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Shire plc – ‘10-K’ for 12/31/09 – ‘XML.R34’

On:  Friday, 2/26/10, at 12:40pm ET   ·   For:  12/31/09   ·   Accession #:  950103-10-520   ·   File #:  0-29630

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 2/26/10  Shire plc                         10-K       12/31/09   62:8.1M                                   Davis Polk & … LLP 01/FA

Annual Report   —   Form 10-K   —   Sect. 13 / 15(d) – SEA’34
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Annual Report                                       HTML   2.87M 
 2: EX-10.26    Material Contract                                   HTML     37K 
 3: EX-21       Subsidiaries List                                   HTML     47K 
 4: EX-23.1     Consent of Experts or Counsel                       HTML     19K 
 5: EX-23.2     Consent of Experts or Counsel                       HTML     19K 
 6: EX-31.1     Certification -- §302 - SOA'02                      HTML     26K 
 7: EX-31.2     Certification -- §302 - SOA'02                      HTML     26K 
 8: EX-32.1     Certification -- §906 - SOA'02                      HTML     20K 
47: XML         IDEA XML File -- Definitions and References          XML    131K 
55: XML         IDEA XML File -- Filing Summary                      XML     94K 
52: XML.R1      Document And Entity Information                      XML     89K 
53: XML.R2      Consolidated Balance Sheets                          XML    268K 
32: XML.R3      Consolidated Balance Sheets (Parentheticals)         XML     57K 
37: XML.R4      Consolidated Balance Sheets (Parentheticals in       XML     33K 
                GBP)                                                             
45: XML.R5      Consolidated Statements of Operations                XML    365K 
44: XML.R6      Consolidated Statements of Operations                XML     51K 
                (Parentheticals)                                                 
59: XML.R7      Consolidated Statement of Changes in Shareholders'   XML   1.03M 
                Equity                                                           
22: XML.R8      Consolidated Statements of Comprehensive Income      XML    122K 
43: XML.R9      Components of Accumulated Other Comprehensive        XML     51K 
                Income                                                           
20: XML.R10     Consolidated Statements of Comprehensive Income      XML     59K 
                (Parentheticals)                                                 
19: XML.R11     Consolidated Statements of Cash Flows                XML    545K 
31: XML.R12     Description Of Operations                            XML     35K 
49: XML.R13     Summary Of Significant Accounting Policies           XML     80K 
33: XML.R14     Business combinations                                XML     79K 
34: XML.R15     Termination costs                                    XML     38K 
41: XML.R16     Gain on sale of product rights                       XML     35K 
62: XML.R17     Reorganization costs                                 XML     43K 
29: XML.R18     Intergration and Acquisition costs                   XML     35K 
15: XML.R19     Accounts receivable, net                             XML     38K 
36: XML.R20     Inventories                                          XML     37K 
48: XML.R21     Assets held for sale                                 XML     35K 
25: XML.R22     Prepaid expenses and other current assets            XML     37K 
46: XML.R23     Investments                                          XML     40K 
35: XML.R24     Property Plant and Equipment, net                    XML     38K 
58: XML.R25     Goodwill                                             XML     39K 
51: XML.R26     Other intangible assets, net                         XML     43K 
38: XML.R27     Accounts payable and accrued expenses                XML     43K 
42: XML.R28     Other current liabilities                            XML     37K 
18: XML.R29     Long-term debt                                       XML     40K 
21: XML.R30     Other long-term debt                                 XML     36K 
26: XML.R31     Other non-current liabilities                        XML     37K 
30: XML.R32     Derivative instruments                               XML     45K 
40: XML.R33     Fair value measurement                               XML     53K 
50: XML.R34     Commitments and contingencies                        XML     56K 
17: XML.R35     Shareholders Equity                                  XML     41K 
23: XML.R36     Earnings per share                                   XML     52K 
54: XML.R37     Segmental reporting                                  XML     97K 
57: XML.R38     Interest expense                                     XML     36K 
39: XML.R39     Other income (expenses), net                         XML     39K 
60: XML.R40     Retirement benefits                                  XML     34K 
24: XML.R41     Taxation                                             XML     86K 
61: XML.R42     Share-based compensation plans                       XML     71K 
28: XML.R43     Restatement of previously issued financial           XML     35K 
                statements                                                       
16: XML.R44     Income Access Share Trust Financial Statements       XML     62K 
27: XML.R45     Valuation and Qualifying Accounts Schedule           XML     45K 
56: EXCEL       IDEA Workbook of Financial Reports (.xls)            XLS    206K 
 9: EX-101.INS  XBRL Instance -- shpgf-20091231                      XML    826K 
11: EX-101.CAL  XBRL Calculations -- shpgf-20091231_cal              XML    203K 
12: EX-101.DEF  XBRL Definitions -- shpgf-20091231_def               XML     86K 
13: EX-101.LAB  XBRL Labels -- shpgf-20091231_lab                    XML    822K 
14: EX-101.PRE  XBRL Presentations -- shpgf-20091231_pre             XML    468K 
10: EX-101.SCH  XBRL Schema -- shpgf-20091231                        XSD     99K 


‘XML.R34’   —   Commitments and contingencies


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<div style="font-size:12pt"><p>23.        Commitments and contingencies<br /><br />(a)        Leases<br /><br />Future minimum lease payments under operating leases at December 31, 2009 are presented below:</p><table style="border-collapse: collapse; margin-top: 20px;"><tr><td height="17" width="567" align="left"> </td><td height="17" width="110" align="right"><b>Operating</b></td></tr><tr><td height="17" width="567" align="left"> </td><td height="17" width="110" align="right"><b>leases</b></td></tr><tr><td height="17" width="567" align="left"> </td><td height="17" width="110" align="right"><b>$’M</b></td></tr><tr><td height="15" width="567" align="left"> </td><td height="15" width="110" align="right">_____________</td></tr><tr><td height="17" width="567" align="right">2010 </td><td height="17" width="110" align="right">31.1 </td></tr><tr><td height="17" width="567" align="right">2011 </td><td height="17" width="110" align="right">22.9 </td></tr><tr><td height="17" width="567" align="right">2012 </td><td height="17" width="110" align="right">20.3 </td></tr><tr><td height="17" width="567" align="right">2013 </td><td height="17" width="110" align="right">19.0 </td></tr><tr><td height="17" width="567" align="right">2014 </td><td height="17" width="110" align="right">18.8 </td></tr><tr><td height="17" width="567" align="left">Thereafter</td><td height="17" width="110" align="right">101.2 </td></tr><tr><td height="15" width="567" align="left"> </td><td height="15" width="110" align="right">_____________</td></tr><tr><td height="19" width="567" align="left"> </td><td height="19" width="110" align="right">213.3 </td></tr><tr><td height="15" width="567" align="left"> </td><td height="15" width="110" align="right">_____________</td></tr></table><p>(i)        Operating leases<br /><br />The Company leases land, facilities, motor vehicles and certain equipment under operating leases expiring through 2027. Lease and rental expense amounted to $35.5 million, $32.6 million and $28.0 million for the years to December 31, 2009, 2008 and 2007, which is predominately included in Selling, general and administrative expenses in the consolidated statements of operations.<br /><br />(b)        Letters of credit and guarantees<br /><br />At December 31, 2009 the Company had irrevocable standby letters of credit and guarantees with various banks in the amount of $15.1 million, providing security for the company’s performance of various obligations. These obligations are primarily in respect of the recoverability of insurance claims, lease obligations and supply commitments. The Company has restricted cash of $9.2 million, as required by these letters of credit.<br /><br />(c)        Collaborative arrangements<br /><br />In-licensing arrangements<br /><br />(i)        Research Collaboration with Santaris Pharma A/S (“Santaris”) on Locked Nucleic Acid (“LNA”) Drug Platform <br /><br />On August 24, 2009 Shire announced that it had entered into a research collaboration with Santaris, to develop its proprietary LNA technology in a range of rare diseases. LNA technology has the benefit of shortened target validation and proof of concept, potentially increasing the speed and lowering the cost of development. As part of the joint research project Santaris will design, develop and deliver pre-clinical LNA oligonucleotides for Shire-selected orphan disease targets, and Shire will have the exclusive right to further develop and commercialize these candidate compounds on a worldwide basis.<br /><br />In the year to December 31, 2009 Shire made an upfront payment of $6.5 million to Santaris, for technology access and R&D funding, which has been expensed to R&D. Shire has remaining obligations to pay Santaris a further $13.5 million subject to certain success criteria, and development and sales milestones up to a maximum of $72 million for each indication. Shire will also pay single or double digit tiered royalties on net sales of the product.<br />Shire and Santaris have formed a joint research committee to monitor R&D activities through preclinical Lead Candidate selection at which point all development and commercialization costs will be the responsibility of Shire.<br /><br />(ii)        JUVISTA<br /><br />On June 19, 2007 Shire signed an agreement with Renovo Limited (“Renovo”) to develop and commercialize JUVISTA, Renovo’s novel drug candidate being investigated for the reduction of scarring in connection with surgery. Renovo has commenced its first pivotal Phase 3 clinical trial in Europe. Under the terms of the agreement, Shire has the exclusive right to commercialize JUVISTA worldwide, with the exception of the EU member states. <br /><br />Shire has remaining obligations to pay Renovo $25 million on the filing of JUVISTA with the FDA; up to $150 million on FDA approval; royalties on net sales of JUVISTA; and up to $525 million on the achievement of very significant sales targets.<br /><br />Shire paid Renovo $75 million, which was expensed as R&D in 2007, and made an equity investment in Renovo Group plc of $50 million. Shire will bear the cost of clinical trials designed specifically for obtaining US regulatory approval. Renovo will bear the costs of clinical trials designed specifically for obtaining EU regulatory approval. Shire and Renovo will share equally the costs of conducting clinical trials that are designed for obtaining both US and EU regulatory approvals. In the year to December 31, 2009 Shire made payments to Renovo of $3.9 million (2008: $7.4 million, 2007: $1.9 million) which has been charged by Shire to R&D.<br /><br />(iii)        Alba Therapeutics Corporation (“Alba”) <br /><br />Shire acquired worldwide rights from Alba to SPD 550, also known as AT-1001, in markets outside of the US and Japan in December 2007. Shire paid an upfront fee of $25 million, which was expensed to R&D in 2007. Alba funded all development until Proof of Concept was completed, after which Shire and Alba equally shared development costs under a joint development plan. In the year to December 31, 2009 Shire paid $nil for reimbursement of shared development costs (2008: $0.5 million; 2007: $nil). On November 15, 2009 following the review of Phase 2 data, Shire terminated the collaboration agreement and returned the rights to SPD 550 to Alba. <br /><br />(iv)        Amicus collaboration for the development of pharmacological chaperones <br /><br />On November 7, 2007 Shire licensed from Amicus the rights to three pharmacological chaperone compounds in markets outside of the US: AMIGAL (HGT-3310) for Fabry disease, PLICERA (HGT-3410) for Gaucher Disease and HGT-3510 (formerly referred to as AT2220) for Pompe disease which were in clinical development. Shire paid Amicus an upfront fee of $50 million, which was expensed to R&D in 2007. On October 29, 2009, Shire and Amicus mutually agreed to terminate the collaboration and to return all rights for the three products to Amicus. In the year to December 31, 2009 Shire paid $18.8 million to Amicus (2008: $18.5 million; 2007: $nil).<br /><br />(v)        Women’s Health Products<br /><br />In August 2006, Shire and Duramed entered into an agreement related to certain Collaboration Products. Under this agreement, Shire was required to reimburse Duramed for US development expenses incurred in respect of the Collaboration Products up to a maximum of $140 million over eight years from September 2006, and Shire had the right to commercialize these products in a number of markets outside of North America, including the larger European markets. US development expenses reimbursed in the year ended December 31, 2008 and 2007 totaled $30.0 million and $15.9 million respectively.<br /><br />On February 24, 2009 Shire and Duramed amended this agreement and it terminated on December 31, 2009. Pursuant to this amendment, Shire agreed to return to Duramed its rights under the agreement effective February 24, 2009. For further information on this amendment see Note 4.<br /><br />Out-licensing arrangements<br /><br />Shire has entered into various collaborative arrangements under which Shire has out-licensed certain product or intellectual property rights for consideration such as up-front payments, development milestones, sales milestones and/or royalty payments. In certain of these arrangements Shire and the licensee are both actively involved in the development and commercialization of the licensed product and have exposure to risks and rewards dependent on its commercial success. In the year to December 31, 2009 Shire received milestone payments totaling $4.0 million (2008: $9.0 million, 2007: $10.0 million) and these payments will be recognized in Other revenues. In the year to December 31, 2009 Shire also recognized milestone income of $8.8 million (2008: $4.2 million, 2007: $1.9 million) within Other revenues and Product sales of $29.4 million (2008: $24.3 million, 2007: $2.3 million) for shipment of product to the relevant licensee.<br /><br />Co-promotion agreements<br /><br />(i)        VYVANSE<br /><br />On March 31, 2009 Shire announced a co-promotion agreement with GSK for VYVANSE with the aim of improving recognition and treatment of ADHD in adults. The three year agreement covers the United States and will more than double the reach and frequency of the current sales effort for VYVANSE. The agreement is based on profit sharing above an agreed upon baseline and these profit share payments will be included within Selling, general and administrative costs. <br /><br />(ii)        LIALDA <br /><br />In the first quarter of 2009 Shire terminated the agreement with Takeda Pharmaceuticals North America, Inc., successor to TAP Pharmaceutical Products, Inc., relating to the co-promotion of LIALDA in the US.<br /><br />(d)        Commitments<br /><br /><br />(i)        Clinical testing <br /><br />At December 31, 2009 the Company had committed to pay approximately $183.9 million (2008: $99.5 million) to contract vendors for administering and executing clinical trials. The Company expects to pay $104.1 million of these commitments in 2010 (2008: $40.7 million in 2009). However, the timing of these payments is dependent upon actual services performed by the organizations as determined by patient enrollment levels and related activities.<br /><br />(ii)        Contract manufacturing<br /><br />At December 31, 2009 the Company had committed to pay approximately $152.3 million (2008: $67.0 million) in respect of contract manufacturing. The Company expects to pay $77.3 million of these commitments in 2010 (2008: $66.9 million in 2009). <br /><br />(iii)        Purchase, service and marketing commitments<br /><br />At December 31, 2009 the Company had committed to pay approximately $22.9 million (2008: $42.6 million) for future purchases and services, predominantly relating to active pharmaceutical ingredients sourcing and IT outsourcing. The Company expects to pay $21.0 million of these commitments in 2010 (2008: $42.4 million in 2009).<br /><br />(iv)        Investment commitments<br /><br />At December 31, 2009 the Company had outstanding commitments to subscribe for interests in companies and partnerships for amounts totaling $5.4 million (2008: $5.7 million) which may all be payable in 2010, depending on the timing of capital calls.<br /><br />(v)        Capital commitments<br /><br />At December 31, 2009 the Company had committed to spend $41.4 million (2008: $95.4 million) on capital projects. This includes commitments for the expansion and modification of its offices in its HGT campus in Lexington, Massachusetts.<br /><br />Legal proceedings<br /><br />General<br /><br />The Company recognizes loss contingency provisions for probable losses when management is able to reasonably estimate the loss. Where the estimated loss lies within a range and no particular amount within that range is a better estimate than any other amount, the minimum amount is recorded. In other cases management's best estimate of the loss is recorded. These estimates are developed substantially before the ultimate loss is known and the estimates are refined in each accounting period in light of additional information becoming known. In instances where the Company is unable to develop a reasonable estimate of loss, no litigation loss is recorded at that time. As information becomes known a loss provision is set up when a reasonable estimate can be made. The estimates are reviewed quarterly and the estimates are changed when expectations are revised. Any outcome upon settlement that deviates from the Company’s estimate may result in an additional expense in a future accounting period. At December 31, 2009 provisions for litigation losses, insurance claims and other disputes totaled $20.1 million (2008: $20.8 million).<br /><br />Specific<br /><br />CARBATROL<br /><br />(i)        Nostrum <br /><br />In August 2003, the Company was notified that Nostrum Pharmaceuticals, Inc. (“Nostrum”) had submitted an abbreviated new drug application (“ANDA”) under the Hatch-Waxman Act seeking permission to market its generic version of the 300mg strength of CARBATROL (Nostrum’s ANDA product) prior to the expiration date of the Company’s Orange Book listed patents for CARBATROL, US patent No. 5,912,013 (“the ‘013 Patent”) and US patent No. 5,326,570 (“the ‘570 Patent”). On September 18, 2003, Shire filed suit against Nostrum in the US District Court for the District of New Jersey alleging infringement of these two patents by Nostrum’s ANDA and ANDA product. Pursuant to the Hatch-Waxman Act, there was a 30 month stay of approval of Nostrum’s ANDA product which expired in February 2006. Nostrum could be in a position to market its 300mg extended-release carbamazepine product upon FDA final approval of its ANDA. On January 23, 2004 the Company amended the complaint to drop the allegations with respect to the ‘013 Patent while maintaining the suit with respect to the ‘570 Patent. On July 17, 2006 the court entered an order staying discovery.<br /><br />In May 2008, the Company was notified that Nostrum had submitted an amendment to the above referenced ANDA seeking permission to market its generic versions of the 100mg and 200mg strengths of CARBATROL prior to the expiration date of the Company’s ‘013 and ‘570 Patents. On July 2, 2008 Shire filed suit against Nostrum in the US District Court for the District of New Jersey alleging infringement of these two patents by Nostrum’s ANDA and ANDA products. Pursuant to the Hatch-Waxman Act, there is a 30 month stay with respect to Nostrum’s 100mg and 200mg ANDA products which will expire in November 2010. This case was referenced as related to the earlier filed case on Nostrum’s 300 mg product and has been assigned to the same Judge as the earlier ongoing case. In a December 15, 2008 decision the court decided that the two cases should proceed separately. No discovery schedule or trial date has been set for either case.<br /><br />(ii)        Corepharma LLC, Teva, Apotex Corp. and Apotex Pharmaceutical Holdings, Inc. (collectively “Apotex”) and Actavis South Atlantic LLC<br /><br />During the course of 2009, Shire settled lawsuits with each of Corepharma, Teva, Apotex and Actavis South Atlantic LLC relating to their respective ANDAs seeking approval to market generic versions of CARBATROL. No payments to these companies are involved in the settlements. As required by law, the Company has submitted to the US Federal Trade Commission and the US Department of Justice all of the agreements entered into as part of these settlements.<br /><br />ADDERALL XR<br /><br />(i)        Sandoz<br /><br />During the course of 2009, Shire settled its lawsuit with Sandoz relating to its ANDA seeking approval to market generic versions of ADDERALL XR. No payments to Sandoz are involved in the settlement. As required by law, the Company has submitted to the US Federal Trade Commission and the US Department of Justice all of the agreements entered into as part of this settlement.<br /><br />(ii)        Teva<br /><br />On October 19, 2009 Teva filed suit in the US District Court for the Southern District of New York against Shire claiming that Shire was in breach of its supply contract for the authorized generic version of ADDERALL XR. Shire has been supplying Teva with authorized generic ADDERALL XR since April 1, 2009. Shire’s ability to supply this product, however, is limited by quota restrictions that the US Drug Enforcement Administration (“DEA”) places on amphetamine, which is the product’s active ingredient. After the lawsuit was filed, DEA granted Shire additional quota for 2009, allowing Shire to supply Teva with additional product. On December 2, 2009 Shire announced that Teva has dismissed its lawsuit, including Teva’s claims for monetary damages, specific performance and equitable relief. No consideration was exchanged by the parties as part of the settlement.<br /><br />REMINYL<br /><br />Generics UK Limited (“Generics UK”) commenced an action in 2007 against the UK Medicines and Healthcare products Regulatory Agency (“MHRA”) seeking judicial review of the MHRA’s application of data exclusivity for REMINYL and the MHRA’s corresponding refusal to grant Generics UK a marketing authorization for a generic version of REMINYL. This case was referred to the European Court of Justice (“ECJ”) which decided the case in favor of the MHRA and upheld data exclusivity for REMINYL until March 2010.<br /><br />In separate proceedings, Generics UK commenced an action in the UK seeking a declaration to nullify the Supplementary Protection Certificate (“SPC”) for EP 236684 (the patent that claims the use of galantamine for the treatment of Alzheimer’s disease). This case was heard in December 2008, and the court’s decision upholding the SPC (which extends the patent’s term to January 2012) was handed down on May 20, 2009. Generics UK’s appeal of that decision was heard on October 14, 2009 the result of which was that the case was referred to the ECJ.<br /><br />FOSRENOL<br /><br />In February 2009 Shire was notified that three separate ANDAs were submitted under the Hatch-Waxman Act seeking permission to market generic versions of 500mg, 750mg and 1,000mg strengths of FOSRENOL. The notices were received from Barr Laboratories, Inc. (“Barr”), Mylan, Inc., Mylan Pharmaceuticals, Inc. and Matrix Laboratories, Inc. (collectively “Mylan”) and Natco Pharma Limited (“Natco”) and related to ANDAs for generic versions of 500mg, 750mg and 1,000mg FOSRENOL. Within the requisite 45 day period, Shire filed lawsuits in the US District Court of the Southern District of New York against each of Barr, Mylan and Natco for infringement of certain of Shire’s FOSRENOL patents. The filing of the lawsuits triggered a stay of approval of these ANDAs for up to 30 months. The lawsuits have been consolidated into a single case. A Markman hearing is scheduled to occur on May 5, 2010. No trial date has been set.<br /><br />VYVANSE<br /><br />On February 24, 2009 Actavis Elizabeth LLC brought a lawsuit against the FDA seeking to overturn the FDA's decision granting new chemical entity exclusivity to VYVANSE. Shire has intervened in the lawsuit. On October 23, 2009, following a period for public comment, the FDA issued a letter setting forth its analysis of the legal and regulatory issues and reaffirming its decision that VYVANSE is entitled to new chemical entity exclusivity. A hearing on cross-motions for summary judgment was held on February 17, 2010. No rulings on the cross-motions were made at the hearing.<br /><br />Subpoena related to ADDERALL XR, DAYTRANA and VYVANSE<br /><br />On September 23, 2009 the Company received a subpoena from the US Department of Health and Human Services Office of Inspector General in coordination with the US Attorney for the Eastern District of Pennsylvania seeking production of documents related to the sales and marketing of ADDERALL XR, DAYTRANA and VYVANSE. The Company is cooperating with this investigation.</p></div>
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<NumberOfCols> 1 </NumberOfCols>
<NumberOfRows> 2 </NumberOfRows>
<HasScenarios> false </HasScenarios>
<MonetaryRoundingLevel> UnKnown </MonetaryRoundingLevel>
<SharesRoundingLevel> UnKnown </SharesRoundingLevel>
<PerShareRoundingLevel> UnKnown </PerShareRoundingLevel>
<HasPureData> false </HasPureData>
<SharesShouldBeRounded> true </SharesShouldBeRounded>
</InstanceReport>


2 Subsequent Filings that Reference this Filing

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 5/25/10  SEC                               UPLOAD9/11/17    1:21K  Shire plc
 4/14/10  SEC                               UPLOAD9/11/17    1:31K  Shire plc
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Filing Submission 0000950103-10-000520   –   Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

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