$

2,429.1

 

 

$

7,318.1

 

 

$

4,138.4

 

Cost of sales (US GAAP)

(1,108.9

)

 

(778.1

)

 

(2,435.9

)

 

(1,026.7

)

US GAAP gross margin

2,636.9

 

 

1,651.0

 

 

4,882.2

 

 

3,111.7

 

Add back Non GAAP adjustments:

 

 

 

 

 

 

 

Expense related to the unwind of inventory fair value adjustments

145.0

 

 

280.7

 

 

625.4

 

 

293.5

 

Depreciation

67.0

 

 

22.4

 

 

139.1

 

 

30.7

 

Non GAAP gross margin

$

2,848.9

 

 

$

1,954.1

 

 

$

5,646.7

 

 

$

3,435.9

 

Non GAAP gross margin % (1)

76.1

%

 

80.4

%

 

77.2

%

 

83.0

%

 

 

 

 

 

 

 

 

(1) Non GAAP gross margin as a percentage of total revenues.

 

Non GAAP reconciliations

(in millions, except per ADS amounts)

 

Reconciliation of US GAAP net income to Non GAAP net income:

 

3 months ended June 30,

 

6 months ended June 30,

 

2017

 

2016

 

2017

 

 

2016

 

US GAAP net income/(loss)

$

240.3

 

 

$

(162.1

)

 

$

615.3

 

 

$

256.9

 

Expense related to the unwind of inventory fair value adjustments

145.0

 

 

280.7

 

 

625.4

 

 

293.5

 

Impairment of acquired intangible assets

20.0

 

 

8.9

 

 

20.0

 

 

8.9

 

Costs relating to license arrangements

123.7

 

 

-

 

 

123.7

 

 

-

 

Legal and litigation costs

7.6

 

 

1.6

 

 

7.6

 

 

16.6

 

Amortization of acquired intangible assets

434.1

 

 

213.0

 

 

798.1

 

 

347.6

 

Integration and acquisition costs

343.7

 

 

363.0

 

 

459.7

 

 

454.1

 

Reorganization costs

13.6

 

 

11.0

 

 

19.1

 

 

14.3

 

Loss/(gain) on sale of product rights

4.8

 

 

(2.3

)

 

(0.7

)

 

(6.5

)

Amortization of one-time upfront borrowing costs for Baxalta and Dyax

1.7

 

 

25.9

 

 

3.5

 

 

44.1

 

(Gain)/loss on sale of long term investments

(13.2

)

 

-

 

 

(13.2

)

 

6.0

 

Loss/(gain) from discontinued operations

1.9

 

 

349.6

 

 

(29.9

)

 

334.6

 

Other Non GAAP adjustments

-

 

 

-

 

 

(4.0

)

 

-

 

Tax effect of adjustments

(188.3

)

 

(316.7

)

 

(387.6

)

 

(365.7

)

Non GAAP net income

$

1,134.9

 

 

$

772.6

 

 

$

2,237.0

 

 

$

1,404.4

 

 

Reconciliation of US GAAP diluted earnings per ADS to Non GAAP diluted earnings per ADS:

 

3 months ended June 30,

 

6 months ended June 30,

 

2017

 

2016

 

2017

 

 

2016

 

US GAAP diluted earnings/(losses) per ADS

$

0.79

 

 

$

(0.71

)

 

$

2.02

 

 

$

1.20

 

Expense related to the unwind of inventory fair value adjustments

0.48

 

 

1.23

 

 

2.06

 

 

1.38

 

Impairment of acquired intangible assets

0.07

 

 

0.04

 

 

0.07

 

 

0.04

 

Costs relating to license arrangements

0.41

 

 

-

 

 

0.41

 

 

-

 

Legal and litigation costs

0.02

 

 

0.01

 

 

0.02

 

 

0.08

 

Amortization of acquired intangible assets

1.42

 

 

0.94

 

 

2.62

 

 

1.63

 

Integration and acquisition costs

1.12

 

 

1.59

 

 

1.51

 

 

2.13

 

Reorganization costs

0.04

 

 

0.05

 

 

0.06

 

 

0.07

 

Loss/(gain) on sale of product rights

0.02

 

 

(0.01

)

 

-

 

 

(0.03

)

Amortization of one-time upfront borrowing costs for Baxalta and Dyax

0.01

 

 

0.11

 

 

0.01

 

 

0.21

 

(Gain)/loss on sale of long term investments

(0.04

)

 

-

 

 

(0.04

)

 

0.03

 

Loss/(gain) from discontinued operations

0.01

 

 

1.53

 

 

(0.10

)

 

1.56

 

Other Non GAAP adjustments

-

 

 

-

 

 

(0.01

)

 

-

 

Tax effect of adjustments

(0.62

)

 

(1.40

)

 

(1.27

)

 

(1.72

)

Non GAAP diluted earnings per ADS

$

3.73

 

 

$

3.38

 

 

$

7.36

 

 

$

6.58

 

 

 

 

Non GAAP reconciliations

(in millions, except per ADS amounts)

 

Reconciliation of US GAAP net cash provided by operating activities to Non GAAP free cash flow:

 

3 months ended June 30,

 

6 months ended June 30,

 

2017

 

2016

 

2017

 

2016

Net cash provided by operating activities

$

1,222.8

 

 

$

590.9

 

 

$

1,681.9

 

 

$

980.4

 

Capital expenditure

(178.6

)

 

(127.5

)

 

(391.1

)

 

(179.1

)

Up-front payments for in-licensed products

20.0

 

 

-

 

 

20.0

 

 

-

 

Non GAAP free cash flow

$

1,064.2

 

 

$

463.4

 

 

$

1,310.8

 

 

$

801.3

 

 

Non GAAP net debt comprises:

 

June 30, 2017

 

December 31, 2016

Cash and cash equivalents

$

263.7

 

 

$

528.8

 

Long term borrowings (excluding capital leases)

(18,011.3

)

 

(19,552.6

)

Short term borrowings (excluding capital leases)

(3,198.1

)

 

(3,061.6

)

Capital leases

(350.6

)

 

(353.6

)

Non GAAP net debt

$

(21,296.3

)

 

$

(22,439.0

)

 

Reconciliation of full year 2017 US GAAP diluted earnings per ADS Outlook to Non GAAP diluted earnings per ADS Outlook:

 

 

 

Full Year 2017 Outlook

 

 

Min

 

 

 

Max

US GAAP diluted earnings per ADS

 

$

5.65

 

 

 

 

$

6.05

 

Expense related to the unwind of inventory fair value adjustments

 

 

 

2.42

 

 

Impairment of acquired intangible assets

 

 

 

0.07

 

 

Costs relating to licensing arrangements

 

 

 

0.46

 

 

Legal and litigation costs

 

 

 

0.04

 

 

Amortization of acquired intangible assets

 

 

 

5.64

 

 

Integration and acquisition costs

 

 

 

2.98

 

 

Reorganization costs

 

 

 

0.10

 

 

Amortization of one-time upfront borrowing costs for Baxalta and Dyax

 

 

 

0.02

 

 

Loss from discontinued operations

 

 

 

(0.10)

 

 

Gain on sale of long term investments

 

 

 

(0.01)

 

 

Other Non-GAAP adjustments

 

 

 

(0.04)

 

 

Tax effect of adjustments

 

 

 

(2.43)

 

 

Non GAAP diluted earnings per ADS

 

$

14.80

 

 

 

 

$

15.20

 

 

 
NOTES TO EDITORS

 

Stephen Williams, Deputy Company Secretary, is responsible for arranging the release of this announcement.

 

Inside Information

 

This announcement contains inside information.

 

About Shire

 

Shire is the leading global biotechnology company focused on serving people with rare diseases. We strive to develop best-in-class products, many of which are available in more than 100 countries, across core therapeutic areas including Hematology, Immunology, Neuroscience, Ophthalmics, Lysosomal Storage Disorders, Gastrointestinal / Internal Medicine / Endocrine and Hereditary Angioedema; and a growing franchise in Oncology.

 

Our employees come to work every day with a shared mission: to develop and deliver breakthrough therapies for the hundreds of millions of people in the world affected by rare diseases and other high-need conditions, and who lack effective therapies to live their lives to the fullest.

 

www.shire.com


THE "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

 

Statements included herein that are not historical facts, including without limitation statements concerning future strategy, plans, objectives, expectations and intentions, the anticipated timing of clinical trials and approvals for, and the commercial potential of, inline or pipeline products, 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's results could be materially adversely affected. The risks and uncertainties include, but are not limited to, the following:

 

  • Shire's products may not be a commercial success;
  • increased pricing pressures and limits on patient access as a result of governmental regulations and market developments may affect Shire's future revenues, financial condition and results of operations;
  • Shire conducts its own manufacturing operations for certain of its products and is reliant on third party contract manufacturers to manufacture other products and to provide goods and services. Some of Shire's products or ingredients are only available from a single approved source for manufacture. Any disruption to the supply chain for any of Shire's products may result in Shire being unable to continue marketing or developing a product or may result in Shire being unable to do so on a commercially viable basis for some period of time;
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