shire pharmaceuticals group plcinvestors.shire.com/~/media/files/s/shire-ir/annual... · 2015. 2....

Shire Pharmaceuticals Group plcAnnual review and summary financial statement 1999

O2@@@@@@@@6KO2@@@@@@@@@@@@@@@6X?

?O2@@@@@@@@@@@@@@@@@@@@@@@@@@@)XO2@@@@@@@@@@@@@@@@@@@?g?I4@@1f@@@@@@@@@@@? @@@@@@@@@@@@

W2@@@@@@@@@@@@@@@@@@@@@@6Xh@@f@@@@@@@@@@@? @@@@@@@@@@@@?W&@@@@@@@@@@@@@@@@@@@@@@@@)X?g3@f@@@@@@@@@@@? @@@@@@@@@@@@W&@@@@@@@@@@@@@@@@@@@@@@@@@@)XgN@f@@@@@@@@@@@? @@@@@@@@@@@@

?W&@@@@@@@@@@@@@@@@@@@@@@@@@@@@)X?f?@f@@@@@@@@@@@? @@@@@@@@@@@@W&@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@1?f?@f@@@@@@@@@@@? @@@@@@@@@@@@7@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@Lf?@f@@@@@@@@@@@? @@@@@@@@@@@@

?J@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@1he@@@@@@@@@@@? @@@@@@@@@@@@O&@@@@@@@@@@@@@0M?eI4@@@@@@@@@@@@@@he@@@@@@@@@@@?

O2@@@@@@@@@@@@@@hI'@@@@@@@@@@@@L?h@@@@@@@@@@@?W2@@@@@@@@@@@@@@@5h?N@@@@@@@@@@@@1?h@@@@@@@@@@@?f?O2@@@6K O2@@@@6K

?O&@@@@@@@@@@@@@@@@?he3@@@@@@@@@@@@?h@@@@@@@@@@@?eO2@@@@@@@@@@6X @@@@@@@@@@@@h@@@@@@@@@@@?eO2@@@@@@@?hfO2@@@@@@@@@@@@6Khg?W2@@@@@@@@@@@@@@@@@@)X?hV4@@@@@@@@@@@?h@@@@@@@@@@@?W2@@@@@@@@@@@@@)K?hf@@@@@@@@@@@@h@@@@@@@@@@@?W2@@@@@@@@@?heO2@@@@@@@@@@@@@@@@6XhfW&@@@@(M?@@@@@@@@@@@@@)K @@@@@@@@@@@W&@@@@@@@@@@@@@@@@@hf@@@@@@@@@@@@h@@@@@@@@@@@W&@@@@@@@@@@?hW2@@@@@@@@@@@@@@@@@@@)X?he

?O&@@@@(Y??3@@@@@@@@@@@@@@@6K? @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@L?he@@@@@@@@@@@@h@@@@@@@@@@@@@@@@@@@@@@@?g?W&@@@@@@@@@@@@@@@@@@@@@)Xhe?W2@@@@@0Ye?N@@@@@@@@@@@@@@@@@@@6K? @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@1?he@@@@@@@@@@@@h@@@@@@@@@@@@@@@@@@@@@@@?gW&@@@@@@@@@@@@@@@@@@@@@@@)X?hW&@@@@(Mg@@@@@@@@@@@@@@@@@@@@@@6K @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@Lhe@@@@@@@@@@@@h@@@@@@@@@@@@@@@@@@@@@@@?f?W&@@@@@@@@@@@@@@@@@@@@@@@@@)Xh

?W&@@@@(Y?g3@@@@@@@@@@@@@@@@@@@@@@@@@6K @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@1he@@@@@@@@@@@@h@@@@@@@@@@@@@@@@@@@@@@@?f?7@@@@@@@@@@@@@@@@@@@@@@@@@@@1hW&@@@@0YhV'@@@@@@@@@@@@@@@@@@@@@@@@@@6K @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@@@@@@@@@@@@@?fJ@@@@@@@@@@@@0M?I4@@@@@@@@@@@@L?g

?O&@@@(Mhe?V'@@@@@@@@@@@@@@@@@@@@@@@@@@@6Xhf@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@@@@@@@@@@@@@?f7@@@@@@@@@@(M?fI'@@@@@@@@@@1?g?W2@@@@(Y?hfV'@@@@@@@@@@@@@@@@@@@@@@@@@@@)X?he@@@@@@@@@@@@@(M?eI'@@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@@@@@@@0?4@@@?e?J@@@@@@@@@@@Hg?V'@@@@@@@@@@Lg?7@@@@(Y ?V4@@@@@@@@@@@@@@@@@@@@@@@@@@@)Xhe@@@@@@@@@@@@(Yf?V'@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@@@@0Mhe?7@@@@@@@@@@5?hN@@@@@@@@@@1gJ@@@@(Y? ?I4@@@@@@@@@@@@@@@@@@@@@@@@@@)X?h@@@@@@@@@@@@H?gN@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@@(Mhf?@@@@@@@@@@@H?h?@@@@@@@@@@@g

?W&@@@(Y ?I4@@@@@@@@@@@@@@@@@@@@@@@@@1?h@@@@@@@@@@@@h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@@H?hf?@@@@@@@@@@@he?@@@@@@@@@@@gW&@@@@H? I4@@@@@@@@@@@@@@@@@@@@@@@Lh@@@@@@@@@@@5h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@@ ?@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@g

?W&@@@@5 ?I4@@@@@@@@@@@@@@@@@@@@1h@@@@@@@@@@@Hh?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@5 ?@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@g?7@@@@(Y ?I4@@@@@@@@@@@@@@@@@h@@@@@@@@@@@?h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@H ?@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@gJ@@@@(Y? I4@@@@@@@@@@@@@@h@@@@@@@@@@@?h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@? ?@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@g

?W&@@@@H @@@@@@@@@@@@hfI'@@@@@@@@@@@@h@@@@@@@@@@@?h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@? ?@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@g?7@@@@5? @@@@@@@@@@@@hf?N@@@@@@@@@@@@h@@@@@@@@@@@?h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@? ?@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@g?@@@@@H? @@@@@@@@@@@@L?hf@@@@@@@@@@@@h@@@@@@@@@@@?h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@? ?@@@@@@@@@@@J@@@@@ @@@@@@@@@@@@)Xhe?J@@@@@@@@@@@@h@@@@@@@@@@@?h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@? ?@@@@@@@@@@@7@@@@5 3@@@@@@@@@@@@)X?hW&@@@@@@@@@@@@h@@@@@@@@@@@?h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@? ?@@@@@@@@@@@L?@@@@@H N@@@@@@@@@@@@@)Kg?O&@@@@@@@@@@@@5h@@@@@@@@@@@?h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@? ?3@@@@@@@@@@)XhW2@@@@@@@@@@g@@@@@? ?@@@@@@@@@@@@@@@@@6KO2@@@@@@@@@@@@@@@Hh@@@@@@@@@@@?h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@? ?N@@@@@@@@@@@)X?f?W&@@@@@@@@@@5g@@@@@? ?3@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@?h@@@@@@@@@@@?h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@? 3@@@@@@@@@@@)KfO&@@@@@@@@@@@Hg@@@@@L ?V'@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@5?h@@@@@@@@@@@?h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@? N@@@@@@@@@@@@@@@@@@@@@@@@@@@@@5?g@@@@@)X? N@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@(Y?h@@@@@@@@@@@?h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@? ?3@@@@@@@@@@@@@@@@@@@@@@@@@@@@H?g@@@@@@)X ?3@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@(Yhe@@@@@@@@@@@?h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@? ?V'@@@@@@@@@@@@@@@@@@@@@@@@@@5h3@@@@@@)K?gO2@(g?V4@@@@@@@@@@@@@@@@@@@@@@@@@@@@(Y?he@@@@@@@@@@@?h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@? V'@@@@@@@@@@@@@@@@@@@@@@@@(YhV'@@@@@@@@@@@@@@@@0Yh?I'@@@@@@@@@@@@@@@@@@@@@@@@@0Yhf@@@@@@@@@@@?h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@? ?V4@@@@@@@@@@@@@@@@@@@@@@0Y?h?V4@@@@@@@@@@@@0M?hfV4@@@@@@@@@@@@@@@@@@@@@@0M @@@@@@@@@@@?h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@? ?I'@@@@@@@@@@@@@@@@@@0M?he

I4@@@@@0M? I4@@@@@@@@@@@@@@@@@@0M @@@@@@@@@@@?h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@? V4@@@@@@@@@@@@@@@0M?hf?I4@@@@@@@@@@@@0M? ?I4@@@@@@@@@@0M?hg

8574 shire99 Report 12/4/00 3:35 pm

Contents

1 Strategic development2 Group at a glance5 Chairman’s review7 Chief Executive’s review8 Operating review

– products currently marketed10 Operating review

– projects under development12 Financial review16 Board of Directors18 Five year review19 Report of the Remuneration Committee28 Corporate governance30 Statement of Directors’ responsibilities31 Index to the consolidated

financial statements32 Report of the Auditors on the US

GAAP financial statements33 Consolidated balance sheets34 Consolidated statements of income35 Consolidated statements of changes

in shareholders’ equity35 Consolidated statements of

comprehensive income36 Consolidated statements

of cash flows38 Notes to the consolidated

financial statements57 Index to the summary

financial statement65 Reconciliation from US GAAP

to UK GAAP66 Shareholders’ information

Glossary

8574 shire99 Report 12/4/00 3:35 pm

1 Shire Pharmaceuticals Group plc

Shire is an international specialty pharmaceuticalcompany with a strategic focus on four therapeutic areas:central nervous system disorders, metabolic diseases,oncology and gastroenterology.

The Group has a global sales and marketing infrastructurewith a broad portfolio of products targeting the US,Canada, UK, Republic of Ireland, France, Germany andItaly, with plans to add other key markets in due course.

Shire’s global search and development expertise hasalready provided three marketed products, whilst thecurrent pipeline of 13 projects includes one project in registration and nine that are post Phase II.

Shire is actively searching to acquire further marketedproducts and development projects to enhance the potential for future growth, both organically and by acquisition.

Shire Pharmaceuticals Group plc

8574 shire99 Report 12/4/00 3:35 pm

Group at a glance

Key marketed products

Principal Marketed by/Products Indication(s) Owner/Licensor Relevant Territory

Treatments for central Adderall ADHD Shire Shire/USnervous system disorders DextroStat ADHD Shire Shire/US

Carbatrol Epilepsy Shire Shire/US

Treatments for metabolic diseases Calcichew range Osteoporosis Nycomed Shire/UK adjunct and Ireland

Treatments for oncology Agrylin Elevated blood Roberts Shire/US platelets and Canada

Treatments for gastrointestinal Pentasa Ulcerative colitis Ferring Shire/USdisorders

Other ProAmatine Low blood Nycomed Shire/US pressure and Canada


8574 shire99 Report 12/4/00 3:35 pm

Development pipeline

Product Indication Pre-clinical Phase I Phase II Phase III Registration Marketed

Central Nervous System

Reminyl (galantamine) Alzheimer’s disease

Dirame Analgesia

SLI 381 ADHD

SLI 503 ADHD

SPD 417 Bipolar disorder

SPD 421 Epilepsy

SPD 418 Epilepsy

SPD 502 Stroke

Metabolic disease

Lambda Hyperphosphataemia

Oncology

SPD 424 Prostate cancer

Agrylin Thrombocythaemia

Gastroenterology

Pentasa 500mg Ulcerative colitis

Emitasol Diabetic gastroparesis


8574 shire99 Report 12/4/00 3:35 pm


Our business is focused on four therapeuticareas: central nervous system disorders(CNS), metabolic diseases, oncology andgastroenterology. However, there is asignificant emphasis on CNS disorders,with 44 per cent of our revenues in 1999 and 8 of our 13 projects being for such disorders.

Reminyl (galantamine) is being developedfor the treatment of Alzheimer’s disease; a condition that initially results in memoryloss, confusion and disorientation. This is followed in time by intellectual and personality changes, emotionaldisintegration and death.

8574 shire99 Report 12/4/00 3:35 pm

Chairman’s review


The merger with Roberts has brought together two of the fastestgrowing publicly traded specialtypharmaceutical companies.

The combined company remainsfocused and dynamic. We are well placed to continue the growth of the company going forward.

M&A activitiesThe merger in December between Shire andRoberts Pharmaceutical Corporation broughttogether two of the fastest growing publiclytraded specialty pharmaceutical companiesin the world. This followed the acquisition of the European subsidiaries of FuiszInternational Ltd in France, Germany andItaly which completed in October/November1999. The Group now covers 6 of the 8 major pharmaceutical markets of theworld and has a much broader and deeper product and project portfolio.

Financial reportingApproximately 65 per cent of the company’sshareholders now reside in the US and 81per cent of our revenues are derived fromthat market. On the basis of this and variousother factors we have taken the decision tochange how we report our results. The nonstatutory accounts in this report have beenprepared in accordance with US GenerallyAccepted Accounting Principles (GAAP) inUS$ and are presented as a ‘pooling ofinterests,’ as if the merger had occurred atthe beginning of the periods described.Previous accounts have been reported in UK GAAP in sterling.

Results Shire again surpassed average industrygrowth rates. Operating profit (pre exceptionalcharges) was up 154 per cent at $59.2 million,based on Group revenues for the year of$401.5 million. Full details of the one time,primarily merger related charges are describedin the Financial review on pages 12 to 15.

OperationsSignificant growth was achieved for all keyproducts and ranged from 16 per cent for theolder Calcichew range to 201 per cent forCarbatrol, although this growth was basedon a launch in June 1998. Adderall, whichaccounted for 37 per cent of product sales,achieved 92 per cent growth versus 1998.

The lead development project, Reminyl, was submitted for regulatory approval inmost of the major markets of the worldduring 1999, including Europe and the US.The first approval for Reminyl was received from Sweden in March 2000. Lambda(lanthanum carbonate) entered Phase III in the US in July 1999.

Board During 1999, there were significant changesto the Shire Board. In March, Dr BernardCanavan was appointed to the Board as a

non-executive Director. We are very pleasedto welcome Dr Canavan and appreciate theadvice he has contributed already duringthe year. In May 1999, Dr Henry Simonresigned as Chairman. We would like tothank Dr Simon for his significant contributionto Shire since he joined in 1987. FollowingDr Simon’s resignation, I was pleased toaccept the invitation to succeed as non-executive Chairman. In December,Stephen Stamp, the Group Finance Directorresigned from the Board and was replacedby Angus Russell. Mr Stamp joined Shire in1994 and was instrumental in the executionof the UK flotation, US IPO and the variousM&A activities during his tenure. We wouldlike to thank him for his significant contributionto the company. We would like to welcomeMr Russell and the experience he will bringto the Board, particularly in the areas ofcorporate finance, mergers and acquisitions,and US and UK financial reporting.

In December, the former President & CEO of Roberts, Mr John Spitznagel, became anon-executive Director of Shire, along withDr Robert Vukovich, Dr Zola Horovitz, RonaldNordmann and Joseph Smith. In February2000, Dr Vukovich resigned his Board positionto pursue other business interests.

OutlookThe broadly based product portfolio isgrowing strongly, whilst the R&D pipelinehas a significant number of projects postPhase II, with development progressing well.Plans are in place to start launching Reminylfollowing further successful approvals, in thefourth quarter of 2000. The combined workforce remains focused and dynamic and webelieve we are well placed to continue thegrowth of the company going forward.

Notice of Annual General MeetingFollowing the merger with Roberts, Shire isnow subject to additional US Securities andExchange Commission rules. The Boardhas decided therefore, to prepare the noticeconvening the Company’s AGM separatelyfrom the annual review. The final notice willbe sent to all shareholders in due course.

Dr James CavanaughChairman

Change 1999* 1998 %

Revenues ($m) 401.5 309.0 +30Operating profit ($m) 59.2 23.3 +154Profit before tax ($m) 56.3 23.6 +139Earnings per share (basic)

– ordinary shares $0.16 $0.09 +78– ADS $0.49 $0.26

*Before exceptional charges.

?@

?@@@@@@6K??3@@@@@@@@6K?N@@@V4@@@@@6K3@@Le?I4@@@6KV'@)X?e?I4@@@6X ?W2@@6X??V'@)Xf?I'@@)X? ?7@@@@)XV'@)X?fV4@@)X J@@@@@@)X??V'@)XgI'@)X? 7@@?I'@@1?V'@)X?f?V'@)K ?J@@5??V'@@L?V'@)XgV'@@@? ?W2@ ?7@@H?eN@@1V'@)K?f?V'@@L ?@@??7@@ ?@@5f?3@@L??V4@@6K?fV'@)X? ?@@L?@@@ J@@Hf?N@@1? ?/K?

@@@6X?e?V'@)X ?@@1?@@@ O2@@6X 7@@?g@@@? ?V@@@@@@@@@@@@@@@@@@@@@@@@@@@6K?f@@@@)XfV'@1 ?@@@?@@@ ?O2@@@@@@1 @@5?g3@@? ?O2@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@e?I4@@)K?e?V'@L? ?@@@@@@@ ?O2@@@@@@@@5 @@H?gN@@? ?O2@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@0MI4@@@@@@@@@@e?I'@@6K?eN@)X ?@@@@@@@ ?W2@@@@0M??I(Y @@h?@@? ?O2@@@@@@@@@@@@@@@@@@@@0M? I@eV4@@@6K??3@1 ?@@@@@@@@@@( W&@@@0M? O2@@@@@@@@@@@6K?e?J@@h?@@?hf?O2@@@@@@@@@@@@@@@0MI4@@@6KV@@L? ?@@@@@@@@@0Y ?W&@@(M? O2@@@@@@@@@@@@@@@@@@@@@@@@@@6X?7@@h?@@?g?O2@@@@@@@@@@@@@@0M?I4@@@@@@)X O2@@@@@@@@@? W&@@(YheO2@@@@@@@@@@@@@@@@@@@@@@0Mg?I4@@@@)X@@5hJ@@?eO2@@@@@@@@@@@@@0M?I4@@@@@1 ?W2@@@@@@@@?@@@?e?W-Xhe7@@@Y?O2@@@6?2@@@@@@@@@@@@@@0Me?I4@0M I'@@@@@Hh7@@@@@@@@@@@@@@0M?I'@@@@L? ?7@@@@@@@@@?@@@?eW&@,he@@@@@@@@@@@@@@@@@0?4@@@0M? ?V'@@@@?h@@@@@@@@@0M??V4@@@)K O2@@@@(?g?3@@@@@@@@@?@@@??W&@(Yhe3@@@@@@@0?4@@@@0M? V'@@@Lh@@@@0M?I'@@@6KO2@@ ?O2@@@@@@@@@@0Y?g?V40M??@@@@@@@@??7@@H?heV4@@0M ?V'@@1h@@0MN@@@@@@@@@hO2@@eO2@@@@@@@@@@0M ?@@@@@@@@??3@5 N@@@L?

?O2@@@e?3@@@@@@@@W2@6K?O2@@@@W2@@@@0?4@@0M? ?@@@V'@@@??V+Y ?@@@1?O2@@@@@5e?N@@?@@@@@@@@@@@@@@@@@@@@@0M ?@@@?V'@@? ?@@@@L

?O2@@@@@@@0Yf@@@@@@@@@@@@@@@@0?4@@0M? ?@@@eN@@L ?@@@@1O2@@@@@@@@(Mg@@@@@?@@@0M? ?@@5e?@@1 ?@@@@@

?O2@@@@@@0Y@@@f?O2@@@@@@@@@ ?@0Ye?3@@ ?@@@@@O2@@@@@@0Me?3@@)KO2@@@@0Y@@@@@@ ?V4@ ?@@?@@

O2@@@@@0M?f?V'@@@@@@@0Me3@@(M? ?@@?@@L??O2@@@@@0MheV4@@@@0MfN@@? ?@@?@@1?

O2@@@@@0M? ?3@)X? ?@@@@@@??O2@@@@@0M ?N@@1? ?3@@@@@?

?O2@@@@@0M 3@@? ?N@@@@@??O2@@@0M N@@? @@@@@?

O2@@@@0M ?3@L @@@@@?O2@@@@0M ?N@1 3@@@@? ?@

?O2@@@@@0M @@ N@@@@??O2@@@@0M? @@L? ?3@@@?

?O2@@@@0M? 3@1? ?N@@@??O2@@@0M N@@? 3@@?

O2@@@@0M ?@@? V4@?O2@@@@0M ?@@?

O2@@@@0M ?@@?W2@@@(M? ?@@?

?O&@@@0Y ?@@??O2@@@0M ?@@?

?W2@@@0M ?@@? @?O&@@0M J@@?

?@@@@? 7@5?J@@@@? @@H?

?W&@(M ?J@@?7@@H? ?7@5?@@5 J@@H?@@? ?W&@5??3@)X? W&@@H??V'@)K ?W&@@5V4@@6K W&@@(YI'@@6X ?W&@@0Y??V4@@)K? O&@(M??I'@@6K? O2@@(YV4@@@6K? O2@@@0Y??I4@@@6K O2@@@0M?

I4@@@@6K O2@@@@@0M??I4@@@@@6K O2@@@@@@0M?I4@@@@@@@@@@@6Khe?O2@@@@@@@@@@@@@@0M?

I4@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@0MI@M?I4@0?4@0?@MI40M?

8574 shire99 Report 12/4/00 3:35 pm

ADHD is primarily a childhooddisorder. Adderall is generallyadministered once or twice a day, so there is no need for a dose atschool, unlike its major competitors.


8574 shire99 Report 12/4/00 3:35 pm

Chief Executive’s review


Shire is an international specialtypharmaceutical company. Weselectively in-license and develop earlystage projects for our own marketing in the major markets of the world.

Shire’s business model has four levels of focus: business, functional, geographic,and therapeutic area.

BusinessShire is an international specialtypharmaceutical company. The term specialtyrefers to products used by specialistdoctors who only treat certain diseases.This clearly distinguishes Shire's strategyfrom that of major pharmaceutical companies.Targeting of specialists allows maximisationof sales by a relatively small sales force.This enables us to compete effectively inthe market place and can be demonstratedby our rapidly growing products and gainsin market share, despite a total sales forceof only 432 representatives. This strategyhas resulted in an enviable revenue peremployee figure for 1999 of around $400k,based on approximately 1000 employeesand total revenues of $401.5 million.

Underpinning the other elements of ourstrategy there are clearly defined financialgoals. These include high gross profit andoperating profit, above average annualsales growth and investment in R&D,combined with aggressive earnings pershare targets.

FunctionalShire focuses on specific functional areasthat we believe are key to our business, suchas ‘search & development’ and marketing.

Rather than having in-house researchlaboratories to generate our own molecules,we selectively in-license projects, usually atthe pre-clinical or early stages of clinicaldevelopment. An example of this is SPD421, a unique pro drug of valproic acid in-licensed from D-Pharm in March 2000. Our strategy also includes the identificationof off-patent products that could beenhanced, using the drug delivery expertiseof our US based company, ShireLaboratories Inc. (SLI), such as SPD 418 or the in-licensing of existing molecules for new indications, such as SPD 503 and SPD 417. These strategies significantlyreduce the risk, cost and time to launch for the typical Shire project compared with the development of a classic newchemical entity.

Marketed products are sought tocomplement our existing portfolio andcurrently targeted prescriber base,

but also as part of our strategy to extendour geographic reach (see below). Anadditional responsibility of the ‘search’function is to identify and negotiate M&Aopportunities, an area that has continued to be successful in the growth of Shire.

Our global R&D group manages eachproject through all relevant stages ofdevelopment and registration, working inmultifunctional project teams that includemarketing and finance.

The other key functional area for Shire ismarketing, the powerhouse of the company.Lean, but well trained and highly motivatedsales forces, effectively target key prescribers,achieving above average sales growth for all key products again in 1999.

GeographyOur aim is to market our products usingShire sales forces in all eight majorpharmaceutical markets of the world. The M&A activity in 1999 brought us closerto this target, adding Canada, Germany,Italy and France to our existing coverage ofthe UK/Ireland and the US. We plan to addthe remaining markets, Spain and Japan bythe end of 2000 and 2004, respectively.This increased geographic coverage hasalready enhanced our ability to attractpotential licensors and we aim to capitaliseon this and the wider geographic rights wehold for existing products and projects overthe coming months and years.

Therapeutic areasOur business is focused on four therapeuticareas: central nervous system disorders(CNS), metabolic diseases, oncology andgastroenterology. However, there is asignificant emphasis on CNS disorders,with 44 per cent of our revenues in 1999and 8 of our 13 projects being for suchdisorders.

We believe our focused strategy and broadproduct and project portfolio will allow us to achieve our financial objectives, whilstdelivering much needed new treatments for patients.

Rolf StahelChief Executive

@@hf@@hf@@L?he

@@@@@@@@@@@6K? @@1?he3@@@@@@@@@@@@@@@@@@@@@6K ?J@@@?heV'@@@@@@e@@@@@@@@@@@@@@@@@@@@6K ?7@@@?he?V4@@@@@@@@@gI@?4@@@@@@@@@@@@@@@@6K ?@@@@?he

I4@@@@@@@6K?he?I4@@@@@@@@@@@@@@6K? ?@@@@?he?I4@@@@@6K ?I4@@@@@@@@@@@@6K? ?O2@@@@@@@@@@@@@@6K? ?@@@@?he?I4@@@@@@@6K ?I4@@@@@@@@@@@6K ?O2@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@6K? ?@@@@?he

I4@@@@@@@@6K ?I4@@@@@@@@@@6K? O2@@@@@@@@@@@@@@@@@@@@@@@@0Mhe?I4@@@@@@@@@6X ?@@@@?he?I'@@@@@@6K? ?I4@@@@@@@@6K?hf?O2@@@@@@@@@@@@@@0M? ?I4@@)X? ?@@@5?heV+?4@@@@@@@6K? I4@@@@@@@6K?f?O2@@@@@@@@@0M ?I'@1? ?@@@H?he

?I4@@@@@6K I4@@@@@@6KO2@@@@@@0M ?@@? ?@@@hfI4@@@@@6K? I4@@@@@@@@(M ?O&@5? ?@@@hf?I4@@@@6K? ?I'@@@@@Y? O2@@@(Y? ?@@@hf

I4@@@6K? N@@@@@@6X? ?O2@@@@@0Y ?@@@hfI4@@@@6K ?@@@?@@@)X ?O2@@@@@0M ?@@@hf?I4@@@6Kg?O2@@?he?@@@@@@@@)X? ?O2@@@@@@0M? ?@@@hf?I4@@@6Kf'@@@@?hfI'@@@@@@1? O2@@@@@@0M J@@@hf?I4@@@6KeV4@@@Lhf?V4@@@@@@L O2@@@@@@0MhO2@@@@@@6K 7@@@hf?I4@@@6Ke?@@1 ?I4@@@@)K? ?O2@@@@@@@@0M?h?@@@@@@@@@@@@6K? @@@@hf?I4@@@6X?@@@ @@@@@@@6K? ?O2@@@@@@@@0M?hf?@@(M?e?I4@@@@@6K ?J@@@@hf?I'@@)T@@@L?hf?O2@@(?4@@@@@@6Khe?O2@@@@@@@@0M? ?@@HhI4@@@@6X ?@@6X? ?7@@@@hfV'@@@Y@@1?he?O2@@@0Ye?I4@@@@@@@@@6KO2@@@@@@@@0M ?@@?he?I4@@)K?hf?@@@1? J@@@@@hf?V4@@@@@@?hO2@@@@0MhI'@@@@@@@@@@@@@@@? ?@@?hf?I'@@6X?he?@@@@L @@ 7@(Y@@hf?I'@@@@LfO2@@@@@@0Mhe?V@@@@@@@@@@@??@@@@@@@@@@@@@@@6Khf?@@L V'@@)Xhe?@@@@1 @@L? ?J@@H?@@hfV'@@@)?2@@@@@@@0M?hO2@@@@@@@@0?4@@@@@@@@@@@@@@@@@@@@@@@@@6Kh?3@1 ?V4@@)X?h?3@@@@L? @@1? W&@5e@@hf?V@@@@@@@@@@0MgO2@@@@@@@@@0M?g@@@@@@@@@?h?I4@@@@@@6K?e?)XN@@L? @@1?h?N@@@@1? 3@@? @@@? 7@@He@@L?he

O2@@@@@@@@@@0Mf?O2@@@@@@@@@0Mh?W2@@@0MI4@@@@@6K?h?I4@@@@6X??@)T@@)X 3@@Lhe@@@@@? N@@L ?W-X @@@L ?J@@5?e@@1?he?O2@@@@@@@@@@@@@@?eO2@@@@@@@@@0M?hfW&@@0MfI4@@@@@6K?h?I4@@@)KC@@@Y@@1 V'@1he3@@@@? ?@@)X? ?7@1 @@@)X? W&@(Y?e@@@?he

O2@@@@@@@@@@0Mf@@@@@@@@@@@0M? 7@(Mh?I4@@@@@6Kh?I4@@@@Y@@@@@@L? ?N@@heV'@@@? ?@@@1? ?@@@ @@@@)X ?W&@(Yf@@@?he?O2@@@@@@@@@@0M?fO2@@@@@@@@0M ?J@(Y?hfI4@@@@6Kh?I4@@@@@@@@@)X 3@L?h?N@@@L ?@@@@L ?@@@L? @@@@@)X? W&@@H?f3@@?he

O2@@@@@@@@@0M?fO2@@@@@@@@0Y@@@? ?7@H I4@@@@@6K?g?I'@@@@@@@@)X? N@1?he3@@)X? ?@@@@)X? ?@@@1? @@V'@@)K ?W&@@5gN@@?he?O2@@@@@@@@@@@0MgO2@@@@@@@0M?f@@@? ?3@L ?I4@@@@6K?gV4@@@@@@@@)X ?@@?he?@@@)X J@@?@@)X J@@@@L ?J@@?V4@@@6K O&@@0Yg?@@Lhe

O2@@@@@@@@@@0Mg?O2@@@@@@@0M ?N@)X? ?I4@@@@6X?gI4@@@@@@@)K?hf?@@?he7@@@@)X? ?W&@5?3@@)X? ?W&@@@@)X? ?7@5e?I'@@@6K O2@@(Mh?@@1he?O2@@@@@@@@@0Mh?O2@@@@@@@ 3@)K ?I4@@@)KheI'@@@@@6X?he?@@?h?J@@V'@@)K W&@@H?V'@@)X W&@@V'@@)X J@@HfV4@@@@6K O2@@@0Y?h?@@@he

?O2@@@@@@@@@heO2@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@6X?f@@@@@@eV'@@6K ?I4@@@6Xh?V4@@@@@)Khe?@@?hW&@5?V4@@@6K ?W&@@5e?V'@@)K? ?W&@@5?V'@@1 ?W&@5?gI4@@@@6Khe?O2@@@@0M?he?3@@he@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@1?f@@@@@@e?V4@@@@6K? ?I'@@)X?h?I4@@@@@6KgO2@@5?g?O&@(Ye?I'@@@6K O&@@(YfV4@@@6K? O&@@(YeV'@@ W&@@H?hI4@@@@@@@@@@@@@@@@@@@0M?hf?N@@L?h@@@@@@@@@@@@@@@@@@@@@@@@@@@0M? I40M ?I4@@? ?I4@@@@@@6K? N@@@1?he?I4@@@@@@@@@@@@@@0Y?f?O2@@(Y?fV4@@@@@6K?he?O2@@@@0Y?gI'@@@6K? O2@@@0Y?e?V'@@6X? ?W&@@5hf?I4@@@@@@@@@@@@@@0M? @@1?h

I4@0M? I4@@@@@@@@@@@@@6K?g?@@@@? I4@@@@@@@@@@g?O2@@@0YhI4@@@@@@@@@@@@@@@@@@@@@0M?h?V4@@@@@@6K?gO2@@@@@0M?gV'@@)K O&@@(Y I4@@@0M? @@@?hI4@@@@@@@@@@@@@@@@@@@@@@@? ?I4@@@@@@@@@@@@@@@@@0M I4@@@@@@@@@@@@@@@0M? I4@@@@@@@@@@@@@@@@@0M?h?V'@@@6K O2@@@0Y? @@@?h

I4@@@@@@@@@@@@0M ?I4@@@@@@@@@@@0M ?I4@0M ?I4@@@@@@@@@@@0M V4@@@@6K ?O2@@@@0M? 3@@?hI4@@@@@6K?gO2@@@@@@@0M? N@@LhI4@@@@@@@@@@@@@@@@@@@0M? ?@@1h

I4@@@@@@@@@@0M ?3@@h?N@@L?g@@1?g3@@?gN@@Lg?@@1g?3@@g?N@@L?f@@1?f3@@LfN@@1f?3@@f?N@@L?e@@1?e3@@?eN@@?e?@@?e

Product sales by geographic region 1999

1 US 81%2 UK/Ireland 13%3 Canada 4%4 Europe 2%

Product sales by therapeutic area 1999

1 Central nervous system 44%2 Other 30%3 Gastroenterology 14%4 Oncology 8%5 Metabolic diseases 4%

Sales by product 19991 Adderall 37%2 DextroStat 2%3 Carbatrol 4%4 Calcichew 4%5 Pentasa 13%6 Agrylin 8%7 ProAmatine 5%8 Noroxin 3%9 Other Europe 3%

10 Other US 17%11 Canada 4%

8574 shire99 Report 12/4/00 3:35 pm


Operating review – products currently marketed

Shire’s lean but well trained and highlymotivated sales forces effectivelytarget key prescribers achievingabove average sales growth for allkey products again in 1999.

CarbatrolCarbatrol, an extended release formulationof carbamazepine, is used as a first linetreatment for epilepsy; a condition thataffects approximately 2.5 million people in the US. Shire Laboratories Inc. (SLI)developed Carbatrol using their proprietaryMicrotrol technology. The product wasdesigned to deliver steady blood levels of drug as a twice daily formulation, ratherthan the usual four times daily dosing ofthe immediate release competitor. Furtheradvantages include the ability to sprinklethe contents over food, making it easier to give to children and the elderly.

SalesSales of Carbatrol in 1999 were $16.0million, an increase of 201 per cent overthe previous year. Although the growth has been tremendous, it should be notedthat Shire did not formally launch theproduct until June 1998.

Market sectorThe US anti-epileptic market was worth$2.5 billion in 1999. The sectors in whichCarbatrol directly competes, thecarbamazepine market and the extendedrelease carbamazepine market, werevalued at $217 million and $79 million,respectively. Carbatrol has continued topenetrate the extended releasecarbamazepine market and had gained22.8 per cent of this market in December 1999.

Marketing rights/territoriesShire owns the global rights for Carbatrol.Currently the product is only available inthe US, however plans to develop forother markets are under consideration.

Treatments for central nervoussystem disorders

Adderall & DextroStatAdderall and DextroStat are bothtreatments for Attention Deficit HyperactivityDisorder (ADHD), a disorder characterisedby varying degrees of inattention,impulsiveness and hyperactivity. ADHD is primarily a childhood disorder, althoughit is increasingly being recognised throughadolescence and into adulthood. It isestimated that between three and five percent of children in the US suffer from thecondition. Adderall is a unique combinationof four amphetamine salts and is generallyadministered once or twice a day. Thisavoids the need for a dose during schoolhours, unlike Adderall’s major competitors.

DextroStat is a branded generic containingdextroamphetamine.

SalesSales of Adderall grew by 92 per centcompared with 1998 to reach $142.0million. The growth of Adderall was fuelledby the addition of 49 sales representativesbetween January and June 1999, anincrease of 46 per cent, and several clinicalpapers which highlighted benefits of Adderallover its major competitor, methylphenidate.

DextroStat, although significantly lessimportant within the product portfolio than Adderall, still contributed sales of$8.8 million, an increase of 47 per centcompared with 1998.

Market sectorIn December 1999, Adderall andDextroStat accounted for 30.7 per cent of US prescriptions written for ADHD.

According to IMS data the total US ADHDmarket was worth $ 614 million in 1999.

Marketing rights/territoriesShire markets Adderall and DextroStat in the US; there are currently no plans toextend this.

8574 shire99 Report 12/4/00 3:35 pm


SalesSales of Agrylin increased by 37 per centto $32.6 million in 1999, of which $22.3million were sales inthe US.

Market sectorThe products Hydrea and hydroxyurea,although unlicensed, are also used off-label by doctors for thrombocythaemia.Together with Agrylin, US sales of thesethree products in 1999, including sales of the former products for their licensedindications, were $46.9 million. In prescription terms, Agrylin gainedmarket share over the year, increasingfrom 8.3 per cent in December 1998 to13.2 per cent in 1999.

Marketing rights/territoriesIn June 1999, all rights to Agrylin, includingintellectual property, were acquired fromBristol Myers Squibb, ending all royaltyobligations on sales. The product iscurrently on the market in the US andCanada; trials are underway in Europe andJapan with a view to gaining marketingapproval for these markets.

Metabolic diseases

Calcichew rangeThis is a range of calcium /calcium andvitamin D supplements, used primarily asadjuncts in the treatment of osteoporosis.Osteoporosis is characterised by aprogressive loss of bone mass causing thebone to become fragile and liable to fracture.It is estimated that around three millionpeople in the UK suffer from this condition.

SalesThe first product in the Calcichew rangewas launched approximately 11 yearsago. However, despite the maturity of therange, sales continued to rise in 1999increasing 16 per cent over the previousyear to $17 million.

Market sectorSince launch, Shire has had two majorcompetitors, Sandoz and Sanofi, fromwhich it has gained market share. InDecember 1999, Shire had a 70 per centshare of the UK calcium prescriptionmarket. The UK calcium market in 1999was valued at $25 million, an increase of16 per cent over the preceding year.

Treatments for gastrointestinaldisorders

PentasaPentasa is licensed in the US for thetreatment of ulcerative colitis, aninflammatory condition affecting the colonand other closely associated areas of thegut. It causes abscesses in the upperlayers of the affected gut lining resulting in recurrent low abdominal pain andfrequent diarrhoea. Pentasa addresses amarket of over 2 million patients in the US.

SalesSales of Pentasa grew by 56 per cent to$51.8 million, a very healthy growth rateeven allowing for the slight distortion as theproduct was in-licensed during mid 1998.

Market sectorPentasa competes primarily in theolsalazine/mesalamine oral market.According to IMS data, these productstogether generated sales of $231 millionduring 1999. Pentasa retained 17.8 percent of this prescription market, which forthese products had grown 12.4 per centcompared with 1998.

Marketing rights/territoriesShire acquired the US rights for Pentasa inmid 1998 from Hoechst Marion Roussel.

Treatments for Oncology

AgrylinAgrylin is the only US product licensed for thetreatment of essential thrombocythaemia.Patients with this condition are more likelyto experience adverse blood clottingevents such as heart attack and stroke,compared with the general population, as a consequence of raised blood plateletlevels. Agrylin is intended to inhibitexcessive platelet production and reducethe morbidity and mortality of heart attackand stroke in these patients.

Marketing rights/territoriesShire markets the Calcichew range in theUK and Ireland and has rights in certainexport countries where sales are generallyhandled by agents.

Treatments for other conditions

ProAmatineProAmatine is the only FDA approvedtreatment available in the US for orthostatichypotension. This is a condition involvinglow blood pressure on standing, resulting indizziness, weakness or unconsciousness.

SalesSales of ProAmatine in 1999 were $19.8 million, an increase of 28 per centover 1998.

Market sectorIn addition to ProAmatine, Florinef is used off-label for orthostatic hypotension. The US prescription market for ProAmatineand Florinef prescriptions indicates thatProAmatine had an 18.8 per cent share inDecember 1999, an increase from 13.9per cent in December 1998. In 1999, thecombined ProAmatine/Florinef market wasworth $37 million.

Marketing rights/territoriesProAmatine is currently marketed by Shire in the US and Canada. Shire alsohas rights for the UK and Ireland, althoughthere are no immediate plans to developthe product for these markets.

8574 shire99 Report 12/4/00 3:35 pm


Operating review – projects under development

Shire selectively in-licensescompounds, taking them through thedevelopment and regulatory reviewprocedure, a process that is referredto as ‘search and development’.

Shire’s global search and developmentexpertise has already provided threemarketed products, whilst the currentpipeline of 13 projects includes oneproject in registration and nine thatare post Phase II.

Project statusDuring 1999 Phase III trials investigatingthe safety and efficacy of the product inosteoarthritis were progressed.

Territorial rights/licenseesShire has exclusive worldwide rights toDirame. These were acquired from Bayer.

SLI 381 and SPD 503 Shire is developing these two projects for thetreatment of attention deficit hyperactivitydisorder (ADHD). They are intended tostrengthen Shire’s position in this market,building on the success of the currentlymarketed Adderall and DextroStat.

SLI 381 is a patent protected modification ofAdderall, being developed with the objectiveof achieving, at minimum, equivalent efficacyto the parent product. SPD 503 is a patentprotected non-scheduled treatment.

Project statusSLI 381 has reached the end of Phase II.SPD 503 is in Phase I.

Territorial rights/licenseesShire will have global rights to thesepatented products. SPD 381 is likely to bemarketed in the US whilst SPD 503 will beaimed at all major markets.

SPD 417 SPD 417 is the development of Carbatrol(carbamazepine) for bipolar disorder, toadd to the existing indications of epilepsyand trigeminal neuralgia. There isanecdotal evidence to support the use of carbamazepine in this disorder, whichaffects approximately 3.5 million patientsin the US.

Project statusDevelopment has now reached the end ofPhase II.

Territorial rights/licenseesShire has global rights to this patented project.

Central nervous system disorders

ReminylReminyl (galantamine) is being developedfor the treatment of Alzheimer’s disease; a condition that initially results in memoryloss, confusion and disorientation. This is followed in time by intellectual and personality changes, emotionaldisintegration and death.

It is estimated that eight million people in the US and Western Europe suffer fromthis disease.

Project statusIn March 1999, a filing was made byJanssen to Sweden, the referencemember state in the EU MutualRecognition Procedure. In March 2000,Sweden approved the MarketingAuthorisation Application, allowing theMutual Recognition Procedure toproceed. In September 1999, asubmission was made to the US Foodand Drug Administration (FDA). Variousother submissions were also made during the year.

Territorial rights/licenseesReminyl is being developed by theJanssen Research Foundation and Shireunder a co-development and licensingagreement. Following successfulapproval, Reminyl will be marketed byJanssen Pharmaceutica in the US and by Janssen-Cilag in most other countries. In the UK and Ireland, Shire will marketthe product under a co-promotionagreement with Janssen-Cilag.

Dirame Dirame is an orally administered, centrally acting analgesic for thetreatment of moderate to moderatelysevere pain. It may have applications inseveral therapeutic areas, including painassociated with cancer, advanced arthritisand post surgical pain. Shire believes that it may have a favourable side effectprofile especially in terms of low addiction potential.

According to IMS data the US analgesicmarket is worth approximately £2.2 billion.

8574 shire99 Report 12/4/00 3:35 pm


It is estimated that there are 650,000patients worldwide with end stage kidney disease.

Project statusLanthanum carbonate entered Phase III in the US in July 1999, following early entry into Phase III in Europe at the end of 1998. Phase I studies in Japan werealso completed during the year.

Territorial rights/licenseesShire has global rights to Lambda.

ProAmatineProAmatine was being studied for thetreatment of hypotension associated with renal dialysis. Development has now ceased following the R&D portfolioreview in early 2000.

Treatments for Oncology

SPD 424SPD 424, previously known as RL0903, is a subcutaneous implant containing aGnRH agonist for the hormonal treatmentof prostate cancer. The hydrogel implantemploys a proprietary technology thatdelivers therapeutic agents at a controlledconstant release for over one year.According to IMS data the US market forprostate cancer has been estimated to be in excess of $1 billion.

Project statusSPD 424 is ready to start Phase III trials.

Territorial rights/licenseesShire acquired the rights to the patentedhydrogel implant delivery technology for the US and Europe from Hydro MedSciences in February 1999.

Agrylin Agrylin is an oral treatment forthrombocythaemia aimed at lowering theblood platelet count. It is marketed in theUS and Canada but is under developmentfor the European market. (See page 9.)

Project statusThe project is currently at Phase III in Europe.

Territorial rights/licenseesAll rights to the product were acquiredfrom Bristol Myers Squibb in June 1999.

SPD 418 This project is aimed at developing a novel,patented formulation of an establishedanti-epileptic agent to complement oursuccess with Carbatrol in this market.

Project statusFeasibility studies were conducted during1999. If these prove to be successful theproject will proceed to Phase I.

Territorial rights/licenseesShire has global rights to this patented project.

SPD 421SPD 421 is a unique pro drug of valproicacid. Initially Shire will study SPD 421 for thetreatment of epilepsy. The world market foranti-epileptics is projected to grow to $4.5billion by 2005.

Project statusThe first Phase I study has been completed.

Territorial rights/licenseesSPD 421 was in-licensed from D-Pharm in March 2000, where it was known as DP-VPA. Shire has exclusive rights todevelop and market the product globally.

SPD 502 SPD 502 is a potent AMPA-antagonist for the treatment of brain damagefollowing acute ischaemic stroke. Stroke is the leading cause of adult disability inthe western world with a prevalence of500-800 per 100,000.

Project statusSPD 502 entered Phase I during 1999.

Territorial rights/licenseesShire has marketing rights outside ofcertain Nordic countries.

Treatments for metabolic diseasesLanthanum carbonate (Lambda) is beingdeveloped to reduce phosphate levels inthe blood of patients with chronic kidneyfailure (hyperphosphataemia). If leftuntreated, hyperphosphataemia can resultin renal osteodystrophy, a painful conditionwhere there are abnormalities in theformation and structure of bone.

Treatments for gastrointestinaldisorders

Pentasa 500mgPentasa 250mg is licensed in the US for the treatment of ulcerative colitis andaddresses a market of up to one millionpatients. This new 500mg tablet formulationwill aid the compliance of patients.

Project statusThis project is about to start Phase III.

Territorial rights/licenseesPentasa was acquired for the US marketfrom Hoechst Marion Roussel during thesecond quarter of 1998.

Emitasol Emitasol is an intranasal formulation of metoclopramide HCl, an existing anti-nausea drug currently available in oral and injectable forms. This route avoids the need for drug absorption through the gastrointestinal tract, whilst beingpreferable to an injection. In 1998,according to IMS data, the US market for anti-nausea compounds wasapproximately $1 billion.

Project statusEmitasol is about to start Phase III studies.

Territorial rights/licenseesShire is developing this project for Ribogene,who will provide up to $7 million in funding.Shire holds an option for exclusive rights to market the product upon approval inNorth America, Canada and Mexico.

Tazofelone & LY 315535 Development of Tazofelone and LY 315535has now ceased, following the R&D portfolioreview in early 2000. It is intended to out-license these two projects.

8574 shire99 Report 12/4/00 3:35 pm


Following the merger with RobertsPharmaceutical Corporation at theend of 1999, these non statutoryaccounts have been prepared inaccordance with US GenerallyAccepted Accounting Principles(GAAP) as a ‘pooling of interests’. The financial information for thecombined Company is presented as if the merger had occurred at thebeginning of the periods described.The Board has decided that theGroup should report its US GAAPresults in US dollars with UK statutoryreporting in sterling. This annualreview reflects that decision.

The following review should be read inconjunction with the Company’s consolidatedfinancial statements and related notesappearing elsewhere in this annual review.

Results of operationsyears ended 31 December 1998 and 1999On 23 December 1999, Shire and Robertsmerged in a tax-free exchange of shares.Shire exchanged 1.0427 ADSs for eachcommon share of Roberts. This transactionwas accounted for as a pooling of interests.Merger transaction expenses and mergerrelated restructuring costs totalled $75.9million and are reflected in Shire’s 1999 accounts.

Total revenues For the year ended 31 December 1999,total revenue increased by 30% to $401.5million, compared to $309.0 million infiscal 1998. This increase was primarily the result of an increase in product sales.Product sales in the US continue torepresent a significant percentage ofworldwide sales, increasing to 81% in1999 from 78% in 1998.

The company manages and controls thebusiness on geographic lines. The threereportable segments are the UnitedStates, Europe and the Rest of the World.Additional information regarding segmentsis provided in Note 20 to the consolidatedfinancial statements.

1999Product sales by segment $m

United States 314Europe 55Rest of World 16

Total product sales 385

Product sales For the year ended 31 December 1999,total product sales increased by 32% to$385.2 million, compared to $291.8 millionin the prior year. Of the Company’s totalproduct sales, 39% related to Adderall andDextroStat, the Company’s productsmarketed in the US for the treatment ofADHD. On a combined basis, theseproducts increased their share of the totalUS ADHD prescriptions written from20.4% in December 1998 to 30.7% inDecember 1999.

Other significant contributors to theincrease in product sales in 1999 were theUS marketed products Pentasa, Carbatroland Agrylin. The Company acquiredPentasa, licensed for the treatment ofulcerative colitis, in the second quarter of1998 and recorded sales of $51.8 millionin 1999 compared to $33.3 million in1998. Carbatrol increased its share of totalUS extended release carbamazepineprescriptions written to 22.8% in December1999 from 8.5% in December 1998 andAgrylin sales grew 37% over 1998 to$32.6 million in 1999.

Cost of salesFor the year ended 31 December 1999cost of sales amounted to 24.3% ofproduct sales as compared to 32.6% in1998. The decrease in cost of salespercentage and corresponding increase ingross margin is attributable to an improvedproduct mix due to the faster growth ofproducts with a higher gross margin.Additionally, the Company acquired all rightsto Agrylin including the ending of royaltyobligations from Bristol Myers Squibb, whichenhanced the gross margin of this product.

Costs and expensesIn 1999 the Company recorded chargestotalling $135.2 million pre-tax for assetimpairments ($48.5 million), merger-relatedtransaction expenses ($32.3 million),restructuring ($43.6 million), loss onproduct dispositions ($5.8 million) andother charges ($5.0 million). These chargesare disclosed separately within operatingexpenses in the Statement of Income.

The Company recorded an impairmentcharge of $34.2 million to adjust intangibleasset values, primarily product rights, totheir estimated fair value. These charges areconsistent with the Company’s accountingpolicy to review periodically the carryingvalue of the intangibles and evaluate whetherthere has been any impairment in thecarrying value of those intangibles ascompared with estimated undiscountedfuture cash flow relating to those intangibles.

Financial review

Total Revenues ($m) 1999 1998• Sales 385.2 291.8• Licensing/development fees 10.8 11.8• Royalties 3.5 3.7• Other 2.0 1.7

1999

1998

8574 shire99 Report 12/4/00 3:35 pm


The estimated fair value has been calculatedusing projected discounted cash flows ofthe products. Other asset impairments arethe write off of inventory held for researchand development work and duplicateequipment ($ 3.2 million), adjustments to thecarrying value of the RiboGene investmentto its estimated realisable value at 31December 1999 ($ 7.6 million), and writedown of notes receivable to their estimatedrealisable value ($ 3.5 million). The components of the restructuringcharge are as follows:

$m

Employee termination costs 37.9Property 5.7

43.6

In December 1999, the decision was madeto close the Roberts’ office facility inEatontown, New Jersey and consolidate thesales and marketing operations into theexisting Shire facility in Florence, Kentuckyand to transfer the research & developmentactivities to Shire’s facility in Rockville,Maryland. Similarly, Roberts’ sales andmarketing operation in the UK wascombined with Shire’s established operationin Andover, Hampshire.

As a result of the restructuring andelimination of duplicate facilities, 147 employees will be terminated. These positions were mainly based in theUS in sales and marketing, research anddevelopment and administrative functions.All employees were notified of theirtermination prior to 31 December 1999.Included in the employee termination costsis approximately $18 million related topension contributions, which was paidprior to the year end. The Companyanticipates all activities associated withthis restructuring to be substantiallycomplete at the end of 2000 with theremaining cash expenditures expected in this period.

The termination costs consist of paymentsfor severance, medical and other benefits,outplacement counselling, acceleration ofpension benefits and excise taxes.

Shire has commenced negotiations withpotential purchasers of the Eatontownproperty, which has been written down toits estimated fair value. The Companyanticipates realising annual savingsresulting from the merger of approximately$20 million.

Research and development Research and development expenditureincreased from $59.3 million in 1998 to$77.5 million in 1999, representing an overallincrease of 30.7%. This increase reflectsthe significant portion of developmentprojects at Phase II or later wheredevelopment costs tend to be higher.

Selling, general and administrative expensesSelling, general and administrative expensesincreased $39.6 million from $131.7 millionin 1998 to $171.3 million in 1999, primarilydue to an increase in size of the US salesforce and higher levels of marketingexpenditure. As a percentage of total revenues, selling, general andadministrative expenses were constant at approximately 43% in 1998 and 1999. A significant component of selling, generaland administrative expenses is amortisation,which increased from $22.0 million in 1998to $24.4 million in 1999, due to the additionof the Pentasa and Agrylin product rights.

Interest income and expense In the year ended 31 December 1999 theCompany received interest income of $7.3million compared with $6.4 million in 1998.Interest expense increased from $6.5million in 1998 to $9.7 million in 1999 as aresult of a full year's interest expense fromthe financing of the Pentasa acquisition.

Income taxesFor the year ended 31 December 1999,income taxes increased $13.1 million from$3.0 million to $16.1 million. The Company’seffective tax rate in 1999 (before mergerrelated transaction expenses, restructuringcosts and asset impairments) was 29%.The Company has recorded net deferredtax assets of approximately $37 million.Realisation is dependent upon generatingsufficient taxable income to utilise suchassets. Although realisation of these taxassets is not assured, managementbelieves it is more likely than not that thedeferred tax assets will be realised.

Liquidity and capital resourcesThe Company has financed its operationssince inception through private and publicofferings of equity securities, the issuanceof loan notes, collaborative licensing anddevelopment fees, product sales andinvestment income.

The Company’s funding requirementsdepend on a number of factors, includingthe Company’s product developmentprogrammes, business and productacquisitions, the level of resources requiredfor the expansion of marketing capabilitiesas the product base expands, increasedinvestment in accounts receivable andinventory which may arise as sales levelsincrease, competitive and technologicaldevelopments, the timing and cost ofobtaining required regulatory approvals fornew products, and the continuing revenuesgenerated from sales of its key products.

For the year ended 31 December 1999operating cash flows amounted to $90.5million compared to $34.6 million in 1998.

As of 31 December 1999, the Companyhad cash, cash equivalents andmarketable securities of $138.4 million,which consisted of immediately availablemoney market fund balances andinvestment grade securities.

DebtIn 1998, the Company acquired theproduct rights to Pentasa. The majority ofthe purchase price was financed through acredit agreement between Roberts, DLJCapital Funding and various other lenders.Under this credit agreement, the merger ofShire and Roberts constituted a change ofcontrol which would trigger the accelerationof the repayment of the principal amountsoutstanding. On 19 November 1999Roberts, Shire’s US subsidiaries and Shireentered into an agreement with DLJ toreplace the existing credit agreement witha $250 million credit facility consisting of a$125 million five-year revolving creditfacility and a $125 million five-year termloan facility.

8574 shire99 Report 12/4/00 3:35 pm

Capital expenditureCapital expenditures in 1999 ofapproximately $4.8 million were principallyfor the upgrade and expansion of salesand administration functions.

Business combinations and divestituresDuring October and November 1999 theCompany acquired the European salesand marketing subsidiaries from FuiszInternational Ltd. The operations located inFrance, Germany and Italy were acquiredfor approximately $39.5 million in cash. A substantial portion of the purchase pricewas allocated to intangible assets, whichare amortised over 20 years.

On 13 January 1999 Shire disposed of itsIndianapolis manufacturing plant for a netconsideration after expenses of $1.5 millionincluding a loan note of $0.5 million. Thenet gain of $0.8 million is included in resultsof operations. During November 1999, theCompany sold the product Tigan for $6.4million. The Company incurred a loss ondisposal of $5.8 million, which is includedwithin the results of operations.

Concentration of credit riskFinancial instruments that potentially exposethe Company to concentrations of creditrisk consist primarily of short-term cashinvestments and trade accounts receivable.

As revenues are mainly derived fromagreements with major pharmaceuticalcompanies and relationships with drugdistributors, and such clients typicallyhave significant cash resources, any creditrisk associated with these transactions isconsidered minimal. The Companyoperates credit evaluation procedures.

Excess cash is invested in short-term moneymarket instruments, including bank andbuilding society term deposits and commercialpaper from a variety of companies withstrong credit ratings. These investmentstypically bear minimal risk.

Market riskShire's principal treasury operations aremanaged by the Group's treasury functionbased in the UK in accordance with theGroup's treasury policies and procedureswhich are approved by Shire's Board. As a matter of policy, Shire does notundertake speculative transactions whichwould increase its currency or interest rate exposure.

The Company is subject to market riskexposure in the following areas:

Interest rate market riskThe Company has cash and cashequivalents on which interest income isearned at variable rates. The financing andcash management requirements of theoperating subsidiaries are transacted withinthe Group's treasury function, whereappropriate, in order to improve the returnon liquid assets, manage any currencyexposure on non-US dollar denominateddeposits and maintain internal controls.

The applicable interest rate on theCompany’s credit facility DLJ rangesbetween 0.5% and 1.5% over the primerate of DLJ Capital Funding, Inc. or theFederal Funds Rate plus 0.5% or between1.5% and 2.5% over the London InterbankOvernight rate, in each case depending onShire's credit rating. The facility is securedby all material property owned by Shireand its subsidiaries and the capital stockof Shire's subsidiaries. If Shire's creditrating reaches specified levels, the facilitywill not be secured. The facility containscustomary covenants and additionalmaintenance tests that require Shire tomaintain a minimum net worth, a specifiedleverage ratio and a specified coverageratio. At 31 December 1999 the Companysatisfied the aforementioned covenantsand maintenance tests.

Foreign exchange market riskThe Group's parent company and anumber of subsidiary operations arelocated outside the United States. As such, the consolidated financial resultsare subject to fluctuations in exchangerates, particularly between the British poundand Canadian dollar against the US dollar.The financial statements of foreign entitiesare translated using the accounting policiesdescribed in Note 1 of the consolidatedfinancial statements. The exposure toforeign exchange market risk is managedby the Group's treasury function, usingforecasts provided by the operating units.Derivative instruments in the form ofaverage rate options are used to hedgeShire's currency exposures. The premiumpaid for the options is amortised over thehedging period. There were no derivativesoutstanding at 31 December 1999 or 1998.

InflationAlthough at reduced levels in recent years,inflation continues to apply upward pressureon the cost of goods and services used bythe Company. However, managementbelieves that the net effect of inflation onthe Company’s operations has beenminimal during the past three years.

Year 2000The Year 2000 (‘Y2K’) issue results fromthe inability of some computer programmesto identify the year 2000 properly, potentiallyleading to errors or systems failures. The Company did not incur any significantproblems relating to the Y2K issue and doesnot expect to incur significant expenses toremedy minor operating issues.

14 Shire Pharmaceuticals Group plc Financial Review

8574 shire99 Report 12/4/00 3:35 pm

Euro conversionOn 1 January 1999, the EuropeanEconomic and Monetary Union (the ‘EMU’)introduced the Euro as the official currencyof the 11 participating member countries.On that date, the currency exchange ratesof the participating countries were fixedagainst the Euro. There is a three yeartransition to the Euro, and at the end of2001 the currency will come into circulationand national currencies will be withdrawnby July 2002.

The UK did not participate in the EMU atthe commencement of the third stage on1 January 1999 and it is uncertain whetheror on what terms the UK would bepermitted to join at a later date. There canbe no prediction as to whether the UK willparticipate in the EMU or as to the rate atwhich the pound sterling would beconverted into the Euro. Furthermore,there can be no prediction as to the likelyimpact on the US dollar/sterling exchangerate of a decision by the UK to participatein the EMU.

It is anticipated that the pricing of goodsand services will be more transparentthrough the use of a single currency withinthe participating member states.Competition is likely to increase with thegreater price transparency and removal ofexchange rate risk. In the longer termmore general price convergence is likely,assuming the EMU leads to greaterharmonisation of healthcare policiesacross the participating member states.

Shire has sales and marketing operations in France, Germany and Italy and thereforethere may be some impact on theCompany’s business and competitiveposition as a result of the increased price transparency.

The Company has reviewed its financial andoperating systems and is satisfied that theintroduction of the Euro will not cause anydisruption to the business, and that thesystems are in place to receive and makepayments in Euros. Shire will continue tomonitor the UK’s stance in relation toparticipation in the Euro and assess theimpact of any significant changes in policy.

Angus RussellGroup Finance Director

15 Shire Pharmaceuticals Group plc Financial Review

????????

?O2@@@@@@@@@6K ??O2@@@@@@@@@@@@@@@@@@@@6K? ?

?O2@@@@@@@@@@@@@@@@@@@@@@@@@@@6K ?O2@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@6X? ?

?O2@@@@@@@@@@@@@0MhfI4@@@@@@@@)K ??O2@@@@@@@@@0M I4@@@@@@6X ?

?O2@@@@@@@@0M? I4@@@@@)X? ??W2@@@@@@@0M I'@@@@1? ?O&@@@@@@0M ?V'@@@@L ?

O2@@@@@(M? V'@@@1 ?W2@@@@@@0Y ?N@@@@ ?

?W&@@@@@0M 3@@@L? ?O&@@@@(M N@@@1? ?

W2@@@@@0Y? ?@@@@? W2@6X? ??W&@@@@(M? ?@@@@? 7@@@1? ?W&@@@@(Y ?@@@@? @@@@@?e?W26X? ?

?W&@@@@(Y? ?@@@@? @@@@@?e?7@@1? ?W&@@@@(Y ?@@@@? @@@@@Le?@@@@L ?

?W2@6X ?W&@@@@0Y? ?@@@@? @@@@@1e?@@@@)X? ??7@@@1 W&@@@(M? ?@@@@? @@@@@@e?@@@@@1? ??@@@@@L? ?O&@@@(Y J@@@5? @@@@@@L??@@@@@@L ??@@@@@1? ?W2@@@@(Y? 7@@@H? @@@@@@1??@@@@@@1 ??@@@@@@L W&@@@@(Y @@@@ @@@@@@@??@@@@@@@ ??@@@@@@)X? ?W&@@@@0Y? ?J@@@5 @@@@@@@??@@@@@@@e?W2@6X ??@@@@@@@1? O2@@@@@@@@@@6K W&@@@@ ?7@@@H @@@@@@@??@@@@@@@L??7@@@1 ??@@@@@@@@? O2@@@@@@@@@@@@@@@@@6K?hf?W&@@@@5 J@@@5? @@@@@@@L?@@@@@@@1?J@@@@@ ?J@@@@@@@@L O2@@@@@@@@@@@0M??I'@@@@6K?heW&@@@@0Y 7@@@H? @@@@?@@1?@@@@@@@@?7@@@@@ ?

?W&@@@?@@@@1 O2@@@@@@@@0MhV4@@@@@6X?g?W&@@@(M ?J@@@5 @@@@?@@@?@@@@?@@@?@@@@@@ ??7@@@@?3@@@@ W2@@@@@@@0M?hf?@@@@@1?gW&@@@@H? W&@@@H @@@@?@@@?@@@@?@@@?@@@@@@ ??@@@@@?N@@@@L? ?W&@@@@@(M ?3@@@@@Lg7@@@@5 ?W&@@@5? @@@@?@@@?@@@@?@@@@@@@@@@ ??@@@@@e3@@@1? W&@@@@@(Y? ?V'@@@@1f?J@@@@(Y ?7@@@(Y? @@@@?3@@@@@@@?3@@@@@@@@@ ??@@@@@eN@@@@L ?W&@@@@@0Y V'@@@@fW&@@@0Y? J@@@@H @@@@?N@@@@@@@?N@@@@@@@@@ ??@@@@@e?3@@@1 W&@@@@(M ?V'@@@L??W&@@@ ?@6X ?W&@@@5? @@@@e@@@@@@@??@@@@??@@@ ??@@@@5e?N@@@@L? ?W&@@@@(Y? N@@@1??7@@@5 ?@@1 W&@@@(Y? @@@@e@@@@@@@??@@@@??@@@ ?J@@@@Hf@@@@1? W&@@@@(Y ?@@@5?J@@@(Y ?@@@ ?W&@@@(Y @@@@e@@@@@@@??@@@@??@@@ ?7@@@@?f3@@@@L ?W&@@@@(Y? J@@@H?7@@@H? ?@@@ W&@@@(Y? @@@@e3@@@@@@??@@@@L?@@@ ?@@@@@?fN@@@@1 ?7@@@@(Y ?W&@@@?J@@@5 ?@@@L? ?W&@@@@H @@@@eN@@@@@@??@@@@1?@@@ ?@@@@5?f?@@@@@L? J@@@@(Y? W&@@@5?7@@@H ?@@@1? W&@@@@5? @@@@e?@@@@@@??@@@@5?@@@ ?@@@@H?f?3@@@@1? ?W&@@@(Y ?O&@@@(Y?@@@5? ?@@@@? ?W&@@@@(Y? @@@@e?@@@@@@??@@@@H?@@@ ?@@@@g?N@@@@@L ?7@@@@H? ?W2@@@@@H??@@(Y? ?@@@@? W&@@@@(Y @@@@e?@@@@@@??@@@@??@@@ ?@@@@h3@@@@1 J@@@@5 O&@@@@@@e?@0Y ?@@@@? ?W&@@@@(Y? @@@@e?3@@@@@?J@@@@??@@@ ?

?J@@@@hV'@@@@L? 7@@@(Y O2@@@@@(M? ?@@@@? W&@@@@0Y @@@@e?N@@@@@?7@@@5??@@@ ??7@@@@h?N@@@@1? ?J@@@@H? O2@@@@@@0Ye?@@@ ?@@@@? ?W&@@@(M @@@@f@@@@@?@@@@H??@@@ ??@@@@@he3@@@@L ?7@@@@ ?O2@@@@@@@0Mf?3@H ?@@@@? W&@@@(Y? @@@@f@@@@@?@@@@e?@@@ ??@@@@5heN@@@@1 J@@@@@L? ?O2@@@@@@@0Mg?V'? ?@@@@? ?O&@@@(Y @@@@f@@@@@?@@@@eJ@@5 ??@@@@Hhe?3@@@@L? 7@@@@@)Khf?O2@@@@@@@@@0M ?@@@@? ?W2@@@@(Y? @@@@f@@@@@@@@@@e7@@H ??@@@@?he?N@@@@1? @@@@@@@@@6K?O26?2@@@@@@@@@@@@@0M ?@@@@? O&@@@@0Y @@@@f@@@@@@@@@@e@@@? ??@@@@?hf@@@@@L ?J@@@@@@@@@@@@@@@@@@@@@@@@@@@0M? ?@@@@? W2@@@@(M @@@@f@@@@@@@@@@e@@@? ??@@@@?hf3@@@@1 ?7@@@@@@@@@@@@@@@@@@@@@@@@0M ?@@@@? ?W&@@@@(Y? @@@@f3@@@@@@@@@e@@@? ??@@@@?hfN@@@@@L? ?@@@@(M?I4@@@@@@@@@@0M ?@@@@? W&@@@@0Y @@@@fN@@@@@@@@@e@@@? ?J@@@@?hf?3@@@@1? J@@@@H ?@@@@? ?O&@@@(M @@@@f?@@@@@@@@@e@@@? ?7@@@@?hf?V'@@@@L 7@@@@? ?@@@@? ?W2@@@@(Y? @@@@f?@@@@@@@@@e@@@? ?@@@@@= N@@@@1 @@@@@? ?@@@@? W&@@@@(Y @@@@f?@@@@@@@@@?J@@@? ?@@@@V@@@@@@@@@@@@@@??@@@@@ @@@@5? ?3@@@? ?O&@@@@(Y? @@@@f?@@@@@@@@@?7@@5? ?@@@@?@@@@@@@@@@@@@@??3@@@@L? @@@@H? ?N@@@?hf?W2@@@@@0Y 3@@@L?e?@@@@@@@@@?@@@H? ?@@@@eI4@@@@@@@@0Me?N@@@@)X @@@@ @@@?hfO&@@@@(M N@@@1?e?@@@@@@@@@?@@@ ?

?J@@@@ 3@@@@1 @@@@ @@@?heW2@@@@@0Y? ?@@@@?e?@@@@@?@@@?@@@ ??7@@@@ N@@@@@L? @@@@ @@@Lh?W&@@@@(M? O2@@@@?@@@@?e?@@@@@?@@@?@@@ ??@@@@5 ?3@@@@1? @@@@L? @@@1hO&@@@@(Y W2@@@@@@?@@@@?e?@@@@@@@@5?@@@ ??@@@@H ?V'@@@@L 3@@@1? @@@@gW2@@@@@0Y? 7@@@@@@@@@@@@?eJ@@@@@@@@H?@@@gO2@@@@@@@@@@@? ??@@@@? N@@@@1 N@@@@? @@@@f?W&@@@@(M? ?J@@@@0Me@@@@@?e7@@@@@@@@??3@@e?O2@@@@@@@@@@@0M ??@@@@? ?@@@@@L? ?@@@@? @@@@fO&@@@@0Y ?@@@heW&@@(Me?J@@@@@Le@@@@@@@@@??N@@W2@@@@@@@@@@@@0M ??@@@@? ?3@@@@1? ?@@@@L ?O2@@( @@@@eW2@@@@(M ?@6Xe?@@@L?g?W&@@(Y?e?7@@@@@1e@@@@@@@@5??J@@@@@@@@@@0M ?J@@@@? ?N@@@@@L ?3@@@1 ?O2@@@0Y @@@@?O&@@@@@Y? ?W2@6Xhf?@@1e?3@@)XgW&@@@HfJ@@@@@@@?J@@@@@@@@H?O&@@@@@@@0M? ?7@@@5? 3@@@@1 ?N@@@@L? W2@@@@(M @@@@@@@@@@@@@@@6K? ?7@@@1g@@@?e?@@@e?N@@@1f?W&@@@5?e?O&@@@@@@@?7@@@@@@@@W2@@@@@@(M ?@@@@H? V'@@@@L? @@@@)X ?O&@@@@0Y? @@@@@@@@@@@@@@@@@6K? ?3@@@@g@@@Le?@@@L?e@@@@L?e?7@@@@H??O2@@@(Y@@@@?@@@@@@@@@@@@@@@@0Y? ?@@@@ ?N@@@@1? 3@@@@)X? ?O2@@@@(M? @@@@@@@@@@@@@@@@@@@6K? ?N@@@@L?f@@@1e?3@@)X?J@@@@1?e?@@@@@?O2@@@@@H?@@@@@@@@@?@@@@@@@@@(M? ?

?J@@@@ 3@@@@L V'@@@@)X O2@@@@@@0Y ?O2@@@@@@@0Me?I4@@@@@@@@6X? @@@@1?f@@@@f@@@)?&@@@@@?e?@@@@@@@@@@@@@e@@@@@@@@@X@@@@@@@@(Y W2@@hg??7@@@5 N@@@@1 ?V'@@@@)K? O2@@@@@@0M ?O2@@@@@@@0MhI4@@@@@@)Khf?J@@@@@?f@@@@e?7@@@@@@@@@@@Le?3@@@@@@@@@0M?e3@@@@@@@V@@@@@@@@@H? 7@@@hg??@@@@H ?3@@@@L? V'@@@@@6K?hf?O2@@@@@@@0M @@@@@@@@@?hf?I'@@@@@6KheW&@@@@@@6?2@@@@@L?J@@@@@@@(Y@@@1e?N@@@@@@@0M?f?@@@@@@@@@@@@@@@@@ @@@@hg??@@@@? ?N@@@@)K ?V'@@@@@@@6KhO2@@@@@@@@0M @@@@@@@@@? V'@@@@@@6Xg?W&@@@@@@@@@@@@@@@)?&@@@@@@0Y?@@@@L?e@@@@@Xg?W&@@@@@@@@@@@@@@@@5 @@X?hg??@@@@? 3@@@@@@? V4@@@@@@@@@@@@@@@@@@@@@@@@0M @@@0M?@@@? ?V4@@@@@@)K?fO&@@@(?4@@@@@@@@@@@@@@@(M?f3@@@1?e3@@@@)X?fO&@@@@@@@@@@@@@@@@@H ?I/?hg?J@@@@? V'@@@@@L I4@@@@@@@@@@@@@@@@@@@@0M @@@? ?I4@@@@@@@@@@@@@@@(YeI4@@@0?'@@@@@@(YgV'@@@?eV'@@@@)K?O2@@@@@@@@@@@@@@@@@@@@? ?@@@@@? ?V'@@@@1 I4@@@@@@@@@@@@@@@0M? 3@@? ?I4@@@@@@@@@@@@0Y?h?V4@@@@0Y?g?V4@@?e?V'@@@@@@@@@@@@@@@@@@@@@(Y@@@@@? ??@@@@? V'@@@5 ?I4@@@@@@@@@0M V4@? ?I4@@@@@@@@0M?hf?I40M? V4@@@@@@@@(M?W@@@@@@@(Y?3@@@5? ?7@@@@? ?V4@0Y I4@@@@@0Y??7@@@@@@(YeV4@0Y? ?3@@@5? ?@@@@@@(Y? ?V4@0Y? J@@@@@@H ?

7@@@@@@? ?@@@@@@5? ?@@@@@@H? ?

?J@@@@@5 ??7@@@@(Y ?J@@@@(Y? ?7@@@@H ?@@@@5? ?@@@0Y? ?

?????????????

8574 shire99 Report 12/4/00 3:35 pm


Board of Directors

1Dr James Cavanaugh (62)Chairman and Non-executive DirectorJoined the Board on 24 March 1997 andwas appointed as Non-executive Chairmanwith effect from May 1999. Dr Cavanaugh isthe President of HealthCare Ventures LLC.He was President of SmithKline & FrenchLaboratories, the US pharmaceuticaldivision of SmithKline Beecham Corporation.

2Rolf Stahel (55)Chief ExecutiveJoined the Group in March 1994 as ChiefExecutive from Wellcome plc where heworked for 27 years. From April 1990 untilFebruary 1994, he served as Director ofGroup Marketing reporting to the ChiefExecutive. A business studies graduate ofKSL Lucerne, Switzerland, he attended the97th Advanced Managers Program atHarvard Business School.

5Dr Bernard Canavan (64)Non-executive Director(Chairman Audit Committee)Joined the Board as a Non-executive Directorin March 1999. Dr Canavan is a medicaldoctor. He was employed by AmericanHome Products for over 25 years until heretired in January 1994. He was president of that Corporation from 1990 to 1994.

6Ronald Nordmann (58)Non-executive DirectorJoined as a Non-executive director inDecember 1999 and has been a financialanalyst in healthcare equities since 1971.From September 1994 until January 2000,he was a portfolio manager and partner at Deerfield Management.

3Angus Russell (43)Group Finance DirectorJoined Shire in December 1999 as GroupFinance Director, previously he worked forICI, Zeneca and AstraZeneca for a total of 19 years. Mr Russell is a charteredaccountant, having qualified with Coopers & Lybrand and is a member of the Association of Corporate Treasurers.His last position was Vice PresidentCorporate Finance at AstraZeneca PLC.

4Dr Wilson Totten (44)Group R&D DirectorHas served as Group R&D Director sinceJanuary 1998. Dr Totten is a medical doctor. His last position was Vice Presidentof Clinical Research & Development with Astra Charnwood where he served from1995 to 1997.

1

2 3

4

5

6

8574 shire99 Report 12/4/00 3:35 pm


9Joseph Smith (61)Non-executive DirectorHas served as a non-executive directorsince December 1999. From 1989 to 1997,Mr Smith served in various positions atWarner-Lambert Company, includingPresident of Parke-Davis Pharmaceuticalsand President of the Shaving ProductsDivision (Schick and Wilkinson Sword).

10John Spitznagel (58)Non-executive DirectorJoined the Board in December 1999following service as President and ChiefExecutive Officer of Roberts since September1997. He was Executive Vice PresidentWorldwide Sales and Marketing from March1996 to September 1997, having served as President of Reed and CarnrickPharmaceuticals from September 1990until July 1995.

7Dr Zola Horovitz (65)Non-executive DirectorHas served as a Non-executive Directorsince December 1999. Dr Horovitz hasbeen self-employed as a consultant in thebiotechnology and pharmaceutical industriessince 1994. Previously he held variouspositions at Squibb Corporation and itssuccessor corporation, Bristol-MyersSquibb & Co, including that of Vice President,Business Development and Planning.

8Dr Barry Price (56)Senior non-executive Director(Chairman Remuneration Committee)Joined the Board on 24 January 1996having spent 28 years with Glaxo holding a succession of key executive positionswith Glaxo Group Research. He is a Non-executive Director of CelltechChiroscience plc and Chairman ofAntisoma plc. Dr Price is Chairman of the Remuneration Committee.

11Bill NuergePresident and Chief Executive, SRIJoined SRI in 1994 as Chief Operating Officer.He currently holds the positions of Presidentand Chief Executive Officer of SRI. Prior tojoining SRI in 1994 he served as GeneralManager and Vice President of Operations forLafayette Pharmaceuticals, Inc., from 1988.

12Jack KhattarPresident and Chief Executive, SLIIn May 1999, Mr Khattar joined Shire aspresident and CEO of Shire Laboratories Inc. Mr Khattar came to Shire from CIMA, a drugdelivery company, where he last served as anExecutive Officer and the Chairman of theOperating Management Committee with afunctional role as VP of Business Development.

13Neil HarrisCompany Secretary Mr Harris is a barrister and has 14 yearsexperience in the pharmaceutical industry. He joined Shire in November 1995 from the group legal department of Wellcome plc,where he had been Senior Legal Advisorfollowing its integration with Glaxo plc.

7

8

9

10

11

12

13

Executive Committee

Rolf Stahel Bill NuergeDr Wilson Totten Jack KhattarAngus Russell Neil Harris

8574 shire99 Report 12/4/00 3:35 pm

O2@@@@@@@@6KO2@@@@@@@@@@@@@@@6X?

?O2@@@@@@@@@@@@@@@@@@@@@@@@@@@)XO2@@@@@@@@@@@@@@@@@@@?g?I4@@1f@@@@@@@@@@@? @@@@@@@@@@@@

W2@@@@@@@@@@@@@@@@@@@@@@6Xh@@f@@@@@@@@@@@? @@@@@@@@@@@@?W&@@@@@@@@@@@@@@@@@@@@@@@@)X?g3@f@@@@@@@@@@@? @@@@@@@@@@@@W&@@@@@@@@@@@@@@@@@@@@@@@@@@)XgN@f@@@@@@@@@@@? @@@@@@@@@@@@

?W&@@@@@@@@@@@@@@@@@@@@@@@@@@@@)X?f?@f@@@@@@@@@@@? @@@@@@@@@@@@W&@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@1?f?@f@@@@@@@@@@@? @@@@@@@@@@@@7@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@Lf?@f@@@@@@@@@@@? @@@@@@@@@@@@

?J@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@1he@@@@@@@@@@@? @@@@@@@@@@@@O&@@@@@@@@@@@@@0M?eI4@@@@@@@@@@@@@@he@@@@@@@@@@@?

O2@@@@@@@@@@@@@@hI'@@@@@@@@@@@@L?h@@@@@@@@@@@?W2@@@@@@@@@@@@@@@5h?N@@@@@@@@@@@@1?h@@@@@@@@@@@?f?O2@@@6K O2@@@@6K

?O&@@@@@@@@@@@@@@@@?he3@@@@@@@@@@@@?h@@@@@@@@@@@?eO2@@@@@@@@@@6X @@@@@@@@@@@@h@@@@@@@@@@@?eO2@@@@@@@?hfO2@@@@@@@@@@@@6Khg?W2@@@@@@@@@@@@@@@@@@)X?hV4@@@@@@@@@@@?h@@@@@@@@@@@?W2@@@@@@@@@@@@@)K?hf@@@@@@@@@@@@h@@@@@@@@@@@?W2@@@@@@@@@?heO2@@@@@@@@@@@@@@@@6XhfW&@@@@(M?@@@@@@@@@@@@@)K @@@@@@@@@@@W&@@@@@@@@@@@@@@@@@hf@@@@@@@@@@@@h@@@@@@@@@@@W&@@@@@@@@@@?hW2@@@@@@@@@@@@@@@@@@@)X?he

?O&@@@@(Y??3@@@@@@@@@@@@@@@6K? @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@L?he@@@@@@@@@@@@h@@@@@@@@@@@@@@@@@@@@@@@?g?W&@@@@@@@@@@@@@@@@@@@@@)Xhe?W2@@@@@0Ye?N@@@@@@@@@@@@@@@@@@@6K? @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@1?he@@@@@@@@@@@@h@@@@@@@@@@@@@@@@@@@@@@@?gW&@@@@@@@@@@@@@@@@@@@@@@@)X?hW&@@@@(Mg@@@@@@@@@@@@@@@@@@@@@@6K @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@Lhe@@@@@@@@@@@@h@@@@@@@@@@@@@@@@@@@@@@@?f?W&@@@@@@@@@@@@@@@@@@@@@@@@@)Xh

?W&@@@@(Y?g3@@@@@@@@@@@@@@@@@@@@@@@@@6K @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@1he@@@@@@@@@@@@h@@@@@@@@@@@@@@@@@@@@@@@?f?7@@@@@@@@@@@@@@@@@@@@@@@@@@@1hW&@@@@0YhV'@@@@@@@@@@@@@@@@@@@@@@@@@@6K @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@@@@@@@@@@@@@?fJ@@@@@@@@@@@@0M?I4@@@@@@@@@@@@L?g

?O&@@@(Mhe?V'@@@@@@@@@@@@@@@@@@@@@@@@@@@6Xhf@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@@@@@@@@@@@@@?f7@@@@@@@@@@(M?fI'@@@@@@@@@@1?g?W2@@@@(Y?hfV'@@@@@@@@@@@@@@@@@@@@@@@@@@@)X?he@@@@@@@@@@@@@(M?eI'@@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@@@@@@@0?4@@@?e?J@@@@@@@@@@@Hg?V'@@@@@@@@@@Lg?7@@@@(Y ?V4@@@@@@@@@@@@@@@@@@@@@@@@@@@)Xhe@@@@@@@@@@@@(Yf?V'@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@@@@0Mhe?7@@@@@@@@@@5?hN@@@@@@@@@@1gJ@@@@(Y? ?I4@@@@@@@@@@@@@@@@@@@@@@@@@@)X?h@@@@@@@@@@@@H?gN@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@@(Mhf?@@@@@@@@@@@H?h?@@@@@@@@@@@g

?W&@@@(Y ?I4@@@@@@@@@@@@@@@@@@@@@@@@@1?h@@@@@@@@@@@@h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@@H?hf?@@@@@@@@@@@he?@@@@@@@@@@@gW&@@@@H? I4@@@@@@@@@@@@@@@@@@@@@@@Lh@@@@@@@@@@@5h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@@ ?@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@g

?W&@@@@5 ?I4@@@@@@@@@@@@@@@@@@@@1h@@@@@@@@@@@Hh?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@5 ?@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@g?7@@@@(Y ?I4@@@@@@@@@@@@@@@@@h@@@@@@@@@@@?h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@H ?@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@gJ@@@@(Y? I4@@@@@@@@@@@@@@h@@@@@@@@@@@?h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@? ?@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@g

?W&@@@@H @@@@@@@@@@@@hfI'@@@@@@@@@@@@h@@@@@@@@@@@?h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@? ?@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@g?7@@@@5? @@@@@@@@@@@@hf?N@@@@@@@@@@@@h@@@@@@@@@@@?h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@? ?@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@g?@@@@@H? @@@@@@@@@@@@L?hf@@@@@@@@@@@@h@@@@@@@@@@@?h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@? ?@@@@@@@@@@@J@@@@@ @@@@@@@@@@@@)Xhe?J@@@@@@@@@@@@h@@@@@@@@@@@?h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@? ?@@@@@@@@@@@7@@@@5 3@@@@@@@@@@@@)X?hW&@@@@@@@@@@@@h@@@@@@@@@@@?h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@? ?@@@@@@@@@@@L?@@@@@H N@@@@@@@@@@@@@)Kg?O&@@@@@@@@@@@@5h@@@@@@@@@@@?h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@? ?3@@@@@@@@@@)XhW2@@@@@@@@@@g@@@@@? ?@@@@@@@@@@@@@@@@@6KO2@@@@@@@@@@@@@@@Hh@@@@@@@@@@@?h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@? ?N@@@@@@@@@@@)X?f?W&@@@@@@@@@@5g@@@@@? ?3@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@?h@@@@@@@@@@@?h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@? 3@@@@@@@@@@@)KfO&@@@@@@@@@@@Hg@@@@@L ?V'@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@5?h@@@@@@@@@@@?h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@? N@@@@@@@@@@@@@@@@@@@@@@@@@@@@@5?g@@@@@)X? N@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@(Y?h@@@@@@@@@@@?h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@? ?3@@@@@@@@@@@@@@@@@@@@@@@@@@@@H?g@@@@@@)X ?3@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@(Yhe@@@@@@@@@@@?h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@? ?V'@@@@@@@@@@@@@@@@@@@@@@@@@@5h3@@@@@@)K?gO2@(g?V4@@@@@@@@@@@@@@@@@@@@@@@@@@@@(Y?he@@@@@@@@@@@?h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@? V'@@@@@@@@@@@@@@@@@@@@@@@@(YhV'@@@@@@@@@@@@@@@@0Yh?I'@@@@@@@@@@@@@@@@@@@@@@@@@0Yhf@@@@@@@@@@@?h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@? ?V4@@@@@@@@@@@@@@@@@@@@@@0Y?h?V4@@@@@@@@@@@@0M?hfV4@@@@@@@@@@@@@@@@@@@@@@0M @@@@@@@@@@@?h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@? ?I'@@@@@@@@@@@@@@@@@@0M?he

I4@@@@@0M? I4@@@@@@@@@@@@@@@@@@0M @@@@@@@@@@@?h?@@@@@@@@@@@he@@@@@@@@@@@@h@@@@@@@@@@@? V4@@@@@@@@@@@@@@@0M?hf?I4@@@@@@@@@@@@0M? ?I4@@@@@@@@@@0M?hg

Shire Pharmaceuticals Group plcEast Anton AndoverHampshire SP10 5RGEngland

Tel +44 (0)1264 333455Fax +44 (0)1264 332879

www.shire.com

8574 shire99 Report 12/4/00 3:35 pm

Year ended 31 December

1995 1996 1997 1998 1999$’000 $’000 $’000 $’000 $’000

US GAAP:Revenues 137,624 127,772 191,554 308,984 401,532Operating expenses (152,655) (183,086) (277,395) (285,748) (477,600)

(Loss)/income from operations (15,031) (55,314) (85,841) 23,236 (76,068)Interest and other, net (3,457) 3,236 3,109 327 (2,868)

(Loss)/income from continuing operations before taxes (18,488) (52,078) (82,732) 23,563 (78,936)

Income taxes (2,518) 15,815 (1,420) (2,991) (16,062)

(Loss)/income from continuing operations (21,006) (36,263) (84,152) 20,572 (94,998)

(Loss)/income from discontinued operations, net of tax (27,045) 556 – – –

Net (loss)/income (48,051) (35,707) (84,152) 20,572 (94,998)Net (loss)/income per share – basic (0.58) (0.30) (0.45) 0.09 (0.39)

Net (loss)/income per share – diluted (0.58) (0.30) (0.45) 0.08 (0.39)

Weighted average number of shares outstanding – basic 83,083 118,766 185,153 234,045 244,699

Weighted average number of shares outstanding – diluted 83,083 118,766 185,153 242,806 244,699

Cash and cash equivalents 24,352 95,056 59,868 52,973 54,082Total assets 356,410 435,338 664,930 873,605 887,763Long term debt 16,183 10,639 10,327 126,774 126,314Shareholders’ equity 242,292 361,365 565,920 663,314 587,284

Five year review


8574 shire99 Accounts 12/4/00 3:36 pm Page 18

Report of the Remuneration Committee


The Company has applied the UK Principles of Good Governance (see page 28) relating to Directors’ remuneration and has compliedwith the provisions of the UK Code of Best Practice as set out below and as disclosed in the Corporate Governance Statements. Thisinformation is included in this annual review as the Company believes it is useful for all readers.

The Board has considered whether to invite the AGM to approve the remuneration policy and has decided that in the circumstances it isnot appropriate to do so.

The Remuneration CommitteeThe Remuneration Committee (the ‘Committee’) comprises four non-executive Directors; Dr. James Cavanaugh, Dr. Bernard Canavan,Joseph Smith, and is chaired by Dr Barry Price. The Chief Executive attends meetings of the Committee at its invitation.

Remuneration policyThe Committee’s policy on the remuneration of executive Directors is directed at the retention and motivation of executive Directors by ensuring that their remuneration is competitive with companies within the sector of emerging pharmaceutical companies, taking into account the interests of shareholders.

The Committee meet regularly and act within agreed terms of reference. In developing remuneration policy and fixing remuneration,consideration is given to salary data of directors of comparable companies of a similar size in industry generally and, more specifically, inthe emerging pharmaceuticals sector. The Chief Executive also advises the Committee on other executive remuneration and on individualperformance. External agencies are also used to advise on levels of remuneration as appropriate. No Director is involved in determininghis own remuneration. The procedures and criteria for determining remuneration policy are regularly reviewed by the Committee.

a) Annual bonusesThe annual bonuses payable to executive Directors are established on the basis of objectives for the Group and personal objectives. They include measurable and quantitative criteria related to financial performance. For the year ended 31 December 1999 these includedrevenue and earnings targets. The maximum annual bonus for each executive Director for the year ended 31 December 1999 was 40 per cent of salary.

b) Share optionsDetails of the share option schemes are set out below and in Note 24 to the financial statements. Except as mentioned below, none ofthe executive Directors who served during the year were granted additional options under any of the Company’s share option schemes inthe year ended 31 December 1999.

Share options under the Sharesave Scheme and Stock Purchase Plan (see notes iv and v on page 27) are offered at a discount aspermitted by paragraph 13.31 of the UK London Stock Exchange Listing Rules. Share options are not otherwise offered at a discount.

The following share options were granted to executive Directors under the Executive Scheme during the year:

Number of Executive Director Date of grant ordinary shares Exercise price

Dr J W Totten 12/5/99 25,000 470.5pA C Russell 13/12/99 50,000 717.5p

Share options are granted to executive Directors and senior executives as an incentive. The grant of options is wholly discretionary. In granting share options, the Committee takes into account the advice and recommendations of the Chief Executive and individualsalary levels and positions within the Group.

c) Retirement benefitsThe Company contributes 10 per cent of salary to the personal pension plans of the executive Directors.

d) Fees for non-executive DirectorsThe remuneration of each of the non-executive Directors was determined by the Board. Dr Cavanaugh has waived his right to receive hisremuneration of £20,000 (approximately $33,000) for the year to 31 December 1999.


Report of the Remuneration Committee


e) Long-term incentive plani) Structure

The Long Term Incentive Plan (the ‘Plan’) was adopted at the general meeting on 30 June 1998. Under the Plan, the Company may at any time, with the approval of the Committee, grant, or request that trustees grant, an award to any full-time employee of anymember of the Group.

ii) EligibilityAn award may be made to any full-time employee (including a Director who is also such an employee) of a member of the Group on the terms set out in the Plan and upon such other terms as the Board (or a committee appointed by the Board) may specify,provided that no award may be granted to an employee who is within two years of his contractual retirement age.

Directors were granted an Award under the Long Term Incentive Plan (as a ‘Conditional Allocation’ as defined in the Plan) in respectof the total number of ordinary shares in the Company, upon the terms set out in the plan, as follows:

Value of Total EarliestAward at number of date on

Date of Grant date ordinary which AwardAward £'000 shares can be made

R Stahel 08/04/99 150 32,230 08/04/03Dr J W Totten 08/04/99 71 15,255 08/04/03S A Stamp 08/04/99 81 17,404 N/AA C Russell 13/12/99 90 12,436 13/12/03

The awards to Mr Stamp in respect of 17,404 ordinary shares lapsed upon the cessation of Mr Stamp's employment on 13 December 1999.

f) Service contractsOf the Directors proposed for election and re-election, Mr Stahel’s, Dr Totten’s and Mr Russell’s service contracts are terminable on 12months’ notice. No Director has a notice period of more than 12 months. Non-executive Directors have been appointed for a fixed twoyear term which will not continue automatically.

g) Related party transactions In January 1999 the Group divested its Indianapolis manufacturing plant and 30 non-strategic products to Integrity PharmaceuticalCorporation for a total consideration of $1.5 million, together with a royalty on net sales of products over a ten year period. Mr. Griggs,who resigned as a Director on 31 December 1998, was at the time of the sale a controlling shareholder of Integrity PharmaceuticalCorporation.

In April 1999 Roberts Pharmaceutical Corporation made a loan in the sum of $283,000 to Mr Spitznagel. The loan is unsecured andbears interest at a rate of 4.15 per cent, per annum. Ten per cent of the principal outstanding plus accrued interest is repayable oneach of the first four anniversaries of the loan and the balance of principal plus accrued interest is repayable on the fifth anniversary ofthe loan. Mr Spitznagel repaid the full outstanding balance of the loan on 29 March 2000.

Mr Spitznagel entered into a consultancy agreement with the Company in December 1999, which provided that;

i) if he has good reason, as defined in his service agreement with Roberts Pharmaceutical Corporation, to terminate his employmentwith Roberts Pharmaceutical Corporation under his service agreement that the Company will cause Roberts PharmaceuticalCorporation to provide him with the payments and benefits he is entitled to upon a ‘good reason’ termination;

ii) Mr Spitznagel would provide consulting services to the Company for at least 42 months following the merger with Roberts PharmaceuticalCorporation, unless Mr Spitznagel terminates the consultancy agreement prior to the end of the 42nd month upon 30 days notice; and

iii) the Company would pay Mr Spitznagel at a rate of $400,000 per annum for his consulting services, $150,000 per annum as anoffice holder, $250,000 per annum to comply with certain restrictive covenants contained therein and $150,000 per annum for tax,financial and estate planning advice, life insurance and health insurance.



Total TotalYear to Year to

Directors’ 31 December 31 DecemberSalary Bonus fees Benefits Pension 1999 1998

Directors’ emoluments Notes $’000 $’000 $’000 $’000 $’000 $’000 $’000

Executive DirectorsR Stahel (i) 486 194 – 20 49 749 656A C Russell (ii) 17 – – – 2 19 –S A Stamp (iii) 261 104 – 15 26 406 387Dr J W Totten (iv) 230 91 – 16 23 360 –Dr J R Murray (v) – – – – – – 164R D Griggs (vi) – – – – – – 138

994 389 – 51 100 1,534 1,345

Non-executive DirectorsDr J H Cavanaugh (vii) – – – – – – –Dr H Simon (viii) – – 20 – – 20 56Dr B J Price – – 32 – – 32 33Dr B Canavan (ix) – – 26 – – 26 –Dr Z Horovitz (x) – – 1 – – 1 –R Nordmann (x) – – 1 – – 1 –J Smith (x) – – 1 – – 1 –J Spitznagel (x) – – 1 – – 1 –Dr R Vukovich (xi) – – 1 – – 1 –R Bransgrove (xii) – – – – – 1 15

– – 83 – – 83 104

Total 994 389 83 51 100 1,617 1,449

Gains on exercise of share options are disclosed on page 24.

Notes(i) Highest paid Director in each year.(ii) Mr Russell was appointed to the Board on 13 December 1999. Directors’ remuneration includes amounts due to Mr Russell from

13 December 1999.(iii) Mr Stamp retired from the Board on 13 December 1999. Directors’ remuneration includes amounts due to Mr Stamp for the period to

13 December 1999. (iv) Dr Totten was appointed to the Board on 1 January 1999.(v) Dr Murray resigned from the Board on 30 June 1998. Directors’ remuneration includes amounts due to Dr Murray for the period to 30

June 1998.(vi) On 1 February 1998 Mr Griggs resigned his executive position and became a non-executive Director. Upon Mr Griggs' resignation from

his executive roles in the Shire Group, Shire Richwood, Inc. entered into a consultancy agreement with Mr Griggs. Under the terms of theconsultancy agreement, Shire Richwood, Inc. agreed to pay Mr Griggs a fee of $75,000 for the first 6 months and thereafter at the rate of $90,000 per annum. After 12 months the consultancy agreement was terminable by either party giving six months written notice.Notice of termination of the consultancy agreement was served on 2 February 1999.

(vii) Dr Cavanaugh is entitled to receive Directors’ fees of £20,000 per annum (approximately $33,000). Dr Cavanaugh has waived hisentitlement of £20,000 (approximately $33,000) for the year to 31 December 1999 and £19,520 (approximately $32,000) for the year to31 December 1998 and has indicated that he will continue to do so for the current fiscal year.

(viii) Dr Simon retired from the Board on 11 May 1999. Directors’ remuneration includes amounts due to Dr Simon for the period to 11 May 1999.

(ix) Dr Canavan was appointed to the Board as a non-executive Director on 11 March 1999. Directors remuneration includes amounts dueto Dr Canavan from that date.

(x) Dr Horovitz, Mr Nordmann, Mr Smith and Mr Spitznagel were appointed non-executive Directors on 23 December 1999. Directors’remuneration includes amounts due to each of them for the period from appointment to 31 December 1999.

(xi) Dr Vukovich retired from the Board on 14 February 2000 having been appointed a non-executive Director on 23 December 1999.(xii) Mr Bransgrove retired from the Board on 30 June 1998. Directors' remuneration includes amounts due to Mr Bransgrove for the period

to 30 June 1998.


22 Shire Pharmaceuticals Group plc Report of the remuneration committee

Directors’ shareholdings*Directors who held office at the end of the year had interests in the share capital of the Company as follows:

Number of Ordinary shares of 5p each

31 December 31 DecemberNotes 1999 1998

Dr J H Cavanaugh (i) 12,244,810 12,244,810R Stahel (ii) 13,827 13,827A C Russell – N/ADr J W Totten – N/ADr B Price 31,350 31,350Dr B Canavan – N/ADr Z Horovitz 3,128 N/AR Nordmann 3,128 N/AJ Smith 125,120 N/AJ Spitznagel 75,503 N/ADr R Vukovich 5,422,922 N/A

*All interests are beneficial unless otherwise stated

Notesi) Dr Cavanaugh is the President of HealthCare Ventures LLC, which is the management company for a number of limited partnerships

which have interests in 12,244,810 ordinary shares. Dr Cavanaugh is also a general partner in these partnerships which acquired theirordinary shares following the acquisition of Pharmavene, Inc. in March 1997.

ii) Mr Stahel exercised options in the Shire Holdings Limited Share Option Scheme for 440,000 ordinary shares in the Company at 50p pershare on 11 May 1999. Mr Stahel disposed of these shares on 12 May 1999 at a price of £4.73.

Directors’ share optionsThe Directors and employees have been granted options over ordinary shares under the Shire Holdings Limited Share Option Scheme(‘SHL Scheme’), the Imperial Pharmaceutical Services Limited Employee Share Option Scheme (Number One) (‘SPC Scheme’), thePharmavene 1991 Stock Option Plan (‘SLI Plan’), the Shire Pharmaceuticals Executive Share Option Scheme (Parts A and B) (‘Executive Scheme’), the Shire Pharmaceuticals Sharesave Scheme (‘Sharesave Scheme’), the Shire Pharmaceuticals Group plcEmployee Stock Purchase Plan (‘Stock Purchase Plan’), the Richwood 1993 and 1995 Stock Option Plans (‘SRI Plan’) and the RobertsStock Option Plan (‘Roberts Plan’) as follows:


Number of ordinary shares Exercise dates

at at1 January 31 December Exercise

Director Scheme Notes 1999 Granted Exercised Lapsed 1999 price Earliest Latest

R Stahel SHL (i) 146,660 – (146,660) – – £0.50 07.03.95 06.03.01146,660 – (146,660) – – 0.50 07.03.96 06.03.01146,680 – (146,680) – – 0.50 07.03.97 06.03.01

89,840 – – – 89,840 1.00 24.11.96 23.11.0289,840 – – – 89,840 1.00 24.11.97 23.11.0289,840 – – – 89,840 1.00 24.11.98 23.11.0290,160 – – – 90,160 1.00 24.01.97 23.01.0390,160 – – – 90,160 1.00 24.01.98 23.01.0390,160 – – – 90,160 1.00 24.01.99 23.01.03

ExecutiveScheme ‘A’ (iii) 13,761 – – – 13,761 2.18 15.02.99 14.02.06ExecutiveScheme ‘B’ (iii) 329,095 – – – 329,095 1.75 15.02.99 14.02.03

81,918 – – – 81,918 3.385 09.02.01 08.02.05Sharesave Scheme (iv) 9,857 – – – 9,857 1.75 01.04.01 30.09.01

1,414,631 – (440,000) – 974,631

Dr J W Totten ExecutiveScheme ‘A’ (iii) 8,862 – – – 8,862 £3.39 09.02.01 08.02.08ExecutiveScheme ‘B’ (iii) 141,138 – – – 141,138 3.385 09.02.01 08.02.05

25,000 – – 25,000 4.705 12.05.02 11.05.06

150,000 25,000 – – 175,000

A C Russell ExecutiveScheme ‘A’ (iii) – 4,181 – – 4,181 £7.175 13.12.02 12.12.09ExecutiveScheme ‘B’ (iii) – 45,819 – – 45,819 7.175 13.12.02 12.12.06

– 50,000 – – 50,000

Dr Z Horovitz Roberts (viii) 31,280 – – – 31,280 $3.64 – 23.10.0231,280 – – – 31,280 3.68 – 16.12.0231,280 – – – 31,280 3.38 – 13.01.0411,730 – – – 11,730 5.60 – 10.06.0431,280 – – – 31,280 5.24 – 01.09.0431,280 – – – 31,280 6.00 – 21.01.0515,640 – – – 15,640 6.02 – 27.05.05

183,770 – – – 183,770

R Nordmann Roberts (viii) 93,840 – – – 93,840 $6.02 – 27.05.05

J Smith Roberts (viii) 31,280 – – – 31,280 $5.24 – 01.09.0431,280 – – – 31,280 6.00 – 21.01.0515,640 – – – 15,640 6.02 – 27.05.05

78,200 – – – 78,200

Dr R Vukovich Roberts (viii) 78,200 – – – 78,200 $4.38 – 09.04.04430,100 – – – 430,100 5.60 – 10.06.04312,800 – – – 312,800 5.24 – 01.09.04

31,280 – – – 31,280 6.00 – 21.01.0515,640 – – – 15,640 6.02 – 27.05.05

1,094,800 – – – 1,094,800 3.68 – 16.12.02

1,962,820 – – – 1,962,820

J Spitznagel Roberts (viii) 93,840 – – – 93,840 $3.64 – 04.03.0278,200 – – – 78,200 3.68 – 16.12.02

109,480 – – – 109,480 4.08 – 10.09.0078,200 – – – 78,200 4.38 – 10.04.04

164,220 – – – 164,220 5.60 – 10.06.04312,800 – – – 312,800 5.24 – 01.09.04

78,200 – – – 78,200 6.76 – 11.12.04375,360 – – – 375,360 6.02 – 27.05.05

1,290,300 – – – 1,290,300




Number of ordinary shares Exercise dates

at at1 January 31 December Exercise

Director Scheme Notes 1999 Granted Exercised Lapsed 1999 price Earliest Latest

S A Stamp SHL Scheme (i) 53,320 – (53,320) – – £0.50 11.04.95 10.04.0153,320 – (53,320) – – 0.50 11.04.96 10.04.0153,360 – (53,360) – – 0.50 11.04.97 10.04.0166,660 – – – 66,660 1.00 24.11.96 23.11.0266,660 – – – 66,660 1.00 24.11.97 23.11.0266,680 – – – 66,680 1.00 24.11.98 23.11.0226,660 – – – 26,660 1.00 24.01.97 23.03.0326,660 – – – 26,660 1.00 24.01.98 23.03.0326,680 – – – 26,680 1.00 24.01.99 23.03.03

ExecutiveScheme ‘A’ (iii) 13,761 – – – 13,761 2.18 15.02.99 14.02.06ExecutiveScheme ‘B’ (iii) 180,523 – – – 180,523 1.75 15.02.99 14.02.06

54,063 – – (54,063) – 3.385 09.02.01 08.02.05

688,347 – (160,000) (54,063) 474,284

On 11 May 1999 Mr Stahel exercised 440,000 share options under the SHL Scheme, the market value at the time of exercise was 473pence per share. On 12 May 1999 Mr Stahel sold 46,750 shares and realised gross proceeds of £221,127 and a gross gain of £197,752.On May 13 Mr Stahel sold a further 393,250 shares and realised gross proceeds of £1,864,005 and a gross gain of £1,667,380.

On 6 April 1999 Mr Stamp exercised 100,000 share options under the SHL Scheme, the market value at the time of exercise was 462pence per share. On 6 April 1999 Mr Stamp sold 25,000 shares and realised gross proceeds of £115,500 and a gross gain of £103,000.On 11 May 1999 Mr Stamp exercised 60,000 share options under the SHL Scheme, the market value at the time of exercise was 473pence per share. On 12 May 1999 Mr Stamp sold 135,000 shares and realised gross proceeds of £638,550 and a gross gain of £571,050.

On 13 December 1999, Mr Stamp resigned from the Board and was replaced as Group Finance Director by Angus Russell. At this time54,063 options granted to Mr Stamp under Executive Scheme ‘B’ lapsed.

On 23 December 1999 Dr Horovitz, Mr Nordmann, Mr Smith, Mr Spitznagel and Dr Vukovich were appointed to the Board following themerger with Roberts Pharmaceutical Corporation. The options recorded on the table represent options that had been granted to thoseDirectors under the Roberts Stock Option Plan as at that date. Dr Vukovich resigned from the Board on 14 February 2000.

On 1 March 2000 the following share options were granted to the Executive Directors under the Executive Scheme Part B at an exerciseprice of £10.275 per share:

Number ofordinary shares

R Stahel 54,189Dr J W Totten 16,995A C Russell 6,422

On 8 March 2000 Dr Horovitz exercised 31,280 share options under the Roberts Scheme at $3.68 per share and on the same dayexercised a further 31,280 share options at $3.64 per share. On 9 March 2000 all of the 62,560 resulting shares were sold realising grossproceeds of £743,213.

On 9 and 10 March 2000 Mr Nordmann exercised 93,840 share options under the Roberts Scheme at $6.02 per share. On 9 March2000 R Nordmann sold 50,000 realising gross proceeds of $956,250.

On 10 March 2000 Dr Canavan purchased 1,000 American Depository Receipts (ADR’s), the equivalent of 3,000 ordinary shares, for $65.56 per ADR.

On 17 March 2000 Mr Spitznagel exercised 600,000 share options under the Roberts Scheme at a total exercise price of $2,677,616. On 24 March 2000 Mr Spitznagel exercised a further 334,809 share options under the Roberts Scheme for a total exercise price of$1,890,013. During March 2000 J Spitznagel sold 934,809 shares realising gross proceeds of $17,073,856.



The middle market price of Shire Pharmaceuticals Group plc’s ordinary shares was 618.5 pence as at 31 December 1999. The high and low mid-market prices during the year to 31 December 1999 were 686.5 pence and 374.5 pence respectively.

Except, as disclosed above, no Director who served during the year under review has been granted or exercised any options during the period between 1 January 2000 and 7 April 2000.

In addition to those options granted to executive Directors disclosed above, employees and former employees of the Group have beengranted options over the following ordinary shares:

Number of Exercise datesordinary Exercise

Scheme Notes shares price Earliest Latest

SHL Scheme (i) 3,320 £1.00 17/08/94 16/08/003,320 1.00 17/08/95 16/08/003,360 1.00 17/08/96 16/08/00

11,300 1.00 01/07/95 30/06/0111,300 1.00 01/07/96 30/06/0111,300 1.00 01/07/97 30/06/0132,953 1.00 24/11/96 23/11/0232,953 1.00 24/11/97 23/11/0232,954 1.00 24/11/98 23/11/02

506 1.00 24/01/97 23/01/03506 1.00 24/01/98 23/01/03508 1.00 24/01/99 23/01/03

SPC Scheme (ii) 14,400 £0.31 30/06/0133,600 0.31 16/08/02

Executive Scheme ‘A’ (iii) 69,283 £2.18 15/02/99 14/02/0635,315 1.90 30/09/99 29/09/067,620 2.69 26/08/00 25/08/07

163,057 3.385 09/02/01 08/02/088,275 3.625 13/08/01 12/08/08

27,194 4.17 11/12/01 10/12/0817,765 4.735 15/03/02 14/03/096,376 4.705 12/05/02 11/05/09

10,618 5.65 26/07/02 25/07/095,623 5.335 23/08/02 22/08/09

Executive Scheme ‘B’ (iii) 214,431 £1.75 15/02/99 14/02/0335,685 1.90 30/09/99 29/09/0340,000 2.34 25/02/00 24/02/04

648,288 2.185 25/03/00 24/03/04477,380 2.69 26/08/00 25/08/04

10,000 2.60 31/10/00 30/10/04873,925 3.385 09/02/01 08/02/05651,725 3.625 13/08/01 12/08/05

17,806 4.17 11/12/01 10/12/0542,500 4.26 12/01/02 11/01/062,000 4.20 10/03/02 09/03/06

959,735 4.735 15/03/02 14/03/06168,624 4.705 12/05/02 11/05/06

19,382 5.65 26/07/02 25/07/0614,377 5.335 23/08/02 22/08/06

Sharesave Scheme (iv) 65,442 £1.75 01/04/01 30/09/0124,182 1.54 01/12/99 31/05/0038,082 1.54 01/12/01 31/05/0226,671 2.20 01/11/00 30/04/0116,463 2.20 01/11/02 30/04/03

Stock Purchase Plan (v) 218,950 £2.30 – –



Number of Exercise datesordinary Exercise

Scheme Notes shares price Earliest Latest

SLI Plan (vi) 616 $0.83 – 09/06/0212,541 1.30 – 03/02/03

1,045 1.30 – 06/04/0358,990 1.30 – 18/10/03

6,964 1.30 – 27/02/049,918 1.30 – 10/04/043,088 1.30 – 17/10/045,574 1.30 – 16/01/051,859 1.30 – 04/04/05

45,280 1.30 – 21/05/05465 1.30 – 11/07/05

1,484 1.30 – 17/10/053,715 1.30 – 05/12/056,022 1.30 – 22/01/06

186,838 1.30 – 05/03/0672,152 1.30 – 13/05/06

1,568 1.30 – 07/08/065,126 1.73 – 06/11/06

62,122 1.73 – 10/12/06

SRI Plan (vii) 259,785 $0.28 – 05/09/00166,996 0.41 – 14/03/01388,852 0.45 – 14/03/01169,439 1.62 – 13/03/02209,316 1.64 – 13/03/02

Roberts (viii) 3,128 $3.64 – 10/07/0187,273 3.64 – 01/12/0177,574 5.48 – 01/12/0178,200 3.64 – 13/02/0210,010 3.64 – 17/07/0275,072 3.64 – 23/10/0223,460 3.64 – 03/12/02

662,891 3.68 – 16/12/0210,948 3.76 – 15/01/03

1,876 4.24 – 22/01/0346,920 3.96 – 02/04/0359,432 3.76 – 21/05/0311,255 3.22 – 01/08/03

890,526 3.28 – 03/12/0393,840 3.38 – 13/01/0412,512 3.80 – 12/02/0415,640 4.10 – 02/03/0440,664 4.32 – 06/04/04

626 4.38 – 09/04/0462,560 4.38 – 13/04/04

203,320 5.60 – 10/06/0425,024 6.54 – 29/07/04

1,495,802 5.24 – 01/09/045,005 7.06 – 09/11/045,005 7.70 – 01/12/04

504,969 6.76 – 11/12/0493,840 6.00 – 21/01/05

6,256 8.28 – 10/03/0515,640 7.00 – 24/03/0521,896 5.88 – 17/05/05

924,324 6.02 – 27/05/05



(i) These options have been granted over shares in Shire Holdings Limited, a previous holding company of the Group. Exercise of theseoptions results in the optionholder receiving ordinary shares in the Company as set out above.

(ii) These options have been granted over shares in SPC, a company acquired by the Group in September 1995. Exercise of these optionsresults in the optionholder receiving ordinary shares in the Company as set out above. As a result of the acquisition of SPC in September1995, and in accordance with the terms of the SPC Scheme, all options granted under the SPC Scheme became immediately capableof exercise.

(iii) Options granted under the Executive Scheme are subject to performance criteria and cannot be exercised in full, unless the Company’sshare price increases at a compound rate of at least 20.5 per cent per annum over a minimum three-year measurement period. If theCompany’s share price increases at a compound rate of at least 14.5 per cent per annum over a minimum three-year measurementperiod, 60 per cent of the options may be exercised. If these conditions are not met after the initial three years, they are thereafter testedquarterly by reference to share price growth over the extended period. If the share price does not meet these conditions at any time,none of the options will become exercisable.

(iv) Options granted under the Sharesave Scheme are granted with an exercise price equal to 80 per cent of the mid-market price on theday before invitations are issued to employees. Following changes in the Inland Revenue rules governing such schemes, employees maynow enter into three or five year savings contracts.

(v) The Stock Purchase Plan is available only to US employees of the Group. Under the Stock Purchase Plan options are granted with anexercise price equal to 85 per cent of the market value of the ordinary shares on the first or last day of the offering period, whichever isthe lower. The offering period is 27 months from the time of the offer and employees can save up to $500 per month. Options may beexercised at the end of the offering period, being 31 December 1999.

(vi) These options have been granted over shares in SLI, formerly Pharmavene, Inc., the company acquired by the Group on 23 March 1997.Exercise of these options results in the optionholder receiving ordinary shares in the Company as set out above. As a result of theacquisition of SLI, and in accordance with the terms of the original share option plan, all options granted under that plan becameimmediately capable of exercise.

(vii) These options have been granted over shares in SRI, formerly Richwood Pharmaceutical Company, Inc., the company acquired by theGroup on 22 August 1997. Exercise of these options results in the optionholder receiving ordinary shares in the Company as set outabove. As a result of the acquisition of SRI, and in accordance with the terms of the original share option plan, all options granted underthat plan became immediately capable of exercise.

(viii) These options have been granted over shares in Roberts Pharmaceutical Corporation, the company that merged with the Group on 23 December 1999. Exercise of these options results in the option holder receiving ordinary shares in the Company as set out above. As a result of the merger and in accordance with the terms of the original Roberts share option plan, all options granted under that planbecame immediately capable of exercise.


The Company is positivelycommitted to high standards ofcorporate governanceThe combined code: Principles of GoodGovernance and Code of Best Practice(‘the Combined Code’) was published inthe UK by the Committee on CorportateGovernance. Shire, which is listed on theUK London Stock Exchange, is required to report on compliance with the Combined Code. Throughout the financialyear the Company has sought to complyfully with the Combined Code and has, in the Directors’ opinion done so, exceptas noted below. The following statementtogether with the Report of theRemuneration Committee on pages 19 to 27 sets out the manner in whichthe Company has applied the principlescontained in section 1 of the Combined Code.

Directors

The BoardThe Directors bring a wide range ofexpertise and experience to the Board.Their biographical details are shown on pages 16 and 17.

The Board meets at least four times ayear and meetings are well attended. The Board has formally reserved specificmatters to itself for determination.Specific powers and authorities are alsodelegated to an Executive Committeeand to the various other BoardCommittees set out below.

All Directors have access to the adviceand guidance of the Company Secretaryand are encouraged to seek independentadvice at the Company’s expense, where they feel it appropriate. No suchindependent advice was sought duringthe year.

Chairman and Chief ExecutiveThe offices of Chairman and ChiefExecutive are held separately. The non-executive Chairman, Dr. JamesCavanaugh is responsible for the runningof the Board and the Chief Executive,Rolf Stahel is responsible for running the business and chairs the Executive Committee.

Dr. Barry Price is the nominated seniorindependent non-executive Director.

Board BalanceThe Board comprises three executiveand seven non-executive Directors. Five of the non-executive Directors (Dr Barry Price, Dr Bernard Canavan,Ronald Nordmann, Dr Zola Horovitz and Joseph Smith) are viewed asindependent of management and freefrom any business or other relationshipwhich could materially interfere with theexercise of their independent judgement.The Chairman ensures that Boarddiscussions are conducted taking allviews into account, so that no individualDirector or small group of Directorsdominates proceedings.

Supply of InformationThe executive Directors and theCompany Secretary are responsible forensuring that detailed information isprovided to the Board at least one weekbefore any scheduled meeting of theBoard. Before decisions are made,consideration is given to the adequacy of information available to the Board and,if necessary, decisions are deferred iffurther information is required.

Appointments to the BoardThe Board has recently delegatedresponsibility for nominations to theBoard to a Nomination Committee madeup of two non-executive Directors, Dr James Cavanaugh and Joseph Smithand one executive director, Rolf Stahel.The Chairman of the NominationCommittee is Dr. James Cavanaugh, thenon-executive Chairman of the Board.

The Nomination Committee intends to adopt formal and transparentprocedures for such appointmentsduring the course of the financial yearending 31 December 2000.

Re-ElectionNon-executive Directors are appointedfor a maximum period of two years. Re-appointment of non-executiveDirectors following the expiry of suchtwo-year period is subject to Board approval.

The provisions of the Company's Articlesof Association dealing with the retirementby rotation of Directors are not fullycompliant with the Combined Code. The Combined Code provides that allDirectors should submit themselves forre-election at regular intervals of at leastevery three years. Accordingly, it isintended that the Notice of AGM willpropose to alter the Articles ofAssociation so as to ensure compliancewith the Combined Code in this respect.

Board CommitteesThe Board reviewed its structure ofstanding committees during the year.Their written terms of reference (with theexception of the Nomination Committee)have been approved by the Board. The principal standing committees are as follows:

a) Audit CommitteeThe Audit Committee meets at leastthree times a year and comprises fournon-executive Directors, namely Dr.James Cavanaugh, Dr. Barry Price,Ronald Nordmann and Dr. BernardCanavan. Dr. Bernard Canavan is theChairman and the majority of theCommittee is independent. Its functionand working practices are set out below.

b) Remuneration CommitteeThe Remuneration Committee meets atleast three times a year and comprisesfour non-executive Directors, namely Dr. James Cavanaugh, Dr. BernardCanavan, Joseph Smith and Dr. BarryPrice. Dr. Barry Price is the Chairman.The Report of the RemunerationCommittee appears on pages 19 to 27which gives details of each Director’sremuneration together with policy andprocedures regarding senior managementremuneration. The remuneration of non-executive Directors is determined by the Chief Executive together with the executive Directors.

c) Nomination CommitteePlease see above under the heading‘Appointments to the Board’.

Corporate governance



d) Executive CommitteeThe day to day management of theCompany and its subsidiaries has beendelegated by the Board to an ExecutiveCommittee which operates within clearand formal parameters. Rolf Stahel is the Chairman of the Committee whichconsists of six Senior Employeesincluding three executive Directors. The Committee reports to and seeks guidance from the Board on a regular basis.

Directors’ remunerationThe Company’s Remuneration Policyappears on page 19. The Policy detailsthe levels of remuneration for Directorsand the basis upon which executiveremuneration is fixed.

Relations with shareholdersThe Company is committed to maintaininggood relations with its Shareholdersthrough the provision of regular interimand annual reports and other tradingstatements, as well as through theAnnual General Meeting. The Companyarranges individual and group meetingswith its institutional shareholders in orderto discuss relevant communications.

The Company’s website atwww.shire.com provides Companyinformation and is regularly updated.

Constructive use of the AnnualGeneral MeetingThe Company holds its Annual GeneralMeeting once a year in London and allShareholders are given the opportunity to ask questions of the Board.

Balanced and understandableassessment of position and prospectsThe Company strives to give full, timelyand realistic assessments of matters thatimpact on its business and financialposition and to present scientific andother price-sensitive data in a balancedway. The Company voluntarily adoptedquarterly financial reporting, which is notobligatory in the UK and before it wasrequired under SEC rules. Newaccounting standards have been adoptedearly before becoming mandatory.

Accountability and audit

Financial ReportingThe Board has ultimate responsibility forthe preparation of accounts and for themonitoring of systems of internal financialcontrol. The Board strives to present abalanced and understandable assessmentof the Company’s position and its prospectsand endeavours to present scientific andother price sensitive information in abalanced way. The Company publishesquarterly financial reports so that theCompany’s financial position can beregularly monitored by its Shareholders.

On behalf of the Board, the Audit Committeeexamines the effectiveness of systems ofinternal financial control on a regularbasis. This is achieved by independentaccess to the Auditors throughout theyear in addition to presentations from theAuditors on a quarterly basis. Anysignificant findings or identified risks areclosely examined and are reported to theBoard with recommendations for action.

Internal ControlIn applying the principle that the Boardshould maintain a sound system ofinternal control to safeguard shareholders'investment and the company's assets,the Directors recognise that they haveoverall responsibility for ensuring that theGroup maintains a system of internalcontrol to provide them with reasonableassurance regarding effective and efficientoperations, internal financial control andcompliance with laws and regulations.

However, there are inherent limitations in any system of internal control andaccordingly even the most effectivesystem can provide only reasonable, and not absolute, assurance.

The Company will have established bythe end of the year the proceduresnecessary to implement the guidance on internal control issued by the Turnbullcommittee. In the meantime, theCompany has adopted the transitionalapproach permitted by the London StockExchange and reviewed the effectivenessof the system of internal control inaccordance with the previous guidance.Accordingly, the disclosures below arerestricted to internal financial controls.The Company will report in accordancewith the Turnbull guidance in the nextannual report.

The key features of the internal financial control system throughout the period covered by the accounts are described below.

The Directors have established anorganisational structure with clearly drawnlines of accountability and delegation ofauthority. All group employees are requiredto adhere to specified codes of conduct atall times and the Board actively promotes aculture of quality and integrity throughoutthe organisation. The identification andappraisal of risks is carried out throughthe annual process of preparing businessplans and budgets and through the closemonitoring of operations.

Financial results and key operational and financial performance indicators arereported regularly throughout the yearand variances from plans and budgetsare followed up vigorously. The Grouphas a system of control procedures and compliance with these procedures is monitored through a system of internal review.

Audit Committee and Auditors The Board has, through the AuditCommittee, established formal andtransparent arrangements for financialreporting, internal control and externalauditing. All employees have beeninformed that any concerns they have in these areas can be raised with theChairman of the Audit Committee in the strictest confidence. The AuditCommittee's terms of reference will beextended to cover the group's riskmanagement activities as a whole andnot just the financial aspects of internalcontrol. The Audit Committee reviews the scope and results of the audit andnon audit services, the cost effectivenessand the independence and objectivity ofthe Auditors.



Accounts and adoption of goingconcern basisThe Directors are required to prepareaccounts for each financial year whichgive a true and fair view of the state ofaffairs of the Company and the Group asat the end of the financial year and of theprofit and loss of the Group for thefinancial year.

The Directors consider that in preparingthe accounts on pages 33 to 56, the Company has used appropriateaccounting policies, consistently appliedand supported by reasonable and prudentjudgements and estimates, that allaccounting standards which they considerto be applicable have been followed. The Directors are satisfied that the Grouphas sufficient resources to continueoperations for the foreseeable future.Accordingly, they consider that it isappropriate to adopt the going concernbasis in preparing the accounts.

Other mattersThe Directors have responsibility forensuring that the Company keepsaccounting records which disclose withreasonable accuracy the financial positionof the Company and which enable themto ensure that the financial statementscomply with the relevant legislation. They also have general responsibility fortaking such steps as are reasonably opento them to safeguard the assets of theGroup and to prevent and detect fraudand other irregularities.

The Directors, having prepared theaccounts, are required to provide to theAuditors such information and explanationas the Auditors think necessary for theperformance of their duty.

Statement of Directors’ responsibilities



Index to the consolidated financial statements


32 Report of the Auditors33 Consolidated balance sheets34 Consolidated statements

of income35 Consolidated statements of

changes in shareholders’ equity35 Consolidated statements of

comprehensive income36 Consolidated statements of

cash flows38 Notes to the consolidated

financial statements


To the Shareholders of ShirePharmaceuticals Group plc:

We have audited the financial statementson pages 33 to 56 which have beenprepared under the historical costconvention and the accounting policiesset out on pages 38 to 40.

Respective responsibilities ofdirectors and auditorsThe directors are responsible for preparingthe financial statements. It is ourresponsibility to form an independentopinion, based on our audit on the financialstatements and to report our opinion to you.

Basis of audit opinionWe conducted our audit in accordancewith Auditing Standards issued by theUnited Kingdom Auditing Practices Boardwhich are substantially consistent withUnited States Generally AcceptedAuditing Standards. An audit includesexamination, on a test basis, of evidencerelevant to the amounts and disclosures inthe financial statements. It also includesan assessment of the significant estimatesand judgements made by the directors inthe preparation of the financial statementsand of whether the accounting policies areappropriate to the circumstances of theGroup, consistently applied andadequately disclosed.

We planned and performed our audit so as to obtain all the information andexplanations which we considerednecessary in order to provide us withsufficient evidence to give reasonableassurance that the financial statementsare free from material misstatement,whether caused by fraud or otherirregularity or error. In forming our opinionwe also evaluated the overall adequacy of the presentation of information in thefinancial statements.

We did not audit the financial statementsfor the years ended 31 December 1997and 31 December 1998 of RobertsPharmaceutical Corporation, a companyacquired during 1999 in a transactionaccounted for as a pooling of interests.Such statements are included in theconsolidated financial statements of Shire Pharmaceuticals Group plc andreflect total assets and total revenues of55 per cent and 64 per cent, respectively,of the related consolidated totals for theyear ended 31 December 1997 and 60 per cent and 57 per cent respectivelyfor the year ended 31 December 1998.These statements were audited by otherauditors whose unqualified reports havebeen furnished to us and our opinion,insofar as it relates to amounts includedfor Roberts Pharmaceutical Corporationfor the years ended 31 December 1997and 31 December 1998, is based solelyupon the report of the other auditors.

We believe that our audit and the report ofother auditors provide a reasonable basisfor our opinion.

OpinionIn our opinion, based on our audit and thereports of the other auditors, the financialstatements present fairly the state ofaffairs of the Group at 31 December 1998 and 1999 and of the Group’sprofits/(losses) and cash flows for theyears ended 31 December 1997, 1998and 1999 and is in accordance withgenerally accepted accounting principlesin the United States.

Arthur AndersenChartered AccountantsReading England29 February 2000

Report of the Auditors on the US GAAP financial statements



Consolidated balance sheets


Year to Year to31 December 31 December

1999 1998$’000 $’000

AssetsCurrent assets:Cash and cash equivalents 54,082 52,973Marketable securities and other current asset investments 84,344 71,726Accounts receivable, net 59,018 76,622Inventories, net 39,538 34,639Deferred tax asset 5,312 5,222Prepaid expenses and other current assets 9,012 5,116

Total current assets 251,306 246,298

Investments 2,604 10,000Property, plant and equipment, net 37,484 42,682Intangible assets, net 557,934 537,159Deferred tax asset 31,799 32,632Other assets 6,636 4,834

Total assets 887,763 873,605

Liabilities and shareholders’ equityCurrent liabilities:Current instalments of long-term debt 9,608 12,351Accounts and notes payable 114,509 54,896Other current liabilities 48,703 14,041

Total current liabilities 172,820 81,288

Long-term debt, excluding current instalments 126,314 126,774Other long-term liabilities 1,345 2,229

Total liabilities 300,479 210,291

Shareholders’ equityCommon stock, 5p par value; 400,000,000 20,063 11,725shares authorised (1998: 200,000,000); and 244,519,024 shares issued and outstanding (1998: 141,092,395)

Additional paid-in capital 832,650 814,953Accumulated other comprehensive losses (10,303) (3,236)Accumulated deficit (255,126) (160,128)

Total shareholders’ equity 587,284 663,314

Total liabilities and shareholders’ equity 887,763 873,605

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


Year to Year to Year to31 December 31 December 31 December

1999 1998 1997$’000 $’000 $’000

RevenuesProduct sales 385,203 291,785 168,916Licensing and development 10,772 11,821 20,130Royalties 3,562 3,697 1,612Other revenues 1,995 1,681 896

Total revenues 401,532 308,984 191,554

Costs and expensesCost of sales 93,475 95,013 67,090Research and development 77,503 59,253 40,663Selling, general and administrative 171,386 131,702 86,555

Other chargesIn-process research and development – – 83,087Asset impairments and restructuring charges 97,132 – –Merger transaction expenses 32,279 – –Loss/(profit) on sale of product rights 5,825 (220) –

Total operating expenses 477,600 285,748 277,395

Operating (loss)/income (76,068) 23,236 (85,841)

Interest income 7,349 6,398 6,547Interest expense (9,742) (6,511) (964)Other (expenses)/income (475) 440 (2,474)

Total other (expenses)/income (2,868) 327 3,109

(Loss)/income before income taxes (78,936) 23,563 (82,732)

Income taxes (16,062) (2,991) (1,420)

Net (loss)/income (94,998) 20,572 (84,152)

Net (loss)/income per shareBasic $(0.39) $0.09 $(0.45)Diluted $(0.39) $0.08 $(0.45)

Weighted average number of sharesBasic 244,698,721 234,044,732 185,153,065Diluted 244,698,721 242,806,410 185,153,065

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

Consolidated statements of income



AccumulatedCommon Common Additional other Total

stock stock paid-in Accumulated comprehensive shareholders’amount no. of capital deficit losses equity

$’000 shares $’000 $’000 $’000 $’000

Balances as of 31 December 1996 5,140 60,995 451,940 (95,414) (301) 361,365Net (loss) – – – (84,152) – (84,152)Dividends paid by pooled entity – – – (1,100) – (1,100)Foreign currency translation – – – – (2,095) (2,095)Issuance of common stock 5,123 62,535 251,169 – – 256,292Issuance of common and preferred stock by pooled entity – – 7,076 – – 7,076Issuance costs – – (3,355) – – (3,355)Options exercised 82 1,001 850 – – 932Options granted on acquisition of subsidiaries – – 28,390 – – 28,390Stock option compensation – – 2,567 – – 2,567

Balances as of 31 December 1997 10,345 124,531 738,637 (180,666) (2,396) 565,920Net income – – – 20,572 – 20,572Dividends paid by pooled entity – – – (34) – (34)Foreign currency translation – – – – (840) (840)Issuance of common stock 905 10,861 57,105 – – 58,010Issuance of common and preferred stock by pooled entity – – 9,220 – – 9,220Issuance costs – – (2,124) – – (2,124)Options exercised 475 5,700 3,610 – – 4,085Stock option compensation – – 5,499 – – 5,499Tax benefit associated with exercise of stock options – – 3,006 – – 3,006

Balances as of 31 December 1998 11,725 141,092 814,953 (160,128) (3,236) 663,314Net (loss) – – – (94,998) – (94,998)Foreign currency translation – – – – (7,067) (7,067)Issuance of common stock for acquisitions 8,123 100,767 (8,123) – – –Issuance of common and preferred stock by pooled entity – – 8,613 – – 8,613Options exercised 215 2,660 3,308 – – 3,523Stock option compensation – – 11,932 – – 11,932Tax benefit associated with exercise of stock options – – 1,967 – – 1,967

Balances as of 31 December 1999 20,063 244,519 832,650 (255,126) (10,303) 587,284

Consolidated statements of changes in shareholders’ equity



1999 1998 1997$’000 $’000 $’000

Net (loss)/income (94,998) 20,572 (84,152)Foreign currency translation adjustments (7,067) (840) (2,095)Unrealised holding (loss)/gain on marketable securities (411) 96 199

Comprehensive (loss)/income (102,065) 19,732 (86,247)

Consolidated statements of comprehensive income


Consolidated statements of cash flows



1999 1998 1997$’000 $’000 $’000

Cash flows from operating activities:Net (loss)/income (94,998) 20,572 (84,152)

Adjustments to reconcile net (loss)/incometo net cash provided by operating activities:Depreciation and amortisation 28,598 25,249 12,309Stock option compensation 13,900 8,505 2,567Acquisition of in-process research and development – – 83,087Non cash exchange gains and losses (664) (1,816) (1,289)(Gain)/loss on sale of fixed assets (828) 16 (13)Loss on sale of intangible assets 5,825 – –Write-down of investment 7,546 – –Decrease/(increase) in accounts receivable 17,012 (24,988) (5,751)(Increase) in inventory (6,543) (5,170) (4,657)Increase in accounts payable 37,083 12,186 511Reserve for restructuring charges 83,608 – –Carbatrol milestone payment – – 8,000Impact of discontinued operations – – (629)

Net cash provided by operating activities 90,539 34,554 9,983

Cash flows from investing activities(Investment in)/redemption of marketable securities (7,940) 3,825 (32,094)Purchase of long-term investment – (10,000) –Deferred consideration – – (10,000)Purchase of subsidiary undertakings (32,000) – (41,053)Expenses of acquisition – (551) (3,118)Net cash acquired with subsidiary undertakings 1,979 – 6,759Purchase of intangible assets (57,848) (142,258) (10,066)Purchase of fixed assets (4,786) (13,871) (13,936)Proceeds from sale of intangible fixed assets 6,575 1,033 –Proceeds from sale of fixed assets 1,413 60 20Collection on notes receivable 7,195 1,751 6,738

Net cash used in investing activities (85,412) (160,011) (96,750)

Cash flows from financing activities:(Increase)/decrease in cash placed on short-term deposit (4,677) (35,664) 33,949Long term debt issued – 125,000 –Payments on long term debt, capital leases and notes (11,499) (11,708) (7,410)Payment of debt issuance costs – (2,528) –Proceeds from issue of common stock, net 8,615 35,027 19,054Proceeds from exercise of options 3,523 4,082 1,016Proceeds from issue of preferred stock – 4,494 6,000Cash dividends paid – (150) (1,629)

Net cash (used by)/provided in financing activities (4,038) 118,553 50,980

Effect of foreign exchange rate changes on cash and cash equivalents 20 9 (401)Net increase/(decrease) in cash and cash equivalents 1,109 (6,895) (36,188)Cash and cash equivalents at beginning of period 52,973 59,868 96,056

Cash and cash equivalents at end of period 54,082 52,973 59,868


1999 1998 1997$'000 $'000 $'000

Supplemental cash flow information:Interest paid 11,612 3,948 953Income taxes paid 11,356 5,285 2,534

Non cash activities:Notes issued for product acquisitions 11,800 – 7,250Notes received for sale of product rights – 218 –Common stock issued for product acquisitions – 11,572 –Common stock issued on conversion – 14,042 –of zero-coupon noteCommon stock issued for acquisitions of subsidiaries – – 259,000Debt assumed on acquisition of subsidiaries 3,300 – –Capitalised leases – 131 256

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



Notes to the consolidated financial statements


1 Summary of significant accounting policies

a) Description of operations andprinciples of consolidationShire Pharmaceuticals Group plc is aninternational specialty pharmaceuticalcompany with a strategic focus on fourtherapeutic areas: central nervous systemdisorders, metabolic diseases, oncologyand gastroenterology. The Company’sprincipal products include Adderall, for thetreatment of Attention Deficit HyperactivityDisorder, and Pentasa, for the treatment of ulcerative colitis.

The Group has operations in the UnitedStates, Europe and the rest of the world.Within these geographic operatingsegments, revenues are derived fromthree sources: sales of products by theCompany’s own sales and marketingoperations, licensing and developmentfees, and royalties.

The accompanying consolidated financialstatements include the accounts of ShirePharmaceuticals Group plc and all itssubsidiary undertakings after elimination ofintercompany accounts and transactions.

b) Use of estimates in financialstatementsThe preparation of financial statements inconformity with generally acceptedaccounting principles requires managementto make estimates and assumptions thataffect the reported amounts of assets andliabilities and disclosure of contingent assetsand liabilities at the date of the financialstatements and reported amounts ofrevenues and expenses during the reportingperiod. Actual results could differ fromthose estimates.

c) Revenue recognitionProduct sales are recognised uponshipment of products. Reserves forproduct returns are established on anaccruals basis at the time revenue forproduct sales is recognised.

Licensing and development fees representrevenues derived from license agreementsand from collaborative research anddevelopment arrangements. Licensing feesare recognised upon transfer or licensingof intellectual property rights. Developmentfee revenue relates to ongoing researchand development in connection withlicensed technology. Revenue in respect of

research and development performed on acost plus or fixed percentage of cost basis isrecognised as research and developmentwork is performed. The total cost ofresearch and development work performedis based on accrued project costs, includingemployee related expenses determinedaccording to actual hours worked. Wherecollaborative research and developmentarrangements stipulate payment on amilestone basis, revenue is recognisedupon achievement of those milestones.

Royalty revenue relating to licensedtechnology is recognised when receivable.

Revenues are stated net of value addedtax and similar taxes, trade discounts andintercompany transactions.

No revenue is recognised for consideration,the value or receipt of which is dependenton future events, future performance, orrefund obligations.

d) Research and developmentResearch and development expendituresinclude funded and unfunded expenditureand are charged to operations in theperiod in which the expense is incurred.Milestones payable in respect of researchand development work are charged tothe income statement on achievement ofthese milestones.

e) Leased assetsThe cost of operating leases is charged tooperations on a straight line basis over thelease term, even if rental payments are notmade on such a basis.

Assets acquired under finance leases are included in the balance sheet astangible fixed assets and are depreciatedover the shorter of the period of lease ortheir useful lives. The capital elements offuture lease payments are recorded asliabilities, while the interest elements arecharged to the income statement overthe period of the leases to give aconstant charge on the balance of thecapital repayments outstanding.

f) PensionsThe group contributes to personal definedcontribution pension plans of employees.Contributions are charged to the incomestatement as they become payable.Details of the Supplemental ExecutiveRetirement Plan operated by the Groupare given in Note 22.

g) Finance costs of debtFinance costs of debt are recorded as adeferred asset and then amortised to theincome statement over the term of thedebt at a constant rate on the carryingamount. Deferred financing costs relatingto debt terminated early are written off tothe income statement in that period.

h) Income taxesThe Company provides for income taxes in accordance with SFAS No.109,‘Accounting for Income Taxes’. Deferredtax assets and liabilities are provided for differences between the financialstatement and tax bases of assets andliabilities that will result in future taxable or deductible amounts. The deferred taxassets and liabilities are measured usingthe enacted tax laws and rates applicableto the periods in which the differences areexpected to affect taxable income. Income tax expense is computed as the taxpayable or refundable for the period plus or minus the change during the period indeferred tax assets and liabilities.

Deferred tax assets are reduced by avaluation allowance when, in the opinion of management, it is more likely than notthat some portion or all of the deferred tax assets will not be realised.

i) Advertising expenseThe Company expenses the cost ofadvertising as incurred. Advertising costsamounted to $6,646,000, $6,715,000,and $5,284,000 for the years ended 31 December 1999, 1998 and 1997 respectively.

j) Foreign currencyMonetary assets and liabilities in foreigncurrencies are translated into US dollars at the rate of exchange ruling at thebalance sheet date. Transactions in foreigncurrencies are translated into US dollars at the rate of exchange ruling at the date of the transaction. Exchange differencesare taken into account in arriving atoperating income.

The results of overseas operations aretranslated at the average rates of exchangeduring the period and their balance sheetsat the rates ruling at the balance sheet date.The cumulative effect of exchange ratemovements is included in a separatecomponent of other comprehensive income.


The consolidated financial statements are prepared from records maintained inthe country in which the subsidiary islocated and are translated into US dollars according to the above policy.

Foreign currency transaction gains andlosses on an after-tax basis included inconsolidated net income in the yearsended 31 December 1999, 1998 and1997, pursuant to Statement of FinancialAccounting Standards (SFAS) No. 52,Foreign Currency Translation, amounted to $880,000 loss, $457,000 gain and$106,000 loss respectively.

k) Employee stock plansThe Company accounts for stock optionsin accordance with the provisions ofAccounting Principles Board (‘APB’) OpinionNo. 25, ‘Accounting for Stock Issued toEmployees’, and related interpretations.

l) Cash equivalents and marketable securitiesCash and cash equivalents include cash in banks and bank short-term investmentswith original maturities of less than ninetydays. Marketable securities classified asavailable for sale consist primarily of debtinstruments with maturities of more thanthree months. They are marked to marketat each balance sheet date, with gains andlosses recorded in a separate componentof other comprehensive income. Otherthan temporary impairments in value arerecorded through the income statement.

m) InventoriesInventories, consisting primarily of finishedgoods, are stated at the lower of cost andnet realisable value. Cost incurred inbringing each product to its present locationand condition is based on purchase costscalculated on a first-in, first-out basis,including transport. Net realisable value isbased on estimated normal selling priceless further costs expected to be incurredto completion and disposal. Provision ismade for obsolete, slow moving ordefective items where appropriate.

n) InvestmentsInvestments which are accounted forunder the cost method are stated at cost,less provisions for other than temporaryimpairment in value. Impairment is assessedby reference to the fair value of thesecurities as determined using establishedfinancial methodologies. The fair valueof investments in private entities and

non-traded securities of public entities aremeasured by valuation methodologiesincluding discounted cash flows.

o) Intangible assetsIntangible assets comprise goodwill andintellectual property rights.

Goodwill arising on the acquisition ofsubsidiary undertakings and businesses,representing any excess of the fair valueof the consideration given over the fairvalue of the identifiable assets andliabilities acquired, is capitalised andwritten off on a straight line basis over its useful economic life.

Goodwill recognised in each significantbusiness combination is being amortisedover a period of 5 to 30 years on astraight line basis depending on thenature of the goodwill, and is evaluatedperiodically for realisability based onexpectations of undiscounted cash flowsfor each subsidiary having a materialgoodwill balance.

The following factors are considered inestimating the useful lives. Where anintangible asset is a composite of anumber of factors, the period ofamortisation is determined fromconsidering these factors together:

– regulatory and legal provisions, includingthe regulatory approval and reviewprocess, patent issues and actions bygovernment agencies

– the effects of obsolescence, changes indemand, competing products and othereconomic factors, including thedevelopment of competing drugs that aremore effective clinically or economically

– actions of competitors, suppliers,regulatory agencies or others that mayeliminate current competitive advantages.

Impairments to goodwill are recognised if expected undiscounted cash flows arenot sufficient to recover the goodwill. If amaterial impairment is identified, goodwill is written down to its fair value. Fair value is determined based on the present valueof expected net cash flows to be generatedby the business, discounted using a ratecommensurate with the risks involved.

Intellectual property, including trademarksfor products with an immediate definedrevenue stream and acquired for valuableconsideration, is recorded at cost and

amortised in equal annual instalments over the estimated useful life of the relatedproduct which range from 5 to 40 years.Intellectual property with no definedrevenue stream where the relatedproduct has not yet completed thenecessary approval process is written off on acquisition. Amounts recorded as intangible assets are reviewed forimpairment on a periodic basis usingexpected undiscounted cash flows.

Continuing milestone payments onintellectual property with no definedrevenue stream are charged to operations.Royalty payments due on sales ofproducts are charged to operations whena liability has been incurred.

p) Property, plant and equipmentProperty, plant and equipment is shown atcost less accumulated depreciation andany provision for impairment. Depreciationis provided on a straight line basis at ratescalculated to write off the cost lessestimated residual value of each asset overits estimated useful life as follows:

years

Land and buildings 50Office furniture, fittings and equipment 4 to 5Warehouse, laboratory and manufacturing equipment 4 to 5

Expenditures for maintenance and repairsare charged to expense as incurred; costsof major renewals and improvements arecapitalised. At the time property, plant and equipment are retired or otherwisedisposed of, the cost and accumulateddepreciation are eliminated from the assetand accumulated depreciation accountsand the profit or loss on such disposition is reflected in income.

q) Concentration of credit riskRevenues are mainly derived fromagreements with major pharmaceuticalcompanies and relationships with drugdistributors. Such clients have significantcash resources and therefore any creditrisk associated with these transactions is considered minimal.

Excess cash is invested in bank and buildingsociety term deposits and commercialpaper from a variety of companies withstrong credit ratings. These investmentstypically bear minimal risk.



40 Shire Pharmaceuticals Group plc Notes to the consolidated financial statements

2) Business combinations and reorganisations

Year ended 31 December 1999a) Acquisition of Laboratoires Murat S.A., Fuisz Pharma GmbH & Co KG and Istoria Farmaceutici S.p.A

On 22 October 1999, Shire completed the acquisition of all the assets and liabilities of Laboratoires Murat S.A. and Fuisz Pharma GmbHand the Cebutid trademark for $33 million, including the costs of acquisition. The purchase price consisted of $29.7 million in cash andthe assumption of $3.3 million in debt.

On 17 November 1999, Shire completed the acquisition of all the assets and liabilities of Istoria Farmaceutici S.p.A for $6.5 million,including the costs of acquisition. The purchase consideration was $6.5 million in cash.

The above transactions have provided Shire with marketing and distribution operations in France, Germany and Italy respectively. Shire has accounted for the acquisitions using purchase accounting. Total goodwill of $22.4 million will be amortised over a period of 20years, the expected economic life of the underlying assets acquired, on a straight-line basis and periodically reviewed for impairment inaccordance with the Company’s accounting policy for purchased goodwill. The results of operations of these acquired companies havebeen included in the consolidated results of the Company since their respective dates of acquisition.

The purchase price of $3.3 million for Laboratoires Murat S.A. was allocated as follows:

$’000

Property, plant and equipment 19Intangible assets 1,073Current assets 1,614Accounts payable (1,292)

Net assets acquired 1,414Goodwill 1,886

Purchase consideration 3,300

$7.5 million was in respect of the Cebutid trademark.

r) Related partiesTransactions with related parties are conducted on the same basis as they would have been with unrelated parties.

Transactions between Group companies have not been disclosed since Group accounts are prepared and include the results of all subsidiary undertakings.

s) New accounting pronouncementsIn June 1998, the FASB issued Statement No. 133, ‘Accounting for Derivative Instruments and Hedging Activities’. This Statement requires that all derivatives be recorded in the balance sheet as either an asset or liability measured at its fair value and that changes in the derivative’s fair value be recognised currently in earnings unless specific hedge accounting criteria are met. In June 1999, the FASB issued SFAS No. 137,‘Accounting for Derivative Instruments and Hedging Activities – Deferral of the Effective Date of FASB Statement No. 133’. This Statement defers for one year the effective date of SFAS 133 to all fiscal quarters of all fiscal years beginning after 15 June 2000. The Company has not yet determined the future impact of this statement on its consolidated financial statements.

t) Companies Act 1985The financial statements for the years ended 31 December 1997, 1998 and 1999 do not comprise statutory accounts within the meaning of Section 240 of the Companies Act 1985.

Statutory accounts for the year ended 31 December 1998 have been delivered to the Registrar of Companies for England and Wales. The auditors’ report on those accounts was unqualified.


The purchase price of $22.2 million for Fuisz Pharma GmbH was allocated as follows:

$’000

Property, plant and equipment 23Intangible assets 3,331Current assets 1,891Accounts payable (1,108)



The purchase price of $6.5 million for Istoria Farmaceutici S.p.A. was allocated as follows:

$’000

Property, plant and equipment 166Intangible assets 3,268Current assets 1,515Accounts payable (897)



b) Merger with Roberts Pharmaceutical CorporationOn 23 December 1999 the Company acquired 100% of the outstanding stock of Roberts Pharmaceutical Corporation in exchange for100,767,482 ordinary shares. Roberts Pharmaceutical Corporation is an international pharmaceutical company which licenses, acquires,develops and commercialises post-discovery drugs in selected therapeutic categories.

This transaction was accounted for by the pooling of interests method. Following the consummation of the transaction, the Companyhas decided to restructure the enlarged business and accordingly has recorded approximately $97.1 million in non-recurring assetimpairment and restructuring charges.

The accompanying consolidated financial statements have been retroactively restated to reflect the combined operations of RobertsPharmaceutical Corporation and Shire Pharmaceuticals Group plc as if the merger was consummated on 1 January 1997.

c) DispositionsOn 13 January 1999 Shire disposed of its Indianapolis manufacturing plant for a net consideration after expenses of $1.5 millionincluding a loan note of $0.5 million. The net gain of $0.8 million is included in results of operations.

During November 1999, the Company sold the product Tigan for $6.4 million. The Company incurred a loss on disposal of $5.8 million,which is included within the results of operations.

d) Pro forma informationThe pro forma effect in 1999 and 1998 of significant acquisitions if acquired on 1 January 1999 and 1 January 1998 respectively wouldhave resulted in revenues, income before extraordinary items, net income and per share data as follows:

1999 1998$'000 $'000

Revenues 417,948 330,346(Loss)/income before extraordinary items (95,463) 19,039Net (loss)/income (95,463) 19,039

Net (loss)/income per share – basic $(0.39) $0.08Net (loss)/income per share – diluted $(0.39) $0.08

Year ended 31 December 1998There were no significant acquisitions or dispositions of businesses during the year ended 31 December 1998




Year ended 31 December 1997

a) Acquisition of Pharmavene, Inc.On 23 March 1997 Shire completed the acquisition of Pharmavene, Inc. (‘Pharmavene’), subsequently renamed Shire Laboratories, Inc.,for approximately $104 million, including the costs of acquisition. The purchase price consisted of $27.2 million in cash, the issue of$60.5 million in shares, the issue of $6.3 million in share options and contingent consideration of $10 million.

In connection with the acquisition, each outstanding share of Pharmavene common stock was exchanged for Shire ordinary shares,resulting in the issuance of 16,947,000 Shire ordinary shares valued at $60.5 million. Options granted by Pharmavene prior to theacquisition date were converted into options to acquire 2,790,000 Shire ordinary shares. These options were valued in determination of the purchase price of Pharmavene at $6.3 million.

The contingent consideration was payable to the former shareholders of Pharmavene on approval of the drug Carbatrol by the FDA. On payment of the contingent consideration in December 1997, the amount of $10 million was capitalised as an intangible assetrepresenting completed products.

Shire accounted for the acquisition of Pharmavene using purchase accounting. The purchase price of $104 million was allocated as follows:

$’000

Property, plant and equipment 1,561Intangible assets 11,065Current assets 14,002Accounts payable (5,711)In-process research and development 83,087


Included within acquired intangible assets is the value of the assembled workforce of $1,065,000 which is being amortised on a straightline basis over a period of 5 years. $10,000,000 is attributed to the value of completed products, as disclosed above, and is beingamortised on a straight line basis over 20 years.

As a result of the transaction, Shire incurred a charge for the year ended 31 December 1997, representing the acquisition of in-processresearch and development in accordance with SFAS No. 2. The acquired in-process research and development charge of $82,774,000represents the value of Pharmavene’s products in development at the date of acquisition. Technological feasibility of these products wasnot established at the date of acquisition. These products were considered to have no alternative future use other than the therapeuticindications for which they were in development. The work remaining to complete the development products involved continuingformulation activity, clinical studies and the submission of regulatory filings to seek marketing approval. As pharmaceutical productscannot be marketed without regulatory approvals, Shire will not receive any benefits unless it receives such regulatory approval.

The results of operations of Shire Laboratires, Inc. have been included in the consolidated results of the Company since the acquisitiondate of 23 March 1997.

b) Acquisition of Richwood Pharmaceutical Company, Inc.On 22 August 1997 the Company acquired all of the outstanding shares of Richwood Pharmaceutical Company, Inc. (‘Richwood’),subsequently renamed Shire Richwood, Inc., a company involved in the development, manufacture and marketing of pharmaceuticalproducts. The consideration paid was $209 million, comprising shares valued at $170.5 million, share options $21.7 million, cash of$15.1 million and acquisition expenses of $1.7 million.

In connection with the acquisition, each outstanding share of Richwood common stock was exchanged for Shire ordinary shares,resulting in the issuance of 39,488,000 Shire ordinary shares valued at $170.5 million. Options granted by Richwood prior to theacquisition date were converted into options to acquire 5,632,000 Shire ordinary shares. These options were valued in determination of the purchase price at $21.7 million.

Shire accounted for the acquisition of Richwood using purchase accounting. The purchase price of $209 million was allocated as follows:

$’000

Property, plant and equipment 2,275Intangible assets 198,445Current assets 14,625Accounts payable (6,434)



The related acquired goodwill and other intangible assets of $198.4 million are being amortised on a straight line basis over a period between 5 and 30 years as follows:

$’000

Completed products/technology 176,006Assembled workforce 2,819Goodwill 19,620

198,445

Completed products and technology represent the portfolio of named identifiable products and technologies owned and marketed by Shire Richwood, Inc. at the time of acquisition.

The results of operations of Shire Richwood, Inc. have been included in the consolidated results of the Company since the acquisition date of 22 August 1997.

3) Cash and cash equivalents31 December 31 December

1999 1998$’000 $’000

Cash at bank and in hand 54,082 52,973

4) Marketable securities and other current assets investments31 December 31 December

1999 1998$’000 $’000

Marketable securities 44,003 36,062Commercial paper 39,200 6,510Institutional cash fund 1,141 29,154

84,344 71,726

There are no restrictions on the sale of marketable securities and no amounts have been pledged as collateral.

There have been no significant changes in market value subsequent to 31 December 1999.

The Company recorded losses on sales of marketable securities during the years ended 31 December 1999, 1998 and 1997 of $227,000,$30,000 and $18,000.

Unrealized holding gains and losses on available for sale marketable securities, as disclosed in the Statement of Comprehensive Income,amounted to $411,000 loss, $96,000 gain and $199,000 gain at 31 December 1999, 1998 and 1997 respectively.

Maturity dates of marketable securities held at 31 December 1999 primarily ranged from 3 to 36 months.

5) Accounts receivable31 December 31 December

1999 1998$’000 $’000

Trade receivables 55,953 64,857Notes receivable 678 9,426Other receivables 2,387 2,339

59,018 76,622

Trade receivables included above are stated net of a provision for doubtful debts of $565,000; 31 December 1998: $577,000.Included within other receivables at 31 December 1999 is $1,144,000 of accured royalty income. At 31 December 1998 other receivables included $669,000 in respect of product divestments and $923,000 of accrued royalty income.

Notes receivable are in respect of the divestment of certain products.



6) Inventory31 December 31 December

1999 1998Inventory consists of: $’000 $’000

Finished goods 26,573 19,990Work-in-process 6,389 6,113Raw materials 6,576 8,536

39,538 34,639

7) Prepaid expenses and other current assets31 December 31 December

1999 1998$’000 $’000

Prepaid expenses 6,621 4,286Other current assets 2,391 830

9,012 5,116

Included within other current assets at 31 December 1999 is $1,098,000 in respect of the current portion of deferred financing costs relating to the $125,000,000 long term loan. The deferred financing costs are being amortised over the five year term of the loan.

8) Investments31 December 31 December

1999 1998$’000 $’000

Investment in RiboGene Inc. 2,604 10,000

The Company has an investment in the convertible preferred stock of RiboGene, Inc., a drug discovery company targeting infectiousdiseases. The shares have no voting rights. One-third of the preferred stock is convertible at the option of the Company to common stock of RiboGene at each of the first three anniversary dates of the investment. The investment is classified as held to maturity.

In accordance with the Company’s stated accounting policy, the cost of the investment has been written down by $7,396,000 to $2,604,000 at 31 December 1999, as the Company considers the value of the investment to have suffered a permanent diminution in value.

9) Property, plant & equipment31 December 31 December

1999 1998Property, plant and equipment consists of: $’000 $’000

Land and buildings 25,498 29,767Office furniture, fittings and equipment 14,527 12,253Warehouse, laboratory and manufacturing equipment 10,595 10,053

50,620 52,073Less: Accumulated depreciation (13,136) (9,391)

37,484 42,682

Depreciation expense for the years ended 31 December 1999, 1998 and 1997 was $4,243,000, $3,281,000 and $1,893,000 respectively.

Included within land and buildings at 31 December 1999 is $12 million relating to the Company's Eatontown, New Jersey office facilityclassified as available for sale.

The asset is continuing to be depreciated.



10) Intangible assets31 December 31 December

1999 1998Intangible assets comprise: $’000 $’000

Intellectual property rights acquired 394,640 363,306Goodwill arising on businesses acquired 238,897 223,776

633,537 587,082Less: Accumulated amortisation (75,603) (49,923)

557,934 537,159

Included in intellectual property above is $35,000,000 for the purchase of the worldwide rights to Agrylin during the year ended 31 December 1999, which allows the Company to retain all rights to the product with no future royalty liability.

Other significant additions to intellectual property during the year ended 31 December 1999 were in respect of product rights for Lodine($5,474,000) and Fareston ($10,000,000), the Cebutid trademark purchased from Fuisz Technologies Ltd ($7,500,000) and intellectualproperty relating to the manufacture of Adderall ($11,800,000) acquired from Arenol Corporation.

During the year ended 31 December 1999 the Company disposed of the Tigan product rights. The loss on sale of $5,825,000 isrecorded in the statement of operations.

Amortisation expense for the years ended 31 December 1999, 1998 and 1997 was $24,355,000, $21,968,000 and $10,416,000 respectively.

Completed Assembled Goodwill Deferredproducts workforce /other consideration Total

The movement on goodwill was as follows: $’000 $’000 $’000 $’000 $’000

As of 1 January 1997 4,222 170 1,355 – 5,747Arising on acquisitions 176,006 3,744 19,619 – 199,369Arising on deferred payment – – – 10,142 10,142Amortisation charge (3,355) (418) (137) (126) (4,036)Foreign exchange 4,311 70 456 64 4,901

As of 31 December 1997 181,184 3,566 21,293 10,080 216,123Adjustment to goodwill – – 691 – 691Amortisation charge (9,091) (790) (704) (506) (11,091)Foreign exchange 1,965 34 254 110 2,363

As of 31 December 1998 174,058 2,810 21,534 9,684 208,086Arising on acquisitions – – 22,383 – 22,383Amortisation charge (9,021) (782) (871) (504) (11,178)Foreign exchange (5,401) (86) (940) (301) (6,728)

As of 31 December 1999 159,636 1,942 42,106 8,879 212,563

The weighted average amortisable life of goodwill at 31 December 1999, 1998 and 1997 was 21 years.

The additions to goodwill during the year ended 31 December 1999 arose on the acquisition of Laboratoires Murat S.A., Fuisz PharmaGmbH & Co KG and Istoria Farmaceutici S.p.A. from Fuisz Technologies Ltd. For further details see Notes 2 (a).

11) Other non current assets31 December 31 December

1999 1998$'000 $'000

Notes receivable 422 2,369Other assets 6,214 2,465

6,636 4,834

Included within other assets at 31 December 1999 is $4,393,000 in respect of deferred financing costs. See Note 7 above for further details.




12) Accounts and notes payable31 December 31 December

1999 1998$’000 $’000

Trade accounts payable 31,540 19,791Accrued expenses 79,520 35,105Notes payable 3,449 –

114,509 54,896

The weighted average interest rate for notes payable at 31 December 1999 and 1998 was 6%. The notes payable are not secured and do not contain any covenants.

13) Current portion of long-term debt31 December 31 December

1999 1998$’000 $’000

Current portion of notes payable 9,573 11,178Current portion of capital leases 35 1,173

9,608 12,351

14) Other current liabilities31 December 31 December

1999 1998$’000 $’000

Income taxes payable 6,727 3,134Deferred tax liabilities – 244Payable for termination of licence agreement 806 832Other accrued liabilities 41,170 9,831

48,703 14,041

Other accrued liabilities at 31 December 1999 relate to restructuring costs incurred as a result of the merger with Roberts Pharmaceutical Corporation.

15) Long-term debt31 December 31 December

1999 1998$’000 $’000

Notes payable 135,887 137,917Less: current instalments (9,573) (11,178)

126,314 126,739

Capital leases payable 35 1,208Less: current instalments (35) (1,173)

– 35

126,314 126,774

Principal payments in each of the next five years and thereafter on long-term debt outstanding at 31 December 1999 amount to:

31 December1999$'000

2000 8,3582001 1,3222002 1,2422003 –2004 125,000

135,922

The weighted average borrowing rate for the year ended 31 December 1999 was 7% (1998: 7%).


$125 million five year term loanThe Company entered into a $125,000,000 five year term loan with DLJ Capital Funding, Inc. on 19 November 1999. This loan replaced an existing $125,000,000 loan facility in the name of Roberts Pharmaceutical Corporation that had been taken out to finance the acquisition of Pentasa in 1998. The new loan is in the name of the parent company, Shire Pharmaceuticals Group plc and Shire’s United Statessubsidiaries including Roberts Pharmaceutical Corporation. The applicable interest rate ranges between 0.5 per cent and 1.5 per cent over the higher of the prime rate of DLJ Capital Funding, Inc. or the Federal Funds Rate plus 0.5 per cent or between 1.5 per cent and 2.5 per cent over the London Interbank Overnight Rate (as adjusted in accordance with the loan agreement), in each case depending on Company's credit rating.

All obligations under the facility are jointly and severally guaranteed by the Company and by its subsidiaries and is initially secured by allmaterial property owned by the Company and its subsidiaries and the capital stock of the subsidiaries. If the Company's credit rating reaches specified levels, the facility will not be secured. The facility contains covenants and maintenance tests that require the Company to maintain a minimum net worth, a specified leverage ratio and a specified coverage ratio. At 31 December 1999 the Company satisfied the aforementioned covenants and maintenance tests.

$11.8 million Unsecured Convertible Zero Coupon Loan NoteThe Company financed the purchase of intellectual property relating to the manufacture of Adderall from Arenol Corporation by a total of$11.8 million in loan notes. On 5 March 1999 the Company issued a $5,800,000 principal amount Unsecured Convertible Zero Coupon Loan note due 30 July 2001 (the ‘First Loan Note’) and a $6,000,000 principal amount Unsecured Convertible Zero Coupon Loan Note due 30 July 2004 (the ‘Second Loan Note’). Both loan notes are in the name of the parent company, Shire Pharmaceuticals Group plc. The agreement provides for the cancellation of certain specified amounts of the aggregate principal amount of the First Loan Note and of such amounts of the Second Loan Note on certain dates to the extent of certain indemnified losses or, to the extent that such amounts of the First Loan Note or the Second Loan Note are not so cancelled, for their conversion into that number of Ordinary Shares equal to the amounts not cancelled divided by the product of (a) the lower of £3.565 (approximately $5.75) of the midweek closing price of the Ordinary Shares on the London Stock Exchange on the relevant date and (b) the exchange rate on the relevant date.

16) Other non-current liabilities31 December 31 December

1999 1998$’000 $’000

Payable for termination of licence agreement 1,209 2,080Other liabilities 136 149

1,345 2,229

17) Financial instruments

The following methods and assumptions were used to estimate the fair value of each material class of financial instrument:

Cash and cash equivalents – carrying amount approximates fair value due to the short-term nature of these instruments.

Marketable securities and other current asset investments – the fair value of marketable securities is estimated based on quotes obtained from brokers.

Accounts receivable – carrying amount approximates fair value due to the short-term nature of these instruments.

Accounts and notes payable – carrying amount approximates fair value due to the short-term nature of these instruments.

Long term debt – the fair value of long term debt is estimated, based on the discounted future cash flows using currently available interest rates.



The carrying amounts and corresponding fair values of financial instruments at 31 December 1999 and 1998 were as follows:

CarryingAmount Fair Value

31 December 1999 $'000 $'000

Financial assets:Cash and cash equivalents 54,082 54,082Marketable securities and other current asset investments 84,344 83,933

Financial liabilities:Accounts and notes payable 114,509 114,487Long-term debt 135,922 135,922

CarryingAmount Fair Value

31 December 1998 $'000 $'000

Financial assets:Cash and cash equivalents 52,973 53,196Marketable securities and other current asset investments 71,726 71,822

Financial liabilities:Accounts and notes payable 54,896 54,896Long-term debt 139,125 138,992

The carrying amounts in the table are included in the consolidated balance sheet under the indicated captions.

18) Leases and other commitments

a) LeasesThe Company leases facilities, motor vehicles and certain office equipment under operating leases. The Company's commitments under the non-cancelable portion of all operating leases for the next five years and thereafter as of 31 December 1999 are as follows:


2000 4,2742001 3,3912002 2,7072003 1,6322004 726Thereafter 600

13,330

Lease and rental expenses included in selling, general and administrative expenses in the accompanying statements of operations amounts to approximately $3,155,000, $1,555,000 and $1,201,000 for the fiscal years ended 31 December 1999, 1998 and 1997 respectively.

b) Other commitmentsIn accordance with several product acquisitions and licensing agreements, and subject to certain cancellation rights reserved by the Company,the Company may be required to make minimum payments related to Noroxin, Sampatrilat and the Lilly Compounds totalling $21.0 million; and purchase ProAmatine inventory in the amount of $74.6 million through 2004. The Noroxin payments may be triggered if minimum saleslevels are not met and the ProAmatine payments may be triggered if minimum sales purchases are not made. The Sampatrilat and Lilly payments are milestone payments due on reaching certain stages in the development of the compounds. The following schedule details the minimumpayments which may be required in each of the next four fiscal years, assuming the previously discussed triggering events occur:


2000 5,0002001 2,0002002 2,0002003 12,000

21,000



31 December1999

ProAmatine inventory $'000

2000 26,8082001 11,9432002 11,9432003 11,9432004 11,943

74,580

Upon successful completion of the development of these products, approval by the FDA, and subsequent marketing of these products,royalties will be in the range of 7% to 10% of product sales with a weighted average royalty of approximately 7%. The duration of theseroyalties is the earlier of 15 years or patent expiration.

In June 1997, the Company concluded agreements with MacFarlan Smith Ltd. (‘MS’) and Janssen Pharmaceutica NV for the procurement of daffodils by MS on behalf of Shire and Janssen and the extraction from those bulbs of galantamine for the use in the production of Reminyl for commercial launch of the product. Under these arrangements, MS arranges for the production, planting and harvesting of thedaffodil bulbs in sufficient quantities to provide the worldwide launch stock for the product and has constructed a plant to undertake theextraction of galatamine with an agreed maximum plant cost of £7 million (approximately $11.2 million). Reciprocal arrangements have been concluded with Janssen, which will bear the entire cost other than a proportion relative to the supply of bulbs and product for sale by Shire in the UK and Ireland.

These arrangements may be terminated by Shire and Janssen subject to the payment by Shire and Janssen to MS in respect of outstanding bulb orders and its capital expenditure.

c) Contingent Liabilities:Until April 1998, Shire Richwood, Inc. (‘SRI’) distributed products containing phentermine, a prescription drug approved in the US as a single agent for short term use in obesity. Contrary to the approved labelling of these products, physicians in the US co-prescribedphentermine with fenfluramine or dexfenfluramine for management of obesity. This combination was popularly known as the ‘fen/phen’ diet. In mid 1997, following concerns raised about cardiac valvular side effects alleged to be associated with this diet regime, the fenfluramine and dexfenfluramine elements of the ‘fen/phen’ diet were withdrawn from the US market. Although SRI has ceased to distributephentermine, the drug remains both approved and available in the US SRI and a number of other pharmaceutical companies are being suedfor damages for personal injury and medical monitoring arising from phentermine used either alone or in combination. Through approximatelyMarch 2000 SRI was named as a defendant in approximately 3,500 lawsuits and had been dismissed from approximately 500 of these cases. There are approximately 2,400 additional cases pending dismissal as of 16 March 2000. In only 127 cases pending was it alleged in the complaint of subsequent discovery that the plaintiff had used SRI's particular product and SRI has been dismissed from 29 of these cases as well. Although there have been reports of substantial jury awards and settlements in respect of fenfluramine and/or dexfenfluramine, to date Shire is not aware of any jury awards made against, or any settlements made by, any phenterminedefendant. Shire denies liability on a number of grounds including lack of scientific evidence that phentermine, properly prescribed, causes the alleged side affects and that SRI did not promote phentermine for long term combined use as the ‘fen/phen’ diet. Accordingly,Shire intends to defend vigorously any and all claims made against the Group in respect of phentermine and believes that a liability is neither probable nor quantifiable at this stage of the litigation.

Pursuant to an unlimited indemnity from SRI's former contract manufacturer of phentermine, EON Laboratories Inc. (EON), legal costs inrespect of the phentermine litigation have, to date, been met by EON's insurers. EON has available, subject to court sanction, a further $15 million of insurance to meet the costs and liabilities of EON and each of its distributors including Shire. EON is a subsidiary of HexalGmbH, a manufacturer of generic pharmaceuticals based in Germany with a reported turnover of approximately $400 million, operations in an estimated 30 countries and approximately 500 employees. Hexal does not publicly disclose more extensive details of its financialposition. EON has indicated to Shire that it will defend and indemnify Shire against costs and liabilities. Although EON has not indicated to Shire an unwillingness or inability to fund any uninsured losses, Shire is unable to determine EON's ability to pay such losses. Shire alsohas access to a limited indemnity given by the former shareholders of SRI for costs and liabilities related to the phentermine litigation not met by insurance or other indemnity arising from litigation filed prior to 12 March 1999.

This indemnity is limited to the value of 1,622,566 ordinary shares of Shire presently held by a third party in escrow and is available ondemand. As of 24 March 2000, based on a closing share price of £10.60, the value of these shares amounted to approximately £17.2 million (approximately $27.5 million). In addition, Shire has access to its own product liability insurance up to a maximum of $3 million. At the present stage of the litigation, Shire is unable to estimate the level of future legal costs after taking into account any available product liability insurance and enforceable indemnities. To the extent that any legal costs are not covered by insurance or available indemnities, these will be expensed as incurred.



19) Net income/(loss) per share Basic net income/(loss) per share is based upon the income available to common stockholders divided by the weighted-average number of common shares outstanding during the period. Diluted earnings/(loss) 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 potentialcommon shares that were outstanding during the period.

The following table sets forth the computation for basic and diluted net income/(loss) per share:

Year ended Year ended Year ended31 December 31 December 31 December

1999 1998 1997$’000 $’000 $’000

Numerator for basic and diluted net (loss)/income per share (94,998) 20,572 (84,152)

No. of shares No. of shares No. of shares

Weighted average number of shares (basic) 244,698,721 234,044,732 185,153,065Effect of dilutive stock options – 8,761,678 –

Weighted average number of shares (diluted) 244,698,721 242,806,410 185,153,065

Basic net (loss)/income per share $(0.39) $0.09 $(0.45) Diluted net (loss)/income per share $(0.39) $0.08 $(0.45)

The calculation of weighted average number of shares for the year ended 31 December 1999 does not include potentially dilutive securities,stock options and convertible debt, because their inclusion would be anti-dilutive in a loss making year.

The calculations for the year ended 31 December 1997 excludes potentially dilutive stock options on the same basis.

20) Analysis of revenue, operating income/(loss), assets and reportable segmentsThe 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. Shire’s principal reporting segments are geographic, 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. All inter-company items are eliminated. The accounting policies of each reportable segment are the same as those of the Group.

U.S. Europe Rest of World Total$’000 $’000 $’000 $’000

Year ended 31 December 1999Product sales 313,582 55,194 16,427 385,203Licensing and development 1,097 9,675 – 10,772Royalties – 3,562 – 3,562Other revenues 517 – 1,478 1,995

Total revenue 315,196 68,431 17,905 401,532

Cost of sales 62,375 20,958 10,142 93,475Research and development 50,544 26,904 55 77,503Selling, general and administrative 108,682 55,986 6,718 171,386Costs of restructuring 93,603 3,529 – 97,132Merger transaction expenses 9,312 22,967 – 32,279Loss on sale of product rights 5,825 – – 5,825

Total operating expenses 330,341 130,344 16,915 477,600

Operating (loss)/income (15,145) (61,913) 990 (76,068)

Total assets 546,849 313,113 27,801 887,763Long-lived assets 348,033 231,560 15,825 595,418Capital expenditure on long-lived assets 64,450 8,143 1,397 73,990



U.S. Europe Rest of World Total$’000 $’000 $’000 $’000

Year ended 31 December 1998Product sales 226,988 50,261 14,536 291,785Licensing and development 622 11,199 – 11,821Royalties – 3,697 – 3,697Other revenues 306 – 1,375 1,681

Total revenue 227,916 65,157 15,911 308,984

Cost of sales 67,889 19,378 7,746 95,013Research and development 27,556 31,647 50 59,253Selling, general and administrative 80,854 45,208 5,640 131,702(Profit) on sale of product rights (220) – – (220)


Operating income/(loss) 51,837 (31,076) 2,475 23,236


Year ended 31 December 1997Product sales 113,814 41,702 13,400 168,916Licensing and development 4,201 15,929 – 20,130Royalties – 1,596 16 1,612Other revenues – – 896 896

Total revenue 118,015 59,227 14,312 191,554

Cost of sales 41,874 18,228 6,988 67,090Research and development 20,876 19,678 109 40,663Selling, general and administrative 52,538 29,211 4,806 86,555In-process research and development 83,087 – – 83,087


Operating (loss)/income (80,360) (7,890) 2,409 (85,841)


Material customersIn the periods set out below, certain customers accounted for greater than 10% of total revenue:

1999 1998 1997Years ended 31 December $’000 $’000 $’000

Customer A 100,267 53,599 –Customer B 54,498 31,387 –Customer C 40,045 35,314 –

21) Other charges

Year ended 31 December 1999As a result of the acquisition of Roberts Pharmaceutical Corporation on 23 December 1999 which was accounted for as pooling of interests, the Company recorded charges totalling $135.2 million pre-tax for asset impairments ($48.5 million), merger-related transaction expenses($32.3 million), restructuring ($43.6 million), loss on product dispositions ($5.8 million) and other charges ($5.0 million). These charges aredisclosed separately within operating expenses in the Statement of Income.

The Company recorded an impairment charge of $34.2 million to adjust intangible asset values, primarily product rights, to their estimated fair value. These charges are consistent with the Company’s accounting policy to review periodically the carrying value of the intangibles andevaluate whether there has been any impairment in the value of those intangibles, as compared with estimated undiscounted future cash flows relating to those intangibles. The estimated fair value has been calculated using projected discounted cash flows of the products. Other assetimpairments are the write off of inventory held for research and development work and duplicate equipment ($3.2 million), adjustments to thecarrying value of the RiboGene Investment to market value at 31 December 1999 ($7.6 million) and write down of notes receivable to theirestimated realisable value ($3.5 million).



The components of the restructuring charges were as follows:

$m

Employee termination costs 37.9Property 5.7

43.6

In December 1999, the decision was made to close the office in Eatontown, New Jersey and consolidate the sales and marketing operations into the existing facility in Florence, Kentucky and to transfer the research and development activities to Shire’s facility in Rockville, Washington.Similarly, Roberts’ sales and marketing operation in the UK was combined with Shire’s established operation in Andover, Hampshire.

As a result of the restructuring, employees were notified of their termination prior to 31 December 1999. As of 31 December 147 employees had been terminated and the Company expects to complete the termination of the remainder of the employees by 30 April 2000. Employeetermination costs consist of payments for severance, medical and other benefits, outplacement counselling, acceleration of pension benefits and excise taxes.

Year ended 31 December 1998During the year ended 31 December 1998 a gain of $220,000 was credited to the income statement in respect of the disposition of certain products.

Year ended 31 December 1997As a result of the acquisition of Shire Laboratories, Inc. (formerly Pharmavene, Inc.) in March 1997, Shire incurred a charge of $83,087,000representing the acquisition of in-process research and development pursuant to SFAS No. 2 (See Note 2).

22) Retirement benefitsThe Company has a number of defined contribution retirement plans and one defined benefit plan covering substantially all employees.For the defined contribution retirement plans, the level of company contribution is fixed at a set percentage of employee's pay. For the defined benefit plan, where benefits are based on employees' years of service and average final remuneration, the pension costis established in accordance with the advice of independent qualified actuaries based on valuations undertaken on varying dates.

Personal defined contribution pension plansCompany contributions to personal defined contribution pension plans totalled $1,558,000, $1,124,000 and $514,000 for the yearsended 31 December 1999, 1998 and 1997 respectively, and were charged to operations as they became payable.

Defined benefit pension plansThe Company operates a defined benefit Supplemental Executive Retirement Plan (SERP) for certain US employees, which wasestablished in 1998. This plan is available to former employees of Roberts Pharmaceutical Corporation who meet certain age and servicerequirements. The plan requires mandatory contributions based on employee contributions and makes discretionary contributions basedon employee compensation. The mandatory contributions to the plan in 1999 totalled $429,000 (1998: $285,000). Estimateddiscretionary contributions of $306,000 were accrued in 1999 (1998: $226,000).

During 1999, as part of the restructuring of the Group, following the merger with Roberts Pharmaceutical Corporation, the SERP wasclosed to new members and contributions have ceased being paid into the plan for existing members. As part of this arrangement, theCompany has paid a lump sum contribution into the plan of $18 million, the result of which is that the company has no future liabilitiesunder the plan.



23) Income taxesThe (provision)/benefit for income taxes consists of:


CurrentFederal (14,007) (7,375) (619)State and foreign (1,556) 118 –

Total current (15,563) (7,257) (619)

DeferredFederal (622) 3,808 (995)State and foreign 123 458 194

Total deferred (499) 4,266 (801)

(16,062) (2,991) (1,420)


Approximate net operating loss carry forwards against future federal tax liabilities 40,418 43,089 17,536Approximate net operating loss carry forwards against future state and foreign tax liabilities 185,458 150,572 39,978

The tax losses shown above have the following expiration dates:31 December

1999$’000

2005 78,2002006 1,2742007 4,4032008 2,8322009 5,3272010 6,2292011 10,430Available indefinitely 117,181

225,876

A comparison of the (provision)/benefit for income taxes as reported to a provision based on federal statutory rates and consolidatedincome before income taxes is as follows:


Benefit/(provision) at federal statutory rates 27,628 (8,247) 28,956Adjusted for:Permanent differences (6,474) 18 (33,124)State and foreign tax (1,200) 1,300 (200)Difference in taxation rates – – (663)Adjustment to prior year liabilities 4,004 – 2,701Goodwill amortisation (9,758) (4,232) (1,532)Other (337) (464) (651)Valuation allowance (29,925) 8,634 3,093

(Provision)/benefit for income taxes (16,062) (2,991) (1,420)



An analysis of the deferred taxation asset is as follows:31 December 31 December

1999 1998$’000 $’000

Losses carried forward 39,411 36,078Capitalised start up costs for tax purposes 3,259 –Restructuring reserve 28,835 –Other 1,568 7,497Debt conversion – 377

73,073 43,952Valuation allowance (35,962) (6,037)

37,111 37,915Excess of tax value over book value of assets – (305)

Net deferred tax assets 37,111 37,610

Valuation allowances against deferred tax assets have not been provided to the extent that it is more likely than not that future incomeand tax planning strategies will enable losses brought forward to be utilised.

The income/(loss) before taxes by tax jurisdiction is as follows:


US (33,924) 30,772 4,541UK (33,996) 5,763 (84,480)Other (11,016) (13,172) (2,793)

(78,936) 23,363 (82,732)

24) Stock incentive plansThe Company has adopted the disclosure only provisions of SFAS No. 123, ‘Accounting for Stock-Based Compensation,’ but appliesAccounting Principles Board Opinion No. 25 and related interpretations in accounting for its plans.

In the years ended 31 December 1999, 1998 and 1997 the Company recognised a charge under APB25 of $11,933,000, $5,497,000and $2,031,000 respectively.

Had compensation for stock options awarded under the plans been determined in accordance with SFAS 123, the Company’s netincome/(loss) and per share data would have been changed to the pro forma amounts indicated below:

Years ended 31 December 1999 1998 1997

Net income/(loss) As reported (94,998) 20,572 (84,152)Pro forma (106,246) 17,439 (89,847)Income/(loss) per shareAs reported – basic $(0.39) $0.09 $(0.45)As reported – diluted $(0.39) $0.08 $(0.45)Pro forma – basic $(0.43) $0.07 $(0.49)Pro forma – diluted $(0.43) $0.07 $(0.49)

The fair value of stock options used to compute pro forma net income/(loss) and per share disclosures is the estimated present value atgrant date using the Black-Scholes option-pricing model with the following weighted average assumptions:

Years ended 31 December 1999 1998 1997

Risk free interest rate 4.67% – 6.25% 4.55% – 6.57% 5.17% – 6.57%Expected dividend yield 0% 0% 0%Expected life 4 years 4 years 4 yearsExpected volatility 53.4% 53.2% 28.21%



Directors and employees have been granted options over ordinary shares under the following stock option plans: Shire Holdings Ltd ShareOption Scheme (‘SHL Scheme’), the Imperial Pharmaceutical Services Ltd Employee Share Option Scheme (Number One) (‘SPC Scheme’),the Pharmavene 1991 Stock Option Plan (‘SLI Plan’), the Shire Pharmaceuticals Executive Share Option Scheme (Parts A and B) (‘ExecutiveScheme’), the Shire Pharmaceuticals Sharesave Scheme (‘Sharesave Scheme’), the Shire Pharmaceuticals Group plc Employee Stock PurchasePlan (‘Stock Purchase Plan’), the Richwood Stock Options Plan (’Richwood Plan’) and the Roberts Stock Option Plan (‘Roberts Plan’).

No further options wil be granted under the SHL Scheme, SPC scheme, SLI Plan, Richwood Plan or Roberts Plan. In a period of five years,not more than five per cent of the issued share capital of the Company may be placed under option under any employee share scheme. In aperiod of ten years, not more than ten per cent of the issued share capital of the Company may be placed under option under any employeeshare scheme. In addition, the following terms apply to options that may be granted under the various plans:

Executive Scheme: up to five per cent of the issued ordinary share capital of the Company, in any period of ten years, subject to a limit of 2.5 per cent in the period of four years following adoption of the Scheme and a limit of three per cent in any period of three calendar years.

Stock Purchase Plan: up to 21,000,000 ordinary shares.

The Company has granted options through 31 December 1999 under the various plans as follows:

Scheme Number of options Expiry period from date of issue Vesting period

SHL Scheme 964,280 7 years, or 3 months after end of employment 1-3 years

SPC Scheme 48,000 7 years, or 6 months after end of employment 2 years

SLI Plan 485,367 10 years Immediate on acquisition by Shire

Executive Scheme 5,371,042 10 years 3 years, subject toperformance criteria

Sharesave Scheme 180,697 6 months after vesting 3 or 5 years

Stock Purchase Plan 218,950 Automatic exercise 27 months

Richwood Plan 1,194,388 5 years Immediate on acquisition by Shire

Roberts Plan 9,174,418 6 years Immediate on acquisition by Shire

A summary of the status of the Company’s stock option plans as of 31 December 1999, 1998 and 1997 and the related transactionsduring the periods then ended is presented below:

Weighted averageYear ended 31 December 1999 exercise price $ Number of shares

Outstanding at beginning of period 3.38 20,784,312Granted 6.86 2,952,734Exercised 2.37 (4,552,618)Forfeited/expired 4.90 (1,547,286)

Outstanding at end of period 4.39 17,637,142

Exercisable at end of period 3.92 13,001,439

The weighted average grant-date fair value of options granted during the year equates to the weighted average exercise price as optionsare granted at market price.

Weighted averageYear ended 31 December 1998 exercise price Number of shares

Outstanding at beginning of period 2.30 21,002,886Granted 5.51 7,170,801Exercised 1.32 (6,628,884)Forfeited/expired 4.01 (760,491)





Weighted averageYear ended 31 December 1997 exercise price Number of shares

Outstanding at beginning of period 2.89 15,090,452Granted 1.54 8,491,081Exercised 1.40 (1,596,314)Forfeited/expired 3.25 (1,543,033)



Options outstanding at 31 December 1999 have the following characteristics:

Number of Weighted average Weighted averageoptions Weighted average exercise price Number of options exercise priceoutstanding Exercise prices remaining life of options outstanding exercisable of options exercisable

864,249 $0.19 – $0.83 1.1 $0.39 864,249 $0.391,827,786 $1.21 – $1.73 3.5 $1.55 1,827,786 $1.55932,612 $2.09 – $3.06 3.7 $2.82 819,231 $2.835,433,152 $3.22 – $4.38 3.4 $3.73 4,206,730 $3.647,225,437 $5.23 – $6.75 5.1 $5.66 5,251,537 $5.711,247,650 $6.77 – $7.69 5.9 $7.59 25,650 $7.14106,256 $8.27 – $11.56 5.2 $10.19 6,256 $8.27

17,637,142 – 4.0 $4.39 13,001,439 $3.92



Index to the summary financial statement


58 General59 Auditors’ statement60 Report of the Directors61 Consolidated profit and

loss account62 Consolidated balance sheet63 Consolidated cash flow statement64 Notes to the summary

financial statement


This summary financial statement does notcontain sufficient information to allow for a full understanding of the results andstate of affairs of the Company or Group. For further information the full UK statutoryannual accounts, the auditors’ report onthose accounts and the directors’ reportshould be consulted.

In accordance with Section 239 of theCompanies Act 1985 shareholders have a right to obtain the full reports andaccounts free of charge by writing to:

The Company SecretaryShire Pharmaceuticals Group plcEast AntonHampshireSP10 5RG

The full UK statutory annual accounts are signed on behalf of the Board by A C Russell, Group Finance Director.

The Company’s auditors have given anunqualified report on the statutory accountsfor the year ended 31 December 1999.The report did not contain a statementunder Section 237 (2) or (3) of theCompanies Act 1985.

General



Auditors’ statement


Auditors’ statement to the shareholders of Shire Pharmaceuticals Group plcWe have examined the summary financialstatement set out on pages 60 to 64.

Respective responsibilities of directors and auditorsThe directors are responsible for preparingthe annual report. Our responsibility asestablished in the United Kingdom byStatute, the Auditing Practices Board andour profession’s ethical guidance, is toreport to you our opinion on theconsistency of the summary financialstatement within the annual review withthe full UK statutory annual accounts anddirectors’ report, and its compliance withthe relevant requirements of Section 251of the Companies Act 1985 and theregulations made thereunder. We alsoread the other information contained in theannual review and consider theimplications for our report if we becomeaware of any apparent misstatements ormaterial inconsistencies with the summaryfinancial statement.

Basis of opinionWe conducted our work in accordancewith Bulletin 1999/6 ‘The auditors’statement on the summary financialstatement’ issued by the AuditingPractices Board.

OpinionIn our opinion the summary financialstatement is consistent with the full annualaccounts and directors’ report of ShirePharmaceuticals Group plc for the yearended 31 December 1999 and complieswith the applicable requirements ofSection 251 of the Companies Act 1985,and the regulations made thereunder.

Arthur AndersenChartered Accountants and Registered Auditors

Abbots HouseAbbey StreetReading RG1 3BD

7 April 2000


Report of the Directors


Results and dividendsThe profit on ordinary activities beforetaxation of the Group was £21.0 million(1998: £9.1 million). The directors do notrecommend the payment of a dividend.

Business reviewA review of the Group’s business andimportant events during the year and likelyfuture developments is set out in theChairman’s review, the Chief Executive’sreview, the operating review and thefinancial review in the full UK statutoryannual accounts.

DirectorsThe directors who served during the yearwere as follows:

Dr James CavanaughChairman and Non-executive Director

Rolf StahelChief Executive

Angus RussellGroup Finance DirectorAppointed 13 December 1999

Dr Wilson TottenGroup R&D DirectorAppointed 1 January 1999

Dr Barry PriceSenior Non-executive Director(Chairman Remuneration Committee)

Dr Bernard CanavanNon-executive Director (Chairman Audit Committee)

Dr Zola HorovitzNon-executive DirectorAppointed 23 December 1999

Ronald NordmannNon-executive DirectorAppointed 23 December 1999

Joseph SmithNon-executive DirectorAppointed 23 December 1999

John SpitznagelNon-executive DirectorAppointed 23 December 1999

Stephen StampResigned 13 December 1999

Dr Henry SimonResigned 11 May 1999

Dr Robert VukovichAppointed 23 December 1999Resigned 14 February 2000


Year ended Year ended31 December 31 December

1999 1998£’000 £’000

TurnoverContinuing operations 131,544 80,328Acquisition 2,334 –

133,878 80,328

Operating expenses before exceptional itemsContinuing operations 100,650 72,449Acquisition 2,856 –

103,506 72,449

Operating profitContinuing operations 30,894 7,879Acquisition (522) –

30,372 7,879

Costs of a fundamental restructuring of continuing operations (11,516) –

Profit on ordinary activities before finance charges 18,856 7,879

Finance charges, net 2,153 1,220

Profit on ordinary activities before taxation 21,009 9,099

Taxation (8,439) (2,852)

Profit on ordinary activities after taxation 12,570 6,247

Earnings per shareBasic 8.7p 4.5pDiluted 8.3p 4.3p

Consolidated profit and loss account



31 December 31 December1999 1998£’000 £’000

Fixed assetsIntangible assets 684,387 7,938Tangible assets 23,256 4,671Investments 1,617 –

709,260 12,609

Current assetsStocks 24,532 6,652Debtors 46,880 17,560Investments 49,850 21,435Cash at bank and in hand 36,038 8,230

157,300 53,877Creditors: amounts falling due within one year (107,140) (14,384)

Net current assets 50,160 39,493

Total assets less current liabilities 759,420 52,102Creditors: amounts falling due in more than one year (80,133) (1,508)

Net assets 679,287 50,594

Capital and reservesCalled-up share capital 12,226 7,055Share premium 838,970 228,537Capital reserve 2,755 2,755Other reserves 24,247 24,247Profit and loss account (198,911) (212,000)

Equity shareholders’ funds 679,287 50,594

Consolidated balance sheet



Year ended Year ended31 December 31 December

1999 1998£’000 £’000

Net cash inflow from operating activities 39,875 3,691Returns on investments and servicing of finance:Interest received 2,334 1,434Interest paid (149) (142)Interest element of finance lease rentals (32) (72)

Net cash inflow from returns on investments and servicing of finance 2,153 1,220

Taxation:Corporation tax paid (3,707) (3,177)

Capital expenditure and financial investments:Purchase of intangible fixed assets (11,500) (629)Purchase of tangible fixed assets (1,303) (1,633)Sale of intangible fixed assets 106 258Sale of tangible fixed assets 1,512 37

Net cash outflow for capital expenditure and financial investments (11,185) (1,967)

Acquisitions and disposals:Purchase of subsidiary undertakings (19,338) –Expenses of acquisitions (7,448) (295)Net cash acquired with subsidiary undertakings 24,147 –

Net cash outflow from acquisitions (2,639) (295)

Net cash inflow/(outflow) before management of liquid resources and financing 24,497 (528)

Management of liquid resources:Increase in cash placed on short-term deposit (1,033) (21,435)

Financing:Issue of ordinary share capital – 19,373Exercise of share options 2,179 2,452Expenses of share issues (6,799) (1,274)Capital element of finance leases (705) (553)Net increase in loans during the year 9,422 –

Net cash inflow from financing 4,097 19,998

Increase/(decrease) in cash in the year 27,561 (1,965)

Consolidated cash flow statement



1) Basis of preparationThe summary financial statement has been prepared in accordance with the accounting polices set out in the full UK statutory annualaccounts for the year ended 31 December 1999. The summary financial statement does not constitute statutory accounts within themeaning of Section 240 of the Companies Act 1985.

2) Directors’ remuneration, interests and transactions

Aggregate remunerationThe total amounts for directors’ remuneration and other benefits were as follows:

1999 1998£’000 £’000

Emoluments 934 829Gains on exercise of share options 2,527 1,941Money purchase pension contributions 62 44

Total 3,523 2,814

Directors’ emoluments

Fees/Basic Taxable Annual 1999 1998salary benefits bonuses total total

Name of Director Notes £’000 £’000 £’000 £’000 £’000

ExecutiveR Stahel 300 12 120 432 371A C Russell 10 – – 10 –S A Stamp 161 9 65 235 219Dr J W Totten 142 10 57 209 –Dr J R Murray – – – – 93R D Griggs – – – – 83

Non-executiveDr J H Cavanaugh – – – – –Dr H Simon 12 – – 12 34Dr B J Price 20 – – 20 20Dr B Canavan 16 – – 16 –Dr Z Horovitz (i) – – – – –R Nordmann (i) – – – – –J Smith (i) – – – – –J Spitznagel (i) – – – – –Dr R Vukovich (i) – – – – –R Bransgrove – – – – 9

Aggregate emoluments 661 31 242 934 829

Notes(i) These directors were appointed to the Board on 23 December 1999 and were entitled to directors’ fees of £20,000 per annum,

(pro rata, each director was due £493).

3) Earnings per shareEarnings per share has been calculated by dividing the profit on ordinary activities after taxation for each year by the weighted averagenumber of shares in issue during those years, in accordance with FRS14. The weighted average number of shares used in calculatingfully diluted earnings per share has been adjusted for the effects of all dilutive potential ordinary shares in accordance with FRS14.

Years ended 31 December 1999 1998

Basic earnings per share 8.7p 4.5pDiluted earnings per share 8.3p 4.3p

Basic earnings per share – weighted average shares 145,202,383 136,924,061Effect of dilutive stock options 6,326,876 7,475,065

Diluted earnings per share – weighted average shares 151,529,259 144,399,126

Notes to the summary financial statement



The Group’s consolidated financial statements set out in the annual review have been prepared under US GAAP, which differs in certainrespects 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 profit/(loss) from US GAAP to UK GAAP1999 1998 1999 1998

Years ended 31 December $’000 $’000 £’000 £’000

Net (loss)/income as reported under US GAAP (94,998) 20,572 (59,046) 12,205Adjustments to conform to UK GAAP:Merger accounting adjustments– elimination of pooled profits and losses (16,437) (16,643) (10,196) (10,026)– restructuring costs charged to income 87,877 – 54,513 –– merger transaction costs capitalised 22,967 – 14,247 –

Amortisation of capitalised goodwill 11,004 11,137 6,802 6,709Amortisation under acquisition accounting (919) – (570) –Recognition of deferred tax asset (2,878) (12,890) (1,771) (7,765)Stock option compensation costs 11,933 5,497 7,362 3,313Tax benefit from exercise of non-qualified stock options 1,967 3,006 1,229 1,811

Net income as reported under UK GAAP 20,516 10,679 12,570 6,247

Shareholders’ equity1999 1998 1999 1998

Years ended 31 December $’000 $’000 £’000 £’000

As reported under US GAAP 587,284 663,314 364,387 398,674Adjustments for:– capitalisation of goodwill (216,769) (223,776) (134,497) (134,497)

Goodwill amortisation 26,161 15,690 16,232 9,430Acquisition accounting for Roberts Pharmaceutical Corporation 735,242 (341,810) 456,191 (205,439)Deferred tax (37,111) (29,240) (23,026) (17,574)

As reported under UK GAAP 1,094,807 84,178 679,287 50,594

Summary of significant differences between US generally accepted accounting principlesfollowed by the Group and UK generally accepted accounting principles.



Registered office addressEast Anton AndoverHampshire SP10 5RG EnglandRegistered in England No. 2883758

Investor relationsTina MoyceCorporate Communications Manager

Tel +44 (0)1264 348515Fax +44 (0)1264 332879

email [email protected] http://www.shire.com

Registrars and transfer officeAll administrative enquiries relating toshareholdings should be addressed toComputershare Services PLC, clearly stating the registered shareholder’s name and address.

Computershare Services PLCPO Box 82 The PavilionsBridgwater Road BristolBS99 7NH England

US Shareholdersi) ADSs

The Company’s American DepositaryShares (ADSs each representing threeordinary shares) are listed on NASDAQunder the symbol ‘SHPGY’. The Companyfiles reports and other documents withthe Securities and Exchange Commissionwhich are available for inspection andcopying at the SEC’s public referencefacilities or can be obtained by writing tothe Company Secretary.

ii) ADR DepositaryMorgan Guaranty Trust Company ofNew York is the depositary for ShirePharmaceuticals Group plc. All enquiriesconcerning American Depositary Receiptsrecords, certificates or transfer of ordinaryshares into ADSs should be addressed to:

Morgan Guaranty Trust Company of New YorkPO Box 8205 BostonMA 02266-8205 USA

Tel +(1) 781 575 4328Fax +(1) 781 575 4088

Shareholders’ information


Cautionary statementStatements included herein which are not historical facts are forward looking statements. The 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 materialise, the Company’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 and commercialisation, the impact of competitiveproducts, government regulation and approval, product liability claims and the lack of adequate insurance.


Acetylcholinesterase an enzyme thatbreaks down acetylcholine to choline and acetate.

Acetylcholinesterase inhibitora compound that inhibits the activity of acetylcholinesterase (see above).

Acne a common inflammatory disorder ofthe pilo-sebaceous glands. It involves theface, back, and chest and is characterisedby the presence of blackheads andwhiteheads, papules, pustules, and, inmore severe cases, cysts and scars.

ADHD Attention Deficit HyperactivityDisorder, a CNS disorder characterised byinattention, impulsiveness and hyperactivity.It is primarily diagnosed in children.

Alzheimer’s disease a condition firstdescribed by the German physician, AloisAlzheimer. The term Senile Dementia of theAlzheimer Types (SDAT) is used to coverdementias related to specific degenerativechanges in the brain described by Alzheimer.

AMPA antagonist an antagonist of the AMPA sub type of glutamate receptorwithin the CNS.

Amyloid plaques an area of glycoproteinthat is found in the brains of Alzheimer’sdisease patients and appears to beinvolved in the disease process.

Angina a constrictive pain usually felt in thechest, which results from lack of oxygen tothe heart muscles.

Bioavailability an absolute term thatindicates measurement of both the rate andtotal amount (extent) of drug that reachesthe general circulation from an administereddosage form.

Central Nervous System (CNS)the brain and spinal cord.

Cocaine craving the craving which resultsfrom an addiction to cocaine.

Cocaine overdose administration of anexcessive dose of cocaine.

Epilepsy an episodic disturbance ofconsciousness during which seizure activityoccurs in the brain.

Hormone a chemical agent usually producedby a specific gland or tissue and transportedby blood to parts of the body where it affectsspecific action on target organs.

Hormone replacement therapy (HRT)a medicament that replaces the naturalhormones lost by women at menopause(estrogens/progesterones).

Hyperphosphataemia an excessiveamount of phosphate in the blood.

Hypertension high blood pressure, i.e.elevation of the arterial blood pressureabove the normal range expected.

In vitro fertilisation the fertilisation of ahuman egg outside the body which is thentransferred back into the uterus to allowfurther development in the mother. The resultant baby is often known as a‘test tube baby’.

Metabolic bone disease an overall termembracing several distinct bone disorderswhich arise from disturbances in the body’smetabolism of bone.

Osteoporosis a disease in which calciumand protein are progressively lost frombones until they become liable to fracture.

Parkinson’s disease a slowly progressivedisease characterised by a mask-like face,a characteristic tremor of resting muscles,muscle rigidity, a slowing of voluntarymovements, and an abnormal gait and posture.

Phase I clinical trials normally conducted in healthy human volunteers followingpre-clinical trials.

Phase II Clinical trials to assess short-termsafety and preliminary efficacy in a limitednumber of patients with the relevant disease.

Phase III clinical trials to undertake acomprehensive evaluation of safety andefficacy in patients with the relevant disease.

Placebo an inactive agent used in clinicalstudies as a control with which to comparea presumed active compound.

Post-surgical apnoea temporarycessation of breathing following surgery.

Pre-clinical trials studies of compoundsundertaken in the laboratory, in isolatedtissues or in living animals.

Premenstrual syndrome (PMS)a condition of irritability, emotionaldisturbance, headache and/or depressionaffecting some women for up to ten daysbefore menstruation. It usually disappearssoon after menstruation begins.

Stroke sudden damage to the tissues ofthe central nervous system which is usuallythe consequence of an interruption to theflow of blood to the brain. This damageoften results from a primary disease in theheart or blood vessels. A stroke can vary in severity from a passing weakness ortingling in a limb to a profound paralysis,coma, and death.

Transdermal transcutaneous, passing,entering or penetrating through the skin.

Transdermal patch a device in which adrug is incorporated in the device (patch)applied to the skin to deliver the drugthrough the skin into the bloodstream.

Urinary incontinence a loss of urine withoutwarning often associated with ageing.

Glossary


shire pharmaceuticals group plcinvestors.shire.com/~/media/files/s/shire-ir/annual... · 2015. 2....

Documents