Morgan Stanley CEOs Unplugged January 3, 2008 Matthew Emmens, CEO Shire plc
Introduction Strategy on track Excellent third quarter results Strong product sales reflecting good results and successful product launches across all areas of our business Upgrading revenue growth guidance to at least 30% (previous guidance: at least 25%) 2
How the Shire strategy is working 6 launches in past two years: FOSRENOL, ELAPRASE, DAYTRANA, LIALDA, VYVANSE, DYNEPO 100% track record of approvals or approvables in past four years Strong intellectual property for key growth driving products Focus on orphan drugs and specialist products fulfilling unmet needs Global expansion into new markets (South America, Russia, Mexico, Australia, Japan) Revenue growth 2006 = 12% 2007 latest published guidance recently upgraded to at least 30% 3
Strong market exclusivity for growth drivers VYVANSE 2012 2023 LIALDA^ 2010 2020 FOSRENOL 2009 2018 ELAPRASE* 2013 EU 2017 2016 DYNEPO 2012 2012 2000 2005 2010 2015 2020 2025 Patent Life Regulatory Exclusivity ^ Currently difficult generic approval pathway for locally acting drugs *Orphan Drug 4
VYVANSE Launch update
VYVANSE is positioned as a new class of ADHD medication not just a replacement to AXR 6
Key attributes to support VYVANSE as an NCE in a new class The first Pro-drug Stimulant Consistent time to maximum concentration of d-amphetamine from patient to patient Significant efficacy throughout the day, even at 6:00 PM Adverse event profile that is mild to moderate in severity and incidence decreases over time Significantly lower abuse related liking effect than an equivalent oral dose of d-amphetamine 7 5
VYVANSE TRxs are growing and separating from coupon redemptions showing that patients are refilling 45000 40000 Weekly Coupon Redemptions 35000 30000 Weekly RX Data 25000 20000 15000 10000 5000 0 6-Jul 20-Jul 3-Aug 17-Aug 31-Aug 14-Sep 28-Sep 12-Oct 26-Oct 9-Nov 23-Nov 7-Dec Every redeemed coupon is accompanied by an Rx Only one coupon (30 capsules) can be redeemed per patient Over 500,000 Rx written since launch SOURCE: IMS Rx & PSKW 8
VYVANSE patients reported coming from ADDERALL XR and other brands 10,045 patients started on VYVANSE have enrolled and completed baseline surveys At baseline, 84% had used a prescription for ADHD prior to VYVANSE 4% 10% 16% No Prior 11% 6% 14% 39% Adderall XR Concerta Daytrana Focalin XR Strattera Other N = 10,045 Source: VYVANSE New Start Patient Experience program 9
Among patients who switched from ADDERALL XR to VYVANSE, 75% reported further improvement in their most bothersome symptom Change in main symptoms after 40 Days with VYVANSE Worse 4% Better 75% About the Same 21% n=455 Source: VYVANSE New Start Patient Experience program including over 10,000 patients surveyed of whom 39% were formerly ADDERALL XR users. Among these patients, more than half reported that they still experienced the most bothersome symptoms of ADHD. Notes: Most bothersome symptoms reported: First: inattention, second: hyperactivity and third: impulsiveness. 10
8 out of 10 parents reported they intend to continue their child on VYVANSE after switching from ADDERALL XR Intent to Continue VYVANSE After 40 Days 16% 4% Yes Maybe No 80% N=455 Source: VYVANSE New Start Patient Experience program 11
VYVANSE is taking market share from all products in the ADHD category, not just ADDERALL XR 5.0% 4.0% Rx Share Change by ADHD Product Since VYVANSE Launch 5.20% 3.0% 2.0% 1.0% 0.0% 6/22 6/29 7/6 7/13 7/20 7/27 8/3 8/10 8/17 8/24 8/31 9/7 9/14 9/21 9/28 10/510/1210/1910/2611/2 11/911/1611/2311/3012/7-1.0% -2.0% Adderall XR Vyvanse Concerta Strattera Generic MPH Generic AMPH -1.80% SOURCE: IMS NGPS - Universe 12
Back to School is not a one-two week event; It runs through October ADHD Market Weekly TRx volume 2007 Actual through 11/16/07 850,000 800,000 Back to School 750,000 700,000 TRxs 650,000 600,000 550,000 500,000 450,000 Vyvanse Launched July 2007 Thanksgiving Labor Day Holiday Season Wk 1 Wk 4 Wk 7 Wk 10 Wk 13 Wk 16 Wk 19 Wk 22 Wk 25 Wk 28 Wk 31 Wk 34 Wk 37 Wk 40 Wk 43 Wk 46 Wk 49 Wk 52 ADHD - 2007 ADHD - 2006 13
Managed Care update Coverage is progressing as planned: 6-9 month post-launch review period on adding new products to formulary is common Early success 3 of top 6 targeted MCO s have added VYVANSE with preferred status Negotiations with numerous plans are progressing Parity with ADDERALL XR formulary status expected by 18 months 14
VYVANSE Summary VYVANSE rapid launch uptake 5.2% market share as of week 12/7/07 Tracking in line with the industry s best successor molecule launches Patients starting on coupons are refilling Rxs Back to school is not a one-two week event, but lasts a few months Physicians and Patients are providing very positive feedback on their clinical experience with VYVANSE Managed Care coverage is progressing as planned VYVANSE has tremendous growth potential beyond 2009 Very strong IP Europe Potential for other indications SOURCE: IMS NGPS as at November 16, 2007 15
LIALDA Launch update
LIALDA s growth continues with 7.5% monthly TRx share and 9.7% NRx monthly share in November NRx Volume TRx Volume NRx Share TRx Share Rx Volume 25,000 20,000 15,000 10,000 5,000 0 March April May June July Aug Sep Oct Nov 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% NRx Volume 722 3,143 5,340 5,896 6,268 7,689 7,594 8,744 8,571 TRx Volume 725 3,427 7,020 9,258 11,583 14,452 15,429 18,575 19,201 NRx Share 0.8% 3.7% 5.8% 6.6% 6.9% 8.1% 9.0% 9.3% 9.70% TRx Share 0.3% 1.4% 2.7% 3.6% 4.4% 5.4% 6.3% 6.9% 7.50% Source: IMS Monthly NGPS November 2007 17
Total Shire GI monthly share reached 23.8% of 5-ASA Market Shire GI Portfolio Oral 5-ASA Monthly TRx Share 25.0% Pentasa Lialda Shire Portfolio 23.8% 20.0% 15.0% 16.9% 10.0% 5.0% 6.9% 0.0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Source: IMS Monthly NPA (NGPS) Restated Feb-June 2007 Data Oral 5-ASA Market Definition: Lialda, Pentasa, Asacol, Colazal and Dipentum 18
LIALDA s prescriptions are being generated from both new patients and conversions from other brands LIALDA June 2007 Patient Source of Business New Patients, 26% Switches, 23% Add On, 2% Restart, 2% Continuing, 48% Source: Verispan Patient Parameters Source of Business, June 2007 19
Recent events
Expansion of Human Genetic Pipeline through inlicensing agreement with Amicus Therapeutics Inc. Acquisition of ex-us rights for: AMIGAL, Fabry disease (Phase 2) PLICERA, Gaucher disease (Phase 2) AT2220, Pompe disease (Phase 1) Financial terms of the license are geared to the successful development and commercialization of the products $50m upfront and up to $390m of development and sales-based milestones and; Royalties on net sales of the products, with tiered, double digit royalty rates Oral therapies based on novel chaperone technology for Lysosomal Storage Disorders: This technology has been applied to various defective enzymes as a result of improper folding. Pharmacological chaperone technology uses small molecules that selectively bind to and stabilize proteins in cells. This leads to improved protein folding into its proper threedimensional shape. The re-folded enzyme can then be trafficked to the specific location in the cell to perform its intended biological function. 21
Concluding Remarks 2007 guidance upgraded as revenue growth accelerates revenue growth to be at least 30% for 2007 (previous guidance: at least 25%) Excellent Q3 results Successful ongoing launches Continuing to demonstrate our ability to execute VYVANSE enthusiastic response from physicians and caregivers ELAPRASE rapid uptake in US and EU LIALDA growth continues 9.7% share of NRx as of week 12/7/07 FOSRENOL strong start in Europe DYNEPO launched in Q1 2007, good reception Good progress in strengthening our R&D pipeline In-licensing agreement with Amicus Therapeutics Inc. 3 oral treatments for: Gaucher, Fabry and Pompe disease JUVISTA license agreement with Renovo Positive Phase 2 clinical trial results SOURCE: IMS NGPS as at November 2, 2007 22
Additional information and Backup slides
Total Revenues Q3 07 Q3 06 Growth $m $m % Product Sales 543.1 386.2 41% Royalties 61.9 60.4 Other Revenues 3.7 2.8 Total Revenues 608.7 449.4 35% Q3 07 Q3 06 Growth $m $m % Product Sales 77% 418.6 359.8 16% (excl. new launches) ELAPRASE 55.1 4.3 LIALDA 16.3 0.0 FOSRENOL US 16.3 11.4 FOSRENOL EU 23% 12.4 0.8 VYVANSE 10.6 0.0 DAYTRANA 9.4 9.9 DYNEPO 4.4 0.0 Product Sales 100% 543.1 386.2 41% Product Sales from New Launches (%) % 25 20 15 10 5 0 23 19 13 Q1 Q2 Q3 2007 24
Major Product Sales Q3 07 Q3 06 Sales US RX* $m $m Growth Growth ADDERALL XR 249.0 207.6 20% 3% VYVANSE 10.6 - n/a n/a DAYTRANA 9.4 9.9-5% 64% PENTASA 43.7 36.9 18% 2% LIALDA 16.3 - n/a n/a ELAPRASE 55.1 4.3 n/m n/a REPLAGAL 40.7 32.4 26% n/a FOSRENOL 28.7 12.2 135% 0% CARBATROL 19.3 20.4-5% -5% XAGRID 16.8 13.3 26% n/a * Source: IMS Data 25
VYVANSE Gross to Net Sales (Q3 2007) Q3 TRx ('000)* $m Notes Sales Demand 217 20.9 Price per TRx = 28.3 (tablets per TRx) x $3.41 (price per tablet) Restocking 10.2 Underlying gross sales 31.1 100% Sales coupons (12.3) 39% Wholesaler discounts & rebates (8.2) 27% 66% Q2 deferred revenue sales 55.9 Add Q3 deferred sales 1.9 Less Q3 sales demand (20.9) Deferred revenue at 9/30/07 36.9 Net Sales 10.6 34% Sales deductions will trend towards a long term rate of approximately 28%. *per IMS 26
DAYTRANA Gross to Net Sales (Q3 2007) Q3 TRx ('000)* $m Notes Sales Demand 183 21.7 Price per TRx = 29.8 (patches per TRx) x $3.98 (price per patch) Destocking (0.1) Underlying gross sales 21.6 100% Sales coupons (3.9) 18% Returns (4.0) 18% 56% Coupon expense to moderate at 10% in 2008. Voluntary market withdrawal. This is a one off charge for Q3 Wholesaler discounts and rebates (4.3) 20% Net Sales 9.4 44% *per IMS Sales deductions are expected to trend towards a long term rate of approximately 25%. 27
Royalties Q3 07 Q3 06 Growth $m $m (%) 3TC 36.7 36.5 1% * ZEFFIX 10.2 9.3 10% ** Other *** 15.0 14.6 3% Total 61.9 60.4 2% *Foreign exchange movements have contributed +4% to reported growth **Foreign exchange movements have contributed +6% to reported growth ***Includes REMINYL/RAZADYNE 28
Financial Ratios (% of net product sales) (on a non-gaap basis) Q3 07 Q3 06 YTD 07 FY 06 COGS 14% 14% 14% 13% Gross margin 86% 86% 86% 87% R&D 19% 19% 18% 20% SG&A 46% 54% 47% 52% Operating EBITDA (1) 21% 14% 22% 16% Operating EBITDA margin (% Total Revenue) 29% 26% 31% 28% (1) Excluding royalties This slide contains non GAAP financial measures. They exclude intangible asset amortization in respect of intellectual property charges, the accounting impact of share-based compensation and the effect of certain cash and non-cash items, both recurring and non-recurring, that Shire's management believes are not related to the core performance of Shire s business. 29
Net Income/EPS Q3 07 Q3 06 Growth YTD 07 Net income ($m) (%) - GAAP 34.7 87.2 - Adjustments 91.5 (1.5) - Non GAAP (1) 126.2 (2) 85.7 47% EPS - ADS (diluted) - GAAP 18.9c 51.3c - Non GAAP (1) 66.3c (2) 50.4c 32% 200.4c (1) These are non GAAP financial measures. They exclude intangible asset amortization charges, the accounting impact of share-based compensation and the effect of certain cash and non-cash items, both recurring and non-recurring, that Shire's management believes are not related to the core performance of Shire s business. (2) The Q3 Non GAAP tax rate was 15% (see slide 21) compared to a guidance rate of 26%. This low tax rate was primarily due to a higher level of tax deductible expenditure than forecast in high-tax territories (principally the US) and reductions in specific tax liabilities relating to tax reviews and tax filings which have now been finalised. The impact of this credit was to increase Non GAAP income by approximately $15m and Non GAAP earnings per ADS by approximately 7c. 30
EPS Reconciliation Q3 07 Q3 07 Q3 06 Q3 06 $m cents/ads $m cents/ads Net income for diluted EPS (ADS) 34.7 18.9c 87.2 51.3c Cost of product sales fair value adjustment - - 6.7 3.9c In-licensing payments 75.0 39.0c 30.5 18.3c Gain on disposal of product rights (7.1) (3.6c) (63.0) (37.5c) Legal settlement provision 27.0 13.8c - - Intangible asset amortization 31.1 15.9c 14.6 8.7c SFAS 123R effect 11.7 6.0c 9.1 5.4c Taxes on above adjustments (46.2) (23.7c) 0.6 0.3c Non GAAP net income / EPS (ADS) 126.2 66.3c 85.7 50.4c 31
Cash flow Q3 2007 $ in millions Cash generation + 200-125 Renovo -30 Fixed asset purchases -26 Asset Sales Net tax/interest -61 Product Milestones +8 +1 Other Financing Cash at 30/6/07 638 Cash outflow Q3 07 (33) Cash at 30/9/07 (1) (2) 605 Convertible debt (1,100) Net debt at 30/9/07 (495) (1) Shire s balance of cash and cash equivalents at 30 Sept 2007 includes $42m of restricted cash and is available to finance payments due to TKT dissenting shareholders (provision at 30 Sept 2007 of $473m) (2) Shire has a revolving credit facility of $1.2bn which was undrawn at 30 Sept 2007 Net cash outflow for Q3 2007 : -33 32
Updated FY 2007 Guidance Q3 07 YTD 07 Updated Q2 Actual Actual FY Guidance FY Guidance Revenue growth 35% 32% > 30% > 25% R&D - GAAP ($m) 180.7 363.7 Less SFAS 123R (3.3) (8.8) Noven - (5.9) Renovo (75.0) (75.0) R&D - Non GAAP ($m) 102.4 274.0 $365m to $375m $340m to $360m SG&A - GAAP ($m) 286.7 753.5 Less SFAS 123R (7.5) (22.7) Legal settlement provision (27.0) (27.0) SG&A - Non GAAP ($m) 252.2 703.8 $955m to $975m $930m to $960m 33
Updated FY 2007 Guidance (cont.) Q3 07 YTD 07 Updated Q2 Actual Actual FY Guidance FY Guidance D&A - GAAP ($m) 46.3 107.4 Less amortization (31.1) (64.0) Up 70% Up 80% Depn - Non GAAP ($m) 15.2 43.4 Up 30% Up 20% Tax charge (credit) - US GAAP (23.2) 43.9 Less non GAAP adjustments 46.2 63.5 Non GAAP Charge 23.0 107.4 Non GAAP-Income before tax 148.7 477.4 Effective Tax rate 15% 22% Low 20%'s 26% 34
VYVANSE demonstrated strong efficacy in Adults with ADHD in a very large Phase III study The study was a double-blind, placebo-controlled, 4-week study with forced dose escalation in 420 adult subjects aged 18 to 55 years with moderate to severe symptomatic ADHD All VYVANSE doses (30, 50, or 70 mg/d) were highly effective compared with placebo, as shown by ADHD-RS-IV (the primary endpoint) Significant improvements in ADHD symptoms were observed within the first week of treatment Adverse event profile was similar to that seen with other ADHD trials in adults. A/Es were mild to moderate in severity and incidence decreased over time VYVANSE did not worsen sleep quality 35 5