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Commitments and Contingencies
 12 Months Ended
Dec. 31, 2012
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies Disclosure

17.       Commitments and contingencies

 

(a)       Leases

 

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

  Operating
  leases
  $’M
  _____________
2013 49.6
2014 32.6
2015 28.4
2016 22.2
2017 18.6
Thereafter 92.9
  _____________
  244.3
  _____________

The Company leases land, facilities, motor vehicles and certain equipment under operating leases expiring through 2032. Lease and rental expense amounted to $43.2 million, $37.6 million and $33.3 million for the years to December 31, 2012, 2011 and 2010 respectively, which is predominately included in SG&A expenses in the Company's consolidated income statement.

 

(b)       Letters of credit and guarantees

 

At December 31, 2012 the Company had irrevocable standby letters of credit and guarantees with various banks and insurance companies totaling $38.2 million, 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.

 

(c)       Collaborative arrangements

 

Details of significant collaborative arrangements are included below:

 

In-licensing arrangements

 

(i)       Collaboration with Acceleron Pharma Inc. (“Acceleron”) for activin receptor type IIB (“ActRIIB”) class of molecules

 

On September 9, 2010 Shire announced that it had expanded its HGT pipeline by acquiring an exclusive license in markets outside of North America for the ActRIIB class of molecules being developed by Acceleron. The collaboration will initially focus on further developing HGT-4510 (also called ACE-031), the lead ActRIIB drug candidate, which is in development for the treatment of patients with Duchenne muscular dystrophy (“DMD”). The Phase 2a trial is on hold and clinical safety is under review. HGT-4510 and the other ActRIIB class of molecules have the potential to be used in other muscular and neuromuscular disorders with high unmet medical need.

In the year to December 31, 2010 Shire made an upfront payment of $45 million to Acceleron which has been expensed to R&D.

In the year to December 31, 2012 Shire's share of R&D costs under this collaboration agreement were $4.5 million (2011: $10.1 million; 2010: $2.7 million) which were expensed to R&D. Shire will pay Acceleron up to a further $165.0 million, subject to certain development, regulatory and sales milestones being met for HGT-4510 in DMD, up to an additional $288 million for successful commercialization of other indications and molecules, and royalties on product sales.

Shire and Acceleron are conducting the collaboration through a joint steering committee, with subcommittees including a joint manufacture committee, and a joint patent committee to monitor the development of HGT-4510 and other compounds.

 

(ii)       Research Collaboration with Santaris Pharma A/S (“Santaris”) on Locked Nucleic Acid (“LNA”) Drug Platform

 

On August 24, 2009 Shire announced that it had entered into a research collaboration with Santaris, to develop its proprietary LNA technology in a range of rare diseases. LNA technology has the benefit of shortened target validation and proof of concept, potentially increasing the speed and lowering the cost of development. As part of the joint research project Santaris will design, develop and deliver pre-clinical LNA oligonucleotides for Shire-selected orphan disease targets, and Shire will have the exclusive right to further develop and commercialize these candidate compounds on a worldwide basis.

In the year to December 31, 2012 Shire paid success milestones of $3.0 million (2011: $2.5 million; 2010: $4.0 million) and other support costs of $8.1 million (2011: $5.3 million; 2010: $2.3 million) to Santaris, which were expensed to R&D. Shire has remaining obligations to pay Santaris $13.5 million subject to certain success criteria, and development and sales milestones up to a maximum of $69 million for each indication. Shire will also pay single or double digit tiered royalties on net sales of the product.

Shire and Santaris have formed a joint research committee to monitor R&D activities through preclinical lead candidate selection at which point all development and commercialization costs will be the responsibility of Shire.

 

(iii)       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 year to December 31, 2012 (2011: $nil) and may be required to pay research, regulatory, development and commercial milestone payments, and royalties on product sales.

In the year to December 31, 2012 Shire paid costs of $8.9 million (2011: $nil; 2010: $nil) to Sangamo, which were expensed to R&D. Shire has remaining obligations to pay Sangamo $33.5 million subject to certain success criteria, and development and sales milestones up to a maximum of $180 million for each indication.

 

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 $67.0 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 year to December 31, 2012 Shire received up-front and milestone payments totaling $18.3 million (2011: $11.5 million, 2010: $nil). In the year to December 31, 2012 Shire recognized milestone income of $19.4 million (2011: $17.5 million, 2010: $8.4 million) in other revenues and $83.8 million (2011: $65.2 million, 2010: $51.1 million) in product sales for shipment of product to the relevant licensee.

 

(i)       Collaboration with Shionogi & Co. Limited (“Shionogi”) for ADHD Medicines in Japan

 

On November 18, 2011 Shire announced that it had entered into an agreement with Shionogi to co-develop and co-commercialize certain of Shire's ADHD medicines in Japan. Shionogi paid Shire an up-front fee and will share costs with Shire in exchange for rights to jointly co-develop and co-commercialize the products upon approval for the Japanese market. Shionogi is a leading Japanese pharmaceutical company with an expertise in developing medicines for the central nervous system, among other therapeutic areas. Working together with the Shionogi team, Shire believes the path to regulatory approval, market development and commercialization for ADHD medicines will be more effective and efficient.

 

In the year to December 31, 2012 Shire's share of R&D costs under this collaboration agreement were $3.2 million (2011: $nil; 2010: $nil million) which were expensed to R&D.

 

Co-promotion agreements - VYVANSE

 

Shire terminated its co-promotion agreement for VYVANSE with GSK in 2010. Following Shire's termination, GSK filed a lawsuit against Shire in the Philadelphia Court of Common Pleas relating to the co-promotion agreement. On June 29, 2012 Shire and GSK settled this dispute. The terms of the settlement are confidential.

 

(d)       Commitments

 

 

(i)       Clinical testing

 

At December 31, 2012 the Company had committed to pay approximately $424.7 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 December 31, 2012 the Company had committed to pay approximately $125.2 million (December 31, 2011: $86.4 million) in respect of contract manufacturing. The Company expects to pay all of these commitments in 2013.

 

(iii)       Other purchasing commitments

 

At December 31, 2012 the Company had committed to pay approximately $144.7 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 $141.5 million of these commitments in 2013.

 

(iv)       Investment commitments

 

At December 31, 2012 the Company had outstanding commitments to subscribe for interests in companies and partnerships for amounts totaling $15.2 million (December 31, 2011: $9.4 million) which may all be payable in 2013, depending on the timing of capital calls.

 

(v)       Capital commitments

 

At December 31, 2012 the Company had committed to spend $97.0 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 December 31, 2012 provisions for litigation losses, insurance claims and other disputes totaled $130.5 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, where 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, but not consolidated with the other cases. 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, which will expire on August 23, 2014. 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 lawsuit against Mylan, Johnson Matthey Pharmaceutical Materials and Johnson Matthey Inc. in New Jersey. In May 2012, the Mylan case that was filed in the Eastern District of New York was transferred and consolidated with the Sandoz, Roxane, Amneal and Actavis cases 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 Teva Pharmaceuticals 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. The Anchen lawsuit was settled in September 2012. This settlement provides TWi Pharmaceuticals, Inc. (“TWi”), the acquirer of Anchen's ANDA, with a license to make, and Anchen a license to market, TWi's generic versions of INTUNIV in the United States on July 1, 2016, or earlier in certain circumstances.  Such sales will require the payment of a royalty to Shire, except in certain circumstances.  Also as part of the settlement, under certain circumstances Shire may authorize Anchen to sell authorized generic versions of INTUNIV supplied by Shire, on which Shire will receive a significant royalty.  A bench trial against Actavis and Teva was held from September 17, 2012 through September 20, 2012. A decision has not yet been given.

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 was held on May 30, 2012, and a written Markman decision was given by the court on June 1, 2012. A trial is scheduled to begin on February 10, 2014.

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. 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. A Markman hearing was held on September 6, 2012 and a written Markman decision was given by the court on January 14, 2013. A trial is scheduled to start on December 2, 2013.

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. A Markman hearing was held on August 10, 2012 and a written Markman decision was given by the court on November 13, 2012. A trial is scheduled to begin on November 8, 2013.

On March 22, 2012, US Patent No. 5,854,290, one of the patents-in-suit in all the INTUNIV litigations referenced above 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 in 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 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 and in certain other non-EU territories. Shire has made an up-front cash payment to Mt.Sinai and will make additional 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 US Food and Drug Administration (“FDA”) approval of their respective versions of generic FOSRENOL.  In April 2012 the 30 month stay of approval with respect to Natco expired. No trial date has been set with respect to Natco.

In January 2013 Shire was notified that Mylan Pharmaceuticals ULC. had submitted an abbreviated new drug submission seeking permission to market generic versions of all approved strengths of FOSRENOL in Canada. Shire is currently reviewing the details of the notification and has 45 days from its receipt to determine if it will file an action under the Canadian Patented Medicines (Notice of Compliance) Regulations. If Shire brings an action, a stay of approval of up to 24-months will be imposed by Health Canada on Mylan Pharmaceuticals ULC's submission.

 

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. All scheduled dates in the lawsuit have been vacated, including the Markman hearing date originally scheduled for April 26, 2012 and the trial date originally scheduled for October 8, 2012. No dates have been rescheduled.

In February 2012, Shire was notified that Osmotica Pharmaceutical Corporation ("Osmotica") 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 Northern District of Georgia against Osmotica. The filing of the lawsuit triggered a stay of approval of the ANDA for up to 30 months. A Markman hearing is scheduled for February 2013, although no specific date has been set. No trial date has been set.

In March 2012, Shire was notified that Watson Laboratories Inc.-Florida 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 Southern District of Florida against Watson Laboratories Inc.-Florida and Watson Pharmaceuticals, Inc. The filing of the lawsuit triggered a stay of approval of the ANDA for up to 30 months. In August 2012, Shire filed an amended complaint adding Watson Pharma, Inc. and Watson Laboratories, Inc. as defendants. A Markman hearing was held on December 20, 2012 and a written Markman decision was given by the court on January 17, 2013. A trial is scheduled to occur during the two week period beginning on April 8, 2013.

In April 2012, Shire was notified that Mylan Pharmaceuticals, Inc. 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 Middle District of Florida against Mylan. The filing of the lawsuit triggered a stay of approval of the ANDA for up to 30 months. No date for a Markman hearing has been set. A trial is scheduled to begin on June 2, 2014.

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 was 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 sought specific performance, equitable relief and damages. Shire filed a counterclaim against Impax seeking damages and a declaratory judgment that Shire had satisfied its obligations under the supply contract.

On February 7, 2013 Shire and Impax settled this dispute and agreed to discontinue all court and related proceedings. Under the terms of the settlement Shire will make a one-time cash payment to Impax of $48.0 million. Also as part of the settlement, the parties have entered into an amended supply agreement which will govern the supply of authorized generic ADDERALL XR from Shire to Impax until the end of the supply term on September 30, 2014.

In February 2011, Shire was notified that Watson Laboratories, Inc.-Florida had 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.-Florida 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 was held on June 13, 2012 but no decision has been rendered. On June 22, 2012, the FDA responded to Shire's ADDERALL XR citizen petition and set forth more stringent bioequivalence standards that all ANDAs for ADDERALL XR must meet for approval. On July 30, 2012, Shire filed a request with the U.S. District Court for the Southern District of New York seeking a 90-day stay of these legal proceedings because Shire believes Watson Laboratories, Inc.-Florida's ANDA fails to meet the FDA's new bioequivalence standards and will not receive FDA approval. The judge granted the 90-day stay on August 3, 2012. On January 18, 2013, Shire, in conjunction with Watson and Par Pharmaceutical, Inc. (the successor-in-interest to Watson's ANDA for ADDERALL XR), filed a Stipulation and Order of Dismissal for all claims, counterclaims and defenses. Shire agreed to dismiss the pending proceedings without prejudice because Par has withdrawn its ANDA for ADDERALL XR and therefore Shire has no reason to continue with the litigation. The Stipulation and Order of Dismissal was ordered by the Judge on January 23, 2013, and the litigation has been dismissed.

DERMAGRAFT

 

On January 4, 2013 Shire was notified that the Massachusetts Institute of Technology (“MIT”) filed a lawsuit against Shire in the US District Court for the District of Massachusetts, alleging that Shire's manufacture, use and sale of DERMAGRAFT infringes patents owned by MIT. The three US patents asserted by MIT are US Patent Nos. 5,759,830, 5,770,417 and 5,770,193. Shire has not yet been served with a Complaint and no trial date has been set.

 

Subpoena related to ADDERALL XR, DAYTRANA and VYVANSE

 

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 covered whether Shire engaged in off-label promotion and other conduct that may implicate the civil False Claims Act.

On February 1, 2013 the Company announced it had reached an agreement in principle to resolve this matter.  The agreement also addresses sales and marketing practices relating to LIALDA and PENTASA pursuant to a subsequent voluntary disclosure made by the Company. Shire cooperated with the US Government throughout the process that led to this agreement in principle.

The Company has recorded a $57.5 million charge comprised of the agreement in principle amount, interest and costs, which has been charged to SG&A in the fourth quarter of 2012.  The agreement in principle is subject to change until this matter is finally resolved.  Discussions between the Company and the US Government are ongoing to establish a final resolution to the 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. 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.