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Shire Pharmaceuticals Group plc Shire Pharmaceuticals Group plc Annual review and summary financial statement 2001 Shire is proud of the part it plays in developing products which help people live their lives to the full. Shire, an international specialty pharmaceutical company, has a strategic focus on three therapeutic areas: central nervous system disorders, oncology and anti-infectives. It also has two platform technologies: advanced drug delivery and biologics. Our global sales and marketing infrastructure has an established product portfolio. Shire has its own marketing subsidiaries in the US, Canada, the UK and the Republic of Ireland, France, Germany, Italy and Spain, with plans to add Japan by 2004. We cover other pharmaceutical markets indirectly through distributors. Our interests in the Pacific Rim are managed through our regional office in Singapore. Shire has a risk-balanced R&D portfolio with clear focus on future product needs. Our global research and development expertise supported by in-licensing has, to date, successfully provided 20 marketed products, while the current pipeline of 24 projects includes 12 that are either in or post Phase II. To enhance the potential for future growth, Shire follows two approaches, firstly, to start projects in-house through research and advanced drug delivery and secondly to in-license projects and products on reasonable commercial terms, and then to develop and launch them. This broad approach strengthens Shire’s strategy and takes account of ongoing changes that are taking place in the industry. During the past seven years, we have completed six mergers and acquisitions and whereas we continue to evaluate M&A opportunities that offer a good strategic fit and add shareholder value, our priority is in-licensing more projects and products. Contents 2 Shire: 2001 at a glance 30 Five-year review 44 Consolidated statements 73 Notes to the summary 4 Chairman’s statement 31 The remuneration report of comprehensive income/ financial statement 5 Chief Executive’s review 38 Corporate governance (losses) 74 Summary of significant Operating review: statements 44 Consolidated statements differences between 6 Central nervous system 40 Statement of directors’ of cash flows US GAAP followed by 10 Anti-infectives responsibilities 46 Notes to the financial the Group and UK GAAP 14 Oncology 40 Report of Independent statements 75 Shire head office and main 16 Additional Shire portfolio Public Auditors Summary financial statement: operating locations 18 Advanced drug delivery 41 Consolidated balance sheets 68 Auditors’ statement 76 Shareholder information 20 Biologics 42 Consolidated statements 69 Directors’ report 77 Glossary 22 Corporate responsibility of operations 70 Consolidated profit and 24 Shire and BioChem 43 Consolidated statements loss account 25 Financial review of changes in shareholders’ 71 Consolidated balance sheet 28 Board of Directors and equity 72 Consolidated cash flow Executive Committee statement Shire Pharmaceuticals Group plc 1 Shire: 2001 at a glance Financial highlights After stock option compensation Before stock option compensation and one-time exceptional charges and one-time exceptional charges 2001* 2000† % 2001* 2000† % $m $m change $m $m change Revenues 877.6 671.1 +31 877.6 671.1 +31 Operating income* 95.5 151.4 –38 279.3 200.2 +39 Income before tax* 111.6 259.4 –58 295.4 204.2 +45 EPS (diluted)* – ordinary shares 7.7c 42.8c –82 43.9c 31.6c +39 – ADS 23.0c 128.4c –82 131.6c 94.9c +39 *2001 figures include the negative impact of a legal settlement of $7.7 million (3.4c per ADS) †2000 figures include the positive impact of a legal settlement of $8.0 million (3.7c per ADS) Average USD:GBP exchange rate – 2001: 1.44, 2000: 1.51 Business highlights ADDERALL XR™ BioChem integration Ten-year government contract ADDERALL XR was launched in the US On 11 May 2001 Shire completed its In October 2001, Shire Biologics signed on 5 November 2001. ADDERALL XR is merger with BioChem Pharma Inc., a ten-year contract with the Government designed to provide an all day treatment a leading Canadian pharmaceutical of Canada to assure a state of readiness with one morning dose. This is considered company. Shire has grown both organically in case of an influenza pandemic to be an increasingly important benefit for and through mergers and acquisitions; it (worldwide epidemic) and to provide children with ADHD and their caregivers, has completed six mergers in seven years. influenza vaccine for all Canadian both at home and at school. On 8 April citizens in such an event. The value of the 2002, ADDERALL XR had captured 16.5%* agreement may exceed CAN$300 million. of the total ADHD US market share. More than 20 million prescriptions have been written for the ADDERALL brand to date. Biologics FOZNOL™** Corporate responsibility Shire Biologics has a global mandate to Shire submitted its first filing for FOZNOL, Our approach to corporate social apply the most innovative science and which is likely to be renamed FOSRENOL, responsibility is intended to provide technologies to discover, develop, produce in Europe on 14 March 2001. It is a framework for managing risk and and market novel human vaccines and anticipated that US filing will occur maintaining the Company’s position as biologics. It is a significant player in what during the second quarter 2002. a good corporate citizen, as well as is being called the “golden age” of FOSRENOL is being developed for the creating a set of goals that will facilitate vaccines. treatment of hyperphosphataemia in continuous improvement throughout patients with chronic kidney failure. If the organisation. approved it will play an important role in building Shire’s international specialty marketing presence. *Source: NDC health data **For the purposes of this document, FOSRENOL will be referred to as FOZNOL in the financial section. 2 Shire Pharmaceuticals Group plc Development pipeline The table below lists our key products under development by therapeutic area indicating their most advanced development status for any market. Indication Product Descriptor Preclinical Phase I Phase II Phase III Registration Marketed CNS Analgesia DIRAME™ Propiram fumarate Bipolar disorder SPD 417 Carbamazepine (CARBATROLTM) ADHD SPD 420 AMPAKINE TM (Cortex CX516) non-scheduled compound ADHD SPD 503 Non-scheduled compound Epilepsy SPD 421 DP-VPA (D-Pharm ) Parkinson’s disease SPD 473 BTS-7439 (DevCo) Parkinson’s disease SPD 474 Class of compounds for Parkinson’s disease Parkinson’s disease SPD 451 Dopamine D1 agonist programme Epilepsy SPD 452 Novel formulation of an established anti-epileptic drug Epilepsy SPD 453 Novel formulation of an established anti-epileptic drug Oncology Thrombocythaemia AGRYLIN™ Anagrelide, XAGRID™ (Europe) Leukaemia TROXATYL™ Troxacitabine Pancreatic cancer TROXATYL™ Troxacitabine Oncology SPD 427 Established oncology product Anti-infectives Influenza SPD 707 Influenza vaccine (FLUVIRAL S/F TM) – traditional egg-derived vaccine for markets outside CanadaUS Canada Influenza SPD 701 Injectable and nasal influenza – cell culture Meningitis, septicaemia SPD 704 Neisseria meningitidis vaccine Opportunistic infections SPD 705 Pseudomonas aeruginosa vaccine HIV/AIDS SPD 754 Previously known as BCH-10618 HIV/AIDS SPD 756 Previously known as BCH-13520 Pneumonia, meningitis, SPD 703 Streptococcus pneumoniae otitis media vaccine Other disease areas Hyperphosphataemia FOSRENOL™ Project lambda, lanthanum carbonate, (FOZNOL™) Ulcerative colitis PENTASA™ 500mg Mesalamine (mesalazine) Ulcerative colitis COLAZIDE™ Balsalazide Shire Pharmaceuticals Group plc 3 Chairman’s statement 2001 was a landmark year for Shire. The completion of the and Mr Gérard Veilleux, joined Shire’s Board as non-executive merger with BioChem Pharma Inc. (BioChem) increased the directors. size and capability of the Shire Group and positioned it well for future development and growth. Shire concluded 2001 as People the third largest pharmaceutical company in the UK and one As the third largest pharmaceutical group in the UK, Shire of the fastest growing specialty companies in the world. employed 1,677 employees worldwide at 31 December 2001. The Group believes in the importance of hiring well-qualified, Mergers and acquisitions experienced staff with proven records of success. The Group’s Shire has grown both organically and through acquisitions, with future success depends upon its ability to attract and retain such six completed mergers and acquisitions within the past seven individuals. Shire will continue to apply and develop a strong years. On 11 May 2001, Shire announced that it had completed focus on staff development at all levels. the merger with BioChem, a Canadian pharmaceutical company. Future prospects 2001 results The launch of ADDERALL XR is progressing well. The recent 2001 concluded with strong financial results and the successful approval of a generic competitor emphasises the need for integration of BioChem. Group revenues and income before tax marketing and promotional expenditure to maintain a rapid rate (pre stock option compensation and exceptional charges) of conversion from ADDERALL and defend the overall ADHD increased by 31% and 45% respectively. Diluted earnings per franchise. In the medium and long term, management believes share were 43.9 cents per ordinary share or 131.6 cents per ADS. that ADDERALL XR is well positioned to establish itself as a leading once-daily ADHD treatment. Much of the impressive growth was driven by our strong product portfolio, which includes ADDERALL XR, ADDERALL™, FOZNOL is anticipated to gain its first European regulatory AGRYLIN™, PENTASA™, PROAMATINE™ and CARBATROL™. approval at the end of Q2 2002, and US regulatory approval Additional growth arose from the launch of REMINYL™* in the during 2003. US, and the continued roll-out of ZEFFIX™. FOZNOL will be the first product developed and marketed by Shire which will be sold in key countries worldwide. To ensure Operations a successful launch of FOZNOL we will incur pre and post As a result of the merger, Shire added two major development launch expenditure during the second half of 2002 and 2003. capabilities in lead optimisation and Biologics.