Commitments and Contingencies

3 Months Ended

Mar. 31, 2012

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure

11.       Commitments and contingencies

(a)       Leases

Future minimum lease payments under operating leases at March 31, 2012 are presented below:

	Operating
	leases
	$’M
	_____________
2012	29.6
2013	32.2
2014	29.4
2015	24.0
2016	16.3
2017	12.2
Thereafter	31.8
	_____________
	175.5
	_____________

The Company leases land, facilities, motor vehicles and certain equipment under operating leases expiring through 2024. Lease and rental expense amounted to $12.8 million and$8.7 million for the three months to March 31, 2012 and2011respectively, which is predominately included in SG&Aexpenses in the Consolidated Statements of Income.

(b)       Letters of credit and guarantees

At March 31, 2012 the Company had irrevocable standby letters of credit and guarantees with various banks and insurance companiestotaling $34.8million, providing security for the Company's performance of various obligations. These obligations are primarily in respect of the recoverability of insurance claims, lease obligations and supply commitments. The Company has restricted cash of $9.2million, as required by these letters of credit.

(c)       Collaborative arrangements

Details of significant updates in collaborative arrangements in the three months to March 31, 2012 are included below:

In-licensing arrangements

(i)       Collaboration and license agreement with Sangamo

On February 1, 2012 Shire and Sangamo announced that they had entered into a collaboration and license agreement to develop therapeutics for hemophilia and other monogenic diseases based on Sangamo's zinc finger DNA-binding protein (“ZFP”) technology. Sangamo is responsible for all activities through submission of Investigational New Drug Applications and European Clinical Trial Applications for each product and Shire will reimburse Sangamo for its internal and external research program-related costs. Shire is responsible for clinical development and commercialization of products arising from the collaboration. Shire paid Sangamo an up-front fee of $13.0 million in the three months to March 31, 2012 (2011: $nil) and may be required to pay research, regulatory, development and commercial milestone payments, and royalties on product sales.

Out-licensing arrangements

Shire has entered into various collaborative arrangements under which the Company has out-licensed certain product or intellectual property rights for consideration such as up-front payments, development milestones, sales milestones and/or royalty payments. In some of these arrangements Shire and the licensee are both actively involved in the development and commercialization of the licensed product and have exposure to risks and rewards dependent on its commercial success. Under the terms of these arrangements, the Company may receive development milestone payments up to an aggregate amount of $39.0 million and sales milestones up to an aggregate amount of $55.4 million. The receipt of these substantive milestones is uncertain and contingent on the achievement of certain development milestones or the achievement of a specified level of annual net sales by the licensee. In the three months to March 31, 2012 Shire received up-front and milestone payments totaling $6.0 million (2011: $5.0 million). In the three monthsto March 31, 2012 Shire recognized milestone income of $5.5million (2011: $6.8 million) in other revenues and $19.1 million (2011: $10.7 million) in product sales for shipment of product to the relevant licensee.

(d)       Commitments

(i)       Clinical testing

At March 31, 2012 the Company had committed to pay approximately $399.7 million (December 31, 2011: $358.6 million) to contract vendors for administering and executing clinical trials. The timing of these payments is dependent upon actual services performed by the organizations as determined by patient enrollment levels and related activities.

(ii)       Contract manufacturing

At March 31, 2012 the Company had committed to pay approximately $101.3 million (December 31, 2011: $86.4 million) in respect of contract manufacturing. The Company expects to pay $76.3 million of these commitments in 2012.

(iii)       Other purchasing commitments

At March 31, 2012 the Company had committed to pay approximately $225.9 million (December 31, 2011: $190.1 million) for future purchases of goods and services, predominantly relating to active pharmaceutical ingredients sourcing. The Company expects to pay $218.9 million of these commitments in 2012.

(iv)       Investment commitments

At March 31, 2012 the Company had outstanding commitments to subscribe for interests in companies and partnerships for amounts totaling $7.3 million (December 31, 2011: $9.4 million) which may all be payable in 2012, depending on the timing of capital calls.

(v)       Capital commitments

At March 31, 2012 the Company had committed to spend $14.1 million (December 31, 2011: $25.4 million) on capital projects.

(e)       Legal and other proceedings

The Company expenses legal costs as they are incurred.

The Company recognizes loss contingency provisions for probable losses when management is able to reasonably estimate the loss. When the estimated loss lies within a range, the Company records a loss contingency provision based on its best estimate of the probable loss. If no particular amount within that range is a better estimate than any other amount, the minimum amount is recorded.  Estimates of losses are often developed substantially before the ultimate loss is known, and are therefore refined each accounting period as additional information becomes known. In instances where the Company is unable to develop a reasonable estimate of loss, no loss contingency provision is recorded at that time. As information becomes known a loss contingency provision is recorded when a reasonable estimate can be made. The estimates are reviewed quarterly and the estimates are changed when expectations are revised. An outcome that deviates from the Company's estimate may result in an additional expense or release in a future accounting period. At March 31, 2012 provisions for litigation losses, insurance claims and other disputes totaled $76.5 million (December 31, 2011: $36.9 million).

The Company's principal pending legal and other proceedings are disclosed below.  The outcomes of these proceedings are not always predictable and can be affected by various factors.  For those legal and other proceedings for which it is considered at least reasonably possible that a loss has been incurred, the Company discloses the possible loss or range of possible loss in excess of the recorded loss contingency provision, if any, provided that such excess is both material and estimable.

VYVANSE

In May and June 2011, Shire was notified that six separate Abbreviated New Drug Applications ("ANDAs") were submitted under the Hatch-Waxman Act seeking permission to market generic versions of all approved strengths of VYVANSE. The notices were from Sandoz, Inc. ("Sandoz"); Amneal Pharmaceuticals LLC ("Amneal"); Watson Laboratories, Inc.; Roxane Laboratories, Inc. ("Roxane"); Mylan Pharmaceuticals, Inc.; and Actavis Elizabeth LLC and Actavis Inc. (collectively, "Actavis"). Within the requisite 45 day period, Shire filed lawsuits for infringement of certain of Shire's VYVANSE patents in the US District Court for the District of New Jersey against each of Sandoz, Roxane, Amneal and Actavis; in the US District Court for the Central District of California against Watson Laboratories, Inc.; and in the US District Court for the Eastern District of New York against Mylan Pharmaceuticals, Inc. and Mylan Inc. (collectively "Mylan"). On December 9, 2011, the District Court of New Jersey consolidated the Sandoz, Roxane, Amneal and Actavis cases. On January 5, 2012, the Watson case was transferred to the District Court of New Jersey. The filing of the lawsuits triggered a stay of approval of all six ANDAs for up to 30 months from the expiration of the new chemical entity exclusivity. In December 2011 and February 2012, Shire received additional notifications that Mylan had filed further certifications challenging other VYVANSE patents listed in the Orange Book. Within the requisite 45 day period, Shire filed a new law suit against Mylan, Johnson Matthey Pharmaceutical Materials and Johnson Matthey Inc. in New Jersey. No trial dates have been set.

INTUNIV

In March and April 2010, Shire was notified that three separate ANDAs were submitted under the Hatch-Waxman Act seeking permission to market generic versions of all approved strengths of INTUNIV. The notices were from TevaPharmaceuticals USA, Inc. and Teva Pharmaceutical Industries Ltd. (collectively, “Teva”);Actavis; and Anchen Pharmaceuticals, Inc. and Anchen, Inc. (collectively, "Anchen"). Within the requisite 45 day period, Shire filed lawsuits in the US District Court for the District of Delaware against each of Teva, Actavis and Anchen for infringement of certain of Shire's INTUNIV patents. The filing of the lawsuits triggered a stay of approval of these ANDAs for up to 30 months. These lawsuits have been consolidated. A Markman hearing was held on February 14, 2012, and a written Markman decision was given by the court on March 22, 2012. A trial is scheduled to begin on September 17, 2012.

In October 2010, Shire was notified that two separate ANDAs were submitted under the Hatch-Waxman Act seeking permission to market generic versions of the 4mg strength of INTUNIV. The notices were from Watson Pharmaceuticals, Inc. and from Impax Laboratories, Inc. (“Impax”). Shire was subsequently advised that Impax amended its ANDA to include the 1mg, 2mg and 3mg strengths of INTUNIV. Within the requisite 45 day period, Shire filed a lawsuit in the US District Court for the Northern District of California against each of Watson Pharmaceuticals, Inc., Watson Laboratories, Inc.-Florida, Watson Pharma, Inc., ANDA, Inc. (collectively “Watson”) and Impax for infringement of certain of Shire's INTUNIV patents. The filing of the lawsuit triggered a stay of approval of these ANDAs for up to 30 months. A Markman hearing has been scheduled for May 30, 2012. No trial date has been set.

In February 2011, Shire was notified that Mylan Pharmaceuticals, Inc. submitted an ANDA under the Hatch-Waxman Act seeking permission to market a generic version of the 4mg strength of INTUNIV. Within the requisite 45 day period, Shire filed a lawsuit in the US District Court for the Southern District of New York against Mylan for infringement of certain of Shire's INTUNIV patents. In April 2011, Shire filed a lawsuit against Mylan in the US District Court for the District of West Virginia for infringement of certain of Shire's INTUNIV patents and dismissed the lawsuit in the Southern District of New York. The filing of the lawsuit in West Virginia did not trigger a stay of approval of this ANDA. A Markman hearing has been scheduled for September 6, 2012. A trial is scheduled to start on December 2, 2013. Shire was subsequently advised that Mylan amended its ANDA to include the 1mg, 2mg and 3mg strengths of INTUNIV. Within the requisite 45 day period, Shire filed another lawsuit against Mylan in the US District Court for the District of West Virginia.

In March 2011, Shire was notified that Sandoz had submitted an ANDA under the Hatch-Waxman Act seeking permission to market a generic version of the 4mg strength of INTUNIV. Within the requisite 45 day period, Shire filed a lawsuit in the US District Court for the District of Colorado against Sandoz for infringement of certain of Shire's INTUNIV patents. The filing of the lawsuit triggered a stay of approval of this ANDA for up to 30 months. Shire was subsequently advised that Sandoz amended its ANDA to include the 1mg, 2mg and 3mg strengths of INTUNIV. Within the requisite 45 day period, Shire filed another lawsuit against Sandoz in the US District Court for the District of Colorado. The filing of the lawsuit triggered a stay of approval of the 1mg, 2mg and 3mg strengths for up to 30 months. No trial date has been set.

On March 22, 2012, US Patent No. 5,854,290, one of the patents-in-suit, was dedicated to the public by the inventors. Two other patents relating to formulations of guanfacine remain in each of the lawsuits regarding INTUNIV. Those two patents expire on December 20, 2020 and July 4, 2022.

REPLAGAL

Mt. Sinai School of Medicine of New York University (“Mt. Sinai”) initiated lawsuits against Shire in Sweden on April 14, 2010, and in Germany on April 20, 2010, alleging that Shire's enzyme replacement therapy (“ERT”) for Fabry disease, REPLAGAL, infringes Mt. Sinai's European Patent No. 1 942 189, granted April 14, 2010.  Mt.Sinai sought injunctions against the use of REPLAGAL in these jurisdictions until expiration of the patent. Mt.Sinai has been granted Supplementary Protection Certificates (“SPC”) in respect of the patent in certain EU countries (including Sweden and Germany) which, where granted, extends the patent until August 2016. Where no SPC has been granted, the patent expires November 2013.

Shire filed an opposition against Mt.Sinai's patent before the European Patent Office (“EPO”) on July 23, 2010, and commenced invalidity proceedings in the UK on December 8, 2010. Mt.Sinai has counterclaimed alleging infringement in the UK proceedings. 

On May 9, 2012, Shire and Mt. Sinai agreed to settle all proceedings in connection with the validity and infringement by REPLAGAL of Mt. Sinai's European Patent No. 1 942 189.  The parties agreed to discontinue all court and related proceedings in this dispute, and Mt.Sinai has granted Shire a non-exclusive license to the patent in connection with the on-going sales of REPLAGAL in the EU. Shire will make an up-front cash payment to Mt.Sinai, with additional contingent cash payments based on REPLAGAL sales over the license term.

FOSRENOL

In February 2009 Shire was notified that three separate ANDAs were submitted under the Hatch-Waxman Act seeking permission to market generic versions of all approved strengths of FOSRENOL. The notices were received from Barr Laboratories, Inc. (“Barr”); Mylan, Inc., Mylan Pharmaceuticals, Inc. and Matrix Laboratories, Inc. (collectively, “Mylan-Matrix”); and Natco Pharma Limited (“Natco”). In December 2010, Shire was notified that Alkem Laboratories Ltd. (“Alkem”) submitted an ANDA under the Hatch-Waxman Act seeking permission to market generic versions of all approved strengths of FOSRENOL. Within the requisite 45 day period, Shire filed lawsuits in the US District Court for the Southern District of New York against each of Barr, Mylan-Matrix and Natco and in both the US District Court for the Southern District of New York and the US District Court for the Northern District of Illinois against Alkem for infringement of certain of Shire's FOSRENOL patents.  In April 2011, Shire and Barr reached a settlement which provides Barr with a license to market its own generic version of FOSRENOL in the US but only after October 1, 2021, or earlier under certain circumstances. No payments to Barr are involved with the settlement. As a result of the settlement, the lawsuit against Barr was subsequently dismissed. The lawsuits against both Mylan-Matrix and Alkem have been dismissed, and consequently, each of Mylan-Matrix and Alkem may enter the market upon FDA approval of their respective versions of generic FOSRENOL.  No trial date has been set with respect to Natco and a stay of approval of up to 30 months remains in effect.

LIALDA

In May 2010 Shire was notified that Zydus Pharmaceuticals USA, Inc. (“Zydus”) had submitted an ANDA under the Hatch-Waxman Act seeking permission to market a generic version of LIALDA. Within the requisite 45 day period, Shire filed a lawsuit in the US District Court for the District of Delaware against Zydus and Cadila Healthcare Limited, doing business as Zydus Cadila. The filing of the lawsuit triggered a stay of approval of the ANDA for up to 30 months. The April 26, 2012 Markman hearing date has been postponed and a new date has not yet been set. A trial is scheduled for October 8, 2012.

In February 2012, Shire received a Paragraph IV Notice Letter from Osmotica Pharmaceutical Corporation ("Osmotica") advising of the filing of an ANDA for a generic version of LIALDA.  Within the requisite 45 day period, Shire filed a lawsuit in the US District Court for the Northern District of Georgia against Osmotica. The filing of the lawsuit triggered a stay of approval of the ANDA for up to 30 months.

In March 2012, Shire received a Paragraph IV Notice Letter from Watson Laboratories Inc.-Florida advising of the filing of an ANDA for a generic version of LIALDA. Within the requisite 45 day period, Shire filed a lawsuit in the US District Court for the Southern District of Florida against Watson Laboratories Inc.-Florida, Watson Pharmaceuticals, Inc. and Watson Pharma, Inc. The filing of the lawsuit triggered a stay of approval of the ANDA for up to 30 months.

In April 2012, Shire received a Paragraph IV Notice Letter from Mylan Pharmaceuticals, Inc. advising of the filing of an ANDA for a generic version of LIALDA.  Shire is currently reviewing the details of Mylan Pharmaceuticals, Inc.'s Paragraph IV Notice Letter. Under the Hatch-Waxman Act, Shire has 45 days from the receipt of the Notice Letter to determine if it will file a patent infringement suit. If Shire brings suit pursuant to the Hatch-Waxman regulations, a stay of approval of up to 30months will be imposed by the FDA on Mylan Pharmaceuticals, Inc.'s ANDA.

ADDERALL XR

On November 1, 2010 Impax filed suit against Shire in the US District Court for the Southern District of New York claiming that Shire is in breach of its supply contract for the authorized generic version of ADDERALL XR.  Shire's ability to supply this product is limited by quota restrictions that the US Drug Enforcement Administration places on amphetamine, which is the product's active ingredient. Impax is seeking specific performance, equitable relief and damages. Shire has filed a counterclaim against Impax seeking damages and a declaratory judgment that Shire has satisfied its obligations under the supply contract. TheApril 10, 2012 trial date has been postponed and a new trial date has not yet been set.

In February 2011, Shire was notified that Watson Laboratories, Inc.–Florida submitted an ANDA under the Hatch-Waxman Act seeking permission to market a generic version of all approved strengths of ADDERALL XR. This new ANDA is not covered under the existing settlement agreements entered into in November 2007 between Shire and Watson Pharmaceuticals, Inc. (the “Settlement Agreements”). The Settlement Agreements cover a different ANDA and do not provide any license for Watson Laboratories, Inc. to sell the products covered in Watson Laboratories, Inc.–Florida's new ANDA.Within the requisite 45 day period, Shire filed a lawsuit in the U.S. District Court for the Southern District of New York against Watson Pharmaceuticals, Inc., Watson Laboratories, Inc.-Florida, Watson Pharm, Inc., Andrx Corporation, and Andrx Pharmaceuticals, L.L.C. for infringement of certain of Shire's ADDERALL XR patents and also for breach of contract in connection with the Settlement Agreements. The filing of the lawsuit triggered a stay of approval of this ANDA for up to 30 months. A Markman hearing is scheduled for June 13, 2012. No trial date has been set.

Subpoena related to ADDERALL XR, DAYTRANA andVYVANSE

On September 23, 2009 the Company received a civil subpoena from the US Department of Health and Human Services Office of Inspector General in coordination with the US Attorney for the Eastern District of Pennsylvania seeking production of documents related to the sales and marketing of ADDERALL XR, DAYTRANA and VYVANSE. The investigation covers whether Shire engaged in off-label promotion and other conduct that may implicate the civil False Claims Act. Shire is cooperating fully with this investigation. At this time, Shire is unable to predict the outcome or duration of this investigation.

Investigation related to DERMAGRAFT

Shire understands that the Department of Justice, including the US Attorney's Office for the Middle District of Florida, Tampa Division and the US Attorney's Office for Washington, DC, is conducting civil and criminal investigations into the sales and marketing practices of ABH relating to DERMAGRAFT.  Shire is cooperating fully with these investigations. The parameters of the investigations are unknown, and Shire is not in a position at this time to predict the scope, duration or outcome of these investigations.

Civil Investigative Demand for ADDERALL XR, ADDERALL XR Authorized Generics and VYVANSE

On April 5, 2012 Shire received a Civil Investigative Demand (“CID”) from the United States Federal Trade Commission (“FTC”) requesting that Shire provide it with certain information regarding the supply and reported shortages of ADDERALL XR and its authorized generics and the marketing and sale of ADDERALL XR, its authorized generics and VYVANSE. Shire believes the CID was triggered by reports of product shortages of ADDERALL XR and the authorized generic products in 2011. Shire is cooperating fully with the FTC. At this time, Shire is unable to predict the outcome or duration of this investigation.Separately, members of the US Congress are reviewing industry wide drug shortages which have been well publicized in the US media and Shire has responded to a specific inquiry relating to ADDERALL XR.