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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period ended September 30, 2003

DRAFT 1A

Commission file number: 0-29630

SHIRE PHARMACEUTICALS GROUP PLC
(Exact name of registrant as specified in its charter)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

As of November 7, 2003, the number of outstanding common shares of the Registrant was 477,349,266.

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THE “SAFE HARBOR” STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Statements included herein that are not historical facts, are forward-looking statements. Such forward-looking statements involve a number of risks and uncertainties and are subject to change at any time. In the event such risks or uncertainties materialize, Shire’s results could be materially affected. The risks and uncertainties include, but are not limited to, risks associated with the inherent uncertainty of pharmaceutical research, product development, manufacturing and commercialization, the impact of competitive products, including, but not limited to, the impact on Shire’s Attention Deficit Hyperactivity Disorder (ADHD) franchise, patents, including but not limited to, legal challenges relating to Shire’s ADHD franchise, government regulation and approval, including but not limited to the expected product approval dates of lanthanum carbonate (FOSRENOL^®), METHYPATCH^®, XAGRID^® and the adult indication for ADDERALL XR^® and other risks and uncertainties detailed from time to time in Shire’s filings, including the Annual Report filed on Form 10-K/A by Shire with the Securities and Exchange Commission.

The following are trademarks of Shire or companies within the Shire Group, which are the subject of trademark registrations in certain territories.

ADDERALL XR^® (mixed amphetamine salts)
ADDERALL^® (mixed amphetamine salts)
AGRYLIN^® (anagrelide hydrochloride)
AMATINE^® (midodrine hydrochloride)
CALCICHEW^® (calcium carbonate)
CARBATROL^® (carbamazepine)
FOSRENOL^® (lanthanum carbonate)
FLUVIRAL^® S/F (split virion influenza vaccine)
METHYPATCH^® (methylphenidate)
PROAMATINE^® (midodrine hydrochloride)
SOLARAZE^® (diclofenac sodium 3%)
TROXATYL^® (troxacitabine)
XAGRID^® (anagrelide hydrochloride)

The following are trademarks of third parties.

3TC (trademark of GlaxoSmithKline (GSK))
ADEPT (trademark of ML Laboratories)
COMBIVIR (trademark of GSK)
EPIVIR (trademark of GSK)
EPIVIR-HBV (trademark of GSK)
HEPTOVIR (trademark of GSK)
PENTASA (trademark of Ferring AS)
REMINYL (trademark of Johnson & Johnson)
TRIZIVIR (trademark of GSK)
ZEFFIX (trademark of GSK)

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PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

     SHIRE PHARMACEUTICALS GROUP PLC
CONDENSED CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these consolidated financial statements.

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SHIRE PHARMACEUTICALS GROUP PLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

4

SHIRE PHARMACEUTICALS GROUP PLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
(Unaudited)

The results for the three and nine months ended September 30, 2002 have been restated to reflect the disposal of the “Over-The-Counter” (OTC) business, which has been accounted for as a discontinued operation.

The accompanying notes are an integral part of these consolidated financial statements.

SHIRE PHARMACEUTICALS GROUP PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME/(LOSS)
(Unaudited)

The components of accumulated other comprehensive income/(loss) as at September 30, 2003 and December 31, 2002 are as follows:

The accompanying notes are an integral part of these consolidated financial statements.

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SHIRE PHARMACEUTICALS GROUP PLC
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)

6

SHIRE PHARMACEUTICALS GROUP PLC
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

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SHIRE PHARMACEUTICALS GROUP PLC
     NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

a) Description of Operations and Principles of Consolidation

Shire Pharmaceuticals Group plc (‘Shire’ or ‘the Company’) is a global specialty pharmaceutical company with a strategic focus on meeting the needs of the specialist physician and currently focuses on developing projects and marketing products in the areas of central nervous system (CNS), gastrointestinal (GI) and renal.

Shire has operations in the world’s key pharmaceutical markets (US, Canada, UK, France, Italy, Spain and Germany) as well as a specialist drug delivery unit in the US. The Company has a particular interest in innovative therapies that are prescribed by specialist doctors as opposed to primary care physicians.

The business is currently operated and managed within five individual operating segments: US, International, Corporate, Research and Development and Biologics (vaccines business). Within these segments, revenues are derived primarily from three sources: sales of products by Shire’s own sales and marketing operations, royalties (where Shire has out-licensed to third parties) and licensing and development fees.

The implementation of Shire’s new strategy, announced on July 31, 2003, is progressing well:

• Plans to spin off the vaccines business (Biologics) are advancing and in parallel, the Company is examining a number of expressions of interest from potential purchasers;
  
  
• TROXATYL (for the treatment of acute myeloid leukaemia and pancreatic cancer) and SPD754 (for HIV) have attracted a number of potential partners;
  
  
• During the three months ended September 30, 2003 the Company closed its early stage research unit (Lead Optimization) based in Canada, at a cost of $12.1 million (refer to note 10 for further information relating to the closure);
  
  
• A US manufacturing and distribution site has been closed in the three months ended September 30, 2003;
  
  
• A review of the organizational structure and US site consolidation is ongoing.

Shire’s strategic priority is now on the development of later stage and lower risk projects. Shire will continue to strengthen its portfolio through merger and acquisition activities and will also in-license projects and products on reasonable commercial terms, and then develop and launch them.

The Company’s principal revenues in the relevant markets include:

• in the US, ADDERALL XR and ADDERALL for the treatment of ADHD; AGRYLIN for the treatment of elevated blood platelets; PENTASA for the treatment of ulcerative colitis; CARBATROL for the treatment of epilepsy; and PROAMATINE for the treatment of orthostatic hypotension. In addition, the Company receives royalties on sales of REMINYL for the treatment of Alzheimer’s disease, marketed by Johnson & Johnson, and on EPIVIR, COMBIVIR and TRIZIVIR for the treatment of HIV/AIDS and EPIVIR-HBV for the treatment of hepatitis B, each marketed by GSK;
  
  
• in the UK and the Republic of Ireland, the CALCICHEW range, used primarily as adjuncts in the treatment of osteoporosis, and REMINYL, which is co-promoted by Janssen-Cilag;
  
  
• in Canada, 3TC for the treatment of HIV/AIDS, COMBIVIR and HEPTOVIR (all marketed in partnership with GSK); AMATINE and FLUVIRAL S/F, a vaccine for the prevention of influenza;
  
  
• in the Rest of the World, royalties on the sales of ZEFFIX for the treatment of hepatitis B, marketed by GSK, and royalties on sales of REMINYL marketed by Johnson & Johnson.
  

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1. Summary of Significant Accounting Policies (continued)

In addition, the Company has a number of projects in later stage development including:

• XAGRID in the EU (which is the trade name of AGRYLIN in the EU). On July 25, 2003 the Company received a positive Committee for Proprietary Medicinal Products opinion;
  
  
• FOSRENOL for the treatment of high blood phosphate levels associated with kidney failure. The Company submitted the first regulatory submission for FOSRENOL under the European Mutual Recognition procedure on March 13, 2001 and a New Drug Application (NDA) with the US FDA on April 30, 2002. The Company received an ‘approvable’ letter from the US FDA on March 3, 2003;
  
  
• Adult indication for ADDERALL XR. The Company received an ‘approvable’ letter from the US FDA on October 20, 2003;
  
  
• METHYPATCH, a transdermal delivery system for the once daily treatment of ADHD. Shire and Noven Pharmaceuticals Inc. are addressing the outstanding issues raised by the US FDA in the ‘not approvable’ letter issued on April 28, 2003;
  
  
• SPD417 for bipolar disorder;
  
  
• SPD476 for ulcerative colitis;
  
  
• SPD503 (Guanfacine) for ADHD.

b) Basis of Presentation

These interim financial statements, which include the operations of the Company, and the financial information included here, are unaudited. They have been prepared in accordance with generally accepted accounting principles in the United States of America (US GAAP) and Securities and Exchange Commission regulations for interim reporting. Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to such rules and regulations. However, such information includes all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary to fairly state the results of the interim periods. Interim results are not necessarily indicative of results to be expected for the full year.

The December 31, 2002 balance sheet was derived from audited financial statements but does not include all disclosures required by US GAAP. However, the Company believes that the disclosures are adequate to make the information presented not misleading.

These interim financial statements should be read in conjunction with the Company’s consolidated balance sheets as of December 31, 2002 and 2001, and the related consolidated statements of operations, cash flows and changes in shareholders’ equity for each of the three years in the period ended December 31, 2002.

c) Accounting Pronouncements adopted during the period

In April 2003, the FASB issued Statement No. 149, “Amendment of SFAS No. 133 on Derivative Instruments and Hedging Activities” (SFAS No. 149). The Statement amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133. In particular, it (1) clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative as discussed in SFAS No. 133, (2) clarifies when a derivative contains a financing component and (3) amends certain other existing pronouncements.

SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003, except as stated below, and for hedging relationships designated after June 30, 2003. The provisions of SFAS No. 149 that relate to SFAS No. 133 Implementation Issues that have been effective for fiscal quarters that began prior to June 15, 2003, should continue to be applied in accordance with their respective effective dates. In addition, certain provisions relating to forward purchases or sales of when-issued securities or other securities that do not yet exist, should be applied to existing contracts as well as new contracts entered into after June 30, 2003. SFAS No. 149 should be applied prospectively.

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1. Summary of Significant Accounting Policies (continued)

c) Accounting Pronouncements adopted during the period (continued)

The adoption of this Statement had no material impact on the results of operations and financial position of the Company.

In May 2003, the FASB issued Statement No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” (SFAS No. 150). The Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liability and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of these instruments were previously classified as equity. This Statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of this Statement had no material impact on the results of operations and financial position of the Company.

d) New Accounting Pronouncements

In January 2003, the FASB issued FIN No. 46, “Consolidation of Variable Interest Entities, an Interpretation of APB No. 51” (FIN 46). This interpretation requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 is effective for all new variable interest entities created or acquired after January 31, 2003, of which, within the Company, there are none. For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN 46 must be applied for the first reporting period beginning after December 15, 2003. The Company is in the process of assessing the impact of adopting FIN 46.

2. 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. The Company evaluates performance based on operating income or loss before interest and income taxes.

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2. Analysis of revenue, operating income and reportable segments (continued)

In the consolidated statement of operations, depreciation and amortization is included within selling, general and administrative.

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2. Analysis of revenue, operating income and reportable segments (continued)

In the consolidated statement of operations, depreciation and amortization is included within selling, general and administrative.

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3. Earnings per share

Basic earnings per share, is based upon the net income available to common stockholders divided by the weighted-average number of common shares outstanding during the period.

Diluted earnings per share is based upon net 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 of basic and diluted earnings per share:

Warrants to purchase approximately 1.4 million common shares for the three months and nine months ended September 30, 2003 were anti-dilutive and were therefore excluded from the computation of diluted earnings per share.

Stock options to purchase approximately 17.5 million and 17.7 million common shares for the three months and nine months ended September 30, 2003, respectively, were anti-dilutive and were therefore excluded from the computation of diluted earnings per share.

4. Employee stock plans

SFAS No. 123, “Accounting for Stock Based Compensation” (SFAS No. 123) prescribes accounting and reporting standards for all stock-based compensation plans, including employee stock options. As allowed by SFAS No. 123, the Company has chosen to continue to account for stock based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB No. 25), and related interpretations.

Accordingly, compensation cost of stock options is measured as the excess, if any, of the quoted market price of Shire’s stock at the measurement date over the option exercise price and is charged to operations over the vesting period. For fixed plans, the measurement date is the grant date. For plans where the measurement date occurs after the grant date, referred to as variable plans, the compensation cost is re-measured on the basis of the current market value of Shire’s stock at the end of each reporting period. The Company recognizes compensation expense for variable plans with performance conditions if achievement of those conditions becomes probable.

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4. Employee stock plans (continued)

At September 30, 2003, the Company had nine stock-based employee compensation plans, which are described more fully in the annual consolidated financial statements.

The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation.

5. Accounts receivable, net

Trade receivables are stated net of a provision for returns and discounts of $7.5 million at September 30, 2003 and $5.5 million at December 31, 2002. Further analysis can be seen below:

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6. Inventories, net

The finished goods inventory has been impaired for slow moving and obsolete stock by $6.2 million at September 30, 2003 and $3.0 million at December 31, 2002.

7. Investments

Throughout the year the Company continuously assesses the carrying value of its investments for other than temporary impairments. Upon completion of this assessment, the Company wrote off $8.5 million of investments during the nine months ended September 30, 2003. This has been reflected in other (expense)/income, net, in the consolidated statement of operations.

8. Other intangible assets, net

Management estimates that the annual amortization charge in respect of intangible fixed assets held at September 30, 2003 will be approximately $45 million for each of the five years to September 30, 2008. Estimated amortization expense can be affected by various factors including future acquisitions and disposals of product rights. Throughout the year the Company continuously assesses the carrying value of its other intangible assets. This involves consideration of amongst other things, the direction of the business and the marketability of the underlying products. The Company recorded asset impairments of $7.8 million and wrote down $6.6 million of assets during the nine months ended September 30, 2003. The asset impairments of $7.8 million resulted from a decline in product prices, which decreased the estimated future cash flows and the $6.6 million resulted from a decision not to renew a product license that was not core to the business.

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9. Long-term debt, excluding current instalments

During the second quarter of 2003, the Company repurchased $29.8 million of the $400.0 million 2% guaranteed convertible notes due 2011, recording a gain of $0.5 million which is reflected in other income. During the nine months ended September 30, 2003 the Company did not issue debt or make any other debt repayment other than in respect of capital leases.

10. Closure costs

On July 31, 2003 Shire announced its decision to close Lead Optimization as a result of a strategic review. The closure will result in:

• the severance of Lead Optimization employees (approximately 130). As of September 2003, 127 had left the Company, with the remaining employees to leave by January 31, 2004. Severance payments will be made to the former employees over a fifteen month period.
  
  
• the $5.5 million write-off of associated tangible fixed assets. These assets were directly related to Lead Optimization and were primarily research and development laboratory equipment.
  
  
• the cancellation, to the extent possible, of contracts directly related to Lead Optimization.

The following table presents the cost of the closure and the total estimated costs.

The costs have been reflected in the statement of operations and within the reporting segments as follows:

As noted above, certain of the costs associated with the closure will be incurred in subsequent periods. The following provides a roll forward of the liability that has been recorded as of September 30, 2003.

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11. Consolidated statement of changes in shareholders’ equity

Each exchangeable share is exchangeable into 3 common shares.

12. Contingent liabilities

(a) Commitments

The Company has undertaken to subscribe to interests in companies and partnerships for amounts totalling $44.6 million (December 31, 2002: $38.1 million). As at September 30, 2003 an amount of $32.0 million (December 31, 2002: $26.4 million) has been subscribed, leaving an outstanding commitment of $12.6 million (December 31, 2002: $11.7 million).

Lease commitments

The Company leases facilities, motor vehicles and certain equipment under operating leases expiring through 2012. Lease expense under these commitments was approximately $8.5 million for the nine months ended September 30, 2003. Expense related to operating leases is recognized on a straight-line basis over the life of the lease. In addition, the Company has a building lease, which is accounted for as a capital lease, which expires in 2019.

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Lease commitments (continued)

Future minimum lease payments presented below include principal lease payments and other fixed executory fees under lease arrangements at September 30, 2003:

Guarantees and collateral

Shire has guaranteed the building lease entered into by its wholly owned subsidiary, Shire US Manufacturing Inc. In addition, as at September 30, 2003 the Company had $5.2 million of restricted cash held as collateral for this lease.

Letter of credit

As at September 30, 2003 the Company had an irrevocable standby letter of credit with Fifth Third Bank to M&T Bank in the amount of $10.0 million related to the bonds that financed the construction of its US manufacturing facility.

(b) FLUVIRAL

In 2001, the Company signed a ten-year contract with the Government of Canada to assure a state of readiness in the case of an influenza pandemic (worldwide epidemic) and to provide influenza vaccine for all Canadian citizens in such an event.

The concept of a state of readiness against an influenza pandemic requires the development of sufficient infrastructure and capacity in Canada to provide 100% of domestic vaccine needs in the event of an influenza pandemic. Canada would require 32 million doses of single-strain (monovalent) flu vaccine within a production period of 16 weeks. Shire Biologics is therefore expanding its production capacity in order to meet this objective within a five-year period.

Under the contract, Shire Biologics will also supply the Government of Canada with a substantial proportion of its annual influenza vaccine requirements over the ten-year period. Subject to mutual agreement, the contract can be renewed for a further period of between one and ten years from 2011.

Shire Biologics is committed to CAN$18.0 million ($13.7 million) of capital expenditure for the purpose of achieving the level of pandemic readiness required. In addition, an annually renewed letter of credit with the Royal Bank has been obtained for CAN$24.5 million ($18.6 million) which would become payable to the Government of Canada if default clauses within the contract with the Government of Canada become enforceable.

Vaccine production facility

In connection with the Government of Canada FLUVIRAL contract, Shire is committed to investing CAN$46.5 million ($35.3 million) in the expansion of its vaccine production facility located in Quebec City. A new building will be located alongside Shire’s existing vaccine production facility in the Quebec Metro High Tech Park. Construction commenced in early November and it is expected that this facility will be operational in 2006.

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(c) Technology Partnerships Canada

As a condition of the agreement the Company has with Technology Partnerships Canada, the Company has an obligation to build a research facility. The construction of the new global vaccine research centre in Laval, Canada will represent an investment of approximately CAN$28.0 million ($21.2 million) and should be completed in December 2004.

(c) Legal proceedings

(i) General

Shire accounts for litigation losses in accordance with SFAS No. 5, "Accounting for Contingencies." (SFAS No. 5). Under SFAS No. 5, loss contingency provisions are recorded for probable losses when management is able reasonably to estimate the loss. Where the estimated loss lies within a range and no particular amount within that range is a better estimate than any other amount the minimum amount is recorded. In other cases management's best estimate of the loss is recorded. These estimates are developed substantially earlier than the ultimate loss is known, and the estimates are refined each accounting period, in light of additional information being known. In instances where Shire is unable to develop a best estimate of loss, no litigation loss is recorded at that time. As information becomes known a loss provision is set up when a best estimate can be made. The best estimates are reviewed quarterly and the estimates are changed when expectations are revised. During the nine months ended September 30, 2003 a legal accrual of $2.0 million was released, to the consolidated statement of operations, due to the outcome of previously pending litigation.

(ii) Specific

There are various legal proceedings against the Company. Please see the Company’s Form 10-K/A for 2002, where these have been fully explained or referred to. There are no material updates to these proceedings since the filing of the 10-K/A, subject as stated below. There is no assurance that the Company will be successful in these proceedings and if it is not there may be a material impact on the Company’s results and financial position.

ADDERALL XR

On August 12, 2003 Shire Laboratories Inc. was issued a new US patent No. 6,605,300 (“ the ‘300 Patent”) covering ADDERALL XR. Shire Laboratories Inc. filed a lawsuit in the US District Court for the Southern District of New York against Barr Laboratories Inc. (“Barr”) for infringement of the ‘300 Patent. The lawsuit results from an Abbreviated New Drug Application (ANDA) filed by Barr for a generic version of ADDERALL XR, pursuant to which Barr provided notice that it would seek to market its generic product before the expiration of the ‘300 Patent in 2018.

Barr cannot launch a generic version of ADDERALL XR before it receives final approval of its ANDA from the FDA. The lawsuit triggers a stay of FDA approval of up to 30 months from Barr’s Paragraph IV notice to allow the court to resolve the suit. Even if Barr receives a final approval from the FDA, it cannot lawfully launch its generic version before the earlier of the expiration of the stay (April 2006) or a district court decision in its favor. There can be no assurance that the Company will be successful in the suit. In the event that the Company does not prevail, then Barr could be in a position to market its extended release mixed amphetamine salt product upon FDA final approval of its ANDA following the current expiry of the existing Hatch-Waxman exclusivity in October 2004. This may have a material adverse impact on the Company’s results and financial position.

CARBATROL

In August 2003 the Company received a Paragraph IV notice from Nostrum Pharmaceuticals, Inc. (“Nostrum”) alleging that Shire Laboratories Inc’s two US patents for CARBATROL are not infringed by Nostrum’s 300 mg extended release carbamazepine product, which is the subject of a Nostrum pending ANDA. This dose strength represents half of Shire’s current sales in epilepsy. On September 18, 2003 Shire Laboratories Inc. filed suit against Nostrum in the United States District Court for the District of New Jersey for infringement of these two patents to preserve its rights while it continues to review information relating to the Paragraph IV notice. There can be no assurance that the Company will succeed in establishing Nostrum’s liability. If the suit does not result in a judgment against Nostrum, then Nostrum could be in a position to market its extended release carbamazepine product upon FDA final approval of its ANDA. This may have an adverse impact on the Company’s results and financial position.

PHENTERMINE

During the three months ended September 30, 2003, additional lawsuits were filed, primarily in Texas state courts, against Shire US Inc. and other defendants in the litigation generally known as the “fen-phen” litigation. The defendants in the filings made during the three months ended September 30, 2003 included fenfluramine defendant, American Home Products (AHP). The Plaintiffs in these new filings are individuals who elected to opt-out of the national settlement reached earlier with AHP. With the recent filings, the number of active cases against Shire US Inc. is 405.

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(ii) Specific (continued)

ADDERALL TRADE DRESS

In October 2003, in the ADDERALL trade dress litigation with Barr, Shire US Inc., and Barr announced that they have agreed to terminate the litigation pending between them in the United States District Court for the District of New Jersey.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the Company’s consolidated financial statements and related notes appearing elsewhere in this report.

Results of operations for the three months ended September 30, 2003 and 2002

Overview

The results for the three months ended September 30, 2002 have been restated to reflect the disposal of the Company’s OTC business, which has been accounted for as a discontinued operation.

Revenues from continuing operations for the three months ended September 30, 2003 increased by 16% to $289.4 million (2002: $249.7 million).

The Company recorded net income of $64.6 million; an increase of 2% compared to the three months ended September 30, 2002. Diluted earnings per common share were 12.8 cents, or 38.3 cents per ADS, an increase of 3% over the three months ended September 30, 2002.

Total revenues

The Company’s revenues are primarily derived from sales of its pharmaceutical products and royalties earned on products it has out-licensed to third parties to market on its behalf. The following table provides an analysis of the Company’s total revenues by source:

For the three months ended September 30, 2003, product sales increased $32.8 million to $238.3 million (2002: $205.5 million) and represented 82% of total revenues (2002: 82%). The Company estimates that for the three months ended September 30, 2003 product sales revenues were broadly in line with prescription-based demand for the quarter, however, reported sales of ADDERALL, AGRYLIN, PENTASA and PROAMATINE were lower, as predicted, as wholesalers reduced inventories. These movements were offset by the expected ‘back to school’ seasonal stocking of ADDERALL XR during the quarter.

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Product sales (continued)

The following table provides an analysis of the Company’s key product sales:

The following discussion includes references to prescription and market share data for the Company’s key products. The source of this data is IMS, September 2003.

ADDERALL franchise

Total ADDERALL franchise sales in the three months ended September 30, 2003 were $130.3 million, an increase of 35% over the three months ended September 30, 2002 ($96.1 million). Over the same period, total ADDERALL franchise prescriptions grew by approximately 13%, despite the entry of generic versions of ADDERALL last year and new competition within the ADHD market.

Increased competitive activities have had a positive impact on US ADHD market growth, which grew by 23% for the three months ended September 30, 2003. Despite competition, ADHD physicians have continued to recognize the strengths of the ADDERALL brand, which maintained its leading position in the ADHD market with a 25% prescription share during the three months ended September 30, 2003 following a strong performance during the ‘back to school’ season.

Sales of ADDERALL XR in the three months ended September 30, 2003 were $121.3 million, an increase of 55% over the three months ended September 30, 2002 ($78.0 million). ADDERALL XR prescriptions increased 34% between the same periods driven by significant US ADHD market growth and an increased share of that larger market. The difference between reported growth and prescription growth is largely due to the expected seasonal stocking of ADDERALL XR during the quarter. Wholesaler inventories at quarter-end were close to normal levels.

Sales of ADDERALL in the three months ended September 30, 2003 were $9.0 million, down 51% from the three months ended September 30, 2002 ($18.1 million). Overall prescriptions were down approximately 48% between the same periods, reflecting the switch to ADDERALL XR and generic competition.

In August 2003 Shire Laboratories Inc. was granted a new US patent, No. 6,605,300, which covers ADDERALL XR. In September 2003 Shire Laboratories Inc. filed a lawsuit against Barr for infringement of this '300 patent. The lawsuit results from an ANDA filed by Barr for a generic version of ADDERALL XR. There can be no assurance that Shire will be successful in the suit. The sales of any generic versions of ADDERALL XR may have a material adverse impact on the Company’s results and financial position. More information is disclosed in the 2002 Form 10-K/A and in Part II, Item 1 of this filing.

CARBATROL

Sales of CARBATROL in the three months ended September 30, 2003 were $11.6 million, an increase of 6% over 2002 ($10.9 million). This is due to an 8% increase in CARBATROL prescription volumes between the same periods, coupled with the recommencement of promotional efforts. As a result, the Company has grown CARBATROL’s share of the extended release carbamazepine market from 36% in the three months ended September 30, 2002 to 40% in the three months ended September 30, 2003.

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Product sales (continued)

In August 2003 Shire received a Paragraph IV notice that a generic company has filed an ANDA for CARBATROL 300 mg. This dose strength represents half of Shire’s current sales in epilepsy. Shire is currently evaluating this Paragraph IV notice and is still planning to file for a bipolar indication in 2004. If the Company does not bring suit or does not prevail in any such suit then the generic company could be able to market its product upon FDA final approval of its ANDA. The sales of any generic versions of CARBATROL may have an adverse impact on the Company’s results and financial position. More information is disclosed in Part II, Item 1 of this filing.

AGRYLIN

Sales of AGRYLIN in the three months ended September 30, 2003 were $25.9 million, a decrease of 10% over 2002 ($28.7 million). US AGRYLIN prescription volumes were up by 5% between the same periods. The decrease in product sales in the three months ended September 30, 2003 was expected as wholesalers reduced stocking from the three months ended June 30, 2003 levels. The Company anticipates further de-stocking in the fourth quarter of 2003 if wholesalers return to normalized inventory levels by the end of the year.

AGRYLIN remains the only product specifically approved for essential thrombocythaemia in the US. The Company is seeking a paediatric extension for AGRYLIN which would extend its orphan drug exclusivity from March 2004 to September 2004, after which time it is expected to face generic competition. The expected launch of XAGRID in the EU (the trade name of AGRYLIN used in the EU) will continue to drive growth from markets outside the US.

PENTASA

Sales of PENTASA in the three months ended September 30, 2003 were $19.8 million, a decrease of 8% over 2002 ($21.6 million). PENTASA prescription volumes remained unchanged between the same periods. The decrease in product sales in the three months ended September 30, 2003 was expected as wholesalers reduced stocking from the three months ended June 30, 2003 levels. The Company anticipates further de-stocking in the fourth quarter if wholesalers return to normalized inventory levels by the end of the year.

Although its formal indication is for mild to moderately active ulcerative colitis, PENTASA is used mainly in the treatment of Crohn’s disease.

PROAMATINE

Sales of PROAMATINE in the three months ended September 30, 2003 were $8.1 million, a decrease of 44% over 2002 ($14.4 million). PROAMATINE prescription volumes increased by 11% compared to the three months ended September 30, 2002, while product sales revenues decreased by 44% during the quarter. The decrease in product sales in the three months ended September 30, 2003 was expected as wholesalers reduced stocking from the three months ended June 30, 2003 levels. The Company anticipates additional de-stocking in the fourth quarter if wholesalers return to normalized inventory levels by the end of the year.

PROAMATINE’s Orphan Drug Status expired in September 2003. Since then several generic copies have entered the market. The sales of any generic versions of PROAMATINE may have an adverse impact on the Company’s results and financial position.

The following table presents the product sales of the Company by operating segment:

Of the Company’s five reportable operating segments, only three generate revenues from the sale of products.

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Product sales (continued)

Product sales in the US continue to represent a significant percentage of the Company’s worldwide product sales, 80% in the three months ended September 30, 2003 (2002: 81%). The 12% product sales growth in our International market over the same period has been supported by the acquisition of two specialty pharmaceutical products during 2002 in Europe, SOLARAZE and ADEPT.

Royalties

Royalty revenue increased 14% to $49.7 million for the three months ended September 30, 2003 (2002: $43.5 million) as a result of strong sales and positive foreign exchange movements. The following table provides an analysis of Shire’s royalty income:

For the product 3TC, a treatment for HIV infection, Shire receives royalties from GSK on worldwide sales, with the exception of Canada, where a commercialization partnership with GSK exists. The nucleoside analogue market for HIV has continued to exhibit solid growth in recent months. This growth is supported by increases in the number of individuals living with HIV, as well as reduced mortality due to more effective treatment regimens.

Shire also receives royalties from GSK on the worldwide sales of ZEFFIX, a treatment for chronic hepatitis B. The commercialization partnership with GSK operates in the Canadian market.

Other royalties are primarily in respect of REMINYL, a product out-licensed to Johnson & Johnson. REMINYL, which is a treatment for mild to moderately severe dementia of the Alzheimer’s type, is growing well in the Alzheimer’s market. Progress continues for other indications and formulations.

Cost of product sales

For the three months ended September 30, 2003, cost of product sales amounted to 15.9% of product sales (2002: 15.5%).

Research and development (R&D)

R&D expenditure increased to $53.3 million in the three months ended September 30, 2003 from $42.0 million in the three months ended September 30, 2002. Expressed as a percentage of total revenues, R&D expenditure for the quarter was 18% (2002: 17%). Included within the expenditure for the three months ended September 30, 2003 is $6.6 million (2% of total revenues) in respect of costs resulting from the closure of Lead Optimization. For more detail on the closure of Lead Optimization see the ‘recent developments’ section of this filing. In addition, as a result of the strategic decision announced in July 2003 relating to TROXATYL and SPD754, expenditure on these projects has been curtailed.

Selling, general and administrative (SG&A)

SG&A expenses decreased from $82.4 million in the three months ended September 30, 2002 to $82.3 million in the three months ended September 30, 2003. Excluding depreciation and amortization, as a percentage of product sales, these expenses were 35% (2002: 40%).

The decrease, as a percentage of product sales, was the result of heavy investment in the ADDERALL XR brand in three months ended September 30, 2002 during its initial US ‘back to school’ season.

The depreciation charge for the three months ended September 30, 2003 was $9.8 million, an increase of $6.6 million compared to the three months ended September 30, 2002. The depreciation charge for the three months ended September 30, 2003 includes a tangible fixed asset write-down of $5.5 million in respect of the closure of Lead Optimization (2002: $nil). For more detail on the closure of Lead Optimization see the ‘recent developments’ section of this filing. The amortization charge for the three months ended September 30, 2003 was $17.3 million, an increase of $7.9 million compared to the three months ended September 30, 2002. The amortization charge for the three months ended September 30, 2003 includes product write-downs of $11.2 million (2002: $3.0 million). The Company continuously assesses the carrying value of its other intangible assets. This involves consideration of amongst other things, the direction of the business and the marketability of the underlying products. The Company recorded asset impairments of $7.8 million and wrote down $3.4 million of assets during the three months ended September 30, 2003. The asset impairments of $7.8 million resulted from a decline in product prices, which decreased the estimated future cash flows and the $3.4 million resulted from a decision not to renew a product license that was not core to the business.

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Interest income and expense

For the three months ended September 30, 2003, the Company received interest income of $3.7 million (2002: $5.1 million). Interest expense decreased from $2.3 million in the three months ended September 30, 2002 to $2.0 million in the three months ended September 30, 2003, primarily due to the partial buy back of the convertible notes in the second quarter of 2003 at a discount to their par value.

Other (expense)/income, net

For the three months ended September 30, 2003, other expense totalled $0.7 million (2002: other income of $0.2 million). The quarter on quarter change is primarily due to foreign exchange movements.

Taxation

For the three months ended September 30, 2003 income taxes increased $2.1 million to $25.1 million, from $23.0 million for the three months ended September 30, 2002. The effective tax rate was 28% for the three months ended September 30, 2003 (2002: 27%). Deferred tax assets, net of valuation allowances, were $58.4 million at September 30, 2003. Realization is dependent upon generating sufficient taxable income to utilize such assets. Although realization of these assets is not assured, management believe it is more likely than not that the deferred tax assets will be realized.

Equity in (losses)/earnings of equity method investees

During the three months ended September 30, 2003 the Company received $0.9 million, representing a 50% share of earnings from the antiviral commercialization partnership with GSK in Canada (2002: $0.7 million). During the same period, a loss of $0.9 million was incurred representing a 50% share of the losses in Qualia Computing Inc. (2002: $nil).

Closure costs

Included within operating expenses is a charge of $12.1 million in relation to the closure of Lead Optimization. This includes severance payments to employees and the write-off of tangible fixed assets. Further discussion and analysis can be found in the ‘recent developments’ section of this filing.

Discontinued operations

The Company completed the divestment of its OTC portfolio on December 27, 2002. These products were originally acquired in 1999 as a result of the Company’s merger with Roberts Pharmaceutical Corporation.

The OTC business contributed net income of $1.8 million for the three months ended September 30, 2002.

Results of operations for the nine months ended September 30, 2003 and 2002

Overview

The results for the nine months ended September 30, 2002 have been restated to reflect the disposal of the Company’s OTC business, which was accounted for as a discontinued operation.

Revenues from continuing operations for the nine months ended September 30, 2003 increased by 22% to $892.9 million (2002: $734.8 million).

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Overview (continued)

The Company recorded net income of $193.2 million; an increase of 7% compared to the nine months ended September 30, 2002. Diluted earnings per common share were 37.9 cents, or 113.6 cents per ADS, an increase of 8% over the nine months ended September 30, 2002. This result was after charging a cost of $7.2 million for pension top up contributions and contractual termination costs in respect of the former Chief Executive’s departure and a $12.1m charge in respect of the closure of Lead Optimization.

Total revenues

The Company’s revenues are primarily derived from sales of its pharmaceutical products and royalties earned on products it has out-licensed to third parties to market on its behalf. The following table provides an analysis of the Company’s total revenues by source: