EX-99.1 2 shireex991724.txt PRESS RELEASE SHIRE ANNOUNCES INCREASE OF 72% IN PRE-TAX INCOME FOR SECOND QUARTER 2001 Basingstoke, UK - 23 July 2001 - Shire Pharmaceuticals Group plc (LSE: SHP.L, NASDAQ: SHPGY, TSE: SHQ CN) announces results for the second quarter ended 30 June 2001.
Highlights: -------------------------------- ----------------------------------------- After APB25 charge Before APB25 exceptionals exceptionals(1) & & merger charges merger charges -------------------------------- ----------------------------------------- Q2-01 Q2-01 Q2-00 % ($m) ($m) ($m) change Revenues 210.8 210.8 159.6 +32% Operating (loss)/income (111.7) 65.5 41.9 +56% (Loss)/income before tax (106.5) 70.7 41.1 +72% EPS (diluted) - per ordinary share (25.3c) 10.6c 6.4c +66% - per ADS (75.9c) 31.7c 19.2c +66% -------------------------------- ------------ -------------- ------------- Average USD:GBP exchange rate Q2 2001 1.42 Q2 2000 1.52
(1) Results stated after APB25 exceptionals & merger charges are as set out in Shire's consolidated income statement on page 11 Product Highlights Adderall* sales up 56% on Q2 2000, with a 32.7% share2 of the US Attention Deficit Hyperactivity Disorder (ADHD) prescription market2 in June 2001 (June 2000: 32.1%). Agrylin* Q2 sales up 39%, with total share2 of 21.3% of the combined US Agrylin* Hydrea and generic hydroxyurea market. Carbatrol* achieved sales growth of 87% and a 33.8% share2 of the US extended release carbamazepine market2 in second quarter 2001. Reminyl* launched in the US in May 2001 by Janssen Pharmaceutica and Ortho McNeil; achieved 7.1% market share2,5 at week nine. Zeffix* Q2 royalties up 49% world-wide compared with the same period last year. 3TC* (Epivir, Combivir, and Trizivir) Q2 royalties up 6% world-wide compared with Q2 2000. *Trademark Business Highlights May 2001 - Shire announces one tier pricing policy for Adderall* Merger with BioChem Pharma Inc. successfully closed 11 May 2001 Positive Phase III results for Adderall XR* presented at the APA (American Psychiatry Association) meeting in May 2001 Reminyl* first AChI3 to suggest positive data in vascular / mixed dementia4 Frakefamide - AstraZeneca offers rights back to Shire SPD 418 (Phase I project for epilepsy) - development discontinued Commenting on the results, Rolf Stahel, Chief Executive of Shire, said: "I am delighted with the outstanding second quarter results, especially the 72% pre-tax income1 growth achieved so early after the effective date of the merger with BioChem. Despite being the biggest merger in our history, the integration has been the fastest and most effectively implemented out of our six mergers in six years. "We continued to strengthen our position in the ADHD market with Adderall* and the preparation for the launch of Adderall XR* which is proceeding at full speed. "I am also very pleased with Reminyl's* uptake and market share in the Alzheimer's market following the launch by Janssen Cilag in the US and in the UK through our own launch jointly with Janssen Cilag UK." 1pre APB25 and exceptionals, including one time merger costs 2Prescription market (IMS) June 2001 3Acetylcholinesterase inhibitor 4Trials initiated by J&J 5New prescriptions market (NRx - IMS data) *Trade Mark For further information please contact: Europe +44 207 831 3113 (today) Clea Rosenfeld - Media and Investor Relations Tina Terrell - Medical Communications - Trade Media +44 1256 894 000 US & Canada +1 450 978 7938 Michele Roy - Corporate Communications Gordon Ngan - Investor Relations +1 450 978 7938 Notes to editors Shire Pharmaceuticals Group plc Shire is a rapidly growing international specialty pharmaceutical company with a strategic focus on four therapeutic areas: central nervous system disorders, anti-infectives, oncology and biologics. For further information on Shire Pharmaceuticals, please visit the company's website: www.shire.com THE "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. The statements in this press release that are not historical facts are forward-looking statements that involve risks and uncertainties, including but not limited to, risks associated with the inherent uncertainty of pharmaceutical research, product development and commercialisation, the impact of competitive products, patents, and other risks and uncertainties, including those detailed from time to time in periodic reports, including the Annual Report filed on Form 10K by Shire with the Securities and Exchange Commission. OVERVIEW OF FINANCIAL RESULTS Introduction Following the merger with BioChem Pharma Inc. in May 2001, these accounts have been prepared in accordance with US Generally Accepted Accounting Principles (GAAP) and as a `pooling of interests'. The unaudited results for the combined company are presented as if the merger had occurred at the beginning of the periods described. Comparisons with previous periods have been made against the combined unaudited US GAAP financial statements as published on the company's website (www.shire.com). Group revenues for the second quarter were $210.8 million, a 32% increase over Q2 2000 ($159.6 million). Pre APB25 exceptionals and merger charges, the Group recorded income before tax of $70.7 million, up 72% (Q2 2000: $41.1 million) and diluted earnings per ordinary share of 10.6 cents or 31.7 cents per ADS, up 66% (Q2 2000: 6.4 cents per ordinary share or 19.2 cents per ADS). After APB25 charge of $0.2 million, exceptionals and merger charges of $177.0 million, the net loss was $124.2 million (Q2 2000: $128.3 million net income after APB25 charge of $0.2 million and exceptional income of $96.6 million). Sales and marketing Product sales for the second quarter, at $171.7 million, increased by 41% over Q2 2000. Sales of Adderall* were $69.4 million, representing growth of 56% on the comparative period in 2000. Adderall* had a 32.7% share of the prescription market2 for Attention Deficit Hyperactivity Disorder (ADHD) in the US in June 2001 (June 2000: 32.1%) and continues to be the brand leader in the US market for ADHD. Sales of Agrylin*, the only US product licensed for the treatment of thrombocythaemia, were $25.8 million, a 39% increase on Q2 2000 sales of $18.5 million. Shire achieved 21.3% of the total US Agrylin*, Hydrea and generic hydroxyurea prescription market2 in June 2001, compared to 16.7% for the month of June 2000. Sales of Pentasa*, for the treatment of ulcerative colitis, were $19.1 million, 45% higher than the comparable period last year. Pentasa* had 17.8% of the US oral mesalamine/olsalazine prescription market2 in June 2001, compared to 18.0% in June 2000. Sales of ProAmatine*, for the treatment of postural hypotension, were $10.5 million, 79% higher than Q2 2000 sales of $5.9 million. The US prescription market2 for ProAmatine* and Florinef prescriptions2 indicates that ProAmatine* had a 23.5% share2 for the month of June 2001, an increase from 20.3% in June 2000. Sales of Agrylin*, Pentasa* and ProAmatine* were slightly ahead of trend during the quarter due to speculative, advance buying by wholesalers in anticipation of price increases. * Trade Mark Carbatrol*, containing carbamazepine for the treatment of epilepsy, recorded sales growth of 87% from sales of $5.3 million in Q2 2000 to $9.9 million in Q2 2001. This translates to 33.8% of the US extended release carbamazepine prescription market2 in June 2001, compared to 28.1% in June 2000. Licensing Licensing and development fees in the second quarter fell by 94% to $0.2 million (Q2 2000: $4.4 million). The quarter on quarter decrease is mainly due to the reduction in recovery of development costs for Reminyl*, an Alzheimer's drug, launched by Janssen (J&J) in the US market in May 2001. Royalties Royalties increased by $4.8 million, up 15% to $38.4 million (Q2 2000: $33.7 million). The company receives royalties from GlaxoSmithKline on the worldwide sales of 3TC*, for the treatment of HIV infection / AIDS, and Zeffix*, an oral treatment for chronic hepatitis B. Additionally, Shire receives royalties from J&J for Reminyl*. Cost of sales and operating expenses Gross margin on product sales increased from 81% in Q2 2000 to 84% in Q2 2001. The higher margin products Adderall* and Agrylin* represented 55% of total product sales in Q2 2001 compared to 52% in Q2 2000. Pre announced pricing changes in respect of Adderall* have also benefited the gross margin in Q2 2001. R&D expenditure for the second quarter increased by 7% to $41.8 million. Expressed as a percentage of total revenues, R&D expenditure was 20% in Q2 2001 compared to 25% in Q2 2000 and 23% for full year 2000. Selling, general and administrative (S,G&A) expenses, excluding the effects of an APB25 charge of $0.2 million (Q2 2000: $0.2 million), increased by 38% to $64.6 million (Q2 2000: $46.6 million). This increase was in line with the growth in product sales and hence, S,G&A expenses remained at 38% of product sales. Depreciation and amortisation increased by 19% to $11.2 million (Q2 2000: $9.4 million). This increase is attributable to the purchase of several new products in Europe since June last year. Exceptional charges Exceptional charges in the second quarter comprise: Merger related expenses of $177.0 million, including asset write-downs of $85.4 million, merger transaction expenses of $83.5 million and $8.1 million related to the disposal of the duplicated manufacturing facilities. * Trade Mark Taxation The effective rate of tax on the profits for the quarter pre APB25 exceptionals and merger charges is 25% (Q2 2000: 22% Pre APB25 and exceptional income). The company has recorded net deferred tax assets of approximately $19.5 million (Q2 2000: $36.4 million). Cash flow Cash, cash equivalents, marketable securities and other current asset investments at 30 June 2001 amounted to $303.3 million (30 June 2000: $419.3 million). After deduction of borrowings this gives a net cash position of $294.8 million (30 June 2000: $199.6 million). The CSFB term loan of $125m was repaid in full in this quarter. Projects UNDER DEVELOPMENT CNS Alzheimer's disease In January 2001, the UK National Institute of Clinical Excellence (NICE) announced that treatments for Alzheimer's disease should be made available as part of the management of UK patients with mild to moderate Alzheimer's disease. This was followed in March by US Food and Drug Administration (FDA) approval, and in May by the US launch of Reminyl* by Janssen Pharmaceutica and Ortho-McNeil Pharmaceutical. Shire will receive royalties on these sales. Reminyl's* postulated dual mode of action, which includes nicotinic receptor modulation and selective inhibition of acetylcholinesterase, has been widely acknowledged by regulatory authorities. It is included in the product labelling across Europe and in the US promotional materials that have been reviewed by the FDA and its Division of Drug, Marketing Advertising and Communication (DDMAC). On 19 June 2001, clinical trial data were presented at the XVII World Congress of Neurology that suggest Reminyl* improves memory, orientation and language skills of patients with vascular dementia or a combination of Alzheimer's disease and cerebrovascular disease ("mixed" dementia) for at least 12 months. The results also suggest that Reminyl* can improve or maintain the ability of these individuals to perform normal activities of daily living, such as bathing, dressing and doing housework. In the overall study, Reminyl* was generally well tolerated by patients. Most side effects were gastrointestinal in nature, of mild to moderate severity and mainly confined to the period when the dose was being increased. Other research has shown that when the dose is increased at a slower rate, the occurrence of nausea and vomiting is not significantly greater than reported by patients taking placebo. Reminyl* is the first cholinesterase inhibitor shown to be potentially effective in treating this substantial group of patients. Janssen is conducting a further study in patients with vascular dementia with the intention of seeking approval from regulatory authorities to add this indication to the licence. Other studies are planned in patients with Lewy body dementia and mild cognitive impairment. * Trade Mark ADHD Positive findings from a Phase III study of Adderall XR**, a novel once daily formulation of Shire's US marketed product, Adderall*(mixed salts of a single entity amphetamine product), were presented at the annual meeting of the American Psychiatric Association in May 2001. This Phase III, double blind, parallel group study examined the effects of Adderall XR**, 10 mg, 20 mg, and 30 mg, compared with placebo, for the treatment of ADHD in 563 patients. The investigators concluded that this new study, one of the largest ADHD medication trials ever conducted, showed that children with ADHD can take one dose of Adderall XR** in the morning to control their ADHD symptoms throughout the day and into the late afternoon. The after school period is a critical time for completing activities and homework. The most commonly observed adverse events in the study were consistent with those typically seen with psychostimulant medications and included: anorexia, insomnia, abdominal pain, emotional lability, and nervousness. Further details on this study are available on Shire's website at www.shire.com/shire/ListPress.shtml A New Drug Application (NDA) seeking marketing approval for Adderall XR** was filed with the US FDA on 3 October 2000. Analgesia Unexpected results from the Phase II anterior cruciate ligament repair study, conducted with frakefamide, have led AstraZeneca to offer to return the rights for this project to Shire. As these results appear to contradict previous positive results gained in the clinic for dental pain and in pre-clinical models, Shire may continue to work on frakefamide to elucidate the reasons for these conflicting results. However, it should be noted that if Shire continues with the project, the development is likely to proceed slower than originally anticipated and that there remains a significant possibility that the project may be discontinued. Epilepsy SPD 418, a project to develop an extended release formulation of an existing anti- epileptic drug, has been discontinued as a consequence of unsatisfactory Phase I results. Shire remains committed to the treatment of epilepsy and has initiated development of two follow-on projects, both designed to develop extended formulations of other established anti-epileptic drugs. These projects are designed to build upon the success of Carbatrol*, available in the US for this condition, and combine with the other epilepsy project under development (SPD 421) into a potentially powerful global epilepsy strategy. *Trademark **Proposed Trademark Oncology/haematology Thrombocythaemia On 3 January 2001, Shire announced that the European Commission had granted orphan drug designation to anagrelide for the treatment of essential thrombocythaemia. Discussions are planned with regulatory authorities regarding the EU filing to gain Marketing Approval. It is envisaged that an application will be made in the EU via a Centralised Procedure early in 2002. Antivirals HIV/AIDS New research findings were presented by GlaxoSmithKline (GSK) in July 2001 regarding a Ziagen/Combivir regimen at the 1st International AIDS Society Conference on HIV Pathogenesis and Treatment. These new findings indicate that a 2 tablet, twice daily, triple nucleoside regimen of Ziagen (abacavir) and Combivir (a fixed dose combination of zidovudine and lamivudine), provide superior efficacy when compared to the more complex protease inhibitor and nucleoside regimen, indinavir + Combivir, and was associated with better tolerability and improved adherence during 48 weeks of therapy. The results highlight the benefit that a regimen such as this, with significant improvements in tolerability and adherence, can have in the treatment of HIV-infected patients. Treatment with Ziagen + Combivir is generally well tolerated. The most serious adverse event associated with Ziagen is a hypersensitivity reaction. Further details on this study are available in a specific press release on Shire's website at www.shire.com/shire/ListPress.shtml. Under agreement, Shire receives royalties from GSK on sales of products containing lamivudine for use in the treatment of HIV/AIDS (3TC*/Epivir/Combivir/Trizivir). GSK has the right to develop, manufacture and sell lamivudine worldwide, except in Canada, where Shire and GSK have formed a commercialisation partnership. Metabolic diseases Hyperphosphataemia The first regulatory submission for Foznol* (lanthanum carbonate), as a treatment for hyperphosphataemia in patients with chronic renal failure, was delivered to a Reference Member State in the EU Mutual Recognition Procedure on 13 March 2001. The NDA filing to the FDA is planned for the end of 2001. * Trade Mark Biologics Influenza vaccine Shire's vaccine development portfolio includes its cell-culture based influenza vaccine candidate, SPD 701. During the first quarter, it was agreed that the partnership with GlaxoSmithKline to develop and commercialise this vaccine would be terminated and that Shire would regain full control of the vaccine and its innovative cell-culture technology. Notes Ziagen, 3TC*, Epivir, Combivir, and Trizivir are trademarks of the GlaxoSmithKline group of companies. Reminyl* is registered by J&J *Trade Mark
Unaudited consolidated balance sheets US GAAP June 30, June 30, 2001 2000 $'000 $'000 ASSETS -------------- -------------- Current assets: Cash and cash equivalents 72,988 316,232 Marketable securities and other current asset investments 230,337 103,082 Accounts receivable, net 124,981 124,520 Inventories, net 48,104 45,124 Deferred tax asset 6,641 12,590 Prepaid expenses and other current assets 26,639 20,315 -------------- -------------- Total current assets 509,690 621,863 Investments 60,307 75,651 Property, plant and equipment, net 114,495 110,143 Intangible assets, net 560,691 567,952 Net assets of business transferred under contractual arrangements 3,934 36,352 Deferred tax asset 12,860 23,841 Other assets 24,109 3,124 -------------- -------------- Total assets 1,286,086 1,438,926 -------------- -------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current instalments of long-term debt 4,518 85,868 Accounts and notes payable 170,985 123,809 Other current liabilities 3,342 18,841 -------------- -------------- Total current liabilities 178,845 228,518 Long-term debt, excluding current installments 4,057 133,893 Other long-term liabilities 12,439 522 -------------- -------------- Total liabilities 195,341 362,933 -------------- -------------- Shareholders' equity: Common stock, 5p par value; 800,000,000 shares authorised; and 461,391,822 (2000: 254,205,361 ) shares issued and outstanding respectively 35,518 20,826 Shares to be issued 459,880 - Additional paid-in capital 757,041 1,192,604 Accumulated other comprehensive losses (53,432) (54,462) Accumulated deficit (108,262) (82,975) -------------- -------------- Total shareholders' equity 1,090,745 1,075,993 -------------- -------------- Total liabilities and shareholders' equity 1,286,086 1,438,926 -------------- -------------- The balance sheet as at June 30, 2000 has been restated to include the results of BioChem Pharma Inc., as this transaction was accounted for as a pooling of interests in accordance with APB 16, Accounting for Business Combinations.
Unaudited consolidated income statements US GAAP 3 months 3 months 6 months 6 months to June 30, to June 30, to June 30, to June 30, 2001 2000 2001 2000 $'000 $'000 $'000 $'000 --------------- --------------- --------------- --------------- Total revenues 210,849 159,563 400,593 310,658 Cost of revenues (27,709) (22,640) (56,985) (45,097) --------------- --------------- --------------- --------------- Gross profit 183,140 136,923 343,608 265,561 Operating expenses (294,848) (95,272) (402,317) (206,513) --------------- --------------- --------------- --------------- Operating (loss)/income (111,708) 41,651 (58,709) 59,048 Interest income 4,485 4,724 9,635 8,195 Interest expense (1,684) (3,974) (4,682) (8,388) Other income, net 2,401 95,057 2,653 102,453 --------------- --------------- --------------- --------------- Total other income, net 5,202 95,807 7,606 102,260 --------------- --------------- --------------- --------------- (Loss)/income before income taxes (106,506) 137,458 (51,103) 161,308 Income taxes (17,685) (9,192) (31,624) (20,082) --------------- --------------- --------------- --------------- Net (loss)/income (see below) (124,191) 128,266 (82,727) 141,226 --------------- --------------- --------------- --------------- Net (loss)/income per share: Basic (25.3c) 26.6c (16.9c) 29.5c Diluted (25.3c) 25.9c (16.9c) 28.8c Weighted average number of shares: Basic 489,977,184 482,234,443 489,205,296 479,509,446 Diluted 489,977,184 496,376,062 489,205,296 492,146,693 The results for the three and six months ended June 30, 2000 have been restated to include the results of BioChem Pharma Inc. as this transaction was accounted for as a pooling of interests in accordance with APB 16, Accounting for Business Combinations. Supplemental information Net (loss)/income as above (124,191) 128,266 (82,727) 141,226 Adjustments: APB25 stock option compensation charge 232 236 2,352 23,482 Exceptional items 177,015 (96,635) 177,015 (99,417) --------------- --------------- --------------- --------------- Net income before APB25 and exceptionals 53,056 31,867 96,640 65,291 --------------- --------------- --------------- --------------- Weighted average number of shares: Diluted 502,584,188 496,376,062 502,381,664 492,146,693 Net income before APB25 and exceptionals per ADS Basic 32.5c 19.8c 59.3c 40.8c Diluted 31.7c 19.2c 57.7c 39.9c --------------- --------------- --------------- ---------------
Unaudited consolidated statements of cash flows US GAAP 3 months 3 months 6 months 6 months to June 30, to June 30, to June 30, to June 30, 2001 2000 2001 2000 $'000 $'000 $'000 $'000 --------------- --------------- --------------- --------------- Cash flows from operating activities: Net (loss)/ income (124,191) 128,266 (82,727) 141,226 Adjustments to reconcile net (loss)/income to net cash provided by operating activities: Depreciation and amortisation 11,204 9,411 22,027 18,670 Stock option compensation 232 236 2,352 23,482 Tax benefit of stock option compensation, charged directly to equity 217 8,750 3,307 9,829 Non cash exchange gains and losses 5,394 (1,840) (5,030) (1,656) Gain on sale of long term investments - (97,918) - (100,516) Gain on sale of fixed assets 7,491 (265) 8,098 (265) (Increase)/decrease in accounts receivable (15,063) (13,504) 17,735 (29,287) (Increase)/decrease in inventory (526) (1,629) 1,671 (3,344) Decrease in deferred tax asset 7,268 1,659 13,768 1,535 (Increase)/decrease in prepayments and other current assets (2,482) (7,353) (13,414) (6,642) Decrease/(increase) in other assets 1,470 7,285 2,228 10,435 Increase/(decrease) in accounts and notes payable 50,660 (11,492) 34,957 (21,596) (Decrease)/increase in other current liabilities (9,787) 10,076 (7,186) (29,862) (Decrease)/increase in other long term liabilities (593) (18) (1,757) (823) Write-down of long term investments 24,937 - 24,937 - Write-down of intangible assets 20,890 - 20,890 - Write-down of net assets of business transferred under contractual arrangements 30,811 - 30,811 - --------------- --------------- --------------- --------------- Net cash provided by operating activities 7,932 31,664 72,667 11,186 --------------- --------------- --------------- --------------- Cash flows from investing activities: Redemption of marketable securities, net (7,246) 12,283 38,754 43,970 Increase in cash placed on short-term deposit (31,624) (16,665) 98,342 (22,029) Purchase of temporary investments - (32) - (10,954) Maturity of long term investments - 18,100 - 114,006 Purchase of long term investments (2,605) (4,605) (11,107) (7,985) Expenses of acquisition of subsidiaries - (445) - (657) Purchase of intangible assets (6,310) (13,820) (32,035) (15,283) Purchase of fixed assets (3,415) (6,567) (6,044) (15,897) Purchase of other assets (138) (376) 547 (543) Proceeds from sale of long term investments - 62,887 - 72,593 Proceeds from sale of fixed assets 1,200 10,265 1,200 10,265 Collection on notes receivable - 228 - 748 --------------- --------------- --------------- --------------- Net cash (used in)/provided by investing activities (50,138) 61,253 89,657 168,234 --------------- --------------- --------------- --------------- Cash flows from financing activities: Movements on long term debt, capital leases and notes (125,356) (278) (201,876) (2,826) Proceeds from issue of common stock, net - 2,912 (17) 5,101 Proceeds from exercise of options 18,922 10,986 23,201 38,178 --------------- --------------- --------------- --------------- Net cash (used in)/provided by financing activities (106,434) 13,620 (178,692) 40,453 --------------- --------------- --------------- --------------- Cash flows provided by/(used in) discontinued operations - 16 - (1,728) --------------- --------------- --------------- --------------- Effect of foreign exchange rate changes on cash and cash equivalents 1,188 (4,293) (3,910) (4,416) --------------- --------------- --------------- --------------- Net (decrease)/increase in cash and cash equivalents (147,452) 102,260 (20,278) 213,729 Cash and cash equivalents at beginning of period 220,440 213,972 93,266 102,503 --------------- --------------- --------------- --------------- Cash and cash equivalents at end of period 72,988 316,232 72,988 316,232 --------------- --------------- --------------- ---------------
The cash flows for the three and six months ended June 30, 2000 have been restated to include the cash flows of BioChem Pharma Inc., which was accounted for as a pooling of interests in accordance with APB 16, Accounting for Business Combinations. Notes to the US GAAP financial statements 1. Analysis of revenue, operating income and reportable segments The Company has disclosed segment information for the individual operating areas of the business, based on the way in which the business is managed and controlled. Following the merger with BioChem the Company will manage R&D on a global basis and the sales and marketing operations on a geographic basis, each being managed and monitored separately and serving different markets. The Company evaluates performance based on operating income or loss before interest and income taxes.
Three months to June 30, 2001 US International R&D Total $'000 $'000 $'000 $'000 -------------- -------------- -------------- -------------- Product sales 141,648 30,057 - 171,705 Licensing and development 244 - - 244 Royalties 120 38,309 - 38,429 Other revenues - 471 - 471 -------------- -------------- -------------- -------------- Total revenue 142,012 68,837 - 210,849 -------------- -------------- -------------- -------------- Cost of revenues 17,616 10,093 - 27,709 Research and development - - 41,827 41,827 Selling, general and administrative 45,580 19,222 - 64,802 Asset impairments and restructuring charges - 85,447 - 85,447 Merger transaction expenses - 83,470 - 83,470 Losses/(gains) on dispositions of assets - 8,098 - 8,098 -------------- -------------- -------------- -------------- Total operating expenses 63,196 206,330 41,827 311,353 -------------- -------------- -------------- -------------- EBITDA 78,816 (137,493) (41,827) (100,504) Depreciation and amortisation (4,642) (6,562) - (11,204) -------------- -------------- -------------- -------------- Operating income/(loss) 74,174 (144,055) (41,827) (111,708) -------------- -------------- -------------- --------------
Three months to June 30, 2000 US International R&D Total $'000 $'000 $'000 $'000 -------------- -------------- -------------- -------------- Product sales 96,449 24,914 - 121,363 Licensing and development 614 3,757 - 4,371 Royalties 85 33,568 - 33,653 Other revenues 9 167 - 176 -------------- -------------- -------------- -------------- Total revenue 97,157 62,406 - 159,563 -------------- -------------- -------------- -------------- Cost of revenues 12,483 10,157 - 22,640 Research and development - - 39,253 39,253 Selling, general and administrative 29,112 17,761 - 46,873 (Gains)/losses on dispositions of assets (282) 17 - (265) -------------- -------------- -------------- -------------- Total operating expenses 41,313 27,935 39,253 108,501 -------------- -------------- -------------- -------------- EBITDA 55,844 34,471 (39,253) 51,062 Depreciation and amortisation (4,354) (5,057) - (9,411) -------------- -------------- -------------- -------------- Operating income/(loss) 51,490 29,414 (39,253) 41,651 -------------- -------------- -------------- -------------- Six months to June 30, 2001 US International R&D Total $'000 $'000 $'000 $'000 -------------- -------------- -------------- -------------- Product sales 268,452 57,419 - 325,871 Licensing and development 2,329 957 - 3,286 Royalties 180 70,510 - 70,690 Other revenues - 746 - 746 -------------- -------------- -------------- -------------- Total revenue 270,961 129,632 - 400,593 -------------- -------------- -------------- -------------- Cost of revenues 35,492 21,493 - 56,985 Research and development - - 79,511 79,511 Selling, general and administrative 81,983 41,781 - 123,764 Asset impairments and restructuring charges - 85,447 - 85,447 Merger transaction expenses - 83,470 - 83,470 Losses on dispositions of assets - 8,098 - 8,098 -------------- -------------- -------------- -------------- Total operating expenses 117,475 240,289 79,511 437,275 -------------- -------------- -------------- -------------- EBITDA 153,486 (110,657) (79,511) (36,682) Depreciation and amortisation (9,870) (12,157) - (22,027) -------------- -------------- -------------- -------------- Operating income/(loss) 143,616 (122,814) (79,511) (58,709) -------------- -------------- -------------- --------------
Six months to June 30, 2000 US International R&D Total $'000 $'000 $'000 $'000 -------------- -------------- -------------- -------------- Product sales 189,550 47,690 - 237,240 Licensing and development 1,990 7,291 - 9,281 Royalties 129 63,534 - 63,663 Other revenues 13 461 - 474 -------------- -------------- -------------- -------------- Total revenue 191,682 118,976 - 310,658 -------------- -------------- -------------- -------------- Cost of revenues 25,437 19,660 - 45,097 Research and development - - 77,482 77,482 Selling, general and administrative 51,532 59,094 - 110,626 (Gains)/losses on dispositions of assets (282) 17 - (265) -------------- -------------- -------------- -------------- Total operating expenses 76,687 78,771 77,482 232,940 -------------- -------------- -------------- -------------- EBITDA 114,995 40,205 (77,482) 77,718 Depreciation and amortisation (8,486) (10,184) - (18,670) -------------- -------------- -------------- -------------- Operating income/(loss) 106,509 30,021 (77,482) 59,048 -------------- -------------- -------------- --------------
2. Net (loss)/income per share Basic net (loss)/income per share is based upon the net (loss)/income available to common stockholders divided by the weighted-average number of common shares outstanding during the period. Diluted net (loss)/income per share is based upon income available to common stockholders divided by the weighted-average number of common shares outstanding during the period and adjusted for the effect of all dilutive potential common shares that were outstanding during the period. The following table sets forth the computation for basic and diluted net income per share:
3 months 3 months 6 months 6 months to June 30, to June 30, to June 30, to June 30, 2001 2000 2001 2000 $'000 $'000 $'000 $'000 ---------------- ---------------- ---------------- ---------------- Numerator for basic net (loss)/income per share (124,191) 128,266 (82,727) 141,226 Interest charged on convertible debt - 102 - 438 ---------------- ---------------- ---------------- ---------------- Numerator for diluted net (loss)/income per share (124,191) 128,368 (82,727) 141,664 ---------------- ---------------- ---------------- ---------------- No. of shares No. of shares No. of shares No. of shares ---------------------------------------------------------------------- Weighted average number of shares: Basic 489,977,184 482,234,443 489,205,296 479,509,446 Effect of dilutive stock options - 12,511,100 - 11,006,728 Convertible debt - 1,630,519 - 1,630,519 ---------------------------------------------------------------------- Diluted 489,977,184 496,376,062 489,205,296 492,146,693 ---------------------------------------------------------------------- Basic net (loss)/income per share (25.3c) 26.6c (16.9c) 29.5c ---------------------------------------------------------------------- Diluted net (loss)/income per share (25.3c) 25.9c (16.9c) 28.8c ---------------------------------------------------------------------- 3. Net product sales 3 months 3 months 3 months 3 months to June 30, 2001 to June 30, to June 30, to June 30, $'000 2000 2001 2001 $'000 % change % of total --------------- --------------- --------------- --------------- Adderall* 69,430 44,386 +56% 40% Agrylin* 25,787 18,531 +39% 15% Pentasa* 19,083 13,170 +45% 11% Carbatrol* 9,882 5,291 +87% 6% Calciums 4,979 4,289 +16% 3% ProAmatine* 10,511 5,869 +79% 6% DextroStat* 2,938 1,845 +59% 2% OTC 5,978 6,635 -10% 3% Others 23,117 21,347 +8% 14% --------------- --------------- --------------- --------------- 171,705 121,363 +41% 100% --------------- --------------- --------------- --------------- 6 months 6 months 6 months 6 months to June 30, 2001 to June 30, to June 30, to June 30, $'000 2000 2001 2001 $'000 % change % of total --------------- --------------- --------------- --------------- Adderall* 139,576 98,925 +41% 43% Agrylin* 42,933 29,536 +45% 13% Pentasa* 33,483 23,517 +42% 10% Carbatrol* 19,521 10,883 +79% 6% Calciums 9,774 8,274 +18% 3% ProAmatine* 18,088 9,444 +92% 6% DextroStat* 4,566 4,157 +10% 1% OTC 13,303 12,436 +7% 4% Others 44,627 40,069 +11% 14% --------------- --------------- --------------- --------------- 325,871 237,240 +38% 100% --------------- --------------- --------------- --------------- 4. Royalty income 3 months 3 months 3 months 3 months to June 30, 2001 to June 30, to June 30, to June 30, $'000 2000 2001 2001 $'000 % change % of total --------------- --------------- --------------- --------------- 3TC* 31,063 29,399 +6% 81% Zeffix* 4,365 2,936 +49% 11% Others 3,001 1,318 +128% 8% --------------- --------------- --------------- --------------- 38,429 33,653 +14% 100% --------------- --------------- --------------- --------------- 6 months 6 months 6 months 6 months to June 30, to June 30, to June 30, to June 30, 2001 2000 2001 2001 $'000 $'000 % change % of total --------------- --------------- --------------- --------------- 3TC* 58,621 56,435 +4% 83% Zeffix* 8,148 5,305 +54% 12% Others 3,921 1,923 +104% 5% --------------- --------------- --------------- --------------- 70,690 63,663 +11% 100% --------------- --------------- --------------- ---------------
Unaudited consolidated income statements Quarter 1 US GAAP 3 months 3 months to March 31, 2001 to March 31, $'000 2000 $'000 --------------- --------------- Total revenues 189,744 151,095 Cost of revenues (29,276) (22,457) --------------- --------------- Gross profit 160,468 128,638 Operating expenses (107,469) (111,241) --------------- --------------- Operating income 52,999 17,397 Interest income 5,150 3,471 Interest expense (2,998) (4,414) Other income, net 252 7,396 --------------- --------------- Total other income, net 2,404 6,453 --------------- --------------- Income before income taxes 55,403 23,850 Income taxes (13,939) (10,890) --------------- --------------- Net income 41,464 12,960 --------------- --------------- Net income per share: Basic 8.5c 2.7c Diluted 8.3c 2.6c Weighted average number of shares: Basic 488,448,379 476,815,531 Diluted 500,699,108 494,047,061 The results for the three months ended March 31, 2000 have been restated to include the results of BioChem Pharma Inc. as this transaction was accounted for as a pooling of interests in accordance with APB 16, Accounting for Business Combinations. Unaudited results for the month of June 2001 The unaudited results for June 2001 are provided to comply with ASR No. 135 and SAB No. 65, which require the publication of thirty days' post merger combined operating results following the merger with Biochem Pharma Inc. 2001 $m Product sales 48 Royalties 14 Other income 1 --------- Total revenues 64 --------- Net income (67) --------- EPS (after APB 25 charges) (13.7c) ADS (after APB 25 charges) (13.7c) EPS (before APB 25 charges) (13.6c) ADS (before APB 25 charges) (13.6c) Unaudited consolidated results for the six months ended June 30, 2001 UK GAAP First half results 2001 The Group recorded a pre-tax profit of(pound)32.5 million (2000:(pound)26.6 million) and basic and diluted earnings per share of 7.6p (2000: 9.8p) and 7.5p (2000: 9.4p) respectively for the first six months of 2001. Group turnover for the first half increased by 56 per cent to(pound)243.7 million (2000:(pound)156.2 million), reflecting the inclusion in 2001 of six weeks post acquisition results for BioChem Pharma Inc. Product sales Product sales represented 92% of total turnover at (pound)224.7 million. Of these, sales of Adderall* and DextroStat* for ADHD in the US were (pound)100.7 million. This represents a growth of 40% on the comparative period in 2000. Royalties Royalty income for the first six months was (pound)16.5 million, an increase of (pound)15.2 million over first half 2000. This is mainly attributed to the inclusion of six weeks post acquisition results for BioChem Pharma Inc. Cost of sales and operating expenses Cost of sales and operating expenses in the first half of 2000 increased by 60% to (pound)204.1 million (2000: (pound)127.9 million). Gross margin on product sales was 83% for the six months to June 2001 (2000: 81%). Distribution and selling costs as a percentage of product sales were 28% (2000: 24%). R&D expenditure during the first half of 2001 was (pound)43.6 million (2000: (pound)35.0 million), an increase of 25% over the comparative period. Expressed as a percentage of Group turnover, R&D expenditure was 18% compared to 23% in the first half of 2000. General and administrative expenditure increased by(pound)31.0 million to(pound)58.6 million (2000:(pound)27.6 million). This increase includes an amortisation charge of(pound)15.7 million on goodwill resulting from the acquisition of BioChem Pharma Inc. in May 2001. Excluding amortisation, general and administrative expenditure represents 10% of turnover (2000: 10%). * Trade Mark
Unaudited consolidated profit and loss accounts UK GAAP 3 months 3 months 6 months 6 months Year to to June 30, to June 30, to June 30, to June 30, Dec 31, 2001 2000 2001 2000 2000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 --------------- --------------- --------------- --------------- --------------- Turnover 135,628 81,698 243,743 156,169 343,624 Cost of sales (18,307) (14,452) (37,925) (28,490) (58,596) --------------- --------------- --------------- --------------- --------------- Gross profit 117,321 67,246 205,818 127,679 285,028 Other operating expenses (102,474) (53,146) (166,146) (99,444) (205,371) --------------- --------------- --------------- --------------- --------------- Operating profit 14,847 14,100 39,672 28,235 79,657 Costs of a fundamental restructuring (8,038) - (8,038) - - --------------- --------------- --------------- --------------- --------------- Profit on ordinary activities before interest 6,809 14,100 31,634 28,235 79,657 Finance charges, net 7,278 (406) 828 (1,653) (2,885) --------------- --------------- --------------- --------------- --------------- Profit on ordinary activities before taxation 14,087 13,694 32,462 26,582 76,772 Tax on profit on ordinary activities (6,261) 2,003 (8,005) (2,172) (3,570) --------------- --------------- --------------- --------------- --------------- Profit on ordinary activities after taxation 7,826 15,697 24,457 24,410 73,202 --------------- --------------- --------------- --------------- --------------- Earnings per share - basic 2.0p 6.2p 7.6p 9.8p 29.0p - diluted 2.0p 6.0p 7.5p 9.4p 28.1p All results included above relate to the continuing operations of the Group. Unaudited consolidated statement of total recognised gains and losses UK GAAP 3 months to 3 months to 6 months to 6 months to Year to June 30, 2001 June 30, June 30, 2001 June 30, 2000 Dec 31, (pound)'000 2000 (pound)'000 (pound)'000 2000 (pound)'000 (pound)'000 --------------- --------------- --------------- --------------- --------------- Profit for the period 7,826 15,697 24,457 24,410 73,202 Translation of overseas subsidiaries' financial statements 9,097 10,078 22,433 12,407 15,985 --------------- --------------- --------------- --------------- --------------- Total recognised gains and 16,923 25,775 46,890 36,817 89,187 losses relating to the period --------------- --------------- --------------- --------------- ---------------
Unaudited consolidated balance sheets UK GAAP June 30, June 30, Dec 31, 2001 2000 2000 (pound)'000 (pound)'000 (pound)'000 --------------- --------------- --------------- Fixed assets Goodwill 2,710,874 458,199 446,983 Other intangible assets 282,430 232,367 247,278 Tangible assets 81,411 19,260 33,261 Fixed asset investments 47,445 2,280 4,142 --------------- --------------- --------------- 3,122,160 712,106 731,664 --------------- --------------- --------------- Current assets Stocks 34,203 26,265 31,536 Debtors - due within one year 102,564 65,716 69,107 - due after one year 17,142 2,068 15,358 Investments 163,780 41,219 93,550 Cash at bank and in hand 51,897 59,081 31,194 --------------- --------------- --------------- 369,586 194,349 240,745 Creditors: amounts falling due within one year (124,053) (79,864) (74,580) --------------- --------------- --------------- Net current assets 245,533 114,485 166,165 --------------- --------------- --------------- Total assets less current liabilities 3,367,693 826,591 897,829 Creditors: amounts falling due in more than one year (11,796) (84,898) (94,186) --------------- --------------- --------------- Net assets 3,355,897 741,693 803,643 --------------- --------------- --------------- Capital and reserves Called-up share capital 23,069 12,710 12,854 Share premium 3,041,377 864,212 873,567 Shares to be issued 327,339 - - Capital reserve 2,755 2,755 2,755 Other reserves 24,247 24,247 24,247 Profit and loss account (62,890) (162,231) (109,780) --------------- --------------- --------------- Equity shareholders' funds 3,355,897 741,693 803,643 --------------- --------------- ---------------
Unaudited consolidated cash flow statements UK GAAP 6 months to 6 months to Year to June 30, June 30, Dec 31, 2001 2000 2000 (pound)'000 (pound)'000 (pound)'000 --------------- ------------------------------ Net cash inflow/(outflow) from operating activities 105,046 (1,829) 52,925 Returns on investments and servicing of finance: Interest received 4,461 2,018 4,125 Interest paid (3,043) (3,671) (7,009) Interest element of finance lease rentals - - (1) --------------- ------------------------------ Net cash inflow/(outflow) from returns on investments and servicing of finance 1,418 (1,653) (2,885) --------------- ------------------------------ Taxation: Overseas corporation tax paid (16,629) (3,297) (4,397) --------------- ------------------------------ Capital expenditure and financial investments: Purchase of fixed asset investment - (560) (2,398) Purchase of intangible assets (16,623) (7,910) (25,776) Purchase of tangible fixed assets (2,575) (2,712) (19,251) Sale of intangible assets - - 1,027 Sale of tangible assets 854 6,784 7,903 --------------- ------------------------------ Net cash outflow for capital expenditure and financial investments (18,344) (4,398) (38,495) --------------- ------------------------------ Acquisitions and disposals: Expenses of acquisitions (19,783) (80) (964) Net cash acquired with subsidiary undertakings 44,452 - - --------------- ------------------------------ Net cash inflow/(outflow) from acquisitions 24,669 (80) (964) --------------- ------------------------------ Cash inflow/(outflow) before management of liquid resources and financing 96,160 (11,257) 6,184 --------------- ------------------------------ Management of liquid resources: Decrease/(increase) in cash placed on short-term deposit 21,742 8,631 (39,171) --------------- ------------------------------ Financing: Issue of ordinary share capital - 3,501 7,904 Exercise of share options 14,457 24,258 29,085 Expenses of share issues (23,584) (2,089) (2,089) Capital element of finance leases - - (22) Net decrease in loans during the year (88,072) - (9,329) --------------- ------------------------------ Net cash (outflow)/inflow from financing (97,199) 25,670 25,549 --------------- ------------------------------ Increase/(decrease) in cash during the period 20,703 23,044 (7,438) --------------- ------------------------------
Notes to the UK GAAP financial statements 1. Earnings per share Earnings per share has been calculated by dividing the profit on ordinary activities after taxation for each period by the weighted average number of shares in issue during those periods, in accordance with FRS14. The weighted average number of shares used in calculating fully diluted earnings per share has been adjusted for the effects of all dilutive potential ordinary shares in accordance with FRS14.
3 months 3 months 6 months 6 months Year to to June 30, to June 30, to June 30, to June 30, Dec 31, 2001 2000 2001 2000 2000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 ---------------- ---------------- ---------------- ---------------- ---------------- Profit for the period (for basic and diluted EPS) 7,826 15,697 24,457 24,410 73,202 Weighted average number of shares in issue for basic EPS 385,797,020 251,924,794 321,948,608 249,282,994 252,497,255 Number of dilutive potential shares 5,833,968 10,276,019 2,340,817 10,033,879 8,411,015 ---------------- ---------------- ---------------- ---------------- ---------------- Total for fully diluted EPS 391,630,988 262,200,813 324,289,425 259,316,873 260,908,270 ---------------- ---------------- ---------------- ---------------- ----------------
2. Basis of preparation The interim accounts have been prepared in accordance with the accounting policies set out in the full UK statutory accounts for the year ended December 31, 2000. The results for the six months ended June 30, 2001 and June 30, 2000 have not been audited and do not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. Summary of significant differences between US generally accepted accounting principles followed by the Group and UK generally accepted accounting principles. The Group's consolidated financial statements have been prepared under US GAAP, which differs in certain respects from UK GAAP. The principal differences between the Group's accounting policies under US GAAP and UK GAAP are set out in the tables below: Reconciliation of net income from US GAAP to UK GAAP
3 months to 3 months 3 months 3 months June 30, to June 30, to June 30, to June 30, 2001 2000 2001 2000 $'000 $'000 (pound)'000 (pound)'000 ------------- --------------- ---------------------------- Net income as reported under US GAAP (124,191) 128,266 (88,636) 84,519 Adjustments to conform to UK GAAP: Merger accounting adjustments - elimination of pooled profits and losses (7,047) (108,895) (5,134) (71,580) - restructuring costs charged to income 157,519 (60) 112,121 (39) Amortisation of capitalised goodwill 2,407 2,583 1,697 1,698 Amortisation under acquisition accounting (30,140) (8,681) (21,400) (5,706) Derecognition of deferred tax asset 7,268 1,786 5,174 1,180 Stock option compensation costs 232 236 166 168 Tax benefit from exercise of non-qualified stock options 217 8,750 154 5,776 Difference in accounting for convertible debt - 87 - 57 Accrued taxes on share options (295) (209) Foreign exchange on US$ denominated liabilities - - 3,893 (376) ------------- ------------- ---------------------------- Net income as reported under UK GAAP 5,970 24,072 7,826 15,697 ------------- ------------- ---------------------------- 6 months 6 months 6 months 6 months to June 30, to June 30, to June 30, to June 30, 2001 2000 2001 2000 $'000 $'000 (pound)'000 (pound)'000 ------------- --------------- ---------------------------- Net income as reported under US GAAP (82,727) 141,226 (59,862) 91,135 Adjustments to conform to UK GAAP: Merger accounting adjustments - elimination of pooled profits and losses (22,556) (126,121) (16,055) (80,857) - restructuring costs charged to income 150,836 (120) 112,079 (75) Amortisation of capitalised goodwill 4,858 5,298 3,395 3,397 Amortisation under acquisition accounting (38,377) (17,801) (27,106) (11,412) Derecognition of deferred tax asset 13,768 1,786 9,747 1,180 Stock option compensation costs 2,352 23,482 1,610 14,690 Tax benefit from exercise of non-qualified stock options 3,307 9,829 2,113 6,449 Difference in accounting for convertible debt (1) 441 (1) 279 Accrued taxes on share options (285) - (202) - Foreign exchange on US$ denominated liabilities - - (1,261) (376) ------------- --------------- ---------------------------- Net income as reported under UK GAAP 37,888 38,020 24,457 24,410 ------------- --------------- ----------------------------
Reconciliation of total shareholders' equity from US GAAP to UK GAAP
June 30, June 30, June 30, June 30, 2001 2000 2001 2000 $'000 $'000 (pound)'000 (pound)'000 ------------- --------------- ---------------------------- Total shareholders' equity as reported under US GAAP 1,090,745 1,075,993 775,547 710,578 Adjustments to conform to UK GAAP: Merger accounting adjustments - elimination of pooled equity - (417,568) - (275,659) - restructuring costs charged to income 50 290 36 192 Goodwill written off to reserves (189,158) (203,617) (134,498) (134,498) Goodwill amortisation 37,157 29,715 26,420 19,628 Net book value of goodwill on acquisition accounting for Roberts Pharmaceutical Corporation 593,041 672,924 421,673 444,497 Net book value of goodwill on acquisition accounting for BioChem Pharma Inc 3,207,083 - 2,280,365 - Deferred tax (19,501) (35,325) (13,866) (23,334) Difference in accounting for convertible debt 463 438 329 289 Difference in valuation of fixed asset investments 244 173 Accrued taxes on share options (397) (282) ------------- --------------- ---------------------------- Total shareholders' equity as reported under UK GAAP 4,719,727 1,122,850 3,355,897 741,693 ------------- --------------- ----------------------------
* Trade Mark