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Shire plc – ‘10-K’ for 12/31/15

On:  Tuesday, 2/23/16, at 4:40pm ET   ·   For:  12/31/15   ·   Accession #:  950103-16-11313   ·   File #:  0-29630

Previous ‘10-K’:  ‘10-K’ on 2/24/15 for 12/31/14   ·   Next:  ‘10-K’ on 2/22/17 for 12/31/16   ·   Latest:  ‘10-K’ on 2/20/18 for 12/31/17   ·   2 References:   By:  SEC – ‘UPLOAD’ on 7/11/16 By:  SEC – ‘UPLOAD’ on 5/25/16 

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

 2/23/16  Shire plc                         10-K       12/31/15  130:15M                                    Davis Polk & … LLP 01/FA

Document/Exhibit                   Description                      Pages   Size 

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2015

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 0-29630

SHIRE PLC

(Exact name of registrant as specified in its charter)

Indicate by check mark whether the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act

Yes [X] No [ ]

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act

Yes [ ] No [X]

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference to Part III of this Form 10-K or any amendment to this Form 10-K.

[X]

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [X] Accelerated filer Non-accelerated filer Smaller reporting company

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [X]

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232,405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X] No [ ]

As at June 30, 2015, the last business day of the Registrant’s most recently completed second quarter, the aggregate market value of the ordinary shares, £0.05 par value per share of the Registrant held by non-affiliates was approximately $47.3 billion. This was computed using the average bid and asked price at the above date.

As at February 12, 2016, the number of outstanding ordinary shares of the Registrant was 601,127,241.

THE “SAFE HARBOR” STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Statements included herein that are not historical facts are forward-looking statements. Such forward-looking statements involve a number of risks and uncertainties and are subject to change at any time. In the event such risks or uncertainties materialize, Shire’s results could be materially adversely affected. The risks and uncertainties include, but are not limited to, the following:

other risks and uncertainties detailed from time to time in Shire’s, Dyax’s or Baxalta’s filings with the Securities and Exchange Commission (“SEC”), including those risks outlined in Baxalta’s current Registration Statement on Form S-1, as amended, and in “ITEM 1A: Risk Factors” in Shire’s Annual Report on Form 10-K for the year ended December 31, 2015.

The following are trademarks either owned or licensed by Shire plc or its subsidiaries, which are the subject of trademark registrations in certain territories, or which are owned by third parties as indicated and referred to in this Form 10-K:

ADDERALL XR^® (mixed salts of a single entity amphetamine)

ADUVANZ^TM (lisdexamfetamine dimesylate)

AGRYLIN^® (anagrelide hydrochloride)

APRISO^® (trademark of Salix Pharmaceuticals, Ltd. (“Salix”))

ASACOL^® (trademark of Medeva Pharma Suisse AG (used under license by Warner Chilcott Company, LLC (“Warner Chilcott”)))

BERINERT^® (trademark of CSL Behring GmbH)

BERINERT P^® (trademark of Aventis Behring GmbH)

BUCCOLAM^® (midazolam hydrochloride oromucosal solution)

CALCICHEW^® (trademark of Takeda Nycomed AS)

CARBATROL^® (carbamazepine extended-release capsules)

CERDELGA^® (trademark of Genzyme Corporation (“Genzyme”))

CEREZYME^® (trademark of Genzyme)

CINRYZE^® (C1 esterase inhibitor [human])

CLAVERSAL^® (trademark of Merckle Recordati)

COLAZAL^® (trademark of Salix Pharmaceuticals, Inc)

CONCERTA^® (trademark of Alza Corporation (“Alza”))

DAYTRANA^® (trademark of Noven Pharmaceutical Inc. (“Noven”))

DELZICOL^® (trademark of Warner Chilcott)

DERMAGRAFT^® (trademark of Organogenesis Inc. (“Organogenesis”))

ELAPRASE^® (idursulfase)

ELELYSO^® (trademark of Pfizer Inc.)

ELVANSE^® (lisdexamfetamine dimesylate)

ELVANSE ADULT^® (lisdexamfetamine dimesylate)

ELVANSE VUXEN^® (lisdexamfetamine dimesylate)

EPIVIR^® (trademark of GlaxoSmithKline (“GSK”))

ESTRACE^® (trademark of Trimel Pharmaceuticals Inc.)

EQUASYM^® (methylphenidate hydrochloride)

EQUASYM XL^® (methylphenidate hydrochloride)

EXPUTEX^® (trademark of Phoenix Labs)

FABRAZYME^® (trademark of Genzyme)

FIRAZYR^® (icatibant)

FOCALIN XR^® (trademark of Novartis AG)

FOSRENOL^® (lanthanum carbonate)

GATTEX^® (teduglutide [rDNA origin])

HUNTERASE^TM (trademark of Green Cross Corp.)

INTUNIV^® (guanfacine extended release)

KALBITOR^® (ecallantide)

KAPVAY^® (trademark of Shionogi Pharma, Inc. (“Shionogi”))

LIALDA^® (trademark of Nogra International Limited) 

MEDIKINET^® (trademark of Medice Arzneimittel Pütter GmbH & Co. KG (“Medice”))

MEZAVANT^® (trademark of Giuliani International Limited)

MIMPARA^® (cinacalcet HCl)

MICROTROL^® (trademark of Supernus Pharmaceuticals, Inc. (“Supernus”))

NATPAR^® (parathyroid hormone)

NATPARA^® (parathyroid hormone (rDNA))

PENTASA^® (trademark of Ferring B.V. Corp (“Ferring”))

PLENADREN (hydrocortisone, modified release tablet)

QUILLIVANT^® (trademark of Next Wave Pharmaceuticals, Inc.)

REMINYL^® (galantamine hydrobromide) (United Kingdom ("UK”) and Republic of Ireland) (trademark of Johnson & Johnson (“J&J”)), excluding UK and Republic of Ireland)

REGPARA^® (cinacalcet HCl)

REPLAGAL^® (agalsidase alfa)

RESOLOR^® (prucalopride)

REVESTIVE^® (teduglutide)

RITALIN LA^® (trademark of Novartis AG)

RUCONEST^® (trademark of Pharming Intellectual Property B.V.)

SALOFALK^® (trademark of Dr Falk Pharma)

SENSIPAR^® (cinacalcet HCl)

STRATTERA^® (trademark of Eli Lilly and Company (“Lilly”))

TYVENSE^® (lisdexamfetamine dimesylate)

UCERIS^® (trademark of Santarus, Inc.)

VANCOCIN^® (trademark of ANI Pharmaceuticals Inc.)

VENVANSE^® (lisdexamfetamine dimesylate)

VPRIV^® (velaglucerase alfa)

VYVANSE^® (lisdexamfetamine dimesylate)

XAGRID^® (anagrelide hydrochloride)

ZAVESCA^® (trademark of Actelion Pharmaceuticals, Ltd.)

ZEFFIX^® (trademark of GSK)

3TC^® (trademark of GSK)

SHIRE PLC

2015 Form 10-K Annual Report

Table of contents

PART I

ITEM 1: Business

General

Shire plc and its subsidiaries (collectively referred to as either “Shire”, or the “Company”) is fast-becoming a leading biotech company, focusing on developing and marketing innovative medicines for patients with rare diseases and other select conditions.

The Company has grown both organically and through acquisition, completing a series of major transactions that have brought therapeutic, geographic and pipeline growth and diversification. The Company will continue to conduct its own research and development (“R&D”), focused on rare diseases, as well as evaluate companies, products and pipeline opportunities that offer a strategic fit and have the potential to deliver value to all of the Company’s stakeholders: patients, physicians, policy makers, payers, investors and employees.

Strategy

Shire’s purpose is to enable people with life altering conditions to lead better lives.

The Company aspires to be a leading global biotech delivering innovative medicines to patients with rare diseases and other specialty conditions. This is underpinned by four strategic drivers:

Growth:

·         Optimize In-Line assets through commercial excellence

·         Advance late-stage pipeline and launch new products

·         Accelerate growth through the acquisition of assets in core / adjacent therapeutic areas (“TAs”)

Innovation:

·         Invest to develop therapeutic advances for diseases with significant unmet need

·         Expand rare diseases expertise through internal research and collaborations with external partners

·         Extend the Company’s portfolio to new indications and TAs

Efficiency:

·         Operate a lean and agile organization

·         Maintain focus on profitability while investing for future growth

·         Retain flexibility to reinvest in high-growth opportunities

People:

·         Foster and reward a high performance culture

·         Attract, develop and retain the best talent

·         Live our values

Business model

In 2013 Shire integrated its operations into a simplified “One Shire” organization. The One Shire model has created a simple structure and a focused, efficient organization that is scalable for growth. The core elements of this model have been retained through multiple acquisitions since its original implementation.

Shire has commercial units that focus exclusively on the commercial execution of its marketed products (the “In-Line” group) in the areas of Hereditary Angioedema/Lysomal Storage Diseases (“HAE/LSD”), Neuroscience, Gastrointestinal (“GI”) and Internal Medicine, and in Ophthalmics to support the development of Shire’s ophthalmic pipeline candidates. This ensures that the Company provides innovative treatments, and services the needs of its customers and patients, as efficiently as possible.

Shire has a single R&D organization (the “Pipeline” group), and early stage research is focused primarily on rare diseases. This single structure is designed to ensure Shire explores and develops opportunities built upon its core capabilities, priority commercial units and TAs, and also seeks to explore related and emerging areas.

Growth is also fuelled by the acquisition of new companies, in-licensing and new product development opportunities through R&D partnerships. Shire’s global corporate development team searches for new technologies, innovative products and strategic partnerships. The team engages in conversations with scientists and entrepreneurs on a global basis, while collaborating with commercial and R&D experts throughout the Company. 

Shire’s support functions, including Technical Operations, are unified across the business to run as efficiently and effectively as possible to support the In-Line and Pipeline activities.

Shire leads its business through the Executive Committee, with support from its In-Line Committee, Pipeline Committee and Corporate Committee, which comprise senior management from across functions and commercial units to support the In-Line products, Pipeline activities and other corporate and group related activity. The Executive Committee is responsible for ensuring the appropriate allocation of resources and focused decision making across the enterprise in the best interests of Shire’s patients, shareholders and other stakeholders.

2015 and Recent Highlights

See “Currently marketed products” and “Products under development” below for a full discussion of 2015 product, pipeline and business highlights, including:

Pipeline development:

Geographical expansion:

Business development:

Other developments:

Financial information about operating segments

The Company comprises a single operating and reportable segment. This segment is engaged in the research, development, licensing, manufacturing, marketing, distribution and sale of innovative specialist medicines to meet significant unmet patient needs. Additional segment information is presented in Note 23 to the Company’s consolidated financial statements contained in ITEM 15: Exhibits and Financial Statement Schedules of this Annual Report on Form 10-K.

Sales and marketing

At December 31, 2015 the Company employed 2,160 (2014: 2,151) sales and marketing staff to service its operations throughout the world, including its major markets in North America, Europe, Latin America, and Asia Pacific.

Currently marketed products

The table below lists the Company’s main marketed products at December 31, 2015 indicating the owner/licensor, disease area and the key territories in which Shire markets the product.

⁽¹⁾ Marketed in Brazil as VENVANSE and in the EU as ELVANSE or TYVENSE.

⁽²⁾ Marketed by distributors in certain other markets.

⁽³⁾ Marketed in the US as LIALDA and in Europe as MEZAVANT XL or MEZAVANT.

⁽⁴⁾ Marketed in Japan under license by Dainippon Sumitomo Pharma Co., Ltd.

⁽⁵⁾ Marketed in Asia Pacific under license by Genzyme.

⁽⁶⁾Marketed in the US as GATTEX and in Europe and Canada as REVESTIVE.

⁽⁷⁾ Marketed in Japan under license by Bayer Yakuhin Limited (“Bayer”).

Treatments for Neuroscience

ADHD is a chronic neurobehavioral disorder that manifests as a persistent pattern of inattention and/or hyperactivity-impulsivity that is more frequent and severe than is typically observed in individuals at a comparable level of development. Although there is no cure for ADHD, there are accepted treatments that have been demonstrated to improve symptoms. Standard treatments include educational approaches, psychological therapies that may include behavior modification, and/or medication.

The worldwide prevalence of ADHD is estimated at 5.3% (Am J Psych. 2007). In the US, the prevalence is estimated at approximately 12% in the paediatric population aged 3 to 17 years. The diagnosis rate is fairly high with approximately 61% of prevalent patients being diagnosed and 66% of these patients being treated with pharmacologic treatment.

In adults the prevalent rates tend to vary widely depending on the sampling scheme and methodology of the study, but the US adult prevalence is as high as 10.5% of the population aged 20 plus with less than a third being diagnosed. Of those diagnosed, slightly more than half receive pharmacologic treatment.

According to IMS Health National Prescription Audit (“IMS NPA”), a leading global provider of business intelligence for the pharmaceutical and healthcare industries, the US ADHD market was valued at approximately $9.6 billion for the twelve months ended December 2015; this represents an increase of approximately 8.1% from the twelve months ended December 2014.

The current market dynamics in the US present significant challenges as well as opportunities for growth. While the market continues to grow in volume, the growth rate is slowing. We expect this trend to continue given the lack of promoted products, increased generic entries and lack of product innovation in the near future. The increased genericization of the market will put increasing pressure on prices, particularly with multiple generic entrants for ADDERALL XR and CONCERTA. Cost pressures are not only driven by the generics but also by increased price sensitivity of customers – physicians may suggest generics anticipating cost concerns for their patients, patients are paying more for their healthcare costs every year, and with the current economic conditions their sensitivity has increased as well. While there are no major innovative product launches in the near future, we expect several new pediatric-friendly forms such as oral suspension, dissolving tablets, sprinkles, and chewables that are expected to launch putting more pressure on the pediatric market.

Within the US the overall ADHD market exists in two distinct parts, pediatric and adult, with different needs and market dynamics. The pediatric market is led by long-acting therapies, with CONCERTA the lead product followed closely by VYVANSE. This market also had a much higher branded share, almost 50%, though generics are growing. The pediatric market is growing, though more slowly than the overall market, and zero to 18 represents just under half of the existing overall ADHD market volume. The adult market is dominated by generics, with short-acting therapies and long acting therapies showing a basic 50/50 split. Growth rates in the adult market are very strong, particularly in the 25 plus age segment.

VYVANSE

VYVANSE is the first pro-drug stimulant for the treatment of ADHD, where the amino acid l-lysine is linked to d-amphetamine. VYVANSE is therapeutically inactive until metabolized in the body.

The FDA approved VYVANSE as a once-daily treatment for children aged 6 to 12 with ADHD in February 2007, for adults in April 2008 and for adolescents aged 13 to 17 in November 2010. In addition VYVANSE became the first drug in its class to be approved by the FDA for maintenance treatment, having been approved both as a maintenance treatment in adults with ADHD in January 2012, and as a maintenance treatment in pediatrics and adolescents aged 6 to 17 in April 2013. VYVANSE is available in the US in seven dosage strengths: 10mg, 20mg, 30mg, 40mg, 50mg, 60mg and 70mg.

VYVANSE was approved by Health Canada for the treatment of ADHD in pediatric patients aged 6 to 12 in February 2009, for adolescents and adults in November 2010, and was launched in Canada in January 2010 for pediatric patients and January 2011 for adolescents and adults.

VENVANSE was granted marketing authorization by ANVISA, the Brazilian health authority, for the treatment of ADHD in children aged 6 to12 and launched in May 2011 and launched for adolescents and adults in November 2013.

ELVANSE/TYVENSE received a positive outcome from the European Decentralised Procedure in December 2012. ELVANSE is indicated as part of a comprehensive treatment program for ADHD in children 6 years of age and over when response to previous methylphenidate treatment is considered clinically inadequate. The product has been approved and launched in eight countries through the European Decentralised Procedure (UK, Germany, Sweden, Spain, Norway, Finland, Denmark and Ireland). The product has also been approved and launched in Switzerland.

ELVANSE ADULT/ELVANSE VUXEN/ADUVANZ received a positive outcome from the European Decentralised Procedure in January 2015. ELVANSE ADULT is indicated as part of a comprehensive treatment programme for ADHD in adults taking into consideration the profile of the patient, including a thorough assessment of the severity and chronicity of the patient’s symptoms, the potential for abuse, misuse or diversion and clinical response to any previous pharmacotherapies for the treatment of ADHD. The product has been approved and launched in the UK, Sweden and Denmark. The product has also been approved and launched in Switzerland.

VYVANSE was also approved in the US in January 2015 as the first and only treatment of moderate to severe BED in adults. BED is defined as recurring episodes (more than once weekly), for at least 3 months, of consuming a large amount of food in a short time, compared with others. Patients feel a lack of control during a binge eating episode and marked distress over their eating. They typically experience shame and guilt, among other symptoms, about their binge eating and may conceal the symptoms. Unlike people with other eating disorders, adults with BED don’t routinely try to “undo” their excessive eating with extreme actions like purging or over-exercising. BED is the most common eating disorder in the US, affecting an estimated 2.8 million adults¹, according to a national survey. BED occurs in both men and women and is more common than anorexia and bulimia combined. BED can occur in normal, overweight, and obese adults, and is seen across racial and ethnic groups.

Further information about litigation proceedings regarding VYVANSE can be found in ITEM 3: Legal Proceedings and Note 17, “Commitments and contingencies, Legal and other proceedings” to the consolidated financial statements set forth in this Annual Report on Form 10-K.

^{1 Crossrow N, Russo LJ, Ming EE,, Witt EA, Victor TW, Wadden TA.  Poster, APA 167th Annual Meeting, New York, NY, May 3 – 7, 2014}

ADDERALL XR

ADDERALL XR is an extended release treatment for ADHD, which uses MICROTROL drug delivery technology and is designed to provide once-daily dosing. It is available in 5mg, 10mg, 15mg, 20mg, 25mg and 30mg capsules.

The FDA approved ADDERALL XR as a once-daily treatment for children aged 6 to 12 with ADHD in October 2001, for adults in August 2004 and for adolescents aged 13 to 17 in July 2005.

Teva Pharmaceutical Industries, Ltd. (“Teva”) and Impax Laboratories, Inc. (“Impax”) commenced commercial shipment of their authorized generic versions of ADDERALL XR in April and October 2009, respectively. Shire currently receives royalties from Impax’s sales of authorized generic ADDERALL XR. Shire’s supply obligations to Impax ended September 30, 2014. Shire has extended its supply agreement with Teva until September 30, 2016. From the third quarter of 2012 Shire also started receiving royalties from Actavis’ sales of its generic version of ADDERALL XR. In December 2013, Shire entered into an agreement with Sandoz Inc. (“Sandoz”) whereby Shire will supply Sandoz with an authorized generic version of ADDERALL XR no later than July 1, 2016.  From the December 1, 2013 effective date of the agreement through the end of the agreement’s five-year supply term, Sandoz has agreed to exclusively sell the authorized generic version of ADDERALL XR supplied by Shire. Shire will receive a royalty on Sandoz's sales of the product.

In June 2012 the FDA stated that it will require that all abbreviated new drug applications (“ANDAs”) for ADDERALL XR will have to establish bioequivalence using partial area under the curve measurements at multiple time points post-dosing and for both d- and l-amphetamine. The FDA response is consistent with recent decisions on other long-acting ADHD products.

INTUNIV

INTUNIV is a selective alpha-2A receptor agonist indicated for the treatment of ADHD. Alpha-2A-adrenoceptors strengthen working memory networks by inhibiting cAMP-HCN channel signalling in the prefrontal cortex (Cell. 2007; 129:397-410). INTUNIV is non-scheduled and has no known potential for abuse or dependence.

The FDA approved INTUNIV as a once-daily monotherapy treatment of ADHD in children and adolescents aged 6 to 17 and as adjunctive therapy to stimulants in February 2011. It is available in 1mg, 2mg, 3mg and 4mg tablets. Actavis launched a generic version of INTUNIV on December 1, 2014. Additional generics were launched following Actavis’s generic exclusivity period on June 1, 2015.

INTUNIV XR was approved by Health Canada as monotherapy for the treatment of ADHD in children aged 6 to 12 years and as adjunctive therapy to psychostimulants for the treatment of ADHD in children, aged 6 to 12 years, with a sub-optimal response to psychostimulants in July 2013 and was launched in Canada in November 2013. The approval was extended to include adolescents aged 13 to 17 in September 2015, and was launched in January 2016.

In September 2015, the European Commission granted Marketing Authorisation for once-daily, non-stimulant INTUNIV (guanfacine hydrochloride prolonged release tablets) for the treatment ADHD in children and adolescents 6 to 17 years old for whom stimulants are not suitable, not tolerated or have been shown to be ineffective. INTUNIV has been launched in Germany, UK and Denmark.

Treatments for Ulcerative Colitis (“UC”)

UC was estimated to affect approximately 1.2 million patients in major markets (US and EU5) in 2010 according to Ulcerative Colitis: Decision Resources’ Market Forecast and Opportunity Analysis (May, 2012). UC is a serious chronic inflammatory disease of the colon in which part or all of the large intestine becomes inflamed and often ulcerated. Typically, patients go through periods of relapse and remission and can suffer from diarrhea, bleeding and abdominal pain. Once diagnosis is confirmed, patients are usually treated for life. The first line treatment for inflammatory bowel disease is mesalamine (5-aminosalicylic acid (“5-ASA”)) based products.

LIALDA/MEZAVANT

LIALDA is indicated in the US and Canada for the induction of remission in patients with mild to moderately active UC and for the maintenance of remission of UC. The addition of the indication for maintenance of remission of UC was approved by Health Canada in February 2011 and by the FDA in July 2011. LIALDA is the first and only FDA-approved once-daily oral formulation of mesalamine indicated for the induction and maintenance of remission.  LIALDA contains the highest commercially available mesalamine dose per tablet (1.2g), so patients can take as few as two tablets once daily. In 2012, the FDA issued draft bioequivalence guidelines for orally-delivered delayed or extended-release mesalamine-based drugs (including LIALDA and PENTASA; see PENTASA section below).

LIALDA was approved by the FDA in January 2007 and was launched in the US in March 2007. Following approvals in other countries, at December 31, 2015, LIALDA/MEZAVANT was commercially available in 19 countries either directly or through distributor arrangements. LIALDA is marketed in certain territories outside the US by Shire under the trade name MEZAVANT and MEZAVANT XL.

Litigation proceedings relating to the Company’s LIALDA patents are in progress. For further information see ITEM 3: Legal Proceedings and Note 17, “Commitments and Contingencies, Legal and other proceedings” to the consolidated financial statements set forth in this Annual Report on Form 10-K.

PENTASA

PENTASA controlled release capsules are marketed by Shire in the US and are indicated for the induction of remission and for the treatment of patients with mild to moderately active UC.

PENTASA is an ethylcellulose-coated, controlled release capsule formulation designed to release therapeutic quantities of mesalamine throughout the gastrointestinal tract. PENTASA is available in the US in 250mg and 500mg capsules.

In September 2012, the FDA issued draft bioequivalence guidelines for generic approvals of orally-delivered delayed or extended-release mesalamine-based drugs (including LIALDA and PENTASA).

Treatments for Rare Diseases

A rare disease is a life-threatening or chronically debilitating condition affecting a limited number of patients. It is defined as rare in Europe when fewer than 5 in 10,000 people are affected, and in the US when fewer than 200,000 people are affected (Aronson J. Br J Clin Pharmacol 2006). Although rare diseases affect only a small number of people, collectively they impact millions of patients and their families. Globally, an estimated 350 million people – almost five percent of the world’s population – are living with a rare disease (Global Genes. Rare diseases: facts and statistics). There are approximately 7,000 rare diseases identified, of which 80% are genetic (Engel PA. Journal of Rare Disorders 2013 / Global Genes. Rare diseases: facts and statistics).

Compared to widespread conditions that strike hundreds of millions of people, rare diseases can lack similar levels of interest amongst the general public and medical/research communities (Shire Impact Report). Many people with a rare disease continue to experience low quality of life, high levels of disability, and may be at risk of early death due to delay in diagnosis or misdiagnosis (EURODIS. The voice of 12,000 patients). Effective treatments are available for only about 1% of rare diseases (Rollet P. Orphanet J Rare Dis 2013). These untreated diseases impose very high societal, emotional and economic costs.

REPLAGAL

REPLAGAL is marketed for the treatment of Fabry disease outside of the US. Fabry disease is a rare, inherited genetic disorder resulting from a deficiency in the activity of the lysosomal enzyme alpha-galactosidase A, which is involved in the breakdown of fats. Although the signs and symptoms of Fabry disease vary widely from patient to patient, the most common include severe pain of the extremities, impaired kidney function which often progresses to kidney failure, early heart disease, stroke and disabling gastrointestinal symptoms. The disease is estimated to affect 1 in 27,000 people (Spada et al, 2006).

REPLAGAL is a fully human alpha-galactosidase A protein made in human cells that replaces the deficient alpha-galactosidase A with an active enzyme to ameliorate certain clinical manifestations of Fabry disease.

In August 2001, REPLAGAL was granted marketing authorization in the EU. At December 31, 2015 REPLAGAL was approved in 53 countries excluding the US.

ELAPRASE

ELAPRASE is a treatment for Hunter syndrome (also known as Mucopolysaccharidosis Type II or MPS II). Hunter syndrome is a rare, inherited genetic disorder mainly affecting males that interferes with the body's ability to break down and recycle waste substances called mucopolysaccharides, also known as glycosaminoglycans or GAGs. In patients with Hunter syndrome, cumulative build-up of GAGs in cells throughout the body interferes with the way certain tissues and organs function, leading to severe clinical complications and early mortality. The disease is estimated to affect approximately 1 in 162,000 males (Meikle et al, 1999).

ELAPRASE was approved by the FDA in July 2006 and granted marketing authorization by the European Medicines Agency (“EMA”) in January 2007 for the long term treatment of patients with Hunter syndrome. ELAPRASE has been granted orphan drug exclusivity by both the FDA and the EMA. ELAPRASE also benefits from the 12 years of data exclusivity from the date of grant of registration given to innovator biologics in the US under the Patient Protection and Affordable Care Act (“PPACA” or “ACA”).

ELAPRASE received approval from the Ministry of Health Labour and Welfare (“MHLW”) in Japan in October 2007. As part of an agreement with Genzyme, Genzyme manages the sales and distribution of ELAPRASE in Japan as well as certain other countries in the Asia Pacific region.

At December 31, 2015 ELAPRASE was approved in 64 countries.

VPRIV

VPRIV is a treatment for Type 1 Gaucher disease. Gaucher disease is a rare, inherited genetic disorder which results in a deficiency of the lysosomal enzyme beta-glucocerebrosidase. This enzymatic deficiency causes an accumulation of glucocerebroside, primarily in macrophages called Gaucher cells in the liver, spleen, bone marrow, and other organs. The accumulation of glucocerebrosidase in Gaucher cells in the liver and spleen leads to organomegaly. Presence of Gaucher cells in the bone marrow and spleen leads to clinically significant anemia and thrombocytopenia. The disease is estimated to affect 1 in 40,000 individuals, with a higher incidence in the Ashkenazi Jewish population (Sidransky et al, 2010, and National Gaucher Foundation).

VPRIV was approved by the FDA in February 2010 for the long term treatment of patients with Type 1 Gaucher disease. The EMA approved the marketing authorization for the use of VPRIV in August 2010. VPRIV has been granted orphan drug status in the EU with up to ten year’s market exclusivity from August 2010. VPRIV also benefits from the 12 years of data exclusivity in the US from the date of grant of registration given to innovator biologics under the ACA.

At December 31, 2015 VPRIV was approved in 51 countries.

FIRAZYR

FIRAZYR is a first-in-class peptide-based therapeutic developed for the symptomatic treatment of acute attacks of HAE. HAE is a debilitating and potentially life-threatening genetic disease characterized by unpredictable recurring swelling attacks in the hands, feet, face, larynx, or abdomen. The disease is estimated to affect approximately 1 in 50,000 individuals (Bowen et al, 2008).

In July 2008 the EMA granted marketing authorization throughout the EU for the use of FIRAZYR for the symptomatic treatment of acute attacks of HAE, and in February 2011 approved FIRAZYR for self-administration after training in subcutaneous injection technique by a healthcare professional. In August 2011 the FDA granted marketing approval for FIRAZYR in the US for treatment of acute attacks of HAE in adults aged 18 and older and, after injection training, patients may self-administer FIRAZYR. FIRAZYR has been granted orphan drug exclusivity by both the FDA and the EMA, providing it with up to 7 and 10 years market exclusivity in the US and EU, respectively, from the date of the grant of the relevant marketing authorization.

At December 31, 2015 FIRAZYR was approved in 44 countries.

CINRYZE

CINRYZE is a C1 esterase inhibitor therapy for routine prophylaxis against HAE, also known as C1 inhibitor (C1-INH) deficiency. CINRYZE is marketed and sold in the US for routine prophylaxis against HAE attacks in adolescent and adult patients with HAE. CINRYZE has been granted orphan drug exclusivity by the FDA, providing it with 12 years of data exclusivity from the date of grant of registration given to innovator biologics in the US under the ACA from October 2008. In June 2011, marketing authorization in the EU was granted for CINRYZE in adults and adolescents with HAE for routine prevention, pre-procedure prevention and acute treatment of angioedema attacks. The approval also includes a self-administration option for appropriately trained patients.

At December 31, 2015 CINRYZE was approved in 36 countries.

GATTEX/REVESTIVE

GATTEX / REVESTIVE (teduglutide [rDNA origin]) for injection is the first prescription medicine for the long-term treatment of adults with SBS who are dependent on parenteral support. SBS is a condition in which a large portion of the intestine has been removed by surgery. As a result, people can’t absorb enough nutrients or fluids from food and liquids to maintain good health. SBS can also be caused by disease or injury that prevents the small intestine from functioning properly despite normal length. To make up for the inadequate absorption, intravenous (“IV”) feeding (parenteral support) may be prescribed to help the patient stay healthy. In the US, approximately 6,000-7,000 SBS patients are dependent on parenteral support with a similar prevalence in Europe (NA HPEN Patient Registry. Oley Foundation.1994). GATTEX / REVESTIVE may help the remaining intestine absorb more nutrients and reduce the need for parenteral support. GATTEX was approved by the FDA in December 2012. REVESTIVE was approved in the EU in August 2012. At December 31, 2015 GATTEX / REVESTIVE was launched in the US, Canada, Sweden, Germany, Norway and France.

NATPARA/NATPAR

NATPARA (parathyroid hormone) for injection is indicated as an adjunct to calcium and vitamin D to control hypocalcemia in patients with HPT. HPT is a rare condition in which the parathyroid glands fail to produce sufficient amounts of parathyroid hormone (“PTH”) or where PTH lacks biologic activity. PTH plays a central role in a variety of critical physiological functions in the body. In patients with HPT, insufficient levels of PTH lead to many physiological abnormalities, including low serum calcium and an inability to convert native vitamin D into its active state to properly absorb dietary calcium. Acute symptoms of HPT are largely due to low serum calcium and range from muscle pain and tingling, to lack of focus or ability to concentrate, and anxiety and depression. In extreme cases, life-threatening events, such as arrhythmias and seizures, may occur. In the US, approximately 75,000

patients are diagnosed with HPT with 41,000 having moderate to severe disease with a similar prevalence in EU5 (France, Germany, UK, Italy and Spain). [J Bone Miner Res. 2013 Dec;28 (12):2570-6].

NATPARA was approved by the FDA in January 2015. NATPARA has been granted orphan drug exclusivity by the FDA. NATPARA also benefits from the 12 years of data exclusivity from the date of registration given to innovator biologics in the US under the ACA.

NATPARA carries a boxed warning that bone cancer (osteosarcoma) has been observed in rat studies with NATPARA. It is unknown whether NATPARA causes osteosarcoma in humans, but because of a potential risk of osteosarcoma, NATPARA is only recommended for use in patients whose hypocalcemia cannot be controlled on calcium supplementation and active forms of vitamin D, and for whom the potential benefits are considered to outweigh this potential risk. NATPARA is only available through a restricted program under a Risk Evaluation and Mitigation Strategy. 

The MAA for NATPAR (parathyroid hormone (“rDNA”) has been validated by the EMA and is currently under review. The EMA granted orphan drug designation for NATPAR in January 2014.

Treatments for Other therapeutic areas

FOSRENOL

FOSRENOL is a phosphate binder that is indicated for use in patients with end-stage renal disease (stage 5) receiving dialysis and, from October 2009, is also indicated in the EU for the treatment of adult patients with Chronic kidney disease (“CKD”) who are not on dialysis with serum phosphate > 1.78 mmol/L (5.5 mg/dL) in which a low phosphate diet alone is insufficient to control serum phosphate levels. It is estimated that there are approximately 2 million patients worldwide with end-stage renal disease on dialysis (Nephrol Dial Transplant, 2005). In this condition the kidneys are unable to regulate the balance of phosphate in the body. If untreated, the blood phosphate levels can become elevated (hyperphosphatemia). The Kidney Disease Improving Global Outcomes (KDIGO) guidelines recommend that serum phosphate levels in CKD patients should be managed towards normal (Kidney International, 2009). FOSRENOL binds dietary phosphate in the gastrointestinal tract to prevent it from passing through the gut lining and, based upon this mechanism of action, phosphate absorption from the diet is decreased.

Formulated as a chewable tablet, FOSRENOL is available in 500mg, 750mg and 1,000mg dosage strengths. The FDA approved the 500mg dosage strength in 2004 and the 750mg and 1,000 mg dosage strengths were approved in 2005. In March 2009 FOSRENOL was launched in Japan. An oral powder formulation was approved and made available in certain European countries in 2012 and was approved in the US in 2014. At December 31, 2015 FOSRENOL was approved in 51 countries.

In addition, the Company has a number of other less material marketed products for the treatment of Neuroscience conditions (e.g., EQUASYM and BUCCOLAM), GI diseases (e.g., RESOLOR) and other TAs (e.g., PLENADREN).

Recently acquired product

Following completion of the acquisition of Dyax on January 22, 2016 Shire obtained KALBITOR.

KALBITOR

KALBITOR is a plasma kallikrein (“pKal”) inhibitor for the treatment of acute attacks of HAE in patients 12 years of age and older. It is administered subcutaneously. It is currently only available in the US. It was approved by the FDA in 2009.

Royalties received from other products

Cinacalcet HCI

Following the acquisition of NPS Pharma in February 2015, Shire receives royalties arising from NPS Pharma’s collaborations with Amgen Inc. (“Amgen”), Janssen Pharmaceuticals N.V. and Kyowa Hakko Kirin. Amgen markets cinacalcet HCI as SENSIPAR in the US and as MIMPARA in the EU; Janssen Pharmaceuticals N.V. markets tapentadol as Nucynta in the US; and Kyowa Hakko Kirin markets cinacalcet HCI as REGPARA in Japan, Hong Kong, Malaysia, Macau, Singapore and Taiwan. Shire is entitled to royalties from the relevant net sales of these products.

Antiviral products

The Company receives royalties on antiviral products based on certain of the Company’s patents licensed to GSK. These antiviral products are for Human Immunodeficiency Virus (“HIV”) and Hepatitis B virus. Royalty terms expired in most territories outside of the US during 2012. In the US, royalty terms expire at various periods through to 2018.

ADHD

ADDERALL XR

Shire receives royalties from Impax’s sales of its authorized generic version of ADDERALL XR. From the third quarter of 2012, Shire also started receiving royalties from Actavis’ sales of their generic version of ADDERALL XR.

INTUNIV

From December 1, 2014 Shire received royalties from Actavis’ sales of its generic version of INTUNIV, for 180 days from launch. Such sales required the payment of a royalty of 25% of gross profits to Shire during the 180 day period of Actavis’ exclusivity, from December 1, 2014 to May 21, 2015.

Hyperphosphatemia

FOSRENOL

The Company licensed the rights to FOSRENOL in Japan to Bayer in December 2003. Bayer launched FOSRENOL in Japan in March 2009. Shire receives royalties from Bayer’s sales of FOSRENOL in Japan. The Company has also received milestone payments from Bayer based on the achievement of certain sales thresholds and may receive further milestone payments in the future if certain sales thresholds are achieved.

In addition, the Company has licensed the rights to certain other products to third parties and receives royalties on third party sales.

Following the acquisition of Dyax on January 22, 2016 Shire has acquired rights to future milestones and royalties from Dyax’s Licensing and Research Funded Porftolio, including royalties arising from relevant net sales of Lilly’s CYRAMZA.

Products under development

The Company focuses its development resources on projects in a number of TAs, including rare diseases, neuroscience, ophthalmics, hematology and GI, and focuses its early development projects primarily on rare diseases. Total R&D expenditures (including impairment charges and depreciation) of $1,564.0 million, $1,067.5 million and $933.4 million were incurred in the years ended December 31, 2015, 2014 and 2013, respectively.

The table below lists the Company’s products in clinical development and registration as of December 31, 2015 by stage of development indicating the most advanced development status reached in major markets and the Company’s territorial rights in respect of each product candidate. If these product candidates are ultimately approved and marketed, they may benefit from patent and/or other forms of exclusivity, as described in more detail in the sections headed “Intellectual property” and “Government Regulation” in this ITEM 1. Some of the patents (or their analogous foreign patent applications or foreign granted patents) listed in the table on pages 24-26 of this ITEM 1 are potentially relevant to the corresponding development projects listed below. However as these product candidates remain in development and are subject to change as development progresses, the patents listed may not necessarily be representative of the scope of patent protection that may ultimately be available if each product candidate is approved and marketed.

Products in registration as of December 31, 2015

SHP606 (lifitegrast) for the treatment of DED

On April 9, 2015 Shire announced that the FDA had accepted for filing and had granted a Priority Review designation for Shire’s NDA for lifitegrast for the treatment of signs and symptoms of DED in adults. In parallel to the NDA submission, Shire had initiated a Phase 3 safety and efficacy study (OPUS-3) in support of potential regulatory submissions. OPUS-3 was a multicenter, randomized, double-masked, placebo-controlled, parallel arm study with a 14 day open-label placebo screening run-in period followed by a 12 week randomized, masked treatment period with a primary efficacy endpoint in patients with dry eye, a recent history of artificial tear use within 30 days of study entry and an eye dryness score (“EDS”) = 40. On October 16, 2015 the FDA requested an additional clinical study and more information about product quality as part of a Complete Response Letter to Shire’s NDA. On October 27, 2015, Shire announced positive topline results from OPUS-3. In OPUS-3, Lifitegrast met the single primary endpoint for patient-reported symptoms of eye dryness (mean change in EDS from baseline to week 12) (treatment difference of 7.16 (95% CI), 3.04, 11.28; p=0.0007), and the key secondary endpoints of symptom improvement at Days 14 and 42 (treatment difference (95% CI) 7.85 (4.33, 11.37) and 9.32 (5.44, 13.20) respectively, (p<0.0001)).  OPUS-3 also evaluated the safety and tolerability of lifitegrast based on occurrence of treatment-emergent adverse events. The safety and tolerability profile of lifitegrast in OPUS-3 was consistent with previous studies involving lifitegrast. Shire has incorporated this data into the resubmitted NDA which was filed on January 22, 2016. On February 4,

2016, Shire announced that the FDA acknowledged receipt of the resubmission of the NDA. The FDA determined that the submission is a complete response and has assigned a 6-month review period for the NDA and a PDUFA date of July 22, 2016.

NATPAR for the treatment of HPT

NATPAR (NATPARA in the US) is currently under review in Europe as an adjunct to calcium and vitamin D to control hypocalcemia in patients with HPT.

INTUNIV for the treatment of ADHD in Japan

Under a collaboration agreement, Shionogi and Shire will co-develop and sell treatments for ADHD in Japan, including INTUNIV. A Phase 3 clinical program to evaluate the efficacy and safety of INTUNIV in Japanese patients aged 6 to 17 has been completed and submission of the INTUNIV application for Marketing Authorisation Application in Japan occurred on January 27, 2016.

Products in clinical development as at December 31, 2015

Phase 3 and Phase 3-ready

SHP465 for the treatment of ADHD in adults

Shire’s NDA for SHP465 was previously submitted in 2006 to support the use of SHP465 as a longer-acting, once-daily treatment for ADHD in adults. With the growing adult ADHD population there is now a larger patient population and Shire expects a greater commercial need for this type of product than in 2006. SHP465 (mixed salts of a single entity amphetamine) capsules provide an extended-release of amphetamines to provide coverage of ADHD symptoms for adults.  On April 7, 2015 Shire announced that it had reached an agreement with the FDA on a regulatory path for SHP465. As required by the FDA and for the purpose of approval of SHP465 for adult patients, Shire is conducting a Phase 3 study designed to evaluate the efficacy of SHP465 administered as a daily morning dose compared to a placebo in the treatment of children and adolescents (6-17 years of age inclusive) diagnosed with ADHD.

FIRAZYR for the treatment of HAE in Japan

Shire initiated a Phase 3 trial to evaluate the efficacy and safety of FIRAZYR for the acute treatment of angioedema of HAE in Japanese patients in 2015. Patient enrollment is currently ongoing.

SHP555 (prucalopride; marketed as RESOLOR in the EU) for the treatment of chronic constipation in the US

On January 10, 2012 Shire announced that it had acquired the rights to develop and market prucalopride in the US in an agreement with Janssen Pharmaceutica N.V.  On June 3, 2015, Shire announced that prucalopride has been approved by the European Commission for use in adults for the symptomatic treatment of chronic constipation in whom laxatives fail to provide adequate relief. RESOLOR is approved for use in women in Europe, so the new variation extends the use of this treatment to male patients. Shire has discussed with the FDA the requirements for filing an NDA for prucalopride and is currently working towards fulfilling those requirements in anticipation of an NDA submission.

SHP609 for the treatment of Hunter syndrome with CNS symptoms

SHP609 is in development as an enzyme replacement therapy (“ERT”) delivered intrathecally for the treatment of Hunter syndrome patients with early cognitive impairment. Hunter syndrome is a Lysosomal Storage Disorder.  In December 2014 the FDA granted SHP609 Fast Track designation. In addition, this product has been granted orphan drug designation in the US. The Company initiated a pivotal Phase 2/3 clinical trial in the fourth quarter of 2013 which is enrolling and an extension study is ongoing.

SHP616 (CINRYZE) for the treatment of AMR

A Phase 2 study for the treatment of AMR with SHP616 was completed in 18 patients. Shire has received FDA and EMA feedback and submitted an investigational new drug application (“IND”) in the second quarter of 2015. FDA granted Fast Track designation for SHP616 in October 2015 and Shire plans to initiate a Phase 3 study for the treatment of acute AMR in the first quarter of 2016.

SHP616 (CINRYZE) life cycle management

Shire is pursuing a subcutaneous formulation of CINRYZE for routine prophylaxis against HAE attacks in adolescent and adult patients. An IND was submitted in October, and Shire initiated a Phase 3 study in the first quarter of 2016.

SHP616 (CINRYZE) for routine prophylaxis against HAE attacks in adolescent and adult patients in Japan

CINRYZE is indicated in the US for prophylaxis and in the EU for both prophylaxis and acute treatment of angioedema attacks in adolescent and adult patients with HAE. Based on feedback from the Pharmaceutical and Medical Devices Agency (“PMDA”), a Clinical Trial Notification (“CTN”) was resubmitted and approved on October 2, 2014.

SHP620 (maribavir) for the treatment of CMV infection in transplant patients

SHP620 was acquired as part of the acquisition of ViroPharma. Shire has completed two Phase 2 studies in transplant recipients. The first trial was in first-line treatment of asymptomatic CMV viremia in transplant recipients and the results of this study showed that maribavir, at all doses, was at least as effective as valganciclovir in the reduction of circulating CMV to below the limits of assay detection (undetectable plasma CMV). The second study recently completed was for the treatment of resistant/refractory CMV infection/disease in transplant recipients. The purpose of this study was to evaluate the efficacy and safety of maribavir in patients with disease which is resistant or refractory to the standard of care CMV therapy (e.g., valganciclovir, foscarnet). This study showed that maribavir, at all doses, and was effective at lowering CMV to below the limits of assay detection. Approximately two-thirds of patients across the maribavir treatment groups achieved undetectable plasma CMV DNA (viral load) within 6 weeks. This product has been granted orphan drug designation in both the US and EU. In late June 2015 Shire conducted an end of Phase 2 meeting with the FDA and received further clarity on the path forward.  Based upon this feedback and additional FDA feedback in November, Shire plans to progress the program into Phase 3 in 2016.

SHP621 Oral Budesonide Suspension (“OBS”), for the treatment of adolescents and adults with EoE

With the Meritage acquisition, Shire acquired the global rights to Meritage Pharma’s compound, OBS, for the treatment of adolescents and adults with EoE, a rare, chronic inflammatory GI disease. EoE is a chronic disease that is increasingly being diagnosed in children and adults, with an estimated prevalence in the US of approximately 181,000. It is characterized by inflammation and accumulation of a specific type of immune cell, called an eosinophil, in the esophagus. EoE patients may have persistent or relapsing symptoms related to esophageal dysfunction, which include dysphagia (difficulty swallowing) and food impaction.

OBS is a proprietary viscous oral formulation of budesonide that is designed to coat the esophagus where the drug can act locally. Budesonide is the active pharmaceutical ingredient in several products approved by the FDA, including products for the treatment of asthma, allergic rhinitis, ulcerative colitis and Crohn’s disease. Budesonide is a corticosteroid and has an established safety profile in those diseases. The FDA has granted orphan drug designation to OBS for the treatment of patients with EoE. Shire initiated a Phase 3 program for the treatment of adolescents and adults with EoE in January of 2016.

SHP633 (Gattex) for the treatment of short bowel syndrome (“SBS”) in Japan

With the acquisition of NPS Pharma, Shire acquired the global rights to Gattex an approved therapy in the US and Europe to treat adults with SBS who are dependent on parenteral support. A Phase 3 bridging study in adults was initiated in Japan in 2014 and is currently ongoing.

SHP640 for the treatment of infectious conjunctivitis

With the acquisition of Foresight on July 30, 2015, Shire acquired global rights to SHP640, a therapy in late-stage development for the treatment of infectious conjunctivitis, an ocular surface condition commonly referred to as pink eye. Foresight had completed a phase 2 proof-of-concept efficacy and safety clinical trial program for SHP640 which involved two studies in adenoviral conjunctivitis – one three-arm study and another two-arm pilot study. While the two-arm study showed a trend toward efficacy, there were too few subjects testing positive for a viral presence for the study to deliver meaningful results, and it was not statistically significant. In the three-arm study, patients treated with SHP640 showed a statistically significant improvement in rates of clinical cure and viral eradication compared to vehicle at Day 6. The Phase 2 clinical data formed the basis of a meeting with the FDA, in which Foresight discussed the path forward to conduct a phase 3 clinical development program for SHP640. Shire intends to initiate a Phase 3 program in the first quarter of 2017. If approved by regulatory agencies, SHP640 has the potential to become the first agent to treat both viral and bacterial conjunctivitis.

SHP643 (formerly DX-2930) for the treatment of HAE

SHP643 is a Phase 3 novel long-acting highly potent human monoclonal antibody inhibitor of pKal, which has patent protection and anticipated regulatory exclusivity beyond 2030. Proof of concept was demonstrated in a multi-center, randomized, double-blind, placebo-controlled, multiple ascending dose Phase 1B study in HAE patients, based on patients in 300mg, 400mg and placebo groups, who  reported having at least two HAE attacks in the three months prior to study entry. Each patient received two treatments of SHP643 separated by 14 days. During the pre-specified, primary efficacy interval of six weeks (Day 8 to 50), the HAE attack rate was reduced by over 90% in the SHP643 combined 300mg and 400mg arms, with 0 attacks in the 300mg group (n=4; p < 0.0001) and 0.045 attacks per week in the 400 mg group (n=11; p=0.005), compared to 0.37 attacks per week in the placebo group (n=11). SHP643 was well tolerated at all dose levels with no evidence of dose-limiting toxicity up to 400 mg. The most common adverse events were HAE attacks, injection site pain, and headache, which were not appreciably higher in the SHP643 arms compared with placebo.

With a novel mechanism of action, the potential for more convenient dosing in an every other week or once monthly subcutaneous injectable form and the ability to significantly reduce HAE attacks, SHP643 has the potential to expand the market to patients currently not treated with prophylaxis therapy.

SHP643 has received Fast Track, Breakthrough Therapy, and Orphan Drug designations by the FDA and received orphan drug designation in the EU. Enrolment into Phase 3 clinical trials is anticipated to start in the first quarter of 2016.

LDX¹ for the treatment of ADHD in Japan

Under a collaboration agreement, Shionogi and Shire will co-develop and sell ADHD products in Japan, including LDX. A Phase 2/3 clinical program to evaluate the efficacy and safety of LDX in Japanese patients aged 6 to 17 was initiated in the second quarter of 2013 and is ongoing.

SHP616 (CINRYZE) new uses

In addition to initiating a Phase 3 study in AMR (discussed above), Shire is considering pursuing the development of Cinryze in Neuromyelitis Optica (“NMO”). Shire received feedback from the FDA in the second quarter of 2015 on NMO and is in the process of determining an optimal path forward which could lead to a Phase 2/3 clinical trial in 2016.

Phase 2

SHP607 for the prevention of ROP

SHP607 is in development as a protein replacement therapy for the prevention of ROP, a rare and potentially blinding eye disorder associated with premature birth. In December 2014 Shire received notification that SHP607 was granted Fast Track designation by the FDA.  In addition, this product has been granted orphan drug designation in both the US and EU. A Phase 2 clinical trial completed enrollment in December of 2015.

SHP610 for Sanfilippo A syndrome (Mucopolysaccharidosis IIIA)

SHP610 is in development as an ERT delivered intrathecally for the treatment of Sanfilippo A syndrome, a Lysosomal Storage Disorder. The Company initiated a Phase 1/2 clinical trial in August 2010 which has now completed. Shire initiated a Phase 2b clinical trial for SHP610 which is now fully enrolled, which is designed to establish clinical proof of concept. An extension study is ongoing. The product has been granted orphan drug designation in the US and in the EU.

SHP625 for the treatment of cholestatic liver disease

SHP625 was acquired as part of the recent acquisition of Lumena Pharmaceuticals, Inc. (“Lumena”) Shire is currently conducting Phase 2 studies in the following indications: Alagille Syndrome (“ALGS”), Progressive Familial Intrahepatic Cholestasis (“PFIC”), and Primary Sclerosing Cholangitis (“PSC”). This product has been granted orphan drug designation both in the US and EU.

On April 9, 2015 Shire announced that the 13-week Phase 2 IMAGO trial of SHP625 did not meet the primary or secondary endpoints in the study of 20 pediatric patients with ALGS. Mean serum bile acid levels and pruritus at the end of the study were lower in both SHP625 and placebo treated groups as compared to baseline. However, a larger Phase 2 ITCH study in pediatric patients with ALGS is currently ongoing.

In late May 2015, Shire also received results from the CLARITY study, a 13 week, doubled blind, placebo-controlled Phase 2 study in combination with UDCA in PBC. SHP625 did not meet the primary endpoint as measured by change in pruritus or the secondary endpoint in level of liver disease as measured by the Alkaline Phosphatase (“ALP”). However, there was a significant reduction in mean serum bile acid levels versus placebo.

In June 2015, Shire received preliminary results from an interim analysis of the INDIGO study, a 72 week open label Phase 2 study in pediatric patients with PFIC. The interim analysis was based on the first 12 subjects who completed 13 weeks of treatment per protocol. SHP625 was well tolerated but there was no statistically significant reduction in mean serum bile levels from baseline. A change from baseline analysis was planned as there is no placebo treatment arm in this study. The changes from baseline for pruritus did reach statistical significance. Five of the 20 patients who received the drug experienced sustained decreases from baseline in serum bile acids ranging from 86 to 99% and also experienced marked reductions in pruritus as evidenced by absence of or only mild scratching at their last evaluation in this ongoing study.  In this subset of patients where biomarkers of liver damage were elevated at baseline, as assessed by ALT and Total Bilirubin, these values were normalized during the study. In December 2015, updated PFIC interim data in 29 patients became available.  While no new responders were identified, the five responders previously identified continued to experience sustained decreases in serum bile acids as well as marked reductions in pruritus benefits and normalization of liver parameters, in those patients who had elevated liver enzymes at baseline.  Shire continues to analyze the totality of the data to determine an appropriate path forward. 

Phase 1

SHP611 for the treatment of MLD

SHP611 is in development as recombinant human arylsulfatase A (“rASA”) delivered intrathecally every other week for the treatment of the late infantile form of MLD. This product has been granted orphan drug designation in the US and the EU. The Company initiated a 24 patient Phase 1/2 clinical trial in August 2012. The primary endpoint of this trial is to determine the safety of ascending doses of rASA over 40 weeks. The secondary endpoint focuses on decline in motor function as defined by change in baseline Gross Motor Function Measure (“GMFM-88”). Exploratory endpoints include change from baseline in cerebrospinal fluid sulfatide levels and change from baseline in the total MLD severity score based on brain Magnetic Resonance Imaging (“MRI”). The trial is currently ongoing, but top line interim results were available in late April 2015.  Based upon interim data for the first 18 patients, SHP611 appeared to be well tolerated at all doses.  In addition, while not statistically significant and despite a decline in GMFM-88 score across all doses, the highest dose caused a slower decline over the 40 week study period compared to the lower dose treatment groups. The higher dose group also showed encouraging data in reduced MLD MRI score and reductions of CSF sulfatide. Shire will continue to analyze these interim results and determine an optimal path forward in this development program.

SHP622 for the treatment of FA

SHP622 is in development for the treatment of Friedreich’s Ataxia and was acquired as part of the acquisition of ViroPharma.  This product is a naturally occurring small molecular weight compound (indole-3-propionic acid) that prevents oxidative stress OX1 by a combination of hydroxyl radical scavenging activity and metal chelation. Phase 1 studies in healthy adults were completed in 2010. The drug was found to be generally well tolerated, and the pharmacokinetics revealed that the drug was rapidly absorbed and distributed in the body after oral administration. A Phase 1b trial of SHP622 in adults has been completed.

SHP623 for prophylactic treatment of HAE

SHP623 is a recombinant C1 inhibitor for the prophylactic treatment of HAE or other complement mediated diseases. SHP623 is intended to have a clinical profile similar to CINRYZE while providing manufacturing advantages and higher potency. In the fourth quarter of 2015, Shire received FDA approval of an IND to initiate a first-in-human study which is expected to be initiated in the first quarter of 2016.

SHP626 for the treatment of NASH 

SHP626 was acquired as part of the acquisition of Lumena and is in development for the treatment of NASH, a common and often “silent” liver disease characterized by fat deposits in the liver and inflammation which can progress to significant fibrosis.  A US IND was approved by the FDA in the fourth quarter of 2014, and a Phase 1b multiple dose trial has been completed.

SHP627 for the treatment of focal segmental glomerulosclerosis (“FSGS”) 

On July 4, 2014 Shire completed its acquisition of Fibrotech Therapeutics Pty Ltd. (Fibrotech”), an Australian biopharmaceutical company developing a new class of orally available drugs with a novel mechanism of action which has the potential to address both the inflammatory and fibrotic components of disease processes. SHP627 has completed a Phase 1 study in healthy subjects and subjects with diabetic nephropathy.  Additional IND enabling studies are being conducted.  Phase 1 studies to determine optimal formulation and dose are expected to be initiated in 2016 followed by a Phase 2 study in FSGS patients in 2017.

SHP631 for the treatment of both the CNS and somatic manifestations in patients with MPS II

On July 23, 2014, Shire announced a worldwide licensing and collaboration agreement with ArmaGen Inc. (“Armagen”) for SHP631 (also known as AGT-182). SHP631 is an investigational enzyme replacement therapy for the potential treatment of both the central nervous system and somatic manifestations in patients with MPS II.  SHP631 is designed to take advantage of the body’s natural system for transporting products across the blood brain barrier by using the same receptor that delivers insulin to the brain. SHP631 has received orphan drug designation from both the FDA and the EMA. In the second quarter of 2015, ArmaGen initiated a Phase 1 sequential, open-label, dose escalation, multi-dose study in adults with Hunter syndrome.  At least two dose levels, assuming tolerability, are planned sequentially, and the trial is expected to deliver information on the possible effect of SHP631 on CSF levels of glycosaminoglycan substrate, which will be important in determining the next steps in clinical development.

Other development projects

A number of additional early development projects, focused on Rare Diseases, are underway in various stages of pre-clinical development.

Following the acquisition of Dyax on January 22, 2016 Shire acquired Dyax’s pipeline portfolio comprising SHP643 (formerly DX-2930) for the treatment of HAE, as outlined above, and a number of other programs at various stages of development. Shire is currently assessing the remainder of Dyax’s pipeline portfolio.

Manufacturing and distribution

Drug Substance & Active pharmaceutical ingredient (“API”) sourcing

The Company sources API from third party suppliers for VYVANSE, INTUNIV, ADDERALL XR, LIALDA, FOSRENOL, PENTASA, XAGRID, CINRYZE, FIRAZYR, BUCCOLAM, NATPARA, GATTEX. Shire has manufacturing capability for agalsidase alfa, idursulfase and velaglucerase alfa at its protein manufacturing plants in Cambridge, and Lexington, Massachusetts, US for REPLAGAL, ELAPRASE and VPRIV, respectively.

The Company currently has dual sources of API for VPRIV, VYVANSE, ADDERALL XR, LIALDA and PENTASA and is qualifying a second source for INTUNIV. The Company has two locations approved for the purification of REPLAGAL drug substance, and two locations approved for the cell culture of ELAPRASE drug substance. The Company manages the risks associated with reliance on single sources of API by carrying additional inventories or developing second sources of supply.

CINRYZE API is derived from human plasma sourced from commercial plasma suppliers. The sourcing of plasma and the production of products derived from plasma are regulated extensively by the FDA, the EMA and other medical product and health care regulatory agencies. Shire relies on a combination of sources for plasma including long term supply agreements and periodic “spot purchases” of plasma from third party plasma suppliers.

Finished Product Manufacturing

The Company sources its products: VYVANSE, INTUNIV, ADDERALL XR, LIALDA, PENTASA, FOSRENOL, EQUASYM, CINRYZE, and XAGRID from third party contract manufacturers. The finished products for: REPLAGAL, ELAPRASE, VPRIV, FIRAZYR, NATPARA, and GATTEX are manufactured by contract manufacturers specializing in aseptic fill-finish operations. BUCCOLAM is manufactured at a Shire plant in the UK.

The Company currently has dual sources for finished product manufacturing for ELAPRASE, REPLAGAL, VPRIV and VYVANSE and is developing a second source for the finished product manufacturing of LIALDA. The Company sources finished product for ADDERALL XR, FIRAZYR, FOSRENOL, INTUNIV, PENTASA, RESOLOR, NATPARA, GATTEX and VPRIV (in some markets) from a single contract manufacturer for each product. The Company manages the risks associated with reliance on single sources of production by carrying additional inventories.

Distribution

The Company’s US distribution center, which includes a large vault to house US Drug Enforcement Administration (“DEA”) regulated Schedule II products, is located in Kentucky. From there, the Company primarily distributes its products: VYVANSE, INTUNIV, ADDERALL XR, LIALDA, PENTASA, FOSRENOL and XAGRID to the US market through the three major wholesalers who have hub or distribution centers that stock Schedule II drugs in the US, providing access to nearly all pharmacies in the US.

The distribution and warehousing of products: REPLAGAL, ELAPRASE, VPRIV, NATPARA, GATTEX and FIRAZYR for the US market is contracted out to specialist third party contractors. 

Outside of the US, physical distribution of Company’s products is either contracted out to third parties (where the Company has local operations) or facilitated via distribution agreements (where the Company does not have local operations).

Material customers

Shire’s three largest trade customers are AmerisourceBergen, McKesson Corp and Cardinal Health, Inc., which are based in the US. In 2015, these wholesale customers accounted for approximately 17%, 17% and 13% of product sales, respectively.

Intellectual Property

An important part of the Company’s business strategy is to protect its products and technologies through the use of patents and trademarks, to the extent available. The Company also relies on trade secrets, unpatented know-how, technological innovations and contractual arrangements with third parties to maintain and enhance its competitive position where it is unable to obtain patent protection or where marketed products are not covered by specific patents. The Company’s commercial success will depend, in part, upon its ability to obtain and enforce strong patents, to maintain trade secret protection, to operate without infringing the proprietary rights of others and to comply with the terms of licenses granted to it. The Company’s policy is to seek patent protection for proprietary technology whenever possible in the US, Canada, major European countries and Japan. Where practicable, the Company seeks patent protection in other countries on a selective basis. In all cases the Company endeavors to either obtain patent protection itself or support patent applications by its licensors. The markets for some of the Company’s currently marketed and potential future products, such as those for rare diseases, are small and where possible the Company has sought and will seek orphan drug designation for products directed to these markets which, if granted, provides regulatory exclusivity for 7 years in the US and 10 years in the EU from the date of product approval (see “Government Regulation” below).

In the regular course of business, the Company’s patents may be challenged by third parties. The Company is a party to litigation or other proceedings relating to intellectual property rights. Details of ongoing litigation are provided in ITEM 3: Legal Proceedings and Note 17, “Commitments and Contingencies, Legal and other proceedings” to the consolidated financial statements.

The degree of patent protection afforded to pharmaceutical inventions around the world is uncertain. If patents are granted to other parties that contain claims having a scope that is interpreted by the relevant authorities to cover any of the Company’s products or technologies, there can be no guarantee that the Company will be able to obtain licenses to such patents or make other arrangements at reasonable cost, if at all.

The existence, scope and duration of patent protection varies among the Company’s products and among the different countries where the Company’s products may be sold. They may also change over the course of time as patents are granted or expire, or become extended, modified or revoked. The following non-exhaustive list sets forth details of granted US and European Patent (“EP”) patents pertaining to the Company’s more significant revenue-generating products and certain products from which the Company receives a royalty, which are owned by or licensed to the Company and that are relevant to an understanding of the Company’s business taken as a whole. The listed EP patents do not necessarily have a corresponding national patent registered in each EU member state and the rights granted pursuant to an EP patent are enforceable only in the EU member state where the EP patent has been registered as a national patent. The expiration dates set forth below do not necessarily reflect changes to the patent term afforded by Patent Term Extensions in the United States, nor supplementary protection certificates (“SPCs”) which are available in many EU member states. The Company also holds patents in other jurisdictions, such as Canada and Japan and has patent applications pending in such jurisdictions, as well as in the US and the EU.

Competition

Shire believes that competition in its markets is based on, among other things, product safety, efficacy, convenience of dosing, reliability, availability and price. Companies with more resources and larger R&D expenditures than Shire have a greater ability to acquire assets as well as fund the research and clinical trials necessary for regulatory applications, and consequently may have a better chance of obtaining approval of drugs that would then compete with Shire’s products. Other products now in use or being developed by others may be more effective or have fewer side effects than the Company’s current or future products. The market share data provided below is sourced from IMS Health. IMS information used in this document is an estimate derived from the use of information under license from the following IMS Health information service; IMS NPA weekly for the period January 17, 2014 to January 22, 2016. IMS expressly reserves all rights, including rights of copying, distribution and republication.

Markets for the treatment of Neuroscience diseases

ADHD market

Competition in the US ADHD market has increased with the launch of competing products in recent years, including authorized generic and generic versions of CONCERTA,RITALIN LA, ADDERALL XR, INTUNIV, FOCALIN XR, as well as non-stimulants STRATERRA and KAPVAY.

Shire’s share of the US ADHD prescription market in December 2015 was 16.7% (compared to 16.2% in December 2014). Overall the US ADHD prescription market grew by 5.8% in the year ended December 31, 2015 (compared to 4.8% in the same period in 2014).

Generic immediate release stimulants which constitute 33.5% of the ADHD market (IMS NPA, MAT December 2015) are showing strong growth in the US ADHD market, growing 10.6% in the 12 months ended December 2015 vs. the 12 months ended December 2014.

Shire’s key ADHD market is the US, with the Company having three products for the treatment of ADHD (VYVANSE, ADDERALL XR and INTUNIV). Shire also has ADHD products launched in Canada, Brazil, Australia, South Korea, Israel and selected EU markets. Further geographic expansion plans are underway, with VYVANSE approved in Mexico and a collaboration agreement with Shionogi to co-develop and sell VYVANSE and INTUNIV in Japan.

Key branded competitors in the US are stimulants CONCERTA (Janssen), APTENSIO XR (Rhodes), EVEKEO (Arbor) and QUILLIVANT (Pfizer), a liquid methylphenidate.

Key competitors in the European ADHD market are CONCERTA (Janssen-Cilag), RITALIN LA (Novartis), MEDIKINET (Medice and distributors) and STRATTERA (Lilly), depending upon the country.  According to IMS Midas and GMD the EU 2015 market size was approximately $498 million (moving annual total (“MAT”) November 2015), with annual growth of 5.8% compared to the same period in 2014 of $470 million.  During that same period VYVANSE grew by 100% ($51 million vs $26 million).

The Company is also aware of several clinical development programs underway by other pharmaceutical companies. Lilly, Targacept, Otsuka Pharmaceutical Co., Ltd., Purdue, Alcobra (in collaboration with Teva), Theravance, Euthymics, Neuroderm, Durect Pharma, Pfizer/Tris, Neos, Ironshore, and Supernus are seeking to develop additional treatment options for ADHD.

BED Market

VYVANSE is the only product approved in the US for the treatment of moderate to severe BED in adults. Medications that are used off-label to treat BED patients include Selective serotonin reuptake inhibitors (“SSRIs”) (Lexapro, Prozac), Serotonin–norepinephrine reuptake inhibitors (“SNRIs”) (Effexor XR, Cymbalta), anti-obesity drugs (Xenical, Belviq), and anticonvulsant Topamax. The Company is also aware of several clinical development programs underway by other pharmaceutical companies; Sunovion Pharmaceuticals, Takeda Pharmaceuticals, and Ironshore Pharmaceuticals/Highland Therapeutics are seeking to develop treatment options for BED.

Markets for the treatment of GI diseases

UC market

UC is a type of inflammatory bowel disease. The first-line treatments for patients with mild to moderate UC are formulations containing mesalamine (also known as 5-ASA). Shire defines the 5-ASA competitive set as the non-sulfasalazine, oral mesalamine and mesalamine pro-drug products.

Competitors vary across markets. Principal competitors in major markets include DELZICOL, ASACOL and ASACOL HD/ASACOL 800 (Allergan [formally Actavis], Tillots and various other licensees), APRISO (Valeant), PENTASA (marketed by Ferring Pharmaceutical, outside of the US only), SALOFALK (Dr. Falk) and CLAVERSAL (Faes Farma, Recordati S.p.A).

5-ASA products are generally protected by formulation patents only. In December 2007, several generic versions of Valeant’s COLAZAL (balsalazide) entered the US market, but no other generic versions of products in the oral 5-ASA competitive set have been introduced to the US market since that time. Generic mesalamine products are available in several European markets, but are not significant competitors in those markets. UCERIS (budesonide)

was approved by the FDA in January 2013 and represents an alternative to 5-ASA products for acute treatment (up to 8 weeks) of mild to moderate UC.

The Company is aware of other 5-ASA and non-ASA biologic treatments in development for UC.

Markets for the treatment of rare genetic diseases

REPLAGAL competes with Genzyme’s FABRAZYME in markets outside the US. Shire is aware of the development of certain compounds to treat Fabry disease by Amicus, Genzyme, Protalix, JCR Pharmaceuticals Co. Ltd, Isu-Abxis, Actelion and Greenovation.

VPRIV competes with two ERTs Genzyme’s CEREZYME (imiglucerase) and Pfizer / Protalix’s ELELYSO / UPLYSO (tagliglucerase) as well as two oral substrate reduction therapies Actelion’s ZAVESCA (miglustat) and Genzyme’s CERDELGA (eliglustat). A biosimilar to Cerezyme (ABCERTIN) has been launched by Isu Abxis in South Korea. Shire is aware of development programs in Gaucher by Protalix and Genzyme.

ELAPRASE is the only product licensed to treat Hunter syndrome in all the markets in which it is registered except South Korea and Mexico. Korean Green Cross Corporation was granted approval for HUNTERASE, an ERT to treat Hunter syndrome, in South Korea in 2012 and in Mexico in 2015.

FIRAZYR and KALBITOR compete in the US with BERINERT and Valeant’s RUCONEST (licensed from Pharming Group N.V.) for acute treatment of HAE. FIRAZYR competes in Europe with CSL Behring’s BERINERT P and Pharming Group N.V.’s RUCONEST. In other markets, FIRAZYR competes with BERINERT.

CINRYZE competes in US and non-US markets with generic androgens for prophylaxis of HAE. In non-US markets, CINRYZE is also indicated for acute treatment and short-term prophylaxis of HAE.

Shire is aware of a number of products in development for treatment and prophylaxis of HAE. These include a subcutaneous formulation of BERINERT, and an oral kalikrein inhibitor (Biocryst). In addition, a number of companies have molecules in discovery phase.

GATTEX competes in the US with EMD/Serono's ZORBTIVE (somatotropin) and Emmaus LifeSciences' NUTRESTORE (L-glutamine). REVESTIVE is the only product approved to treat SBS in Europe. Shire is aware of the development of certain compounds to treat SBS by Zealand Pharma and Naia Ltd.

NATPARA competes against calcium and vitamin D and occasionally Lilly’s Forteo (teriparatide, PTH1-34) prescribed off-label. Shire is aware of the development of compounds to treat hypoparathyroidism by EnteraBio and Chugai.

Government regulation

The clinical development, manufacturing and marketing of Shire’s products is subject to governmental regulation in the US, the EU and other territories. The Federal Food, Drug, and Cosmetic Act, the Prescription Drug Marketing Act and the Public Health Service Act in the US, and numerous directives and guidelines in the EU, govern the development, design, non-clinical and clinical research, testing, manufacture, safety, efficacy, labelling, packaging, storage, record keeping, premarket clearance or approval, adverse event reporting, advertising and promotion of the Company’s products. Product development and approval within these regulatory frameworks takes a number of years and involves the expenditure of substantial resources. Pharmaceutical and medical device manufacturers are also inspected regularly by the FDA.

In general, pharmaceutical and biotechnology products must undergo rigorous preclinical testing. Clinical trials for new products are typically conducted in three sequential phases that may overlap. In Phase 1, the initial introduction of the product into healthy human volunteers, the emphasis is on testing for safety (adverse effects), dosage tolerance, metabolism, distribution, excretion and clinical pharmacology. Phase 2 involves studies in a limited patient population to determine the initial efficacy of the product for specific targeted indications, to determine dosage tolerance and optimal dosage and to identify possible adverse side effects and safety risks. Once a product is found to be effective and to have an acceptable safety profile in Phase 2 evaluations, Phase 3 trials are undertaken with a larger number of patients to provide enough data to statistically evaluate the efficacy and safety of the product and to evaluate more fully clinical outcomes. The failure to demonstrate adequately the quality, safety and efficacy of a product under development can delay or prevent regulatory approval of the product.

In order to gain marketing approval the Company must submit to the relevant regulatory authority for review information on the quality (chemistry, manufacturing and pharmaceutical) aspects of the product as well as the non-clinical and clinical data. The FDA undertakes this review for the US. In the EU the review may be undertaken by the following: (i) members of the EMA’s Committee for Medicinal Products for Human Use as part of a centralized procedure; (ii) an individual country's regulatory agency, followed by “mutual recognition” of this review by a number of other countries' agencies, depending on the process applicable to the product in question; or (iii) a competent member state’s regulatory agency through a decentralized procedure, an alternative authorization procedure to the “mutual recognition” procedure.

Approval can take several months to several years, or be denied. The approval process can be affected by a number of factors. For example, additional studies or clinical trials may be requested during the review and may delay marketing approval and involve unbudgeted costs. As a condition of approval, the regulatory agency will require post-marketing surveillance to monitor for adverse effects, and may require other additional studies as it deems appropriate. After approval for the initial indication, further clinical studies are usually necessary to gain approval for any additional indications. The terms of any approval, including labelling content, may be more restrictive than expected and could affect the marketability of a product.

As a condition of approval, the regulatory agency will require that the product continues to meet regulatory requirements as to quality, safety and efficacy and will require strict procedures to monitor and report any adverse effects. Where adverse effects occur or may occur, the regulatory agency may require additional studies or changes to the labelling (for example, application of a “black box” warning). Compelling new “adverse” data may result in a product approval being withdrawn at any stage following review by an agency and discussion with the Company.

Some jurisdictions, including the EU and the US, may designate products for disease treatment within a relatively small patient population as “orphan drugs”. Generally, if a product that has an orphan drug designation subsequently receives the first marketing approval for the indication for which it has such designation, the product is entitled to orphan drug exclusivity. Orphan drug exclusivity means that applications to market the same product for the same indication may not be approved, except in limited circumstances, for a period of up to ten years in the EU and for up to seven years in the US. These laws are particularly pertinent to Shire’s rare disease products.

In the US, the Drug Price Competition and Patent Restoration Term Act of 1984, known as the US Hatch-Waxman Act, established a period of marketing exclusivity for brand-name drugs as well as abbreviated application procedures for generic versions of those drugs. Once the applicable exclusivity period for the brand-name drug has expired (which may range from 3-5 years), generic manufacturers may file with the FDA for approval to manufacture and market generic versions of the brand-name drug. Approval is sought by filing an Abbreviated New Drug Application (“ANDA”). As a substitute for conducting full-scale pre-clinical and clinical studies, the FDA can accept data establishing that the drug formulation, which is the subject of an abbreviated application, is bio-equivalent and has the same therapeutic effect as the previously approved drug, among other requirements. EU legislation also contains data exclusivity provisions. All medicinal products will be subject to an “8+2+1” exclusivity regime. A generic company may file a marketing authorization application for that product with the health authorities referencing the innovator’s data eight years after the innovator has received its first community authorization for a medicinal product. The generic company may not commercialize the product until after either 10 (8+2) or 11 years (8+2+1) have elapsed from the date of grant of the initial marketing authorization. The one-year extension is available if the innovator obtains an additional indication during the first eight years of the marketing authorization that is of significant advancement in clinical benefit. While the US Hatch-Waxman Act addresses the development and entrance of generic products, the ACA amended the Public Health Service Act to create an abbreviated

licensure pathway for biological products that are demonstrated to be “biosimilar” to or “interchangeable” with an FDA-licensed biological product. The Biologics Price Competition and Innovation Act of 2009 allow for approval of a biosimilar if data substantiates that the product is “highly similar” to an approved and existing biological product. Similar to a non-biologic product, an interchangeable biological product may be substituted for the reference product by a pharmacist without the intervention of the health care provider who prescribed the reference product.

In the US, the DEA regulates the national production and distribution of scheduled drugs (i.e. those drugs containing controlled substances) by allocating production quotas based, in part, upon the DEA’s view of national demand. As scheduled drugs, the production and distribution of Shire’s stimulant ADHD products (ADDERALL XR, VYVANSE and EQUASYM) are strictly controlled and supply of active ingredient is dependent on the DEA’s permitted annual quotas and its willingness to update those quotas to meet any shortage of drugs.

The branch of the FDA responsible for product marketing oversight routinely reviews company marketing practices and also may impose pre-clearance requirements on materials intended for use in marketing of approved drug products. Shire is also subject to various US federal and state laws pertaining to healthcare fraud and abuse, including anti-kickback and false claims laws. Similar review and regulation of advertising and marketing practices exists in the other geographic areas where the company operates.

The FDA has broad regulatory compliance and enforcement powers. If the FDA determines that a company failed to comply with applicable regulatory requirements, it can take a variety of compliance or enforcement actions, such as issuing an FDA Form 483 notice of inspectional observations, a warning letter, an untitled letter, imposing civil money penalties, suspending or delaying issuance of approvals, requiring product recall, imposing a total or partial shutdown of production, withdrawal of approvals or clearances already granted, pursuing product seizures, consent decrees or other injunctive relief, or criminal prosecution through the Department of Justice. The FDA can also require a Company to repair, replace or refund the cost of products that the Company manufactured or distributed. Outside the US, regulatory agencies may exert a range of similar powers.

The Department of Health and Human Services (“HHS”) administers the Medicare and Medicaid programs, major government payers for the elderly and poor in the US, respectively. Shire is subject to various mandated discounts and rebates, as well as compliance requirements, in order to participate in these programs. HHS will be interpreting, implementing and enforcing manufacturers’ compliance with rebate payments, discounts and mandated price reporting changes under the Patient Protection and ACA.

Regulatory Developments

In the US various legislative proposals at the federal and state levels could bring about major changes in the affected health care systems. Some states have passed such legislation, and further federal and state proposals are possible. Such proposals and legislation include, and future proposals could include, price controls, patient access constraints to medicines, cost sharing through improved patient health outcomes, abbreviated licensure pathway for biosimilars and increases in required rebates or discounts. Similar initiatives exist in the EU. The Company cannot predict the outcome of such initiatives, but will work to maintain patient access to its products and to oppose price constraints. Additionally, legislation is being debated at the federal and state level in the US that could allow patient access to drugs approved in other countries – most notably Canada. This is generally referred to as drug re-importation. Although there is substantial opposition to this potential legislation within areas of the federal government, including the FDA, the Company cannot predict the outcome of such legislative activities. Several local US jurisdictions, including the King County of Washington State and Alameda, San Francisco and San Mateo Counties in California, have imposed drug-disposal responsibilities and fees on drug manufacturers. Depending on the outcome of court cases and the ability of other municipalities to pass similar ordinances, these additional costs of doing business in the US may extend to other localities. The US market is a litigious one, and several agencies, including the Office of Inspector General, Department of Justice and DEA have been stepping up their enforcement activities as part of the ACA, leading to the imposition of an increasing number of Corporate Integrity Agreements (CIA) with pharmaceutical and biotechnology companies as part of ultimate settlements (see reference to Shire’s CIA under Note 17, “Commitments and Contingencies, Legal and other proceedings” to the consolidated financial statements set forth in this Annual Report on Form 10-K). Aggressive drug price actions taken in the US by various manufacturers over the last several years has precipitated a media maelstrom and reinvigorated a hypersensitive atmosphere regarding the cost of drugs charged by manufacturers. While it is unlikely that the US Federal government will or can implement price controls in the near or midterm time frame, multiple states have proposed price control legislation and transparency initiatives. Though several states have been unsuccessful with passing legislation (e.g., CA, NC, NY, OR, PA), there is a high probability that new legislation will be proposed in 2016. Both CA and OH are proposing referendums on their fall 2016 ballots that would prohibit state agencies from paying more than the lowest price for the same drug paid by the US Department of Veterans Affairs. Despite the attention on price increases, historically Shire has taken a responsible approach to price increases.

Similar regulatory and legislative considerations are encountered in Europe and other international markets where governments regulate pharmaceutical prices and patient reimbursement levels. The differing approach to price regulation has led to some parallel trade within the EU where Shire’s products are imported into markets with higher prices from markets with lower prices. Exploitation of price differences between countries in this way can adversely impact domestic sales in those markets with higher prices.

In July 2015, the House voted and passed its version of the 21st Century Cures Act, which includes language to amend the Social Security Act’s Section 1927(k)(1), the definition of Average Manufacturer Price (“AMP”). Specifically, section 4002 of the Cures Bill provides language to exclude from the primary manufacturer’s AMP the transfer sales of authorized generics (“AGs”) to secondary manufacturers.  The ACA supported Shire and other primary manufacturer’s position of the inclusion of AG transfer sales in the primary manufacturer’s AMP by redefining “wholesaler” to include other manufacturers.  However, the House version of the bill circumvents the “wholesaler” issue and explicitly excludes these sales from the AMP calculation.  For any primary manufacturer that began including AG transfer sales in AMP since 2010, this reversal could mean a substantial rise in AMP, and an accompanying rise in Medicaid rebate liability.  Survival of section 4002 depends on what provisions are included in the Senate version and potential edits post conference.

Third party reimbursement and pricing

In the US:

On February 1, 2016, the CMS issued regulations implementing the Medicaid rebate provisions of the Affordable Care Act (the “Final Rule”).  CMS’ interpretation of the rebates related to line extensions, and the Average Manufacturer Price (“AMP”) aspects of the Final Rule, could increase rebate costs.  CMS’ proposed expansion of the Medicaid rebate program to US Territories (including Puerto Rico, US Virgin Islands, Guam, Northern Mariana Islands and Samoa) could also impact both the Company’s contracting strategies to some of these Territories and increase Shire’s Medicaid rebate and operational costs. CMS’ publication of its own pricing compendium, (“NADAC”), as well as AMP-based Federal Upper Limits (“FUL”) could affect

reimbursement to pharmacists for drugs, depending on the rate of each state’s adoption.  The tax revenue aspects of the fiscal cliff in the Budget Control Act were not fully resolved via the Taxpayers Relief Act of 2012, and because of this and due to the budget climate in the US, government programs like Medicare, Medicaid and others could face additional spending cuts or changes which could affect government payer utilization or payment of Shire’s products.

In the EU and certain other territories, price controls and Health Technology Assessments for new, highly priced medicines are expected. Uncertainty exists about the pricing and reimbursement status of newly approved products in the EU. Germany, for example, has implemented the Act for the Restructuring of the Pharmaceutical Market in Statutory Health Insurance. This law essentially maintains free pricing for new chemical entities, but assesses the patient relative benefit of new drugs within six months of commercialization, in order to inform subsequent price negotiations. Prices of drugs bringing added patient benefit will qualify for price negotiation, while those with no added benefit will be subject to reference pricing (where price is determined by taking the lowest and/or average price of similar medicines in Germany). Criteria required to prove a drug’s benefit in Germany include; an improvement of health, reduction of illness duration, extension of survival, reduction of side effects or improvement of the quality of life. Third party reimbursement limits may reduce the demand for the Company’s products. The slow pace of the price applications process in some countries has delayed and, occasionally, prevented product launches. In some countries regional authorities are seeking to constrain drug prices and uptake. As such the Company’s estimated product launches may be delayed. The novelty of ADHD and behavioral drugs in the EU and other markets will require strong education and promotion efforts in order to gain acceptance and an economically viable reimbursement profile.

Responsibility

Corporate responsibility (“Responsibility”) is embedded at Shire and is a clear expectation of all employees as part of its culture. Individual performance reviews include an evaluation of how goals were achieved, not just that they were achieved. Responsibility is also reflected in how Shire operates as a “corporate citizen.” This commitment to Responsibility is supported by Shire’s Board of Directors, championed by the Chief Executive Officer and driven forward by Shire’s senior leaders.

In 2014, Shire conducted a materiality assessment with external stakeholders, including patient groups, physicians, investors, media and payers to obtain feedback on and prioritization of Shire’s most important areas of Responsibility. Findings showed that Access to Medicines, Disease Awareness and Transparency are the areas of primary importance to Shire’s stakeholders. These are the areas that have consequently received greatest focus in 2015.

A number of senior managers at Shire “sponsor” Responsibility areas, including the priority areas of Access to Medicines, Disease Awareness and Transparency but also areas such as the environment, health and safety, compliance and risk management, our people and the community. These sponsors are responsible for setting goals which support Shire’s overall strategy, and for ensuring progress is made against these goals. Responsibility objectives are reviewed quarterly, and Sponsors meet as a group twice a year to monitor progress. Shire’s Responsibility team facilitates the working groups, sponsors and communications.

Shire communicates regularly to employees about Responsibility. The Company also communicates regularly via a section on its website and intranet dedicated to information and ongoing updates on Shire’s work, initiatives and achievements that illustrate Shire’s commitment to Responsibility.

Employees

The Company’s employees are vital to its success. At December 31, 2015 the Company had 5,548 employees (2014: 5,016 employees).

Available information

The Company maintains a global internet site at www.shire.com. The Company makes available on its website its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”). Shire's reports filed with, or furnished to, the SEC are also available on the SEC's website at www.sec.gov in a document, and for Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, in an XBRL (Extensible Business Reporting Language) format. XBRL is an electronic coding language to create an interactive financial statement data over the internet. The information on the Company’s website is neither part of nor incorporated by reference in this Annual Report on Form 10-K.

ITEM 1A: Risk Factors

The Company has adopted a risk management strategy designed to identify, assess and manage the significant risks that it faces. While the Company aims to identify and manage such risks, no risk management strategy can provide absolute assurance against any losses.

Set out below are the principal risk factors associated with the business that have been identified through the Company's risk management and internal control system. The Company believes that these risk factors apply equally and therefore all should be carefully considered before any investment is made in Shire.

The Company’s products may not be a commercial success

The commercial success of the Company’s marketed products and other new products that the Company may launch in the future, will depend on their approval and acceptance by physicians, patients and other key decision-makers, as well as the receipt of marketing approvals in different countries, the time taken to obtain such approvals, the scope of marketing approvals as reflected in the product labels, approval of reimbursement at commercially sustainable prices in those countries where price and reimbursement is negotiated, and safety, efficacy, convenience and cost-effectiveness of the product as compared to competitive products.

The Company’s revenues, financial condition or results of operations may be adversely affected if any or all of the following occur:

If the Company is unable to commercialize its products successfully, there may be a material adverse effect on the Company’s revenues, financial condition or results of operations.

Increased pricing pressures and limits on patient access as a result of governmental regulations and market developments may affect the Company’s future revenues, financial condition and results of operations

The Company’s product revenues are subject to increasing pressures from governmental initiatives to regulate or influence prices and access to customers. Regulations in the United States, the European Union and other jurisdictions mandating price controls or imposing constraints on patients’ ability to purchase Shire’s products

significantly impacts its business, and the Company’s financial condition and results of operations could be adversely affected in the future by changes in such regulations, practices or policies.

Regulatory measures that could have a material adverse effect on the Company include the imposition of government-approved drug pricing schedules, the use of drug formularies, prohibitions on direct-to-consumer advertising or drug marketing practices and caps or limits on the level of reimbursement provided to the Company by governmental reimbursement schemes for its products.

These pressures have also resulted in market developments, such as the consolidation of managed care organizations and private health insurers that have increased the relative bargaining power of institutional drug purchasers and enhanced their ability to negotiate discounts and extract other concessions in exchange for purchasing Shire’s products.

Such regulatory and market developments create downward pressures on the prices at which the Company can offer its products and on the level of reimbursement its treatments receive from health care providers, private health insurers and other organizations, such as health maintenance organizations and managed care organizations.

Additional factors affecting the Company’s ability to obtain and maintain adequate prices and levels of reimbursement for its products include:

Moreover, the cost of treatment for some of the Company's products is high, particularly those which are used for the treatment of rare diseases. The Company may encounter difficulty in obtaining or maintaining satisfactory pricing and reimbursement for such products. The failure to obtain and maintain pricing and reimbursement at satisfactory levels for its products may adversely affect the Company’s revenues, financial condition or results of operations.

The Company depends on third parties to supply certain inputs and services critical to its operations including certain inputs, services and ingredients critical to its manufacturing processes

The Company relies on third-party suppliers, vendors and outsourcing partners to, among other things, research, develop, manufacture and commercialize its products, to provide certain key ingredients and manufacturing inputs and to manage certain sales, distribution, marketing, information technology, accounting, transaction-processing and other business services. While the Company depends on these third parties for multiple aspects of its product development, manufacturing, commercialization and business activities, it does not control these third parties directly.

As a result, there is a possibility these third parties may not complete activities on schedule or in accordance with the Company’s expectations, and their failure to meet certain contractual, regulatory or other obligations to Shire, or any disruption of Shire’s relationship with these third parties could delay or prevent the development, approval, manufacture or commercialization of the Company’s products, result in non-compliance with applicable laws and regulations, disrupt Shire’s operations, or result in reputational or other harm to the Company.

This outsourcing risk is of particular concern with respect to third-party suppliers of key manufacturing inputs of Shire’s drug products. Although the Company dual-sources certain key products and/or active ingredients, the Company currently relies on a single source for production of the final drug product for each of ADDERALL XR, CINRYZE, FIRAZYR, FOSRENOL, INTUNIV, LIALDA, PENTASA and NATPARA/NATPAR. The Company currently relies on a single active ingredient source for each of ELAPRASE, FIRAZYR, FOSRENOL, INTUNIV, REPLAGAL and GATTEX/REVESTIVE and also relies on limited third party sources to provide the donated human plasma necessary for the manufacture of CINRYZE. Following the completion of the acquisition of Dyax Corp on January 22, 2016 Shire acquired DX-2930, which currently relies on separate sole sources for both production of the final drug product and supply of the active ingredient for its Phase 3 trial. In addition, one of those drug substance sites has not been approved by the FDA and would need to be approved prior to commercial launch. Any failure by a single-source supplier to provide the Company with the required volumes on time or at all, or to provide products that do not meet regulatory requirements, could lead to significant delays in the production of Shire’s products, increases in operating costs, lost product sales, an interruption of research activities, or the delay of new product launches, all of which could have a material adverse effect on the Company’s revenues, financial condition or results of operations.

Any disruption to the supply chain for any of the Company’s products, or any difficulties or delays in the manufacturing, distribution and sale of its products may result in the Company being unable to continue marketing or developing a product, or may result in the Company being unable to do so on a commercially viable basis for some period of time

A disruption, delay or other difficulties in the manufacturing, distribution and sale of Shire’s products, or in the supply chain of any of its products, may have a material adverse effect on the Company and its revenues, financial condition and results of operations. Examples of such manufacturing and supply chain difficulties include, but are not limited to:

Also, as noted above, the Company has also entered into many agreements with third parties for the provision of goods and services to enable it to manufacture its products. If these third parties are unable to manufacture products, or provide these goods and services, in each case in accordance with its respective contractual obligations, the Company’s ability to manage its manufacturing processes or to operate its business, including to continue the development or commercialization of its products as planned or on a commercial basis, may be adversely impacted.

The manufacture of the Company’s products is subject to extensive oversight by various regulatory agencies. Regulatory approvals or interventions associated with changes to manufacturing sites, ingredients or manufacturing processes could lead to significant delays, an increase in operating costs, lost product sales, an interruption of research activities or the delay of new product launches

Pharmaceutical and device manufacturing sites must be inspected and approved by regulatory agencies such as the FDA, and similar agencies in other countries. Active ingredients, excipients and packaging materials used in the manufacturing process must be obtained from sources approved by regulatory agencies.

The development, approval and manufacturing of the Company's products depend on the ability to procure ingredients and packaging materials from approved sources and for the manufacturing process to be conducted at approved sites. Changes of manufacturer or changes of source of ingredients or packaging materials must generally be approved by the regulatory agencies, which will involve testing and additional inspections to ensure compliance with the applicable regulatory agency’s regulations and standards. The need to qualify a new manufacturer or source of ingredients or packaging materials can take a significant amount of time. Should it become necessary to change a manufacturer or supplier of ingredients or packaging materials, or to qualify an additional supplier, the Company may not be able do so quickly, or at all, which could delay or disrupt the manufacturing process.

US-based manufacturers must be registered with the DEA and similar regulatory authorities in other countries if they handle controlled substances. Certain of the Company’s products, including ADDERALL XR and VYVANSE, contain ingredients which are controlled substances subject to quotas managed by the DEA. As a result, the Company’s procurement and production quotas may not be sufficient to meet commercial demand.

CINRYZE, ELAPRASE, REPLAGAL and VPRIV are manufactured using highly complex biological processes. The complexity of the manufacturing results in a number of risks, including the risk of microbial contamination. Additionally, CINRYZE is derived from human plasma, and is therefore subject to the risk of biological contamination inherent in plasma-derived products. The sole manufacturer of CINRYZE has received observations on Form 483 and a warning letter from the FDA identifying issues with respect to the manufacturing process for CINRYZE which

must be addressed to the satisfaction of the FDA. Any regulatory interventions, in relation to these, or any other issues, if they occur, may delay or disrupt the manufacture of the Company’s products.

The failure to obtain regulatory approvals promptly or at all and/or regulatory interventions associated with changes to manufacturing sites, ingredients or manufacturing processes could lead to significant delays, an increase in operating costs, lost product sales, an interruption of research activities, the delay of new product launches or constraints on manufacturing output, all of which could have a material adverse effect on the Company’s revenues, financial condition and results of operations.

The Company has a portfolio of products in various stages of research and development. The successful development of these products is highly uncertain and requires significant expenditures and time, and there is no guarantee that these products will receive regulatory approval

Products that initially appear promising in research or development may be delayed or fail to reach later stages of development as:

Success in preclinical and early clinical trials does not ensure that late stage clinical trials will be successful. Clinical results are frequently susceptible to varying interpretations that may delay, limit, or prevent regulatory approvals. The length of time necessary to complete clinical trials and to submit an application for marketing approval for a final decision by a regulatory authority varies significantly and may be difficult to predict. Moreover, once an application is submitted, additional data may be sought by regulators or an application may be rejected. If the Company’s large-scale or late-stage clinical trials for a product are not successful, the Company will not recover its substantial investments in that product. The Company has a range of programs in or entering late stage clinical development. For example, an NDA for SHP606 for the treatment of signs and symptoms of adults with DED is currently in registration with the FDA and following the acquisition of Dyax in January 2016 the Company has acquired SHP643 (formerly DX-2930) for the treatment of HAE, which is in Phase 3.

In addition, even if the products receive regulatory approval, they remain subject to ongoing regulatory requirements, including, for example, obligations to conduct additional clinical trials or other non-clinical testing, changes to the product label (which could impact its marketability and prospects for commercial success), new or revised requirements for manufacturing, written notifications to physicians, or product recalls or withdrawals.

The actions of certain customers could affect the Company's ability to sell or market products profitably. Fluctuations in buying or distribution patterns by such customers can adversely affect the Company’s revenues, financial conditions or results of operations

A considerable portion of the Company’s product sales are made to major pharmaceutical wholesale distributors, as well as to large pharmacies, in both the US and Europe. In 2015, for example, 47% of the Company's product sales were attributable to three customers in the US: AmerisourceBergen Drug Corp, McKesson Corp. and Cardinal Health, Inc. In the event of financial failure of any of these customers there could be a material adverse effect on the Company’s revenues, financial condition or results of operations. The Company’s revenues, financial condition or results of operations may also be affected by fluctuations in customer buying or distribution patterns. These fluctuations may result from seasonality, pricing, wholesaler inventory objectives, or other factors. A significant portion of the Company's revenues for certain products for treatment of rare diseases are concentrated within a

small number of customers. Changes in the buying patterns of those customers may have an adverse effect on the Company's revenues, financial condition or results of operations.

Failure to comply with laws and regulations governing the sales and marketing of its products could materially impact Shire’s revenues and profitability

The Company engages in various marketing, promotional and educational activities pertaining to, as well as the sale of, pharmaceutical products and medical devices in a number of jurisdictions around the world. The promotion, marketing and sale of pharmaceutical products and medical devices is highly regulated and the sales and marketing practices of market participants, such as the Company, have been subject to increasing supervision by governmental authorities, and Shire believes that this trend will continue.

In the United States, the Company’s sales and marketing activities are monitored by a number of regulatory authorities and law enforcement agencies, including the US Department of HHS, the FDA, the US Department of Justice, the SEC and the DEA. These authorities and agencies and their equivalents in countries outside the US have broad authority to investigate market participants for potential violations of laws relating to the sale, marketing and promotion of pharmaceutical products and medical devices, including the False Claims Act, the Anti-Kickback Statute and the Foreign Corrupt Practices Act, among others, for alleged improper conduct, including corrupt payments to government officials, improper payments to medical professionals, off-label marketing of pharmaceutical products and medical devices, and the submission of false claims for reimbursement by the federal government. Healthcare companies may also be subject to enforcement actions or prosecution for such improper conduct. Any inquiries or investigations into the operations of, or enforcement or other regulatory action against, the Company by such authorities could result in significant defense costs, fines, penalties and injunctive or administrative remedies, distract management to the detriment of the business, result in the exclusion of certain products, or the Company, from government reimbursement programs or subject the Company to regulatory controls or government monitoring of its activities in the future. The Company is also subject to certain ongoing investigations by governmental agencies. For further information, see ITEM 3: Legal Proceedings and Note 17, “Commitments and Contingencies, Legal and other proceedings” to the consolidated financial statements set forth in this Annual Report on Form 10-K.

The Company’s products are subject to intense competition from generics

Shire faces significant competition from the manufacturers of generic drug products in all of its major markets. The introduction of lower-priced generics by the Company’s competitors or their successful efforts in aggressively commercializing and marketing their alternative drug products pose significant challenges to maintaining Shire’s market share, revenues and sales growth.

For example, since 2009, generic versions of ADDERALL XR have been marketed and, since 2014, generic versions of INTUNIV have been marketed in the United States. As a result, product sales of ADDERALL XR and INTUNIV have declined.

Factors which could cause further or more rapid declines in Shire’s product sales include:

Should any of the above developments occur, the resulting generic competition could reduce sales and market share of Shire’s branded products and have a material adverse effect on the Company’s revenues, financial condition or results of operations.

Adverse outcomes in legal matters and other disputes, including the Company’s ability to enforce and defend patents and other intellectual property rights required for its business, could have a material adverse effect on the Company’s revenues, financial condition or results of operations

During the ordinary course of its business the Company may be involved in claims, disputes and litigation with third parties, employees, regulatory agencies, governmental authorities and other parties. The range of matters of a legal nature that might arise is extremely broad but could include, without limitation, intellectual property claims and disputes, product liability claims and disputes, regulatory litigation, contract claims and disputes, employment claims and disputes, and tax or other governmental agency audits and disputes.

Any unfavorable outcome in such matters could adversely impact the Company’s ability to develop or commercialize its products, adversely affect the profitability of existing products, subject the Company to significant defense costs, fines, penalties, audit findings and injunctive or administrative remedies, distract management to the detriment of the business, result in the exclusion of certain products, or the Company, from government reimbursement programs or subject the Company to regulatory controls or government monitoring of its activities in the future. Any such outcomes could have a material adverse effect on the Company’s revenue, financial condition or results of operations. For further information see ITEM 3: Legal Proceedings and Note 17, “Commitments and Contingencies, Legal and other proceedings” to the consolidated financial statements set forth in this Annual Report on Form 10-K.

The Company faces intense competition for highly qualified personnel from other companies and organizations

The Company relies on recruiting and retaining highly skilled employees to meet its strategic objectives. The Company faces intense competition for highly qualified personnel and the supply of people with the requisite skills may be limited, generally or geographically. The range of skills required and the geographies in which they are required by the Company may also change over time as Shire’s business evolves. If the Company is unable to retain key personnel or attract new personnel with the requisite skills and experience, it could adversely affect the implementation of the Company’s strategic objectives and ultimately adversely impact the Company’s revenues, financial condition or results of operations.

Failure to successfully execute or attain strategic objectives from the Company’s acquisitions and growth strategy may adversely affect the Company’s financial condition and results of operations

The Company’s business depends to a significant extent on its ability to improve and expand its product pipeline through strategic acquisitions. Such improvements and expansions, however, are subject to the ability of the Company’s management to effectively identify appropriate strategic targets and effectuate the contemplated transactions, the availability and relative cost of acquisition opportunities as well as competition from other pharmaceutical companies seeking similar opportunities.

Moreover, even when such transactions are successfully executed, the Company may face subsequent difficulties in integrating the operations, infrastructure and personnel of acquired businesses and may experience unanticipated risks or liabilities that were not discovered, accurately disclosed or sufficiently assessed during the transactions’ due diligence process. Finally, even successfully acquired and integrated businesses may ultimately fail or fall short of achieving the Company’s strategic objectives for the transaction over the long term.

Any failures in the execution of a transaction, in the integration of an acquired business or in achieving the Company’s strategic objectives with respect to such acquisitions could result in slower growth, higher than expected costs, the recording of asset impairment charges and other actions which could adversely affect the Company’s business, financial condition and results of operations.

The Company has recently completed and is currently pursuing a number of strategic acquisitions. On February 21, 2015, Shire completed the acquisition of NPS Pharma for a total cash consideration of approximately $5.2 billion. On January 22, 2016 Shire also completed the acquisition of all the outstanding share capital of Dyax for a total upfront cash consideration of approximately $5.9 billion and a further approximately $0.6 billion in cash consideration contingent upon the approval of DX-2930 for the prophylactic treatment of HAE. Finally, on January 11, 2016 Shire announced a combination with Baxalta Incorporated had been agreed by both Boards.

These proposed and completed acquisitions as well as future acquisitions each entail various risks, which include but are not limited to:

A slowdown of global economic growth, or economic instability of countries in which the Company does business, could have negative consequences for the Company’s business and increase the risk of non-payment by the Company’s customers

Growth of the global pharmaceutical market has become increasingly tied to global economic growth. Accordingly a substantial and lasting slowdown of the global economy, or major national economies, could negatively affect growth in the markets in which the Company operates. Such a slowdown, or any resultant austerity measures adopted by governments in response to a slowdown, could result in national governments making significant cuts to their public spending, including national healthcare budgets, or reducing the level of reimbursement they are willing and able to provide to the Company for its products and, as a result, adversely affect the Company’s revenues, financial condition or results of operations.

A slowdown of a nation’s economy could also lead to financial difficulties for some of the Company’s significant customers, including national governments, and result in a greater risk of delayed orders or payments, defaults or non-payments of outstanding payment obligations by the Company’s customers in that country, which could adversely affect the Company’s revenues, financial condition or results of operations.

The Company is subject to evolving and complex tax laws, which may result in additional liabilities that may adversely affect the Company’s financial condition or results of operations

The Company is subject to evolving and complex tax laws in the jurisdictions in which it operates, and routinely obtains advice on matters, including the tax treatment of the break fee received in connection with the terminated offer for Shire by AbbVie Inc. (“AbbVie”) in 2014. Significant judgment is required in determining the Company’s tax

liabilities, and the Company’s tax returns are periodically examined by various tax authorities. The Company regularly assesses the likelihood of outcomes resulting from these examinations to determine the adequacy of its accrual for tax contingencies; however, due to the complexity of tax contingencies, the ultimate resolution of any tax matters may result in payments greater or less than amounts accrued. In addition, the Company may be affected by changes in tax laws, including tax rate changes, new tax laws, and revised tax law interpretations in domestic and foreign jurisdictions.

The failure of a strategic partner to develop and commercialize products could result in delays in development, approval or loss of revenue

The Company enters into strategic partnerships with other companies in areas such as product development, manufacturing, sales and marketing. In these partnerships, the Company is sometimes dependent on its partner to deliver results. While these partnerships are governed by contracts, the Company may not exercise direct control. If a partner fails to perform or experiences financial difficulties, the Company may suffer a delay in the development, a delay in the approval or a reduction in sales, or royalties of a product.

The failure to secure new products or compounds for development either through in-licensing, acquisition or internal research and development efforts, or the failure to realize expected benefits from acquisitions of businesses or products, may have an adverse impact on the Company's future results

The Company's future results will depend, to a significant extent, upon its ability to develop, in-license or acquire new products or compounds, or to acquire other businesses. The expected benefits from acquired products, compounds or businesses may not be realized or may require significantly greater resources and expenditure than originally anticipated. The failure to realize expected benefits from acquisitions of businesses or products including those resulting from integration into the Company, or the failure to develop, in-license or acquire new products or compounds on a commercially viable basis, could have a material adverse effect on the Company's revenues, financial condition or results of operations.

The Company may fail to obtain, maintain, enforce or defend the intellectual property rights required to conduct its business

The Company's success depends upon its ability and the ability of its partners and licensors to protect their intellectual property rights. Where possible, the Company's strategy is to register intellectual property rights, such as patents and trademarks. The Company also relies on various trade secrets, unpatented know-how and technological innovations and contractual arrangements with third parties to maintain its competitive position. The failure to obtain, maintain, enforce or defend such intellectual property rights, for any reason, could allow third parties to make competing products or impact the Company’s ability to develop, manufacture and market its own products on a commercially viable basis, or at all, which could have a material adverse effect on the Company's revenues, financial condition or results of operations.

The Company intends to enforce its patent rights vigorously and believes that its commercial partners, licensors and third party manufacturers intend to enforce vigorously those patent rights they have licensed to the Company. However, the Company’s patent rights, and patent rights that the Company has licensed, may not provide valid patent protection sufficiently broad to prevent any third party from developing, using or commercializing products that are similar or functionally equivalent to the Company's products or technologies. These patent rights may be challenged, revoked, invalidated, infringed or circumvented by third parties. Laws relating to such rights may in future also be changed or withdrawn.

Additionally, the Company's products, or the technologies or processes used to formulate or manufacture those products may now, or in the future, infringe the patent rights of third parties. It is also possible that third parties will obtain patent or other proprietary rights that might be necessary or useful for the development, manufacture or sale of the Company's products. The Company may need to obtain licenses for intellectual property rights from others and may not be able to obtain these licenses on commercially reasonable terms, if at all.

The Company also relies on trade secrets and other un-patented proprietary information, which it generally seeks to protect by confidentiality and nondisclosure agreements with its employees, consultants, advisors and partners. These agreements may not effectively prevent disclosure of confidential information and may not provide the Company with an adequate remedy in the event of unauthorized disclosure. In addition, if the Company's employees, scientific consultants or partners develop inventions or processes that may be applicable to the Company's products under development, such inventions and processes will not necessarily become the Company's property, but may remain the property of those persons or their employers.

The Company has filed applications to register various trademarks for use in connection with its products in various countries and also, with respect to certain products, relies on the trademarks of third parties. These trademarks may not afford adequate protection or the Company or the third parties may not have the financial resources to enforce their rights under these trademarks which may enable others to use the trademarks and dilute their value.

In the regular course of business, the Company is party to litigation or other proceedings relating to intellectual property rights. For details of current intellectual property litigation, See ITEM 3: Legal Proceedings and Note 17, “Commitments and Contingencies, Legal and other proceedings” to the consolidated financial statements set forth in this Annual Report on Form 10-K.

The introduction of new products by competitors may impact future revenues

The pharmaceutical, biotechnology and device industries are highly competitive and are characterized by substantial investment in continuous product development and technological change. The Company faces significant competition from large pharmaceutical and biotechnology companies, many of whom have substantially greater resources than the Company. In addition, many of the Company’s competitors have more products and have operated longer in the fields in which the Company competes. A number of companies are pursuing the development of technologies which compete with the Company’s existing products or research programs. These competitors include specialized pharmaceutical firms and large pharmaceutical companies acting either independently or together with other pharmaceutical companies. Furthermore, academic institutions, government agencies and other public and private organizations conducting research may seek patent protection and may establish collaborative arrangements for competitive products or programs. As a result of this competition the Company's products could be rendered obsolete or uneconomic or lose market share following the development of new products, new methods of treatment, or technological advances in manufacturing or production by competitors which could adversely affect the Company’s revenues, financial condition, and results of operations.

If a marketed product fails to work effectively or causes adverse side effects, this could result in damage to the Company's reputation, the withdrawal of the product and legal action against the Company

Unanticipated side effects or unfavorable publicity from complaints concerning any of the Company's products, or those of its competitors, could have an adverse effect on the Company's ability to obtain or maintain regulatory approvals or successfully market its products. The testing, manufacturing, marketing and sales of pharmaceutical products and medical devices entail a risk of product liability claims, product recalls, litigation and associated adverse publicity. The cost of defending against such claims is expensive even when the claims are not merited. A successful product liability claim against the Company could require the Company to pay a substantial monetary award. If, in the absence of adequate insurance coverage, the Company does not have sufficient financial resources to satisfy a liability resulting from such a claim or to fund the legal defense of such a claim, it could become insolvent. Product liability insurance coverage is expensive, difficult to obtain and may not be available in the future on acceptable terms. Although the Company carries product liability insurance when available, this coverage may not be adequate. In addition, it cannot be certain that insurance coverage for present or future products will be available. Moreover, an adverse judgment in a product liability suit, even if insured or eventually overturned on appeal, could generate substantial negative publicity about the Company's products and business and inhibit or prevent commercialization of other products.

The Company is dependent on information technology and its systems and infrastructure face certain risks, including from service disruptions, the loss of sensitive or confidential information, cyber-attacks and other security breaches or data leakages that could have a material adverse effect on the Company’s revenues, financial condition or results of operations

The Company relies to a large extent upon sophisticated information technology systems to operate its businesses. In the ordinary course of business, the Company collects, stores and transmits large amounts of confidential information (including, but not limited to, personal information and intellectual property), and it is critical that the Company does so in a secure manner to maintain the confidentiality and integrity of such confidential information. The size and complexity of the Company’s information technology and information security systems, and those of third-party vendors with whom the Company contracts (and the large amounts of confidential information that is present on them), make such systems potentially vulnerable to service interruptions or to security breaches from inadvertent or intentional actions by the Company’s employees or vendors, or from attacks by malicious third parties.

The Company and its vendors’ sophisticated information technology operations are spread across multiple, sometimes inconsistent platforms, which pose difficulties in maintaining data integrity across systems. The ever-increasing use and evolution of technology, including cloud-based computing, creates opportunities for the unintentional dissemination or intentional destruction of confidential information stored in the Company’s systems. The Company and its vendors could also be susceptible to third party attacks on their information security systems, which attacks are of ever increasing levels of sophistication and are made by groups and individuals with a wide range of motives and expertise, including criminal groups, “hackers” and others. While the Company has taken steps to protect such information and invested heavily in information technology, there can be no assurance that these efforts will prevent service interruptions or security breaches in its systems, the loss of data or other confidential information due to a lack of redundant backup systems, or the unauthorized or inadvertent wrongful use or disclosure of confidential information that could adversely affect the Company’s business operations or result in the loss, dissemination, or misuse of critical or sensitive information.

A breach of the Company’s security measures or the accidental loss, inadvertent disclosure, unapproved dissemination, misappropriation or misuse of trade secrets, proprietary information, or other confidential information, whether as a result of theft, hacking, fraud, trickery or other forms of deception, or for any other cause, could enable others to produce competing products, use the Company’s proprietary technology or information, and/or adversely affect the Company’s business position. Further, any such interruption, security breach, loss or disclosure of confidential information, could result in financial, legal, business, and reputational harm to the Company and could have a material adverse effect on the Company’s revenues, financial condition or results of operations.

In addition, legislators and/or regulators in countries in which the Company operates are increasingly adopting or revising privacy, information security and data protection laws, as well as focusing on increased privacy-related enforcement activity, that potentially could have a significant impact on the Company’s current and planned privacy, data protection and information security-related practices, its collection, use, sharing, retention and safeguarding of consumer and/or employee information, and some of its current or planned business activities.

Risks Related to the Proposed Merger with Baxalta Incorporated

Failure to consummate the merger as contemplated could negatively impact the price of the Company’s ordinary shares and ADSs and the future business and financial results of the Company and/or the combined company

The consummation of the merger of BearTracks, Inc., a wholly-owned subsidiary of the Company (“Merger Sub”) within and into Baxalta, with Baxalta surviving the merger as a wholly-owned subsidiary of the Company (the “merger”) may be delayed, the merger may be consummated on terms different than those contemplated by the Agreement and Plan of Merger, dated as of January 11, 2016, as it may be amended from time to time, (the “merger agreement”) between the Company, Merger Sub and Baxalta, or the merger may not be consummated at all. Failure to consummate the merger would prevent the Company’s ordinary shareholders from realizing the anticipated benefits of the merger. The current market price of the Company’s ordinary shares and ADSs may reflect a market assumption that the merger will occur, and a failure to consummate the merger could result in a significant decline in the market price of the Company’s ordinary shares and ADSs and a negative perception of the Company generally. Any delay in the consummation of the merger or any uncertainty about the consummation of the merger could also negatively impact the share price and future business and financial results of the Company and/or the combined company following the proposed merger.

There is no assurance that Shire and Baxalta will be able to obtain the required governmental and regulatory approvals to consummate the merger, which, if delayed or not granted, may delay or jeopardize the merger

The merger is conditioned on the expiration or termination of the applicable waiting period (or extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, merger control approval under the relevant merger control laws of the European Union and the consent of certain other merger control authorities and other governmental entities. The governmental and regulatory agencies from which Shire and Baxalta are seeking these approvals have broad discretion in administering the applicable governing regulations. As a condition to their approval of the transactions contemplated by the merger agreement, those agencies may impose requirements, limitations or costs or require divestitures or place restrictions on the conduct of the combined company’s business. The required approvals may not be obtained or the required conditions to the merger may not be satisfied, or, even if the required approvals are obtained and the conditions to the consummation of the merger are satisfied, the terms, conditions and timing of such approvals are uncertain. Any delay in consummating the merger could cause Shire and/or the combined company not to realize some or all of the synergies that Shire expects to achieve if the merger is successfully consummated within the expected time frame.

The merger remains subject to additional conditions, some of which Shire and Baxalta cannot control, which could result in the merger not being consummated or being delayed, any of which could negatively impact the share price and future business and operating results of the Company and/or the combined company

The merger is subject to the satisfaction or waiver of other conditions in addition to the approval of governmental authorities described above, including, but not limited to, (i) the approval of the issuance of ordinary shares and ADSs by the Company’s ordinary shareholders; (ii) the adoption of the merger agreement by the stockholders of Baxalta; (iii) effectiveness of a registration statement on Form S-4 registering ordinary shares to be issued in the merger; (iv) the absence of any orders, injunctions or rulings, or laws that would have the effect of enjoining or preventing the consummation of the merger; (v) the approval of the United Kingdom Listing Authority (the “UKLA”) of a prospectus relating to the ordinary shares and a circular convening a meeting of Shire’s ordinary shareholders; (vi) approval from the NASDAQ Global Select Market to list the ADSs; (vii) approval of the UKLA and London Stock Exchange to list the ordinary shares; and (viii) Section 4.02 of the tax matters agreement dated as of June 30, 2015 (the “tax matters agreement”), by and between Baxter International Inc. (“Baxter”) and Baxalta, shall have been waived with respect to the closing of the merger, pursuant to the terms of the letter agreement, dated as of January 11, 2016 (the “letter agreement”), among the Company, Baxter and Baxalta, and each of the Company and Baxalta shall have received from Baxter a certificate, as described in the letter agreement, to the effect that the tax advisor to Baxter has furnished an opinion in substantially the same form and substance as the tax opinion delivered by such advisor on the date immediately prior to the signing of the merger agreement. Certain conditions to the merger may not be satisfied or, if they are, the timing of such satisfaction is uncertain. If any conditions to the merger are not satisfied or, where waiver is permitted by applicable law, not waived, the merger will not be consummated.

The merger is not subject to a financing condition. While Shire has secured an $18 billion fully underwritten bank facility of which $13 billion is available to finance the cash component of the per share merger consideration, certain customary conditions precedent to funding must be satisfied in order for the Company to utilize its bank facility, and if such conditions are not satisfied or if the Company’s lenders do not satisfy their funding commitment, the Company may be unable to obtain the funds necessary to consummate the merger.

If for any reason the merger is not completed or the closing of the merger is significantly delayed, the market price of the Company’s ordinary shares and ADSs and business and results of operations of the Company and/or the combined company may be adversely affected.

Lawsuits have been filed, and other lawsuits may be filed, against the Company and Baxalta and Baxalta’s board of directors challenging the merger, and an adverse ruling in any such lawsuit may delay or prevent the completion of the merger or result in an award of damages against the Company

Multiple putative class action complaints have been filed by purported Baxalta stockholders in connection with the merger. The complaints generally allege that the members of the Baxalta board breached their fiduciary duties to Baxalta stockholders by entering into the merger agreement and approving the merger, and that the Company, Baxalta and/or Merger Sub, aided and abetted such breaches of fiduciary duties. The complaints further allege that, among other things, the per share merger consideration undervalues Baxalta and certain provisions of the merger agreement inappropriately inhibit competing bids. The complaints seek, among other things, to enjoin the merger.

Additional lawsuits arising out of or relating to the merger agreement or the merger may be filed in the future. The results of complex legal proceedings are difficult to predict and could delay or prevent the completion of the merger. The existence of litigation relating to the merger could impact the likelihood of obtaining the stockholder approvals from either the Company or Baxalta. Moreover, the pending litigation is, and any future additional litigation could be, time consuming and expensive and could divert the Company’s management’s attention away from their regular business.

One of the conditions to completion of the merger is the absence of any law or judgment issued by any court or tribunal of competent jurisdiction that prevents, makes illegal or prohibits the closing of the merger. Accordingly, if a plaintiff is successful in obtaining a judgment prohibiting completion of the merger, then such judgment may prevent the merger from being completed, or from being completed within the expected time frame.

If the proposed merger is not completed, the Company will have incurred substantial costs that may adversely affect the Company’s financial results and operations

The Company has incurred and will continue to incur substantial costs in connection with the proposed merger with Baxalta. These costs are primarily associated with the fees of attorneys, accountants and financial advisors. In addition, the Company diverted significant management resources in an effort to complete the merger and are subject to restrictions contained in the merger agreement on the conduct of the Company’s business during the pendency of the merger. If the merger is not completed, the Company will have received little or no benefit in respect of such costs incurred.

The merger agreement restricts the Company’s ability to pursue alternatives to the merger, however, in specified circumstances, the Company may terminate the merger agreement to accept a superior proposal

Under the merger agreement, the Company has agreed not to (1) take certain actions to solicit proposals relating to alternative business combination transactions or (2) subject to certain exceptions, including the receipt of a “parent superior proposal” (as such term is defined in the merger agreement), enter into discussions or an agreement concerning, or provide confidential information in connection with, any proposals for alternative business combination transactions. However, in specified circumstances, the Company may terminate the merger agreement to enter into a definitive agreement with response to a “parent superior proposal” prior to obtaining approval of the merger from its stockholders.

Upon termination of the merger agreement in specified circumstances, the Company would be required to disburse a termination fee equal to $369 million to Baxalta and/or reimburse Baxalta for its merger-related expenses in an amount not to exceed $65 million, which expense reimbursement would be offset against any termination fee subsequently disbursed. Following the disbursement of the termination fee and/or reimbursement of merger-related expenses, the Company will, other than in certain circumstances, have no further obligation or liabilities to Baxalta. Such termination would deny the Company and its respective stockholders any benefits from the merger and could negatively impact market price of the Company’s ordinary shares and ADSs.

These provisions could discourage a third party that may have an interest in acquiring all or a significant part of the Company from considering or proposing that acquisition, even if such third party were prepared to enter into a transaction that is more favorable to the Company or the Company’s ordinary shareholders than the merger.

In specified circumstances, Baxalta could terminate the merger agreement to accept an alternative proposal

Under the merger agreement, Baxalta may terminate the merger agreement to enter into a definitive agreement with respect to a “company superior proposal” (as such term is defined in the merger agreement) prior to obtaining approval of the merger from its ordinary shareholders. In such event, Baxalta would be obligated to disburse a termination fee equal to $369 million, but would have no further obligation or liabilities to the Company. Such termination would deny the Company and its stockholders any benefits from the merger and could negatively impact the price of the Company’s ordinary shares and ADSs.

Uncertainties associated with the merger may cause a loss of employees and may otherwise affect the future business and operations of Shire and the combined company

Uncertainty about the effect of the merger on employees and customers may have an adverse effect on the Company and, if the proposed combination with Baxalta is consummated, on the combined company following the merger. These consequent uncertainties may impair the Company’s, and following the closing of the merger, the combined company’s, ability to retain and motivate key personnel and could also cause customers, suppliers, licensees, partners and other business partners to defer entering into contracts with, making other decisions concerning, or seeking to change existing business relationships with the Company, and following the closing of the merger, the combined company. Because the Company depends on the experience and industry knowledge of their executives and other key personnel to execute their business plans, the combined company may be unable to meet its strategic objectives.

While the merger is pending, the Company may not be able to hire qualified personnel to replace any key employees that may depart to the same extent that they have been able to in the past. In addition, if the merger is not completed, the Company may also encounter challenges in hiring qualified personnel to replace key employees that may depart the Company subsequent to the merger announcement.

Risks Related to the Combined Company Following the Merger

The Company may not successfully integrate the businesses of Shire and Baxalta

If the merger is consummated, achieving the anticipated benefits of the proposed combination of Shire and Baxalta will depend in part upon whether the two companies integrate their businesses in an effective and efficient manner. The Company may not be able to accomplish this integration process successfully. The integration of businesses is complex and time-consuming. The difficulties that could be encountered include the following:

In addition, there will be integration costs and non-recurring transaction costs (such as fees paid to legal, financial, accounting and other advisors and other fees paid in connection with the merger) associated with the proposed merger, including costs associated with combining their operations and achieving the synergies the Company expects to obtain, and such costs may be significant.

An inability to realize the full extent of the anticipated benefits of the proposed combination of Shire and Baxalta, including estimated cost synergies, as well as any delays encountered in the integration process and realizing such benefits, could have an adverse effect upon the revenues, level of expenses and operating results of the combined company, which may materially adversely affect the value of the Company’s ordinary shares and ADSs after the consummation of the merger.

The Company will incur significant additional indebtedness in connection with the merger, which will decrease the combined company’s business flexibility and increase its interest expense. All of the Company’s debt obligations, and any future indebtedness the Company may incur, will have priority over the Company’s ordinary shares and ADSs with respect to payment in the event of a liquidation, dissolution or winding up

The Company has secured an $18 billion fully underwritten bank facility, of which $13 billion is available to finance the cash component of the per share merger consideration. The Company has announced that it intends to maintain an investment grade credit rating for the combined company, but one or more credit rating agencies may determine that the combined company’s credit rating is below investment grade, which could increase the combined company’s borrowing costs. The combined company’s indebtedness following consummation of the merger could have the effect, among other things, of reducing the combined company’s flexibility to respond to changing business and economic conditions as well as reducing funds available for capital expenditures, acquisitions, and creating competitive disadvantages for the combined company relative to other companies with lower indebtedness levels. The Company will also incur various costs and expenses associated with the debt financing.

The Company intends to refinance the bank facility through capital market debt issuances in due course. Its ability to refinance the indebtedness will depend on the condition of the capital markets and the combined company’s financial condition at such time. Any refinancing of indebtedness could be at higher interest rates and may require the combined company to comply with more onerous covenants, which could further restrict business operations and such refinancing may not be available at all.

Moreover, the combined company may be required to raise substantial additional financing to fund capital expenditures and acquisitions. The combined company’s ability to arrange additional financing and the costs of that financing will depend on, among other factors, the combined company’s financial position and performance, as well as prevailing market conditions and other factors beyond Shire’s control.

In any liquidation, dissolution or winding up of Shire, the Company’s ordinary shares and ADSs would rank below all debt claims against Shire or any of its subsidiaries. In addition, any convertible or exchangeable securities or other equity securities that Shire may issue in the future may have rights, preferences and privileges more favorable than those of the Company’s ordinary shares and ADSs. As a result, holders of the Company’s ordinary shares and ADSs will not be entitled to receive any payment or other distribution of assets upon any liquidation or dissolution until after Shire’s obligations to its debt holders and holders of equity securities, which rank senior to the Company’s ordinary shares and ADSs, have been satisfied.

The merger could result in significant liability to Baxalta and the Company if the merger causes the spin-off of Baxalta from Baxter or a Later Distribution, as defined below, to be taxable

Under the letter agreement, from and after the closing of the merger, Baxalta agreed to indemnify, and the Company agreed to guarantee such indemnity to, Baxter and each of its affiliates and each of their respective officers, directors and employees against certain tax-related losses attributable to, or resulting from, in whole or in part, the merger. If the contribution of property by Baxter in one or more transfers to Baxalta in exchange for shares of Baxalta common stock, cash, and the assumption of certain liabilities, together with the distribution by Baxter on July 1, 2015 of approximately 80.5% of the shares of Baxalta common stock to shareholders of Baxter (the “spin-off”) and/or a Later Distribution, collectively, the “Baxter Transactions”, are determined to be taxable as a result, in whole or in part, of the merger (for example, if the merger is deemed to be part of a plan, or series of related transactions, that includes the Baxter Transactions), Baxter and its shareholders could incur significant tax liabilities, and under the tax matters agreement, and the letter agreement, Baxalta and the Company may be required to indemnify Baxter for any such tax liabilities. Baxter’s waiver of the provisions under the tax matters agreement restricting Baxalta’s ability to enter into and consummate the merger will not relieve Baxalta or the Company of its obligation to indemnify Baxter if the merger causes any of the Baxter Transactions to be taxable.

In connection with the signing of the merger agreement, the Company received an opinion from Cravath, Swaine & Moore LLP, tax counsel to the Company, to the effect that the merger will not cause Baxter’s contribution of assets to Baxalta, Baxter’s initial distribution of Baxalta shares on July 1, 2015, Baxter’s distribution of cash received from Baxalta to its creditors or a Later Distribution to fail to qualify as tax-free to Baxter and its shareholders under Sections 355, 361 and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended. The merger is conditioned on the receipt by the Company at the time of the consummation of the merger of a tax opinion to the same effect.

The tax opinion referred to in the immediately preceding paragraph is based upon various factual representations and assumptions, as well as certain undertakings made by the Company, Baxter and Baxalta. If any of the factual representations or the assumptions in the tax opinion is untrue or incomplete in any material respect, an undertaking is not complied with or the facts upon which the tax opinion is based are materially different from the facts at the time of the merger, the opinion may not be valid. Moreover, opinions of counsel are not binding on the Internal Revenue Service (the “IRS”). As a result, the conclusions expressed in the tax opinion could be challenged by the IRS. None of the Company, Baxalta or Baxter has requested a ruling from the IRS regarding the impact of the merger on the tax treatment of the Baxter Transactions. Further, the tax opinion does not address all tax aspects of the spin-off, a Later Distribution and other related transactions and it is possible the Company may be obligated to indemnify Baxter despite the continuing validity of the tax opinion.

The Company’s indemnification obligations to Baxter and its subsidiaries, officers, directors and employees under the tax matters agreement and letter agreement are not limited in amount or subject to any cap. If Baxalta or the Company is required to indemnify Baxter and its subsidiaries and their respective officers, directors and employees under the circumstances set forth in the tax matters agreement, as supplemented by the letter agreement, it could have a material adverse effect on Baxalta and the Company.

In this annual report, references to the “Later Distributions” includes the following transactions that may be undertaken by Baxter: (i) any debt-for-equity exchange (and related underwritten offering) with respect to Baxalta shares, (ii) any offer to exchange Baxter shares for Baxalta shares, (iii) a contribution of Baxalta shares to Baxter’s U.S. pension fund, and/or (iv) a dividend of Baxalta shares to Baxter’s stockholders, in each case, that are undertaken prior to the earlier of any Baxalta or Company stockholder vote with respect to the merger and that are intended to be part of a plan that includes the spin-off.

Certain Baxalta agreements may contain change of control provisions that may be triggered by the merger that, if not waived, could cause the combined company to lose the benefit of such agreement and incur liabilities or replacement costs, which could have a material adverse effect on the combined company

Baxalta and its affiliates are each party to various agreements with third parties, including certain license agreements, business development-related agreements, production and distribution related agreements, bonding/financing facilities, contracts for the performance of services material to the operations of Baxalta and/or its affiliates, IT contracts, technology licenses and employment agreements that may contain change of control provisions that could be triggered upon the closing of the merger. Agreements with change of control provisions typically provide for or permit the termination of the agreement upon the occurrence of a change of control of one of the parties which can be waived by the relevant counterparties. In the event that there is such a contract or arrangement requiring a consent or waiver in relation the merger, there can be no assurance that such consent will be obtained at all or on favorable terms. If such a waiver is not obtained from any such counterparty, the combined company could lose the benefit of the underlying agreement and incur liabilities or replacement costs, which could have an adverse effect on the combined company.

Sales of the Company’s ordinary shares and/or ADSs in anticipation of the merger, and resales of such shares following the consummation of the merger, may adversely affect the market price of the Company’s ordinary shares and/or ADSs prior to, and following, the merger

Certain Baxalta stockholders, such as index funds or funds with concentration, geographic or other limitations on their permitted investments, may be required to sell ordinary shares or ADSs of Shire that they receive in the merger. Other Baxalta stockholders may already hold ordinary shares or ADSs of Shire and those stockholders may decide not to hold the shares that they receive in the merger. Such sales of ordinary shares or ADSs could adversely affect the market price of the Company’s ordinary shares and/or ADSs.

Upon consummation of the merger, the Company expects that it will issue up to approximately 311 million ordinary shares, based on the number of shares of Baxalta common stock outstanding as of December 31, 2015, in the aggregate In addition, the per share merger consideration represents a premium of approximately 37.5% to the unaffected share price of Baxalta common stock on August 3, 2015, the day prior to the public announcement of the Company’s initial offer for Baxalta, based on the closing price of the Company’s ADSs on January 8, 2016, which may cause significant arbitrage activity by investors seeking to take advantage of the price differential. This risk of dilution coupled with the possibility of merger arbitrage activity could result in downward pressure on the Company’s ordinary shares and ADSs and encourage third parties to engage in short sales of the Company’s shares.

In addition, these factors could also make it more difficult for the combined company to raise funds through future offerings of ordinary shares and ADSs. The issuance of ordinary shares and ADSs in the merger and the sale of additional ordinary shares or ADSs that may become eligible for sale in the public market from time to time upon exercise of options or the vesting of restricted securities will further dilute the combined company’s ordinary shares and/or ADSs. Moreover, the increase in the number of ordinary shares or ADSs, or an increase in the number of such shares outstanding following a future issuance, sale or transfer of such ordinary shares or ADSs by the Company or the possibility of such an issue, sale or transfer may lead to sales of such shares or the perception that such sales may occur, either of which may adversely affect the market for, and the market price of, the Company’s ordinary shares or ADSs.

The market price of the Company’s ordinary shares and ADSs may be adversely affected by reports of third-party analysts published in connection with the consummation of the merger

The trading market for the Company’s ordinary shares and ADSs depends in part on the research and reports that third-party securities analysts publish about Shire and its industry. In connection with the consummation of the merger, one or more of these analysts could downgrade the Company’s ordinary shares and ADSs or issue other negative commentary about Shire or its industry, which could cause the market price of the Company’s ordinary shares and ADSs to decline.

The market price of the Company’s ordinary shares and ADSs may be affected by factors different from those affecting the market price for shares of the Company’s ordinary shares and ADSs prior to the merger

If the merger is consummated, the risks associated with the combined company may affect the results of operations of the combined company and the market price of the Company’s ordinary shares and ADSs following the merger differently than they could affect the results of operations of Shire and the market price of its securities while it is a separate company. Additionally, the results of operations of the combined company may be affected by additional or different factors than those that currently affect the results of operations of Shire, including, but not limited to: complexities associated with managing the larger, more complex, combined business; integrating personnel from the two companies while maintaining focus on providing products and services; and potential performance shortfalls resulting from the diversion of management’s attention caused by integrating the companies’ operations.

ITEM 1B: Unresolved Staff Comments

None.

ITEM 2: Properties

The following are the principal premises of the Company, as at December 31, 2015:

At December 31, 2015 all of the above sites were utilized by the Company with the exception of the Exton site, which is expected to be occupied in the first half of 2016. The Company owns or leases premises in a number of other locations in a number of countries around the world.

ITEM 3: Legal Proceedings

The information required by this Item is incorporated herein by reference to Note 17, “Commitments and Contingencies, Legal and other proceedings” to the consolidated financial statements listed under ITEM 15: Exhibits and Financial Statement Schedules in this Annual Report on Form 10-K.

ITEM 4: Mine Safety Disclosures

Not applicable.

PART II

ITEM 5: Market for Registrant’s common equity, related stockholder matters and issuer purchases of equity securities

Ordinary Shares

The Company’s ordinary shares are traded on the London Stock Exchange (“LSE”).

The following table presents the high and low closing mid-market quotation per ordinary share of Shire as quoted in the Daily Official List of the LSE for the periods indicated.

The total number of record holders of ordinary shares of Shire on February 12, 2016 was 5,039. Since certain of the ordinary shares are held by broker nominees, the number of record holders may not be representative of the number of beneficial owners.

American Depositary Shares

American Depositary Shares (“ADSs”) each represent three ordinary shares of Shire. An ADS is evidenced by an American Depositary Receipt (“ADR”) issued by Citibank, N.A. as depositary, and is listed on the NASDAQ Global Select Market. On February 12, 2016 the proportion of ordinary shares represented by ADRs was 19% of the outstanding ordinary shares.

The following table presents the high and low market quotations for ADSs quoted on the NASDAQ Global Select Market for the periods indicated.

The number of record holders of ADSs on February 12, 2016 was 2,161. Since certain of the ADSs are held by broker nominees, the number of record holders may not be representative of the number of beneficial owners.

Dividend policy

A first interim dividend for the six months to June 30, 2015 of 4.21 US cents (2.69 pence) per ordinary share, equivalent to 12.63 US cents per ADS, was paid in October 2015. The Board has resolved to pay a second interim dividend of 22.16 US cents (15.32 pence) per ordinary share equivalent to 66.48 US cents per ADS for the six months to December 31, 2015.

A first interim dividend for the six months to June 30, 2014 of 3.83 US cents (2.24 pence) per ordinary share, equivalent to 11.49 US cents per ADS, was paid in October 2014. A second interim dividend for the six months to December 31, 2014 of 19.09 US cents (12.51 pence) per ordinary share equivalent to 57.27 US cents per ADS, was paid in April 2015.

This is consistent with Shire’s stated policy of paying a dividend semi-annually, set in US cents per ordinary share.  Typically, the first interim payment each year will be higher than the previous year’s first interim dividend.  Dividend growth for the full year will be reviewed by the Board when the second interim dividend is determined. However there is no guarantee that dividends will be declared for any periods.

Income Access Share Arrangements

Pursuant to the Scheme of Arrangement (the “Scheme”) that became effective on May 23, 2008 Shire plc became the holding company of the former holding company of the Shire group, Shire Biopharmaceuticals Holdings (“Old Shire”). As a result of the Scheme, Shire has put in place income access arrangements which enable Shire ordinary shareholders, other than Shire ADS holders, to choose whether they receive their dividends from Shire plc, a company tax resident in the Republic of Ireland, or from Old Shire, a Shire group company tax resident in the UK.

Old Shire has issued one income access share to the Income Access Trust (the “IAS Trust”) which is held by the trustee of the IAS Trust (the “Trustee”). The mechanics of the arrangements are as follows:

The ADS Depositary has made an election on behalf of all holders of ADSs such that they will receive dividends from Old Shire under the income access share arrangements. Dividends paid by Old Shire under the income access share arrangements will not, under current legislation, be subject to any UK or Irish withholding taxes. If a holder of ADSs does not wish to receive dividends from Old Shire under the income access share arrangements, he/she must withdraw his/her ordinary shares from the ADS program prior to the dividend record date set by the ADS Depositary and request delivery of the Shire plc ordinary shares. This will enable him/her to receive dividends from Shire plc.

It is the expectation, although there can be no certainty, that Old Shire will distribute dividends on the income access share to the Trustee for the benefit of all ordinary shareholders who make an income access share election in an amount equal to what would have been such ordinary shareholders’ entitlement to dividends from Shire plc in the absence of the income access share election. If any dividend paid on the income access share and or paid to the ordinary shareholders is less than such ordinary shareholders’ entitlement to dividends from Shire plc in the absence of the income access share election, the dividend on the income access share will be allocated pro rata among the ordinary shareholders and Shire plc will pay the balance to these ordinary shareholders by way of dividend. In such circumstances, there will be no grossing up by Shire plc in respect of, and Old Shire and Shire plc will not compensate those ordinary shareholders for, any adverse consequences including any Irish withholding tax consequences.

Shire will be able to suspend or terminate these arrangements at any time, in which case the full Shire plc dividend will be paid directly by Shire plc to those ordinary shareholders (including the ADS Depositary) who have made an income access share election. In such circumstances, there will be no grossing up by Shire plc in respect of, and

Old Shire and Shire plc will not compensate those ordinary shareholders for, any adverse consequences including any Irish withholding tax consequences.

In the year ended December 31, 2015 Old Shire paid dividends totalling $127.7 million (2014: $112.8 million; 2013: $91.1 million) on the income access share to the Trustee in an amount equal to the dividend ordinary shareholders would have received from Shire plc.

Distributable Reserves

The payment of dividends by Shire plc is governed by Jersey law. Under Jersey law, Shire plc is entitled to fund payments of dividends from any source (other than a capital redemption reserve or nominal capital account). Prior to making any dividend payment, the Directors of Shire plc who authorize the payment of the dividend must make a solvency statement to the effect that Shire plc will be able to continue to carry on its business and discharge its liabilities as they fall due immediately after the payment is made and for the twelve month period following the making of the payment. Shire's future dividend policy will be dependent upon the amount of its net assets, its financial condition, the terms of its then-existing debt facilities and other relevant factors existing at the time.

For dividends paid by Old Shire on the income access share to the Trustee, the ability of Old Shire to pay dividends is determined under English law. As a matter of English law Old Shire can only pay dividends out of its distributable profits, which are the accumulated realized profits of Old Shire and not the consolidated group, so far as not previously utilized by distribution or capitalization, less accumulated realized losses, so far as not previously written off in a reduction or reorganization of capital.

Equity Compensation Plan Information

Equity compensation plan information is incorporated herein by reference to ITEM 12: Security Ownership of Certain Beneficial Owners and Management and Related Stock Holder Matters of this Form 10-K.

ITEM 6: Selected financial data

The selected consolidated financial data presented below as at December 31, 2015 and 2014 and for the years to December 31, 2015, 2014 and 2013 were derived from the audited consolidated financial statements of the Company, included herein.

The selected consolidated financial data presented below as at December 31, 2013, 2012 and 2011 and for the years to December 31, 2012 and 2011 were derived from the audited consolidated financial statements of the Company, which are not included herein.

The selected consolidated financial data should be read in conjunction with ITEM 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations and with ITEM 15: Exhibits and Financial Statement Schedules in this Annual Report on Form 10-K.

(“RM”) reporting unit and impairment loss of $19.9 million in respect of RESOLOR IPR&D assets in the year to December 31, 2013; impairment loss of $197.9 million in respect of RESOLOR intangible assets (finite lived intangible assets ($126.7 million) and IPR&D assets ($71.2 million)) in the year to December 31, 2012 and impairment loss of $16.0 million in respect of RESOLOR IPR&D assets in the year to December 31, 2011;

For further information, see ITEM 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations and ITEM 15: Exhibits and Financial Statement Schedules in this Annual Report on Form 10-K.

For further information, see ITEM 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations and ITEM 15: Exhibits and Financial Statement Schedules in this Annual Report on Form 10-K.

ITEM 7: Management’s discussion and analysis of financial condition and results of operations

The following discussion should be read in conjunction with the Company’s consolidated financial statements contained in ITEM 15: Exhibits and Financial Statement Schedules in this Annual Report on Form 10-K.

Overview

The Company has grown both organically and through acquisition, completing a series of major transactions that have brought therapeutic, geographic and pipeline growth and diversification. The Company will continue to conduct its own research and development, focused on rare diseases, as well as evaluate companies, products and pipeline opportunities that offer a strategic fit and have the potential to deliver value to all of the Company’s stakeholders: patients, physicians, policy makers, payers, investors and employees.

The Company’s purpose is to enable people with life altering conditions to lead better lives. The Company will execute on its purpose through its strategy and business model. For further details of Shire’s strategy and business model, refer to ITEM 1: Business of this Annual Report on Form 10-K.

Through deep understanding of patients’ needs, the Company is able to:

Shire’s in-licensing and acquisition efforts are focused on products in specialist markets with strong intellectual property protection or other forms of market exclusivity and global rights. Shire believes that a carefully selected and balanced portfolio of products with strategically aligned and relatively small-scale sales forces will deliver strong results.

Company revenues, expenditures and net assets are attributable to the R&D, manufacture, sale and distribution of pharmaceutical products within one reportable segment. The Company also earns royalties (where Shire has out-licensed products to third parties) which are recorded as royalty revenues.

Revenues are derived primarily from two sources - sales of the Company’s own products and royalties:

The markets in which the Company conducts its business are intensely competitive and highly regulated.

The health-care industry is also experiencing:

Shire’s strategy has been developed to address these industry-wide competitive pressures. This strategy has resulted in a series of initiatives in the following areas:

Markets

Shire’s current portfolio of approved products focuses on the following markets: HAE/LSD, Neuroscience, and GI and Internal Medicine. Shire has also established an Ophthalmics commercial unit in preparedness for the commercialization of Shire’s ophthalmic pipeline candidates. In addition, Shire has a number of marketed products for other TAs from which it generates product revenues or royalties from third parties. In 2015 Shire derived approximately 45% of

product sales from rare disease products, 36% from Neuroscience products and 19% from GI and Internal Medicine products. Shire’s early stage research is primarily focused on rare diseases.

Shire has grown in part through acquisition which has brought therapeutic, geographic and pipeline growth and diversification. In 2015 Shire acquired NPS Pharma, Meritage Pharma and Foresight. On January 11, 2016, Shire announced that the boards of directors of Shire and Baxalta had reached an agreement under which Shire will combine with Baxalta. On January 22, 2016, Shire announced the closing of the acquisition of Dyax.

The acquisition of NPS Pharma added global rights to an innovative product portfolio with multiple growth catalysts, including GATTEX/REVESTIVE and NATPARA. The acquisition of Meritage Pharma provided global rights to OBS, a Phase 3 ready asset for the treatment of adolescents and adults with EoE, a rare, chronic inflammatory GI disease. This enhances Shire’s late-stage pipeline and builds upon the Company’s rare disease and GI commercial infrastructure and expertise. With the acquisition of Foresight Shire acquired the global rights to FST-100 (topical ophthalmic drops combining 0.6% povidone iodine (PVP-I) and 0.1% dexamethasone), a therapy in late-stage development for the treatment of infectious conjunctivitis, an ocular surface condition commonly referred to as pink eye. This acquisition further strengthens Shire’s late-stage pipeline, has a clear strategic fit with lifitegrast, which is in late-stage development for treatment of dry eye disease, and further demonstrates Shire’s commitment to building a leadership position in ophthalmics.

The acquisition of Dyax and their lead pipeline product, DX-2930, alongside Dyax’s currently marketed product KALBITOR, expands and extends Shire’s industry-leading HAE portfolio (FIRAZYR and CINRYZE), advancing its leadership position in rare diseases and enhancing the Company’s growth profile.

The proposed combination with Baxalta will enable Shire to become a global leader in rare diseases.

In 2015 Shire derived 27% (2014: 30%) of product sales from outside of the US. Shire has ongoing commercialization and late-stage development activities, which are expected to further supplement the diversification of revenues in the future, including the following:

R&D

In 2013 Shire combined the R&D organizations of its former divisions into a single One Shire R&D organization, focused around a prioritized portfolio of clinical development and research programs. Shire has focused its R&D efforts on five TAs: Neuroscience, GI/Metabolic Diseases, Renal/Fibrotic Diseases, Ophthalmic Diseases, and Diseases of the Complement Cascade. Shire concentrates its resources on obtaining regulatory approval for later-stage pipeline products within these therapeutic areas and focuses its early stage research activities in rare diseases.

Evidence of the successful progression of the late stage pipeline can be seen in the granting of approval and associated launches of the Company’s products over the last five years. In this time several products have received regulatory approval including: in the US, FIRAZYR in 2011, VYVANSE for BED and NATPARA in 2015; in the EU, ELVANSE/TYVENSE for adults, INTUNIV for children and adolescents in 2015.

Shire’s management reviews direct costs for all R&D projects by development phase.

Shire’s R&D costs in 2015 and 2014 included expenditure on programs in all stages of development. The following table provides an analysis of the Company’s direct R&D spend categorized by development stage, based upon the development stage of each program as at December 31, 2015 and 2014:

In addition to the above, the Company recorded R&D employee costs of $303 million in 2015 (2014: $270 million) and other indirect R&D costs of $680 million (2014: $232 million), comprising depreciation and impairment charges.

For a discussion of the Company’s current development projects see ITEM 1: Business.

Patents and Market Exclusivity

The loss or expiration of patent protection or regulatory exclusivity with respect to any of the Company’s major products could have a material adverse effect on the Company’s revenues, financial condition and results of operations, as generic or biosimilar products may enter the market. Companies selling generic products often do not need to complete extensive clinical studies when they seek registration of a generic or biosimilar product and accordingly, and are generally able to sell a generic version of the Company’s products at a much lower price.

As expected, in 2009 Teva and Impax commenced commercial shipments of their authorized generic versions of ADDERALL XR, which led to lower sales of branded ADDERALL XR compared to the periods prior to the authorized generic launches.

In 2011 generic versions of the Company’s CARBATROL and REMINYL products respectively were launched, which led to lower sales of these branded products compared to the period before loss of exclusivity.

In 2014 and 2015 generic versions of the Company’s INTUNIV product was launched, which led to lower sales of Shire’s INTUNIV product compared to the period before loss of exclusivity.

Shire is engaged in various legal proceedings with generic manufacturers with respect to its VYVANSE and LIALDA patents. For more detail of current patent litigation, see Note 17, “Commitments and Contingencies, Legal and other proceedings” to the consolidated financial statements set forth in this Annual Report on Form 10-K.

Corporate Development

Shire focuses its corporate development activity on the acquisition and in-licensing of businesses, products or compounds which offer a strategic fit and have the potential to deliver demonstrable value to all of the Company’s stakeholders.

Recent mergers or acquisitions

On January 22, 2016 Shire completed the acquisition of Dyax which has expanded and extended Shire’s industry-leading HAE portfolio by adding the currently approved product, KALBITOR, SHP643 (formerly DX-2930), a Phase 3 program for the treatment of HAE as well as a number of other programs at various early stages of development.

On January 11, 2016 Shire announced that the boards of directors of Shire and Baxalta had reached an agreement under which Shire will combine with Baxalta, creating the global leader in the rare diseases. Under the agreement Baxalta shareholders are to receive $18.00 in cash and 0.1482 Shire ADS per Baxalta share. Closing of the transaction is subject to approval by Baxalta and Shire shareholders, certain regulatory approvals, redelivery of tax opinions delivered at signing and other customary closing conditions. For further details, see “Risks Related to the Proposed Merger with Baxalta Incorporated” under Item 1A and “The January 2016 Facilities Agreement” under Item 7’s Liquidity and Capital Resources discussion.

In 2015, Shire acquired:

In 2014, Shire acquired:

In 2013, Shire acquired:

Collaboration and licensing activity

Shire has also entered into a number of collaboration and license agreements in recent years, including:

Organization and Structure

In 2013 the Company integrated its operations into a simplified One Shire organization in order to drive future growth and innovation. Shire now comprises a single operating and reportable segment. For further details see ITEM 15: Exhibits and Financial Statements Schedules and Note 23 “Segmental reporting” to the consolidated financial statements set forth in this Annual Report on Form 10-K. As part of the One Shire reorganization, the Company undertook a review of all of its pipeline programs and identified those projects that fit with the Company’s new strategic direction and have an acceptable likelihood of success. Following that review and overall streamlining of the R&D organization, several clinical and pre-clinical projects were discontinued which resulted in the elimination of a significant number of R&D roles and functional roles that support R&D in Basingstoke, and some positions were re-located.

In addition the Company also relocated its international commercial hub from Nyon, Switzerland to Zug, Switzerland.

In 2014 certain aspects of the One Shire program were temporarily put on hold due to AbbVie’s offer for Shire, which was terminated in October 2014. Subsequent to the termination of AbbVie’s offer, Shire announced on November 10, 2014 its plans to relocate over 500 positions to Lexington, Massachusetts from its Chesterbrook, Pennsylvania, site and establish Lexington as the Company’s US operational headquarters in continuation of the One Shire efficiency program. This relocation streamlines business globally through two principal locations, Massachusetts and Switzerland, with support from regional and country-based offices around the world.

For further details see ITEM 15: Exhibits and Financial Statements Schedules and Note 4 “Reorganization costs” to the consolidated financial statements set forth in this Annual Report on Form 10-K.

On October 22, 2013 Shire discontinued the construction of its new manufacturing facility in San Diego. Subsequently on January 16, 2014, the Company sold and transferred certain of the assets relating to the manufacturing, marketing, sale and distribution of DERMAGRAFT to Organogenesis Inc. For further information, see ITEM 15: Exhibits and Financial Statement Schedules and Note 8, “Results of discontinued operations” to the consolidated financial statements set forth in this Annual Report on Form 10-K.

Results of operations for the years to December 31, 2015 and 2014

Financial highlights for the year to December 31, 2015 are as follows:

Product sales growth in 2015 was held back, as expected, by 4 percentage points due to the foreign exchange headwinds from the strong US dollar, primarily affecting sales of ELAPRASE, REPLAGAL and VPRIV.

⁽¹⁾ The Company’s management analyzes product sales and revenue growth for certain products sold in markets outside of the US on a constant exchange rate (“CER”) basis, so that product sales and revenue growth can be considered excluding movements in foreign exchange rates. Product sales and revenue growth on a CER basis is a Non GAAP financial measure (“Non GAAP CER”), computed by comparing 2015 product sales and revenues restated using 2014 average foreign exchange rates to 2014 actual product sales and revenues. Average exchange rates for the year to December 31, 2015 were $1.53:£1.00 and $1.11:€1.00 (2014: $1.65:£1.00 and $1.33:€1.00).

⁽²⁾ Lisdexamfetamine dimesylate (“LDX”) currently marketed as VYVANSE in the US and Canada, VENVANSE in Latin America and ELVANSE in certain territories in the EU for the treatment of ADHD and in the US for the treatment of moderate to severe BED.

Total revenues

The following table provides an analysis of the Company’s total revenues by source:

Product sales