Shire Plc. CEO Discusses Q3 2010 Results - Earnings Call Transcript

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Shire Plc. (SHPGY) Q3 2010 Earnings Call October 29, 2010 9:00 AM ET


Eric Rojas - IR

Graham Hetherington - CFO

Angus Russell - CEO

Sylvie Gregoire - President, Human Genetic Therapies

Jeff Jonas - SVP, Specialty Pharmaceuticals R&D

Mike Cola - President, Specialty Pharmaceuticals



Good day, ladies and gentlemen, and welcome to Shire’s 2010 third quarter results co-hosted by Eric Rojas. My name is Richard, and I’ll be your coordinator for today. (Operator Instructions). Mr. Eric, please go ahead.

Eric Rojas

Thanks Richard. Good morning and good afternoon everyone, thank you for joining us today for Shire’s third quarter 2010 financial results. By now you should have all received our press release and should be viewing our presentation via our IR website on And for some reason you have not received the press release or are unable to access our website, please contact Souheil Salah in our UK Investor Relations Department on +44-1256-894-160, and he will be happy to assist you. Our speakers today are Angus Russell, Graham Hetherington, Sylvie Gregoire, Mike Cola and Jeff Jonas.

Before we begin, I would refer you to slide number 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 could materially affect our results.

Today's agenda is on slide 3. Angus will begin with opening remarks of Shire's Q3 performance and highlights and Graham will continue with the financial review. Sylvie will update you on the latest developments in our HGT business. Mike Cola and Jeff Jonas will follow with a review of our Specialty Pharma pipeline and present results on our Phase 2 study of investigative use of VYVANSE as a adjunctive treatment in major depressed disorder. Angus will then summarize the key points for this presentation, who'll then open up for your questions.

As always we are requesting that you ask a maximum of two questions per person so that everyone gets a chance to ask their questions. I will be more than happy to follow-up offline for any subsequent questions or clarifications. I will now hand over the call over to Angus.

Angus Russell

Thanks Eric and hello everyone. So turning to slide number 5 in the deck, just few introductory remarks to say I believe these results again excellent. Driven principally by growth in product revenues and revenues in total were up 31% to $874 million. Non-GAAP diluted earnings rose to $1.16 in the quarter, that is up a 138% for this as the same quarter last year.

On top of that we've yet again produced very strong cash generation which is up 23% on last year to $271 million in the quarter. These strong results have enabled us to increase our guidance for earnings for the full year so previously remember the end of Q2, we said that we thought then that results were trending towards $4 for the year. Now I'm pleased that we’ve been able to lift that estimate to up to $420 per ADS for the year. Hitting that target will actually deliver growth in around 20% in earnings over last year and sets us obviously well on the way towards achieving our aspirational target which I’ll remind you is to hit mid teens sales growth on average between the end of 2009 and 2015.

So turning to the next slide, I was just going to quickly summarize some of the results. You’re going to hear a lot more of the detail behind these and the rest of my colleagues during this call. But let me just try and pull out some of the major features. Obviously we were delighted to receive the final full approval from VPRIV in the EU. And in regard to REPLAGAL, you see yet again another quarter of very strong growth with over 330 new patients added to treatment on REPLAGAL during the quarter. So we will update you a lot more about the future outlook for both our capacity and demand for these products.

In regard to VYVANSE, again, another very strong quarter’s growth. Underlying prescription growth in the US market was up 28% versus the same quarter last year, and in the quarter the total ADHD market in the US grew by 13% versus last year. We are now seeing the year-to-date number of 12% growth very, very strong.

At their exit, we've got Dr. Jeff Jonas with us today and he and Mike are going to review the first of what I hope will be a number of updates during subsequent quarters in regard to the earlier stages of development of some of our current assets and it will start today with VYVANSE looking at the use of VYVANSE in depressive disorder. It’s because of which although we've delivered very good strong results we've also been thinking about our growth beyond the horizon of 2015 and starting to invest. So whilst we were doing that through investing in our early stage pipeline on some of our current assets we've also added two new assets to the portfolio.

Not coming through the nature of bolt-on acquisitions. You can see those listed here, firstly Acceleron, very interesting company with a very interesting technology. As you know we announced that we negotiated the transaction to secure the exclusive ex-North American rights to a group of compounds known as ActRIIB. These are compounds which are aimed at building muscle and treating potentially many muscle wasting diseases. Proof of concept is being run in Duchenne Muscular Dystrophy, a very high unmet need. And again, so we will talk a little bit more about that. Movetis, Belgian company spin out from J&J contains many people use to work against them; a very interesting and experienced group of scientists who have real expertise in the area of these niche gastrointestinal disorders.

I'm pleased report that during the quarter we closed the tender offer and secured over 99% acceptance and now we will move to what's known as the squeeze out to the remaining 0.8% and that gives us great confidence under very legal process. We are unable to do that and therefore confident that we will close this transaction now and have a 100% ownership by the end of the year.

Movetis, as you know, has what is already a marketed drug launched in three countries, RESOLOR. It addresses the symptomatic condition of chronic constipation again a very high unmet medical need. But for me it is a very clear demonstration of the way to develop drugs in this world of ever increasing healthcare economic, but I think looking for health economic value and personalized medicine. And for me this is a very sensible program undertaken by these people and actually developing a drug which they recognize will have real benefit for patients who have this very severe symptomatic disease.

So with those highlights, let me now pass over to Graham who's I suppose is going to give you more detail behind these very strong financial results. Graham?

Graham Hetherington

Thank you and good afternoon everyone. This morning, I'm going to be talking about four key things. But first our excellent performance in the quarter and the product sales growth underpinning the performance; second, the operating leverage we've seen and how the strong sales growth delivered in the past nine months has accelerated margin enhancement; third, an update on our expectations for full year earnings in 2010; and finally, the dynamics we’re expecting to shape our performance beyond 2010. Angus has highlighted the financial performance in the quarter. So on slide eight, I'm going to focus on the revenue of growth driving this performance.

Our clinical program has continued to grow strongly even against tough comparatives. The 31% increase this quarter compares to the quarter in 2009, but was itself $0.20 up on the previous year. Stripping out the impact of foreign exchange, you can see our year-on-year growth was 3% higher at 34%.

Under our XR, product sales are up over 40% compared to last year and part of the results, the high level of Medicaid rebates charged in the third quarter last year. We also reported higher than expected sales in the third quarter this year as a result of some one-time rebate true ups that pushed sales deductions down to lower end of our expected 60% to 70% range.

We also saw some modest stocking in the quarter. These higher ADDERALL XR sales have, along with lower cost contributed to our third quarter numbers coming in ahead of expectations. In the fourth quarter, I expect the contribution from ADDERALL XR to reduce, and I will give more specifics a little later.

Before finishing talking about ADDERALL XR, its worth remembering from the first three quarters of last year, we would call it estimates of ADDERALL XR Medicaid rebates at a higher rate than we are now. We revised our estimates in the Medicaid rebate downwards from the fourth quarter of 2009 when we recorded a large one-off benefit. We've laid out the effects of this on our quarterly saving last year on chart 44 and the appendix. But even after adjusting the 2009 comparatives for this difference, Shire's third quarter growth was still an impressive 24% per revenues, over 60% for EBITDA and then a 90% growth for the EPS.

Turning now to royalties and other revenues at the bottom of the chart. These are up compared to last year when we were still receiving the lower Teva royalties prior to impact with a launch in October 2009. Again I'll touch on the dynamics for the balance of 2010 later.

On chart 9, you can see the growth in our core products continuing to drive out revenues, adding an impressive $162 million to quarterly revenues compared to last year. This represents a 31% growth year-on-year. Significantly the growth is broadly based with six core products highlighted on this chart. This young portfolio of products has again demonstrated the excellent platform that represent the future growth. Picking out some highlights; from the ADHD franchise we saw a 17% year on year growth for VYVANSE. Significantly VYVANSE is US prescription demand increased by 28% year-on-year due to strong market growth, up 13%. And higher market share up 1.6% points year-on-year.

We did experience destocking of approximately $12 million of gross sales, with wholesaler days inventory ending the quarter at the lower end of the normal range. This equates to $8 million at the net sales level. We expect that wholesalers will increase their days on hand in the fourth quarter to accommodate the seasonal increase in demand.

Sales deduction for VYVANSE were in line with the second quarter of 37%, reflecting healthcare reform this year and our couponing program during the important back-to-school season.

We expect sales deduction for VYVANSE to be between 35% and 37% in the fourth quarter. INTUNIV's launch continues to be impressive with prescriptions up 29% compared to the second quarter. It shows now up to 2.6%, that is significantly higher among child adolescence sides.

INTUNIV's reported sales were lower in the third quarter both compared to the second quarter due to the recognition of the third launch stop revenues in the second quarter. Excluding these, sales were up 6% quarter-on-quarter less than the prescription growth rate due mainly served to the impacts of healthcare reform on sales reductions.

In the GI business, LIALDA continues to gain market share and generate double-digit growth. And we saw significant growths from our HGT franchise. ELAPRASE delivered 7% growth even with foreign exchange headwinds. The quarter was also held back by the timing of shipments to some markets which we should see benefit from in the coming quarters. Sylvie will cover the performance of VPRIV and REPLAGAL in more detail later.

Turning to next chart 10. At the top, you can see how our sales have increased ahead of the growth and spend on R&D and SG&A. We’re delivering sustained operating leverage with both R&D and SG&A reducing as a percentage of total product sales, continuing the trend we saw last quarter. With this, our EBITDA margins have doubled from 15% last year to 30% this year. And while we’re delivering this level of margin well ahead of plan, we’ll continue to manage our cost closely to deliver further operating leverage as our core portfolio revenues grow.

Let’s look at our cash generation on chart 11. The $271 million of cash generated in the quarter compares to $220 million last year and takes the 2010 year-to-date cash generation to just shy of $1 billion. Cash stood at just under $800 million at the end of the quarter and after the Movetis transaction, we still had over $200 million of cash on hand and a strong and flexible funding position to manage future re-financing and support investment to further enhance the quality of our business.

Chart 12 lays out the well balanced investment strategy we have been developing to deliver sustained growth. These are wide ranging and highlight the increasing depth of our portfolio. From the top right in the chart you can see the investment in our recently launched products, these are already generating returns and supporting our ability invest in the longer term. We are supporting a range of late stage R&D investments that will drive the midterm growth in our core franchises and even more exciting we are finding persuasive assets to invest in to accelerate our early stage pipeline to support sustained long term growth.

All of this is underpinned by our investment highlighted at the bottom of the chart and the infrastructure supporting our commercial execution, international development and manufacturing capability. Mike and Sylvie will be giving more detail of some of the attracted pipeline opportunities. We have to give us the confidence to increase investment to deliver sustained growth and returns.

Finally let's look at the dynamics of the total business on chart 13, to support our increased earnings expectations for the full year. We now see earnings for ADS increasing up to $4.20. This would represent a year-on-year increase of 20%, with experience to number of positive trends through 2010 which we couldn’t have forecast at the beginning of the year. As a result, the increasingly strong underlying performance of the business has allowed us to increase guidance through the year by $0.70 from a flow of $3.50 at the beginning of the year, to now up to $4.20, despite the cumulative effects of a number of dynamics that we had to build.

First, you're healthcare reform, which are applied on the first two quarters of the calls. Second, European austerity measures which resulted in mandated price reductions in some of EU markets. Third, foreign exchange rates which have continued to fluctuate as we've entered the fourth quarter. And then the fourth quarter specifically will clear developing Movetis cost and the loss of revenues following the sale of Daytrana.

The growth in our core portfolio will continue to drive rent revenue growth for the fourth quarter. However, the razor growth will reduce as a result of three factors. First significantly low ADDERALL XR product sales compared to the fourth quarter last year, when the benefits of the change in estimates of the Medicaid rebate liability was recorded.

Also in the fourth quarter this year I expect to see growth demands increase to a near of 70% of gains for ADDERALL XR. Second, significantly lower impact for royalties compared to the fourth quarter last year which benefited from impact as launch shipments. As I said earlier, lots of sales from Daytrana which is averaged around $17 million a quarter during the beginning of this year.

I am expecting gross margins this year still to be in line with the end of 2009 between 86% and 87%. As I mentioned earlier, we are continuing to make targeted increases in investment in 2010 and beyond. The phasing of these investments along with the consolidation of the Movetis infrastructure in the fourth quarter mean that combined R&D and SG&A expense for the full year is likely to grow up marginally above 10% year-on-year. Finally, I expect our tax rate in 2010 to be broadly in line with last year’s 25% rate the full year.

So building on the increase and earnings expectations this year, let’s look at the trends we see out beyond 2010 on chart 14. We’re very positive, will be delivering good growth. The growth of our young core portfolio will continue to be a key feature. We’ll see further investment supporting the sustained future growth to the business and critically we’ll move do this while increasing earnings and operating margins. We expect to see solid earnings growth in 2011 even after seeing the acceleration of some of the HGT business' potential into 2010, and all of it to reinforce as strong start to the period in which we have sparred to grow cumulatively at the mid teens level.

With that, I’ll hand it over to Sylvie.

Sylvie Gregoire

Thank you Graham, good morning and good afternoon everyone. So following on Graham’s chart on page 12, showing the evolution of the growth drivers in our business, I will begin by reviewing the past five years' growth of HGT. I will then provide a brief overview of the programs that will contribute to our future growth and then of course highlight the progress we’ve made this quarter and summarize where we stand with REPLAGAL and VPRIV relative to the status of the additional manufacturing capacity that’s coming on in line in Lexington. So if you switch to page 16, you’ll see the evolution of the business over the last five years. So the past year really completes a series of transformational events for our rare disease business.

Shire acquired TKT in the spring of 2005 and since then HGT is growing from one commercial product to four commercial product, as it increases geographic presence to 28 countries with sales in 48 countries and has developed a strong and really focused pipeline on rare diseases.

So let's walk through the milestone events of this transformation. The 2005 as I said is the year Shire bought TKT. That was a business that had been in existence for already 15 years with a focus on genetic diseases. There were already a lot of historical knowledge about that field of rare diseases. At that point REPLAGAL for the treatment of Fabry disease was in the market in the major European countries and ELAPRASE was in development. The launch of ELAPRASE for Hunter treatment in 2006 wasn’t a self-transformation for our business.

A large proportion of diagnosed Hunter patients were treated quickly and so the uptick and penetration with product was such, that it was instrumental to really the rapid expansion of our geographic footprint. 2007 marked another significant milestone for HGT and I guess TKT as it was the first year of profitability in the third quarter of that year.

Several acquisitions and licensing deals are concluded in 2008 including Jerini which added FIRAZYR to our commercial portfolio. And of course in 2009 this was a very busy year for us with the acceleration of VPRIV and the filing and the manufacturing activities and off the market penetration of REPLAGAL.

So where do we stand here in 2010, well we launched VPRIV this year in the US and Europe and REPLAGAL has become global market leader for the treatment of Fabry disease, we just entered recently into a collaboration agreement for our new pipeline product for Duchenne Muscular Dystrophy and our year-to-date revenue stand right now at $633 million. So as you can see we have transformed the HGT business into an important growing business contributing approximately this quarter 30% of Shire's overall revenue with him delivering on this profile of profitability with a contribution above 40%, a broad geographic footprint in a diversified profile. We are transitioning now to the next page, page 17 in your deck.

In addition to the four products that we have today on our market, all of which are expected to grow over the next five years. We have several products in our pipeline, and this chart shows all the charts pipeline and highlighted in color are the HGT products and Mike will use the same slide in a bit to talk about his product that will impact on him. Starting with our marketed products or products latest in development will move to theory there at the far right of the chart in hereditary angioedema.

First of all the self-administration data has completed, and a label change has file in Europe. We expect to be able add seven administration to the label and the EU in the first half of next year, and believe that this will be a very highly differentiating feature for the product. Market research indicates that when patients have serious they are at hand or at home. The update of the product is much faster. So having the ability to bring FIRAZYR home and inject it to yourself will be an important to patients and make it distinctly different from other treatments.

The US also will be a very important market of course from FIRAZYR. And the fast day trial is now fully enrolled and we expect to able to file the complete response letter to the FDA early next year. The submission will off course include self-administration a portion of the results that we have recently generated.

But lets move to our earlier stage pipeline and let me discuss first, HGT 4510 or you might have known as AC031 the Acceleron collaboration product for Duchenne Muscular Dystrophy. So if you could sit to the next page and we'll come back to page 17 for the discussion of the intrathecal program. We were delighted to announce a partnership with Accleron this quarter for the ex-North American license agreement of for active and receptors type 2D class of molecules. These are negative regulators of muscle growth which impact muscle mass. The first indication for the compound is Duchenne Muscular Dystrophy and of course that is a fatal muscle wasting disease with no current therapy. The estimated worldwide population is 50,000 and the ex-North American population size is estimated to be at about 38,000.

This of course represents an excellent strategic fit for our business. And the product is a fusion protein administered subcu, and will be able to leverage as well our manufacturing capabilities for the product as we in the agreement manufacture the Phase III product as well as the commercial product worldwide. So there's several ways to address DMD and why is this, but you got to look class of compound of interest. And the diagram on the left is meant to be picked the various approaches.

Their targeted genetic approach is that address selective subset of diseases. Those are called the curative on the last of the chart. And then there are other treatments on the right hand of the charts that are really more symptomatic type of approaches to the treatment of the disease and those are the ones used today like antioxidants and steroids.

ActRIIB type of products approach addresses the deterioration in the muscle directly and has therefore potential in the entire DMD population. And the mechanism of action is such that the class of compounds has potential of course to treat a wide variety of muscle wasting diseases for which DMD will be the first group of concepts as indication. So the program right now is in Phase IIa and we hope to be able to start Phase IIb in the next 12 to 18 months.

If we back now to the previous chart and we briefly cover the earlier programs in the pipeline, well we have a series of programs to address severe progressive central nervous system disorders where there is no current treatment. These are all enzymoglycemic therapies administered intrathecally via an implanted port. All the programs emanated from our only trajectories and we've used in our own technology platform.

Two of these programs are in Phase I, II in man. And HGT 2310 is a new formulation of hydrosulfates specifically designed for administration and particularly for the treatment of patients that have, 100 patients that have CNS manifestations with the disease. And there are about half of the Hunter population that has a CNS component to their disease. They study, there are multiple dose ranging type studies and patients have been treated in with HGT 2310 now for some of them for up to six months and the drug has been very well tolerated today.

Similarly, the enzyme replacement therapy for Sanfilippo HGT 1410 is also administered to the same port system. The incidents of Sanfilippo by the way is about the same as the incidents for Hunter syndrome one in 100,000 to one in 150,000. The principal for development is the same. It’s a multiple dose, dose ranging study to determine the appropriate dose before we're going to the pivotal time and its early but patients who have received the drug so far have also well tolerated the treatment. So we hope to have some results from both of these programs during 2012.

HGT 1110 is our enzymoglycemic therapy for MLD. Once again the incidents of MLD is about the same as Hunter syndrome and results from the intravenous study with METAZYM you will recall had lead us to believe that an intrathecal approach would be more suitable for and give a better chance of success for that therapy. So this program is in preclinical at this stage and we intend to file an IND for this program next year. So you will note that three of the four commercial products in several of pipeline products are from our own new search effort.

And in addition therefore to these projects that I have mentioned we had several other projects at various stages of research or preclinical development and these projects emanate from either own efforts, collaborations with universities or other companies such as Sentara.

So now let me turn to the highlights of what we see in the quarter and move on from these growth drivers in the future. So page 19, we will first talk about REPLAGAL. REPLAGAL became the global market leader in Q3 and we estimate that REPLAGAL is now used to treat approximately 80% of Fabry patients in the EMEA region.

Our third quarter revenue grew $92 million with more 330 patients added to their deed this quarter. And you will see it from the chart that the proportion not even switch patients are similar to that thing in the last quarter. But there now we stand at about 2,300 patients on REPLAGAL worldwide and we are very pleased that patients who switch to REPLAGAL are doing well.

Slightly better yield combined with different presentation waits and saving the patients start times allows us to continue to provide REPLAGAL for a number of additional patients this year.

As for next year, 2011, we expect to able to continue to meet the demands for an additional 300 Fabry patients throughout the year. And I will share with you in a minute the impact of our new manufacturing facility in Lexington has on the ability to [superfy] the Fabry market beyond this treatment of patients that I just mentioned.

So if we can turn now to the chart, the next chart, we’ll discuss VPRIV. So VPRIV this quarter has received the EU approval. And the global market share in Gaucher disease is now is now at 16% with a 31% odd market share in the US and 19% share in the EMEA region. Hence this is our estimate of the market at this stage.

Q3 revenues were $50 million representing a 71% growth over Q2 at constant exchange rates. Market research indicates that patients and physicians are very satisfied with VPRIV, and pleased with the patients and co-pay assistance services provide. We are currently a little over a 1,000 Gaucher patients treated with VPRIV and we can meet the demand for about another 200 patients until the new manufacturing capacity comes on line in Lexington.

So we talked a lot about the facility. Let’s turn to the discussion of the staff of the facility on the next page. Now we’re now on page 21. So the new facility in Lexington you recall has two times 1,500 liter cell culture capacity and we can have, we have space to add another of such capacity of two times 1,500. As well as an additional to this we do repurification, additional purification capacity exists in the plant.

The technology there is state-of-the-art with single use disposable components for cell culture. We are in use chemically defined media for the processes that from the products that are going in the facility and germ-free process is of course reduces the risk of viral contamination. But in addition, the single use technology helps reduce contamination carry over and reduces cleaning and change over timing of plant, making utilization more efficient.

So on the diagram in the center of this slide, I am attempting to show the steps towards the approval of the plant. We are currently performing process validation activities with the validation batches for REPLAGAL and the engineering batches for VPRIV ongoing at the moment. The next step is to write up the submission with the data that you have collected, submitted for regulatory view and gain approval of course into various markets.

And since the activities in the plant are different for REPLAGAL and VPRIV we expect slightly different timings of approval. Let me walk you through each so that you can understand the different submissions plan for the approval of the manufacturing plant. So let's start with the left, REPLAGAL.

So for REPLAGAL we continue to do the cell culture part of the process in our plant in Cambridge. We will however purify REPLAGAL at the Lexington facility, which will free up the capacity at the Cambridge facility. What we need to do here is to do three validation batches from a purification process standpoint and some of these for review.

This manufacturing activity is going at the same scale with essentially the same processes in Cambridge. We expect to be able to file data on these batches in early Q2 of next year. And although standard review time of the agency is six months, we have already had productive discussions with the EMEA and they have a good understanding of the required activities and the data set we intend to generate. As soon as the agency approves the facility we could provide REPLAGAL to 700 additional Fabry patients over and above the 300 patients announced on the previous chart.

Now let's turn to the VPRIV manufacturing activities on the right. It's different from REPLAGAL and that we will be doing both cell culture and purification at this facility. And although the process will be essentially the same as that in Cambridge, there is a three-fold scale up to him and sound comfortable in the cell culture process and then switch to disposable technology. So the amount of data generated for this application will be substantially more than for REPLAGAL. So here again the activities at present are engineering ones, qualifying batch is starting early next year. We have also initiated discussion with authorities. And they are aware of the submission plan. As soon as VPRIC is manufactured at this plant, can be used, there would be no supply constraints for VPRIV.

I hope this helps clarify the ongoing activities that are state-of-the-art, as well the anticipated timing for approval of eh plant for each of the products you’ve mentioned. So in summary its been a successful quarter again here at HTG and I will hand you over Mike who will provide an update on specialty pharma business.

Mike Cola

Thank you, Sylvie. As Graham and Angus mentioned, the business is doing well with all the record products growing nicely. We are going to give you a break and I will through some of the performance of all those products individually and we are going to focus more on the pipeline today as we gradually restocked it over the last 12 to 18 months.

But we did see very good market growth in the quarter particularly in ADHD by high teens protein adult segment we are going to be very strong back-to-school season in [Beach] area. As I said over the last 12 to 18 months we've restocked the portfolio of the combination of new indications better focused, on the existing in line products and geographic expansion for this product, continue progression of our early stage programs particularly carry away. And with the closing on a Movetis transaction two new acquired products and a library of new molecules that came from Movetis those two products are MB002 and 003.

If you go to slide 23, I'd like to highlight some of the programs that are either new in the last few months or have progressed significantly since we last updated you. Starting on the right hand side of the chart, we are progressing INTUNIV based on what we believe will be a 10 year data, exclusivity regulatory barrier for us. We think there is a tremendous need in Europe for effective non stimulant. And it really serves to help us fill out our European franchise. We’ve been talking over the last year particularly since the acquisition of Equasym about our desire to build out an ADHD franchise in Europe. I think with the addition of INTUNIV EU, we moved towards that goal in a significant way.

Moving to the last, on our phase II programs, there is a number of new signal signings studies that we will walk through today. The first proof of concept is an MDD which walk through in some detail, but we are also excited about the other products in that area particularly LL3 which I would point out to you. This is a new program for us, in the Movetis transaction. We did not have the time or the ability to focus on LL2 and LL3. We are now becoming familiar with them and we think there is tremendous prospects for LL3, particularly in GERD and gastroparesis as it’s another five HD 4 which we have, US and European rights to.

Moving further to left at the earlier stage programs, we continue to progress our carry VYVANSE processing. We have a molecule that seems to be behaving itself well. Again, we are focusing our efforts on 2014 - 15 period for a launch in the US for ADHD. We have two backup molecules for this carry away processing program which we are also excited about.

We’ve also progressed SPD 535 on anagrelide analogue and demand and have proof of principle that it lowers platelets with a very good tolerability, side effect profile and good PK profile. We are not going to go into details of that program today, we have to do that in February, we decided to focus on one program only and that’s MDD and we’ll give you that there is kind of detail that we are going to give you on an entity on 535 on February.

So, over the next few quarters we will try to take selective programs and drill into them as they progress. And with that, I would like to turn it over to Jeff Jonas. Jeff's been with Shire a little over two years. I think he is a big reason that we’ve been able to reinvigorate our pipeline, he came to us with a broad range of the industry experience over the last 20 plus years. Prior coming to Shire he was in SVP at ISIS with broad responsibility for the pipeline. Before ISIS, Jeff was Chief Medical Officer and Executive VP at (inaudible). Jeff received his M.D. from Harvard and completed his residence and psychiatry at Harvard as well.

And with that, I will turn it over to Jeff to discuss MDD.

Jeff Jonas

Thanks Mike and good morning and afternoon everybody. I want to be clear at the offset that VYVANSE is only approved at a treatment for ADHD. But nonetheless we are very excited about the other findings we are going to share with you today regarding potential new uses for VYVANSE. So, let's turn now and take a look at some of the new data that we generate.

Its common to call VYVANSE a stimulant, but in fact VYVANSE is a powerful modulator of dopamine which is a neurotransmitter in the Brain. And this is important because dopamine is to implicated in the creation or alteration of important CNS mood states, cognition, wakefulness, reward and impulsivity that is CNS symptoms that maybe seen in a number of psychiatric disorders. So if you turn to slide 25, what you see here is a representation of some of those disorders, where we believe dopamine plays a role, and where these symptoms may have major impact in the ideology and the disability associated with those disorders.

There is wide panoply of such disorders and we’ll be investing in these and our programs moving forward with buybacks. I want to point out that this is an approach that is well suited for the Shire SP research model. These are areas where there is a clear scientific foundation, well defined end points and a critical literature that supports work in the area.

So we believe that this leads to a reasonably high probability of success for these types of indications and for these studies. Now today I am going to focus on one of our programs and that is the use of VYVANSE in augmenting treatment and major depressive disorder in patients who do not respond to conventional therapy without accessorized.

Turn now please to slide 26, I want to begin a little bit by talking about major depression. For those of you who are not familiar with this disease. This is a biological disorder of mood that has associated symptoms that impact the patient’s cognition, their motivation, their interest in living and their ability to perform normal day-to-day assumptions.

There is a warm clinical literature that suggest that many of these symptoms are related to imbalances of dopamine. And there are some clinical trials that have suggested that ELAPRASE can impact these symptoms favorably.

Most recently some agents that have been approved for helping patients with an adequate response and depression are agents that actually impact dope, to impact dopamine. Nonetheless, when patients don’t get better they have residual symptoms that can impair their ability to work.

And these are (inaudible) we believe can be still be modulated, but otherwise a moving of dopamine system. So we believe there is un medical need. A cleared established role for dopamine in treating this disorder and as a result this led us the study of VYVANSE in these indications. Please turn to the next slide. I mentioned earlier that their significant medical need in patients who are being treated for depression. Overall, depression is a debilitating illness and by 2020, the world’s health organization estimates it will be the second leading cause of morbidity world wide. Very importantly, almost two thirds of patients who have depression do not achieve clinical remission. They still have symptoms that include difficulty in concentration, motivation, loss of interest and poor mood. These are symptoms that we believe may benefit from modulation with dopamine. Importantly, from a development stand point, there are clear established regulatory path ways for having products approved for augmenting major depression disorder. VYVANSE is an ideal candidate we believe for this. It’s a drug that we’re familiar with, its character, it’s well characterized and it has known actions on multiple dopamine pathways.

We believe that study in VYVANSE in this area makes good sense and we believe the residual symptoms should be dopamine responsive. Next slide, I want to put numeric terms the size of this opportunity and the nation of the unmet medical needs in patients who are inadequacy treated with depression. In the G7, every year, there are more than 45 million cases, new cases of major depression. More than half are diagnosed and in those who are diagnosed, the great majority are treated. Despite that fact and despite modern treatments, nearly 60% are incomplete responders. Putting it into context, this represents approximately $10 billion market in the G7 and for a company like Shire with a specialty pharma model, you get a small share of this market with a highly valuable.

Very importantly, from a Shire prospective, patients who are unresponsive to the treatment are typically refereed to psychiatrist and specialty treaters. This is an areas where [indiscernible] Shire is highly familiar. So since we have a product we believe can help me in this need, we designed a study to test this hypothesis. Next slide please.

This slide describes the study and some of the initial demographic results. We study patients who had depression who were first treated with the antidepressant LEXAPRO for up to eight weeks using 20 milligrams the top label dose of that drug. They had eight weeks of open label treatment, after that period of time patients who did not respond and who do not remit were randomized for another six weeks of treatment to either placebo or VYVANSE. VYVANSE is titrated slowly and only allowed to go up to a maximum of 50 milligrams per day.

We studied patients between the ages of 18 and 55 and may restored on well established rating scale called MADRS. For those of you who aren't familiar with MADRS this is a well established psychiatric rating scale, its 10 items, and it measures all the core symptoms of depression, sadness, tension, lack of sleep, disturbance of appetite and so forth.

Each item is rated on a zero to six scale with zero being our present and six being the worst. So when you see the data on the following slide, just remember that our lower score means that patient is getting better. One important I would like to make a better design at this study. This was the study that was designed to be a signal detection study. It was meant to be done rapidly and let us arrive at a clear decision, we want to have a study where we saw clear signal in a small number of patients.

As a result we specified that a statically win or significant study would be above fee value of less than 0.1. This is the type of Shire innovative model we would like to exemplify here and with our other signal finding studies. The study was designed considerably so that if we saw a signal, we felt we could rely on it, so for example it was a slow titration and again we didn’t go up to the maximum dose of VYVANSE only to 50 milligrams.

The bottom of the slide shows you some of the initial study demographics. This was a multicenter trial that was conducted on 15 sites across the United States. The demographics of the patients who are included in this trail were typical for depression trial, the majority were female and the mean age is about 40 years. The mean daily dose of VYVANSE in this trial was 30 milligrams. And as mentioned earlier this gives us a lot of room to essentially improve the signal in subsequent studies.

Overall in terms of safety, there were no significant or remarkable safety findings. If you look at the discontinuation there were no marked differences between patients who were treated with placebo or VYVANSE. Next slide please.

This slide shows you a summary of the data, this on the Y-axis of CV changed in modest and if you recall what I said earlier a lower score indicates improvement or that is the patient getting better. We randomize a 129 patients who did not remit and that is not kept clinical remission on treating with anti-depressants.

In these patients we met our primary prospective and going which a significant difference of P less than 0.1, with an effect size or a difference in the change in base line on the margins of more than two points. We believe this is an exciting finding of one which we believe that we can replicate in later studies would lead to an approval and an important therapeutic option for patients and clinicians.

The right hand side of slide shows its the sub population of an interesting group patients. And these are patients who basically don’t respond at all, they are inadequate responders. Not only do they not remit, they have very little movement in their overall depression scale.

In this group of patients, we actually see a bigger effect from the addition of VYVANSE almost a reduction of the moderates of almost four points. Again, we need that in clinical practices we’d be an extremely exciting finding and quite clinically meaningful.

The next slide gives you a good idea of the strength of this signal. When someone gets better from antidepressant treatment you’d like to see them get better in all the symptoms, with all the symptoms of depression not just a few. So here you see graphically laid out the individual MADRS items for the study. The blue bar again represents placebo, the red bar again represents VYVANSE plus Lexapro and again a lower score in the case of improvement. What you see is profit board, nice levels of improvement, some are achieving significance.

In many of the symptoms that we would expect to be responsive to modulation of dopamine. For example, lassitude and anhedonia, which is the failure to enjoy life and other things and concentration improvement. Some of the concerns of medicines like amphetamines are that they may increase anxiety or may cause insomnia. As you can see here for both in ingredients of inner tension and reduce sleep, we don’t see that and in fact we see some improvement in sleep and in anxiety and inner tension.

The one area where we had a greater signal for side effect with VYVANSE was in reduction of appetite. I want to remind everyone again that this study was a signal finding study, powered to significant at point one. So to us we are very excited and we believe these findings on the items confirm the strength of the sick.

Turning to the next slide, we have a summary of the safety findings. In short, we have no safety findings that are not consistent with the already available label for VYVANSE. There is nothing unexpected in terms of either changes in blood pressure or heart rate or laboratory data. There was, however, a difference in weight, and then patients who were on placebo plus lexapro actually gained a little bit of weight up 0.32 kilograms over the six weeks of the study.

While patients treated with VYVANSE in combination with the SSRI actually had a decrease of weight of 1.2 kilograms. It was a corresponding decrease of the body mass in this as well at VYVANSE.

Where do you go from here? We are very excited by the strength of the signal we have seen in this study. Remembering that we achieved our win criteria with only 50 patients per hour. We believe that we have the opportunity to enhance the activity of this drug by speeding up the titration and allowing us and going to a higher dose with maximum label dose of 70 milligrams.

We are completing some Phase I studies necessary from moving into Phase III and we plan to meet with global regulatory authorities to understand what will be required for a global registration program in the future. We do have one other depression study underway we are just looking at a somewhat different group of patients with depression. These are patients who had inadequate response to major depression of antidepressant therapy, the depression with a difficulty concentrating and when the executive function, an area that we think VYVANSE may have had significant value too.

In conclusion, we believe these data confirms hypothesis of dopamine-modulating effects Major Depressive Disorder. It looks as though VYVANSE can deliver improvement in common residual depressive symptoms. There are no safety surprises and importantly we believe this confirmation of the hypothesis shows the de-risk, the other data and other studies that we are conducting in novel indications for VYVANSE. These include our study of negative symptoms and schizophrenia which is actively enrolling, our positive impairment study which I have described briefly and our study for study for looking at wakefulness models for narcolepsy and shift work disorder that’s already where we had data under analysis. So we are very excited about the opportunities that VYVANSE may pose, and we look forward to providing further details for this down the road.

I'd now like to turn the remainder of the meeting over to Angus Russell for a concluding comments.

Angus Russell

Thanks very much Jeff on giving us very detailed update on pricing and redevelopment. Let me turn to final slide in the presentation this morning on page 36 of your deck. So, I believe that this quarter is showing us not any delivery in significant value now and for the medium term but also looking into the future. Very strong financial performance as we said driven primarily by products and revenue growth which was up 31%. This strong quarter has enabled us to lift our full-year earnings guidance now up to $4, 20 for ADS. I believe there is clear evidence that we are continuing to execute extremely well and our strategy on focusing on specialist and rare diseases.

We're primarily aiming to deliver tremendous value to the healthcare systems to patients divisions and payers to new world that we all know that we have to prove value to in the future. We are driving growth in that from the very balanced portfolio product, the days of Shire being dependent on just one major revenue driver long gone.

We now have a portfolio of eight, soon to be nine with the addition of RESOLOR products which are going to drive our growth over this medium and longer term. With the same time you’ve heard today from the first time comes from exciting new ideas as we begin to focus on that period beyond 2015, when I believe we will be able to bring forward from the pipeline a number of new drugs which will continue to sustain and grow this company beyond that too high to 2015 horizon.

And as Graham points back earlier we are investing also in the expansion of our global footprint this is up to support the other growing international nature of Shire business. Although then I believe we are delivering tangible, visible, sustainable growth. We believe also with this model we are extremely well positioned to absorb the future industry macro economic challenges.

And we believe that with these results where I said earlier the 420 will effectively represent 20% growth over 2009 and there is a new high point for Shire in earnings terms that takes us right back on track to where our historic trend would have us. I believe this puts us in a great position to grow ourselves and reach our aspirational target of mid-teens growth on average between the end of 2009 and 2015.

With those final remarks let me hand back to the operator and we will be very pleased to address any of your questions.

Question-and-Answer Session


Ladies and gentlemen, the question-and-answer will now begin. (Operator Instructions). We already have a question in queue comes from the line of Kevin Wilson. Please go ahead.

Kevin Wilson

Two questions from me. The first is on REPLAGAL in the US. Could you help us out with the timing of the BLA there? It may be me, I couldn't find any mention in the release of the timing of your planned filing in the US of that BLA. And secondly, on the exciting use of VYVANSE as an adjunct to depression, can you talk a little bit about how large the Phase 3 might need to be. I am thinking about other companies AstraZeneca I think had 1,000 patients in their Seroquel adjunct Phase 3 trials. And, of course, then the implications for the R&D spend in the back half of 2011 and into 2012, to the extent that you may feel inclined to give us some guidance. Thank you.

Angus Russell

Okay. The US positions on REPLAGAL are following on from last quarter.

Sylvie Gregoire

Yes. You recall that last quarter we decided to take the opportunity to gather the information which comes from the hundreds of patients who have come on to REPLAGAL really in the last six months to a year and take on this data, analyze it and create a much more robust package of information for the agency in the US to have a look at. And so that’s what we are doing at the momentum and we will evaluating this data and I suspect we will be having meeting sitting around that sometime in the back half of next year, based on again the long-term data that we see on the switch patients and we’ve got many sources for that, that we are looking at, at the moment.

Angus Russell

I would just add for that to remind you (Inaudible) has already displayed today. We said this a number of times that for now this is the situation where as she said we believe we can supplement the findings with the number of we have but to remind you we are effectively pretty much fully sold out. Our incremental capacity is minimal over the next few months and she said we have a growth potential. But in terms of the US market we have the time we believe to enhance the clinical findings and give the FDA very full data set. VYVANSE, so it's Mike, Jeff.

Mike Cola

Let Jeff handle the timing cost design.

Jeff Jonas

Basically right now we'll need to confer obviously with regulatory authorities about the design of a Phase III program or ongoing trials. I can say that based on the size of the signal we've seen that only 60 patients per arm, we would be optimistic that we would not require very large trials, it just confirm the signal but again that will be pending regulatory authority.

The other, I just want to make the comment that since this is not, this is a drug that’s been well studied and has a long safety record that a lot of the requirements that are associated with the new drug or new chemical entity, we probably won't have associated with this.

In terms of design, I believe that we will use a design looking for adjunctive therapy. It’s a well articulated regulatory pathway. As I mentioned there are already two agents approved that utilizes pathway both here and in the EU. So we are pretty comfortable that we won't have to do anything novel in terms of a design.

Mike Cola

The only think I would add is with the long IP that we have in this product 20203-20204. It does really enable us to invest in VYVANSE and get great returns on these additional indications.

Angus Russell

My guess is just the question about our operating price is always too early grab in terms of rewrite, obviously we need as Jeff says, to meet with the FDA to agree the shape and nature of the studies and then obviously when we have some numbers attached into that, we can give you some estimates. Right now it would be way too early. Graham

Graham Hetherington



Thank you for that question. The next comes from the line of David Steinberg. Please go ahead.

David Steinberg

When you first gave us a look into 2010, you indicated that you thought that there would be no generics to ADDERALL XR, and that proved to be spot on. And the authorized generics had a nice impact on your financials. So, as you give us the first glimpse into 2011, I was wondering if you could comment on whether you would expect a generic ADDERALL XR to reach the market.

Angus Russell

Well as we always caveat with this, with a bit of a help for you saying, it is not in our gift to promise but seems been a lot of evidence that people can now look at. Lets recap the things that have happened in recent months that obviously at least increased our confidence of having ADDERALL XR lease through 2011, it is not long ago.

Many people know that the FDA has issued a number of guidelines in regards to various long acting CNS drugs where it is very clear they have major concerns. Lets say the historic way generics were approved in regard to simply Cmax scenario were under the curve. We've seen that most recently manifested in a discussion around CONCERTA where has been discussion now of generics having to conduct studies which will look a partial area under the curve at different time points.

I will remind you that CONCERTA is one drug, it has that single relief over a longer period, but that doesn’t necessarily either link it to ADDERALL XR. ADDERALL XR reminds you is different technology and actually has a double coat mechanism. And so we believe that that is an interesting and perhaps difficult threshold and one that will take time.

Given these are not official guidelines yet as well. That is another significant point I would make is that we are still waiting for the official framework from FDA to be announced, and that would be my expectation that the next step would the FDA would formalize some kind of guidelines. Their normal process would be to post those on their website. And that point then generics actually have obviously an ability to look at what’s required and then start studies. But if you think about that, it seems to me with some ways off in terms of the framework isn’t yet established. As I said, I think ADDERALL XR with its double dose mechanism you need to think about that and how tougher challenge that represents. And then they have to run those studies and follow them and right now we're seeing it take sometimes 18 months to two years for ANDAs to get approved in normal circumstances.

Bottom line is I can’t give a 100% guarantee, no we're not good to do that. This is a regulatory decision. But as we like you study the evidence that gives us some confidence to say we think we are a little ways off yet from seeing a generic coming to the market.

David Steinberg

Then Mike, you talked a little bit about your strategy coming together for Europe in the ADHD area with INTUNIV and VYVANSE. I was wondering if you could give us some color on what is going on in that market in Europe. In the US obviously we have been seeing dramatically accelerating scripts in ADHD. What can you tell us and what is going on in Europe right now?

Mike Cola

Just a little bit of a contrast. I think in the US we have seen tremendous growth mostly driven by the adult market which has been going in the high teens. As that market continues to grow it overtakes the [pubs] market just numerically and you're starting to see this phenomenon of a very rapidly expanding market. The market growth year-to-date is somewhere around 12% which I just think is remarkable in the US.

In Europe, its still very, very early days. It’s about $350 million. I think you have to look at it country-by-country to really understand the dynamic. Our goal is to establish that footprint with EQUASYM and then have VYVANSE and in tune of follow close behind it. We continue to progress our VYVANSE program particularly in [pubs] and we think INTUNIV meets a very high unmet need and may be even could be the core property for Europe as I think an effective non-stimulant may have a easier regulatory ride and a little bit of a better public perception in a stimulant way.


The next question comes from the line of David Buck. Please go ahead.

David Buck

First couple, quick ones for Mike. Can you give some thoughts on the AHRQ study and what you think the findings might be? Also what the company's messaging has been with doctors ahead of that? Also, following up on the ADDERALL XR question, do you still think that Teva, formerly Barr, has the 180-day exclusivity that the generic was approved? And can we get RESOLOR sales for the third quarter? And then just for Sylvie a quick one. On REPLAGAL the 330 patients that were added in the quarter was that reflected in the sales levels or is that a quarter end figure? Thanks.

Mike Cola

David I will start with the AHRQ and maybe Jeff can join me, if he would like. There's not a lot to comment. As you know its been delayed repeatedly. What it is, is a metadata analysis that I believe started sometime towards the end of 2006 based on a number of managed care data bases. I think these are very difficult studies to do. They are obviously retrospective and it's very difficult to bring the data together. That study has been repeatedly delayed. What we are hearing now and its public knowledge is that its likely to be sometime in the first half of next year that we will get some kind of signal from them as to what’s going on.

You may have seen guidance posted for treatment therapies on their website. And I think, again there’s no data here. It’s not the metadata analysis but if you take a look at the treatment guidelines that are being posted for comments, I think it’s a very balanced view of ADHD that’s it a real disease that if these drugs work and their relatively safe. I don’t know if that pertains a signal as to what they’re finding in the ARC medadata analysis but we view that as a positive. Beyond that, we don’t comment, we don’t comment to physicians about ARC. It’s outside of our purview and control and we have to wait and see what’s going on.

Jeff Jonas

The second question on Teva, I don’t know exactly how to answer that. Maybe if you could just give me a little more color as to what you’re trying to get at?

David Buck

Yes, well, if you look at Teva they didn't launch their own generic, they launched your authorized generic. So theoretically they should still have 108 days of exclusivity.

Jeff Jonas

I believe that’s true but remember, there are no approved ANDAs and I have to go through that process into Angus’s earlier point about the guidance that we now have. Again not policy, but guidance that we now have under as far as partially you see for bioequivalence. I still think that’s a fairly high hurdle to meet for this double pulse system that we have.

Mike Cola

And then RESOLOR, I don’t think we have guided. Eric was right.

Eric Rojas

What I said, we had said of course we didn’t consolidate it and we won’t be consolidating it until the transaction is completed.

Jeff Jonas

Somewhere before the end of the year but it will be virtually at the year end, so I mean, RESOLOR shouldn’t featuring in terms of sales in any significant way this year.

David Buck

I guess any sense run rate based on what Movetis is doing obviously to control the company now can you give us a sense of quarterly run rate.

Jeff Jonas

And I considered the top of the presentation the stagnant launch that we have, so its Europe only and it is stagnant launch we just have in Germany, UK it just coming on and self pay indulgence so. Its still very early days if you are trying drop these on it.

Angus Russell

So there I think there is a question what the number represented exactly you gave that.

Sylvie Gregoire

You refer to page 19 in the deck of over 330 patients, added in Q3 so there is more patients that’s been added since then. That number is figured on the chart as well as in the text.


Your next question comes from Graham Parry, please go ahead.

Graham Parry

I just want to hit on the rebate levels for ADDERALL XR, if you could just clarify exactly how much of the dollar amounts of the catch-up was and therefore the underlying rebate rate was on ADDERALL XR? And whether the fourth-quarter rate that you're talking to me now would be in line with that, so we should be thinking about this for quarter and for 2011? Could you also quantify the stocking? I think you just referred to a little bit of stocking, but if you just give us a dollar number for that? And then on VYVANSE inventories, you indicated they were low. Are they sustainably low or is this a level at which you would expect to see some pickup? Thanks.

Graham Hetherington

In terms of VYVANSE that they are unsustainably low, it revolves just a function of timing of the take up (inaudible) during back to school period. I would expect those inventories to go back up so I would expect to see that inventory going back in and also the trade during the fourth quarter.

In terms of ADDERALL XR, as I said earlier the 60% growth in that reflecting the lower rebates in the quarter came out about 60%. In the fourth quarter, I see that’s going back up to 70%, so I think that’s the clearest guidance I can give you for the fourth quarter.

In terms of stocking XR and that normal level of stocking in the third quarter was $4 million at the gross level. I hope that helps.


Your next question comes from the line of Ken Cacciatore. Please go ahead.

Ken Cacciatore - Cowen and Company

Sylvie, you gave a nice update on Lexington. I just wanted to push it a little bit further. Is this abnormal interaction this early you're having with the EMEA, and I would say abnormal in a positive way? And then also we are hearing from clinicians that Fabry patients in the US are clearly suffering from under dosing. And this is my observation, not yours, but looking for commentary. Is the agency not feeling any as much urgency here at the FDA not feeling as much urgency as the EMEA in looking at that facility? So I just wanted some kind of comments there? Then also if, Mike, you could give us some commentary about maybe RESOLOR in the US and the pathway forward there with J&J? Thank you.

Angus Russell

So, Ken, pushing, pushing, pushing again, right?

Sylvie Gregoire

Well, in the approach to registering a plant are always discussions with the agency even just that as early as when you are trying to design the new plan. So, that the ongoing discussions regarding approval of the product and what you are going to make in the plan. this is not a typical in the sense that you would always have them.

In a supply constraint of course timeframe those discussions are important so that even closely the company and the agency can monitor what's the activities in the plan, what exactly material will be doing and those are the types of conversations that we have been having for REPLAGAL and (inaudible) for VPRIV to the authorities in general so that everybody is up to speed and as much of them wanting to know this information to supply the market as you indicated the authorities feeling responsibility for the patients as much as for us to gain varying sides as what would be satisfactory for them in this time of supply concern.

Angus Russell

Its early days but we are examining , exploring our whole relationship to change as we inherited the supply agreement, development agreement and we are looking at we can do in US with J&J. As you know, GI is no longer a strategic area for them, so we're trying to assess their commitment and how far they want to go with the product themselves but very early stay tune, we should no more by the end of the year.


Next question comes from (inaudible). Please go ahead.

Unidentified Analyst

Two question for Mike with respect to INTUNIV in Europe and I wonder just it was possible IT segment non-markets so you have buybacks targeting the adult ADHD population INTUNIV and where the kids as segment. Secondly just on the potential of VYVANSE and new indications, this is [ascertaining] these indications historic and I wondered if it seem significant of off level use already for 30 million new indications and even the (inaudible) or if its some buy backs? Thanks.

Mike Cola

I think in Europe, it’s a little early for us to say we’re going to segment the market particularly by age, category. I think particularly in ADHD, there is going to be a fair amount of concern and probably rems like program in the adult area. If you have noticed you’ve seen concerted strong hold to get an adult indication in Europe. So it shows you the sensitivity that there is stimulants for this category, for ADHD. I do believe INTUNIV is a good base line core product repeats in Europe. I think if you look at the safety profile, it’s very attractive.

I think the other thing we keep in mind is that as we invest in Europe, we still have this very long exclusivity with Biovance. I think we have time to build out these other indications in Europe as well and that exclusivity goes out to 2024 and for INTUNIV, we think we’ll get the 10 years data exclusivity. Jeff, you want to take this (inaudible) user?

Jeff Jonas

I think historically, there’s been U.S. about off label. We’re going to wear very much off label at all obviously and just to reiterate, the drug ins only approved for the treatment of ADHD and of course, it does have permission I think are well aware of the safety carry outs around the drug and the label. To think that to some expense, the characterization of these as stimulants has limited the exploration of their potential uses and I think one of the reasons we embarked on these studies is to see how better to really articulate whether these drugs have effect in other areas.

We’re optimistic but right now again, I think we’re no aware of much off label use.


Thank you the next question comes from the line of David Amsellem please go ahead.

David Amsellem - Piper Jaffray & Co

On the ADDERALL royalty, the expectation for the fourth quarter of 2010, I know it is going to be lower than the fourth quarter of '09, but are you expecting a meaningful increase sequentially, given your commentary on inventory climbing here, and generally fourth quarter being strong seasonally for the ADHD market?

Angus Russell

In the third quarter we saw about $18 million worth of extra royalties. I would expect those to reduce slightly as you go into the fourth quarter. We benefit from these royalties as a result of impact through sales and seen impacts losing share marginally over the last few months so I think as a result you will see lower Royalties marching in the fourth quarter and third.

David Amsellem - Piper Jaffray & Co

The on INTUNIV, obviously you didn't see a lot of summer seasonality this year, given that it is a new product. But going forward, and this is more of a general question on the product, are there attributes that make it less susceptible to seasonality going forward than the stimulants? In other words, our children more likely to actually stay on it throughout a 12-month period rather than take a break over the summer?

Mike Cola

This is (inaudible) there is no reason to take a drug holiday with this product and I think you saw throughout the summer that we had pretty steady little bit but pretty steady script volume throughout the summer and it offers a little bit when the (inaudible) users the stimulant users come back into the market at the end of summer so you see that you share flatten a little bit but yet excellent is good things about INTUNIV. I think you will see kids stay on that product right through the summer and actually the Christmas holidays.


The next question comes from the line of Justin Smith. Please go ahead.

Justin Smith

It is just a very quick one. Three months ago you guys were very clear, I think, with regards to Lexington and how many patient actually you could make into HGT going forward. So I'm just trying to understand the reason on the outlook statement for the sort of second part of that sentence with regards to 2011, when you talk about earnings growth at a rate that reflects the pull ahead into 2010 of HGT growth. I am just trying to understand if there is anything to that or if I am reading too much into that language?

Graham Hetherington

I think what I was saying was that we are really optimistic that we will be able to deliver solid earnings growth into 2011. There is no doubt that if you take the 27% of growth that we are looking at now to 2009 would be stretching things to go into the straight line that till 2011 and the reason for that is the fact that we have achieved so much more out of the HGT business in 2010 which we planned to achieve in 2011.

So I think that helps.

Angus Russell

The industry commentary is really a comment on area under the curve what we have done is go forward by the cash flow and profit sooner than we have very much and we wouldn’t still we talked earlier about HGT already in this quarter becoming something like a 30% of our portfolio. These are targets we have for kind of two years hence originally. So what you are seeing is a pull forward of that result. Its more fun to have a positive comment to say we have achieved some of our longer term milestone much sooner than we have reflected but as Graham says having done that it would be a little bit unreasonable to expect that we can put that again on top of what's been a tremendously strong performance this year.


Moving to next question. The next question comes from line of Frank Pinkerton. Please go ahead.

Frank Pinkerton

Thanks for taking the question. Just one really. Can you walk me through INTUNIV pricing, especially when you think about it on a per prescription basis? It appears that kind of backing in with scripts looked to go down quarter over quarter. My assumption always was that INTUNIV was going to be a premium priced product to products like VYVANSE or ADDERALL. Thank you.

Eric Rojas

Hold on, we are getting our facts straight here.

Angus Russell

Were you looking just to clarify, you are looking up to quarterly progression of the product?

Frank Pinkerton

Correct. You made a comment saying that there was some stockings that impact some of the prior quarters, and there was no stocking that impacted the September '10 quarter. When I take the data that I have, I back in, I get into an INTUNIV prescription price in the 120 area. My assumption is that was always a product that was priced at a premium to other ADH medications.

Graham Hetherington

The pricing has been fairly consistent through the year about 147 and those to [TRX]. I think that movements that you are referring to on inventory. As of Q2 we were very specific, it terms of these sales recognition in Q1 we recognized $22 million and Q2 we recognized $20 million and in Q3 that we didn’t need to include that because we have recognized all of deferred revenues. In the second and third quarter additionally supporting the increase in prescription we saw inventory tracking prescription up increasing by about $10 million in the second quarter and about $7 million in the third quarter. And I think with that you will see pricing has been consistent and that’s premium through that period.


The next question comes from the line of Jack Scannell.

Jack Scannell

Jack Scannell here from Sanford Bernstein. Just calling with a follow-up on the earlier AHRQ question. There is a study at the University of Pennsylvania, which I believe Shire is funding, which seems to be looking at a very similar set of questions. I just wonder whether you can tell us whether they came to you and asked for money, or whether you went to them and asked them to do the study? Then, secondly, when the results from that study are likely to be available?

Jeff Jonas

This is Jeff Jonas, this was the study where Penn came to us and basically we funded having completely hands off. It’s being done to typical investigator sponsor trial specifications so it’s being autonomously by the University of Pennsylvania. To your other point it is a study that is similar in some sense as to the AHRQ study we believe it will actually be a larger database of patients and again we have to wait and see and what they show. But Penn is of course a world class organization in this area.

Angus Russell

I think the point Jeff you should referenced future comments depend because we have no control over things like publication or how they analyze results so just to reinforce there is nothing to do with us. As Jeff said they approached us and we were happy to put some money behind Jeff said a very prestigious academics institution obviously.


Next question comes from the line of Tom Russo please go ahead.

Tom Russo

Thanks for taking the question and congrats on a great quarter. First, just, Sylvie, circling back, and I apologize, but just wanted to clarify. The discussions that you referred to, is one scenario there potential to use the commercial grade material prior to formal approval of the facility?

Sylvie Gregoire

There are various approaches, when we discussed with the authorities they comment on the amount of data that they would like to see for approval. They would at their discretions can decide what time of review they will utilize relative to standard time of review or a standard set of data that might be normal for the agencies. So all of those things factor into therefore it’s not amount of time.

And this will all take, and then, and therefore you know that’s basically the main drivers of the timing of the approval of the facility.

Angus Russell

Okay so I am fully aware that we are kind of getting some repeat here now and I think the interesting times over the long time on the call so probably take one more question and then I will rap the presentation.


No more question. Next from Bill Tanner please go ahead.

Bill Tanner

Thanks very much for taking the question. A couple on VYVANSE. And maybe, Angus, just any comment on the co-promote termination. Then, secondly, for Jeff, I understand that perhaps in the clinic there haven't been -- there hasn't been a lot of usage of stimulants to look at some of the other indications. But VYVANSE is being looked at now, but are there no clinical data or I guess any kind of trial data that exist that might give one confidence that this is going to be a fruitful path?

Angus Russell

Maybe if I take the co-promotes as you’ve seen that from the press release, so let me just recap and wait for you and make sure if it is on the same page here. So if you remember if we announced the co-promote on VYVANSE in the US market with GSK about two years ago in that, it was a three-year deal that was introduced at the outset. It was a game shared type arrangements in other words we sat down for two years or so to go with GSK, they did their own research and then we sat down agreed a forecast which was very much inline with our own forecast of items.

At that time remember we told you that there was a primary care dimension, a slightly bigger primary care dimension in adult treatments of ADHD about a third of the market we estimated roughly would be driven by primary care prescriptions and that’s not an area that we without specialist structure targets. So, we unlisted that larger primary care sales force in the US to add detailing effort in the primary space which we hoped would drive upside which I guess hope to drive upside to our then agreed mutually agreed on forecast.

We believe in the early months they certainly helped us get VYVANSE out there in adult and increase the awareness of that amongst the PCP community. It’s been very clear I think to both companies in the last year that there has been a little or no benefit from having that additional effort on VYVANSE in adults. So I would say a number of things now.

One is we are driving the current growth that you are seeing is very high adult growth which is in the mid to high teens right now. It’s purely coming out of Shire's detailing effort. We have seen that upside GSK agree to that and see upside that’s one of the reasons we decided to take time and talk about this because they are getting no payment given that it’s getting gain arrangements committing there. Large sales force and we are seeing no benefit in continuing either.

So probably about two or three weeks ago Mike and his team sat down with their opposite numbers in GSK and mutually agreed in what I would contrast discussions the mutual separation given since we know benefit on either side of the fence. I have to say I am tremendously surprised and I can’t help to say somewhat disappointed that they’ve now decided to mitigate on this so, you have heard the fact pack, we believe as a result of those facts that we have a very, very strong position you see in the press release that I can only characterize. This is a frivolous litigation exercise on their part so we'll strongly defend our contractual position which I think is very clear and the courts are no doubt determined that’s where it ends up, so that’s about it.

Jeff Jonas

And so the second question was in terms of their support to the mechanism, and I think with respect to, it sort of technical question so let me just say that at the outset, in fact drugs like VYVANSE actually are active in some of the preclinical models like learn helplessness models that are predictive of antidepressant response, and that’s been known for sometime. It was initially thought that those were sort of artifacts of the stimulant effect but it turns out if you block that effect, there are other effects that VYVANSE and drugs like it have that suggest the antidepressant activity. And in fact, these drugs not only cause the release directly of dopamine and norepinephrine, but actually block where you uptake like antidepressants, so the very sound theoretical underpinning to look at them in this fashion. There are some clinical trials that have been done, not multi-center trials however, that suggest activity. They have been typically done with earlier, earlier forms of amphetamine, and they have had some evidence of activity but we think VYVANSE because of its half life and its profile maybe more desirable in this area.

So there is a good underpinning and I was just to trying to leap through some of the references, I don’t have them right in front me, but we can actually provide those, they are published literature. So, there is a pretty good storage history for doing this, and finally there is long clinical as someone mentioned, so it doesn’t have to try these in the past and use them anecdotally.

Angus Russell

Okay, thanks Jeff. With that we would be happy take any more question, Derek can follow up with you offline after the call. But let me just wrap up by saying again, I believe these are another sets of very strong results which clearly demonstrate the strength of our business model. You have seen it, I think it indeed calls for lots of number of interesting other factor.

One is that we are beginning now to invest in our earlier stage pipeline and hopefully you are as excited as we are about some of the new developments that we believe as I said before will provide sustainable growth beyond that horizon of 2015. Still we said, bit of watershed quarter for HGT's acceleration in achieving some of the milestone is leading to HGT becoming a significant part of the overall Shire business now.

And in specially pharma, obviously we spend a lot of time today talking about these exciting new indications of VYVANSE from both Jeff and Mike as they have indicated. We have a lot more clinical dates to share with you in subsequent quarters.

So putting all that together I guess and being aware of the season that we are currently in, I hope you find that that’s more of a treat than a trick and we wish you all a happy Halloween weekend and we look forward to talking to you again soon. Good bye.


Thank you very much. Ladies and gentlemen that concludes your call today. You may now disconnect. Thank you for joining.

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