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| <NonNumbericText> <div style="font-size:12pt"><p>12. Investments</p><table style="border-collapse: collapse; margin-top: 20px;"><tr><td height="17" width="480" align="left"><b> </b></td><td height="17" width="108" align="right"><b>December 31,</b></td><td height="17" width="108" align="right"><b>December 31,</b></td></tr><tr><td height="17" width="480" align="left"> </td><td height="17" width="108" align="right"><b>2009 </b></td><td height="17" width="108" align="right"><b>2008 </b></td></tr><tr><td height="17" width="480" align="left"> </td><td height="17" width="108" align="right"><b>$’M</b></td><td height="17" width="108" align="right"><b>$’M</b></td></tr><tr><td height="11" width="480" align="right"> </td><td height="11" width="108" align="right">____________</td><td height="11" width="108" align="right">____________</td></tr><tr><td height="17" width="480" align="left">Investments in private companies</td><td height="17" width="108" align="right">3.9 </td><td height="17" width="108" align="right">19.3 </td></tr><tr><td height="17" width="480" align="left">Available-for-sale securities</td><td height="17" width="108" align="right">87.0 </td><td height="17" width="108" align="right">6.1 </td></tr><tr><td height="17" width="480" align="left">Equity method investments</td><td height="17" width="108" align="right">14.8 </td><td height="17" width="108" align="right">17.5 </td></tr><tr><td height="11" width="480" align="right"> </td><td height="11" width="108" align="right">____________</td><td height="11" width="108" align="right">____________</td></tr><tr><td height="17" width="480" align="left"> </td><td height="17" width="108" align="right">105.7 </td><td height="17" width="108" align="right">42.9 </td></tr><tr><td height="11" width="480" align="right"> </td><td height="11" width="108" align="right">____________</td><td height="11" width="108" align="right">____________</td></tr></table><p>Disposal of Virochem Pharma Inc (“Virochem”)<br /><br />On March 12, 2009 the Company completed the disposal of its cost investment in Virochem to Vertex in a cash and stock transaction. The disposal was part of a transaction entered into by all the shareholders of Virochem with Vertex. The carrying amount of the Company’s investment in Virochem on March 12, 2009 was $14.8 million. Shire received total consideration of $19.2 million in cash and two million Vertex shares (valued at $50.8 million) from the disposal, recognizing a gain on disposal of $55.2 million which has been recognized in Other income/(expense), net during the year to December 31, 2009. <br /><br />Additional consideration of $2.0 million in cash and 0.2 million Vertex shares is being held in escrow until March 11, 2010 pending any warranty claims and breaches of representations made by Virochem and by all selling shareholders, including Shire. The escrow conditions are considered substantive and hence a gain has not been recognized relating to these amounts in the year to December 31, 2009. The Vertex stock received has been accounted for as an available-for-sale investment.<br /><br />Disposal of Questcor Pharmaceutical Inc (“Questcor”) <br /><br />For the year to December 31, 2008 Other (expense)/income net includes a gain of $9.4 million from the sale of Shire’s available-for-sale investment in Questcor, a specialty pharmaceutical company focused on providing prescription drugs for central nervous system disorders. Shire received cash consideration of $10.3 million on the sale of this investment.<br /><br />Other-than-temporary impairment of available-for-sale securities<br /><br />The Company recorded other-than-temporary impairments of $0.8 million, $58.0 million and $3.0 million against its available-for-sale securities in the years to December 31, 2009, 2008 and 2007 respectively.<br /><br />During the year to December 31, 2008 the Company recognized impairment charges of $44.3 million relating to its investment in Renovo Group plc, representing unrealized holding losses that were reclassified out of other comprehensive income into earnings in 2008, as management concluded that the impairment was other than temporary. The decline in the market value of the Company’s investment in Renovo Group plc initially arose from the results of clinical trials for JUVISTA which were announced over 2007 and 2008. During the third quarter of 2008, in considering whether the decline in value was temporary or “other than temporary” the Company considered the following factors: the severity of the decline from historical cost (87%) and its duration (eleven months); market analysts’ targets of Renovo Group plc’s share price for the next 18-24 months; and the revised expected filing date for JUVISTA due to the adoption of a sequential rather than parallel Phase 3 development plan. <br /><br />These factors, together with the significant decline in global equity markets during the third quarter of 2008 meant that the Company was unable to reasonably estimate the period over which a full recovery in the value of its investment in Renovo Group plc could occur. As such, the Company concluded that the decline in value was “other than temporary”. Therefore the full difference between the book value of the investment and the fair (market) value was recognized as an other than temporary impairment. Accordingly the Company recognized an impairment charge of $44.3 million for its investment in Renovo Group plc through the consolidated statement of operations in the third quarter of 2008. For purposes of computing the impairment charge fair value was assumed to be £0.26 per share, representing the closing price of Renovo Group plc securities on the London Stock Exchange on September 30, 2008.</p></div> </NonNumbericText> |
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