Business Combinations

12 Months Ended

Dec. 31, 2012

Business Combinations [Abstract]

Business Combination Disclosure

3.       Business combinations

Acquisition of Lotus Tissue Repair, Inc (“Lotus”)

On February12, 2013 Shire completed the acquisition of 100% of the outstanding share capital ofLotus, a privately held biotechnology company based in Cambridge, MA.Cash consideration paid on closing by the Company was $49.3 million. Further contingent cash consideration of up to $275.0 million may be payable by the Company in future periods, dependent upon the achievement of certain safety and development milestones.

Lotus is developing a proprietary recombinant form of human collagen Type VII as the first and only intravenous protein replacement therapy currently being investigated for the treatment of Dystrophic EpidermolysisBullosa (“DEB”).  DEB is a devastating orphan disease for which there is no currently approved treatment option other than palliative care. The acquisition adds a late stage pre-clinical product for the treatment of DEB with global rights to Shire's HGT pipeline. This acquisition is complementary to Shire's existing investment in developing ABH001, which is currently being investigated as a dermal substitute therapy for the treatment of non-healing wounds in patients with EB.

The acquisition of Lotus will be accounted for as a purchase business combination. The assets acquired and the liabilities assumed from Lotus will be recorded at the date of acquisition, at their fair value. Shire's consolidated financial statements will reflect these fair values at, and the results of Lotus will be included in Shire's consolidated statement of income from, February12, 2013. As the initial accounting for the business combination has not yet been completed, further disclosure relating to this acquisition will be included in the Company's Form 10-Q for the three months ended March 31, 2013.

In the year to December 31, 2012 the Company expensed costs of $0.5 million relating to the Lotus acquisition, which have been recorded within Integration and acquisition costs in the Company's consolidated statement of income.

Acquisition of FerroKinBioSciences, Inc.(“FerroKin”)

On April 2, 2012 Shire completed the acquisition of 100% of the outstanding share capital of FerroKin. The acquisition-date fair value of consideration totalled $159.3 million, comprising cash consideration paid on closing of $94.5 million and the fair value of contingent consideration payable of $64.8 million. The maximum amount of contingent cash consideration which may be payable by Shire in future periods is $225.0 million.The amount of contingent cash consideration ultimately payable by Shire isdependent upon the achievement of certain clinical development, regulatory and net sales milestones.

The acquisition of FerroKin adds global rights to aPhase 2 product,SPD 602 (formerly referred to as FBS0701),to Shire's SP pipeline. SPD 602is intended to serve a chronic patient need for treatment of iron overload following numerous blood transfusions. Together with our collaboration with Sangamo Biosciences Inc. (“Sangamo”),this acquisition is a strategic step in building Shire's hematology business, which already includes XAGRID and a growing development pipeline.

The acquisition of FerroKinhas been accounted for as a purchase business combination. The assets acquired and the liabilities assumed from FerroKin have been recorded at their fair values atthe date of acquisition, being April 2, 2012. The Company's consolidated financial statements and results of operations include the results of FerroKinfrom April 2, 2012. In the year to December 31, 2012 the Company included pre-tax losses of $19.1 million,for FerroKin within its consolidated statement of income.

The purchase price has been allocated to acquired in-process research and development (“IPR&D”)in respect of SPD602 ($166.0 million), net current liabilities assumed ($6.6 million), net non-current liabilities assumed (including deferred tax liabilities) ($46.2 million) and goodwill ($46.1 million). Goodwill arising of $46.1 million, which is not deductible for tax purposes, has been assigned to the SPoperating segment.

In the year to December 31, 2012 the Company expensed costs of $12.1 million (2011: $nil) relating to the FerroKin acquisition, which have been recorded within Integration and acquisition costs in the Company's consolidated statement of income.

Acquisition of certain assets & liabilities of Pervasis Therapeutics, Inc. (“Pervasis”)

On April 19, 2012 Shire acquired substantially all the assets and certain liabilities of Pervasis. The acquisition date fair value of the consideration totaled $26.1 million, comprising cash consideration paid on closing of $2.5 million and the fair value of contingent consideration payable of $23.6 million. The maximum amount of contingent cash consideration which may be payable by Shire in future periods is up to $169.5 million. The amount of contingent cash consideration ultimately payable by Shire isdependent upon achievement of certain clinical development, regulatory and net sales milestones. The acquisition adds SRM-003 (formerly VASCUGEL) to Shire's Regenerative Medicine business. SRM-003 is currently in Phase 2 development for acute vascular repair, focused on improving hemodialysis access for patients with end-stage renal disease.

The acquisition has been accounted for as a purchase business combination. The assets acquired and the liabilities assumed from Pervasishave been recorded at their fair values at the date of acquisition, being April 19, 2012.The Company's consolidated financial statements and results of operations include the results of the assets acquired and the liabilities assumed from Pervasis from April 19, 2012. The purchase price has been allocated to acquired IPR&D (principally for VASCUGEL) ($24.3 million), current liabilities assumed ($0.2 million) and goodwill ($2.0 million). Goodwill, which is not deductible for tax purposes, has been assigned to the RM operating segment.

Acquisition of Advanced BioHealing, Inc. (“ABH”)

On June 28, 2011 Shire completed its acquisition of 100% of the outstanding shares and other equity instruments of ABH. The fair value of cash consideration paid by the Company during 2011 was$739.6 million.

The acquisition of ABH adds the DERMAGRAFT product, a bio-engineered skin substitute, to Shire's portfolio.

The acquisition of ABH was accounted for as a purchase business combination. The assets acquired and the liabilities assumed from ABH have been recorded at their fair values at the date of acquisition, being June 28, 2011. The determination of final fair values was completed on June 28, 2012. The Company's consolidated financial statements and results of operations include the results of ABH from June 28, 2011. The amount of ABH's revenues and pre-tax losses included in the Company's consolidated statement of income for the year ended December 31, 2011 were $105.3 million and $15.3 million (after intangible asset amortization of $20.0 million) respectively.

The Company's allocation of the purchase price to the assets acquired and liabilities assumed is outlined below:

	Fair value
	$’M
ASSETS
Current assets:
Cash and cash equivalents	14.6
Accounts receivable	30.1
Inventories	30.7
Deferred tax assets	51.1
Other current assets	7.9
	_______________
Total current assets	134.4
Non-current assets:
Property, plant and equipment	16.6
Goodwill	197.0
Other intangible assets
- DERMAGRAFT product technology	710.0
- other intangible assets	1.5
Other non-current assets	0.2
	_______________
Total assets	1,059.7
	_______________
LIABILITIES
Current liabilities:
Accounts payable and other current liabilities	52.4
Non-current liabilities:
Long term debt, less current portion	9.1
Deferred tax liabilities	258.5
Other non-current liabilities	0.1
	_______________
Total liabilities	320.1
	_______________
Fair value of identifiable assets acquired and liabilities assumed	739.6
Consideration	_______________
Cash consideration paid	739.6
	_______________

Other intangible assets principally comprise $710.0 million relating to DERMAGRAFT product technology, the product brand name and related relationships. The fair value of this asset has been estimated using an income approach, using the excess earnings method. The estimated useful life of the technology is 18 years, and amortization expense will be recorded on a straight line basis.

Goodwill arising of $197.0 million, which is not deductible for tax purposes, has been assigned to the RM operating segment. Goodwill includes the values of tax synergies, assembled workforce and future potential indications for DERMAGRAFT which at the time of acquisition did not meet the criteria for recognition as separate intangible assets.

In the year to December 31, 2012the Company incurred costs of $12.6 million (2011:$13.6 million) in respect of the acquisition and post-acquisition integrationof ABH, which have been charged to Integration and acquisition costs in the Company's consolidated statement of income.

Acquisition of Movetis

On September 6, 2010 the Company launched a voluntary public takeover offer for all the shares and warrants in Movetis, a Belgium-based specialty GI company, at a price of €19 per share in cash. On October 12, 2010 the Company acquired 99.21% of the shares of Movetis as a result of the successful tender offer. By November 8, 2010, following a statutory squeeze-out of the remaining shares and warrants not tendered in the offer, the Company had acquired 100% of the shares and warrants in Movetis for a total cash consideration of $592.0 million.

The acquisition added RESOLOR to Shire's global GI portfolio. On January 10, 2012 Shire also acquired the rights to RESOLOR in the US from J&J.

The acquisition of Movetis has been accounted for as a purchase business combination. The assets acquired and the liabilities assumed from Movetis have been recorded at their fair value at October 12, 2010, being the date of acquisition. The Company's consolidated financial statements and results of operations include the results of Movetis from October 12, 2010. The Company's allocation of the purchase price to the Movetis assets acquired and liabilities assumed is outlined below:

	$’M
	_____________
ASSETS
Current assets:
Cash and cash equivalents	109.0
Short-term investments	7.0
Other current assets	8.6
	_____________
Total current assets	124.6
	_____________
Property, plant and equipment, net	1.1
Goodwill	27.9
Other intangible assets, net
- currently marketed product	317.0
- IPR&D	139.0
- other intangible assets	14.0
Other non-current assets	0.8
Deferred tax asset	40.4
	_____________
Total assets	664.8
	_____________
LIABILITIES
Current liabilities:
Accounts payable and other current liabilities	19.0
Non-current liabilities:
Deferred tax liability	53.8
	_____________
Total liabilities	72.8
	_____________
Fair value of identifiable assets acquired and liabilities assumed	592.0
	_____________

Other intangible assets include $317.0 million relating to intellectual property rights for Movetis' currently marketed product, RESOLOR, for the treatment of chronic constipation in women in whom laxatives fail to provide adequate relief. The fair value of RESOLOR has been estimated using an income approach, based on the present value of incremental after tax cash flows attributable to the asset after deduction of contributory asset charges.The estimated useful life of the RESOLOR currently marketed product intangible asset is 14 years, with amortization being recorded on a straight line basis.

IPR&D principally relates to Movetis' RESOLOR product for the treatment of chronic constipation in men ($93 million) and children ($42 million). The fair value of these IPR&D assets have been estimated based on an income approach, using the present value of incremental after tax cash flows expected to be generated by these development projects after the deduction of contributory asset charges for other assets employed in these projects. The estimated cash flows have been probability adjusted to take into account their stage of completion and the remaining risks and uncertainties surrounding their future development and commercialization. The estimated, probability adjusted after tax cash flows have been discounted at rates between 12-14% to determine a present, or fair, value.

In the year to December 31, 2012 the Company recorded impairment charges totaling $197.9 million in respect of these intangible assets. See note 12 for further details.

Goodwill arising of $27.9 million, which is not deductible for tax purposes, has been assigned to the Specialty Pharmaceuticals operating segment.

In the year to December 31, 2010 the Company expensed transaction costs of $6.9 million relating to the Movetis acquisition, which have been recorded within Integration and acquisition costs in the Company's consolidated statements of income.

The amount of Movetis's revenues and pre-tax losses included in the Company's consolidated statements of income for the year ended December 31, 2010 were $0.3 million and $17.5 million respectively.

Supplemental disclosure of proforma information

The unaudited pro forma financial information to present the combined results of the operations of Shire, FerroKin andPervasisare not provided as the impacts of these acquisitions were not material to the Company's results of operations for any period presented.