Shire plc Q3 2009 Earnings Call Transcript

Nov. 1.09 | About: Shire PLC (SHPG)

Shire plc (SHPGY) Q3 2009 Earnings Call Transcript October 30, 2009 10:00 AM ET


Eric Rojas – IR

Angus Russell – CEO

Graham Hetherington – CFO

Mike Cola – President, Specialty Pharmaceuticals

Sylvie Gregoire – President, Human Genetic Therapies


Gary Nachman – Leerink Swann

Rodolphe Besserve – Société Générale

Tom Russo – Robert W. Baird & Co.

Dani Saurymper– Goldman Sachs

David Steinberg – Deutsche Bank Securities Inc.

Karl Bradshaw – Morgan Stanley Dean Witter (Europe)

Ken Cacciatore – Cowen and Company, LLC.

David Amsellem – Piper Jaffray & Co.

Justin Smith – MF Global UK Limited


Good afternoon, ladies and gentlemen, and welcome to the Shire plc quarter three results conference call hosted by Eric Rojas. My name is Ava and I am the event manager. (Operator instructions). I would like to advise all parties this conference is being recorded for replay purpose. And now I would like to hand over to Eric. Eric, please go ahead.

Eric Rojas

Good morning and good afternoon everyone. Thank you for joining us today for Shire's third quarter 2009 financial results. By now you should have all received our press release and should be viewing our presentation via our Web site on

If for some reason you have not received the press release or are unable to access our Web site, please contact Sue Hale in our UK Investor Relations department on +44-125-689-4160, as he will be happy to assist you.

Our speakers today are Angus Russell, Chief Executive Officer; Graham Hetherington, Chief Financial Officer; Mike Cola, President, Specialty Pharma; and Sylvie Gregoire, President, HGT.

Before we begin, I would refer you to slide #2 of our presentation and remind you that any statements made during this call, which are not historical statements, will be forward-looking statements and as such will be subject to risks and uncertainties, which if they materialize materially affect our results.

Today's agenda is as follows. We begin with opening remarks from Shire's performance and highlights during the third quarter from Angus Russell. Graham Hetherington will continue with a financial review. Mike Cola and Sylvie Gregoire will then give updates on their respective businesses. Finally, Angus will summarize the key points of this presentation. We will then open up for your questions.

Once again, could I please ask in the interest of time so that everyone gets a chance to ask questions that you limit yourself to two questions. As always, Clea Rosenfeld and myself will be more than happy to follow-up offline for any subsequent questions. Thank you for your understanding. Over to you, Angus.

Angus Russell

Thanks very much, Eric, and hello everyone. If we just turn to what I think is slide #5 in the deck, which says Core Product Portfolio Delivering Excellent Growth. And therein I think lies one of the principal messages about this quarter. You can see that product sales, excluding ADDERALL XR were up 20% this quarter to $532 million. On a constant currency basis that was up 23% on the same quarter last year, which itself was a very strong quarter last year.

Q3 non-GAAP earnings per ADS of $0.49 and year-to-date that means we have non-GAAP earnings per ADS of $2.38. Also, I would draw your attention this quarter, and Graham will give you a lot more information on this in due course, but we continue to proactively manage our costs through the transition period of ADDERALL XR generization.

In terms of cash generation that also remains very strong this quarter, we generated $226 million of cash. And on the basis of these results we continue to reaffirm our guidance framework that we have had out there for 2009. We believe we are well set to end the year in that guidance framework. Again, I am sure Graham will give you some more indication on that later on some more detail.

Turning to the next slide, I just wanted to step back from the immediacy of today's results and talk a little bit about the broader picture and how Shire has been transforming itself over the past few years. If you look back five years ago through 2004, Shire was still characterized as being a one product company, driven by ADDERALL XR within one therapeutic focus of ADHD.

The primary technology underpinning novel science, underpinning our business was molecule chemistry and we had one technology platform in the form of oral drug delivery known as Shire Laboratories, Inc. in those days.

Our exclusivity protection for products was very dependent in the U.S. only on Hatch Waxman. And the U.S. was predominantly our major market recounting in those days for about 90% of our entire business.

We had a very small presence in Canada and six other EU markets at that time. If we fast forward to today what you see is a very different looking business. You see a company which has rapidly established itself as a leading specialty biopharmaceutical company on a global basis. The business now based on small molecules, but also peptides and biological products.

In terms of technology platforms, we no longer have the oral drug delivery business, which provides us with some drugs early on in our life, but now we have three new platforms. In HGT, we have the human cell line for developing our biological enzymes. In Specialty Pharma we have the CARRIERWAVE technology behind VYVANSE, which Mike has told you before, we hope in the future may lead to other products.

And most recently in this quarter we entered into an agreement with Santaris to look at Locked Nucleic Acid technology, so-called antisense, and I am sure Sylvie can answer some more questions if you have them. But that in itself is adding to our range of technological capabilities across our businesses.

In terms of therapeutic focus, we are still the leading company in ADHD. We also have interest in the gastrointestinal area on Human Genetic Therapies. But more importantly than that, we are no longer the one product company. We have very much a balanced portfolio these days.

In this quarter, you can see the impact of six core products really driving a larger percentage of that growth of 20% over the same period last year. As you know, we are about to launch. In fact, we have on a preapproved access basis already launched Velaglucerase into the market globally. And next week in the U.S. we will be launching our new ADHD treatment INTUNIV.

So going forward we now have eight growth driving products, all very recently launched in the last two years or three years, all having very robust intellectual property protection for many years to come. And that's a very clear differentiation from not only the industry, but from the Shire of five years ago.

Behind that we have an equally strong pipeline of products which continue to move through R&D. As I said before, we now have a global presence, which extends to 27 countries and will early next year probably become in excess of 30 countries.

So turning to the next page, the big question obviously is this strategy delivering? We believe it is, not only by evidenced by the current quarter's results and our aspirational targets beyond 2009, but also in the fact that we are now meeting, we believe, very much the focused needs of patients and physicians.

As I said a moment ago Velaglucerase alfa certainly meets what's an acute shortage in the market in not only the U.S., but on a worldwide basis. REPLAGAL is also as a result of acute shortages in the market, we see an increased demand for that in the EU. And as you know we are now pursuing a preapproval access route in the U.S.

As I said also, we are launching new products in Specialty Pharma. INTUNIV will launch here in the U.S. as a pediatric and adolescent treatment next week. And Mike Cola will give you a lot more information on the platform behind that launch in a few moments.

We continue to expand the business through acquisition, as I said, not only with products, but also with technologies, reference the comments about Santaris. And we are targeting our geographic expansion in markets where we can make a rapid return and continue to expand our model on a very profitable basis.

All of this therefore gives us confidence that we can aspire to grow our business in the mid teens range on average over the course of the period from the end of 2009 through 2015.

So with that overview let me hand to Graham to give you some more detail behind the current quarter's results.

Graham Hetherington

Thank you, Angus, and good morning, good afternoon, everyone. Before I headline the third quarter results I would like to highlight the areas that I will be covering to reinforce momentum of the businesses we move towards 2010.

The first is the balanced strength of our core portfolio. The second is the continued and consistent growth of this new portfolio. The third element is the sustained cash generation from ADDERALL XR and the specific dynamics that we're seeing here. And the fourth is to underline the key dynamics that will support our growth into 2010 and beyond.

But looking at the third quarter results on chart #9, these results include the key headline again that the growth of revenues from our core portfolio are up by 20% and they reinforce strength and momentum of the business.

It's also significant that we're generating healthy earnings and cash during this period of transition while continuing to invest in the future of the business. Total revenues have reduced by only 14% despite ADDERALL's contributing just a quarter of the revenues that delivered in the same quarter last year.

You'll also see that the impact of foreign exchange was less significant in the last quarter as exchange rates have stabilized.

Royalties were flat in the third quarter. And as we move into the fourth quarter, royalties from Teva have ended. These will be replaced by royalties from Impax, which have the potential for greater contribution depending on the net sales that Impax record.

I used the next chart on the last call and I have decided to repeat it. The revenue stream from ADDERALL XR of Shire sales is now really a minor part of the business. In just 2007, Shire generated just over $540 million of product sales in the third quarter, of which nearly a half was from ADDERALL XR. This year we generated 11% higher total product revenues since two years ago and nearly 90% of these revenues were generated by our core product portfolio. XR only generated 12% of the total.

The next chart reinforces my first big point, the strength and diversity of our core product portfolio. We now have a broad-based growth portfolio, as Angus outlined. VYVANSE grew again by a third in the quarter. LIALDA grew on the back of U.S. prescriptions, up a third, international growth, price increases, and supported by lower sales deductions year-on-year.

PENTASA and FOSRENOL again posted increases, benefiting from the price increases we posted in the last year. And the HGT business continued to demonstrate its ongoing growth potential with strong double-digit constant currency growth versus last year.

Looking specifically at VYVANSE, we've seen the return to market share growth in this growing market during the back to school season. Due to a one-off adjustment in the quarter, sales deductions were lower at 26%. And in the fourth quarter, I would expect to see a return to higher sales deductions at nearer 32%.

In the quarter, we have seen a demand led increase of inventories of $4 million compared to last year, where inventories increased by over $30 million, driven by the shipment of $24 million of new dosage strengths. The real indicator of the growth of VYVANSE in the quarter is prescriptions, which grew by nearly 60% year-on-year.

My second key point is highlighted on the next chart, chart #12. This is the sustained growth of our core product sales. We've posted a 20% increase in core product sales this quarter, but this chart puts the growth into perspective. Since the beginning of 2007 our core products have grown into a compound annual growth rate of 47%.

With the addition of new product launches in the next few months we're really well set to achieve strong double-digit core product sales growth going forward.

Let's take a look at ADDERALL XR on the next chart, chart #13. ADDERALL's continuing to generate sustained cash flows. In the third quarter, it contributed $71 million of product revenues and a small royalty contribution from Teva.

This is lower than I expected for the second quarter, because Medicaid has remained a higher share of the brand than any of us anticipated. As you can see on the chart on the right side, nearly 30% of the brand, compared to historic levels of less than 20%.

In the quarter we saw growth to net deductions of 73%. Conversely, we also did not see any destocking in the quarter. In fact, inventories increased marginally by $6 million.

This remains a very dynamic environment. In the fourth quarter, I currently expect to see continued high levels of sales deductions, return to supply chain inventory reductions, offset by the emergence of royalty stream from the Impax net sales in the quarter.

We're also dealing with another challenging variable with Medicaid rebates. There're two drivers of Medicaid rebates, which I have laid out on the right hand side of the chart. The first, utilization, we've already identified as being higher than expected. And the second, the unit rebate level.

Now, because of the specific and unique circumstances of the authorized generic, there is a wide range of potential unit rebate that could theoretically apply. The states have been invoicing us in line with our interpretation in the last quarter of how the rebate should be calculated. But up until now, as a result of uncertainties over the rebate level, we've had to conservatively account for these rebates at the midpoint of a higher range of potential rebate levels.

What this means is at the end of the third quarter our Medicaid rebate provision is now cumulatively $64 million, more than the underlying invoice level. We will be reviewing the level of our provision in the future quarters and will update you on how this and Medicaid utilization have developed on our Q4 call.

Let's look briefly on cash flow on the next chart. I'm pleased to confirm that we continued to generate good operating cash. With the year-to-date net cash inflow we've ended the quarter with nearly $400 million of cash on hand. Our only significant borrowings are $1.1 billion convertible. We have a $1.2 billion facility which remains unutilized and no refinancing until 2012. Shire continues to have a strong and flexible funding position.

Now, let's have a look at the remainder of 2009, which I've detailed in the next chart. Key message is that we remain on track to deliver earnings for the year within the guidance framework I established a year ago.

Looking at the component parts of the income statement we have seen our gross margin continue to be held back at 84% in the quarter. The ADDERALL XR dynamics I've been describing are not helping. And I do not see expect to see a significant improvement in the fourth quarter.

But as we see our high margin products grow through into 2010, we will see our overall margin increasing back to the Shire more normal level of 86% in the coming quarters.

Turning to R&D, which has spiked in the quarter for the three reasons. First, the accelerated investment behind Vela and REPLAGAL, which you'll hear more about from Sylvie.

Secondly, a one-off upfront R&D payment of $7 million in relation to the Santaris collaboration. And thirdly, the successful recruitment of trial patients behind the development of a number of the specialty products.

In total, for the full year, I now expect absolute R&D dollars will be showing single digit percentage increase year-on-year.

SG&A, which reflects proactive cost management of the business this year, is now $56 million down on last year, despite increasing investment and commercial costs behind the Vela and REPLAGAL programs and with less foreign exchange benefits in the third quarter.

I now expect full-year absolute SG&A dollars to be showing a mid single digit percentage decrease year-on-year.

On tax, after the one-off low tax charge in the second quarter, we're now seeing the expected higher tax rates in the second half. And I can now refine the full-year expectation for the normalized rates to be 23%.

Let's move to talk about 2010 on the next chart. This time last year we provided one-off earnings guidance for 2009 to help address the uncertainty that existed as generic competition was about to be introduced against ADDERALL XR. We're in a different position this year, but I do want to reinforce our confidence in two ways.

The first is ADDERALL, which I've detailed on this chart. I've already described some of the variables we're looking at. As we look forward into 2010 there are a number of overriding dynamics. The first is our working assumption is that the citizens' petition will hold during 2010 and beyond.

Second is, we'll continue to see above average levels of rebates, supporting our successful managed care strategy and medicaid rebates. And thirdly, our branded XR market share will continue to be retained.

The content of this chart #16 captures the range of forecasts that are out in the marketplace at the moment. Shire can capture a sensible working range for total XR revenues looking forward.

I've also added our own assessments of some of the key positive and negative dynamics that will influence the final outcome of these total revenues. These include the royalty stream from Impax, the potential for Medicaid rebate levels to reduce, and the impact if the CP were to fall, and the consequences of any increase in Medicaid rebate levels. All of this reinforces the value generation potential of ADDERALL XR even though a large part of the generic event is behind us.

Moving on to chart #17 and far more important for 2010, I'd like to focus on the significant drivers of future growth and value for Shire.

First, the sustained growth from our core product portfolio. We're carrying significant momentum into 2010. And there is real potential for this to be accelerated, supported by the new product launches, scheduled for the coming few months.

We'll be able to continue to leverage our historic investment in our infrastructure. We've demonstrated our ability to proactively manage our cost base. And you'll continue to see revenues grow at a significantly faster rate than any increase in SG&A.

And in terms of capital expenditure, we are nearing the end of some significant investments in the business, in particularly, increased manufacturing capacity at HGT. Finally, we will be continuing to invest in our pipeline to support future growth.

We'll be entering 2010 with great momentum and the platform to meet our longer-term growth aspirations.

I hand you on to Mike.

Mike Cola

Thank you, Graham, and welcome, everyone. I am on slide #19. I am going to briefly walk you through an update on VYVANSE back to school, the INTUNIV launch and then some general business and specialty.

So slide #19, we are having a very strong back to school season, which I will detail in the next slide. We have a continued steady performance in the adult segment, aided somewhat by our GSK colleagues. We feel there is still no impact on VYVANSE from generic XR and we just reached the $1 billion mark in cumulative gross sales since launch, a real milestone for us internally.

Slide #20, just a real quick view of where we are with the VYVANSE back to school period. I know there was a lot of concern in the last quarter about the flattening in second quarter. You see that we've had nice market share growth in back to school, particularly in August, September, and we will give you a quick update on October. Our current weeklies are running at 13.4 for the week ending October 16.

So very strong back to school performance. Obviously, we see the volumes come back in the pediatric market in back to school. If you flip to slide #21, you can see just like every year the volumes came back. We have a heavier weighting towards our pediatric share, which is a year ahead of our adult share and we've made good share gains over that period as we thought we would.

We're nearing the end of the back to school time period. That doesn't mean we don't grow share for the rest of the year. It does slow down generally a little bit. But I just want to give a heads up for the fourth quarter; obviously, we have two major holidays, Thanksgiving and Christmas. And we see big volume drops and we generally see a little bit of a share dip during those periods.

Slide #22, we continue to grow that pediatric share as I said. Obviously as the volume comes back in the pediatric side of the market that starts to dominate our overall share. We've had good share growth in the third quarter based on that 5.3. Overall, very good performance in pediatrics for back to school.

Real quick look at the adult market, which has grown steadily for us. I think the remarkable thing about the dynamic is that the market growth itself continues to be exceptional in the high-teens. We continue to penetrate that market with 9.4. As I said, it's a bit behind, it's almost a year behind the pediatric indication. But we continue to make great progress in a market that's growing four times to five times the pediatric rate.

If you move on to slide #24, this is data through September on the authorized generic and the impact to branded AXR. We're obviously in the very, very early stages of the Impax launch. I think it's really too early to comment on their launch. But you can see again in September, we saw a very little effect. We actually grew a little bit of the branded market share. And it seems like we've reached a stable place with the Teva authorized generic.

Slide #25, moving onto INTUNIV, we feel it's a significant opportunity for Shire and ADHD is approved September 2. It's positioned to complement, not compete with our ADHD portfolio, particularly, VYVANSE, which I will walk you through in detail.

And it's really an opportunity for us to capture patients, not previously available to Shire. If you think about the last six years or seven years we've been defending our position in the stimulant side of the market. We think there is a unique opportunity for us to go after a different type of patient over the next five years with INTUNIV. The drivers are in place for near and long-term success with this product. I will talk a little bit about how we will be supporting it in the marketplace.

Again, our FDA approval, once daily treatment for ADHD in children and adolescents 6 to 17. This is a novel mechanism, selective alpha-2A receptor agonist. It's the first non-stimulant approved for ADHD since Strattera in '01. It is non-scheduled. We see efficacy within two weeks to three weeks. It is the only product in the category without a black box warning on it.

The unique part about it is it's effective in a range of symptoms even going beyond the core ADHD symptoms, particularly, those that are disruptive at home and school. And it'll be available in pharmacies following week, as we are going to launch next week.

A little bit on the positioning. Again, I just want to reinforce that VYVANSE is the cornerstone of our ADHD franchise. It's really focused on those core symptoms of ADHD of inattentiveness, hyperactivity, impulsivity, and a lack of focused or distractibility.

INTUNIV is looking for a different patient type that not only exhibits those core symptoms, but also includes the disruptive symptoms of arguing, losing temper, and deliberately annoying others. When we test this with physicians they are easily able to identify that patient type. And we think it's very complementary to our current core positioning for VYVANSE.

As I said earlier, it's really an opportunity to capture patients that we haven't been able to go after. If you look at slide #28 and just look at the pinkish, hopefully it's pinkish area above the dotted line, the current ADHD market definition for pediatrics is with 2.5 million patients on stimulants, about 300,000 on Strattera, a non-stimulant.

If you look at the area below the line there's approximately 500,000 pediatric patients on non-traditional meds. These are atypical antipsychotics, short-acting clonidine, short-acting guanfacine. There is also another 700,000 patients that are diagnosed, but untreated. Mostly, because there is dissatisfaction with all the therapies in the marketplace.

If you look at that group together at launch we'll have an additional 1.5 million patients for us to have access to that we haven't in the past. Does that mean we will not have access to the 2.5 million stimulant users? No. We think we'll have a very positive outcome in the spring of our co-administration study. We think somewhere between 40% and 60% of that patient population will be eligible to use INTUNIV once we have that data in our hands.

So, overall it's really a market expansion activity for us. It's a different patient population than we've been able to address in the past and it's quite exciting for our sales force.

Finally, slide #29, just some quick updates in Specialty. We did receive a CKD, Chronic Kidney Disease, indication across the EU for FOSRENOL. We will be launching across the different countries in the first half of the year. And we are continuing to assess our path forward in the U.S., although we're not completely hopeful there.

LIALDA global Phase III trials in diverticulitis are ongoing. As many of you know, we've ended our collaboration with Alba around celiac compound based on a Phase II outcome, where not much efficacy was shown. And on VYVANSE non-ADHD we continue to progress those programs, particularly, cognitive programs in depression and schizophrenia.

Thank you, and I'm going to turn you all over to Sylvie.

Sylvie Gregoire

Thanks, Mike. We're now on page #31 for those who are following on the webcast. We've had a very busy quarter at HGT, and as Graham has mentioned, we've had nice growth of our commercial products, with ELAPRASE growing at 20% year-over-year at constant exchange rate and REPLAGAL growing at 15% at constant exchange rate.

In addition, over the last few weeks we've seen a clear increase in the demand in the EU for REPLAGAL due to the Fabrazyme shortage. The shortage has also motivated the FDA in the U.S. to approve a treatment protocol for us to initiate preapproval treatment of patients with REPLAGAL in that territory. And we've agreed also to honor emergency IND requests that come to us from the FDA.

So patients with Fabry disease in the U.S. can now have access to REPLAGAL. Last week we've also announced that we will file for approval of REPLAGAL in the U.S by the end of the year.

FIRAZYR is approved in the EU and now in Russia, and is now launched in 11 European countries. The ramp-up of these launches is consistent with products that are considered hospital products in Europe and need to go through reimbursement and hospital formulary listing at each hospital before giving access to patients. This does take some time and gates the access of drug to patient.

The awareness, however, of the product and the intent to use is very high with the treating physician. And the product profile continues to meet our expectations. So as positive experience builds, we expect utilization rates to continue to increase.

Important to our growth also is the international expansion of our presence in various countries, as mentioned by Angus earlier. It represents another driver for our business, and especially ELAPRASE and REPLAGAL, which are now registered in more than 40 countries.

The direct presence helps brings these products to the countries, allows us to meet the needs of the patients of these populations, but also maximize really the potential for these products. Our geographic footprint will be further leveraged as we add FIRAZYR and Velaglucerase to these particular geographies.

Next page, we will talk a little bit about Velaglucerase. We've had a lot of activity in the quarter around this product. The early access program is in place in U.S. and in Europe, and well under way. And we're making good progress in providing the product to Gaucher patients all over.

The patient can get the product infused at home in most instances. And we have accommodated, of course, to meet this demand our manufacturing timelines by 18 months to match the supply that is required in the marketplace.

We've also completed the rolling NDA submission for the product in the United States at the end of August. And we anticipate priority review at the agency and of course, we're therefore preparing for Q1 launch in the U.S. The agency has also started to schedule inspections for the product.

We have filed for approval in Canada for Velaglucerase and we are expecting to file very shortly in the European Union for the product as well. The data for the Phase II program will be presented at the Lysosomal Disease Network meeting in February for those who are following that.

Next page, our other business highlights in the HGT business. We continue to be committed to growing the business focused on rare diseases in the long-term as well as in the near-term. And we have added to our long-term portfolio this quarter, a new technology to serve these patients with a collaboration with Santaris for the development of Locked Nucleic Acid technology products to treat really rare diseases that would not be amenable to treatment with our current enzyme replacement therapy technology. This allows us to expand and diversify our portfolio of products in the long-term.

You'll have seen also that we've agreed with Amicus Therapeutics to terminate our collaboration on (inaudible) therapies for lysosomal storage diseases.

Importantly, now to our ability to reliably support our commercial products in our pipeline, we continue to make progress on our capital projects relating to manufacturing. You'll recall that we added roller bottle manufacturing capacity in Lexington for the manufacturing of ELAPRASE. The validation batches were filed with the agencies in this quarter and we expect to have approval of the facility as well as the product that was made there in the beginning of next year.

Our large scale facility, which is under construction in Lexington is nearing completion. And we expect to be able to make validation batches in 2010. Velaglucerase will be the first product in that plant. And this additional manufacturing site is important in that. It will provide gross margin improvement, but will also contribute to the supply chain risk mitigation, since it represents really a new manufacturing site or a separate place where we can make product, and it uses disposable technology, an additional safeguard really for the potential of contamination.

I will pass to Angus now, who will give us some closing remarks.

Angus Russell

Thanks very much, Sylvie. So, turning to slide #35 and you can see it's headed up solid foundation for future growth and that's how we as a management team I think look at our business now. I hope this morning you've seen both with the third quarter results, but also the story we walked you through this morning that Shire's in great shape.

A very strong financial performance this quarter. Excellent growth as Graham highlighted from the core products, but also most importantly through a very difficult transition year, proactive cost management. All of that led to very strong cash flow again this quarter and the ability for Graham to reaffirm our guidance for 2009.

So as I posed the question earlier, is the strategy delivering? I think the answer is yes it is. In future, we will be driving growth from this balanced portfolio of eight core products. With the recent launch of Velaglucerase on a pre-approved access basis, INTUNIV in the U.S. next week, we will now have a stable of eight core growth products, all launched in the last two years or three years, all relatively young with great intellectual property protection.

REPLAGAL also as Sylvie highlighted will be filing a Biologics License Application by the end of this year in the U.S. And in addition, we'll continue to extend our global reach. I said at the start 27 countries with probably three more to come in the first half of next year.

We continue to develop and advance and enhance our strong R&D product pipeline. All of this platform we believe puts us well on the road to achieving our aspirational target of growing sales in the mid-teens range on average from the end of this year through to the end of 2015.

So with those remarks, I'd like to now hand back to the operator and take your questions.

Question-and-Answer Session


(Operator instructions). And we have our first question from Gary Nachman. Please go ahead.

Gary Nachman – Leerink Swann

Hi, thank you. First, for Sylvie, a few on REPLAGAL. What is your share of the market been in Europe? And how has that improved since Genzyme had its issues with Fabrazyme? What data will you be including in the U.S. filing? And then how much supply do you have at this time for REPLAGAL and how's that going to improve in the near-term?

Sylvie Gregoire

Maybe I will start with your last question first, Gary. We have sufficient REPLAGAL to meet any anticipated need that we see in the marketplace for this product. So we don't see any supply constraint for this product at all. In terms of market share, we've been competing with Fabrazyme for many years now in Europe, and it ranges between 40% and 50%. But, of course, these are all numbers, there is no IMS data, so these are self-reported numbers or assessment numbers by ourselves and it depends a bit country by country as well.

And then your third question was what will we be filing in the U.S. with REPLAGAL. We'll be filing with long-term observational data from our Fabrazyme outcome survey study as well as the data that comes from our extension trial. And so it's not on a new trial, it is really on the ongoing long-term experience of the product that we will be filing.

Gary Nachman – Leerink Swann

Okay, great. And then a quick one for, Mike, on VYVANSE. How has formulary acceptance been? Has it improved? We actually heard that you got a big win at Express Scripts. And how has GSK been helping your penetration in the market? Has it really been all for adults or are you getting some benefit (inaudible) as well? Thanks.

Mike Cola

Yes, first question, on the formulary, we generally don't comment on our individual big wins. But again, our goal with VYVANSE was to replicate the AXR coverage and we've done that and more, and it continues to improve as the drug performs. I think it's performed quite well for most of these managed care organizations.

As far as GSK's performance, I think they've really done a good job so far, particularly in the areas where they are targeting GSK only physicians. Again, we said this was really predicated on a very long-term relationship. We look for the ultimate benefits from this in the out years, we're still in the relatively early stages of this relationship.

Gary Nachman – Leerink Swann

Okay, thank you.


Thank you for the question. And we have a next question from Rodolphe Besserve. Please go ahead.

Rodolphe Besserve – Société Générale

Hi, good afternoon. First question, could you please elaborate on the two legal issues you mentioned in your press release, sales and marketing investigation in ADHD? Is it a general investigation for the overall industry or just on your products? And also on the suit from Teva on the supply agreement for ADDERALL XR. And do you intend to make any provision for one of these two issues in the future?

The Second question is on financial payments on the termination for collaboration with Alba and Amicus. Do you intend to make any booking in the future?

Angus Russell

Okay. So let me answer your first two questions on the OIG inquiry and also the Teva litigation. In regards to the OIG inquiry, I think many of us know we live in a world of regulation, very high regulation in this industry. And all of you are very expert at following the industry know that it's almost become standard practice for the OIG to actually inquire about the practices behind how we market and develop our products.

So at this stage is what you said, it's a general inquiry. It's only obviously just been notified to us. We'll cooperate fully with all the questions that we'll have and I would just characterize it as very early stage. And there is obviously no implication or inference of wrongdoing or anything else. This is just a very general inquiry and to say one that you've seen happen to many companies in our industry.

In regard to the Teva litigation, as you know we are the supplier. It's a situation where Teva is one of two authorized generic providers now of ADDERALL XR. We are the manufacturer, reminding you that neither Teva nor Impax have approvals for their own drugs, so, basically we supply the product to them both.

Remind you that ADDERALL XR is a scheduled product. And as such basically requires what's called a DEA quota. Drug Enforcement Agency controls scheduled compounds in the U.S. environment, very tightly. And as a result of that, when you are manufacturing these products, you have to get a quota, which is a total allowance of how much this material can be made.

You can imagine in a period where there are now up to three different people in the market, selling, basically people are trying to track the usage through all the different levels of inventory in the wholesaler and pharmacy chains and work out how much product is out there. And then at the same time we obviously have to apply for a quota with the DEA.

The situation here is that Teva have actually sued us under the contract on the base of concerns that we won't be able to get enough quota to supply them. I don't think for a moment that, that's proven, so there is no issue again in terms of a wrongdoing or implications of any wrongdoing here. It's simply, I think, concerns on Teva's behalf that we may not be able to provide them.

We have a great relationship with DEA. We've had long-term, as you know, been in this business. We negotiate quotas with them all the time. And we will be moving forward in regard to those continued discussions with the DEA. And again, this is a litigation that's at a very early stage with many possible outcomes.

On that basis, given that both litigations, as I just said are extremely, over the first investigation and this litigation with Teva is preliminary, no, there is no provisions, there is no implication of wrongdoing at this time. And consequently we have no basis to make any kind of provision whatsoever.

In regard to your questions on Alba and Amicus, maybe I will let Graham Hetherington, our CFO, comment on the any financial implications of termination of those two agreements. Graham?

Graham Hetherington

Rodolphe Besserve, in the case of Alba, there's no termination payment at all. In the case of Amicus, Amicus included in their release a termination payment of just over $5 million, which will be booked in the fourth quarter.

Rodolphe Besserve – Société Générale

Okay, thank you.


And we have a next question from Tom Russo. Please go ahead.

Tom Russo – Robert W. Baird & Co.

Good morning. The first question on Vela. Sylvie, can you be any more specific about the number of patients you have right now in the U.S.? I guess I am looking for help interpreting the comment about continuing to service 300 patients to 600 patients by the end of the year. That's my first question.

Sylvie Gregoire

Yes, certainly. I just want to say starting in September we have started to treat patients with Velaglucerase in the U.S. and in Europe. So just to set the scene. In terms of the exact numbers, I understand how they maybe of interest to you, but really in reality for the models of utilization of a product like Velaglucerase that is used at not a fixed dose and in dose in milligrams per kilogram, as you can well imagine, the exact numbers of patients is only relatively important.

What should be important to you, however, is whether or not major treatment centers have started to use the product. And indeed they have, both in the EU and in the U.S. And so I think that we're well on our way of accumulating patients in treatment for Velaglucerase. And the range that we provided, 300 patients to 600 patients by year-end, represents exactly that. The unknown in terms of which dose, at which does the patients will be treated, but it does represent what we see our inventory and what we can supply in terms of a range of patients in the marketplace.

When you're ready to put numbers in your model, however, you'll have to remember that, again, it's not the number of patients that matter, but really sort of the dose that these patients are on and then the utilization of the product, which will then be really more easy for you to capture when sales numbers come, which will be next year sometime.

Tom Russo – Robert W. Baird & Co.

Just to clarify that a little bit, is it fair to say that at the time you do launch and can begin charging, you will be maxed out in terms of your capacity?

Sylvie Gregoire

No, we have announced obviously that beyond at the end we can supply this range, 300 patients to 600 patients, by the end of this year and that we can add several hundred patients over the course of 2010 as we continue to manufacture the product. Remember, we did make some changes in the manufacturing schedule to accommodate for more manufacturing of Velaglucerase.

Tom Russo – Robert W. Baird & Co.

But you think as much as you can make, the market will take?

Sylvie Gregoire

Well, we think that certainly as much as we can take the market will take at this stage it.

Angus Russell

Tom, you're probably aware there's potential at the moment the shortages affecting several thousand patients. Just to nail this one, the clarity here is that very often with most treatments and (inaudible) people looking at cost per patient or whatever. The point that Sylvie is getting over here is that basically these are treatments, which are weight related, they can vary between the severity of disease with patients and the weight of patients. And the issue is, is how much can we supply and what we charge for that. It's not a patient relationship.

The reason we put patient ranges out there was to give physicians and patients groups some feel for what our potential was, as Sylvie said, in inventory, and how much of a gap in what's very many thousands of patients globally who can't receive full treatments at the moment. So to Sylvie's point, we're trending at the moment with the uptake in these early weeks, and it is early weeks, but we're trending towards we believe the full utilization of our capacity.

Tom Russo – Robert W. Baird & Co.

Thanks very much.


And we have a next question come from Dani Saurymper.

Dani Saurymper – Goldman Sachs

It's Dani Saurymper with Goldman Sachs. Two questions or three questions actually, sorry. Can you remind us on INTUNIV about the patent life for that product? And secondly, on CARRIERWAVE, I think you indicated you would update us and perhaps elaborate a bit more on alternative uses for CARRIERWAVE technology. I was wondering whether that now something we should expect in the new year.

And then just lastly, Angus, if you could just maybe discuss a little bit more about your international expansion plans. It seems some of this is primarily going to be organically driven, so to speak, but do you think you can continue to deliver internationally through organic means or do you see a need for further expansion from acquisitions in international markets specifically?

Angus Russell

Yes, okay. Three clear questions, Dani. I'm going to ask Mike Cola to answer first two. I think Mike did give a summary last quarter in more detail and just gave a quick overall summary on CARRIERWAVE again. But, Mike, if you could talk to the INTUNIV patent estate and then the CARRIERWAVE programs perhaps just once more cover again what we're doing in CARRIERWAVE.

Mike Cola

They're somewhat related, Dani, and actually, I think I would like to follow up with you and maybe Eric after the call on the exact patents, because I don't know them off the top of my head. But effective patent life is out through 16 and I believe we have patents that go well beyond that. But when we think about it, we think of it in terms of data exclusivity and exclusivity in the market. It is a 505 B2. It is a Hatch Waxman play. So we are thinking five years, six years.

It's related to your second question on CARRIERWAVE, our top priority in CARRIERWAVE is second generation INTUNIV. We think we can improve the product, maybe reduce some of the somnolence and sedation with the second generation CARRIERWAVE product and also eliminate the food effect. There is, particularly with fatty foods, an absorption variable there.

We have other products under way that you will hear more about by mid-year next year on the pain side related to CARRIERWAVE. And we will continue to progress those programs and update you in the first half of the year.

Angus Russell

Okay and then you asked me about the international expansion. You're right. At the moment, our organic growth is driving our international expansion from just seven countries, four years ago to 27 countries right now. And as I said, probably as many as 30 countries by the middle of next year. Really HGT is driving that growth. It's no coincidence that the explosion, if you like, in geographic expansion in Shire is taking place in this last three year, four year period, which is the period of ownership of HGT.

And the reason for that is obviously stating the obvious, these are rare genetic diseases. Two-thirds of the patients therefore exist outside of the U.S. When you're looking to drive the products peak sales you have to be able to register and sell these products on a global basis. The good side of this and why it can be rolled out very rapidly, as you know, is the commercial support and infrastructural needs of the HGT business are very small when compared to a traditional pharmaceutical business. Therefore, we are able to enter markets very rapidly with as few sometimes as four people or five people and get up and running, sell products and actually make profit within a 12 month to 18 month period. And that's why we can do this without significant dilution to our earnings on a various rapid rollout basis.

As you said, ultimately, there is a lot of organic growth to come here. There are other products like FIRAZYR, as Sylvie indicated, are on a slower trajectory, because they are hospital-based products, which historically, as you know, have a slower take-off for the reasons that Sylvie outlined earlier. In Mike's shop we've got FOSRENOL and XAGRID, which are also very large now international products. And MEZAVANT, which is the name for LIALDA, in rest of the world.

For Mike, there is more of a challenge and his business requires more sales force, more infrastructure. And in Mike's business what you see, is what we said is a much more targeted geographic roll-out, where we tend to use distributors and agents maybe for three years or five years to establish the beach head, because that minimizes our infrastructural investment, which would otherwise have us probably diluted for that period of time in growing a business in traditional pharmaceuticals.

So the model for Mike is a little bit different from HGT. There I say we will strike deals with distributors, three years or five years, then get the business back in three years or five years time when there is a sales base which can absorb that investment.

On top of that and to your point, of course, acquisition and business development activities do extend to looking more broadly. We spend a lot of time in the leadership team discussing that in the past 12 months. I would say interests me as I look across the spectrum of the pharmaceutical industry and see people rushing into the developing markets and buying all sorts of generic and branded generic businesses, in Shire, we've rejected that, we want to stick very much with our niche high margin kind of model.

And the good thing for Shire is that really hasn't been played out or we really haven't penetrated deeply into many of the world's existing traditional pharmaceutical markets. So I think, again, a contrast to the rest of the big pharma industry is that they're already out there in many of the traditional markets. They have exhausted growth potential and they're having now to go and in doing that changing the kinds of business and the kinds of returns they are making as they expand.

In Shire, our intention is to continue to drive our growth in markets that I say we still think we have a lot of potential. Not only with the organic platform and pipeline that we have today, but also, as you said, with the potential for acquisitions in these markets, which could continue to drive that growth also.

Dani Saurymper – Goldman Sachs

Great. Can I just quickly ask a follow-up then, just for Sylvie? You mentioned you can supply 300 patients to 600 patients by year-end potentially. Is that a number of patients you actually think you will supply? And then just related to that, in terms of number of patients in the U.S., can you just remind us how many patients are being treated currently with Cerezyme in the U.S. market?

Sylvie Gregoire

Well, the Cerezyme treatment market is divided by really the worldwide geography. So you can and you should look up I think certainly Genzyme has published sort of their numbers or you can infer from their publications what the treatment statistics. The world is like divided for the treatment of Cerezyme.

As it relates to the range of patients again that we have put out in the U.S., I am not sure I can add more to sort of how we explain how we get to that range in terms of how our supply matches that range. We make certain assumptions on patient doses that they're going to use. As you know there's more than one fixed dose that is approved for the treatment of Gaucher patients. And then we make assumptions on weight at this stage and then we provide you with this range, which is why the range is somewhat large.

We are following, remember, on a week-to-week basis however how many patients are on drug and at which dose, since we have this data available for us certainly with the treatment protocol in the U.S. And we allocate and reallocate to make sure that we can make available all the supply that we had to the patients with Gaucher between now and the end of the year, which again provides this range. So I hope that's helpful to you.

Dani Saurymper – Goldman Sachs

Thanks a lot.


And we have a question from David Steinberg. Please go ahead.

David Steinberg – Deutsche Bank Securities Inc.

Okay, thanks. My question is about the pending launch of INTUNIV. And you have somewhat of a unique situation you're about to launch a non-schedule drug into a market that largely has scheduled stimulus. I assume you're going to be pursuing a sampling program. Could you talk about the magnitude of the sampling? Would you classify it as moderate, aggressive?

And then in order to track the launch of the product, if the sampling is fairly aggressive, when do you think we could get a read on scripts as they would accurately reflect demand, given the early part of the launch they would understate through demand?

Angus Russell

Hi, David, thanks a lot. Mike, I think that's a question for you.

Mike Cola

Thanks, Angus. Yes, sampling. Very nice to be able to sample in this area. Obviously, we haven't been able to do that with our C2 controlled substances. We do have a starter kit that's been out with KOLs for the last few weeks. There are a very limited quantities of those starter kits, right around 5,000. But I would call our sampling not overly aggressive. But for an ADHD drug, where there hasn't been much sampling, I would say it's at least aggressive.

These are not your usual sample kits. These sample kits are titration packs with ones and twos, so there are two week dose titration and then the physician will pick a dose. So we shouldn't see a huge lag, put it that way, David, in the script data. There will be a little bit of a lag because the one month quantities that went to KOLs for 5,000 patients, but I don't see that as huge. And then we should start picking up those scripts relatively quickly that are coming off the dose titration packs.

We're going to monitor it along the way through our coupon program, because within those dose titration packs, there is a coupon, and it has to be activated by logging on to or calling into Shire. And it gives us a good metric to follow. Those of you who followed the VYVANSE launch, we were able to get a pretty good read, very early read on the coupons. So hopefully that gives you some indication.

I think you'll start seeing the scripts come through relatively quickly. I do think it's not the optimal time to be launching a product right at the end of the year. There is not a huge number of doctor/patient visits in the November/December timeframe.

David Steinberg – Deutsche Bank Securities Inc.

Okay, thanks, Mike. And then, Sylvie, on HGT, ELAPRASE is now approaching $400 million a year in the annualized sales. I was wondering could you just get us up-to-date on the saturation of the U.S. market, where you stand in Europe? And then as you've had more experience with this product, any change in sort of your estimate of the number of patients globally that potentially you could address with this product?

Sylvie Gregoire

Yes, so, the penetration in the U.S. and in Europe, to answer your question specifically, still stands at about 75%. But like with any new product clearly there are new diagnosis of new patients all the time, so although that number of penetration of diagnosed patients treated is constant, there is still a growth in the EU and in the U.S. scene for ELAPRASE.

The driver of the growth continues to be the less well penetrated markets, which are in Latin America and Eastern Europe, where we have somewhere between 35%, 40% penetration there. So we can see continued growth from over the several next few years from these particular regions. And I'll just remind you that we set our range of peak sales that we've talked about before is between $400 million and $600 million. And I think you can see that we're getting close to the bottom of that range, and there is remaining growth.

David Steinberg – Deutsche Bank Securities Inc.

Okay, thanks.


We have a next question from Karl Bradshaw. Please go ahead.

Karl Bradshaw – Morgan Stanley Dean Witter (Europe)

Hi, guys, thanks a lot. I have two questions. I will take first one for Graham. Graham, could you just give us a sense of what kind of upside we can expect for REPLAGAL revenues in the EU in fourth quarter, because I assume that you would have benefited from issues with Fabrazyme? And the second question is for Mike. I mean you have talked a little bit about the addressable population for INTUNIV. And could you just sort of run us through the level of education that's required and how you will be detailing this versus VYVANSE? Thanks a lot.

Graham Hetherington

Let me just pick up on REPLAGAL. The simple answer in terms of dollar revenues, the number really isn't material in the fourth quarter. But let me ask, Sylvie, just to talk more about the background.

Sylvie Gregoire

Yes, so we've just in recent weeks, of course, have seen an increased demand for REPLAGAL in the EU. And so as the quarter evolves we will be seeing the importance of that. There will be some, I think, additional revenues observed in the fourth quarter. But what really matters is that the rate of retention of these patients going forward and what impact that has on the long-term and as you know, the Fabry market also grows on its own. It's been growing for the last eight years as products have been in the market. So there are two factors to the continued growth in the near-term for REPLAGAL.

Angus Russell

Mike, the INTUNIV question.

Mike Cola

Hey, Karl. Just if you take a look back on slide #27, I tried to capture the relative positioning of the two products. Again, to your point on education, I think this isn't going to be that difficult based on our market research. When we talk to physicians about recognizing the patient type that not only has the core ADHD symptoms, but these disruptive behaviors around arguing, losing temper, deliberately annoying others, they recognize that patient type pretty well. We can educate moms as well as a non-stimulant, non-scheduled product. We can do more on the direct to patient side than we usually do, a little more openly.

And then kind of how we're going about this operationally, we have our 600 plus reps out in the field. Remember, that we brought on GSK to focus on VYVANSE adult. We feel we have the capacity to launch this product with our sales force in P1, really own that education and discussion with the physicians and KOLs. I think we're uniquely positioned for this one.

Karl Bradshaw – Morgan Stanley Dean Witter (Europe)

Thanks a lot.


And we have a next question from Ken Cacciatore. Please go ahead.

Ken Cacciatore – Cowen and Company, LLC.

Yes, thank you. Sylvie, just following up on your comment about retention of REPLAGAL, can we talk about retention of Velaglucerase? You did mentioned home infusion, but can you give us a sense of how that plays itself out? Your expectations when Cerezyme manufacturing comes back up to speed, do you think you'll have full retention of the patients you're currently gathering? And then I have a question for Mike on INTUNIV.

Sylvie Gregoire

Well, as the physicians gain experience with Velaglucerase, we've had good feedback on the experience that they're having with treating their patients and we have patient feedback. As you know, nowadays, patients are not shy of blogging and commenting. And so, therefore I think we can certainly expect good retention of Velaglucerase, certainly from patients perspective and a physicians perspective, their experience being good with the product. And so we've made some assumptions ourselves. But I guess we'll see ourselves as the recovery of the Cerezyme becomes available in the U.S., which is again on its own something to watch. And you read the same things we read regarding the speed of that recovery in the beginning of 2010.

Ken Cacciatore – Cowen and Company, LLC.

Are you paying for the home infusion set up or how's that being done?

Sylvie Gregoire

The infusion costs are being paid by the company and the drug is provided free of charge.

Ken Cacciatore – Cowen and Company, LLC.

Okay, thank you. And, Mike, on INTUNIV, can you give us a sense of the pricing discussions, what's going on with managed care at this point? And then maybe a little bit of some of your survey work on actually how much immediate release guanfacine is being used currently? And maybe if you would be willing to give us a sense of kind of your target goal here is the Strattera is around 7% share. Is that something that you're focused on in terms of targets or could you share with us some targets?

Mike Cola

Sure, Ken, I'll start with pricing and managed care and then maybe move onto ambition. On the managed care side, again, I think you need to realize it's a very different situation than VYVANSE, where we're trying to replicate the AXR managed care status in a relatively short period of time. This product is priced as a premium product, similar to Strattera. Again, we are in the early stages of these discussions, but I believe we will start out in Tier III with the larger co-pay. That's with the coupon at the end of the sample package to get people through that period.

We're not going to buy our way on to managed care formulary status. That's not the way Shire does it. We will build share and then in that 6 months to 12 month period go back and have those discussions again with the managed care organizations. But again, we think this product can live quite successfully as a Tier III product. Obviously, what we're trying to avoid is any type of prior auth or restrictions around it.

On the ambition, I've hesitated, I guess, to talk about the ambition, because you can dream a couple of dreams here, right. You can look at Strattera the way it is today at a 7% share of the market and 300,000 patients and say, that's really what you can do with INTUNIV. But you have to remember, Strattera, before people realized it really didn't have great efficacy and the safety profile wasn't so wonderful, got to an 18.8 share. I'm not saying that's what we're aiming for, but internally, we're daring people to dream about making this a big product.

It's got a great label, and when I think about the attributes of non-stimulant, on schedule, no black box warning, stimulant like a FEC size [ph], differentiated in a very difficult patient population, these children with disruptive behaviors, it's got efficacy throughout the day. That's a package I like. I think that's something that, as we educate the market, will play very well. And we've been hesitant to talk about this, because, in fact, we didn't have a label until very recently. Now that we got that label you guys can see it and it looks pretty good.

Ken Cacciatore – Cowen and Company, LLC.

Strattera played out fairly quickly in terms of uptake. Is this something going to be a bit of a slow build, understanding you're launching it, not a great time, going to become clearer to us within the first six months?

Mike Cola

I think we'll have a really good idea in six months. I mean the things that we're looking for as indicators of success are physicians' ability to titrate these guys to the most effective dose. We're hoping that parents understand that you're going to work through a little somnolence and sedation upfront. So far that hasn't been a problem. It hasn't been a problem in the clinical trials. The experiences we have, we haven't gotten negative feedback on that. In fact, I think some parents actually like that upfront.

So I think we'll have a pretty good idea by mid-year. I think the launches are very different. I wasn't around for the Strattera launch, but it was very much focused on getting lots of area under the curve upfront and kind of over promising, if I can say that in under delivering. We're trying to not over promise to physicians and parents with this product. We're telling them what it is, how to use it. And I think as they get experience with it we're going to build tremendous credibility with the physicians. As we say internally, we don't want to be heroes in January and goats in April. We want the product to have reasonable expectations and deliver on those expectations.

Ken Cacciatore – Cowen and Company, LLC.

Can you give us a sense of the low hanging fruit on the immediate release guanfacine, maybe immediate release clonidine? Do you have those figures?

Mike Cola

Yes, I mean, if you think about the 500,000, and I will lump them together, the 500,000 patients that are on I'll say nontraditional meds. They include the atypical antipsychotics, short-acting clonidine and guanfacine. The clonidine, guanfacine, I think if you count them up, and we can come back to you on this, is somewhere potentially would be around a 5% of the market. If you add the atypical antipsychotics I think you get in just that nontraditional meds up towards what would be counted as about 12% of the market that is not part of the current market definition. So that business, low hanging fruit, that sounds a little easier than it will be. But in fact, I think that's business that we can go at pretty easily.

Angus Russell

Thank you. The other thing I add to that, Mike, is just to remind people Strattera when it's launched, when you mentioned 18%, it was launching at the time in adults as well, and have a joint adult, pediatric, adolescent label. So this is peak adolescent only as I'll just remind people of that factor as well that this is not for the adult market, this product. So say Strattera obviously call that way of adult launch in terms of the rate of its take-off.

Mike Cola

And I think they also did much more of a mass market top tier pharma launch with lots of boots on the street and lots of promotional dollars. We're going to have our focus sales force, again, we're going to set a reasonable expectation and we're going to deliver on it.

Sylvie Gregoire

Any more question?


We have a next question from Rodolphe Besserve. Please go ahead.

Rodolphe Besserve – Société Générale

Yes, thanks. Could you just give an update on METAZYM? And do you intend to start a pivotal phase by the end of this year? And could you just indicate about the design and the size of this trial? And a second question also. Since the mid-stage pipeline now sounds a bit empty, so are you anxious about this and do you intend to fix this issue rapidly? And how do you intend to fix it? And would you focus more on HGT or Specialty? I don't know if you're making licensing or acquisitions. Thanks.

Sylvie Gregoire

I'll take the first question on METAZYM or the enzyme replacement therapy for metachromatic leukodystrophy that we have in-license. As you know, and I think we've made it quite clear, it was unfortunately quite public also, we've had some difficulty with making enough supply at the contractor, which was the same contractor that Zymenex was using for making this enzyme. So they've been making some and we still intend to start the trial.

Whether or not we will be able to enroll the first patient between now and the end of the year might be a little bit iffy, But the trial is indeed intended to start and with the supplies that are made at these contractors. In order to alleviate this problem going forward, we, obviously, are looking at additional ways of manufacturing the product either externally and including making product ourselves internally. So keep in tune relative to the start of the program, hopefully shortly.

Angus Russell

In terms of the pipeline discussion, Rodolphe, I think thank you for asking it, because I think it's important to clarify that the things we announced termination of today, Alba and Amicus, Amicus was as much about a technology to supplement, if you like, the existing positions. Alba was about a brand new novel treatment, something has never been treated therapeutically in celiac disease. And so my point being these were very early proving kind of trials. That's why we've structured them as small amounts of money upfront and licensing deals. That's kind of the way we think about how we structure deals for risk like that.

My point really is that even if those products had worked and we're moving on, these were not featured in the planning horizon we're looking at. They wouldn't have led to product launches until well out into the 2015, '16 kind of timeframe. So what I come back to is, as we think about our long range plan and our aspirational targets to grow in mid-teens between now and the end of 2015, that's really driven by products that you already see in the market. I think that's a huge differentiating feature again.

These products, as I said at my outset, six of them you see in the quarter driving growth very much now. Two more just about to start their life in the market. It's a very new product pipeline, and one with long exclusivity and some of that exclusivity as in the case of VYVANSE, goes out until 2023 and 2024. So this is a huge differentiating factor for me. But I think it is really important to understand that the growth from now for that period through 2015 is fundamentally driven by the eight products that you can, in a sense, touch and feel in the marketplace today. And as I say very strong exclusivity underpinning that growth into the future. So we'll remain active in the M&A world. That's part of our strategy, is obviously continuing to bring in things to the pipeline. You will continue to see us do that.

Also, I would want to just reiterate something that's been talked about earlier on this call, which is, we increasingly have a capability in Shire to develop our own products, whether it be an HGT, with a human cell single gene expression platform here to produce more enzyme therapies for these rare diseases or whether it's CARRIERWAVE.

And so things we go through next year, you'll be hearing more news about the CARRIERWAVE projects. In addition, Mike highlights on the last call that we're looking at other known compounds that we've had in the Shire portfolio before and looking at new indications, new potential for those drugs too.

So it's a balance now I think between the technology platforms we have, which we will continue to add to it as we did with Santaris recently to open up even more opportunities in the future and we will supplement the pipeline. But don't for a minute think that, that's required to deliver the growth that you see actually out now to 2015, which is really coming through the portfolio of eight drugs that are now out there in the marketplace.

Rodolphe Besserve – Société Générale

Okay, thank you.


We have a next question from David Amsellem. Please go ahead.

David Amsellem – Piper Jaffray & Co.

Thanks. So just quickly on FOSRENOL in the CKD indication in Europe, can you remind us what portion of the pre-dialysis patients need treatment for hypophosphatemia and hyperphosphatemia and how big you believe the incremental opportunity is for that product?

Angus Russell

Mike, would you like to answer that please?

Mike Cola

Sure. The exact percentage of that patient population, which is obviously four times, maybe five times larger than ESRD is unclear. In our own planning and our own thinking we think it has impact, but it's not a huge impact to the current market share for the product. It brings more patients into the market. It gives us parity, probably most importantly with mandella [ph] to compete in that market. But again, we don't see a huge number of new patients for us in that indication.

David Amsellem – Piper Jaffray & Co.

Okay and then one last question on INTUNIV. Do you think there are any major differences that you can highlight between INTUNIV and short-acting clonidine efficacy or tolerability wise? And why would a doctor using short-acting clonidine off label successfully switch to INTUNIV?

Mike Cola

Well, for one reason because it's not indicated for ADHD. I think the other reason you need to understand about short-acting clonidine is it's used multiple times per day. We're told it's used as many as four times a day with patients. So A) compliance is very difficult. It definitely ratchets up the safety profile of the product, see more AEs. This product is a true once a day product, efficacious throughout the day. Much easier compliance. Should see a much lower adverse event profile. And I think, again, physicians have been waiting for this. I don't think anybody views short-acting clonidine as a good product.

Angus Russell

I'm going to take one more question in the interest of time. I think call's been going on a while now. So let's have one more question. We are available obviously Clea and Eric are available to take your calls rest of the day for any more detailed questions. So let's just take one more question on the call please, operator.


Okay, and it will be from Mr. Justin Smith. Please go ahead.

Justin Smith – MF Global UK Limited

Yes, thanks very much. Just a very quick question on INTUNIV and the fact that it's non-scheduled. I'm just kind of wondering if that has an impact with regards to how much time your reps are going to be able to get in front of the doctors, because presumably if it's non-scheduled that doesn't mean that patients need to go to the doctor every time they need to get a new prescription. So I was just wondering if you could share any thoughts there?

Angus Russell


Mike Cola

Yes, there's a couple components to that question. When I think about the treatment patterns between a physician and a patient, I don't think it changes that much whether it's scheduled or unscheduled. I think most of these children are getting doctor visits once a quarter. Regs changed in the U.S. What's it Angus? 18 months ago, where they could do forward dating of a 90-day script, so one month, one month, one month. And so the doctor/patient visits are really not the issue here.

I think as far as access to physicians though for us, I think it does open some doors in places around the country where you have mothers that are very much safety seeking for their child. You have very proactive parents, particularly, in the Northeast. I think this will create a lot of interest in those areas. Anytime you have a new product in the bag as well I think it helps us get access to those physicians. I also think in those areas that we've had difficulty accessing the physicians you will see at least one more conversation that we haven't been able to have around VYVANSE.

Justin Smith – MF Global UK Limited

That’s great. Thank you very much.

Mike Cola


Eric Rojas

Okay, folks, I'm going to draw it to a close there. And just finish again by saying we think we've delivered real tangible evidence again this quarter of a business that's really doing very well with core products, growing at 20%, managing our way through the transition with great cost control and looking forward to what I think is very, very strong growth potential in the future from a very young portfolio, a balanced portfolio of new products.

So, we're in the U.S. And to use a World Series, right in the middle of the World Series, I can use the World Series analysis I think or analogy the batting line-up looks good, the bullpens got lots of strength, and we are all set to go for the future.

So given where we are in the U.S., I think we should say, go Phillies. Thanks very much and have a great day.


Thanks, Eric. Ladies and gentlemen, that concludes your conference call for today. You may now disconnect. Thank you for joining and have a very good day.

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