Jersey (Channel Islands)
(State or other jurisdiction of incorporation or organization)
|
98-0601486
(I.R.S. Employer Identification No.)
|
5 Riverwalk, Citywest Business Campus, Dublin
24, Republic of Ireland
(Address of principal executive offices and zip code)
|
+353 1 429 7700
(Registrant’s telephone number, including area code)
|
·
|
Shire’s products may not be a commercial success;
|
·
|
revenues from ADDERALL XR are subject to generic erosion;
|
·
|
the failure to obtain and maintain reimbursement, or an adequate level of reimbursement, by third-party payors in a timely manner for Shire's products may impact future revenues and earnings;
|
·
|
Shire relies on a single source for manufacture of certain of its products and a disruption to the supply chain for those 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;
|
·
|
Shire uses third party manufacturers to manufacture many of its products and is reliant upon third party contractors for certain goods and services, and any inability of these third party manufacturers to manufacture products, or any failure of these third party contractors to provide these goods and services, in each case in accordance with its respective contractual obligations, could adversely affect Shire’s ability to manage its manufacturing processes or to operate its business;
|
·
|
the development, approval and manufacturing of Shire’s products is subject to extensive oversight by various regulatory agencies and regulatory approvals or interventions associated with changes to manufacturing sites, ingredients or manufacturing processes could lead to significant delays, increase in operating costs, lost product sales, an interruption of research activities or the delay of new product launches;
|
·
|
the actions of certain customers could affect Shire's ability to sell or market products profitably and fluctuations in buying or distribution patterns by such customers could adversely impact Shire’s revenues, financial conditions or results of operations;
|
·
|
investigations or enforcement action by regulatory authorities or law enforcement agencies relating to Shire’s activities in the highly regulated markets in which it operates may result in the distraction of senior management, significant legal costs and the payment of substantial compensation or fines;
|
·
|
adverse outcomes in legal matters and other disputes, including Shire’s ability to obtain, maintain, enforce and defend patents and other intellectual property rights required for its business, could have a material adverse effect on Shire’s revenues, financial condition or results of operations;
|
Page
|
||
PART I FINANCIAL INFORMATION
|
||
ITEM 1. FINANCIAL STATEMENTS
|
||
Unaudited Consolidated Balance Sheets at June 30, 2013 and December 31, 2012
|
5
|
|
Unaudited Consolidated Statements of Income for the three months and six months to June 30, 2013 and June 30, 2012
|
7
|
|
Unaudited Consolidated Statements of Comprehensive Income for the three months and six months to June 30, 2013 and June 30, 2012
|
8
|
|
Unaudited Consolidated Statement of Changes in Equity for the six months to June 30, 2013
|
9
|
|
Unaudited Consolidated Statements of Cash Flows for the six months to June 30, 2013 and June 30, 2012
|
10
|
|
Notes to the Unaudited Consolidated Financial Statements
|
12
|
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
36
|
|
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
53
|
|
ITEM 4. CONTROLS AND PROCEDURES
|
53
|
|
PART II OTHER INFORMATION
|
53
|
|
ITEM 1. LEGAL PROCEEDINGS
|
53
|
|
ITEM 1A. RISK FACTORS
|
53
|
|
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
53
|
|
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
|
53
|
|
ITEM 4. MINE SAFETY DISCLOSURES
|
53
|
|
ITEM 5. OTHER INFORMATION
|
54
|
|
ITEM 6. EXHIBITS
|
54
|
June 30,
|
December 31,
|
|||||||||||
2013
|
2012
|
|||||||||||
Notes
|
$’M | $’M | ||||||||||
ASSETS
|
||||||||||||
Current assets:
|
||||||||||||
Cash and cash equivalents
|
1,301.9 | 1,482.2 | ||||||||||
Restricted cash
|
17.6 | 17.1 | ||||||||||
Accounts receivable, net
|
4 | 915.2 | 824.2 | |||||||||
Inventories
|
5 | 492.2 | 436.9 | |||||||||
Deferred tax asset
|
212.5 | 229.9 | ||||||||||
Prepaid expenses and other current assets
|
6 | 289.1 | 221.8 | |||||||||
Total current assets
|
3,228.5 | 3,212.1 | ||||||||||
Non-current assets:
|
||||||||||||
Investments
|
33.2 | 38.7 | ||||||||||
Property, plant and equipment, net
|
953.1 | 955.8 | ||||||||||
Goodwill
|
7 | 611.6 | 644.5 | |||||||||
Other intangible assets, net
|
8 | 2,998.1 | 2,388.1 | |||||||||
Deferred tax asset
|
44.5 | 46.5 | ||||||||||
Other non-current assets
|
33.9 | 31.5 | ||||||||||
Total assets
|
7,902.9 | 7,317.2 | ||||||||||
LIABILITIES AND EQUITY
|
||||||||||||
Current liabilities:
|
||||||||||||
Accounts payable and accrued expenses
|
9 | 1,456.7 | 1,501.5 | |||||||||
Convertible bonds
|
10 | 1,100.0 | - | |||||||||
Other current liabilities
|
11 | 158.8 | 144.1 | |||||||||
Total current liabilities
|
2,715.5 | 1,645.6 | ||||||||||
Non-current liabilities:
|
||||||||||||
Convertible bonds
|
10 | - | 1,100.0 | |||||||||
Deferred tax liability
|
731.4 | 520.8 | ||||||||||
Other non-current liabilities
|
12 | 624.5 | 241.6 | |||||||||
Total liabilities
|
4,071.4 | 3,508.0 | ||||||||||
Commitments and contingencies
|
13 | - | - |
June 30,
|
December 31,
|
|||||||||||
2013
|
2012
|
|||||||||||
Notes
|
$’M | $’M | ||||||||||
Equity:
|
||||||||||||
Common stock of 5p par value; 1,000 million shares authorized; and 562.8 million shares issued and outstanding (2012: 1,000 million shares authorized; and 562.5 million shares issued and outstanding)
|
55.8 | 55.7 | ||||||||||
Additional paid-in capital
|
3,024.1 | 2,981.5 | ||||||||||
Treasury stock: 14.5 million shares (2012: 10.7 million shares)
|
(476.9 | ) | (310.4 | ) | ||||||||
Accumulated other comprehensive income
|
14 | 52.2 | 86.9 | |||||||||
Retained earnings
|
1,176.3 | 995.5 | ||||||||||
Total equity
|
3,831.5 | 3,809.2 | ||||||||||
Total liabilities and equity
|
7,902.9 | 7,317.2 |
3 months to
|
3 months to
|
6 months to
|
6 months to
|
|||||||||||||||||
June 30,
|
June 30,
|
June 30,
|
June 30,
|
|||||||||||||||||
2013
|
2012
|
2013
|
2012
|
|||||||||||||||||
Notes
|
$’M | $’M | $’M | $’M | ||||||||||||||||
Revenues:
|
|
|||||||||||||||||||
Product sales
|
1,230.2 | 1,147.7 | 2,346.9 | 2,254.6 | ||||||||||||||||
Royalties
|
36.3 | 56.3 | 74.8 | 112.6 | ||||||||||||||||
Other revenues
|
8.0 | 3.8 | 14.7 | 12.4 | ||||||||||||||||
Total revenues
|
1,274.5 | 1,207.8 | 2,436.4 | 2,379.6 | ||||||||||||||||
Costs and expenses:
|
||||||||||||||||||||
Cost of product sales
|
175.7 | 152.5 | 331.6 | 310.9 | ||||||||||||||||
Research and development ("R&D")(1)
|
260.1 | 238.6 | 484.3 | 458.9 | ||||||||||||||||
Selling, general and administrative ("SG&A")(1)
|
457.6 | 511.0 | 896.3 | 1,011.0 | ||||||||||||||||
Goodwill impairment charge
|
7 | - | - | 198.9 | - | |||||||||||||||
Gain on sale of product rights
|
(4.5 | ) | (3.6 | ) | (11.0 | ) | (10.8 | ) | ||||||||||||
Reorganization costs
|
3 | 26.4 | - | 43.9 | - | |||||||||||||||
Integration and acquisition costs
|
17.4 | 7.1 | 21.5 | 12.4 | ||||||||||||||||
Total operating expenses
|
932.7 | 905.6 | 1,965.5 | 1,782.4 | ||||||||||||||||
Operating income
|
341.8 | 302.2 | 470.9 | 597.2 | ||||||||||||||||
Interest income
|
0.5 | 0.6 | 1.2 | 1.4 | ||||||||||||||||
Interest expense
|
(8.9 | ) | (9.6 | ) | (18.0 | ) | (19.8 | ) | ||||||||||||
Other (expense)/ income, net
|
(1.4 | ) | (1.8 | ) | (2.5 | ) | 0.1 | |||||||||||||
Total other expense, net
|
(9.8 | ) | (10.8 | ) | (19.3 | ) | (18.3 | ) | ||||||||||||
Income before income taxes and equity in earnings/(losses) of equity method investees
|
332.0 | 291.4 | 451.6 | 578.9 | ||||||||||||||||
Income taxes
|
(74.4 | ) | (53.0 | ) | (129.6 | ) | (103.0 | ) | ||||||||||||
Equity in earnings/(losses) of equity method investees, net of taxes
|
0.5 | (0.6 | ) | 0.9 | 0.3 | |||||||||||||||
Net income
|
258.1 | 237.8 | 322.9 | 476.2 | ||||||||||||||||
Earnings per ordinary share - basic
|
46.9c | 42.7c | 58.6c | 85.8c | ||||||||||||||||
Earnings per ordinary share - diluted
|
45.3c | 41.3c | 57.5c | 82.8c | ||||||||||||||||
Weighted average number of shares (millions):
|
||||||||||||||||||||
Basic
|
549.6 | 557.0 | 550.5 | 555.2 | ||||||||||||||||
Diluted
|
586.0 | 594.9 | 587.5 | 594.8 |
(1)
|
R&D includes intangible asset impairment charges of $19.9 million (2012: $27.0 million) for the three months and six months to June 30, 2013. SG&A costs includes amortization of intangible assets relating to intellectual property rights acquired of $45.8 million for the three months to June 30, 2013 (2012: $51.0 million) and $91.7 million for the six months to June 30, 2013 (2012: $96.6 million).
|
3 months to
|
3 months to
|
6 months to
|
6 months to
|
|||||||||||||
June 30,
|
June 30,
|
June 30,
|
June 30,
|
|||||||||||||
2013
|
2012
|
2013
|
2012
|
|||||||||||||
$'M
|
$'M
|
$'M
|
$'M
|
|||||||||||||
Net income
|
258.1 | 237.8 | 322.9 | 476.2 | ||||||||||||
Other comprehensive income:
|
||||||||||||||||
Foreign currency translation adjustments
|
1.6 | (54.3 | ) | (34.5 | ) | (17.7 | ) | |||||||||
Unrealized holding gain/(loss) on available-for-sale securities (net of taxes of $0.9 million, $2.9 million, $1.1 million and $2.9 million)
|
1.5 | 3.1 | (0.2 | ) | 6.0 | |||||||||||
Comprehensive income
|
261.2 | 186.6 | 288.2 | 464.5 |
June 30,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
$’M | $’M | |||||||
Foreign currency translation adjustments
|
50.6 | 85.1 | ||||||
Unrealized holding gain on available-for-sale securities, net of taxes
|
1.6 | 1.8 | ||||||
Accumulated other comprehensive income
|
52.2 | 86.9 |
Shire plc shareholders' equity
|
||||||||||||||||||||||||||||
Common
stock
Number
of shares
M's
|
Common
stock
$'M
|
Additional
paid-in
capital
$’M
|
Treasury
stock
$'M
|
Accumulated
other
comprehensive
income
$'M
|
Retained earnings
$'M
|
Total
equity
$'M
|
||||||||||||||||||||||
As at January 1, 2013
|
562.5 | 55.7 | 2,981.5 | (310.4 | ) | 86.9 | 995.5 | 3,809.2 | ||||||||||||||||||||
Net income
|
- | - | - | - | - | 322.9 | 322.9 | |||||||||||||||||||||
Foreign currency translation
|
- | - | - | - | (34.5 | ) | - | (34.5 | ) | |||||||||||||||||||
Options exercised
|
0.3 | 0.1 | - | - | - | - | 0.1 | |||||||||||||||||||||
Share-based compensation
|
- | - | 37.2 | - | - | - | 37.2 | |||||||||||||||||||||
Tax benefit associated with exercise of stock options
|
- | - | 5.4 | - | - | - | 5.4 | |||||||||||||||||||||
Shares purchased by employee benefit trust ("EBT")
|
- | - | - | (50.0 | ) | - | - | (50.0 | ) | |||||||||||||||||||
Shares purchased under share buy-back program
|
- | - | - | (179.3 | ) | - | - | (179.3 | ) | |||||||||||||||||||
Shares released by EBT to satisfy exercise of stock options
|
- | - | - | 62.8 | - | (62.9 | ) | (0.1 | ) | |||||||||||||||||||
Unrealized holding loss on available-for-sale securities, net of taxes
|
- | - | - | - | (0.2 | ) | - | (0.2 | ) | |||||||||||||||||||
Dividends
|
- | - | - | - | - | (79.2 | ) | (79.2 | ) | |||||||||||||||||||
As at June 30, 2013
|
562.8 | 55.8 | 3,024.1 | (476.9 | ) | 52.2 | 1,176.3 | 3,831.5 |
6 months to June 30,
|
2013
|
2012
|
||||||
$’M | $’M | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net income
|
322.9 | 476.2 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
151.2 | 152.4 | ||||||
Share based compensation
|
36.4 | 43.4 | ||||||
Impairment of intangible assets
|
19.9 | 27.0 | ||||||
Goodwill impairment charge1
|
198.9 | - | ||||||
Gain on sale of product rights
|
(11.0 | ) | (10.8 | ) | ||||
Other
|
20.9 | 4.3 | ||||||
Movement in deferred taxes
|
21.2 | (24.1 | ) | |||||
Equity in earnings of equity method investees
|
(0.9 | ) | (0.3 | ) | ||||
Changes in operating assets and liabilities:
|
||||||||
(Increase)/decrease in accounts receivable
|
(102.6 | ) | 22.4 | |||||
Increase in sales deduction accrual
|
40.0 | 27.6 | ||||||
Increase in inventory
|
(53.9 | ) | (67.0 | ) | ||||
(Increase)/decrease in prepayments and other assets
|
(66.5 | ) | 32.1 | |||||
(Decrease)/increase in accounts and notes payable and other liabilities
|
(160.7 | ) | 34.7 | |||||
Returns on investment from joint venture
|
3.2 | 4.9 | ||||||
Net cash provided by operating activities (A)
|
419.0 | 722.8 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Movements in restricted cash
|
(0.5 | ) | 6.2 | |||||
Purchases of subsidiary undertakings and businesses, net of cash acquired
|
(227.8 | ) | (97.0 | ) | ||||
Purchases of property, plant and equipment ("PP&E")
|
(65.0 | ) | (64.4 | ) | ||||
Purchases of intangible assets
|
- | (43.5 | ) | |||||
Proceeds received on sale of product rights
|
10.3 | 10.4 | ||||||
Returns from equity investments
|
3.7 | 8.4 | ||||||
Net cash used in investing activities (B)
|
(279.3 | ) | (179.9 | ) |
2013
|
2012
|
|||||||
$’M | $’M | |||||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Payments to acquire shares under share buy-back program
|
(177.7 | ) | - | |||||
Payment of dividend
|
(79.2 | ) | (70.7 | ) | ||||
Payments to acquire shares by the Employee Benefit Trust ("EBT")
|
(50.0 | ) | (10.7 | ) | ||||
Excess tax benefit associated with exercise of stock options
|
6.1 | 35.2 | ||||||
Contingent consideration payments
|
(8.8 | ) | - | |||||
Other
|
(7.5 | ) | (2.4 | ) | ||||
Net cash used in financing activities(C)
|
(317.1 | ) | (48.6 | ) | ||||
Effect of foreign exchange rate changes on cash and cash equivalents (D)
|
(2.9 | ) | (1.6 | ) | ||||
Net (decrease)/increase in cash and cash equivalents (A+B+C+D)
|
(180.3 | ) | 492.7 | |||||
Cash and cash equivalents at beginning of period
|
1,482.2 | 620.0 | ||||||
Cash and cash equivalents at end of period
|
1,301.9 | 1,112.7 |
Supplemental information associated with continuing operations:
|
||||||||
6 months to June 30,
|
2013 | 2012 | ||||||
$’M | $’M | |||||||
Interest paid
|
(16.9 | ) | (17.3 | ) | ||||
Income taxes paid
|
(196.8 | ) | (68.3 | ) |
1.
|
Summary of Significant Accounting Policies
|
(a)
|
Basis of preparation
|
(b)
|
Use of estimates in interim financial statements
|
(c)
|
New accounting pronouncements
|
2.
|
Business combinations
|
3.
|
Reorganization costs
|
4.
|
Accounts receivable, net
|
2013
|
2012
|
|||||||
$’M | $’M | |||||||
As at January 1,
|
41.7 | 31.1 | ||||||
Provision charged to operations
|
150.8 | 135.0 | ||||||
Provision utilization
|
(150.7 | ) | (129.5 | ) | ||||
As at June 30,
|
41.8 | 36.6 |
5.
|
Inventories
|
June 30,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
$’M | $’M | |||||||
Finished goods
|
155.0 | 124.4 | ||||||
Work-in-progress
|
245.3 | 220.6 | ||||||
Raw materials
|
91.9 | 91.9 | ||||||
492.2 | 436.9 |
6.
|
Prepaid expenses and other current assets
|
June 30,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
$’M | $’M | |||||||
Prepaid expenses
|
49.2 | 31.7 | ||||||
Income tax receivable
|
175.3 | 130.6 | ||||||
Value added taxes receivable
|
20.4 | 20.9 | ||||||
Other current assets
|
44.2 | 38.6 | ||||||
289.1 | 221.8 |
7.
|
Goodwill
|
June 30,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
$’M | $’M | |||||||
Goodwill arising on businesses acquired
|
611.6 | 644.5 |
2013
|
2012
|
|||||||
$’M | $’M | |||||||
As at January 1,
|
644.5 | 592.6 | ||||||
Acquisitions
|
170.3 | 48.1 | ||||||
Goodwill impairment charge
|
(198.9 | ) | - | |||||
Foreign currency translation
|
(4.3 | ) | (4.7 | ) | ||||
As at June 30,
|
611.6 | 636.0 |
8.
|
Other intangible assets, net
|
June 30,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
$’M | $’M | |||||||
Amortized intangible assets
|
||||||||
Intellectual property rights acquired for currently marketed products
|
2,446.6 | 2,462.0 | ||||||
Acquired product technology
|
710.0 | 710.0 | ||||||
Other intangible assets
|
44.5 | 44.5 | ||||||
3,201.1 | 3,216.5 | |||||||
Intellectual property rights acquired for IPR&D
|
945.8 | 231.0 | ||||||
4,146.9 | 3,447.5 | |||||||
Less: Accumulated amortization
|
(1,148.8 | ) | (1,059.4 | ) | ||||
2,998.1 | 2,388.1 |
Other intangible assets
|
||||||||
2013
|
2012
|
|||||||
$’M | $’M | |||||||
As at January 1,
|
2,388.1 | 2,493.0 | ||||||
Acquisitions
|
732.8 | 272.5 | ||||||
Amortization charged
|
(91.7 | ) | (97.3 | ) | ||||
Impairment charges
|
(19.9 | ) | (27.0 | ) | ||||
Foreign currency translation
|
(11.2 | ) | (15.6 | ) | ||||
As at June 30,
|
2,998.1 | 2,625.6 |
9.
|
Accounts payable and accrued expenses
|
June 30,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
$’M | $’M | |||||||
Trade accounts payable and accrued purchases
|
201.7 | 208.1 | ||||||
Accrued rebates – Medicaid
|
454.6 | 455.6 | ||||||
Accrued rebates – Managed care
|
226.2 | 184.9 | ||||||
Sales return reserve
|
93.1 | 90.5 | ||||||
Accrued bonuses
|
70.5 | 109.0 | ||||||
Accrued employee compensation and benefits payable
|
74.4 | 64.5 | ||||||
R&D accruals
|
70.9 | 73.5 | ||||||
Provisions for litigation losses and other claims
|
73.5 | 118.2 | ||||||
Other accrued expenses
|
191.8 | 197.2 | ||||||
1,456.7 | 1,501.5 |
10.
|
Convertible Bonds
|
11.
|
Other current liabilities
|
June 30,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
$’M | $’M | |||||||
Income taxes payable
|
24.9 | 78.4 | ||||||
Value added taxes
|
18.5 | 23.6 | ||||||
Contingent consideration payable
|
86.4 | 16.0 | ||||||
Other current liabilities
|
29.0 | 26.1 | ||||||
158.8 | 144.1 |
12.
|
Other non-current liabilities
|
June 30,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
$’M | $’M | |||||||
Income taxes payable
|
63.3 | 58.9 | ||||||
Deferred revenue
|
10.7 | 11.4 | ||||||
Deferred rent
|
11.2 | 11.9 | ||||||
Insurance provisions
|
12.4 | 12.3 | ||||||
Contingent consideration payable
|
499.0 | 120.4 | ||||||
Other non-current liabilities
|
27.9 | 26.7 | ||||||
624.5 | 241.6 |
13.
|
Commitments and contingencies
|
(a)
|
Leases
|
Operating
|
||||
leases
|
||||
$’M | ||||
2013
|
21.6 | |||
2014
|
40.3 | |||
2015
|
31.2 | |||
2016
|
23.0 | |||
2017
|
17.3 | |||
2018
|
11.8 | |||
Thereafter
|
82.8 | |||
228.0 |
(b)
|
Letters of credit and guarantees
|
(c)
|
Collaborative arrangements
|
(d)
|
Commitments
|
(i)
|
Clinical testing
|
(ii)
|
Contract manufacturing
|
(iii)
|
Other purchasing commitments
|
(iv)
|
Investment commitments
|
(v)
|
Capital commitments
|
(e)
|
Legal and other proceedings
|
14.
|
Accumulated Other Comprehensive Income
|
Foreign
currency
translation
adjustment
|
Unrealized
holding
gain/(loss) on
available-for-
sale securities
|
Accumulated
other
comprehensive
income
|
||||||||||
$M | $M | $M | ||||||||||
As at January 1, 2013
|
85.1 | 1.8 | 86.9 | |||||||||
Current period change:
|
||||||||||||
Other Comprehensive income before reclassification
|
(34.5 | ) | (2.1 | ) | (36.6 | ) | ||||||
Gain recognized in the income statement (within Other (expense)/income, net) on disposal of available-for-sale securities
|
- | 1.9 | 1.9 | |||||||||
Net current period other comprehensive income
|
(34.5 | ) | (0.2 | ) | (34.7 | ) | ||||||
As at June 30, 2013
|
50.6 | 1.6 | 52.2 |
15.
|
Financial instruments
|
Fair value
|
Fair value
|
||||||||
June 30,
|
December 31,
|
||||||||
2013
|
2012
|
||||||||
$’M | $’M | ||||||||
Assets
|
Prepaid expenses and other current assets
|
3.0 | 1.3 | ||||||
Liabilities
|
Other current liabilities
|
2.7 | 3.0 |
Location of net
(loss)/gain recognized in
income
|
Amount of net (loss)/gain
recognized in income
|
||||||||
In the six months to
|
June 30,
|
June 30,
|
|||||||
2013
|
2012
|
||||||||
$’M | $’M | ||||||||
Foreign exchange contracts
|
Other income, net
|
(3.8 | ) | 6.9 |
16.
|
Fair value measurement
|
Carrying
|
Fair value
|
||||||||||||||||||||
value
|
|||||||||||||||||||||
Total
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||||||||
At June 30, 2013
|
$'M
|
$'M
|
$'M
|
$'M
|
$'M
|
||||||||||||||||
Financial assets:
|
|||||||||||||||||||||
Available-for-sale securities(1)
|
12.3 | 12.3 | 12.3 | - | - | ||||||||||||||||
Contingent consideration receivable (2)
|
38.6 | 38.6 | - | - | 38.6 | ||||||||||||||||
Foreign exchange contracts
|
3.0 | 3.0 | - | 3.0 | - | ||||||||||||||||
Financial liabilities:
|
|||||||||||||||||||||
Foreign exchange contracts
|
2.7 | 2.7 | - | 2.7 | - | ||||||||||||||||
Contingent consideration payable(3)
|
585.4 | 585.4 | - | - | 585.4 | ||||||||||||||||
Total
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||||||||
At December 31, 2012
|
$'M
|
$'M
|
$'M
|
$'M
|
$'M
|
||||||||||||||||
Financial assets:
|
|||||||||||||||||||||
Available-for-sale securities(1)
|
14.2 | 14.2 | 14.2 | - | - | ||||||||||||||||
Contingent consideration receivable (2)
|
38.3 | 38.3 | - | - | 38.3 | ||||||||||||||||
Foreign exchange contracts
|
1.3 | 1.3 | - | 1.3 | - | ||||||||||||||||
Financial liabilities:
|
|||||||||||||||||||||
Foreign exchange contracts
|
3.0 | 3.0 | - | 3.0 | - | ||||||||||||||||
Contingent consideration payable(3)
|
1
|
136.4 | 136.4 | - | - | 136.4 |
(1)
|
Available-for-sale securities are included within Investments in the consolidated balance sheet.
|
(2)
|
Contingent consideration receivable is included within Prepaid expenses and other current assets and Other non-current assets in the consolidated balance sheet.
|
(3)
|
Contingent consideration payable is included within Other current liabilities and Other non-current liabilities in the consolidated balance sheet.
|
·
|
Available-for-sale securities – the fair values of available-for-sale securities are estimated based on quoted market prices for those investments.
|
·
|
Contingent consideration receivable – the fair value of the contingent consideration receivable has been estimated using the income approach (using a probability weighted discounted cash flow method).
|
·
|
Foreign exchange contracts – the fair values of the swap and forward foreign exchange contracts have been determined using an income approach based on current market expectations about the future cash flows.
|
·
|
Contingent consideration payable – the fair value of the contingent consideration payable has been estimated using the income approach (using a probability weighted discounted cash flow method).
|
2013
|
2012
|
|||||||
$'M
|
$'M
|
|||||||
Balance at January 1,
|
38.3 | 37.8 | ||||||
Gain recognized in the income statement (within Gain on sale of product rights) due to change in fair value during the period
|
11.0 | 10.8 | ||||||
Reclassification of amounts to Other receivables within Other current assets
|
(9.7 | ) | (10.0 | ) | ||||
Amounts recorded to other comprehensive income (within foreign currency translation adjustments)
|
(1.0 | ) | (0.7 | ) | ||||
Balance at June 30,
|
38.6 | 37.9 | ||||||
Contingent consideration payable
|
||||||||
2013 | 2012 | |||||||
$'M
|
$'M
|
|||||||
Balance at January 1,
|
136.4 | - | ||||||
Initial recognition of contingent consideration payable
|
451.4 | 127.8 | ||||||
Loss recognized in the income statement (within Integration and acquisition costs) due to change in fair value during the period
|
13.7 | 2.1 | ||||||
Reclassification of amounts to Other current liabilities
|
(8.4 | ) | (2.7 | ) | ||||
Change in fair value during the period with corresponding adjustment to the associated intangible asset
|
(7.7 | ) | - | |||||
Balance at June 30,
|
585.4 | 127.2 |
Financial assets:
|
Fair Value at the Measurement Date
|
||||||
At June 30, 2013
|
Fair value
|
Valuation
Technique
|
Significant
unobservable Inputs
|
Range
|
|||
$'M
|
|||||||
Contingent consideration receivable ("CCR")
|
38.6
|
Income approach
(probability
weighted
discounted cash
flow)
|
• Probability weightings
applied to different
sales scenarios
|
• 10 to 40%
|
|||
• Future forecast
royalties receivable at
relevant contractual
royalty rates
|
• $10 million to
$171 million
|
||||||
• Assumed market
participant discount
rate
|
• 6.0%
|
||||||
Financial liabilities:
|
Fair Value at the Measurement Date
|
||||||
At June 30, 2013
|
Fair value
|
Valuation
Technique
|
Significant
unobservable Inputs
|
Range
|
|||
$'M
|
|||||||
|
|
|
|
||||
Contingent consideration payable
|
585.4
|
Income approach
(probability
weighted
discounted cash
flow)
|
• Cumulative probability
of milestones being
achieved
|
• 18 to 57%
(Weighted
average)
|
|||
• Assumed market
participant discount
rate
|
• 2.1 to 8.8%
(Weighted
average)
|
||||||
• Periods in which
milestones are
expected to be
achieved
|
• 2014 to 2024
|
||||||
• Forecast quarterly
royalties payable on
net sales of
relevant products
|
• $1.7 to $7.6
million
|
Fair Value at the Measurement Date
|
|||||||
At June 30, 2013
|
Fair value
|
Valuation
Technique
|
Significant
unobservable Inputs
|
Rate used
|
|||
$'M
|
|||||||
|
|
|
|
||||
Movetis-related IPR&D intangible assets
|
20.3
|
Income approach
(discounted cash
flow)
|
• Decline in forecast
peak sales since last
impairment test
|
• 50%
|
|||
• Assumed market
participant discount
rate
|
• 8.9%
|
||||||
June 30, 2013
|
December 31, 2012
|
|||||||||||||||
Carrying
|
Carrying
|
|||||||||||||||
amount
|
Fair value
|
amount
|
Fair value
|
|||||||||||||
$’M | $’M | $’M | $’M | |||||||||||||
Financial liabilities:
|
||||||||||||||||
Convertible bonds (Level 1)
|
1,100.0 | 1,211.3 | 1,100.0 | 1,228.2 | ||||||||||||
Building financing obligation (Level 3)
|
7.8 | 10.5 | 8.0 | 10.3 |
·
|
Convertible bonds – the fair value of Shire’s $1,100 million 2.75% convertible bonds due 2014 is determined by reference to the market price of the instrument as the convertible bonds are publicly traded.
|
·
|
Building finance obligations - the fair value of building finance obligations are estimated based on the present value of future cash flows, and an estimate of the residual value of the underlying property at the end of the lease term, associated with these obligations.
|
17.
|
Earnings per share
|
3 months to
|
3 months to
|
6 months to
|
6 months to
|
|||||||||||||
June 30,
|
June 30,
|
June 30,
|
June 30,
|
|||||||||||||
2013
|
2012
|
2013
|
2012
|
|||||||||||||
$’M | $’M | $’M | $’M | |||||||||||||
Numerator for basic earnings per share
|
258.1 | 237.8 | 322.9 | 476.2 | ||||||||||||
Interest on convertible bonds, net of tax
|
7.5 | 7.8 | 15.1 | 16.2 | ||||||||||||
Numerator for diluted earnings per share
|
265.6 | 245.6 | 338.0 | 492.4 | ||||||||||||
Weighted average number of shares:
|
||||||||||||||||
Millions
|
Millions
|
Millions
|
Millions
|
|||||||||||||
Basic 1
|
549.6 | 557.0 | 550.5 | 555.2 | ||||||||||||
Effect of dilutive shares:
|
||||||||||||||||
Share based awards to employees 2
|
2.6 | 4.4 | 3.3 | 6.1 | ||||||||||||
Convertible bonds 2.75% due 2014 3
|
33.8 | 33.5 | 33.7 | 33.5 | ||||||||||||
Diluted
|
586.0 | 594.9 | 587.5 | 594.8 |
1.
|
Excludes shares purchased by the EBT and under the share buy-back program and presented by Shire as treasury stock.
|
2.
|
Calculated using the treasury stock method.
|
3.
|
Calculated using the ‘if-converted’ method.
|
3 months to
|
3 months to
|
6 months to
|
6 months to
|
|||||||||||||
June 30,
|
June 30,
|
June 30,
|
June 30,
|
|||||||||||||
2013
|
2012
|
2013
|
2012
|
|||||||||||||
No. of shares
|
No. of shares
|
No. of shares
|
No. of shares
|
|||||||||||||
Millions
|
Millions
|
Millions
|
Millions
|
|||||||||||||
Share based awards to employees1
|
11.0 | 6.3 | 9.1 | 4.5 |
1.
|
Certain stock options have been excluded from the calculation of diluted EPS because (a) their exercise prices exceeded Shire plc’s average share price during the calculation period or (b) the required performance conditions were not satisfied as at the balance sheet date.
|
18.
|
Segmental reporting
|
SP
|
HGT
|
RM
|
All Other
|
Total
|
||||||||||||||||
3 months to June 30, 2013
|
$’M | $’M | $’M | $’M | $’M | |||||||||||||||
Product sales
|
813.2 | 394.9 | 22.1 | - | 1,230.2 | |||||||||||||||
Royalties
|
24.8 | - | - | 11.5 | 36.3 | |||||||||||||||
Other revenues
|
4.8 | 3.2 | - | - | 8.0 | |||||||||||||||
Total revenues
|
842.8 | 398.1 | 22.1 | 11.5 | 1,274.5 | |||||||||||||||
Cost of product sales(1)
|
95.0 | 69.4 | 11.3 | - | 175.7 | |||||||||||||||
Research and development(1)
|
181.9 | 70.7 | 7.5 | - | 260.1 | |||||||||||||||
Selling, general and administrative(1)
|
242.2 | 103.3 | 47.1 | 65.0 | 457.6 | |||||||||||||||
Gain on sale of product rights
|
(4.5 | ) | - | - | - | (4.5 | ) | |||||||||||||
Reorganization costs
|
- | - | - | 26.4 | 26.4 | |||||||||||||||
Integration and acquisition costs
|
9.9 | 6.6 | 0.9 | - | 17.4 | |||||||||||||||
Total operating expenses
|
524.5 | 250.0 | 66.8 | 91.4 | 932.7 | |||||||||||||||
Operating income/(loss)
|
318.3 | 148.1 | (44.7 | ) | (79.9 | ) | 341.8 | |||||||||||||
Total assets
|
3,058.6 | 2,220.2 | 748.1 | 1,876.0 | 7,902.9 | |||||||||||||||
Long-lived assets(2)
|
117.2 | 684.2 | 52.5 | 102.1 | 956.0 | |||||||||||||||
Capital expenditure on long-lived assets(2)
|
9.5 | 13.5 | 15.0 | 5.3 | 43.3 |
(1)
|
Depreciation from manufacturing plants ($10.0 million) is included in Cost of product sales; depreciation of research and development assets ($4.3 million) and impairment of IPR&D intangible assets in the SP reporting segment ($19.9 million) is included in Research and development; and all other depreciation and amortization charges ($61.9 million) is included in Selling, general and administrative.
|
(2)
|
Long-lived assets comprise all non-current assets (excluding goodwill and other intangible assets, deferred contingent consideration assets, deferred tax assets, investments, income tax receivable and financial instruments).
|
SP
|
HGT
|
RM
|
All Other
|
Total
|
||||||||||||||||
3 months to June 30, 2012
|
$’M | $’M | $’M | $’M | $’M | |||||||||||||||
Product sales
|
735.5 | 359.8 | 52.4 | - | 1,147.7 | |||||||||||||||
Royalties
|
45.4 | - | - | 10.9 | 56.3 | |||||||||||||||
Other revenues
|
3.6 | 0.2 | - | - | 3.8 | |||||||||||||||
Total revenues
|
784.5 | 360.0 | 52.4 | 10.9 | 1,207.8 | |||||||||||||||
Cost of product sales(1)
|
84.8 | 50.7 | 17.0 | - | 152.5 | |||||||||||||||
Research and development(1)
|
158.3 | 76.0 | 4.3 | - | 238.6 | |||||||||||||||
Selling, general and administrative(1)
|
311.5 | 95.9 | 42.6 | 61.0 | 511.0 | |||||||||||||||
Gain on sale of product rights
|
(3.6 | ) | - | - | - | (3.6 | ) | |||||||||||||
Integration and acquisition costs
|
2.8 | - | 4.3 | - | 7.1 | |||||||||||||||
Total operating expenses
|
553.8 | 222.6 | 68.2 | 61.0 | 905.6 | |||||||||||||||
Operating income/(loss)
|
230.7 | 137.4 | (15.8 | ) | (50.1 | ) | 302.2 | |||||||||||||
Total assets
|
2,534.6 | 1,931.1 | 980.5 | 1,594.8 | 7,041.0 | |||||||||||||||
Long-lived assets(2)
|
130.1 | 707.9 | 25.0 | 64.2 | 927.2 | |||||||||||||||
Capital expenditure on long-lived assets(2)
|
12.1 | 18.3 | 0.1 | 5.8 | 36.3 |
(1)
|
Depreciation from manufacturing plants ($7.0 million) is included in Cost of product sales; depreciation of research and development assets ($6.4 million) and impairment of IPR&D intangible assets in the SP reporting segment ($27.0 million) is included in Research and development; and all other depreciation and amortization charges ($65.5 million) is included in Selling, general and administrative.
|
(2)
|
Long-lived assets comprise all non-current assets (excluding goodwill and other intangible assets, deferred contingent consideration assets, deferred tax assets, investments, income tax receivable and financial instruments).
|
SP
|
HGT
|
RM
|
All Other
|
Total
|
||||||||||||||||
6 months to June 30, 2013
|
$’M | $’M | $’M | $’M | $’M | |||||||||||||||
Product sales
|
1,559.3 | 746.8 | 40.8 | - | 2,346.9 | |||||||||||||||
Royalties
|
50.3 | - | - | 24.5 | 74.8 | |||||||||||||||
Other revenues
|
11.2 | 3.5 | - | - | 14.7 | |||||||||||||||
Total revenues
|
1,620.8 | 750.3 | 40.8 | 24.5 | 2,436.4 | |||||||||||||||
Cost of product sales(1)
|
180.8 | 130.9 | 19.8 | 0.1 | 331.6 | |||||||||||||||
Research and development(1)
|
329.3 | 140.3 | 14.7 | - | 484.3 | |||||||||||||||
Selling, general and administrative(1)
|
500.1 | 208.8 | 94.9 | 92.5 | 896.3 | |||||||||||||||
Goodwill impairment charge
|
- | - | 198.9 | - | 198.9 | |||||||||||||||
Gain on sale of product rights
|
(11.0 | ) | - | - | - | (11.0 | ) | |||||||||||||
Reorganization costs
|
- | - | - | 43.9 | 43.9 | |||||||||||||||
Integration and acquisition costs
|
11.8 | 8.0 | 1.7 | - | 21.5 | |||||||||||||||
Total operating expenses
|
1,011.0 | 488.0 | 330.0 | 136.5 | 1,965.5 | |||||||||||||||
Operating income/(loss)
|
609.8 | 262.3 | (289.2 | ) | (112.0 | ) | 470.9 | |||||||||||||
Total assets
|
3,058.6 | 2,220.2 | 748.1 | 1,876.0 | 7,902.9 | |||||||||||||||
Long-lived assets(2)
|
117.2 | 684.2 | 52.5 | 102.1 | 956.0 | |||||||||||||||
Capital expenditure on long-lived assets(2)
|
16.9 | 22.8 | 24.3 | 12.2 | 76.2 |
(1)
|
Depreciation from manufacturing plants ($17.8 million) is included in Cost of product sales; depreciation of research and development assets ($8.9 million) and impairment of IPR&D intangible assets in the SP reporting segment ($19.9 million) is included in Research and development; and all other depreciation and amortization charges ($124.5 million) is included in Selling, general and administrative.
|
(2)
|
Long-lived assets comprise all non-current assets (excluding goodwill and other intangible assets, deferred contingent consideration assets, deferred tax assets, investments, income tax receivable and financial instruments).
|
SP
|
HGT
|
RM
|
All Other
|
Total
|
||||||||||||||||
6 months to June 30, 2012
|
$’M | $’M | $’M | $’M | $’M | |||||||||||||||
Product sales
|
1,442.2 | 711.2 | 101.2 | - | 2,254.6 | |||||||||||||||
Royalties
|
87.8 | - | - | 24.8 | 112.6 | |||||||||||||||
Other revenues
|
11.9 | 0.5 | - | - | 12.4 | |||||||||||||||
Total revenues
|
1,541.9 | 711.7 | 101.2 | 24.8 | 2,379.6 | |||||||||||||||
Cost of product sales(1)
|
171.9 | 112.0 | 27.0 | - | 310.9 | |||||||||||||||
Research and development(1)
|
289.3 | 162.3 | 7.3 | - | 458.9 | |||||||||||||||
Selling, general and administrative(1)
|
611.6 | 200.4 | 84.2 | 114.8 | 1,011.0 | |||||||||||||||
Gain on sale of product rights
|
(10.8 | ) | - | - | - | (10.8 | ) | |||||||||||||
Integration and acquisition costs
|
4.4 | - | 8.0 | - | 12.4 | |||||||||||||||
Total operating expenses
|
1,066.4 | 474.7 | 126.5 | 114.8 | 1,782.4 | |||||||||||||||
Operating income/(loss)
|
475.5 | 237.0 | (25.3 | ) | (90.0 | ) | 597.2 | |||||||||||||
Total assets
|
2,534.6 | 1,931.1 | 980.5 | 1,594.8 | 7,041.0 | |||||||||||||||
Long-lived assets(2)
|
130.1 | 707.9 | 25.0 | 64.2 | 927.2 | |||||||||||||||
Capital expenditure on long-lived assets(2)
|
19.2 | 26.3 | 0.1 | 8.2 | 53.8 |
(1)
|
Depreciation from manufacturing plants ($14.2 million) is included in Cost of product sales; depreciation of research and development assets ($12.8 million) and impairment of IPR&D intangible assets in the SP reporting segment ($27.0 million) is included in Research and development; and all other depreciation and amortization charges ($124.7 million) is included in Selling, general and administrative.
|
(2)
|
Long-lived assets comprise all non-current assets (excluding goodwill and other intangible assets, deferred contingent consideration assets, deferred tax assets, investments, income tax receivable and financial instruments).
|
·
|
On July 5, 2013 Shire received approval from Health Canada for INTUNIV XR (guanfacine hydrochloride extended-release tablets) as monotherapy for the treatment of ADHD in children aged 6 to 12 years and as adjunctive therapy to psychostimulants for the treatment of ADHD in children, aged 6 to 12 years, with a sub-optimal response to psychostimulants. The targeted launch date is November 2013.
|
·
|
In June 2013 data from an on-going phase 2 study was presented at the 18th Congress of the European Hematology Association. Seventy-two-week data in patients with hereditary anemias indicate that the safety, tolerability and efficacy profile of SPD602 supports its continued development. Full data from the ongoing phase 2 proof-of-concept program will be available mid-2014.
|
·
|
This program has been discontinued following review of headline data from the proof-of-concept study which did not support continued development.
|
·
|
This program has been discontinued as part of ongoing portfolio prioritization assessments.
|
·
|
On May 9, 2013 Shire announced that it had prevailed in its litigation against Watson Pharmaceuticals Inc., Watson Laboratories, Inc.-Florida, Watson Pharma, Inc. and Watson Laboratories, Inc. in connection with their ANDA for a generic version of Shire’s LIALDA. Following a bench trial, the US Court for the Southern District of Florida upheld the validity of US Patent No. 6,773,720 and ruled that the proposed generic product infringes that patent. Watson has appealed this ruling to the Court of Appeals of the Federal Circuit.
|
·
|
In the fourth quarter of 2012 Shire commenced a share buy-back program, for the purpose of returning funds to shareholders, of up to $500 million, through both direct purchases of Ordinary Shares and through the purchase of Ordinary Shares underlying American Depositary Receipts. As of July 24, 2013 Shire had made on-market repurchases totaling 9,567,253 Ordinary Shares at a cost of $ 289.9 million (excluding transaction costs).
|
·
|
Product sales in the second quarter of 2013 were $1,230 million, up 7%, when compared against a strong set of comparatives in the second quarter of 2012. On a Constant Exchange Rate (“CER”) basis, which is a Non GAAP measure, product sales were up 8%.
|
·
|
Total revenues were up 6% to $1,275 million (2012: $1,208 million) as the growth in product sales was partially offset, as expected, by lower royalties, particularly from ADDERALL XR.
|
·
|
Operating income was up 13% to $342 million (2012: $302 million), as the good underlying operating leverage in the second quarter of 2013 further benefited from lower legal and litigation costs and lower impairment charges, only partially offset by higher reorganization and acquisition costs compared to the second quarter of 2012. R&D expenditure was up 15% as Shire continues to progress a number of promising pipeline programs. The increase was moderated by lower SG&A expenditure (down 5%) as the Company focuses on simplifying its business, delivering efficient growth and with that enhanced margins.
|
·
|
Diluted earnings per ordinary share increased 10% to $0.45 (2012: $0.41), due to higher operating income partially offset by a higher effective tax rate of 22% (2012: 18%).
|
3 months to
|
3 months to
|
|||||||||||
June 30,
|
June 30,
|
|||||||||||
2013
|
2012
|
change
|
||||||||||
$'M
|
$'M
|
%
|
||||||||||
Product sales
|
1,230.2 | 1,147.7 | +7 | |||||||||
Royalties
|
36.3 | 56.3 | -36 | |||||||||
Other revenues
|
8.0 | 3.8 | +111 | |||||||||
Total
|
1,274.5 | 1,207.8 | +6 |
3 months to
|
3 months to
|
|||||||||||||||||||||||
June 30,
|
June 30,
|
Product sales
|
Non-GAAP CER
|
US prescription
|
Exit market
|
|||||||||||||||||||
2013
|
2012
|
growth
|
growth4
|
growth1
|
share1
|
|||||||||||||||||||
Net product sales:
|
$'M
|
$'M
|
%
|
%
|
%
|
%
|
||||||||||||||||||
VYVANSE
|
300.3 | 266.2 | 13 | % | +13 | +7 | 16 | |||||||||||||||||
ELAPRASE
|
149.2 | 122.2 | 22 | % | +25 | n/a | 2 | n/a | 2 | |||||||||||||||
LIALDA/MEZAVANT
|
137.5 | 94.1 | 46 | % | +46 | +17 | 26 | |||||||||||||||||
REPLAGAL
|
114.1 | 123.2 | -7 | % | -5 | n/a | 3 | n/a | 3 | |||||||||||||||
ADDERALL XR
|
112.3 | 133.9 | -16 | % | -16 | -11 | 5 | |||||||||||||||||
INTUNIV
|
90.4 | 69.1 | 31 | % | +31 | +10 | 5 | |||||||||||||||||
VPRIV
|
82.5 | 82.7 | 0 | % | +1 | n/a | 2 | n/a | 2 | |||||||||||||||
PENTASA
|
73.6 | 63.9 | 15 | % | +15 | -1 | 14 | |||||||||||||||||
FIRAZYR
|
49.5 | 31.7 | 56 | % | +56 | n/a | 2 | n/a | 2 | |||||||||||||||
FOSRENOL
|
42.1 | 43.2 | -3 | % | -2 | -19 | 4 | |||||||||||||||||
XAGRID
|
26.5 | 25.5 | 4 | % | +5 | n/a | 2 | n/a | 2 | |||||||||||||||
DERMAGRAFT
|
22.3 | 52.4 | -57 | % | -57 | n/a | 2 | n/a | 2 | |||||||||||||||
Other product sales
|
29.9 | 39.6 | -24 | % | -23 | n/a | n/a | |||||||||||||||||
Total product sales
|
1,230.2 | 1,147.7 | 7 | % |
(1)
|
Data provided by IMS Health National Prescription Audit (“IMS NPA”) relates solely to US-based prescriptions. Exit market share represents the average monthly US market share in the month ended June 30, 2013.
|
(2)
|
IMS NPA Data not available.
|
(3)
|
Not sold in the US in the second quarter of 2013.
|
(4)
|
The Company’s management analyzes product sales and revenue growth for certain products sold in markets outside of the US on a constant exchange rate (“CER”) basis, so that product sales and revenue growth can be considered excluding movements in foreign exchange rates. Product sales and revenue growth on a CER basis is a Non-GAAP financial measure (“Non-GAAP CER”), computed by comparing 2013 product sales and revenues restated using 2012 average foreign exchange rates to 2012 actual product sales and revenues. Average exchange rates for the three months and six months to June 30, 2013 were $1.53:£1.00 and $1.30:€1.00 (2012: $1.59:£1.00 and $1.30:€1.00) and $1.55:£1.00 and $1.31:€1.00 (2012: $1.59:£1.00 and $1.30:€1.00).
|
3 months to
|
3 months to
|
|||||||||||
June 30,
|
June 30,
|
|||||||||||
2013
|
2012
|
Change
|
||||||||||
$'M
|
$'M
|
%
|
||||||||||
3TC and ZEFFIX
|
11.3 | 10.6 | +7 | |||||||||
FOSRENOL
|
10.8 | 13.0 | -17 | |||||||||
ADDERALL XR
|
4.9 | 25.7 | -81 | |||||||||
Others
|
9.3 | 7.0 | +33 | |||||||||
Total royalties
|
36.3 | 56.3 | -36 |
6 months to
|
6 months to
|
|||||||||||
June 30,
|
June 30,
|
|||||||||||
2013
|
2012
|
change
|
||||||||||
$'M
|
$'M
|
%
|
||||||||||
Product sales
|
2,346.9 | 2,254.6 | +4 | |||||||||
Royalties
|
74.8 | 112.6 | -34 | |||||||||
Other revenues
|
14.7 | 12.4 | +19 | |||||||||
Total
|
2,436.4 | 2,379.6 | +2 |
6 months to
|
6 months to
|
|||||||||||||||||||||||
June 30,
|
June 30,
|
Product sales
|
Non-GAAP CER
|
US prescription
|
Exit market
|
|||||||||||||||||||
2013
|
2012
|
growth
|
growth
|
growth1
|
share1
|
|||||||||||||||||||
$'M
|
$'M
|
%
|
%
|
%
|
%
|
|||||||||||||||||||
Net product sales:
|
||||||||||||||||||||||||
VYVANSE
|
598.7 | 526.2 | 14 | % | +14 | +7 | 16 | |||||||||||||||||
ELAPRASE
|
263.5 | 247.8 | 6 | % | +9 | n/a | 2 | n/a | 2 | |||||||||||||||
LIALDA/MEZAVANT
|
238.0 | 184.1 | 29 | % | +29 | +13 | 26 | |||||||||||||||||
REPLAGAL
|
228.1 | 257.6 | -11 | % | -10 | n/a | 3 | n/a | 3 | |||||||||||||||
ADDERALL XR
|
212.1 | 245.3 | -14 | % | -14 | -15 | 5 | |||||||||||||||||
INTUNIV
|
168.1 | 137.6 | 22 | % | +22 | +11 | 5 | |||||||||||||||||
VPRIV
|
164.1 | 154.4 | 6 | % | +7 | n/a | 2 | n/a | 2 | |||||||||||||||
PENTASA
|
144.6 | 129.7 | 11 | % | +12 | -2 | 14 | |||||||||||||||||
FIRAZYR
|
91.2 | 51.4 | 77 | % | +77 | n/a | 2 | n/a | 2 | |||||||||||||||
FOSRENOL
|
84.4 | 88.7 | -5 | % | -5 | -18 | 4 | |||||||||||||||||
XAGRID
|
49.9 | 48.7 | 2 | % | +2 | n/a | n/a | 2 | ||||||||||||||||
DERMAGRAFT
|
40.8 | 101.2 | -60 | % | -60 | n/a | 2 | n/a | 2 | |||||||||||||||
Other product sales
|
63.4 | 81.9 | -23 | % | -22 | n/a | n/a | |||||||||||||||||
Total product sales
|
2,346.9 | 2,254.6 | 4 | % |
(1)
|
Data provided by IMS Health National Prescription Audit (“IMS NPA”) relates solely to US-based prescriptions. Exit market share represents the average monthly US market share in the month ended June 30, 2013.
|
(2)
|
IMS NPA Data not available.
|
(3)
|
Not sold in the US in the six months to June 30, 2013.
|
6 months to
|
6 months to
|
|||||||||||
June 30,
|
June 30,
|
|||||||||||
2013
|
2012
|
Change
|
||||||||||
$'M
|
$'M
|
%
|
||||||||||
3TC and ZEFFIX
|
23.8 | 24.2 | -2 | |||||||||
FOSRENOL
|
19.8 | 23.0 | -14 | |||||||||
ADDERALL XR
|
13.0 | 51.0 | -75 | |||||||||
Other
|
18.2 | 14.4 | +26 | |||||||||
Total royalties
|
74.8 | 112.6 | -34 |
Period
|
Total
Number of
ordinary
shares
Purchased
|
Average Price
Paid Per
ordinary share (£)
|
Total Number of
ordinary shares
underlying ADRs
Purchased
|
Average Price
Paid Per ordinary
share underlying
ADRs ($)
|
Approximate
Dollar Value of
ordinary shares
that May Yet Be
Purchased Under
the Share Buy-
back Program
|
|||||
January 2013
|
715,203
|
19.934
|
336,300
|
32.360
|
$360 million
|
|||||
February 2013
|
448,896
|
20.748
|
164,100
|
31.954
|
$340 million
|
|||||
March 2013
|
466,918
|
20.110
|
244,200
|
30.518
|
$318 million
|
|||||
April 2013
|
866,594
|
19.731
|
500,400
|
30.263
|
$277 million
|
|||||
May 2013
|
1,136,618
|
19.383
|
418,698
|
30.081
|
$231 million
|
|||||
June 2013
|
320,688
|
20.716
|
181,857
|
32.247
|
$215 million
|
June 30,
|
December 31,
|
|||||||
2013
|
2012
|
|||||||
$’M | $’M | |||||||
Cash and cash equivalents1
|
1,301.9 | 1,482.2 | ||||||
Convertible bonds
|
1,100.0 | 1,100.0 | ||||||
Other
|
8.9 | 9.3 | ||||||
Total debt
|
1,108.9 | 1,109.3 | ||||||
Net cash
|
193.0 | 372.9 |
(1)
|
Substantially all of the Company’s cash and cash equivalents are held by foreign subsidiaries (i.e. those subsidiaries incorporated outside of Jersey, Channel Islands, the jurisdiction of incorporation of Shire plc, Shire’s holding company). The amount of cash and cash equivalents held by foreign subsidiaries has not had, and is not expected to have, a material impact on the Company’s liquidity and capital resources.
|
2.01
|
Agreement and Plan of Merger by and among Shire Pharmaceuticals Group plc, Transkaryotic Therapies, Inc. and Sparta Acquisition Corporation, dated as of April 21, 2005.(1)
|
2.02
|
Agreement of Merger dated as of February 20, 2007 among Shire plc, Shuttle Corporation and New River Pharmaceuticals, Inc.(2)
|
2.03
|
Business Combination Agreement dated as of July 3, 2008 between Maia Elfte Vermögensverwaltungs GmbH and Jerini AG. (3)
|
2.04
|
Heads of Agreement by and among Shire plc and Movetis NV relating to a friendly tender offer, dated August 3, 2010. (4)
|
2.05
|
Agreement and Plan of Merger, dated as of May 17, 2011, by and among Shire Pharmaceuticals Inc., ABH Merger Sub Inc., Advanced Biohealing, Inc., and solely for the limited purposes set forth therein, Canaan VII L.P. and Shire plc. (5)
|
2.06
|
Agreement and Plan of Merger, dated as of March 14, 2012, by and among Shire Pharmaceuticals LLC, Pelegrina Corporation, FerroKin BioSciences, Inc. and Shareholder Representative Services LLC, solely for the limited purposes set forth therein. (6)
|
3.01
|
Form of Memorandum of Association of Shire plc as adopted by a special resolution passed on April 10, 2008 and amended by a special resolution passed on September 24, 2008. (7)
|
3.02
|
Form of Article of Association of Shire plc as amended by a special resolution passed on April 26, 2011 and adopted by a special resolution passed on April 26, 2011. (8)
|
4.01
|
Form of Assignment and Novation Agreement between Shire Limited, Shire plc, JPMorgan Chase Bank, N.A. dated April 16, 2008 relating to the Deposit Agreement among Shire plc, JPMorgan Chase Bank, N.A. as depositary and all holders from time to time of ADRs issued thereunder dated November 21, 2005.(9)
|
4.02
|
Form of Deposit Agreement among Shire plc, JPMorgan Chase Bank, N.A. as depositary and all holders from time to time of ADRs issued thereunder dated November 21, 2005. (10)
|
4.03
|
Form of Ordinary Share Certificate of Shire Limited. (11)
|
4.04
|
Form of American Depositary Receipt Certificate of Shire Limited. (12)
|
4.05
|
Trust Deed for the New Shire Income Access Trust, dated August 29, 2008. (13)
|
4.06
|
Form of Amended and Restated Deposit Agreement among Shire plc, Citibank, N.A. as successor depositary, and all holders from time to time of ADRs thereunder dated May 23, 2011 (14)
|
10.01
|
Tender and Support Agreement dated as of February 20, 2007 among Shire plc, Mr. Randal J. Kirk and the other parties named therein. (15)
|
10.02
|
Multicurrency Term and Revolving Facilities Agreement as of February 20, 2007 by and among Shire plc, ABN AMRO Bank N.V., Barclays Capital, Citigroup Global Markets Limited, The Royal Bank of Scotland plc, and Barclays Bank plc. (16)
|
10.03
|
Accession and Amendment Deed dated April 15, 2008 between Shire Limited, Shire plc, certain subsidiaries of Shire plc and Barclays Bank PLC as Facility Agent relating to a US $1,200,000,000 facility agreement dated February 20, 2007 (as amended by a syndication and amendment agreement dated July 19, 2007). (17)
|
10.04
|
Subscription Agreement dated May 2, 2007 relating to the 2.75% Convertible Bonds due 2014 between Shire plc and ABN AMRO Bank N.V. and NM Rothschild & Sons Limited (trading together as ABN AMRO Rothschild, an unincorporated equity capital markets joint venture) and Barclays Bank PLC and Citigroup Global Markets Limited and Goldman Sachs International and Morgan Stanley & Co. International plc and others. (18)
|
10.05
|
Amending Subscription Agreement dated May 8, 2007 relating to the 2.75% Convertible Bonds due 2014 between Shire plc and ABN AMRO Bank N.V. and NM Rothschild & Sons Limited (trading together as ABN AMRO Rothschild, an unincorporated equity capital markets joint venture) and Barclays Bank PLC and Citigroup
|
Global Markets Limited and Goldman Sachs International and Morgan Stanley & Co. International plc and others. (19) | |
10.06
|
Trust Deed dated May 9, 2007 relating to the 2.75% Convertible Bonds due 2014 between Shire plc and BNY Corporate Trustee Services Limited. (20)
|
10.07
|
Supplemental Trust Deed dated April 15, 2008 between Shire Limited, Shire plc and BNY Corporate Trustee Services Limited relating to a trust deed dated May 9, 2007 relating to US $1,100,000,000 2.75% Convertible Bonds due 2014. (21)
|
10.08
|
Accession and Amendment Agreement dated April 15, 2008 between Shire Limited, Shire plc, BNY Corporate Trustee Services Limited and The Bank of New York relating to a paying and conversion agency agreement dated May 9, 2007 relating to US $1,100,000,000 2.75% Convertible Bonds due 2014. (22)
|
10.09*
|
Revised and Restated Master License Agreement dated November 20, 1995 among Shire BioChem Inc (f/k/a BioChem Pharma Inc.), Glaxo Group Limited, Glaxo Wellcome Inc. (formerly Glaxo Canada Inc.), Glaxo Wellcome Inc. (formerly Glaxo Inc.), Tanaud Holdings (Barbados) Limited, Tanaud International B.V. and Tanaud LLC. (23)
|
10.10*
|
Settlement Agreement, dated August 14, 2006 by and between Shire Laboratories Inc. and Barr. (24)
|
10.11*
|
Product Development and License Agreement, dated August 14, 2006 by and between Shire LLC and Duramed Pharmaceuticals, Inc. (25)
|
10.12*
|
Product Acquisition and License Agreement, dated August 14, 2006 by and among Shire LLC, Shire plc and Duramed Pharmaceuticals, Inc. (26)
|
10.13
|
Novation Agreement dated November 21, 2005 relating to the Employment Agreement of Angus Russell dated March 10, 2004. (27)
|
10.14
|
Novation Agreement dated April 11, 2008 relating to the Employment Agreement of Angus Russell dated March 10, 2004, as previously novated on November 21, 2005. (28)
|
10.15
|
Form of Amended and Restated Employment Agreement between Shire plc and Mr Matthew Emmens, dated March 12, 2004. (29)
|
10.16
|
Amendment Agreement dated November 21, 2005 relating to the Amended and Restated Employment Agreement of Matthew Emmens dated March 12, 2004. (30)
|
10.17
|
Ratification and Guaranty dated November 21, 2005 relating to the Amended and Restated Employment Agreement of Matthew Emmens dated March 12, 2004. (31)
|
10.18
|
Amendment Agreement dated May 20, 2008 relating to the Amended and Restated Employment Agreement of Matthew Emmens dated March 12, 2004, as amended on November 21, 2005. (32)
|
10.19
|
Ratification and Guaranty dated May 20, 2008 relating to the Amended and Restated Employment Agreement of Matthew Emmens dated March 12, 2004. (33)
|
10.20
|
Form of Indemnity Agreement for Directors of Shire Limited. (34)
|
10.21
|
Service Agreement between Shire Limited and Mr Graham Hetherington, dated July 2, 2008. (35)
|
10.22
|
Form of Settlement Agreement and Mutual Release in re: Transkaryotic Therapies, Inc., by and between Shire Human Genetic Therapies, Inc., Shire plc and the parties set forth therein. (36)
|
10.23
|
Amended Agreement dated February 24, 2009 relating to the Product Development and License Agreement dated August 14, 2006. (37)
|
10.24
|
Amendment to the Shire Portfolio Share Plan as approved by the Annual General meeting held on April 27, 2010. (38)
|
10.25
|
Multicurrency revolving and swingline facilities agreement as at November 23, 2010 by and among Shire plc & with a number of financial institutions, for which Abbey National Treasury Services Plc (trading as Santander Global Banking and Markets), Bank of America Securities Limited, Barclays Capital, Citigroup Global Markets Limited, Lloyds TSB Bank plc and The Royal Bank of Scotland plc acted as mandated lead arrangers and bookrunners and Credit Suisse AG, London Branch, Deutsche Bank AG, London Branch, Goldman Sachs International, Morgan Stanley Bank, N.A. and Sumitomo Mitsui Banking Corporation, Brussels Branch acted as arrangers. (39)
|
10.26
|
Service Agreement between Shire plc and Mr. Flemming Ornskov, dated October 24, 2012.
|
31.1
|
Certification of Flemming Ornskov pursuant to Rule 13a - 14 under The Exchange Act.
|
31.2
|
Certification of Graham Hetherington pursuant to Rule 13a - 14 under The Exchange Act.
|
32.1
|
Certification of Flemming Ornskov and Graham Hetherington pursuant to Section 906 of the Sarbanes - Oxley Act of 2002.
|
101.INS XBRL Instance Document
|
|
101.SCH XBRL Taxonomy Extension Schema Document
|
|
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
|
|
101.DEF XBRL Taxonomy Definition Linkbase Document
|
|
101.LAB XBRL Taxonomy Extension Label Linkbase Document
|
|
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
|
|
*
|
Certain portions of this exhibit have been omitted intentionally, subject to a confidential treatment request. A complete version of this agreement has been filed separately with the Securities and Exchange Commission.
|
(1)
|
Incorporated by reference to Exhibit 99.02 to Shire's Form 8-K filed on April 25, 2005.
|
(2)
|
Incorporated by reference to Exhibit 2.1 to Shire's Form 8-K filed on February 23, 2007.
|
(3)
|
Incorporated by reference to Exhibit 2.1 to Shire's Form 8-K filed on July 10, 2008.
|
(4)
|
Incorporated by reference to Exhibit 2.04 to Shire's Form 10-Q filed on November 5, 2010.
|
(5)
|
Incorporated by reference to Exhibit 2.1 to Shire's Form 8-K filed on June 30, 2011.
|
(6)
|
Incorporated by reference to Exhibit 2.06 to Shire's Form 10-Q filed on May 23, 2012.
|
(7)
|
Incorporated by reference to Exhibit 99.02 to Shire's Form 8-K filed on October 1, 2008.
|
(8)
|
Incorporated by reference to Exhibit 3.1 to Shire's Form 8-K filed on April 29, 2011.
|
(9)
|
Incorporated by reference to Exhibit 4.01 to Shire's Form 8-K filed on May 23, 2008.
|
(10)
|
Incorporated by reference to Exhibit 4.02 to Shire's Form 8-K filed on May 23, 2008.
|
(11)
|
Incorporated by reference to Exhibit 4.03 to Shire's Form 8-K filed on May 23, 2008.
|
(12)
|
Incorporated by reference to Exhibit 4.04 to Shire's Form 8-K filed on May 23, 2008.
|
(13)
|
Incorporated by reference to Exhibit 4.05 to Shire's Form 10-K filed on February 27, 2009.
|
(14)
|
Incorporated by reference to Exhibit (a) to Shire's Form F-6 filed on April 27, 2011.
|
(15)
|
Incorporated by reference to Exhibit 99.1 to Shire's Form 8-K filed on February 23, 2007.
|
(16)
|
Incorporated by reference to Exhibit 10.2 to Shire's Form 10-Q filed on May 1, 2007.
|
(17)
|
Incorporated by reference to Exhibit 10.01 to Shire's Form 8-K filed on May 23, 2008.
|
(18)
|
Incorporated by reference to Exhibit 10.1 to Shire's Form 10-Q filed on August 2, 2007.
|
(19)
|
Incorporated by reference to Exhibit 10.2 to Shire's Form 10-Q filed on August 2, 2007.
|
(20)
|
Incorporated by reference to Exhibit 10.3 to Shire's Form 10-Q filed on August 2, 2007.
|
(21)
|
Incorporated by reference to Exhibit 10.02 to Shire's Form 8-K filed on May 23, 2008.
|
(22)
|
Incorporated by reference to Exhibit 10.03 to Shire's Form 8-K filed on May 23, 2008.
|
(23)
|
Incorporated by reference to Exhibit 10.09 to Shire's Form 10-K/A filed on May 30, 2008.
|
(24)
|
Incorporated by reference to Exhibit 10.1 to Shire's Form 10-Q filed on November 7, 2006.
|
(25)
|
Incorporated by reference to Exhibit 10.2 to Shire's Form 10-Q filed on November 7, 2006.
|
(26)
|
Incorporated by reference to Exhibit 10.3 to Shire's Form 10-Q filed on November 7, 2006.
|
(27)
|
Incorporated by reference to Exhibit 10.03 to Shire's Form 8-K filed on November 25, 2005.
|
(28)
|
Incorporated by reference to Exhibit 10.06 to Shire's Form 8-K filed on May 23, 2008.
|
(29)
|
Incorporated by reference to Exhibit 10.13 to Shire's Form 10-K filed on March 12, 2004.
|
(30)
|
Incorporated by reference to Exhibit 10.01 to Shire's Form 8-K filed on November 25, 2005.
|
(31)
|
Incorporated by reference to Exhibit 10.02 to Shire's Form 8-K filed on November 25, 2005.
|
(32)
|
Incorporated by reference to Exhibit 10.04 to Shire's Form 8-K filed on May 23, 2008.
|
(33)
|
Incorporated by reference to Exhibit 10.05 to Shire's Form 8-K filed on May 23, 2008.
|
(34)
|
Incorporated by reference to Exhibit 10.07 to Shire's Form 8-K filed on May 23, 2008.
|
(35)
|
Incorporated by reference to Exhibit 10.23 to Shire's Form 10-Q filed on November 10, 2008.
|
(36)
|
Incorporated by reference to Exhibit 10.24 to Shire's Form 10-Q filed on November 10, 2008.
|
(37)
|
Incorporated by reference to Exhibit 10.25 to Shire's Form 10-Q filed on May 7, 2009.
|
(38)
|
Incorporated by reference to Exhibit 10.27 to Shire's Form 10-Q filed on May 6, 2010.
|
(39)
|
Incorporated by reference to Exhibit 10.28 to Shire's Form 10-K filed on February 23, 2011.
|
Date: August 1, 2013
|
/s/ Flemming Ornskov
Flemming Ornskov
Chief Executive Officer
|
Date: August 1, 2013
|
/s/ Graham Hetherington
Graham Hetherington
Chief Financial Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Shire plc;
|
2.
|
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d - 15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d - 15(f)) for the registrant and have:
|
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
|
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
|
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ Flemming Ornskov
Flemming Ornskov
Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Shire plc;
|
2.
|
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d - 15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d - 15(f)) for the registrant and have:
|
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
|
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
|
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ Graham Hetherington
Graham Hetherington
Chief Financial Officer
|
1.
|
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and
|
2.
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Shire plc.
|
/s/ Flemming Ornskov
Flemming Ornskov
Chief Executive Officer
|
/s/ Graham Hetherington
Graham Hetherington
Chief Financial Officer
|
Goodwill
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill Disclosure | 7. Goodwill
In the six months to June 30, 2013 the Company completed the acquisitions of SARcode, Premacure and Lotus, which resulted in goodwill with a value of $86.6 million, $29.6 million and $54.1 million, respectively (see Note 2). On an Interim basis the goodwill of SARcode has been assigned to the SP operating segment and the goodwill of Premacure and Lotus has been assigned to the HGT operating segment.
At June 30, 2013 goodwill of $376.8 million (December 31, 2012: $291.1 million) is held in the SP segment, $234.8 million (December 31, 2012: $154.5 million) in the HGT segment and $nil (December 31, 2012: $198.9 million) is held in the RM segment. The Company is continuing to assess the impact of the ongoing “One Shire” realignment on its operating and reportable segments (see note 18 for details) and the related impact on the allocation of goodwill.
Goodwill is tested for impairment at least annually as at October 1 each year. This assessment is also performed whenever there is a change in circumstances that indicates the carrying value of these assets may be impaired. As at October 1, 2012 the Company determined that the fair value of all reporting units exceeded their book value, indicating that the goodwill allocated to each reporting unit was not impaired. In the first quarter of 2013 the Company identified circumstances which indicated that the carrying value of goodwill in the RM reporting unit may not be recoverable, which triggered an impairment test in advance of the annual testing date. These circumstances included the results of an independent market research study of the DERMAGRAFT sales potential, commissioned by the Company, which was finalized late in the first quarter of 2013. In addition, while the Company still expects DERMAGRAFT to return to growth over coming quarters, the recently completed restructuring of the RM sales and marketing organization and the implementation of a new commercial model had a more pronounced impact than previously expected. As a result of these and other factors forecast future sales are now lower than at the time of acquisition. The results of the Company's March 31, 2013 impairment test showed that the carrying amount of the RM reporting unit exceeded its fair value and the implied value of the goodwill was $nil. As a result the Company recorded an impairment charge of $198.9 million related to the goodwill allocated to the RM reporting unit. The RM goodwill impairment charge is not deductible for tax purposes. This is the primary reason that the effective rate of tax in the first half of 2013 (29%) is higher than the same period in 2012 (18%). Accumulated goodwill impairment as at June 30, 2013 was $198.9 million (December 31, 2012: $nil). Key assumptions used to determine the fair value of the RM reporting unit included expected cash flows for the period from March 31, 2013 to December 31, 2023 and the associated discount rate of 15.1%, which was derived from management's best estimate of the after-tax weighted average cost of capital for the RM reporting unit. The Company determined the estimated fair value of the RM reporting unit using discounted cash flow analyses. Discounted cash flow analyses are dependent upon a number of quantitative and qualitative factors including estimates of forecasted revenue, profitability, earnings before interest, taxes, depreciation and amortization, and terminal values. The discount rates applied in the discounted cash flow analyses also have an impact on the estimates of fair value, as use of a higher rate will result in a lower estimate of fair value. |
Convertible Bonds (Details) (USD $)
In Millions, unless otherwise specified |
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Debt Instrument [Line Items] | |
Debt issuance date | May 09, 2007 |
Issuance price to principal amount, percent | 100.00% |
Final maturity date | May 09, 2014 |
Stated interest rate | 2.75% |
Principal amount | $ 1,100 |
Consolidated Statements of Income (USD $)
In Millions, except Per Share data, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|||||||||
Revenues: | ||||||||||||
Product sales | $ 1,230.2 | $ 1,147.7 | $ 2,346.9 | $ 2,254.6 | ||||||||
Royalties | 36.3 | 56.3 | 74.8 | 112.6 | ||||||||
Other revenues | 8.0 | 3.8 | 14.7 | 12.4 | ||||||||
Total revenues | 1,274.5 | 1,207.8 | 2,436.4 | 2,379.6 | ||||||||
Costs and expenses: | ||||||||||||
Cost of product sales | 175.7 | 152.5 | 331.6 | 310.9 | ||||||||
Research and development ("R&D") | 260.1 | [1] | 238.6 | [1] | 484.3 | [1] | 458.9 | [1] | ||||
Selling, general and administrative ("SG&A") | 457.6 | [1] | 511.0 | [1] | 896.3 | [1] | 1,011.0 | [1] | ||||
Goodwill Impairment charge | 0 | 0 | 198.9 | 0 | ||||||||
Gain on sale of product rights | (4.5) | (3.6) | (11.0) | (10.8) | ||||||||
Reorganization costs | 26.4 | 0 | 43.9 | 0 | ||||||||
Integration and acquisition costs | 17.4 | 7.1 | 21.5 | 12.4 | ||||||||
Total operating expenses | 932.7 | 905.6 | 1,965.5 | 1,782.4 | ||||||||
Operating income | 341.8 | 302.2 | 470.9 | 597.2 | ||||||||
Interest income | 0.5 | 0.6 | 1.2 | 1.4 | ||||||||
Interest expense | (8.9) | (9.6) | (18.0) | (19.8) | ||||||||
Other (expense)/ income, net | (1.4) | (1.8) | (2.5) | 0.1 | ||||||||
Total other expense, net | (9.8) | (10.8) | (19.3) | (18.3) | ||||||||
Income before income taxes and equity in earnings/(losses) of equity method investees | 332.0 | 291.4 | 451.6 | 578.9 | ||||||||
Income taxes | (74.4) | (53.0) | (129.6) | (103.0) | ||||||||
Equity in earnings/(losses) of equity method investees, net of taxes | 0.5 | (0.6) | 0.9 | 0.3 | ||||||||
Net income | $ 258.1 | $ 237.8 | $ 322.9 | $ 476.2 | ||||||||
Earnings per ordinary share - basic | $ 0.469 | $ 0.427 | $ 0.586 | $ 0.858 | ||||||||
Earnings per ordinary share - diluted | $ 0.453 | $ 0.413 | $ 0.575 | $ 0.828 | ||||||||
Weighted average number of shares: | ||||||||||||
Basic | 549.6 | [2] | 557.0 | [2] | 550.5 | [2] | 555.2 | [2] | ||||
Diluted | 586.0 | 594.9 | 587.5 | 594.8 | ||||||||
|
Accumulated Other Comprehensive Income
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
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Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income (Loss) | 14. Accumulated Other Comprehensive Income
The changes in accumulated other comprehensive income, net of their related tax effects, in the six months to June 30, 2013 are included below:
|
Segmental Reporting (by Segment) (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | |||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
Dec. 31, 2012
|
|||||||||||||||||||
Segment reporting, operating income/(loss) | |||||||||||||||||||||||
Product sales | $ 1,230.2 | $ 1,147.7 | $ 2,346.9 | $ 2,254.6 | |||||||||||||||||||
Royalties | 36.3 | 56.3 | 74.8 | 112.6 | |||||||||||||||||||
Other revenues | 8.0 | 3.8 | 14.7 | 12.4 | |||||||||||||||||||
Total revenues | 1,274.5 | 1,207.8 | 2,436.4 | 2,379.6 | |||||||||||||||||||
Cost of product sales | 175.7 | 152.5 | 331.6 | 310.9 | |||||||||||||||||||
Research and development ("R&D") | 260.1 | [1] | 238.6 | [1] | 484.3 | [1] | 458.9 | [1] | |||||||||||||||
Selling, general and administrative ("SG&A") | 457.6 | [1] | 511.0 | [1] | 896.3 | [1] | 1,011.0 | [1] | |||||||||||||||
Goodwill Impairment charge | 0 | 0 | 198.9 | 0 | |||||||||||||||||||
Gain on sale of product rights | (4.5) | (3.6) | (11.0) | (10.8) | |||||||||||||||||||
Reorganization costs | 26.4 | 0 | 43.9 | 0 | |||||||||||||||||||
Integration and acquisition costs | 17.4 | 7.1 | 21.5 | 12.4 | |||||||||||||||||||
Total operating expenses | 932.7 | 905.6 | 1,965.5 | 1,782.4 | |||||||||||||||||||
Operating income/(loss) | 341.8 | 302.2 | 470.9 | 597.2 | |||||||||||||||||||
Assets | 7,902.9 | 7,041.0 | 7,902.9 | 7,041.0 | 7,317.2 | ||||||||||||||||||
Long-lived assets | 956.0 | 927.2 | 956.0 | 927.2 | |||||||||||||||||||
Capital expenditure on long-lived assets | 43.3 | 36.3 | 76.2 | 53.8 | |||||||||||||||||||
Cost of Product Sales
|
|||||||||||||||||||||||
Segment reporting, additional information | |||||||||||||||||||||||
Depreciation of assets | 10.0 | 7.0 | 17.8 | 14.2 | |||||||||||||||||||
Selling, General and Administrative
|
|||||||||||||||||||||||
Segment reporting, additional information | |||||||||||||||||||||||
Other depreciation and amortization | 61.9 | 65.5 | 124.5 | 124.7 | |||||||||||||||||||
Research and Development Assets | Research and Development
|
|||||||||||||||||||||||
Segment reporting, additional information | |||||||||||||||||||||||
Depreciation of assets | 4.3 | 6.4 | 8.9 | 12.8 | |||||||||||||||||||
Specialty Pharmaceuticals
|
|||||||||||||||||||||||
Segment reporting, operating income/(loss) | |||||||||||||||||||||||
Product sales | 813.2 | 735.5 | 1,559.3 | 1,442.2 | |||||||||||||||||||
Royalties | 24.8 | 45.4 | 50.3 | 87.8 | |||||||||||||||||||
Other revenues | 4.8 | 3.6 | 11.2 | 11.9 | |||||||||||||||||||
Total revenues | 842.8 | 784.5 | 1,620.8 | 1,541.9 | |||||||||||||||||||
Cost of product sales | 95.0 | [2] | 84.8 | [3] | 180.8 | [4] | 171.9 | [5] | |||||||||||||||
Research and development ("R&D") | 181.9 | [2] | 158.3 | [3] | 329.3 | [4] | 289.3 | [5] | |||||||||||||||
Selling, general and administrative ("SG&A") | 242.2 | [2] | 311.5 | [3] | 500.1 | [4] | 611.6 | [5] | |||||||||||||||
Goodwill Impairment charge | 0 | 0 | |||||||||||||||||||||
Gain on sale of product rights | (4.5) | (3.6) | (11.0) | (10.8) | |||||||||||||||||||
Reorganization costs | 0 | 0 | |||||||||||||||||||||
Integration and acquisition costs | 9.9 | 2.8 | 11.8 | 4.4 | |||||||||||||||||||
Total operating expenses | 524.5 | 553.8 | 1,011.0 | 1,066.4 | |||||||||||||||||||
Operating income/(loss) | 318.3 | 230.7 | 609.8 | 475.5 | |||||||||||||||||||
Assets | 3,058.6 | 2,534.6 | 3,058.6 | 2,534.6 | |||||||||||||||||||
Long-lived assets | 117.2 | [6],[7] | 130.1 | [6] | 117.2 | [6],[7] | 130.1 | [6] | |||||||||||||||
Capital expenditure on long-lived assets | 9.5 | [7] | 12.1 | [6] | 16.9 | [6] | 19.2 | [6] | |||||||||||||||
Specialty Pharmaceuticals | IPR&D | Research and Development
|
|||||||||||||||||||||||
Segment reporting, additional information | |||||||||||||||||||||||
Impairment of unamortized intangible assets | 19.9 | 27.0 | 19.9 | 27.0 | |||||||||||||||||||
Human Genetic Therapies
|
|||||||||||||||||||||||
Segment reporting, operating income/(loss) | |||||||||||||||||||||||
Product sales | 394.9 | 359.8 | 746.8 | 711.2 | |||||||||||||||||||
Royalties | 0 | 0 | 0 | 0 | |||||||||||||||||||
Other revenues | 3.2 | 0.2 | 3.5 | 0.5 | |||||||||||||||||||
Total revenues | 398.1 | 360.0 | 750.3 | 711.7 | |||||||||||||||||||
Cost of product sales | 69.4 | [2] | 50.7 | [3] | 130.9 | [4] | 112.0 | [5] | |||||||||||||||
Research and development ("R&D") | 70.7 | [2] | 76.0 | [3] | 140.3 | [4] | 162.3 | [5] | |||||||||||||||
Selling, general and administrative ("SG&A") | 103.3 | [2] | 95.9 | [3] | 208.8 | [4] | 200.4 | [5] | |||||||||||||||
Goodwill Impairment charge | 0 | 0 | |||||||||||||||||||||
Gain on sale of product rights | 0 | 0 | 0 | 0 | |||||||||||||||||||
Reorganization costs | 0 | 0 | |||||||||||||||||||||
Integration and acquisition costs | 6.6 | 0 | 8.0 | 0 | |||||||||||||||||||
Total operating expenses | 250.0 | 222.6 | 488.0 | 474.7 | |||||||||||||||||||
Operating income/(loss) | 148.1 | 137.4 | 262.3 | 237.0 | |||||||||||||||||||
Assets | 2,220.2 | 1,931.1 | 2,220.2 | 1,931.1 | |||||||||||||||||||
Long-lived assets | 684.2 | [6],[7] | 707.9 | [6] | 684.2 | [6],[7] | 707.9 | [6] | |||||||||||||||
Capital expenditure on long-lived assets | 13.5 | [7] | 18.3 | [6] | 22.8 | [6] | 26.3 | [6] | |||||||||||||||
Regenerative Medicine
|
|||||||||||||||||||||||
Segment reporting, operating income/(loss) | |||||||||||||||||||||||
Product sales | 22.1 | 52.4 | 40.8 | 101.2 | |||||||||||||||||||
Royalties | 0 | 0 | 0 | 0 | |||||||||||||||||||
Other revenues | 0 | 0 | 0 | 0 | |||||||||||||||||||
Total revenues | 22.1 | 52.4 | 40.8 | 101.2 | |||||||||||||||||||
Cost of product sales | 11.3 | [2] | 17.0 | [3] | 19.8 | [4] | 27.0 | [5] | |||||||||||||||
Research and development ("R&D") | 7.5 | [2] | 4.3 | [3] | 14.7 | [4] | 7.3 | [5] | |||||||||||||||
Selling, general and administrative ("SG&A") | 47.1 | [2] | 42.6 | [3] | 94.9 | [4] | 84.2 | [5] | |||||||||||||||
Goodwill Impairment charge | 0 | 198.9 | |||||||||||||||||||||
Gain on sale of product rights | 0 | 0 | 0 | 0 | |||||||||||||||||||
Reorganization costs | 0 | 0 | |||||||||||||||||||||
Integration and acquisition costs | 0.9 | 4.3 | 1.7 | 8.0 | |||||||||||||||||||
Total operating expenses | 66.8 | 68.2 | 330.0 | 126.5 | |||||||||||||||||||
Operating income/(loss) | (44.7) | (15.8) | (289.2) | (25.3) | |||||||||||||||||||
Assets | 748.1 | 980.5 | 748.1 | 980.5 | |||||||||||||||||||
Long-lived assets | 52.5 | [6],[7] | 25.0 | [6] | 52.5 | [6],[7] | 25.0 | [6] | |||||||||||||||
Capital expenditure on long-lived assets | 15.0 | [7] | 0.1 | [6] | 24.3 | [6] | 0.1 | [6] | |||||||||||||||
All Other Segment
|
|||||||||||||||||||||||
Segment reporting, operating income/(loss) | |||||||||||||||||||||||
Product sales | 0 | 0 | 0 | 0 | |||||||||||||||||||
Royalties | 11.5 | 10.9 | 24.5 | 24.8 | |||||||||||||||||||
Other revenues | 0 | 0 | 0 | 0 | |||||||||||||||||||
Total revenues | 11.5 | 10.9 | 24.5 | 24.8 | |||||||||||||||||||
Cost of product sales | 0 | [2] | 0 | [3] | 0.1 | [4] | 0 | [5] | |||||||||||||||
Research and development ("R&D") | 0 | [2] | 0 | [3] | 0 | [4] | 0 | [5] | |||||||||||||||
Selling, general and administrative ("SG&A") | 65.0 | [2] | 61.0 | [3] | 92.5 | [4] | 114.8 | [5] | |||||||||||||||
Goodwill Impairment charge | 0 | ||||||||||||||||||||||
Gain on sale of product rights | 0 | 0 | 0 | 0 | |||||||||||||||||||
Reorganization costs | 26.4 | 43.9 | 0 | ||||||||||||||||||||
Integration and acquisition costs | 0 | 0 | 0 | 0 | |||||||||||||||||||
Total operating expenses | 91.4 | 61.0 | 136.5 | 114.8 | |||||||||||||||||||
Operating income/(loss) | (79.9) | (50.1) | (112.0) | (90.0) | |||||||||||||||||||
Assets | 1,876.0 | 1,594.8 | 1,876.0 | 1,594.8 | |||||||||||||||||||
Long-lived assets | 102.1 | [6],[7] | 64.2 | [6] | 102.1 | [6],[7] | 64.2 | [6] | |||||||||||||||
Capital expenditure on long-lived assets | $ 5.3 | [7] | $ 5.8 | [6] | $ 12.2 | [6] | $ 8.2 | [6] | |||||||||||||||
|
Commitments and Contingencies (Leases, and LC and Guarantees ) (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | |
---|---|---|---|
Mar. 31, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Future Minimum Lease Payments under Operating Leases | |||
2013 | $ 21.6 | ||
2014 | 40.3 | ||
2015 | 31.2 | ||
2016 | 23.0 | ||
2017 | 17.3 | ||
2018 | 11.8 | ||
Thereafter | 82.8 | ||
Future minimum lease payments, total | 228.0 | ||
Operating Leases, Rent Expense | |||
Lease and rental expense | 21.5 | 25.4 | 21.5 |
Letters of credit and guarantees | |||
Irrevocable standby letters of credit and guarantees | $ 48.7 |
Other Intangible Assets, Net
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
|
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Intangible Assets, Net (Excluding Goodwill) [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Intangible Assets Disclosure | 8. Other intangible assets, net
As at June 30, 2013 the net book value of intangible assets allocated to the SP segment was $ 1,582.4 million (December 31, 2012: $1,238.0 million), to the HGT segment was $ 760.3 million (December 31, 2012: $474.6 million) and to the RM segment was $655.4 million (December 31, 2012: $675.5 million).
The change in the net book value of other intangible assets for the six months to June 30, 2013 and 2012 is shown in the table below:
In the six months to June 30, 2013 the Company acquired intangible assets totaling $732.8 million, relating to intangible assets acquired with SARcode, Premacure and Lotus (see Note 2 for further details).
In the second quarter of 2013 the Company reviewed certain IPR&D intangible assets acquired through Movetis N.V. (“Movetis”) for impairment and recognized an impairment charge of $19.9 million (2012: $27.0 million) recorded within R&D in the consolidated income statement, to write-down these IPR&D assets to their fair value. These impairment charges have been recorded in the SP operating segment. The fair values of these assets were determined using the income approach, which used significant unobservable (Level 3) inputs (see Note 16 for further details).
Management estimates that the annual amortization charge in respect of intangible assets held at June 30, 2013 will be approximately $170 million for each of the five years to June 30, 2018. Estimated amortization expense can be affected by various factors including future acquisitions, disposals of product rights, regulatory approval and subsequent amortization of acquired IPR&D projects, foreign exchange movements and the technological advancement and regulatory approval of competitor products. |
Prepaid Expenses and Other Current Assets (Details) (USD $)
In Millions, unless otherwise specified |
Jun. 30, 2013
|
Dec. 31, 2012
|
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Prepaid Expense and Other Assets, Current [Abstract] | ||
Prepaid expenses | $ 49.2 | $ 31.7 |
Income tax receivable | 175.3 | 130.6 |
Value added taxes receivable | 20.4 | 20.9 |
Other current assets | 44.2 | 38.6 |
Prepaid expenses and other current assets, total | $ 289.1 | $ 221.8 |
Commitments and Contingencies (Collaborative Arrangements) (Details) (Out-licensing Arrangement, USD $)
In Millions, unless otherwise specified |
6 Months Ended | |
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Jun. 30, 2013
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Jun. 30, 2012
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Out-licensing arrangements | ||
Milestone payments received | $ 3.0 | $ 6.0 |
Other Revenues
|
||
Out-licensing arrangements | ||
Milestone revenues recognized | 4.0 | 6.0 |
Product Sales
|
||
Out-licensing arrangements | ||
Milestone revenues recognized | 26.3 | 38.0 |
Development Milestone
|
||
Out-licensing arrangements | ||
Maximum milestone payment receivable | 39.0 | |
Sales Milestone
|
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Out-licensing arrangements | ||
Maximum milestone payment receivable | $ 71.5 |
Commitments and Contingencies (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||
Future Minimum Lease Payments under Operating Leases |
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Earnings Per Share
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share Disclosure | 17. Earnings per share
The following table reconciles net income and the weighted average ordinary shares outstanding for basic and diluted earnings per share for the periods presented:
1. Excludes shares purchased by the EBT and under the share buy-back program and presented by Shire as treasury stock. 2. Calculated using the treasury stock method. 3. Calculated using the 'if-converted' method.
The share equivalents not included in the calculation of the diluted weighted average number of shares are shown below:
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Fair Value Measurement
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Jun. 30, 2013
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures | 16. Fair value measurement
Assets and liabilities that are measured at fair value on a recurring basis
As at June 30, 2013 and December 31, 2012 the following financial assets and liabilities are measured at fair value on a recurring basis using quoted prices in active markets for identical assets (Level 1); significant other observable inputs (Level 2); and significant unobservable inputs (Level 3).
(1) Available-for-sale securities are included within Investments in the consolidated balance sheet. (2) Contingent consideration receivable is included within Prepaid expenses and other current assets and Other non-current assets in the consolidated balance sheet. (3) Contingent consideration payable is included within Other current liabilities and Other non-current liabilities in the consolidated balance sheet.
Certain estimates and judgments were required to develop the fair value amounts. The fair value amounts shown above are not necessarily indicative of the amounts that the Company would realize upon disposition, nor do they indicate the Company's intent or ability to dispose of the financial instrument.
The following methods and assumptions were used to estimate the fair value of each material class of financial instrument:
Assets and Liabilities Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3)
The change in the fair value of the Company's contingent consideration receivable and payables, which are measured at fair value on a recurring basis using significant unobservable inputs (Level 3), are as follows:
Quantitative Information about Assets and Liabilities Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3)
Quantitative information about the Company's recurring Level 3 fair value measurements is included below:
The Company re-measures the CCR (relating to contingent consideration due to the Company following divestment of one of the Company's products) at fair value at each balance sheet date, with the fair value measurement based on forecast cash flows, over a number of scenarios which vary depending on the expected performance outcome of the product following divestment. The forecast cash flows under each of these differing outcomes have been included in probability weighted estimates used by the Company in determining the fair value of the CCR.
Contingent consideration payable represents future milestones the Company may be required to pay in conjunction with various business combinations and future royalties payable as a result of certain business combinations and licenses. The amount ultimately payable by Shire in relation to business combinations is dependent upon the achievement of specified future milestones, such as the achievement of certain future development, regulatory and sales milestones. The Company assesses the probability, and estimated timing, of these milestones being achieved and re-measures the related contingent consideration to fair value each balance sheet date. The amount of contingent consideration which may ultimately be payable by Shire in relation to future royalties is dependent upon future net sales of the relevant products over the life of the royalty term. The Company assesses the present value of forecast future net sales of the relevant products and re-measures the related contingent consideration to fair value each balance sheet date.
The fair value of the Company's contingent consideration receivable and payable could significantly increase or decrease due to changes in certain assumptions which underpin the fair value measurements. Each set of assumptions and milestones are specific to the individual contingent consideration receivable or payable. The assumptions include, among other things, the probability and expected timing of certain milestones being achieved, the forecast future net sales of the relevant products and related future royalties payable, the probability weightings applied to different sales scenarios of one of the Company's divested products and forecast future royalties receivable under scenarios developed by the Company, and the discount rates used to determine the present value of contingent future cash flows. The Company regularly reviews these assumptions, and makes adjustments to the fair value measurements as required by facts and circumstances.
Assets Measured At Fair Value on a Non-Recurring Basis in the period using Significant Unobservable Inputs (Level 3)
In the second quarter of 2013 the Company reviewed certain IPR&D intangible assets acquired through Movetis for impairment and recognized an impairment charge of $19.9 million, recorded within R&D in the consolidated income statement, to write-down these assets to their fair value. The fair value of these assets was determined using the income approach, which used significant unobservable (Level 3) inputs. These unobservable inputs included, among other things, risk-adjusted forecast future cash flows to be generated by these assets and the determination of an appropriate discount rate to be applied in calculating the present value of forecast future cash flows. The fair value of these assets, determined at the time of the impairment review, was $20.3 million.
Quantitative information about Non-Recurring Level 3 Fair Value Measurements which occurred in the period is included below:
Financial assets and liabilities that are not measured at fair value on a recurring basis
The carrying amounts and estimated fair values as at June 30, 2013 and December 31, 2012 of the Company's financial assets and liabilities which are not measured at fair value on a recurring basis are as follows:
Certain estimates and judgments were required to develop the fair value amounts. The fair value amounts shown above are not necessarily indicative of the amounts that the Company would realize upon disposition, nor do they indicate the Company's intent or ability to dispose of the financial instrument.
The following methods and assumptions were used to estimate the fair value of each material class of financial instrument:
The carrying amounts of other financial assets and liabilities materially approximate to their fair value because of the short-term maturity of these amounts. |
Accounts Receivable, Net (Details) (USD $)
In Millions, unless otherwise specified |
6 Months Ended | ||
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Jun. 30, 2013
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Jun. 30, 2012
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Dec. 31, 2012
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Provision for discounts and doubtful accounts | |||
As at January 1, | $ 41.7 | $ 31.1 | |
Provision charged to operations | 150.8 | 135.0 | |
Provision utilization | (150.7) | (129.5) | |
As at June 30, | 41.8 | 36.6 | |
Accounts receivable, net | 915.2 | 824.2 | |
Accounts receivable related to royalty income | $ 34.8 | $ 38.5 |
Other Intangible Assets, Net (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Intangible Assets, Net (Excluding Goodwill) [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Other Intangible Assets |
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Intangible Assets (Excluding Goodwill) Roll Forward |
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Financial Instruments (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Derivative Instrument Detail [Abstract] | |||||||||||||||||||||||||||||||||
Schedule of Foreign Exchange Contracts, Statement of Financial Position |
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Schedule of Foreign Exchange Contracts, Gain (Loss) in Other Income (Expense) |
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Goodwill (Details) (USD $)
In Millions, unless otherwise specified |
6 Months Ended | |||||||||||||
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Jun. 30, 2013
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Jun. 30, 2012
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Dec. 31, 2012
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Jun. 30, 2013
Lotus
|
Feb. 12, 2013
Lotus
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Jun. 30, 2013
Premacure AB
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Jun. 30, 2013
SARcode Biosciences Inc
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Apr. 17, 2013
SARcode Biosciences Inc
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Jun. 30, 2013
Regenerative Medicine
|
Dec. 31, 2012
Regenerative Medicine
|
Jun. 30, 2013
Specialty Pharmaceuticals
|
Dec. 31, 2012
Specialty Pharmaceuticals
|
Jun. 30, 2013
Human Genetic Therapies
|
Dec. 31, 2012
Human Genetic Therapies
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Goodwill [Line Items] | ||||||||||||||
Business Acquisition, Purchase Price Allocation, Assets Acquired (Liabilities Assumed), Net | $ 174.2 | $ 368.0 | ||||||||||||
Goodwill | 54.1 | 29.6 | 86.6 | 0 | 198.9 | 376.8 | 291.1 | 234.8 | 154.5 | |||||
Effective rate of tax | 29.00% | 18.00% | ||||||||||||
Goodwill facts and circumstances leading to impairment | Goodwill is tested for impairment at least annually as at October 1 each year. This assessment is also performed whenever there is a change in circumstances that indicates the carrying value of these assets may be impaired. As at October 1, 2012 the Company determined that the fair value of all reporting units exceeded their book value, indicating that the goodwill allocated to each reporting unit was not impaired. In the first quarter of 2013 the Company identified circumstances which indicated that the carrying value of goodwill in the RM reporting unit may not be recoverable, which triggered an impairment test in advance of the annual testing date. These circumstances included the results of an independent market research study of the DERMAGRAFT sales potential, commissioned by the Company, which was finalized late in the first quarter of 2013. In addition, while the Company still expects DERMAGRAFT to return to growth over coming quarters, the recently completed restructuring of the RM sales and marketing organization and the implementation of a new commercial model had a more pronounced impact than previously expected. As a result of these and other factors forecast future sales are now lower than at the time of acquisition. | |||||||||||||
Discount Rate | 15.10% | |||||||||||||
Goodwill impairment method for fair value determination | The results of the Company’s March 31, 2013 impairment test showed that the carrying amount of the RM reporting unit exceeded its fair value and the implied value of the goodwill was $nil. As a result the Company recorded an impairment charge of $198.9 million related to the goodwill allocated to the RM reporting unit. The RM goodwill impairment charge is not deductible for tax purposes. This is the primary reason that the effective rate of tax in the first half of 2013 (29%) is higher than the same period in 2012 (18%). Accumulated goodwill impairment as at June 30, 2013 was $198.9 million (December 31, 2012: $nil). Key assumptions used to determine the fair value of the RM reporting unit included expected cash flows for the period from March 31, 2013 to December 31, 2023 and the associated discount rate of 15.1%, which was derived from management’s best estimate of the after-tax weighted average cost of capital for the RM reporting unit. The Company determined the estimated fair value of the RM reporting unit using discounted cash flow analyses. Discounted cash flow analyses are dependent upon a number of quantitative and qualitative factors including estimates of forecasted revenue, profitability, earnings before interest, taxes, depreciation and amortization, and terminal values. The discount rates applied in the discounted cash flow analyses also have an impact on the estimates of fair value, as use of a higher rate will result in a lower estimate of fair value | |||||||||||||
Accumulated Goodwill Impairment | 198.9 | 0 | ||||||||||||
Business Acquisition, Cost of Acquired Entity, Cash Paid | 49.4 | 151.0 | ||||||||||||
Goodwill [Roll Forward] | ||||||||||||||
As at January 1, | 644.5 | 592.6 | ||||||||||||
Acquisition | 170.3 | 48.1 | ||||||||||||
Goodwill impairment charge | (198.9) | 0 | ||||||||||||
Foreign currency translation | (4.3) | (4.7) | ||||||||||||
As at June 30, | $ 611.6 | $ 636.0 |
Inventories (Tables)
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Jun. 30, 2013
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||
Schedule of Inventory |
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Segmental Reporting (Tables)
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Jun. 30, 2013
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Reporting Information, by Segment |
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