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Executives

Michael Cola - President of Specialty Pharmaceuticals, Member of Senior Staff Committee and Member of Management Committee

Graham Hetherington - Chief Financial Officer, Principal Accounting Officer and Director

Sylvie Gregoire - President of Human Genetic Therapies Business and Member of Management Committee

Angus Russell - Chief Executive Officer and Executive Director

Jeff Jonas - Senior Vice President of Research & Development for Pharmaceuticals Business

Eric Rojas - Director of Investor Relations - North America

Analysts

Ken Cacciatore - Cowen and Company, LLC, Research Division

Thomas J. Russo - Robert W. Baird & Co. Incorporated, Research Division

Gary Nachman - Susquehanna Financial Group, LLLP, Research Division

David M. Steinberg - Deutsche Bank AG, Research Division

Keyur Parekh - Goldman Sachs Group Inc., Research Division

Luisa Hector - Crédit Suisse AG, Research Division

Peter Verdult - Morgan Stanley, Research Division

Graham Parry - BofA Merrill Lynch, Research Division

Frank H. Pinkerton - SunTrust Robinson Humphrey, Inc., Research Division

Guillaume van Renterghem - UBS Investment Bank, Research Division

Shire plc (SHPGY) Q3 2011 Earnings Call October 28, 2011 9:00 AM ET

Operator

Good day, ladies and gentlemen, and welcome to the Shire's 2011 Third Quarter Results hosted by Eric Rojas. My name is Joan, and I'm your event manager. [Operator Instructions] I would like to advise all parties that this call is being recorded for replay purposes, and now, I'd like to hand it over to Eric. Go ahead please.

Eric Rojas

Good morning, and good afternoon, everyone. Thank you for joining us today for Shire's Third Quarter 2011 Financial Results.

By now, you should have all received our press release and should be viewing our presentation via our website on shire.com. If for some reason you have not received the press release or are unable to access our website, please contact Souheil Salah in our U.K. Investor Relations department on +44-1256-894-160 and he will be happy to assist you.

Our speakers today are Angus Russell, Graham Hetherington and Jeff Jonas. Mike Cola, Sylvie Gregoire and Kevin Rakin will be available for Q&A as well.

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 as they materialize can materially affect our results.

Today's agenda is on Slide 3. Angus will comment on Shire's Q3 performance and recent highlights. Graham will continue with a financial review and update Shire's full year outlook. Jeff Jonas will give an update on financial uses, and Angus will make closing remarks and open up the call for your questions. We request that you only ask 2 questions so that everyone gets a chance to participate in the call. Sarah Elton-Farr and I will be available after the call for any follow-up questions.

I'll now hand the call over to Angus.

Angus Russell

Thanks, Eric, and good morning, good afternoon, everyone. If we just turn to Slide 5, and I'll start with the revenue performance, which once again this quarter was very strong. Total revenues were up 24%, the second quarter we delivered more than $1 billion in revenues. In this quarter, product sales performance within that was up a very strong 28% and also delivered over $1 billion. For me, this reflects a very balanced strong growing portfolio of products. Most importantly, the growth is mostly volume driven with very little price components in these overall results.

Turning to the next slide and looking similarly at the earnings line. Most importantly, on track, we believe now to deliver what we've seen as increasing earning expectations over the course of this year, and that will once again deliver significant growth for 2011. This quarter, you've seen a trend of reinvesting back into the business, and we'll be giving you some highlights later in this presentation about how we're investing in interesting late-stage pipeline developments.

Turning now to some of the business highlights on the next slide and starting with our Specialty Pharma business. Firstly, VYVANSE, very strong again prescription volume performance this quarter. Prescription has increased 20% over the same quarter of last year, and that's double the 10% quarterly total market growth, which obviously reflects market share gains during the quarter and a strong back to school season.

This quarter, we're also showing you results on our EU Phase III pediatric trial. This data is very consistent with previous results we've generated on efficacy and safety in our U.S. studies and is profiled to previous studies of that nature. It also, this study, includes interestingly a Concerta reference arm, and for me, this reflects the need to do studies against current standards of care, particularly in Europe but I believe in time, this will extend to most jurisdictions in healthcare around the world. And so for me, it's very groundbreaking for Shire to be doing this kind of study. That is to say, the new paradigm of treatment. And Jeff Jonas will be talking a little bit more about that later in this presentation. We're also progressing our non-ADHD indications of VYVANSE, and Jeff will also be previewing particularly the work in major depressive disorder in our now commencing Phase III study.

Moving to INTUNIV, prescriptions increased 9% over Q2 this year and 59% over the same quarter of last year. Again, this reflects favorable increases in market share trends being driven by our new consumer marketing campaigns and the adjunctive therapy with stimulant launch that took place earlier this year. We're also enrolling our EU pivotal Phase III programs for INTUNIV.

Looking now at MEZAVANT or LIALDA. U.S. prescription market share again increased to 20.7%. As you remember, the FDA recently approved the new label indication for LIALDA to add a maintenance of remission claim, and that's clearly beginning to have an effect on driving continued market share gains.

Now turning to our HGT segment, starting off with FIRAZYR. As you remember, just last month, we received approval here in the U.S. for the self-administration for acute attacks of hereditary angioedema in adults. We've commenced our launch and I'm pleased to say that the product seems to be very well received by patients, physicians and payers.

With regard to REPLAGAL in the Fabry market, our x U.S. market share continues to climb and has now exceeded 80%. You can see here 81% at this current moment in time, driven both by switch from existing treatments and also new patient growth. We're continuing to meet the very high demand, and we're monitoring closely to ensure that we can provide supply continuity to the patients moving onto our treatment. You'll have seen also in the press release that we've announced that we've commenced a rolling BLA submission in the U.S. following discussions with FDA, and I'm sure you'll have further questions for Sylvie in regard to the current status of that BLA program. Overall then, we've seen 40% growth in revenues in REPLAGAL in the quarter versus the same period last year.

VPRIV, not a dissimilar story to REPLAGAL in that we're seeing continued sharp increase in demand, really created by ongoing shortages with Cerezyme. So growth in the quarter, again a very strong 31% compared to the same period last year.

Now looking finally at the Lexington new manufacturing facility in Boston. VPRIV process validation runs have recently been completed, and that now puts us in a position to begin initiating regulatory filings for VPRIV next month. And we expect on that basis to receive approvals sometime early in 2012. I'll just remind you that approval of VPRIV also means that we'll be able to release extra capacity for REPLAGAL after that new facility.

Finally turning to our newest business segment, Regenerative Medicine and looking at performance of DERMAGRAFT this quarter, I'm pleased to say we hit a very nice number here, $50 million of net sales in the first full quarter under Shire's ownership. That's a 27% increase versus the same quarter last year and reflects now a 6% market share of the addressable patient population. Given this strong growth and really looking into the future, we are finalizing now a strategy for new infrastructure which will be necessary to meet increasing manufacturing capacity to supply this very strong demand.

That demand is really coming from, as you know, these diabetic results or indication related to obviously the growth or significant growth of diabetes here in the U.S. market. And here's a statistic for you that among U.S. residents aged 65 and older, current estimates are that 10.9 million or about 27% of the population have diabetes. And when you look at projections over the next decade, that could reach numbers as high as 50% in the U.S. population.

Now turning to the next slide and just revisiting a slide we've used with you on previous occasions. What you can see is here, obviously, in terms of our key products, DERMAGRAFT now being added, FIRAZYR obviously a new U.S. approval is tantamount really to a significant upside for that product's prospects. So here, you can see portfolio of 9 products very much driving this tremendously strong revenue growth in the quarter. And looking forward, we expect to see good growth going forward for several years as of this relatively young product portfolio.

Behind that, as I said, we're reinvesting now in a very good, strong, emerging late-stage pipeline. And as I said, Jeff Jonas, particularly, is going to take you through some of the key highlights of the VYVANSE programs in that late-stage pipeline. And behind that, we're working on a number of other further ideas in earlier stages of Phase I, II and also preclinical. And I would imagine as we move into 2012, we'll have other things to say in regard to many of those programs as they move through clinical development.

So with those introductory remarks, let me now hand over to Graham to give you some more detail about the financial results.

Graham Hetherington

Thank you, Angus, and good morning, good afternoon, everyone. We've seen from Angus' slides that we've continued to build on the strong growth we've achieved in recent quarters. I'm going to focus today on an overview of another strong performance this quarter while I'll explain a number of one-off items impacting the shape of the results. Secondly, we're going to take a quick look at royalties to explain both this quarter's numbers and our expectations going forward. Thirdly, I'll talk about the continued strong growth across our portfolio and how that's enabling us to continue to deliver operating leverage while we've been investing for future growth. And finally, I'll reinforce how we're on track to deliver market expectations in 2011.

So moving on to Chart 12. Here, we take a closer look at the strong earnings growth we've achieved this quarter. Product sales are up 28% or 25% on a constant currency basis year-on-year and, as Angus said, exceed $1 billion for the first time in the quarter. Total revenues are up 24%. As we expected, growth in total revenues and EBITDA has been held back due to royalties, and I'll talk a bit more in a bit more detail about these in a moment. We've maintained our underlying operating margin on product sales at 30% even after our investment programs to support sustained future growth. Our non-GAAP earnings per ADS of $1.28 are up 10% against the strong quarter's performance last year. It's worth noting that in this quarter, we absorbed $8 million of temporary foreign exchange losses below the EBITDA line, and these have contributed to holding back our reported EPS growth in the quarter. Our business model continues to be cash generative and contributed $296 million of cash in the third quarter this year.

Moving on to Chart 13. As I mentioned earlier, I'd like to highlight some specifics in relation to our royalties. If we recall, our 3TC and Zeffix royalties are scheduled to significantly reduce going into 2012. In any event, ahead of this, we have to not recognize revenue for 3TC and now Zeffix in certain territories. As I highlighted on our Q2 call, this is due to a disagreement about how the relevant royalty rates should be applied and the expiry dates of certain patents. As a result, combined 3TC and Zeffix royalties are down 57% or $24 million this quarter compared to last year. While a dialogue is ongoing to resolve this issue, U.S. GAAP requires that we don't recognize this part of our royalty revenue. And if discussions prove successful, then we may be in a position to recognize these royalties at that time. In the quarter, to give you a scale of magnitude, we did not recognize $28 million of royalty in the third quarter of this year. And in total, $50 million of royalty revenue has not been recognized due to this dispute during 2011. This dynamic in overall has been partly offset by stronger royalties from our partner sales of FOSRENOL in Japan. Looking forward and overall, I'm now expecting combined royalties and other revenues to be around 17% lower for the full year compared to 2010. This compares to my previous guidance of 10% low.

Turning now to Slide 14 and focusing on our product sales. Our ADHD franchise continues to deliver impressive growth, helped by a market that grew by 10% in the quarter, more importantly by our brands capturing a growing share of that market. VYVANSE, as Angus said, is having a strong back to school season and continues to grow, exiting the quarter with a market share of around 16% and with U.S. prescriptions growing at 20%, significantly outperforming the growing ADHD market. Total sales of VYVANSE, including sales in Canada and Brazil, were up $49 million or 32%, nearly 1/3.

INTUNIV also gained share, and prescriptions increased by 59% in the third quarter compared to last year. Product sales increased slightly less than this underlying growth rate, at 50% due to the impacts of stocking movements year-on-year.

ADDERALL XR benefited from low sales deductions in the quarter. These were 47% this quarter compared to 60% in the third quarter last year, a movement which equates to about $33 million. This was due to some one-time adjustments, including a lowering of our estimate of the amount of inventory in the pipeline and the related sales deduction reserve. Looking forward, we still expect sales deductions going forward to be in the range of 60% to 65%.

In our GI franchise, LIALDA and MEZAVANT continues to perform well, up $14 million or 18%, as we continue to achieve market gains in the U.S. We saw some destocking in the third quarter, and we could see further destocking in the fourth, as well as marginally higher sales deductions looking into the fourth quarter.

PENTASA was down 2% due to a high level of destocking in the quarter, which impacted net sales by around $10 million.

Moving onto HGT. We saw continued strong growth in the quarter. REPLAGAL was up 40%, driven by strong demand from both new patients and patients switching from Fabrazyme. Sales of VPRIV increased by 31%, also driven by new patients and those switching from Cerezyme. And finally, ELAPRASE product sales were up 13% against the third quarter last year due to increased patient volumes. Ordering patents did however hold back the growth in the third quarter, which we expect to even out over the full year.

ABH, a Regenerative Medicine business, we've seen a great start from our newly acquired product, DERMAGRAFT, which contributed $50 million of sales and continues to grow strongly, driven by a growing U.S. diabetic population and continued adoption of the treatment.

Overall, total revenues are up 24% or $212 million, and that's even after the divestments of DAYTRANA, which contributed $50 million of revenues to the third quarter last year and the $12 million decline in royalties and other revenues we've seen. As you've seen, our young and increasingly diverse portfolio continues to deliver impressive results. I'm confident the portfolio and the investments we're making in our pipeline will continue to represent an excellent platform for growth.

Turning to Slide 15. Our approaching margins based on product sales for the 9 months year-to-date have increased by 140 basis points over the same period last year to 29% supported by our sales growth. We've done this while continuing our investment program to advance our pipeline and support our growing business while increasing combined R&D and SG&A by 24% in the quarter year-on-year. Specifically, increases in R&D are funding investments and new uses for VYVANSE and our intrathecal programs included Hunter CNS, specifically Sanfilippo A in this quarter. We also described how we're absorbing the operating cost of our Swiss Hub on the basis and now ABH in 2011, none of which were in our Q3 2010 comparatives.

It's also worth noting that the weaker fallout, which as you've seen is favorable for reported sales, has an unfavorable impact on our operating costs. We estimate that in the year-to-date, approximately $51 million of the increase in R&D and SG&A over 2010 are being due to exchange rate movements.

Year-to-date, gross margins of just over 86% are marginally lower than 2010. This includes the impact of a one-off inventory write-down in the quarter of expired ELAPRASE and purified bulk material during this quarter.

In summary, we'll continue to manage our cost base carefully while investing in the many opportunities that we have for profitable, long-term growth.

Let's look at our cash flow on Slide 16. As I mentioned earlier, this quarter, we generated $296 million of cash, up 9% from last year. Free cash flow, after taking account of tax and interest payments, was $138 million, up 56% from last year. We finished the quarter with cash of $297 million, and as a result, net debt of just over $800 million. We continue to have a strong and flexible funding position, supported by access to our 5-year $1.2 billion bank facility which is currently undrawn.

Finally, let's look at our full year outlook for 2011 on Slide 17. During the year, we've seen market consensus for 2011 earnings rise, and I'm pleased to say that we remain on track to meet current market expectations for the year. Critically, this outlook includes the impacts of the lower royalties that I mentioned earlier.

Looking at the individual lines of the income statement, product sales continue to grow well. We now expect royalties and other revenues for the full year to be down by approximately 17% compared to 2010. And taken together, I'm expecting good year-on-year growth in total revenues, with growth in the second half of the year likely to be in line with the 22% we achieved in the first half. The full year gross margin percentage will be in line with our previous guidance at a similar level to that recorded in 2010. And as I've said before, I continue to expect combined R&D and SG&A to be up 20% on 2010. And our expectation for our full year tax rate remains between 22% and 24% despite the higher rates in this third quarter.

Taking these dynamics together with the excellent performance we've seen so far this year, I'm confident that 2010 will be another very strong year for Shire.

I'll now hand over to Jeff, who'll provide an update on our recent VYVANSE trial results in Europe and potential new usage for VYVANSE.

Jeff Jonas

Thanks, Graham. Good morning and good afternoon, everybody. I'm pleased to be sharing some of our exciting new data today, beginning with the results of our European pivotal VYVANSE Trial 325. This full detail was presented at the AACAP meeting last Friday. You can find the link to the poster in the appendix of this slide deck.

Next slide please. This study, 325, in many ways represents the type of risk we believe companies must take to show the value of their products, a paradigm shift for our approach to R&D here at Shire and one of the ways in which we are executing on our vision to develop drugs that provide meaningful benefits to patients. In brief, while we included our reference arm here to support our European filing and work with payers, we believe we were able to establish a clinically meaningful value proposition as a result of the data you're about to see. I mentioned earlier the full data set have recently been presented at the AACAP meeting so we won't present them here, and the safety data are consistent with current labeling. So I'll present on the next slide the top line efficacy data of the study.

As you can clearly see, therapy with VYVANSE resulted in a statistically significant improvement in the primary endpoint when compared to placebo as did Concerta. However, while we did not call out a primary comparison of the 2 active arms of registration, one can see the relative amount of improvement for VYVANSE versus Concerta in this study. Based on these encouraging data, it goes without saying that we believe our European filing will proceed on target, and we believe these data will help increase the overall probability of success for this filing. In addition, these data suggest that there are no major differences between U.S. and European patients in how they respond to treatment with VYVANSE.

Next slide please. I'd now like to turn some new data arising from our VYVANSE new uses program. An important reminder to everyone. VYVANSE is only approved for the treatment of ADHD, and the data presented in the following slides represents investigational use of the drug and should not be interpreted as suggesting any use aside from treatments approved in the current label.

Next slide. One of the great opportunities VYVANSE represents for us is that its long patent life and our long runway that we have to develop new indication for the drug into the 2020s for both Europe and the U.S. I'm going to focus today on exciting findings in our second study of VYVANSE for the augmentation of the treatment of major depression.

Next slide. Before doing that, I want to remind all of you about the underlying theory behind our new uses program. Briefly, when we started this program, we believe that the mechanism whereby VYVANSE has its effects may impact psychiatric symptoms associated with a number of disorders. However, as new data has arisen, we've begun to consider that the enhanced mood and cognition might well be a common thread here. The one thing conceptualized all the effects in VYVANSE on negative symptoms, schizophrenia, major depression and wakefulness, has variance of an effect on improving performance and cognition. For binge eating disorder, the role of VYVANSE in affecting dopamine is still the likely probable mechanism of action. Based on this, we chose to examine VYVANSE's activity in those disorders where we think there is a significant unmet medical need in large populations, where we believe we can offer a differentiated product profile. The treatment is typically provided by specialty physicians and where there is a potentially clear regulatory pathway.

Next slide. This slide provides an overview of our major depression program. As a reminder, after our positive signal finding study and after meeting with the regulatory agencies, we began our Phase III program for major depression. And as you may recall from earlier talks, we believe this program has the promise of yielding an important new therapy for major depressive disorder in a market of 3 million patients in the G7, with the potential value in the G7 of at least $1 billion for this market.

The important details to note regarding this program are seen here on the slide. In particular, we estimate that all in, our NDA will encompass 1,500 subjects in 3 short-term trials and 1 open label long-term trial. We expect total enrollment in this global program to take 24 months.

It's important to point out why we believe we can achieve this goal in such an efficient manner. Some of you no doubt know that other adjunct trials underway have involved many more, thousands of more patients. Our approach has focused on conducting our studies with clear go, no-go criteria so that we could derisk our programs at the outset, looking for populations we believe are more likely to respond to our treatment. One could well call this a patient-centric approach, but the end result is that based on the effect size we saw on our initial study and based on the data you are about to see, we believe our Phase III program could be accomplished successfully and efficiently, with numbers smaller than those seen in competitor augmentation trials for major depressive disorder. We reason that positive studies in such populations like the one studied here will provide the information on the overall probability of success for the program, as well as potentially identifying response biomarkers or populations who are particularly responsive to VYVANSE augmentation. Study 205, which I'll now discuss on the next slide, represents this approach.

Study 205 looked at an important subgroup of patients with major depression but a group where establishing activity might well have been expected to be quite difficult. In brief, we studied patients who are near or at remission of their depressive symptoms but who are still suffering from cognitive difficulties. Recall what I said previously about the efficiency of our program and our approach to conducting trials. You'll see that this trial was modestly sized, about 70 subjects per arm and powered at 80% for an effect size we felt would be clinically meaningful. This task helps assure that if a signal arises, it is meaningful and not just a finding statistically significant but not clinically or commercially meaningful. That is not simply the result of an overpowered trial.

You can see the design of this multicenter trial on this slide, but in brief, as I've said earlier, this population might be characterized as patients whose physicians are reluctant to change therapies because they are almost well but not totally better. Again, we knew this would be a difficult population to study. The next slide shows the top line results.

In brief, Study 205 was a clear win and showed that VYVANSE has significant effect not only on cognition and executive function but also on the depressive symptoms of these subjects. To put these findings into context, you can imagine patients who are almost better, out of the hospital, but aren't quite better enough to return to full function, whether that be either jobs or family responsibilities. These data suggest that VYVANSE augmentation, if confirmed, could be a valuable addition to the therapeutic armamentarium and one that could be used without the risk of physicians having to stop and restart medications in depressed patients.

While we intend to present these data in full at a major medical meeting in December, we believe it's fair to say that these data support our belief in the meaningful activity of VYVANSE in the augmentation of major depression and encourage us about the probability of success for the overall program.

Finally, I want to provide a brief update on the other VYVANSE life cycle programs. For excessive daytime sleepiness, you may remember we began this program with a head-to-head trial against a competitor. We're now discussing with health authorities our ability to establish a superiority claim for this program. For negative symptoms in schizophrenia, you may remember that we had excellent tolerability in that study and so now, we're exploring higher doses to the treatment of this disorder. Finally, binging disorder, as you know, has a Phase II trial where now enrollment has been complete, and we expect data availability in the first half of 2012.

I want to thank you for your attention and now back to you, Angus.

Angus Russell

Thanks very much, Jeff. So turning to Slide 29 just to try and bring all of that together in some summary comments. For me, I believe this again clearly demonstrates the power of our strategy and its ability to deliver a number of benefits. Most benefits are set out here on the slide.

Firstly, we now have a very strong balanced product portfolio, delivering over $1 billion worth of sales for the quarter and very strong growth prospects well into the future. As you've heard from Jeff, we're investing in a number of very promising pipeline opportunities. All of those lead me to the next point, which is these are all aimed at delivering valuable and innovative treatments to meet what we all know is a changing health care environment, and we've tried to illustrate how the studies are very different from traditional studies conducted in this industry in the past. And all of these, of course, continues us on our journey of helping patients to lead better lives.

So with those closing comments, let me hand back to the operator and invite you to ask your questions.

Question-and-Answer Session

Operator

[Operator Instructions] We do have your first question, and it's from the line of Ken Cacciatore.

Ken Cacciatore - Cowen and Company, LLC, Research Division

Just a couple of questions. First, Sylvie, on REPLAGAL, can you give us a sense of what the data was that was submitted? Just a review of that. I know you've talked about it before. And also, can you discuss your expectations if the product is approved in a timely fashion with the supply issue? Can you give us a sense of the market here in the U.S.? You're at 80% x U.S., so maybe a sense of what the penetration rate could be. Then a follow-up for Kevin on DERMAGRAFT.

Angus Russell

Sylvie?

Sylvie Gregoire

Certainly. So we filed the BLA this week and in it, we've added the information that we've been collecting over the last 1.5 years. And that includes, of course, the pharmacokinetic data that was requested by the FDA and some clinical data that mostly comes from the treatment IND study that's been ongoing in the U.S., where a lot of patients are on Fabrazyme and switched to REPLAGAL in that study. And we've conducted an analysis and that will be part of the submission for the agency to review. Alongside with that, of course, there's many, many man-years, additional of safety data that were gathered through the nearly 2.5 years now of additional patients that have been coming onto the product. We now have 2,800 patients on REPLAGAL worldwide. And so that information and combined with some public information coming from the only place in the world where there's some amounts of head-to-head information between Fabrazyme and REPLAGAL comes from Canada and the agency, I'm sure we'll be looking at least to what is in public domain relative to that. Actually, there has shown no difference after 3 years in the utilization of the products. So that sort of completes the package of information that will be -- that the FDA will be reviewing. And we've been -- we started the review on a rolling basis based on the fact that we had fast-tracked designation. And we anticipate or we hope getting priority review, and that we'll give it about a 6-month review time in -- as per the standards of the FDA and, of course, subject to them to do it in a more expeditious fashion if they need to. In terms of the market signs in the U.S., there are about 650 patients or so that are Fabry treated patients in the U.S. We have currently are treating about with REPLAGAL. In the current treatment IND, 20% of these patients or about 140 patients are treated with REPLAGAL at the moment. And of course, we know that there are some patients that are haven't been treated for up to 2 years because no new patients have come onto treatment during that period of time. And so I think, first, in the end, that yes, the patients have been reminded free of charge in the U.S. for a period of time. And so those patients would probably convert into treated -- into paid patients sometime on a timely approval. And then we hope that those patients who have been waiting -- because we've been receiving much demand from the U.S., Fabry population would also come on REPLAGAL at that time.

Ken Cacciatore - Cowen and Company, LLC, Research Division

And then just quickly on DERMAGRAFT, just wondering on your very broad coverage. The product is growing very rapidly. So I'm just trying to understand what the gating item is so you've been in more aggressive growth. Is it the clinician education? Is it clinician experience? Are you broadening out the clinician base? And should we see -- could we see kind of this level of continued growth or maybe even an acceleration growth as experience has broadened out?

Angus Russell

Okay, a couple of responses. One is I think we are seeing a broader physician acceptance as we ramp up our sales force because we don't cover all our potential call point yet. But really, what we've -- ultimately, the big picture here is that DERMAGRAFT has become the #1 biologic for treating diabetics with ulcers and it's really driving kind of an advanced new standard of care for these chronic ulcers, and so we should see continued growth. But that is actually less the rate limiting step than what Angus referred to, which is manufacturing capacity. And so we continue to ramp in our current facility capacity and it's -- so really, it's balancing that ramp and then the increased demand that we see out there, but we -- the bottom line is we should see continued healthy growth up to 6% market share and being the #1 product.

Operator

Your next question comes from the line of David Steinberg.

David M. Steinberg - Deutsche Bank AG, Research Division

A couple of questions, Sylvie, on the HGT business. I was wondering if you could talk about pricing for your orphan drugs in Europe. I know in the recent past that -- and there was so many austerity measures. There has been de minimis, pricing pressure particularly vis-a-vis and some with more commodity larger therapeutic areas. What's the most recent information you have on pricing in Europe? And then with regard to REPLAGAL, you're now at 80% share in Europe, very impressive. But one of these days, your competitors will be able to supply the market, and I was wondering what your current thinking is on a reasonable level of switchbacks when that occurs.

Sylvie Gregoire

Yes. The austerity measures, if you will, in Europe are -- would have some impact but I would probably say little -- smaller impact than in many other businesses in terms of the -- and the fact that the growth of the market in Europe has far surpassed sort of the effect of the austerity measures that we've seen. I would assume maybe 4% to 5% on the pricing of our products across in that region. And of course, our growth surpasses that quite significantly. So I think when we forecast, we also forecast some form of erosion. But again, the orphan products, as you said yourself, are somewhat -- have been somewhat protected by a drastic cut in terms of reimbursement. And in terms of our market share, yes, it's at 81% x U.S. at the moment, and we expect it to somewhat continue to grow at least with the new patients coming on board as long as the Fabrazyme shortage continues. The shortages projected, I guess, for a number of months is still going forward and it's now entering its third year. And so the patients that have started on REPLAGAL, some of them started almost 2.5 years ago. So the intent for them to switch is currently predicted to be not very large because the satisfaction with the product has been very high. We've seen no patients discontinuing with new drivers for them or any such matter. And of course, they know now that Shire can provide a reliable source of supply and they're satisfied with the short-term infusion that REPLAGAL affords them, and so -- although it's not impossible, of course, that there would be some amounts of switching. That amount of switching is would be considered less and less so as time goes by and certainly with the continued treatment with REPLAGAL.

David M. Steinberg - Deutsche Bank AG, Research Division

Okay, just one quick follow-up. When both of you or you can supply more than the market, what's the theoretical number of additional Fabry patients around the world you think are eligible to pick up the Shire?

Sylvie Gregoire

Well, there's a number of Fabry patients that are actually diagnosed and untreated. This market grows at about 5% to 6% per year. And so if you calculate going forward, that's looking that's what we anticipate [indiscernible] the market will be able to be shared across the region. So if the market breakdown is still low that the -- x U.S. patients are the majority and that we continue to grow worldwide on a similar basis once, of course, supply recovers into the United States for all the patients there and waiting.

Operator

Your next question comes from the line of Tom Russo.

Thomas J. Russo - Robert W. Baird & Co. Incorporated, Research Division

Sylvie, just a follow-up to the earlier question. Do you actually have visibility into the number of those patients in the U.S. with Fabry who are kind of waiting in the wings, not on Fabrazyme and not yet on your treatment IND?

Sylvie Gregoire

No, we don't have specific numbers because these patients, although they've been calling both customer service to get some customer care at each companies to get some product, there's not a clear number or registry of them that's coming forward. But we don't -- we do know that if you look at the normal number of patients in Europe, the new proportion of new patients in Europe, you can anticipate that. And the market in U.S. has always been slightly less evolved than in Europe. So if you take the number of new patients in Europe and you half that, you would anticipate that there would be a few hundred patients that by now would be waiting for a product. But again, the speed at which they would be onboarding or calling when there's product available is not yet known, but we certainly know that there's a pent-up demand. The exact size of it is hard to say.

Thomas J. Russo - Robert W. Baird & Co. Incorporated, Research Division

Okay. And a quick one for Graham. I think FX had an impact on earnings this quarter. In the past, Shire has given kind of a framework for thinking about how moves and currencies could impact earnings going forward. And apologies if I've missed it, but have you provided that or would you mind providing something like that at this time?

Graham Hetherington

In the quarter, from a translation point of view, it was broadly awash. Revenues benefited to the tune of about $24 million, and costs were impacted negatively to the tune of about $21 million. So you've got a net positive of about $3 million. So that was pretty much awash in the quarter. I did refer to the fact that below EBITDA and above earnings, we had an unusual $8 million worth of one-off foreign exchange transaction losses, but that's not something we'd expect to repeat going forward. In terms of the future sensitivities to foreign exchange, the shape of the business today says that a $0.10 movement of the euro -- and it's the euro versus the dollar which is our biggest sensitivity. A $0.10 movement on the euro compared to the dollar equates to a $0.15 impact on our earnings. So I think $0.10 movement is directionally about 2% movement on our earnings. So it has some effects but it's not dramatic.

Operator

Your next question comes from the line of Graham Parry.

Graham Parry - BofA Merrill Lynch, Research Division

Firstly, on REPLAGAL, I was just intrigued at the timing of filing the BLA when Genzyme has talked about filing and approval in the first quarter. And does that mean you can actually get such a rapid review, you can get some approved before then? Are you thinking that might be delayed? Or is it just that you don't mind launching to ramp up Cerazyme capacity? And then secondly, on VYVANSE in negative symptoms of schizophrenia, I just noticed on your product slide, VYVANSE new uses had just become VYVANSE MDD on the pipeline slide. I'm just wondering what's going on with that? Have you made the decision to move to Phase III? Or is outlicensing this on the cards now?

Angus Russell

Yes. I think that last one, I mean Jeff will correct me if I'm wrong, but I think we did talk about it. Maybe reflecting Graham, but we formerly began enrollments in our MDD program Phase III. We said, and Jeff presented on one of the slides, that we're in discussion with regulators and/or payers on some of the other programs. The binge eating disorder started the proof of concept Phase II study. That's under -- that's enrolled now, so that's under way. But in regards to EDS and negative symptoms of schizophrenia, it's only reflecting. As yet, we haven't finalized the Phase III program details because we're in discussion. So Jeff?

Jeff Jonas

You did it perfectly. So REPLAGAL, I think, probably you meant for Fabrazyme, not Cerezyme. You said Cerezyme, Graham, where at the end of that, how can you increase supply of Cerezyme. I guess you meant Fabrazyme because you asked -- was asking about REPLAGAL specificity.

Sylvie Gregoire

Well, I guess there are shortages of both. In fact for -- if we go to Cerezyme. First, there has been an acute shortage of Cerezyme, and we've seen therefore sharp increases in the demand of VPRIV as well. And so -- but I think your question was about REPLAGAL and why we decided to launch or to file basically the BLA at this time in March, potentially in a period when Fabrazyme was returning. But Graham, you have to remember that part of the challenge of responding actually to the ongoing supply shortage for both these products is that there's not knowing how long or how deep the problem will last and how widespread they will be. And so we've already seen and we see some regional differences as well, of course, with these products. But the reality is, I think that perhaps the unfortunate experiment has shown that there's some interest in the marketplace for having an alternative product available and being able to be supplied to patients when demand is there. And remember, in the U.S., we're already treating 140 patients free of charge at the moment. And so there is some interest or value to be able to have the product approved at some point and not only for the sake of what goes on forward, but even for those patients who are already satisfactorily treated with a product that's not yet on the market.

Angus Russell

I think it'd be fair to say as well, we've always indicated that it would take to a lot of pass this year to look at the data we were accumulating on these 140 patients we were treating. So there's an element of, "we didn't to want sooner." It's that we have to accumulate all the data and so we said, "We have about something like 18 months of data." And obviously, it goes without saying, the longer the period we're studying these patients, the greater clarity can be given as to the outcome. So it's just we've arrived at that moment in time, so in no way linked in any way to competitors' position. Sylvie said that will be what it will be, and shortages of forecast to continue on both these products well into next year.

Operator

Your next question comes from the line of Luisa Hector.

Luisa Hector - Crédit Suisse AG, Research Division

So on ADHD, can you comment on the rebate environment around VYVANSE? Is it fair to assume around 40% and were there any changes in the third quarter? And on INTUNIV, can you quantify the destocking effect and then update us on any plans to take that one into Europe? And is there any update on the outlook for the ADDERALL XR generics? I know there's a conference ongoing where there had been some comments from the FDA on multiphasic drugs. I just wondered if you had any update on that. And then second question on RESOLOR. Clearly, this one has been disappointing. It's a tough environment around Europe. Is there any particular update on whether you expect to see a pickup in sales in the medium term? And is there any significant cost association with this one within Europe?

Angus Russell

Okay. So why don't I ask Graham to talk about destocking on INTUNIV, and then Graham -- one on rebates on VYVANSE and something.

Graham Hetherington

Absolutely.

Angus Russell

You can do those 2 and then we'll ask Jeff to talk about our EU program on INTUNIV after that.

Graham Hetherington

So specifically, in terms of the stocking movements on INTUNIV, this time last year, we saw a stocking at the gross level of about $7 million and a destocking this quarter of around $3 million at the gross level. So that's a movement of about $10 million at the gross sales level. That's probably near a movement of $7 million at the net level. In terms of VYVANSE, we saw gross-to-net in the third quarter this year of 41%, which compared to an unusually high 44% in the second quarter last year and 37% in the third quarter last year. I think looking forward and something in around the low 40s is the right kind of number to think of going forward from here.

Angus Russell

So Jeff, do you want to give us any more background on the EU program for INTUNIV?

Jeff Jonas

Sure. We're enrolling now in our programs for INTUNIV now, and we do have our comparative program underway and that's on track for filing. So those programs are enrolling well. And there are some comparative studies as we've discussed earlier. I think with respect to the -- with respect to your other question, with respect to the bioequivalence, the Office of Generic Drugs have been looking at this, as you know, and it looks as though the standard of a partial AUC is going to be maintained. And so we don't see any groundbreaking changes in guidance at this point with respect to that policy, except for ADDERALL XR.

Angus Russell

Okay, so you've pretty covered the partial area into the curve and base. So Mike, the question around RESOLOR in the EU in the current austere times RESOLOR seems to be going quite slowly and that's a fair comment in regard to it's rollout and launch. So could you give any more insights underlying about that?

Michael Cola

Yes, I think it is a very difficult environment. You saw GSK comments. I think particularly for us in Germany, where we do have reimbursement, we continue to have difficulty in a capitated environment to get people to pay for a more expensive therapy. We continue to work with pricing and reimbursement organizations around the world, Spain, France, Italy. And I think we're going to be delayed on pricing and reimbursement in these major countries. Again, I don't think we're unique in this situation. I think the product is performing well in the market with the patients that it's designed for, but it's going to be a much more difficult pricing and reimbursement environment than we had originally planned for.

Luisa Hector - Crédit Suisse AG, Research Division

And the cost situation, do you have reps in those countries while you sit and wait for the reimbursement? Or is that something that's yet to be implemented?

Michael Cola

Yes, so we don't have reps in those countries. We decided to wait. We only have reps on the ground, where we have pricing and reimbursement. We're primarily focused on U.K., Belgium and Germany right now. Actually, in U.K. and Belgium, the launch has gone quite well and we're exceeding our internal expectations. Germany, as I said, we're still struggling.

Operator

Your next question comes from the line of Guillaume van Renterghem.

Guillaume van Renterghem - UBS Investment Bank, Research Division

I have 2 questions, if you don't mind. The first one is whether you could provide us an update on the litigation you have with GSK with regards to their not getting a sort of VYVANSE on your patients. We see that you're doing pretty well. In other words, the litigation was straight after GSK decided not to pursue that -- this one. I'm just wondering are you joyful of being out? Did you have ideas they may have to pay you, maybe some benefit on the type that they did not deliver? And the second point is on R&D. I see that your R&D remained kind of high double-digit compared to was -- and I think low double-digit for the big pharma and why it's a bit surprising because you don't do much research. So I'm wondering long term, what kind of R&D as percentage of sales we could expect?

Angus Russell

Okay, maybe let me just comment on the last point. I mean, that frankly is a bit of a fallacy that we don't do much research. We actually do. I mean, I think you have to differentiate between doing a lot of research infrastructure and that's not the case, but we have a number of collaborations. We have in-house capabilities, as I said, not as big as pharma in terms of ownership of infrastructure, but I would argue that's the good thing these days. I've said for quite a long time that I think owning a lot of infrastructure in the current, very rapidly changing environment is actually more of a problem than a benefit, but we have a number of research collaborations with outside parties looking at proof of concepts in a number of different early-stage programs. If I look at, if you like, preclinical programs spread across the business, pre-proof of concepts and research, it's something like 23 programs right now, which are very active and, say, some of that has worked on in-house, many of them worked on in external collaborations with outside parties. So it's a mythology to say we have no early stage pipeline or research these days. In terms of where some of the bigger costs go, as we all know, most major costs start to emerge in kind of Phase II, particularly Phase III programs. And I think, on this call, we've already talked pretty actively about Phase II. There is a slide that shows our complete pipeline breakdown in the appendices. And from that, you can see that we have, I say, a number now of advancing Phase II programs, things like perhaps -- particularly the programs Jeff spoke about earlier related to VYVANSE new uses, the programs in the EU for ADHD both with VYVANSE and INTUNIV. We have an ongoing program on LIALDA, a very long-term study that finishes end next year in Phase III, a big study in diverticulitis. And then we have a number of intrathecal programs in our HGT business of Phase I, Phase II in 2 diseases and probably prospective of a third disease beginning clinical development program sometime next year. So that's, I would say, where a large proportion of our increasing development is spent. I would come back in conjecture. The question is we have good prospects and we've tried to draw out some of those points this morning. I'm not going to comment -- I'd think it's well known where big pharmas' issues lie right now, but I come back to we have very good, we think, value propositions for this changing world of healthcare. I'd apologize in regard to the GSK issues. I heard the first one, which was around the adult -- the litigation around the adult co-promotion. Mike, I don't think we've gotten anything new to say.

Michael Cola

No update on that now.

Angus Russell

No. It's just an ongoing piece of litigation. Graham, maybe you've heard a bit more about news on GSK as it relates to this.

Graham Hetherington

No, it wasn't -- my understanding of the question was, if we co-promote and finish sometime ago, it's clear to us that, that didn't have any value. Since then, VYVANSE has continued to make significant progress across the ADHD market in the U.S. without the help of that co-promote. It's not us litigating against GSK. They have sued us, and we are in continued ongoing discussion on that basis and that has not yet been resolved.

Operator

Your next question comes from the line of Gary Nachman.

Gary Nachman - Susquehanna Financial Group, LLLP, Research Division

First question, Mike, could you remind us what the EU ADHD market opportunity looks like overall and how you plan to go after with both VYVANSE and INTUNIV, and how the timing of those will work? When is it realistic for them to hit the market? And then I have a follow-up for Graham.

Angus Russell

Mike?

Michael Cola

Yes, the size of opportunity is -- as you guys know it's a relatively early market, growing rapidly, but it's still, I think, right around $420 million for the last 20 or for the last 12 months. It's to me very much like the ADHD market was maybe 12, 15 years ago in the U.S. It obviously needs a lot of development. We're in it for the long haul. Flagship product, as Jeff described, with the 325 data is obviously VYVANSE, and that's where the majority of our efforts are focused. We think with that 325 package, we have derisked a lot of our issues around pricing and reimbursement. If you believe, we've also covered some potential risk if you end up with a generic Concerta in Europe as far as reference pricing. So I feel fairly strongly that VYVANSE is going to have a very nice shot in Europe. INTUNIV is relatively new as far as our approach to Europe because we have what we feel is a 10-year window of data exclusivity with INTUNIV. We've decided to develop it and we're looking between the 2 programs.

Angus Russell

[Audio Gap]

Either historically or now. Why would we bother? Well, simply put, we have this very long runway that Jeff referred to. We have patent protection, composition, amount of patents protecting VYVANSE actual 2024 in international markets, and that gives us a nice runway which, to Mike's point, allows us the time and effort to actually educate, build the awareness and bring very strong clinical data that Jeff and his teams are currently providing us with.

Michael Cola

It also provides the footprint for the new uses indications as they come along.

Angus Russell

Correct. All right. And you said you had a question for Graham as well?

Gary Nachman - Susquehanna Financial Group, LLLP, Research Division

Yes, yes, yes. So Graham, on the ADDERALL XR sales deduction, how do you determine when to apply those? Because the last couple of quarters, you thought they would be much higher and they came in much lower. And it generally helps the revenue a lot and seems more unpredictable than what we think. So just a little bit more color on how the process works with that.

Graham Hetherington

Well, ADDERALL XR is particularly complicated in an area where complex estimates are made in any event. And the reason ADDERALL XR is so much more complicated is because of the high level of rebates that you're seeing. If you were doing plus or minus 10% on a rebate level of 30%, then it's obviously a far smaller number than plus or minus 10% on a 60% number. We've also, with ADDERALL XR, got particular sensitivities to channel mix and to the extent to which we are supplying products to the old price generics because if you increase the proportion of your sales to the authorized generics, you're having to recall that at the cost price that we're selling it to the authorized generics. And that massively swings a key variable which goes into the calculation of the rebate level. So that explains in hopefully relatively simple terms why there is a level of volatility that's out there. I do believe that as we've now had 2 years into having ADDERALL operating with authorized generics, that level of background volatility is starting to narrow. It will never go away. What we have seen in this particular quarter is that we have now got sufficient data to have a level of confidence as to what the actual level of inventory is in the pharmacy and part of the supply chain. Put very simply, we've been overestimating how much product is in the pharmacy. And now that we've got that data to have the confidence -- we've been getting it wrong. We've corrected that, dropped our assumption of level of inventory, with that dropped the provision that we're making and you seeing that benefit in this quarter. I do entirely understand and accept that it's not the first time I've said that going forward, we would expect gross to nets to be in the 60% to 65% range, restated again. And I guess my confidence level of being in that range is now higher than it was 3 or 6 months ago.

Gary Nachman - Susquehanna Financial Group, LLLP, Research Division

Okay. And you would think it should be in that range.

Graham Hetherington

Yes.

Gary Nachman - Susquehanna Financial Group, LLLP, Research Division

I was just going to say also for 2012 going into next year, like it's not something that's just going to be a big difference, 2011 versus 2012 that should normalize next year as well.

Graham Hetherington

I think given -- if 2012 has the same products and channel mix, then it would be in the same level.

Angus Russell

I think -- just bearing in mind, let me add that these are incredibly complex calculations based on what's quite an unusual situation as you all know. So we're doing our best and credit to Graham and his team. They've given their best to do guidance here but unfortunately, it may not be absolutely perfect guidance for the reasons Graham has highlighted.

Graham Hetherington

But the only thing that's going to be perfect, it will be perfectly wrong.

Operator

Your next question comes from the line of Christopher Eccles.

Peter Verdult - Morgan Stanley, Research Division

It's Pete Verdult here from Morgan Stanley. Just a few questions, just going to be what sort have been asked. Jeff, on this data, reference data, with Concerta for the European study of VYVANSE, I mean, I'm assuming that there's a difficult significance between and power and analysis between VYVANSE and Concerta. So I'm just trying to work out. You've highlighted the difference in efficacy in this one trial, but how should we be thinking in terms of what you're going to be able to, what you think you might be able to get in terms of label claims and the feedback you're getting from discussions with European regulators? Then to Sylvie on the Gaucher market. You've talked about the market shares in Fabrys, but can you just remind us what you think the market share picture is in the U.S. between Cerezyme and VPRIV? And then just coming back to RESOLOR. I mean, Angus, we're seeing FIRAZYR getting off to a good start. RESOLOR is looking like a bit like I'm not quite sure at the moment. So I just wanted to see, given the landscape in Europe with new competitors potentially coming on in the next 12 to 18 months, I mean, how long do you give RESOLOR before you start to assess the investment your putting behind it?

Angus Russell

Jeff, would you like to touch -- I'm not sure which name do you use.

Jeff Jonas

I thought there's a couple of points to make. One is that I want to emphasize that this was done as a reference arm and of course, we did do a number of post-hoc analyses on this. And in answer directly to your question, I think with the caveat stronger, this was post hoc, we did have a -- we were significantly better than the competitor in the study on these analyses. Obviously, it's a study that's done to GCP. And the effect size difference is about 0.5, so it's really -- it's a meaningful effect size. And that was a pretty consistent finding across the board for the primary and secondary endpoints. With respect to labeling, I think that's something we have to discuss and we, obviously, to file in the EU hasn't gone in yet. But I think that as a follow-up to that, it's that we based on this data. We're pretty confident that we could do this again. Let me just say that, and so we will explore potential superiority claims for VYVANSE.

Angus Russell

Sylvie, the Gaucher market?

Sylvie Gregoire

Yes, Peter, at the end of Q3, we had about 1,200 patients that are given VPRIV worldwide. In terms of market share, we estimate that in the U.S., we have about 34% of the market and then in the EMEA region, about 23%. Again, we've had though a surge in demand and recently and most prominently in the U.S. And so we hope that, that announced new numbers at the next quarter, I guess, stands out.

Angus Russell

Okay, and just on RESOLOR. Let me just start it off really summarizing Mike's earlier comments. I think 2 things to say, Pete. One is, as Mike said, we're working with a number of expert consultants and our enhanced team on health economics and reimbursement, and we're going through various discussions here to see how we can get paid and reimbursed. To Mike's point, the product where it's being used is working very effectively and the patients obviously are benefiting enormously. So the other aspect of this is how long will the austere situation in Europe continue, and none of us know that. But again, we have to put that into our thinking. So bottom line is I would said, it's too early to start to draw any real conclusions here. The other thing I'd remind you about -- because sometimes I read -- all the data's was all about RESOLOR and RESOLOR was not going that well. Let me point again to the slide in our pack in the appendix on the pipeline, where you'll see we have 2 Phase II programs. One in GERD, refractive GERD, and the other one in C2 switch. Interesting and exciting programs, again, for us with parts of the Movetis acquisition. So in some respects, we're looking at it with more excitement. I understand the risks attaching to a Phase II program, but these would represent bigger opportunities than RESOLOR ever did. So this was stuff we talked about that we haven't done a lot of diligence on. We look to the acquisition base very much initially on RESOLOR but we're well aware of the capability. But across that business where that's now translated as you can see on that slide in the appendix into 2 Phase II programs now. So Mike, anything else?

Michael Cola

Yes, I would just say again, Peter, I think you have to look at it in terms of the class of drugs, the 5-HT4s and the idea behind RESOLOR was to establish, reestablish the safety of that class of drugs. Cisapride was $1.3 billion drug. Obviously, it had safety issues. We would like to reestablish that safety profile with RESOLOR and have 557, which is refractory GERD and potentially gastroparesis behind it, which would be a very big indication. So when we think of the investment and the appropriate level of investment, it is around that whole pipeline of 5-HT4s.

Angus Russell

It's too early to make conclusions about RESOLOR, Peter. And let's watch the development of these 2 programs.

Operator

Your next question comes from the line of Frank Pinkerton.

Frank H. Pinkerton - SunTrust Robinson Humphrey, Inc., Research Division

Just first question on ADDERALL XR, is there any investment sales marketing or otherwise going on, on that product? Or is it still complete flow through on the P&L?

Graham Hetherington

It's pretty much all complete flow through.

Frank H. Pinkerton - SunTrust Robinson Humphrey, Inc., Research Division

Okay, great. And then second one, a question, and Angus, this one is really for you. I think the last time you've gotten this is altogether and heard that cell site cats and told us what you're going to do over an extended period of time was November 2008. Looking at things like geographic diversity of revenue, HGT as a percentage of sales and then it's really on the margin side, you kind of blown through all of those targets. Now that Shire has kind of become a completely different company, should we still take those 2015 aspirational targets you put out at that time and think of those as things that are sound as we balance things like austerity in Europe, new acquisitions and other things? Or when can we expect kind of an update of where you expect Shire to go over the next 5 years?

Angus Russell

That's, Frank, very insightful and good questions. So let me try to address it in the way you put the question. Let's start where really -- no, we're not kind of like throwing away our 2015 ambitions. We've -- in the press release, we said -- we reiterate, our aspirational goal is to continue good growth, and -- but in regards to geography, that's an interesting one. Let's wind the clock back to when I came into the role in early 2008. Back then, we were a very, very U.S.-centric business, I would say, a very high proportion. We've been as high as -- we have 80%, 90% of the business based in the U.S. But all of us felt uncomfortable, but we knew also we had a portfolio in the HGT business addressing rare diseases that would follow very much genetic population spread and therefore, in other words, sales would come more in international markets, probably about 2/3's in the international markets as opposed to the U.S. So yes, 2 things like are kind of linked together. The growth of HGT as a proportion of our overall company would obviously drive hopefully for us the international footprint. And as you said, we've achieved that with a little bit of a following. We've achieved that much, much faster. That was the 2015 goal to be about 1/3, I used to say of our business. And almost in every metric you look at, HGT is pretty much there in the current year. So that allows us to look at this geography, and the geography itself has moved. As I've said, you're now looking at probably -- so we would put about a 1/3 x U.S. and a 2/3 U.S. kind of shape to the business today. So it has moved the needle. Our goal was going to try and drive it 50-50. Frankly, there was nothing magical. For me, it was about setting a tone for the company internally as much in driving people to think more internationally and start to contemplate our growth in global markets. That's all working very well. We're very early on, I would say, in certain of those areas. Like Asia-Pacific, we really don't have a big basis there. Latin America is doing well but again, it could be bigger. And certainly in there in China for us haven't really been features. We're giving a serious strategic thought to all of those, but I would say is we're not going to, say, slavishly follow these kind of targets. I said there was nothing magical Day 1 in them, they were just to drive employees' understanding of what we would like to achieve. What we've decided as a team is what's really important and really colored as much by some of the changing economic environment, and particularly how that impacts healthcare. We want to go where our business model plays. In other words, where we can see value propositions, where we're going to get aid for introducing treatments for chronic and acute conditions in small patient population. That, simply put, is our strategy to focus on those kind of markets. And we're kind of a little bit agnostic as to geography. We will go where there's a serious value proposition that can be driven by really robust clinical data and outcomes. And that simply put is what we're about to as a company today. So for us, the geography will kind of be will be, what it will be. I've highlighted that, yes, there are parts of the world that we would like to increase our footprint and find the right entry point, but to contrast that maybe with other players in the industry, that we're not going to come up with a China kind of strategy and say, "We're going into China. We want 20% market share, and we'll do that anyway we can by buying whatever kind of business we can." We want to look for something that's valuable that fits our way of doing business and where our capabilities lie. If that leads to us getting a 20% share in China, that's great. But we're not going to just rush off and do that and risk that we end up with less than the value proposition. So that's the kind of the geography piece. The other piece I sort of answered a little bit earlier with one of my questions about our R&D. I think you are seeing this change in shape of Shire that just again, because of the growth and where we've ended up as a company at this period of our life, we now have a lot of capability and has a lot of experience of rare genetic diseases, a lot of experience associated with serious ADHD and GI conditions and regenerative medicine. So we want to put those capabilities to work not only in acquiring more bolt-on acquisitions and assets to enrich our great opportunities, but also that uses capability we have in-house to generate our own programs. And that's what you're kind of seeing with what I mentioned earlier, Carrierwave intrathecal and the prospects. We're continuing to expand the use of DERMAGRAFT in the whole regenerative medicine platform. So you're going to see much more of a mix, and I think the new world demands that. I mean, we all know that some of the early stage assets are not being funded like they used to be, and that could leave within 5 years. So there's just not being the available opportunities out there that we saw maybe 10 years ago. So we have to think about that and factor that into our thinking. But for me, the secret there, Frank, would be, as I said earlier, doing it in a smart way, not repeating the past, necessarily not using the traditional models of how you do R&D being collaborative, as Jeff has pointed out, derisking programs very early on to avoid spending a lot of money and then failing near the end. These are the kind of new principles we are trying very much to implement and carve out that new business model of the future. So I hope that's kind of helpful, and thanks for the question, because it gives me an opportunity of getting these comments across to everybody this morning. You'll hear a lot more about that. I would conjecture next year. We've been working hard as a management team on this for the past, probably 1 year or maybe even 2 years now. We're at a point of beginning to think about how we do communicate that more widely, but that doesn't mean that we're not going to try and maintain our aspirational target of good growth into the future. It's all about doing that. It's about sustaining what's been a great track record over several years. So with that, let me just perhaps invite one more question. I'm conscious of everybody's time here and it obviously starting to get a bit later in Europe. So let me just say one more question.

Operator

Your next question comes from the line of Keyur Parekh.

Keyur Parekh - Goldman Sachs Group Inc., Research Division

I have 2, if I may. First, for Graham. Graham, as you think about the commercial opportunity for ADHD in Europe, can you give us some sense of what the investments needed might be for that and how do you see that phasing out over 2012 and 2013? And then secondly, on the pipeline chart, I see that you moved the 535 into Phase II. Can you give us some sense of kind of what that project looks like and when we might actually see some real data for that drug?

Angus Russell

Graham, I guess...

Graham Hetherington

In terms of the ADHD market bill -- in terms of market development, we've got a lot of resource in place already. Clearly, we are already funding the Phase III trials, perhaps, a significant investment term which is in place already. We wouldn't be looking at a commercial launch for probably a good couple of years now, and any launch that we had from a commercial point of view would be very targeted. It would be a progressive run-up in terms of commercialization resource. As we've got more detailed plans, then we can be more specific as we go forward.

Michael Cola

I can just say filing at the end of the year, we are in pre-launch mode. We're T minus 14 months from our first wave countries. But to Graham's point, I think we size the investment in the market with the opportunity. It's not like a U.S. launch.

Graham Hetherington

It's a pan-European launch.

Michael Cola

No, and it's going to happen actually in waves. So a bit smaller than you might think.

Angus Russell

SPD 535, Jeff, you want to say something?

Jeff Jonas

Certainly. We are definitely looking at the proof of concept indication. As you know, we have a molecule. We know that it can lower platelets and we know we've been successful in attenuating the adverse events that we were targeting. It's now in a -- we're now looking at graft maintenance and right now, the next decision points for this will be sometime next year and as well as our -- the chronic tox data come out and all the typical things that one does with the new molecule. So those are ongoing but right now, that's where we are with that.

Angus Russell

Okay. So with that, I'd like to thank you all for your attendance on the call this morning. I'll just wrap again. We think we've demonstrated once again a very, very strong performance. We're reinvesting for the future and continuing to bring very important treatments and valuable treatments to the market. So with that, I wish you all a happy and hopefully not too scary Halloween weekend.

Operator

Thank you, ladies and gentlemen. That concludes your conference call for today. You may now disconnect. Thank you for joining. Have a very good day.

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