Edgar Filing: Shire plc

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, 2011

[ ]	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)

Jersey (Channel Islands) (State or other jurisdiction of incorporation or organization)	98-0601486 (I.R.S. Employer Identification No.)

5 Riverwalk, Citywest Business Campus, Dublin 24, Republic of Ireland (Address of principal executive offices and zip code)	+353 1 429 7700 (Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Name of exchange on which registered
American Depositary Shares, each representing three Ordinary Shares 5 pence par value per share	NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)

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, 2011, 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 $17,197 million. This was computed using the average bid and asked price at the above date.

As at February 21, 2012, the number of outstanding ordinary shares of the Registrant was 562,526,002.

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, the Company’s results could be materially adversely affected. The risks and uncertainties include, but are not limited to, risks associated with: the inherent uncertainty of research, development, approval, reimbursement, manufacturing and commercialization of the Company’s Specialty Pharmaceuticals, Human Genetic Therapies and Regenerative Medicine products, as well as the ability to secure new products for commercialization and/or development; government regulation of the Company’s products; the Company’s ability to manufacture its products in sufficient quantities to meet demand; the impact of competitive therapies on the Company’s products; the Company’s ability to register, maintain and enforce patents and other intellectual property rights relating to its products; the Company’s ability to obtain and maintain government and other third-party reimbursement for its products; and other risks and uncertainties detailed from time to time in the Company’s filings with the Securities and Exchange Commission.

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)

AGRYLIN® (anagrelide hydrochloride)

APLIGRAF® (trademark of Organogenesis, Inc. (“Organogenesis”))

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

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

ATRIPLA® (trademark of Bristol Myers Squibb Company (“BMS”) and Gilead Sciences, Inc. (“Gilead”))

BERINERT P® (trademark of Aventis Behring GmbH)

CALCICHEW® range (calcium carbonate with or without vitamin D3)

CARBATROL® (carbamazepine extended-release capsules)

CEREZYME® (trademark of Genzyme Corporation (“Genzyme”))

CINRYZE® (trademark of Viropharma Biologics, Inc.)

CLAVERSAL® (trademark of Merckle Recordati)

COLAZAL® (trademark of Salix Pharmaceuticals, Inc)

COMBIVIR® (trademark of GlaxoSmithKline (“GSK”))

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

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

DERMAGRAFT® (Human Fibroblast-Derived Dermal Substitute)

DIPENTUM® (trademark of UCB Pharma Ltd (“UCB”))

DYNEPO® (trademark of Sanofi-Aventis)

ELAPRASE® (idursulfase)

EPIVIR® (trademark of GSK)

EPIVIR-HBV® (trademark of GSK)

EPZICOM®/KIVEXA (EPZICOM) (trademark of GSK)

EQUASYM® (methylphenidate hydrochloride)

EQUASYM XL® (methylphenidate hydrochloride)

FIRAZYR® (icatibant)

FOSRENOL® (lanthanum carbonate)

FABRAZYME® (trademark of Genzyme)

HEPTOVIR® (trademark of GSK)

INTUNIV® (guanfacine extended release)

JUVISTA® (trademark of Renovo Limited (“Renovo”))

KALBITOR® (trademark of Dyax Corporation)

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

LIALDA® (trademark of Giuliani International Limited (“Guiliani”))

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

METAZYM™ (arylsulfatase-A)

METADATE CD® (trademark of UCB Pharma, S.A.)

MEZAVANT® (trademark of Guiliani)

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

MOVICOL® (trademark of Edra AG, S.A.)

OASIS® (trademark of Healthpoint, Ltd. (“Healthpoint”))

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

REGRANEX® (trademark of Healthpoint)

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

REMINYL XL™ (galantamine hydrobromide) (UK and Republic of Ireland) (trademark of J&J, excluding UK and Republic of Ireland)

RENASYS® (trademark of Smith & Nephew Plc (“Smith & Nephew”))

REPLAGAL® (agalsidase alfa)

RESOLOR® (prucalopride)

RITALIN LA® (trademark of Novartis)

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

SALOFALK® (trademark of Dr Falk Pharma)

SEASONIQUE® (trademark of Barr Laboratories, Inc. (“Barr”))

STRATTERA® (trademark of Eli Lilly)

THERASKIN® (trademark of Soluble Systems, LLC (“Soluble Systems”))

TRIZIVIR® (trademark of GSK)

TRUVADA® (trademark of Gilead)

V.A.C.® (trademark of Kinetic Concepts, Inc. (“KCI”))

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)

Table of Contents

SHIRE PLC

2011 Form 10-K Annual Report

Table of contents

PART I
ITEM 1. BUSINESS
	General	6
	Strategy	6
	2011 highlights	6
	Financial information about operating segments	6
	Sales and marketing	7
	Manufacturing and distribution	20
	Intellectual property	21

	Competition	24
	Government regulation	27
	Third party reimbursement	28
	Responsibility	30
	Employees	30
	Available information	30

ITEM 1A.	RISK FACTORS	31
ITEM 1B.	UNRESOLVED STAFF COMMENTS	37
ITEM 2.	PROPERTIES	38
ITEM 3.	LEGAL PROCEEDINGS	39
ITEM 4.	MINE SAFETY DISCLOSURES	39

PART II
ITEM 5.	MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	40
ITEM 6.	SELECTED FINANCIAL DATA	43
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	45
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	73
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	76
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	76
ITEM 9A.	CONTROLS AND PROCEDURES	76
ITEM 9B.	OTHER INFORMATION	76

PART III
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	77
ITEM 11.	EXECUTIVE COMPENSATION	82
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	95
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE	96
ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	96

PART IV
ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	98

Table of Contents

PART I

ITEM 1: Business

General

Shire plc and its subsidiaries (collectively referred to as either “Shire” or the “Company”) is a leading specialty biopharmaceutical company that focuses on meeting the needs of the specialist physician.

The Company has grown through acquisition, completing a series of major mergers or acquisitions that have brought therapeutic, geographic and pipeline growth and diversification. The Company will continue to evaluate companies, products and pipeline opportunities that offer a good strategic fit and enhance shareholder value.

Strategy

Shire’s strategic goal is to become the world’s leading specialty biopharmaceutical company that focuses on meeting the needs of the specialist physician. Shire focuses its business on attention deficit and hyperactivity disorder (“ADHD”), gastrointestinal (“GI”) diseases, human genetic therapies (“HGT”) and regenerative medicine (“RM”) as well as opportunities in other therapeutic areas to the extent they arise through acquisitions. 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.

2011 Highlights

See “Currently marketed products” and “Products under development” below for a full discussion of 2011 Product, pipeline and business highlights, including:

·	the approval and launch of once-daily INTUNIV as adjunctive therapy to stimulants for the treatment of ADHD in children and adolescents aged 6 to 17 in the United States (“US”);

·	the approval of FIRAZYR in Europe for self-administrated subcutaneous injections by the European Medicines Agency (“EMA”) in the EU and by the US Food and Drug Administration (“FDA”) in the US for treatment of acute attacks of Hereditary Angioedema (“HAE”);

·	launch of VENVANSE for the treatment of ADHD in children in Brazil, the first launch of VYVANSE (lisdexsamfetamine dimesylate) outside of North America;

·	the initiation of Phase 3 clinical trials for VYVANSE as adjunctive therapy in Major Depressive Disorder (“MDD”);

·	the approval of LIALDA/MEZAVANT for the maintenance of remission of ulcerative colitis in the US and Canada;

·	the approval of Shire’s new manufacturing facility in Lexington, MA for the purification of REPLAGAL drug substance by the EMA;

·	the acquisition of Advanced BioHealing, Inc. (“ABH”) which added DERMAGRAFT, a bio-engineered skin substitute, to Shire’s portfolio, and led to the establishment of the RM business unit;

·	positive exploratory data showing the improvement of cognition and executive function in patients with MDD and improvement in negative symptoms of schizophrenia in patients taking VYVANSE as adjunctive therapy;

·	the submission of a Biologics License Application (“BLA”) to the FDA in the US for REPLAGAL; and

acceptance for review by the UK Medicines Healthcare products Regulatory Agency (“MHRA”) in the United Kingdom (“UK”) of a Marketing Authorization Application (“MAA”) for VENVANSE for the treatment of ADHD in children and adolescents. The MHRA will act as the Reference Member State for filings in eight European countries.

Financial information about operating segments

Shire’s internal financial reporting is consistent with its business unit and management reporting structure. In the third quarter of 2011, following the acquisition of ABH, the Company now has three business units and three reporting segments: Specialty Pharmaceuticals (“SP”), HGT and RM. The RM segment currently comprises the ABH business. Substantially all of the Company’s revenues, expenditures and net assets are attributable to the research and development (“R&D”), manufacture, sale and distribution of pharmaceutical products within SP, HGT and of medical devices within RM. The Company also earns royalties (where Shire has out-licensed certain product rights to third parties)

Table of Contents

which are recorded as revenues. Segment revenues, profits or losses and assets for 2011, 2010 and 2009 are presented in Note 24 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, 2011, the Company employed 2,395 (2010: 1,839) sales and marketing staff to service its operations throughout the world, including its major markets in the US and Europe.

Currently marketed products

The table below lists the Company’s material marketed products at December 31, 2011 indicating the owner/licensor, disease area and the key territories in which Shire markets the product.

SP

Products	Disease area	Owner/licensor	Key territories
Treatments for ADHD

VYVANSE/VENVANSE (lisdexamfetamine dimesylate)	ADHD	Shire	US, Canada and Brazil(1)

ADDERALL XR (mixed salts of a single-entity amphetamine)	ADHD	Shire	US and Canada

INTUNIV (extended release guanfacine)	ADHD	Shire	US

EQUASYM (methylphenidate hydrochloride) modified release (XL)	ADHD	Shire	Europe and Latin America(2)

Treatments for GI diseases

LIALDA (mesalamine)/ MEZAVANT(mesalazine)	Ulcerative colitis	Giuliani SpA	US and Europe(3)
PENTASA (mesalamine)	Ulcerative colitis	Shire	US

RESOLOR (prucalopride)	Chronic constipation in women	Shire	Europe

Treatments for diseases in other therapeutic areas
FOSRENOL (lanthanum carbonate)	Hyperphosphatemia in end stage renal disease	Shire	US, Europe and Japan(2, 4)

XAGRID (anagrelide hydrochloride)	Elevated platelet counts in at risk essential thrombocythemia patients	Shire	Europe (2)

Table of Contents

HGT

Products	Disease area	Owner/licensor	Key territories

REPLAGAL (agalsidase alfa)	Fabry disease	Shire	Europe, Latin America and Asia Pacific(5)

ELAPRASE (idursulfase)	Hunter syndrome (Mucopolysaccharidosis Type II, MPS II)	Shire	US, Europe, Latin America and Asia Pacific(6)

VPRIV (velaglucerase alfa)	Gaucher disease, type 1	Shire	US, Europe and Latin America

FIRAZYR (icatibant)	HAE	Shire	US, Europe and Latin America

RM

Products	Disease area	Owner/licensor	Key territories

DERMAGRAFT(Human Fibroblast-Derived Dermal Substitute)	Diabetic foot ulcers (“DFU”)	Shire	US

(1)	The product is marketed as VENVANSE in Brazil.

(2)	Marketed by distributors in certain markets.

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

(4)	Marketed in Japan under license from Shire by Bayer Yakuhin Limited (“Bayer”).

(5)	Marketed in Japan under license by Dainippon Sumitomo Pharma Co., Ltd. (“DSP”).

(6)	Marketed in Asia Pacific by Genzyme under license from Shire.

Specialty Pharmaceuticals

Treatments for ADHD

ADHD is one of the most common psychiatric disorders in children and adolescents (J Am Acad Child Adolesc Psychiatry, 2007). Worldwide prevalence of ADHD is estimated at 5.3% (Am J Psych. 2007). In the US, approximately 9.5 percent of all school-aged children, or about 4.4 million children aged 4 to 17, have been diagnosed with ADHD at some point in their lives. However, only two-thirds (66.3%) of those with a current ADHD diagnosis were taking medication (CDC, 2010). According to the results from the National Comorbidity Survey Replication (Am J Psychiatry, 2006), the disorder is also estimated to affect 4.4% of US adults aged 18 to 44. When this percentage is extrapolated to the full US population aged 18 and over, Shire estimates that approximately 10.3 million adults in the US have ADHD (based on US Census projected 2010).

ADHD is a psychiatric behavioral 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 behavioral modification, and/or medication.

According to IMS, a leading global provider of business intelligence for the pharmaceutical and healthcare industries, the US market for ADHD treatments was valued at approximately $7.3 billion for the twelve months ended December 31, 2011, an increase of 19.7% from the twelve months ended December 31, 2010.

Table of Contents

VYVANSE/ VENVANSE

VYVANSE is a New Chemical Entity (“NCE”) and 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. VYVANSE is available in the US in six dosage strengths: 20mg, 30mg, 40mg, 50mg, 60mg and 70mg.

VYVANSE has NCE exclusivity through to February 23, 2012 and is also covered by US patents of which the last to expire remain in effect until June 29, 2023.

Health Canada approved VYVANSE for the treatment of ADHD in paediatric patients aged 6 to 12 in February 2009 and for adolescents and adults in November 2010. Shire launched VYVANSE in Canada in February 2010.

In July 2010 ANVISA, the Brazilian health authority, granted marketing authorization approval for lisdexamfetamine dimesylate for the treatment of ADHD in children aged 6-12. VENVANSE was launched in Brazil in April 2011.

On January 31, 2012, the FDA approved VYVANSE for the maintenance treatment of ADHD in adults. VYVANSE is the first product in its class with this indication.

Litigation proceedings relating to VYVANSE are in progress. For further information see ITEM 3: Legal Proceedings and Note 19, “Commitments and Contingencies, Legal proceedings” to the consolidated financial statements set forth in this Annual Report on Form 10-K.

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 and can be administered either as a capsule or sprinkled on soft food.

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.

In October 2005 the Company filed a Citizen Petition with the FDA requesting that the FDA require more rigorous bioequivalence testing for generic or follow-on drug products that reference ADDERALL XR before they can be approved. The Company received correspondence from the FDA in April 2006 stating that, due to the complex issues raised, which require extensive review and analysis by the FDA’s officials, a decision could not yet be reached by the FDA. To date, the FDA has not yet reached a decision on this Citizen Petition and has not provided any guidance as to when that decision may be reached.

Litigation proceedings relating to ADDERALL XR are in progress. For further information see ITEM 3: Legal Proceedings and Note 19, “Commitments and Contingencies, Legal proceedings” to the consolidated financial statements set forth in this Annual Report on Form 10-K.

INTUNIV

INTUNIV is the first in a new class of approved ADHD medications, 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 in September 2009 as a once-daily monotherapy treatment of ADHD in children and adolescents aged 6 to 17. It is available in 1mg, 2 mg, 3 mg and 4 mg tablets. In February 2011 the FDA approved INTUNIV as adjunctive therapy to stimulants for the treatment of ADHD in children and adolescents aged 6 to 17. Shire launched INTUNIV in November 2009.

Litigation proceedings relating to the Company’s INTUNIV patents are in progress. For further information see ITEM 3: Legal Proceedings and Note 19, “Commitments and Contingencies, Legal proceedings” to the consolidated financial statements set forth in this Annual Report on Form 10-K.

Table of Contents

EQUASYM

In March 2009, Shire acquired from UCB the worldwide rights (excluding the US, Canada and Barbados) to EQUASYM (methylphenidate hydrochloride) IR and XL for the treatment of ADHD in children and adolescents aged 6 to 18. Due to the inherent advantages of longer acting formulations in meeting the needs of children and adolescent patients, Shire is focusing exclusively on the XL form. At December 31, 2011 EQUASYM XL was commercially available in 11 countries in 10mg, 20mg and 30mg strengths. EQUASYM XL is marketed in Mexico and South Korea under the trade name METADATE CD.

Treatments for GI diseases - Ulcerative Colitis (“UC”)

Ulcerative Colitis was estimated to affect approximately 1.2 million patients worldwide in 2007 according to Decision Resources, Immune and Inflammatory Disorders Study #4, Ulcerative Colitis (August 2008). Ulcerative colitis 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 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 ulcerative colitis 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.

LIALDA was approved by the FDA in January 2007 and was launched in the US in March 2007. Following approvals in 2007 in the EU and Canada, at December 31, 2011 LIALDA/MEZAVANT (this product is marketed in Europe and Canada as MEZAVANT) was commercially available in 16 countries either directly or through distributor arrangements.

Litigation proceedings relating to the Company’s LIALDA patents are in progress. For further information see ITEM 3: Legal Proceedings and Note 19, “Commitments and Contingencies, Legal proceedings” to the consolidated financial statements set forth in this Annual Report on Form 10-K.

PENTASA

PENTASA controlled release capsules are approved in the US (marketed by Shire in the US and by Ferring outside of the US) and indicated for the induction of remission and for the treatment of patients with mild to moderately active ulcerative colitis.

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 2008 the Company filed a Citizen Petition with the FDA requesting that the FDA require more rigorous bioequivalence testing for generic or follow-on drug products that reference PENTASA before they can be approved. On August 24, 2010 Shire received a ruling from the FDA on the Citizen Petition. The ruling granted Shire’s request with regard to the requirement that bioequivalence to PENTASA be shown by dissolution testing and further imposed a requirement for rigorous pharmacokinetic data. The ruling denied the request that studies with clinical endpoints should also be required because the FDA concluded that comparative clinical endpoint studies would be less sensitive, accurate and reproducible than pharmacokinetic studies.

Treatments for GI diseases - chronic constipation

Chronic idiopathic constipation is a widespread and often debilitating disorder. The constipated patient population can be split into three distinct groups: (1) patients with primary constipation (without other underlying diseases or not caused by use of medication); (2) patients constipated as a result of regular use of medication such as opioids and (3) patients with severe constipation resulting from neurodegenerative disorders such as multiple sclerosis and Parkinson’s disease. Chronic constipation is characterized by infrequent and difficult passage of stool over a prolonged period. Other symptoms include infrequent bowel movements, bloating, straining, abdominal discomfort and pain, incomplete evacuation and unsuccessful attempts at evacuation. The disease has been clearly defined by the widely accepted Rome III criteria based on the type and duration of the symptoms. Chronic constipation is seen as a persistent disease with approximately 70% of patients having more than three symptom episodes per week. It is estimated that 40% of patients with chronic constipation are not satisfied with their current treatment (Alimentary Pharmacology and Therapeutics, 2007).

Table of Contents

RESOLOR

RESOLOR (prucalopride) is the first of a new generation of selective, high-affinity 5-HT4 receptor agonists that stimulates gastrointestinal motility and acts primarily on different parts of the lower gastrointestinal tract (enterokinetic).

In October 2009 RESOLOR was approved by the EMA throughout the EU as a once daily oral treatment for symptomatic treatment of chronic constipation in women in whom laxatives fail to provide adequate relief. In July 2010, Swissmedic granted RESOLOR marketing authorization in Switzerland for the treatment of idiopathic chronic constipation in adults for whom the currently available treatment options involving dietary measures and laxatives do not provide sufficient effect. RESOLOR is available in 1mg and 2mg dose strengths, both for once-daily dosing. At December 31, 2011 RESOLOR was available in six EU countries. Launches in additional European countries are planned throughout 2012.

Treatments for diseases in other therapeutic areas

FOSRENOL

FOSRENOL is a phosphate binder that is indicated for use in end-stage renal disease (stage 5) patients receiving dialysis and, from October 2009, is also indicated in the EU for the treatment of adult patients with 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 by Shire’s licensee Bayer. At December 31, 2011 FOSRENOL was commercially available in 41 countries worldwide.

Litigation proceedings relating to the Company’s FOSRENOL patents are in progress. For further information see ITEM 3: Legal Proceedings and Note 19, “Commitments and Contingencies, Legal proceedings” to the consolidated financial statements set forth in this Annual Report on Form 10-K.

XAGRID

Myeloproliferative disorders (“MPD”), including essential thrombocythemia (“ET”), are a group of diseases in which one or more blood cell types are overproduced. In the case of ET, excess numbers of platelets, which are involved in the blood clotting process, can result in abnormal blood clot formation giving rise to events such as heart attack and stroke. Excessive platelet production can also lead to the formation of abnormal platelets, which may not be as effective in the clotting process. This can lead to events such as gastrointestinal bleeding.

XAGRID (anagrelide hydrochloride) is marketed in Europe for the reduction of elevated platelet counts in at-risk ET patients. It was granted a marketing authorization in the EU in November 2004. XAGRID has been granted orphan drug status in the EU, providing it with up to ten years market exclusivity from November 2004.

In the US, anagrelide hydrochloride is sold by the Company under the trade name AGRYLIN for the treatment of thrombocythemia secondary to a MPD. Generic versions of AGRYLIN have been available in the US market since expiration of marketing exclusivity in 2005.

Human Genetic Therapies

REPLAGAL

REPLAGAL is currently the global market leader for the treatment of Fabry disease. 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 often progressing to full 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.

Table of Contents

In August 2001, REPLAGAL was granted marketing authorization and co-exclusive orphan drug status in the EU with up to 10 years market exclusivity and is also covered by patents in the EU and the US, of which the last to expire remain in effect until September 12, 2017. At December 31, 2011 REPLAGAL was approved in 46 countries.

Litigation proceedings relating to REPLAGAL are in progress. For further information see ITEM 3: Legal Proceedings and Note 19, “Commitments and Contingencies, Legal proceedings” to the consolidated financial statements set forth in this Annual Report on Form 10-K.

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. Hunter syndrome is one of several related lysosomal storage disorders (“LSD”). 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 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, providing it with up to seven and ten years market exclusivity in the US and EU, respectively, from the date of the grant of the relevant marketing authorization.

ELAPRASE received approval from the Ministry of Health, Labour and Welfare 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, 2011 ELAPRASE was approved in 48 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. In this LSD, clinical features are reflective of the distribution of 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 was authorized as an orphan medicine through the Centralised Procedure in Europe providing up to 10 years market exclusivity from the date of the grant of the relevant marketing authorization. At December 31, 2011 VPRIV was approved in 38 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 May 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. 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 seven and ten years market exclusivity in the US and EU, respectively, from the date of the grant of the relevant marketing authorization. At December 31, 2011 FIRAZYR was approved in 38 countries globally.

Table of Contents

Regenerative Medicine

DERMAGRAFT

DERMAGRAFT is a bio-engineered skin substitute that assists in restoring damaged tissue.

DERMAGRAFT is indicated for use in the treatment of full-thickness DFUs greater than six weeks in duration, which extend through the dermis, but without tendon, muscle, joint capsule, or bone exposure. DFUs are open sores or ulcers on the feet that can occur in people with diabetes as a result of peripheral neuropathy, or damage to the nerves, and can severely compromise a patient’s quality of life. It is estimated that DFUs affect nearly 900,000 people annually in the US, of which approximately 60% to 70% are estimated to be slow healers that could be treated with DERMAGRAFT, based on its approved indication (Lavery et al, 2003 and Margolis et al, 1999).

DERMAGRAFT was approved by the FDA in 2001 as a Class III medical device for the treatment of DFUs. DERMAGRAFT is also approved for the treatment of DFUs in South Africa, Israel and Singapore and the Company is exploring commercialization opportunities for those countries.

Table of Contents

Royalties received from other 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. The table below lists these products, indicating the principal indications, the company responsible for marketing the product and the relevant territory. In 2009, GSK established a partnership with Pfizer called ViiV Healthcare (“ViiV”) that brought together the HIV portfolios of GSK and Pfizer. ViiV markets the HIV products licensed to GSK by the Company.

The terms of the Company’s license agreement with GSK include royalty rates in the mid teens on sales of products in territories with patent coverage and single digit royalties in territories without patent coverage. GSK is required to pay royalties, through the term of the last-to-expire patent in each territory. In territories where no patent exists, GSK is required to pay royalties for 10 years from the first commercial sale. Royalty terms expire in most territories outside of the US during 2012. In the US, royalty terms expire between 2014 and 2018. After expiration the Company will cease to receive royalties from GSK on sales of products in the affected territories.

The Company may terminate the agreement in the event GSK fails to pay royalties for two successive quarters. Either party may terminate the agreement for material breach or insolvency.

Products	Principal indications	Relevant territory/marketed by

3TC/EPIVIR (lamivudine)	HIV	Canada / Shire & ViiV (1); RoW / ViiV
COMBIVIR (lamivudine and zidovudine)	HIV	Canada / Shire & ViiV; RoW / ViiV
TRIZIVIR (lamivudine, zidovudine and abacavir)	HIV	Canada / Shire & ViiV; RoW / ViiV
EPZICOM/KIVEXA (lamivudine and abacavir)	HIV	Canada / Shire & ViiV; RoW / ViiV
ZEFFIX/EPIVIR-HBV/ HEPTOVIR(2) (lamivudine)	Hepatitis B infection	Canada / Shire & GSK; RoW / GSK

(1) In 1996 Shire formed a commercialization partnership with GSK to market 3TC and ZEFFIX in Canada. In 2009 GSK assigned its interest in the partnership to ViiV.

(2) This is not a comprehensive list of trademarks for this product. The product is also marketed under other trademarks in some markets.

ADHD

ADDERALL XR

Shire receives royalties from Impax’s sales of authorized generic ADDERALL XR.

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 may also receive milestone payments from Bayer based on the achievement of certain sales thresholds.

Other royalties

The Company has licensed the rights to other products to third parties and receives royalties on third party sales.

Table of Contents

Products under development

The Company focuses its development resources on projects within its core therapeutic areas of ADHD, GI, HGT and RM, as well as early development projects in additional therapeutic areas. Total R&D expenditures of $770.7 million, $661.5 million and $639.9 million were incurred in the years to December 31, 2011, 2010 and 2009 respectively.

The table below lists the Company’s products in clinical development as of December 31, 2011 by disease areas indicating the most advanced development status reached in key 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 21-23 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.

Product

Disease area

Development status at December 31, 2011

The Company’s territorial rights


SP

Treatments for ADHD

INTUNIV (extended release guanfacine)	ADHD	Registration in Canada (entered Phase 3 in Q1 2003)	Global

VYVANSE/VENVANSE (lisdexamfetamine dimesylate)	ADHD	Registration in EU (entered Phase 3 in Q4 2008)	Global

INTUNIV	ADHD	Phase 3 in EU (entered Phase 3 in Q2 2010)	Global


Guanfacine Carrier Wave	ADHD and other CNS Disorders	Phase 1	Global

Treatments for GI diseases

LIALDA (mesalamine)/MEZAVANT (mesalazine)	Diverticulitis	Phase 3 globally (entered Phase 3 in Q4 2007)	Global (excluding Italy and Latin America) (1)

RESOLOR (prucalopride)	Chronic Constipation (Males)	Phase 3 in EU (entered Phase 3 in Q4 2010)	Europe

RESOLOR (prucalopride)	Chronic Constipation	Phase 3-ready in US	US (5)

SPD 557(M0003)	Refractory gastroesophageal reflux disease (“rGERD”)	Phase 2	EU and North America

Treatments for diseases in other therapeutic areas

XAGRID

Essential thrombocythaemia

Phase 3 in Japan (entered Phase 3 in Q4 2010)

Global

Table of Contents

VYVANSE (lisdexamfetamine dimesylate)	Adjunctive therapy in Major Depressive Disorder (“MDD”)	Phase 3 (entered Phase 3 in Q4 2011)	Global
VYVANSE (lisdexamfetamine dimesylate)	Excessive Daytime Sleepiness (“EDS”)	Phase 2	Global

VYVANSE (lisdexamfetamine dimesylate)	Negative Symptoms of Schizophrenia (“NSS”)	Phase 2	Global

VYVANSE (lisdexamfetamine dimesylate)	Other non ADHD indications in adults	Phase 2	Global

SPD 535	Arteriovenous grafts in hemodialysis patients	Phase 1	Global

HGT
Treatment for Fabry
REPLAGAL (agalsidase alfa)	Fabry disease	Registration in the US (additional study initiated to support US dossier Q1 2010)(4)	Global

Treatment for Duchenne Muscular Dystrophy (“DMD”)

HGT-4510	DMD	Phase 2a (currently on clinical hold)	Global (Excluding North America) (2)

Enzyme Replacement Therapies (“ERT”)

HGT-2310	Hunter Syndrome with central nervous system (“CNS”) symptoms, idursulfase-IT	Phase 1/ 2	Global (3)

HGT-1410	Sanfilippo Syndrome (Mucopolysaccharidosis IIIA)	Phase 1/ 2	Global

HGT-1110	Metachromatic Leukodystrophy (“MLD”)	Preclinical	Global

HGT-3010	Sanfilippo Syndrome (Mucopolysaccharidosis IIIB)	Preclinical	Global

RM

Treatment for Diabetic Foot Ulcers

DERMAGRAFT	DFU	Registration in Canada (dossier submitted for approval in Q1 2011)	Global

Treatment for Venous Leg Ulcers (“VLU”)

DERMAGRAFT	VLU	Phase 3 (entered Phase 3 in Q2 2009)	Global

Table of Contents

(1)	Mochida Pharmaceutical Co., Ltd has rights to develop and sell LIALDA in Japan under license with Shire.

(2)	As a result of a license and collaboration agreement with Acceleron Pharma Inc (“Acceleron”).

(3)	Genzyme has rights to manage marketing and distribution in Japan and certain other Asia Pacific countries under a license with Shire.

(4)	REPLAGAL entered Phase 3 in Q4 1998 for registration outside the US.

(5)	US rights were acquired from J&J in January 2012.

SPECIALTY PHARMACEUTICALS

Treatments for ADHD

INTUNIV for ADHD in Canada

In October 2011 Shire submitted a New Drug Submission (“NDS”) seeking the approval in Canada for INTUNIV for the treatment of ADHD in children and adolescents aged 6 to 17. In December 2011, Health Canada accepted the NDS for screening.

VYVANSE/VENVANSE for ADHD in the EU

In December 2011 Shire submitted an MAA seeking approval for VYVANSE (to be marketed as VENVANSE) for the treatment of ADHD in children aged 6 to 17. In January 2012 the EMA accepted this MAA for review.

INTUNIV for ADHD in the EU

INTUNIV for the treatment of ADHD in children aged 6 to 17 in the EU is in Phase 3 development.

Guanfacine Carrier Wave for the treatment of various CNS disorders

A lead candidate has been selected for development and a Phase 1 program has been initiated to determine safety and tolerability of this compound. The ongoing Phase 1 program will be supportive of potentially three different CNS-related indications: ADHD, hyperactivity in Autism Spectrum Disorder and Pediatric Anxiety.

Treatments for GI diseases

LIALDA/MEZAVANT for the treatment of diverticulitis

Phase 3 worldwide clinical trials investigating the use of LIALDA/MEZAVANT to prevent recurrent attacks of diverticulitis were initiated in 2007 and are ongoing.

RESOLOR for the treatment of chronic constipation in males

A Phase 3 European clinical trial to further assess the efficacy of RESOLOR for the treatment of chronic constipation in males was initiated in 2010 and is ongoing.

RESOLOR for the treatment of chronic constipation in the US

On January 10, 2012, Shire announced that it acquired the rights to develop and market RESOLOR in the US in an agreement with Janssen Pharmaceutica N.V. This product is Phase 3-ready and definitive plans will be implemented following discussions with regulatory authorities.

SPD 557 for the treatment of refractory GERD

SPD 557 (M0003) is a selective 5-HT4 receptor agonist. An exploratory Phase 2 program to investigate the effect of the product on reflux episodes in patients currently treated with proton pump inhibitors was initiated in the fourth quarter 2010 and is ongoing.

Treatments for diseases in other therapeutic areas

XAGRID for the treatment of essential thrombocythaemia in Japan

A Phase 3 clinical program has been initiated to assess the safety and efficacy of XAGRID in adult essential thrombocythaemia patients treated with cytoreductive therapy who have become intolerant to their current therapy or whose platelet counts have not been reduced to an acceptable level.

Table of Contents

Lisdexamfetamine dimesylate ((“LDX”), currently marketed as VYVANSE in the US for the treatment of ADHD) for the treatment of inadequate response in MDD

A Phase 3 clinical program to assess the efficacy and safety of LDX as adjunctive therapy in patients with MDD was initiated in the fourth quarter of 2011 and is ongoing.

LDX (currently marketed as VYVANSE in the US for the treatment of ADHD) for the treatment of EDS

Based on discussions with regulatory agencies regarding potential development pathways for LDX as a possible EDS treatment option, Phase 3 studies could begin in 2012.

LDX (currently marketed as VYVANSE in the US for the treatment of ADHD) for the treatment of NSS

Based on discussions with regulatory agencies regarding potential development pathways for LDX as a possible NSS treatment option, Phase 3 studies could begin in 2012.

LDX (currently marketed as VYVANSE in the US for the treatment of ADHD) for the treatment of other non ADHD indications in adults

Shire is conducting a Phase 2 pilot clinical trial to assess the efficacy and safety of LDX for the treatment of Binge Eating Disorder.

SPD 535 for the treatment of improvement in potency of arteriovenous access in hemodialysis patients

SPD 535 is in development as a novel molecule with platelet lowering ability and without phosphodiesterase type III inhibition apparent at clinically relevant doses. Data from Phase 1 clinical trials demonstrated positive proof-of-principle. Work is ongoing on additional Phase 1 studies to support progression to a Phase 2 proof-of-concept program that will target prevention of thrombotic complications associated with arteriovenous access in hemodialysis patients.

Projects in pre-clinical development

A number of additional projects are underway in various stages of pre-clinical development for the SP area, including programs using Carrier Wave technology. More data on these programs is expected throughout 2012.

Development projects discontinued in 2011

The Company has discontinued the following SP development projects during the year ended December 31, 2011:

·	FOSRENOL for the treatment of pre-dialysis chronic kidney disease

·	JUVISTA for the improvement of scar appearance

·	SPD 556 for the treatment of ascites

·	Carrier Wave molecules for the treatment of pain

·	RESOLOR for the treatment of opioid-induced constipation

HUMAN GENETIC THERAPIES

Treatments for Fabry

REPLAGAL – for the treatment of Fabry disease in the US

On October 24, 2011 Shire initiated a rolling Biologics License Application (“BLA”) for REPLAGAL in the US, designated Fast Track by the FDA. The Company submitted the final BLA sections in November 2011. In 2010 Shire withdrew an earlier BLA in order to gather additional clinical data for REPLAGAL. These data, including data from Shire’s ongoing US treatment Protocol, have now been evaluated and included in the new filing. The BLA has been accepted for Priority Review and assigned an action date of May 17, 2012.

Treatment for DMD

HGT-4510 for DMD

HGT-4510 (also referred to as ACE-031) was added to the Shire HGT portfolio in 2010 through an exclusive license in markets outside of North America for the ActRIIB class of molecules being developed by Acceleron. The lead ActRIIB drug candidate, HGT-4510 is in development for the treatment of patients with DMD. The Phase 2a trial is on hold. Additional preclinical toxicology work will be conducted in 2012. This product has been granted orphan designation in the US and the EU.

Table of Contents

ERT

HGT-2310 for the treatment of Hunter syndrome with CNS symptoms, idursulfase-IT (intrathecal delivery)

HGT-2310 is in development as an ERT delivered intrathecally for Hunter syndrome patients with CNS symptoms. The Company initiated a Phase 1/2 clinical trial in the first quarter of 2010. This trial is ongoing. This product has been granted orphan designation in the US.

HGT-1410 for Sanfilippo A Syndrome (Mucopolysaccharidosis IIIA)

HGT-1410 is in development as an ERT delivered intrathecally for the treatment of Sanfilippo A Syndrome (Mucopolysaccharidosis IIIA), an LSD. The product has been granted orphan drug designation in the US and in the EU. The Company initiated a Phase 1/2 clinical trial in August 2010. This trial is ongoing.

Early Research Products

HGT-3010 for Sanfilippo B Syndrome (Mucopolysaccharidosis IIIB)

HGT-3010 is in preclinical development as an ERT delivered intrathecally for the treatment of Sanfilippo B Syndrome (Mucopolysaccharidosis IIIB).

HGT-1110 - for the treatment of MLD

HGT-1110 is in preclinical development as an ERT delivered intrathecally for the treatment of Metachromatic Leukodystrophy. This product has been granted orphan drug designation in the US and the EU.

A number of additional early stage research projects are also underway for the HGT business area.

REGENERATIVE MEDICINE

Treatments for DFU

DERMAGRAFT – for the treatment of DFU

On March 21, 2011, prior to acquisition by the Company, ABH filed a Class IV Medical Device Application to Health Canada to seek approval for DERMAGRAFT for the treatment of DFU.

Treatments for VLU

DERMAGRAFT – for the treatment of VLU

On August 24, 2011 Shire announced its preliminary analysis of the top-line results from ABH’s Phase 3 pivotal trial of DERMAGRAFT in subjects with VLU. The international pivotal trial was designed as a prospective, multicenter, randomized, controlled clinical study to assess the product’s safety and efficacy in the promotion of healing VLU. The preliminary analysis of the data was that the trial did not meet the primary endpoint mutually agreed with the FDA and EMA and a subsequent detailed analysis of the data set is ongoing.

Table of Contents

Manufacturing and distribution

Active pharmaceutical ingredient (“API”) sourcing

The Company sources API from third party suppliers for its SP products and its HGT product FIRAZYR. Shire has manufacturing capability for agalsidase alfa, idursulfase and velaglucerase alfa at its protein manufacturing plant in Cambridge, Massachusetts, US for its HGT products, REPLAGAL, ELAPRASE and VPRIV, respectively and manufacturing capability for its RM product DERMAGRAFT at its manufacturing facility in La Jolla, California, US.

The Company currently has dual sources of API for VYVANSE, ADDERALL XR, LIALDA and PENTASA and is developing a second source for INTUNIV. The Company manages the risks associated with reliance on single sources of API by carrying additional inventories or developing second sources of supply.

In order to support the rapid growth of VPRIV and REPLAGAL, as well as to support clinical development, additional manufacturing capacity has been added in Lexington, Massachusetts, US. The facility has been approved for the purification of REPLAGAL API, and in November 2011 the Company submitted regulatory filings with both the EMA and the FDA for the production of VPRIV API at the new facility. On February 21, 2012 the EMA’s Committee for Medicinal Products for Human Use approved the production of VPRIV in this facility.

DERMAGRAFT is grown from a cryopreserved master cell bank that was procured from a single neonatal foreskin sourced in 1990. The cell line has been qualified by the FDA and the Company performs extensive testing to help ensure the safety of the fibroblast cells in the master cell bank.

Finished Product Manufacturing

The Company sources all of its SP products from third party contract manufacturers. HGT finished products are manufactured by contract manufacturers specializing in aseptic fill-finish operations.

The Company currently has dual sources for ELAPRASE, REPLAGAL 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 and VPRIV 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.

The Company currently utilizes numerous third-party suppliers for the raw materials used in the manufacturing of DERMAGRAFT. The Company currently obtains certain serum reagents, the mesh framework and the manifold used in the manufacture of DERMAGRAFT from single suppliers. The Company manages the risks associated with reliance on single sources by carrying additional inventories and, where appropriate, entering into contractual supply agreements with a bulk order provision in the case of early termination by the supplier.

During 2009, following a comprehensive evaluation of its operations and strategic focus, Shire decided to phase out operations at its SP manufacturing facility at Owings Mills, Maryland. This phase out was successfully completed during 2011.

Distribution

The Company’s US distribution center for SP products, 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 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 HGT products for the US market is contracted out to specialist third party contractors.

The Company ships DERMAGRAFT from its La Jolla, California facility using third-party carriers that are experienced in cold-chain logistics as well as from a third-party carrier and distributor’s site located in Louisville, Kentucky, from which the Company ships the majority of DERMAGRAFT intended for customers located in the Eastern part of the US.

Outside of the US, physical distribution of SP and HGT 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

The Company’s three largest trade customers are Cardinal Health, Inc., McKesson Corp, and AmerisourceBergen which are based in the US. In 2011, these wholesale customers accounted for approximately 23%, 19% and 7% of product sales, respectively.

Table of Contents

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 potential products for rare genetic diseases caused by protein deficiencies are small, and, where possible, the Company has sought orphan drug designation for products directed to these markets, (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 19, “Commitments and Contingencies, Legal 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 EP patents pertaining to the Company’s material products and certain products from which the Company receives a royalty, which are owned by or licensed to the Company and that are important 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.

	Granted US and EP Patents	Expiration Date
ADDERALL XR	US 6,322,819 US RE 41148 US 6,605,300 US RE 42096 US 6,913,768 EP 1123087	October 21, 2018 October 18, 2018 October 18, 2018 October 21, 2018 January 29, 2023 October 21, 2019
DERMAGRAFT	US 4,963,489 US 5,266,480 US 5,443,950	October 16, 2012 November 30, 2010 August 22, 2012
ELAPRASE	US 5,728,381 US 5,798,239 US 5,932,211	March 17, 2015 August 25, 2015 September 3, 2019
FIRAZYR	US 5,648,333 EP 370453	July 15, 2014 November 14, 2009

Table of Contents

FOSRENOL	US 5,968,976 US 7,381,428 US 7,465,465 EP 0817639	October 26, 2018 August 26, 2024 August 26, 2024 March 19, 2016
INTUNIV	US 5,854,290 US 6,287,599 US 6,811,794	September 21, 2015 December 20, 2020 July 4, 2022
LIALDA/MEZAVANT	US 6,773,720 EP 1198226 EP 1183014 EP 1287822	June 8, 2020 June 8, 2020 June 9, 2020 June 8, 2020
REPLAGAL	US 5,641,670 US 5,733,761 US 6,083,725 US 6,395,884 US 6,458,574 EP 0750044 EP 0935651	June 24, 2014 March 31, 2015 September 12, 2017 September 12, 2017 September 12, 2017 November 5, 2012 September 12, 2017
RESOLOR	EP 807110	November 16, 2015
VPRIV	US 5,641,670 US 5,733,761 US 6,270,989 US 6,566,099 US 7,138,262 US 7,833,766 EP 0672160	June 24, 2014 June 24, 2014 June 24, 2014 September 12, 2017 August 18, 2020 February 6, 2027 December 2, 2013

Table of Contents

VYVANSE	US 7,105,486 US 7,223,735 US 7,655,630 US 7,659,253 US 7,659,254 US 7,662,787 US 7,671,030 US 7,671,031 US 7,674,774 US 7,678,770 US 7,678,771 US 7,687,466 US 7,687,467 US 7,700,561 US 7,718,619 US 7,723,305	June 29, 2023 June 29, 2023 February 24, 2023 February 24, 2023 February 24, 2023 February 24, 2023 February 24, 2023 February 28, 2023 March 18, 2023 March 25, 2023 March 25, 2023 February 24, 2023 April 8, 2023 June 29, 2023 February 24, 2023 February 24, 2023
EPZICOM/KIVEXA	US 5,693,787 US 5,663,320 US 5,696,254 US 6,180,639 EP 565 549 EP 515 157	December 2, 2014 September 2, 2014 December 9, 2014 July 30, 2018 January 3, 2012 May 20, 2012
LAMIVUDINE: EPIVIR/EPIVIR-ZEFFIX/3TC	US 5,693,787 US 5,663,320 US 5,696,254 US 6,180,639 RE 39155 EP 565 549 EP 515 157	December 2, 2014 September 2, 2014 December 9, 2014 July 30, 2018 January 2, 2014 January 3, 2012 May 20, 2012
TRIZIVIR	US 5,693,787 US 5,663,320 US 5,696,254 US 6,180,639 EP 382 526 EP 565 549 EP 515 157	December 2, 2014 September 2, 2014 December 9, 2014 July 30, 2018 February 8, 2010 January 3, 2012 May 20, 2012

Table of Contents

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 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.

ADHD market

Competition in the US ADHD market has increased with the launch of competing products in recent years, including the launch of an authorized generic version of CONCERTA and RITALIN LA in 2011, and the launch of authorized generic ADDERALL XR by Teva and Impax in 2009. In late 2010, KAPVAY (twice daily, clonidine extended release) was approved by the FDA for the treatment of ADHD and was launched in the US by Shionogi & Co., Ltd in 2011. Shire’s share of the US ADHD market in December 2011 was 27.9% (compared to 24.5% in December 2010). Overall the US ADHD market grew by 10.4% in the year to December 31, 2011 (compared to 12.4% in the same period in 2010).

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 in Canada, Brazil, Mexico, South Korea and selected EU markets and further geographic expansion plans are underway, including a collaboration with Shionogi and Co. Ltd. to develop and sell ADHD products in Japan.

Key branded competitors in the US are stimulants CONCERTA and FOCALIN XR, and non-stimulants STRATTERA and KAPVAY. Generic immediate release stimulants which constitute 28.6% of the ADHD market (IMS NPA, December 2011) are also formidable in the US ADHD market, growing 2.4% in the year from December 31, 2010 to December 31, 2011.

Key competitors in the European ADHD market are CONCERTA (Janssen-Cilag), RITALIN LA (Novartis), MEDIKINET (Medice and distributors) and STRATTERA (Eli Lilly), depending upon the country.

The Canadian market continues to show strong growth, driven particularly by the adult market. CONCERTA is the number one selling brand in volume and share, although for the moving annual total (“MAT”) ending November 2011, generic methylphenidate volume and share grew by 15% and 2% respectively. Both the Brazilian and Mexican markets are growing strongly and in Brazil, which is predominantly an IR market, there is increasing penetration of the extended release brands.

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

Ulcerative Colitis 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.

The US oral 5-ASA market is led by Warner Chilcott’s ASACOL. In December 2011, ASACOL had a 37.4% share of the oral 5-ASA market, declining from 42.2% in December 2010.

In December 2011, Shire’s share of the US UC market was 35.8% (compared to 34.5% in December 2010).

The EU oral 5-ASA market was somewhat more fragmented (all data in this paragraph is stated as at November 2011). Ferring’s PENTASA and Warner Chilcott’s ASACOL were the major competitors across the EU. PENTASA (marketed in the EU by Ferring) captured 29.6% versus ASACOL’s 19.0% share of the EU G5 oral 5-ASA market (UK, Germany, Spain, Italy, and France). Warner Chilcott’s ASACOL led the UK market with a 45.8% share, followed by Ferring’s PENTASA, which had a 27.1% share. The German market was led by Dr Falk’s SALOFALK, with 53.2% market share, followed by Ferring’s PENTASA with 18% share. Ferring’s PENTASA and CLAVERSAL were the leaders in the oral 5-ASA market in Spain with 35.2% and 29.3% shares respectively. In 2010, Ferring launched a new competitor, PENTASA 1g tablet, in the EU and it has been launched in multiple countries in 2010 and 2011.

Mesalamine and balsalazide (mesalamine pro-drug) products are generally protected by formulation patents only. In December 2007, the FDA denied Salix’s Citizen Petition for COLAZAL and Salix subsequently announced the launch of an authorized generic version by Watson Laboratories. Three other generic versions of COLAZAL were then introduced. Generic versions of COLAZAL had a 7.5% share of the US oral 5-ASA market in December 2011.

Table of Contents

In May 2011, Cosmo / Ferring submitted an MAA in the EU for the oral corticosteroid, budesonide MMX, for the induction of remission in mild to moderate UC. In December 2011, Cosmo / Santarus submitted an NDA in the US for budesonide MMX for the same indication. If approved, this will be a new competitor in 2012 or 2013.

Janssen / MSD’s biologic, REMICADE, is approved for treatment and maintenance of moderate to severe UC in the US, Canada and the EU. Abbott submitted a supplemental NDA (“sNDA”) in the US in late 2010 and the EMA in early 2011 for an indication in moderate to severe UC for HUMIRA.

The Company is aware of other 5-ASA and non-ASA biologic treatments in development for UC by Tillotts, Salix, Janssen, Cosmo, Pfizer, and Millenium.

Chronic constipation market

In Europe, over-the-counter and prescription laxatives are the current first line therapy for chronic constipation. The highest value laxative (by revenue) is MOVICOL, a polyethylene glycol (“PEG”) 3350, sold by Norgine. In Europe, RESOLOR is indicated for symptomatic treatment of chronic constipation in women in whom laxatives fail to provide adequate relief and currently there are no other products available in the EU with the same indication.

Almirall submitted an MAA in the EU in September 2011 for a guanylate cyclase type-C agonist, linaclotide (under license from Ironwood), for the treatment of irritable bowel symptoms with constipation (“IBS-C”), which if approved would be a new competitor in the EU in 2012 or 2013. Ironwood submitted an NDA in October 2011 for linaclotide in the US for the treatment of IBS-C and chronic constipation. If approved, we expect Ironwood and Forest (who are co-developing and co-promoting linaclotide in the US) to launch linaclotide in 2012 or 2013 in the US.

In August 2011, Sucampo submitted an MAA in the UK for the chloride-channel activator, lubiprostone, for chronic idiopathic constipation which, if approved, would be a new competitor in the UK in 2012.

The Company is aware of other therapies for the treatment of chronic constipation / IBS-C being developed by Synergy Pharmaceuticals, Inc., ARYx Therapeutics, Theravance, Inc., Sucampo Pharmaceuticals, Inc., and Albireo.

Markets for the treatment of rare genetic diseases

Competitors for LSDs include Actelion Ltd., Protalix BioTherapeutics Inc (“Protalix”), and Genzyme. For example, REPLAGAL competes with Genzyme’s FABRAZYME, and VPRIV competes with Genzyme’s CEREZYME, Actelion’s ZAVESCA and will compete with the Protalix compound taliglucerase alfa (worldwide rights outside of Israel licensed to Pfizer) if approved. Shire is aware of two companies (Korea Green Cross Corporation and JCR Pharmaceuticals Co. Ltd) that are developing ERTs for the treatment of Hunter syndrome. JCR and Isu-Abxis also have early stage biosimilar programs for Gaucher and Fabry disease, and Harvest Moon and Dong A Pharmaceuticals have early stage biosimilar programs for Gaucher disease.

FIRAZYR competes in Europe with CSL Behring’s BERINERT P, a human plasma-derived C1-esterase inhibitor (C1-INH) product, and with Pharming Group N.V.’s RUCONEST (a recombinant version of C1-INH), which has been launched in certain European countries by Swedish Orphan Biovitrum. FIRAZYR also competes in Europe with ViroPharma’s Cinryze, another human plasma-derived C1-esterase inhibitor (C1-INH) product, which was approved in 2011 for both acute treatment and prevention of acute HAE attacks. FIRAZYR competes in the US with BERINERT and with Dyax Corporation’s KALBITOR, a plasma kallikrein inhibitor. ViroPharma’s CINRYZE, is approved in the US only for prophylaxis of HAE attacks.

For more information on orphan drug designation, see “Government regulation” below.

Regenerative medicine

The medical device and biotechnology industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. Competition in the regenerative medicine industry is particularly intense, due largely to the fact that regenerative medicine products currently compete with both traditional and advanced products, as well as bio-engineered products. DERMAGRAFT competes with other products based on efficacy, price, reimbursement, ease of use and healthcare provider education.

DERMAGRAFT competes in the US against other living cell products, such as Organogenesis’s APLIGRAF and also against manufacturers of traditional wound care products, including Healthpoint’s REGRANEX, Healthpoint’s OASIS Matrix products, and Soluble System’s THERASKIN. In addition, DERMAGRAFT competes against advanced mechanical technologies, such as negative pressure wound therapy. Negative pressure wound therapy uses a vacuum to remove excess fluid and cellular waste that create inflammation and hinder ulcer healing. Current competitors include KCI’s V.A.C. therapy and Smith & Nephew’s RENASYS.

Table of Contents

HIV Market

The HIV competitive landscape is becoming more crowded and complicated as treatment trends evolve. The Company’s 3TC/lamivudine/EPIVIR products (all licensed to GSK) are part of the Nucleoside/Nucleotide Reverse Transcriptase Inhibitors (“NRTI”) market. TRIZIVIR, COMBIVIR and EPZICOM/KIVEXA are part of the combined NRTI market. TRUVADA (tenofovir/emtricitabine), sold by Gilead, is the market leader in combination NRTI. In addition to the two NRTI HIV markets in which lamivudine is sold, there is competition from NRTIs, PIs and entry inhibitors.

TRUVADA and ATRIPLA (efavirenz/emtricitabine/tenofovir), a cross-class fixed dose combination also sold by Gilead, both represent the most direct competition to lamivudine.

Several generic drug companies have filed abbreviated new drug applications (“ANDAs”), seeking approval for EPIVIR, COMBIVIR, and EPZICOM in the US and several tentative approvals of generic lamivudine have been issued by the FDA. In December 2011, the FDA approved generic versions of EPIVIR that are manufactured by Aurobindo and Apotex.

Table of Contents

Government regulation

The clinical development, manufacturing and marketing of Shire’s products are 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, labeling, 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 labeling 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 labeling. 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 relatively small patient populations 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 HGT business unit.

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. Approval to manufacture these drugs is sought by filing an 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.

In the US, the DEA also 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

Table of Contents

scheduled drugs, the production and distribution of Shire’s ADHD products are strictly controlled and supply of active ingredient is dependent on the DEA’s permitted annual quotas and their 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 also 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 a 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.

The Department of Health and Human Services (“HHS”) administers the Medicare and Medicaid programs, major government payers for the poor and elderly 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 Affordable Care Act (“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 and increases in required rebates or discounts. Similar issues 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 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.

Similar regulatory and legislative issues 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.

Third party reimbursement and pricing

General. The Company’s revenue depends, in part, upon the price that third parties, such as health care providers and governmental organizations reimburse on behalf of patients and physicians for the cost of the Company’s products or competitive products and treatments. These third party payers are increasingly challenging the pricing of drugs and medical devices through tougher contracting and, especially with regards to Medicare and Medicaid, through the ACA and new regulations. Many government and commercial payers are also seeking positive pharmaco-economic data in order to justify the pricing of products. Some governments are demanding that manufacturers share more of the financial risk by making the price of a product commensurate with lowered overall cost of care.

Commercial Managed Care. Commercial payors negotiate the pricing of products to control their costs, including the use of formularies to encourage members to utilize preferred products with favorable terms. Exclusion from a formulary, or a disfavored formulary position, can reduce product usage in the payor’s patient population. In addition, reimbursement policies increasingly favor generic versions of drugs. For example, sales of the Company’s branded CARBATROL product have decreased in the US as a result of managed care initiatives implemented to favor generic versions. Overall drug usage could increase due to the expansion of covered lives under the ACA. However, increases in usage could be offset by increases in rebates. The estimated additional 16 to 18 million covered commercial managed care members, anticipated as a result of the ACA, could also increase the power of third-party payers, as they become gatekeepers to more members.

Medicaid. Many of the Company’s products are reimbursed by Medicaid, a joint federal / state health insurance plan for the poor in the US. Medicaid mandates federal rebates from manufacturers for participation in the program. Many states outsource management of Medicaid benefits to third parties (“Managed Medicaid” or “MMC”), leaving it to them to

Table of Contents

negotiate commercial rebates and formulary position with manufacturers. Other states manage their own formulary and require manufacturers to pay additional “state supplemental” rebates for positioning on its preferred drug list.

In addition to the increase in eligible Medicaid members, other factors could also influence the net sale price of products to Medicaid members, and could alter the overall composition of Medicaid membership, including:

The ACA mandates that manufacturers pay federal rebates on MMC utilization, on top of the commercial rebates negotiated with manufacturers. Some states are also trying to impose state supplemental rebates on MMC utilization. If states succeed, it would significantly increase costs for access to state’s formularies. The cost of rebates to MMC plans will also depend on how much each state controls the formulary.

·	Many states are also seeking to either outsource more Medicaid to MMC, or bring MMC members back into state administered Medicaid, depending on which arrangement is more financially favorable. These changes could affect both the utilization and rebates in each state’s Medicaid program.

·	The ACA has expanded eligibility for Medicaid and that is predicted to increase membership in the program by approximately 16 to 18 million new lives. However, it is not possible to predict the overall increases in Medicaid and Managed Medicaid business and the cost for Shire specifically.

The industry awaits finalization of the Centers for Medicare and Medicaid Services’ (“CMS”) proposed interpretation of Medicaid rebate increases related to product line extensions under the ACA. Depending on the guidelines, Shire’s Medicaid rebates could increase. CMS’ issuance of new Average Manufacturer’s Price (“AMP”) rules could also increase Medicaid rebate costs. CMS’ publication of its own pricing compendium, (“NADAC”), could affect reimbursement to pharmacists for drugs, depending on the rate of each state’s adoption. The lifting of the court-imposed injunction on use of AMP to establish Medicaid reimbursement rates to pharmacists could also decrease reimbursement rates for drugs.

Medicare. Some of the Company’s products are reimbursed by Medicare, a federal health insurance plan for the elderly and disabled in the US. Medicare is facing cost-reduction pressure from the ACA and the Budget Control Act (“BCA”). The Independent Medicare Advisory Board (“IPMAB”) established by the ACA will be seeking to find savings, with all recommendations put up for fast-track legislation. The legislature has proposed additional rebates for Medicare Part D outpatient drug utilization. The legislature has also proposed the imposition of new rebates on Part B injectable drug utilization. As CMS and the Office of Inspector General (“OIG”) implement comparisons between Average Sales Price (“ASP”) and AMP, the reimbursement to physicians could decrease for some products, depending on which metric is used for setting the reimbursement. Medicare’s End Stage Renal Disease Prospective System will also bundle previously separately-billable renal drugs into the overall dialysis payment, potentially reducing the reimbursement rates for renal products, such as Shire’s FOSRENOL.

In Shire’s new RM business unit, DERMAGRAFT is regulated in the US by the FDA as a Class III medical device, but treated under Medicare Part B by CMS as a biologic. Under Part B, in the outpatient hospital, ambulatory surgery center and physician office settings, biologics used as skin substitutes are reimbursed separately by CMS. In addition, CMS currently assigns DERMAGRAFT a “K” status indicator, which indicates items paid separately under such payment system currently using an ASP methodology. Effective as of January 1, 2012, the American Medical Association (“AMA”) assigned new current procedural terminology codes in relation to the invoicing of all skin substitute applications. These new codes will affect physicians, outpatient hospitals, and ambulatory surgery centers in their coding for skin substitute applications. These new codes will provide lower payment amounts in 2012 for physician services. The Company cannot predict the extent to which future changes will affect the procedures that use DERMAGRAFT.

Accountable Care Organizations (“ACOs”). The ACA aims to create more ACOs offering integrated end-to-end care for Medicare members, moving Medicare to single payments for health outcomes. The ACO incentives under the ACA could create new gatekeepers for access to Shire’s drugs and could require further rebates to be provided in order to maintain access to ACO members.

Legal & Regulatory Landscape. The US Supreme Court will soon hear a case that could eliminate the individual health mandate of the ACA, which would heavily reduce the projected increases in covered lives under the ACA, and create higher managed care rebates. There is also a lawsuit challenging the ACA Medicaid expansion. Follow-up legislation, funding for agencies and interpretation from the agencies could greatly affect implementation of programs. Depending on whether policies favorable to orphan drugs continue, and to what extent managed care entities find mechanisms to impose cost limits, Shire’s orphan drug business could also be affected. The failure of the Congressional Super Committee in the US to find savings in the budget may also affect Shire, depending on what government payer programs are targeted. The BCA now automatically cuts $1.2 trillion from the US budget over the next decade. Medicare will take a 2% reduction, although Medicaid will be protected. 2012 being an election year in the US, a change in the legislative balance of power could alter the pace of the sequestration process and ACA initiatives.

Enforcement. The US drug and medical device market is highly litigious. The ACA has increased funding aimed at enforcement and investigation of drug and medical device manufacturers, and several states have followed suit, intending to exact more settlements from manufacturers. The OIG is also regularly imposing Corporate Integrity Agreements (“CIA”)

Table of Contents

on manufacturers. A CIA can add significant cost for a manufacturer, given the need to hire an Independent Review Organization (“IRO”) to comply with the CIA. Shire has received a subpoena from the OIG relating to the sales and marketing of ADDERALL XR, DAYTRANA and VYVANSE. Please see Note 19, “Commitments and Contingencies, Legal proceedings” to the consolidated financial statements listed under ITEM 15: Exhibits and Financial Statement Schedules in this Annual report on Form 10-K.

International. In the EU, price controls and non-reimbursement for new, highly priced medicines are expected. Uncertainty exists about the reimbursement status of newly approved products in the EU. Germany, for example, is working on the Act for the Restructuring of the Pharmaceutical Market in Statutory Health Insurance. This proposed law would maintain free pricing the first year, but assess the benefit of new drugs within three months of commercialization, in order to set a price as of the 13th month. Prices of drugs bringing added value will qualify for price negotiation, while those with no added value will be subject to reference pricing. Criteria required to prove a drug’s benefit include "additional patient-related outcomes". Third party reimbursement limits may reduce the demand for a Company’s products. The slow pace of the price applications process in some countries have delayed and, occasionally, prevented launches of a Company’s products. 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 appropriate reimbursement profile.

Responsibility

The Company continues to develop its approach to corporate responsibility (“Responsibility”). The Shire Responsibility Co-ordination Team (the “Team”) comprises representatives from, among other departments, Legal, R&D, Human Resources, Environment Health & Safety, Compliance & Risk Management, Facilities, Marketing and Corporate Communications. The Chairperson of the Team is Shire’s General Counsel, Tatjana May. The Team determines the Company’s overall Responsibility strategy, which is approved by the Company’s Board of Directors, and works with the businesses and functions to embed Responsibility practices within all operations. The Team sets and monitors Responsibility objectives which support delivery of Shire’s overall strategy, and meets at least three times a year to discuss and monitor progress. Shire communicates widely about its approach to Responsibility and has a section on its website dedicated to information and ongoing updates on Shire’s work, initiatives and achievements that illustrate Shire’s commitment to corporate responsibility.

Employees

In the pharmaceutical industry, the Company’s employees are vital to its success. At December 31, 2011 the Company had 5,251 employees (2010: 4,183 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.

Table of Contents

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 loss.

Set out below are the key risk factors associated with the business that have been identified through the Company's approach to risk management. Some of these risk factors are specific to the Company, and others are more generally applicable to the pharmaceutical industry or specific markets in which the Company operates. The Company believes that these risk factors apply equally and therefore all should be carefully considered before any investment is made in Shire.

RISK FACTORS RELATED TO THE COMPANY’S BUSINESS

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 timing of the receipt of additional marketing approvals, the scope of marketing approvals as reflected in the product’s label, the countries in which such approvals are obtained, the authorization of price and reimbursement 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 may not be able to grow its product revenues as quickly as anticipated if any or all of the following occur:

·	if Shire’s products or competitive products are genericized or if the prices of competitor products are otherwise reduced significantly;

·	if there are unanticipated adverse events experienced with the Company’s products or those of a competitor’s product in the same therapeutic area not seen in clinical trials that impact the physician’s willingness to prescribe the Company’s products;

·	if issues arise from clinical trials being conducted for post marketing purposes or for registration in another country or if regulatory agencies in one country act in a way that raises concerns for regulatory agencies or for prescribers or patients in another country;

·	if patients, payors or physicians favor other treatments over the Company’s products;

·	if government regulation is stricter for the Company’s products than for other treatments;

loss of patent protection or ability of competitors to challenge or circumvent patents (See ITEM 3: Legal Proceedings and Note 19, “Commitments and Contingencies, Legal proceedings” to the consolidated financial statements set forth in this Annual Report on Form 10-K for details of current patent litigation);

·	if planned geographical expansion into emerging markets is not successful;

·	if the sizes of the patient populations for the Company’s products are less than expected or the Company fails to identify new patients for its products; or

·	if there are lawsuits filed against Shire, including but not limited to, product liability claims, consumer law claims, and payor or reimbursement litigation.

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

Unanticipated decreases in revenues from ADDERALL XR could significantly reduce the Company’s revenues and earnings

Following the launch of authorized generic versions of ADDERALL XR in 2009, Shire’s sales of ADDERALL XR decreased by 42% in 2010 compared to 2009. In the year to December 31, 2011 product sales of ADDERALL XR increased 48% to $532.8 million, representing approximately 12% of the Company’s total revenues, (sales of ADDERALL XR in the years to December 31, 2010 and 2009 were $360.8 million and $626.5 million respectively).

The Company sells authorized generic versions of ADDERALL XR to Teva and Impax and currently receives royalties from Impax in respect of sales of its authorized generic. Shire continues to sell the branded version of ADDERALL XR.

Factors that could negatively impact total revenue from ADDERALL XR include, but are not limited to:

·	erosion of ADDERALL XR product sales if the authorized generic versions capture Shire’s branded market share;

Table of Contents

·	any approval by the FDA of any ANDAs for ADDERALL XR which could further reduce branded market share. Any such approval may eliminate or reduce royalties currently received from Impax;

·	issues impacting the production of ADDERALL XR or the supply of amphetamine salts including, but not limited to, the ability to get sufficient quota from the US DEA;

·	changes in reimbursement policies of third-party payers; and

·	changes to the level of sales deductions for ADDERALL XR for private or public payers.

In addition, in respect of the period prior to October 1, 2010, when certain provisions of the 2010 Affordable Care Act became effective and provided further clarity, there were potentially different interpretations as to how shipments of authorized generic ADDERALL XR to Teva and Impax should be included in the Medicaid rebate calculation. The CMS may disagree with the Company's interpretation as to how shipments of authorized generic ADDERALL XR should be included in the Medicaid rebate calculation, and require the Company to apply an alternative interpretation of the Medicaid rebate legislation, resulting in additional liability to be recorded by the Company. For further details, see ITEM 7: Management’s discussion and analysis of financial condition and results of operations.

The failure to obtain and maintain reimbursement, or an adequate level of reimbursement, by third-party payers in a timely manner for the Company's products may impact future revenues and earnings

The Company's revenues are partly dependent on the level of reimbursement provided to the Company by governmental reimbursement schemes for its products. Changes to governmental policy or practices could adversely affect the Company's revenues, financial condition and results of operations. In addition, the reimbursement of treatments by health care providers, private health insurers and other organizations, such as health maintenance organizations and managed care organizations is under downward pressure and this, in turn, could impact on the prices at which the Company can sell its products.

The market for the Company’s products could be significantly influenced by the following, which could result in lower prices for the Company's products and/or a reduced demand for the Company's products:

·	higher levels of controls on the use of the Company’s products and/or requirements for additional price concessions by managed health care organizations;

·	legislative proposals to reform health care and government insurance programs in many of the Company's markets; and

·	price controls and non-reimbursement of new and highly priced medicines for which the economic and therapeutic rationales are not established.

The prices for certain of the Company's products, in particular products for the treatment of rare genetic diseases such as REPLAGAL, ELAPRASE and VPRIV, may be high compared to other pharmaceutical products. The Company may encounter difficulty in obtaining satisfactory pricing and reimbursement for such products. The failure to obtain and maintain pricing and reimbursement at satisfactory levels for such products may adversely affect the Company’s revenues, financial condition and results of operations.

A disruption to a product’s supply chain 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

The Company sources some products from third party contract manufacturers, and for certain products has its own manufacturing capability. 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, FIRAZYR, FOSRENOL, INTUNIV, PENTASA, RESOLOR and VPRIV, relies on a single active ingredient source for each of ELAPRASE, FIRAZYR, FOSRENOL, INTUNIV, REPLAGAL, RESOLOR and VPRIV and relies on a single source for certain serum reagents, the mesh framework and the manifold used in the manufacture of DERMAGRAFT.

In the event of:

·	financial failure of a third party contract manufacturer; or

·	the failure of a third party manufacturer to comply with its contractual obligations; or

·	the failure of the Company or a third party contract manufacturer to comply with mandatory manufacturing standards ( “Current Good Manufacturing Standards” or “cGMP”); or

Table of Contents

·	the failure of the Company or a third party contract manufacturer to manufacture sufficient quantities of product to meet demand; or

·	any other form of disruption to the supply chain.

the Company may experience a delay in supply or be unable to supply, market or develop its products. Any disruption in the supply chain could have a material adverse effect on the Company’s revenues, financial condition and results of operations.

There is no assurance that suppliers will continue to supply on commercially viable terms, or be able to supply components that meet regulatory requirements. The Company is also subject to the risk that suppliers will not be able to meet the quantities needed to meet market requirements which may result in the shortage of product supplies in the market

The development and approval of the Company's products depends on the ability to procure active ingredients and special packaging materials from sources approved by regulatory authorities. As the marketing approval process requires manufacturers to specify their own proposed suppliers of active ingredients and special packaging materials in their applications, regulatory approval of a new supplier would be required if active ingredients or such packaging materials were no longer available from the supplier specified in the marketing approval. The need to qualify a new supplier could delay the Company's development and commercialization efforts.

The Company uses bovine-derived serum sourced from New Zealand and North America in the manufacturing process for ELAPRASE and DERMAGRAFT. The discovery of additional cattle in North America or the discovery of cattle in New Zealand with bovine spongiform encephalopathy, or mad cow disease, could cause the regulatory agencies in some countries to impose restrictions on these products, or prohibit the Company from using them. This could disrupt the Company’s ability to supply these products and would have a material adverse effect on the Company’s revenues, financial conditions or results of operations.

The actions of certain customers can affect the Company's ability to sell or market products profitably, as well as impact net sales and growth comparisons

A small number of large wholesale distributors control a significant share of the US and certain European markets. In 2011, for example, 49% of the Company's product sales were attributable to three customers in the US; McKesson Corp., Cardinal Health, Inc and AmerisourceBergen Corp. In the event of financial failure of either of these customers, the Company may suffer financial loss and a decline in revenues and earnings. In addition, the number of independent drug stores and small chains has decreased as retail pharmacy consolidation has occurred. Consolidation or financial difficulties could cause customers to reduce their inventory levels, or otherwise reduce purchases of the Company's products. Such actions could have an adverse effect on the Company's revenues, financial condition and results of operations. A significant portion of the Company’s SP product sales are made to major pharmaceutical wholesale distributors as well as to large pharmacies in both the US and Europe. Consequently, product sales and growth comparisons may be affected by fluctuations in the buying patterns of major distributors and other trade buyers. These fluctuations may result from seasonality, pricing, wholesaler buying decisions, or other factors. In addition, a significant portion of the Company's revenues for certain products for treatment of rare genetic diseases are concentrated with 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 and results of operations.

Investigations or enforcement action by regulatory authorities or law enforcement agencies relating to the Company’s activities in the highly regulated markets in which it operates may result in the distraction of senior management, significant legal costs and the payment of substantial compensation or fines

The Company engages in various marketing, promotional and educational activities pertaining to, as well as the sale of, pharmaceutical products in a number of jurisdictions around the world. The promotion, marketing and sale of pharmaceutical products is highly regulated and the operations of market participants, such as the Company, are closely supervised by regulatory authorities and law enforcement agencies, including the US Department of Health and Human Services (“HHS”), the FDA, the US Department of Justice, the SEC and the DEA. These authorities and agencies have broad authority to investigate market participants for violations of federal laws relating to the marketing and promotion of pharmaceutical products, 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 the submission of false claims for reimbursement by the federal government. Pharmaceutical companies may be subject to enforcement actions or prosecution for such conduct, as well. Any inquiries or investigations into the operations of, or enforcement or other regulatory action against, the Company by such authorities could result in the distraction of senior management for prolonged periods of time, significant defence costs, substantial monetary penalties and require extensive government monitoring of Company activities in the future. As an example, on September 23, 2009 the Company received a subpoena from the HHS Office of Inspector General in coordination with the US Attorney for the Eastern District of Pennsylvania, seeking production of documents related to the sales and marketing of ADDERALL XR, VYVANSE and DAYTRANA. Shire is cooperating and responding to this subpoena (For further

Table of Contents

information see ITEM 3: Legal Proceedings and Note 19, “Commitments and Contingencies, Legal proceedings” to the consolidated financial statements set forth in this Annual Report on Form 10-K).

Adverse outcomes in legal matters could have a material adverse effect on our revenue, financial condition and 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, employment claims and disputes, intellectual property claims and disputes, contract claims and disputes, product liability claims and disputes, regulatory litigation and tax audits.

Any unfavourable outcome in such matters could adversely impact the Company’s ability to develop and commercialize its products, distract senior management to the detriment of the business, adversely affect the profitability of existing products, possibly subject the Company to substantial fines, penalties and injunctive or administrative remedies, and possibly result in the imposition of regulatory controls or exclusion of certain products or the Company from government reimbursement programs. Any such outcomes could have a material adverse effect on our revenue, financial condition and results of operations. (For further information see ITEM 3: Legal Proceedings and Note 19, “Commitments and Contingencies, Legal proceedings” to the consolidated financial statements set forth in this Annual Report on Form 10-K).

Contractual relationships can create a significant dependency on third parties, the failure of whom can affect the ability to operate the Company's business and to develop and market products

The Company has entered into many agreements with third parties for the provision of goods and services to enable it to operate its business. If the third party does not provide the goods or services on the agreed basis, the Company may not be able to continue the development or commercialization of its products as planned or on a commercial basis. Additionally, it may not be able to establish or maintain good relationships with the suppliers.

The Company has entered into licensing, co-development and other agreements with third parties. These contractual agreements may be altered, terminated or expire and the Company may not be able to renew, extend or contract on similar commercial terms, with the party or another third party. In such circumstances, the Company may be unable to continue to develop or market its products as planned and could be required to abandon or divest a product line.

RISK FACTORS RELATED TO THE PHARMACEUTICAL AND BIOTECHNOLOGY INDUSTRIES IN GENERAL

The actions of governments, industry regulators and the economic environments in which the Company operates may adversely affect its ability to develop and profitably market its products

Changes to laws or regulations impacting the pharmaceutical industry, in any country in which the Company conducts its business, may adversely impact the Company's revenues, financial condition and results of operations. For example, changes to the regulations relating to orphan drug status may affect the exclusivity granted to products with such designation.

A slowdown of global economic growth, or continued instability of the Eurozone, could have negative consequences for our 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 also reduce the level of reimbursement that governments are willing and able to provide to the Company for its products and, as a result, adversely affect the Company’s revenues, financial condition and results of operations.

Any slowing economic environment may also lead to financial difficulties for some of the Company’s significant customers. In such situations, the Company could experience delays in payment or non-payment of amounts owed which may result in a rising level of contractual defaults by its contractual counterparties. The Company does business, both directly (with government hospitals, clinics, pharmacies and other agencies) and indirectly (through wholesalers and distributors), with a number of Eurozone governments (including the governments of Greece, Ireland, Italy, Portugal and Spain) that have experienced or may continue to experience declines in their creditworthiness which may result in the continuation of significant cuts to public spending in an attempt to manage their budget deficits.

In addition, there are concerns for the overall stability and suitability of the Euro as a single currency, given the economic and political challenges facing individual Eurozone countries. Continuing deterioration in the creditworthiness of Eurozone

Table of Contents

countries, the withdrawal of one or more member countries from the EU, or the failure of the Euro as a common European currency could adversely effect the Company’s revenues, financial condition or results of operations.

The introduction of new products by competitors may impact future revenues

The markets in which the Company operates are highly competitive. Many of the Company's competitors are large, well-known pharmaceutical, biotechnology, chemical and healthcare companies with considerable resources. Companies with more resources and larger R&D expenditures have a greater ability to fund clinical trials and other development work necessary for regulatory applications. They may also be more successful than the Company in acquiring or licensing new products for development and commercialization. If any product that competes with one of the Company's principal drugs is approved, the Company's sales of that drug could be negatively impacted.

The pharmaceutical, biotechnology and regenerative medicine industries are also characterized by continuous product development and technological change. The Company's products could, therefore, be rendered obsolete or uneconomic, through the development of new products, technological advances in manufacturing or production by its competitors.

The successful development of products is highly uncertain and requires significant expenditures and time

Products that appear promising in research or development may be delayed or fail to reach later stages of development or the market for several reasons, including:

·	preclinical or clinical tests may show the product to lack safety or efficacy;

delays may be caused by slow enrollment in clinical studies; regulatory requirements for clinical trial drug supplies; extended length of time to achieve study endpoints; additional time requirements for data analysis or dossier preparation; time required for discussions with regulatory agencies, including regulatory agency requests for additional preclinical or clinical data; delays at regulatory agencies due to staffing or resource limitations; analysis of or changes to study design; unexpected safety, efficacy, or manufacturing issues; delays may arise from shared control with collaborative partners in the planning and execution of the product development, scaling of the manufacturing process, or getting approval for manufacturing;

·	manufacturing issues, pricing or reimbursement issues, or other factors may render the product economically unviable;

·	the proprietary rights of others and their competing products and technologies may prevent the product from being developed or commercialized; and

·	failure to receive necessary regulatory approvals.

Success in preclinical and early clinical trials does not ensure that large-scale 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. 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.

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. Further, a number of the Company’s ADHD products contain controlled substances and are subject to regulation by the US DEA and equivalent agencies in other countries.

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

The Company enters into strategic partnerships with other companies in areas such as product development and 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.

Table of Contents

The failure to secure new products or compounds for development, either through in-licensing, acquisition or internal research and development efforts, 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 in-license, acquire or develop new products or compounds. The Company also expends significant resources on research and development. The failure to 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 and results of operations. The failure of these efforts to develop products appropriate for testing in human clinical trials could have a material adverse effect on the Company's revenues, financial condition and 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 variously on trade secrets, unpatented know-how and technological innovations and contractual arrangements with third parties to maintain its competitive position.

Patents and patent applications covering a number of the technologies and processes owned or licensed to the Company have been granted, or are pending in various countries, including the US, Canada, major European countries and Japan. The Company intends to enforce vigorously its patent rights and believes that its partners intend to enforce vigorously patent rights they have licensed to the Company. However, patent rights may not prevent other entities from developing, using or commercializing products that are similar or functionally equivalent to the Company's products or technologies. The Company's patent rights may be successfully challenged in the future or laws providing such rights may be changed or withdrawn. The Company cannot assure investors that its patents and patent applications or those of its commercial partners, licensors and third party manufacturers will provide valid patent protection sufficiently broad to protect the Company's products and technology or that such patents will not be challenged, revoked, invalidated, infringed or circumvented by third parties. In the regular course of business, the Company is party to litigation or other proceedings relating to intellectual property rights. (See ITEM 3: Legal Proceedings and Note 19, “Commitments and Contingencies, Legal proceedings” to the consolidated financial statements set forth in this Annual Report on Form 10-K for details of current patent litigation).

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. If third parties are the first to invent a particular product or technology, it is possible that those parties will obtain patent rights that will be sufficiently broad to prevent the Company or its strategic partners from developing, manufacturing or selling its products. The Company may need to obtain licenses for intellectual property rights from others to develop, manufacture and market commercially viable products and may not be able to obtain these licenses on commercially reasonable terms, if at all. In addition, any licensed patents or proprietary rights may not be valid and enforceable.

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 of such information. 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. Protracted and costly litigation could be necessary to enforce and determine the scope of the Company's proprietary rights. The failure to obtain or maintain patent and trade secret protection, for any reason, could allow other companies to make competing products which could have a material adverse effect on the Company's revenues, financial condition or results of operations.

The Company has filed applications to register various trademarks for use in connection with its products in various countries including the US and countries in Europe and Latin America and intends to trademark new product names as new products are developed. In addition, with respect to certain products, the Company 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 any rights under any of these trademarks. The Company's inability or the inability of these third parties to protect their trademarks because of successful third party claims to those trademarks could allow others to use the Company's trademarks and dilute their value.

Table of Contents

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 entails 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.

Loss of highly qualified management and scientific personnel could cause the Company subsequent financial loss

The Company faces competition for highly qualified management and scientific personnel from other companies, academic institutions, government entities and other organizations. It may not be able to successfully attract and retain such personnel. The Company has agreements with a number of its key scientific and management personnel for periods of one year or less. The loss of such personnel, or the inability to attract and retain the additional, highly skilled employees required for its activities could have an adverse effect on the Company's business.

ITEM 1B: Unresolved Staff Comments

None.

Table of Contents

ITEM 2: Properties

The following are the principal premises of the Company, as at December 31, 2011:

Location	Use	Approximate Square Footage	Owned or Leased
Dublin, Ireland	Office accommodation	16,000	Leased
Basingstoke, UK	Office accommodation	127,000	Owned
Wayne, Pennsylvania, US	Office accommodation	420,000	Leased
Florence, Kentucky, US	Warehousing and distribution facility	96,000	Leased
Lexington, Massachusetts, US	Office accommodation, laboratories and manufacturing, warehousing and distribution facility	622,000	Owned
Cambridge, Massachusetts, US	Office accommodation and laboratories	181,000	Leased
Cambridge, Massachusetts, US	Manufacturing facility	29,000	Leased
Cambridge, Massachusetts, US	Office accommodation	34,000	Leased
North Reading, Massachusetts, US	Warehousing facility	92,000	Leased
Belmont, Massachusetts, US	Warehousing facility	16,000	Leased

La Jolla, California, US	Office accommodation, laboratories and manufacturing, warehousing and distribution facility	74,000	Leased

San Diego, California, US	Office accommodation and warehousing	47,000	Leased

Sao Paulo, Brazil	Office accommodation	14,000	Leased

Ville St Laurent, Quebec, Canada	Office accommodation	35,000	Leased
Berlin, Germany	Office accommodation	22,000	Leased

Nyon, Switzerland	Office accommodation	40,365	Leased

Madrid, Spain	Office accommodation	16,383	Leased

The Company also has other smaller locations in some of the countries listed above and in several other countries around the world. At December 31, 2011 all the above sites were utilized by the Company. Shire also has a small amount of Cambridge office space that is sub-leased and a small amount of Lexington laboratory space that it owns but leases.

Table of Contents

ITEM 3: Legal Proceedings

The information required by this Item is incorporated herein by reference to Note 19, “Commitments and Contingencies, Legal 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.

Table of Contents

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.

	High £ per ordinary share		Low £ per ordinary share
Year to December 31, 2011
1st Quarter		18.32		15.61
2nd Quarter		19.61		17.91
3rd Quarter		21.36		18.18
4th Quarter		22.43		18.83

Year to December 31, 2010
1st Quarter		15.16		12.20
2nd Quarter		14.83		13.21
3rd Quarter		15.21		13.41
4th Quarter		15.67		14.05

The total number of record holders of ordinary shares of Shire on February 21, 2012 was 4,944. 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 21, 2012 the proportion of ordinary shares represented by ADRs was 27.37% 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.

	High $ per ADS		Low $ per ADS
Year to December 31, 2011
1st Quarter		89.23		72.61
2nd Quarter		96.32		87.92
3rd Quarter		104.00		87.43
4th Quarter		103.90		88.04

Year to December 31, 2010
1st Quarter		67.31		57.64
2nd Quarter		68.05		57.94
3rd Quarter		71.18		60.93
4th Quarter		74.12		66.79

Table of Contents

The number of record holders of ADSs on February 21, 2012 was 1,451. 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, 2011 of 2.48 US cents (1.52 pence) per ordinary share, equivalent to 7.44 US cents per ADS, was paid in October 2011. The Board has resolved to pay a second interim dividend of 12.59 US cents (7.96 pence) per ordinary share equivalent to 37.77 US cents per ADS for the six months to December 31, 2011.

A first interim dividend for the six months to June 30, 2010 of 2.25 US cents (1.41 pence) per ordinary share, equivalent to 6.75 US cents per ADS, was paid in October 2010. A second interim dividend for the second half of 2010 of 10.85 US cents (6.73 pence) per ordinary share equivalent to 32.55 US cents per ADS was paid in April 2011.

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 USD dividend. Dividend growth for the full year will be reviewed by the Board when the second interim dividend is determined.

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 into place income access arrangements which enable Shire ordinary shareholders, other than Shire ADS holders, to choose whether they receive their dividends from Shire a company resident for tax purposes in the Republic of Ireland or from Old Shire, a Shire group company resident for tax purposes 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:

If a dividend is announced or declared by Shire plc on its ordinary shares, an amount is paid by Old Shire by way of a dividend on the income access share to the Trustee, and such amount is paid by the Trustee to ordinary shareholders who have elected (or are deemed to have elected) to receive dividends under these arrangements. The dividend which would otherwise be payable by Shire plc to its ordinary shareholders will be reduced by an amount equal to the amount paid to its ordinary shareholders by the Trustee.

ii)

If the dividend paid on the income access share and on-paid by the Trustee to ordinary shareholders is less than the total amount of the dividend announced or declared by Shire plc on its ordinary shares, Shire plc will be obliged to pay a dividend on the relevant ordinary shares equivalent to the amount of the shortfall. In such a case, any dividend paid on the ordinary shares will generally be subject to Irish withholding tax at the rate of 20% or such lower rate as may be applicable under exemptions from withholding tax contained in Irish law.

iii)	An ordinary shareholder is entitled to make an income access share election such that she/he will receive his/her dividends (which would otherwise be payable by Shire plc) under these arrangements from Old Shire.

iv)

An ordinary shareholder who holds 25,000 or fewer ordinary shares at the first record date after she/he first becomes an ordinary shareholder, and who does not make a contrary election, will be deemed to have made an election (pursuant to the Shire plc articles of association) such that she/he will receive his/her dividends under these arrangements from Old Shire.

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, she/he must withdraw his/her ordinary shares from the ADS program prior to the dividend record date set by the Depositary and request delivery of the Shire plc ordinary shares. This will enable him/her to receive dividends from Shire plc (if necessary, by making an election to that effect).

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 (or are deemed to 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.

Table of Contents

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 Depositary) who have made (or are deemed to 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, 2011 Old Shire paid dividends totalling $67.6 million (2010: $58.3 million; 2009: $45.9 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 make payments of dividends from its accumulated profits and other distributable reserves. 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 debts 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 distributable reserves, 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.

Performance Graph

For a graph comparing the cumulative total return to our stockholders during the five years ending December 31, 2011 to that of the London Stock Exchange 100 Index, please refer to ITEM 11: Executive Compensation – Directors’ Remuneration Report.

Table of Contents

ITEM 6: Selected financial data

The selected consolidated financial data presented below as at December 31, 2011 and 2010 and for the years to December 31, 2011, 2010 and 2009 were derived from the audited consolidated financial statements of the Company, included herein.

The selected consolidated financial data presented below as at December 31, 2009, 2008 and 2007 and for the years to December 31, 2008 and 2007 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 the consolidated financial statements and related notes appearing elsewhere in this report.

Year to December 31,	2011			2010			2009			2008			2007
		$’M			$’M			$’M			$’M			$’M
Statements of Operations:
Total revenues		4,263.4			3,471.1			3,007.7			3,022.2			2,436.3
In-process R&D		-			-			(1.6	)		(263.1	)		(1,866.4	)
(Loss)/gain on sale of product rights		(6.0	)		16.5			6.3			20.7			127.8
Other operating expenses(1)		(3,148.2	)		(2,693.5	)		(2,392.2	)		(2,367.8	)		(2,076.8	)
Operating income/(loss)		1,109.2			794.1			620.2			412.0			(1,379.1	)
Total other (expense)/income, net(2)		(19.1	)		(24.8	)		22.8			(146.4	)		(19.0	)
Income/(loss) from continuing operations before income taxes and equity in earnings/(losses) of equity method investees		1,090.1			769.3			643.0			265.6			(1,398.1	)
Income taxes		(227.6	)		(182.7	)		(138.5	)		(98.0	)		(55.5	)
Equity in earnings/(losses) of equity method investees, net of taxes		2.5			1.4			(0.7	)		2.4			1.8

Income/(loss) from continuing operations, net of taxes		865.0			588.0			503.8			170.0			(1,451.8	)
Loss from discontinued operations, net of tax		-			-			(12.4	)		(17.6	)		-
Net income/(loss)		865.0			588.0			491.4			152.4			(1,451.8	)

Add: net loss attributable to the noncontrolling interest in subsidiaries		-			-			0.2			3.6			-
Net income/(loss) attributable to Shire plc		865.0			588.0			491.6			156.0			(1,451.8	)

Earnings/(loss) per share – basic
Income/(loss) from continuing operations		156.9	c		107.7	c		93.2	c		32.1	c		(268.7c	)
Loss from discontinued operations		-			-			(2.3c	)		(3.3c	)		-
Earnings/(loss) per ordinary share - basic		156.9	c		107.7	c		90.9	c		28.8	c		(268.7c	)
Earnings/(loss) per share – diluted
Income/(loss) from continuing operations		150.9	c		105.3	c		91.9	c		31.8	c		(268.7c	)
Loss from discontinued operations		-			-			(2.2c	)		(3.2c	)		-
Earnings/(loss) per ordinary share - diluted		150.9	c		105.3	c		89.7	c		28.6	c		(268.7c	)

Table of Contents

(1)	The following items are included within Other operating expenses:

●

Up-front and milestone payments for in-licensed development projects, expensed to R&D, of $nil, $45.0 million, $43.4 million, $nil and $155.9 million in the years ended December 31, 2011, 2010, 2009, 2008 and 2007 respectively;

●

Costs of $62.9 million associated with the termination of the Women’s Health development agreement with Duramed Pharmaceuticals, Inc. (“Duramed”) in the year to December 31, 2009; and

●

Impairment loss of $16.0 million in respect of certain IPR&D assets in the year to December 31, 2011, impairment loss of $42.7 million following the decision to divest DAYTRANA to Noven in the year to December 31, 2010, and costs of $149.9 million on the cessation of commercialization of DYNEPO in the year to December 31, 2008.

(2)	The following items are included within Total other (expense)/ income, net:

●

Gains on sale of non-current investments of $23.5 million, $11.1 million, $55.2 million, $9.4 million and $0.1 million in the years ended December 31, 2011, 2010, 2009, 2008 and 2007 respectively;

●

Other than temporary impairment charges for available-for-sale investments of $2.4 million, $1.5 million, $0.8 million, $58.0 million and $3.0 million in the years ended December 31, 2011, 2010, 2009, 2008 and 2007 respectively; and

●

Interest expense in respect of the Transkaryotic Therapies, Inc. (“TKT”) appraisal rights litigation of $nil, $nil, $nil, $87.3 million and $28.0 million in the years ended December 31, 2011, 2010, 2009, 2008 and 2007 respectively.

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.

Weighted average number of
shares (millions):	2011			2010			2009			2008			2007
Basic		551.1			546.2			540.7			541.6			540.3
Diluted		595.4			590.3			548.0			545.4			540.3
Cash dividends declared and paid per ordinary share		13.330	c		11.500	c		9.908	c		8.616	c		7.3925	c

December 31,
	2011		2010		2009		2008		2007
		$’M		$’M		$’M		$’M		$’M
Balance sheets:
Total current assets		2,208.2		1,880.3		1,570.2		1,044.4		1,696.8
Total assets		6,380.2		5,387.6		4,617.5		3,933.7		4,330.1
Total current liabilities		2,534.3		1,293.3		1,020.0		823.8		1,262.2
Non-current liabilities		660.9		1,642.9		1,685.0		1,782.4		1,811.9
Total liabilities		3,195.2		2,936.2		2,705.0		2,606.2		3,074.1
Total equity		3,185.0		2,451.4		1,912.5		1,327.5		1,256.0

Table of Contents

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 Part IV in this Annual Report on Form 10-K.

Overview

Shire’s strategic goal is to be the world’s leading specialty biopharmaceutical Company that focuses on meeting the needs of the specialist physician. Shire focuses its business on ADHD, GI diseases, HGT and RM, as well as opportunities in other therapeutic areas to the extent they arise through acquisitions. 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.

Substantially all of the Company’s revenues, expenditures and net assets are attributable to the R&D, manufacture, sale and distribution of pharmaceutical products within three reportable segments: SP, HGT and RM. The Company also earns royalties (where Shire has out-licensed products to third parties) which are recorded as revenues.

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

·	93% (2010: 90%) of total revenues are derived from product sales, of which 66% (2010: 71%) are within SP, 31% (2010: 29%) are within HGT and 3% (2010: nil) are within RM; and

·	6% of total revenues are derived from royalties (2010: 9%).

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

There is increasing legislation both in the US and the rest of the world which is placing downward pressure on the net pricing of pharmaceutical products and medical devices. For example the US government passed healthcare reform legislation in 2010 which included an increase in Medicaid rebate rates and extended Medicaid rebates to those products provided through Medicaid managed care organizations. The legislation also imposed annual fees to be paid by both pharmaceutical manufacturers (from 2011) and medical device companies (from 2013). The impact of these recent changes to US healthcare legislation, and other healthcare reforms in the rest of the world, has not to date had a material impact on the Company’s results of operations.

The health care industry is also experiencing:

·	pressure from governments and healthcare providers to keep prices low while increasing access to drugs;

·	increasing challenges from third party payers for products to have demonstrable clinical benefit, with pricing and reimbursement approval becoming increasingly linked to a product’s clinical effectiveness and impact on overall costs of patient care;

·	increased R&D costs, because development programs are typically larger and take longer to get approval from regulators;

·	challenges to existing patents from generic manufacturers;

·	governments and healthcare systems favoring earlier entry of low cost generic drugs; and

·	higher marketing costs, due to increased competition for market share.

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

Markets

Historically, Shire’s portfolio of approved products has been heavily weighted towards the North American market. The acquisition in 2005 of TKT and the consequent establishment of our HGT business, together with the acquisitions of Jerini in 2008 (which brought the HAE product FIRAZYR), EQUASYM in 2009 (which facilitated Shire’s immediate access to the European ADHD market) and Movetis in 2010 (which brought EU rights to RESOLOR and further developed our GI pipeline), provided Shire with platforms to increase its presence in Europe and the RoW, thereby working towards diversifying the risk associated with reliance on one geographic market.

In 2011 the SP and HGT businesses derived 15% and 80%, respectively, of their product sales from outside of the US. Currently all RM product sales are generated in the US. Shire’s long-term mission is to increase the value of product sales from (i) outside of the US and (ii) outside of US, UK, Germany, France, Italy, Spain and Canada. Shire has made significant progress towards geographic diversification with additional development and commercialization activities in

Table of Contents

2011. In addition, 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:

·	continued launch of VYVANSE in Brazil (marketed as VENVANSE) and the potential approval and launch of VYVANSE in Mexico;

·	filing in 2011 of an MAA for VYVANSE (to be marketed as VENVANSE) in certain countries in the EU to support registration for treatment of ADHD in children;

·	INTUNIV Phase 3 clinical program to support submission of an MAA in the EU;

·	continued roll-out of VPRIV in certain EU and Latin American countries;

·	continued roll-out of FIRAZYR in certain European and Latin American countries;

·	the LIALDA/MEZAVANT diverticulitis Phase 3 program; and

·	continued roll-out of RESOLOR in the EU and the Rest of the World (“RoW”).

R&D

Over the last five years Shire has focused its R&D efforts on products in its core therapeutic areas and concentrated its resources on obtaining regulatory approval for later-stage pipeline products within these core therapeutic areas. In addition to continued efforts in its late stage pipeline for the ADHD, GI, HGT and RM therapeutic areas, Shire has also progressed work on an earlier stage pipeline.

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 seven years. Since January 2005, several products have received regulatory approval including: in the US, ELAPRASE in 2006, LIALDA and VYVANSE in 2007, INTUNIV in 2009, VPRIV in 2010, and FIRAZYR in 2011; in the EU, FOSRENOL in 2005, ELAPRASE and MEZAVANT in 2007, and VPRIV in 2010; in Canada, VYVANSE in 2010.

Shire’s strategy is focused on the development of product candidates that have a lower risk profile. As Shire further expanded its earlier phase pipeline, R&D costs in 2011 included expenditure on several pre-clinical to Phase 3 studies for products in development as well as Phase 3(b) and Phase 4 studies to support recently launched products in the SP and HGT businesses, together with the development of new projects in both the SP, HGT and RM businesses. 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 manufacturers may enter the market. Generic manufacturers often do not need to complete extensive clinical studies when they seek registration of a copy product and accordingly, they are generally able to sell the Company’s drugs 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 period prior to the authorized generic launch. As discussed in ITEM 1: Business, the FDA has not yet reached a decision on the Citizen Petition for ADDERALL XR which was filed in October 2005. An FDA decision which does not require generic follow-on products to complete successful bio-equivalence or additional clinical testing could lead to increased generic competition for ADDERALL XR in addition to the authorized generic versions which already exist. In 2011 authorized generic and 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.

Shire is engaged in various legal proceedings with generic manufacturers with respect to its VYVANSE, INTUNIV, FOSRENOL, LIALDA and ADDERALL XR patents. For more detail of current patent litigation, see ITEM 3: Legal Proceedings and Note 19, “Commitments and Contingencies, Legal proceedings” to the consolidated financial statements set forth in this Annual Report on Form 10-K.

Business Development

Shire seeks to focus its business development activity on the acquisition and in-licensing of products and projects which have the benefit of long-term patent protection and/or data exclusivity, other forms of market exclusivity and/or barriers to entry.

Through the acquisition of ABH in 2011 Shire obtained DERMAGRAFT, which is currently marketed in the US for the treatment of DFU. Through the acquisition of Movetis in 2010, Shire obtained the recently launched RESOLOR, a promising GI pipeline and world-class R&D talent. In addition, in early 2012 Shire acquired the rights to market RESOLOR

Table of Contents

in the US. In 2010 Shire also acquired an exclusive license in markets outside of North America for the ActRIIB class of molecules being developed by Acceleron. The collaboration with Acceleron will initially focus on further developing HGT-4510 (also called ACE-031) for the treatment of patients with DMD.

In 2009, Shire acquired the worldwide rights (excluding the US, Canada and Barbados) to EQUASYM and EQUASYM XL from UCB and entered into a research collaboration with Santaris Pharma A/S (“Santaris”) for the development of its Locked Nucleic Acid (“LNA”) drug platform technology.

Organization and Structure

In the third quarter of 2011, following the acquisition of ABH, an organizational realignment was carried out. Following this re-organization the Company now has three business units and three reporting segments: SP, HGT and RM (which currently comprises only the ABH business).

During 2010, to support the Company’s mission to increase the proportion of product sales generated outside of the US, Shire established an international commercial hub in Switzerland.

Table of Contents

Results of operations for the years to December 31, 2011 and 2010

Financial highlights for the year to December 31, 2011 are as follows:

·	Product sales in 2011 were up 26% to $3,950 million (2010: $3,128 million). On a constant exchange rate (“CER”)1 basis, which is a Non GAAP measure, product sales were up 24%.

Product sales growth was generated from across the portfolio, particularly VYVANSE (up 27% to $805 million), ADDERALL XR (up 48% to $533 million), REPLAGAL (up 35% to $475 million), ELAPRASE (up 15% to $465 million), LIALDA/MEZAVANT (up 27% to $372 million) and VPRIV (up 79% to $256 million). Product sales in 2011 also benefited from $105 million of DERMAGRAFT sales made subsequent to the acquisition of ABH.

·	Total revenues in 2011 exceeded $4 billion for the first time, increasing by 23% (Non GAAP CER: up 21%) to $4,263 million (2010: $3,471 million). The strong product sales growth more than offset decreased royalties and other revenues, down 9% due to lower 3TC and ZEFFIX royalties.

·	Operating income was up 40% to $1,109 million (2010: $794 million), as total revenues grew at a faster rate than R&D and SG&A expenditure. Operating income in 2010 included impairment charges recorded on the divestment of DAYTRANA and an up-front payment of $45 million to Acceleron.

·	Diluted earnings per ordinary share were up 43% to 150.9c (2010: 105.3c) due to higher operating income and a lower effective tax rate in 2011 of 21% (2010: 24%).

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 2011 product sales and revenues restated using 2010 average foreign exchange rates to 2010 actual product sales and revenues. This Non-GAAP financial measure is used by Shire’s management, and is considered to provide useful information to investors about the Company’s results of operations, because it facilitates an evaluation of the Company’s year on year performance on a comparable basis. Average exchange rates for the year to December 31, 2011 were $1.60:£1.00 and $1.39:€1.00 (2010: $1.55:£1.00 and $1.33:€1.00).

Total revenues

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

Year to December 31,	2011		2010		Change
	$'M		$'M		%
Product sales		3,950.2		3,128.2		+26	%
Royalties		283.5		328.1		-14	%
Other revenues		29.7		14.8		+101	%
Total		4,263.4		3,471.1		+23	%

Table of Contents

Product sales

	Year to		Year to
	December 31,		December 31,		Product sales			Non-GAAP CER			US prescription			Exit market
	2011		2010		growth			growth			growth1			share1
	$'M		$'M		%			%			%			%
SP
ADHD
VYVANSE		805.0		634.2		+27			+27			+21			17
ADDERALL XR		532.8		360.8		+48			+47			+11			7
INTUNIV		223.0		165.9		+34			+34			+78			4
EQUASYM		19.9		22.0		-10			-14			n/a	2		n/a	2
DAYTRANA		-		49.4		n/a	4		n/a	4		n/a	4		n/a

GI
LIALDA / MEZAVANT		372.1		293.4		+27			+26			+9			21
PENTASA		251.4		235.9		+7			+7			-2			14
RESOLOR		6.1		0.3		n/a			n/a			n/a	3		n/a	3

General Products
FOSRENOL		166.9		182.1		-8			-11			-16			5
XAGRID		90.6		87.3		+4			-1			n/a			n/a	2
CARBATROL		52.3		82.3		-36			-36			-30			10
Other product sales		95.5		105.6		-10			-13			n/a			n/a
		2,615.6		2,219.2		+18
HGT
REPLAGAL		475.2		351.3		+35			+30			n/a	3		n/a	3
ELAPRASE		464.9		403.6		+15			+12			n/a	2		n/a	2
VPRIV		256.2		143.0		+79			+76			n/a	2		n/a	2
FIRAZYR		33.0		11.1		+197			+188			n/a	2		n/a	2
		1,229.3		909.0		+35

RM
DERMAGRAFT		105.3		-		n/a			n/a	5		n/a	2		n/a	2
Total RM product sales		105.3		-		n/a
Total product sales		3,950.2		3,128.2		+26

(1)	Data provided by IMS Health National Prescription Audit (“IMS NPA”). Exit market share represents the average US market share in the month ended December 31, 2011.

(2)	IMS NPA Data not available.

(3)	Not sold in the US in the year to December 31, 2011.

(4)	The Company divested DAYTRANA to Noven effective October 1, 2010.

(5)	DERMAGRAFT was acquired by Shire on June 28, 2011.

Specialty Pharmaceuticals

VYVANSE – ADHD

VYVANSE product sales grew strongly in 2011 as a result of higher prescription demand, due to an increase in VYVANSE’s market share and growth in US ADHD market (10%), and the effect of a price increase taken in 2011. These factors more than offset the effect of de-stocking and higher sales deductions in 2011 compared to 2010.

Table of Contents

Litigation proceedings regarding VYVANSE are ongoing. Further information about this litigation can be found in ITEM 3: Legal Proceedings and Note 19, “Commitments and Contingencies, Legal proceedings” to the consolidated financial statements set forth in this Annual Report on Form 10-K

ADDERALL XR – ADHD

ADDERALL XR product sales grew by 48%, or $172 million, principally as a result of lower sales deductions as a percentage of branded gross product sales, increases in US prescription demand (in line with growth in the US ADHD market) and a price increase taken during 2011.

Sales deductions in 2011 represented 57% of branded gross product sales (2010: 65% of branded gross product sales). The decrease in sales deductions was primarily due to the lowering of our estimate of inventory in the US retail pipeline and the related sales deduction reserve in the third quarter of 2011 (representing 2% of gross product sales in 2011) and the mix of customer sales affecting the rebate calculation. The eight percentage point decrease in sales deductions (as a percentage of branded gross product sales) contributed $85 million to ADDERALL XR’s net product sales in 2011. ADDERALL XR sales deductions in 2012 are expected to be in the range of 60-65%.

There are potentially different interpretations as to how shipments of authorized generic ADDERALL XR to Teva and Impax should be included in the Medicaid rebate calculation. Since authorized generic launch in 2009 the Company has recorded its accrual for Medicaid rebates based on its best estimate of the rebate payable, consistent with the Company’s interpretation of the Medicaid rebate legislation. Shire believes that its interpretation of the Medicaid rebate legislation is reasonable and correct. Additionally, from October 1, 2010 forward, provisions of the 2010 Affordable Care Act provide further clarity, in a manner consistent with the Company’s interpretation, as to how shipments of authorized generics from that date should be included in the Medicaid rebate calculation.

The CMS could disagree with Shire’s interpretation of the Medicaid rebate legislation for shipments of authorized generic products prior to October 1, 2010. CMS could require Shire to apply an alternative interpretation of the Medicaid rebate legislation and request that Shire pays up to $212 million above the recorded liability. However, Shire believes it has a strong legal basis supporting its interpretation of the Medicaid rebate legislation, and that there would be a strong basis to limit any additional payment to a level approximating the full, un-rebated cost to the States of ADDERALL XR (equivalent to approximately $134 million above the recorded liability), and to initiate litigation to recover any amount paid in excess of the recorded liability. The result of any such litigation cannot be predicted.

Litigation proceedings regarding ADDERALL XR are ongoing. Further information about this litigation can be found in ITEM 3: Legal Proceedings and Note 19, “Commitments and Contingencies, Legal proceedings” to the consolidated financial statements set forth in this Annual Report on Form 10-K.

INTUNIV – ADHD

INTUNIV product sales were up 34% compared to 2010, primarily driven by significant growth in US prescription demand together with a price increase taken during 2011. These positive factors were offset by lower stocking and higher sales deductions in 2011 compared to 2010, and the effect of the inclusion of launch stocking shipments within reported 2010 product sales.

LIALDA/MEZAVANT – Ulcerative colitis

The growth in product sales for LIALDA/MEZAVANT in 2011 was primarily driven by higher US prescription demand following increases in US market share, a price increase taken since the fourth quarter of 2010 and the effect of stocking in 2011 compared to de-stocking in 2010.

Litigation proceedings regarding LIALDA/MEZAVANT are ongoing. Further information about this litigation can be found in ITEM 3: Legal Proceedings and Note 19, “Commitments and Contingencies, Legal proceedings” to the consolidated financial statements set forth in this Annual Report on Form 10-K.

PENTASA – Ulcerative colitis

Product sales of PENTASA continued to grow despite lower US prescription demand, due to the impact of a price increase taken during 2011.

Table of Contents

FOSRENOL – Hyperphosphatemia

Product sales of FOSRENOL outside the US decreased marginally primarily because of mandatory price reductions that were imposed in several key markets. Product sales of FOSRENOL in the US decreased due to lower US prescription demand and higher sales deductions compared to 2010, which more than offset a 2011 price increase.

Litigation proceedings regarding Shire’s FOSRENOL patents are ongoing. Further information about this litigation can be found in ITEM 3: Legal Proceedings and Note 19, “Commitments and Contingencies, Legal proceedings” to the consolidated financial statements set forth in this Annual Report on Form 10-K.

Human Genetic Therapies

REPLAGAL – Fabry disease

The 35% growth (30% on a Non GAAP CER basis) in REPLAGAL product sales was driven by the treatment of new patients, being both naïve patients and switches from patients being treated with FABRAZYME. Reported REPLAGAL sales also benefited from favorable foreign exchange, due to the weaker US dollar over the course of 2011 compared to 2010.

Litigation proceedings regarding REPLAGAL are ongoing. Further information about this litigation can be found in ITEM 3: Legal Proceedings and Note 19, “Commitments and Contingencies, Legal proceedings” to the consolidated financial statements set forth in this Annual Report on Form 10-K.

ELAPRASE – Hunter syndrome

Product sales for ELAPRASE increased as a result of increased patients on therapy across all regions in which ELAPRASE is sold. Reported ELAPRASE sales also benefited from favorable foreign exchange.

VPRIV – Gaucher disease

VPRIV product sales growth was driven by the treatment of new patients, being both naïve patients and patients switching from CEREZYME. Reported sales also benefited from favorable foreign exchange.

FIRAZYR – HAE

The significant growth rate in global product sales in 2011 follows the successful launch of FIRAZYR in the US in August 2011 and the approval for self-administration in the EU in March 2011.

Regenerative Medicine

DERMAGRAFT – DFU

DERMAGRAFT continues to see strong revenue growth in the US, up 33% for the full year 2011 compared to the full year 2010(1). The growth resulted from a combination of an expanding US diabetic population, continued adoption of DERMAGRAFT as a treatment for DFU, and the continued investment in marketing programs and additional sales representatives to market the product.

(1)	Shire acquired DERMAGRAFT through its acquisition of ABH in June 2011.

Royalties

	Year to December 31,		Year to December 31,
	2011		2010		Change
	$'M		$'M		%
ADDERALL XR		107.1		100.3		+7%
3TC and ZEFFIX		82.7		154.0		-46%
FOSRENOL		46.5		26.8		+74%
Other		47.2		47.0	<1%
Total		283.5		328.1		-14%

Table of Contents

Royalty income decreased in 2011 compared to 2010 as lower royalties from 3TC and ZEFFIX more than offset higher royalty income from ADDERALL XR and FOSRENOL.

Royalty income from 3TC and ZEFFIX continues to be adversely impacted by increased competition from other products. Additionally, with effect from the second quarter of 2011, Shire has not recognized royalty income for 3TC and ZEFFIX for certain territories due to a disagreement between GSK and Shire about how the relevant royalty rates should be applied given the expiry dates of certain patents. GSK and Shire are holding discussions in order to seek to resolve the disagreement. In 2012 royalty terms for 3TC and ZEFFIX will begin to expire in most territories outside of the US, and in the US royalty terms for 3TC and ZEFFIX expire between 2014 and 2018. After expiry the Company will cease to receive royalties from GSK on sales of 3TC and ZEFFIX in those territories.

Cost of product sales

Cost of product sales increased to $588.1 million for the year to December 31, 2011 (15% of product sales), up from $463.4 million in the corresponding period in 2010 (15% of product sales).

Cost of product sales as a percentage of product sales stayed constant as the effect of slightly higher margins from existing products and lower costs incurred on the transfer of manufacturing from Owings Mills in 2011 were offset by the inclusion of DERMAGRAFT (including the unwind of the fair value adjustment for inventory acquired with ABH) and a write down of expired ELAPRASE unpurified bulk material which was not prioritised for purification as capacity was directed towards meeting demand for REPLAGAL and VPRIV in 2011.

For the year to December 31, 2011 cost of product sales included depreciation of $39.8 million (2010: $38.1 million).

R&D

R&D expenditure for the year to December 31, 2011 increased to $770.7 million (20% of product sales), compared to $661.5 million in the corresponding period in 2010 (21% of product sales).

R&D in 2010 included an up-front payment of $45.0 million (representing 1% of product sales) on entering the collaboration with Acceleron for development of the ActRIIB class of molecules. Excluding this up-front payment, R&D increased by $154.2 million in 2011, reflecting the Company’s continued investment in a number of targeted R&D programs, including new uses for VYVANSE, Sanfilippo and other development programs. In addition, R&D in 2011 also included a full year of Movetis’s development programs and ABH’s expenditure in the second half of 2011, an impairment charge of $16.0 million (2010: $nil) in respect of certain IPR&D assets and the adverse impact of foreign exchange in 2011 compared to 2010.

For the year to December 31, 2011 R&D included depreciation of $25.2 million (2010: $19.0 million) and an impairment charge of $16.0 million (2010: $nil).

SG&A

SG&A expenses increased to $1,751.4 million (44% of product sales) for the year to December 31, 2011 from $1,526.3 million (49% of product sales) in the corresponding period in 2010.

In 2010 SG&A included an impairment charge of $42.7 million to write down the DAYTRANA intangible asset to its fair value less costs to sell, prior to the divestment of DAYTRANA to Noven. Excluding this impairment charge SG&A increased by $267.8 million as the Company supported the growth of its existing and recently launched products along with developing its international infrastructure. SG&A in 2011 also included a full year of Movetis’s operating costs, ABH’s expenditure in the second half of 2011 and the adverse impact of foreign exchange in 2011 compared to 2010.

For the year to December 31, 2011 SG&A also included depreciation of $63.1 million (2010: $62.1 million) and intangible asset amortization of $165.0 million (2010: $133.5 million).

Reorganization costs

For the year to December 31, 2011 Shire recorded reorganization costs of $24.3 million (2010: $34.3 million) relating to the transfer of manufacturing from its Owings Mills facility to a third party and the establishment of an international commercial hub in Switzerland.

Integration and acquisition costs

For the year to December 31, 2011 Shire recorded integration and acquisition costs of $13.7 million (2010: $8.0 million), which related to the acquisition and integration of ABH ($13.6 million) and the integration of Movetis ($8.3 million), offset

Table of Contents

by an adjustment to contingent consideration payable for EQUASYM ($8.2 million). In 2010 integration and acquisition costs primarily related to the acquisition of Movetis.

Interest expense

For the year to December 31, 2011 Shire incurred interest expense of $39.1 million (2010: $35.1 million). Interest expense principally relates to the coupon and amortization of issue costs on Shire’s $1,100 million 2.75% convertible bonds due 2014.

Other income/(expense), net

For the year to December 31, 2011 the Company recognized other income, net of $18.1 million (2010: $7.9 million). Other income in the year to December 31, 2011 included a gain of $23.5 million arising on the disposal of substantially all of Shire’s holding in Vertex (Shire received these shares as partial consideration for its investment in ViroChem following ViroChem being acquired by Vertex). Other income in the year to December 31, 2010 included a gain of $11.1 million arising on the disposal of Shire’s investment in Virochem.

Taxation

The effective rate of tax in 2011 was 21% (2010: 24%). The effective tax rate in 2011 is lower than 2010 due to favourable changes in profit mix in 2011, including the full year effect in 2011 of the Company’s establishment of an international commercial hub in Switzerland in the fourth quarter of 2010, together with the effect of certain expenses in 2010 (including the up-front payment to Acceleron) being incurred in territories with a tax rate lower than Shire’s effective tax rate.

Table of Contents

Results of operations for the years to December 31, 2010 and 2009

Financial highlights for the year to December 31, 2010 are as follows:

Product sales were up 16% to $3,128 million (2009: $2,694 million). Product sales excluding ADDERALL XR grew strongly through 2010 (up 34% to $2,767 million), more than offsetting the decline in ADDERALL XR product sales (down 42% to $361 million) following loss of market exclusivity in April 2009. On a Non-GAAP CER1 basis, product sales excluding ADDERALL XR were up 35%.

The 34% growth in product sales excluding ADDERALL XR to $2,767 million was driven by VYVANSE (up 26% to $634 million), REPLAGAL (up 81% to $351 million), LIALDA/MEZAVANT (up 24% to $293 million), and recently launched INTUNIV ($166 million) and VPRIV ($143 million).

Total revenues were up 15% (Non-GAAP CER: up 16%) to $3,471 million (2009: $3,008 million) due to the growth in product sales and higher royalties (up 12% to $328 million).

Operating income increased by $174 million, or 28%, to $794 million (2009: $620 million), due to higher revenues and continued operating leverage, which allowed the Company to absorb the effects of increased investment in its targeted R&D programs and an increase in selling, general and administrative (“SG&A”) activities to support its recent and future growth.

Net income attributable to Shire increased by $96 million to $588 million (2009: $492 million) and diluted earnings per ordinary share increased by 17% to 105.3c (2009: 89.7c).

(1)

The Company’s management analyzes product sales and revenue growth for certain products sold in markets outside of the US on a 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, computed by comparing 2010 product sales and revenues restated using 2009 average foreign exchange rates to 2009 actual product sales and revenues. This Non-GAAP financial measure is used by Shire’s management, and is considered to provide useful information to investors about the Company’s results of operations, because it facilitates an evaluation of the Company’s year on year performance on a comparable basis. Average key exchange rates for year to December 31, 2010 were $1.55:£1.00 and $1.33:€1.00 (2009: $1.57:£1.00 and $1.39:€1.00).

Total revenues

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

Year to December 31,	2010		2009		Change
	$'M		$'M		%
Product sales		3,128.2		2,693.7		+16
Royalties		328.1		292.5		+12
Other revenues		14.8		21.5		-31
Total		3,471.1		3,007.7		+15

Table of Contents

Product sales

	Year to December 31,		Year to December 31,		Product sales			Non-GAAP CER			US prescription			Exit market
	2010		2009		growth			growth			growth1			share1
	$'M		$'M		%			%			%			%
SP
ADHD
VYVANSE		634.2		504.7		+26			+26			+28			15
ADDERALL XR		360.8		626.5		-42			-43			-32			7
INTUNIV		165.9		5.4		n/a	4		n/a	4		n/a	4		3
DAYTRANA		49.4		71.0		-30			-30			n/a			n/a	5
EQUASYM		22.0		22.8		-4			+1			n/a			n/a	2