Annual Report 2014
`
`Our journey forward
`
`CFAD Exhibit 1062
`CFAD v. NPS
`IPR2015-01093
`
`

`

`At Shire we have a clear and focused strategy
`to become a leading global biotech delivering
`innovative medicines to patients with rare
`diseases and other specialty conditions.
`
`To this end, we work together as one to excel
`across four key strategic drivers: growth,
`innovation, effi ciency and people.
`
`View more at
`AR2014.shire.com
`
`

`

`Growth See page 18
`
`Innovation See page 20
`
`Efficiency See page 22
`
`People See page 24
`
`Strategic report
`
`Chairman’s review
`Chief Executive Officer’s review
`Financial highlights
`Where we are
`Strategy and business model
`Key Performance Indicators
`At a glance: In-line
`At a glance: Pipeline
`Strategic drivers
`Responsibility
`Principal risks
`Year in review
`Review of our business
`Governance
`
`Board of Directors
`Corporate governance report
`Directors’ remuneration report
`Additional statutory information
`Directors’ responsibilities statement
`Financial statements
`
`Independent auditor’s report
`Consolidated balance sheets
`Consolidated statements of income
`Consolidated statements of comprehensive income
`Consolidated statements of changes in equity
`Consolidated statements of cash flow
`Notes to the consolidated financial statements
`Other information
`
`Other financial information
`Shareholder information
`Shire head offices
`Cautionary statements
`Parent company financial statements of Shire plc
`Shire trademarks
`
`02
`04
`08
`09
`10
`12
`14
`16
`18
`26
`32
`40
`42
`
`60
`62
`74
`102
`106
`
`107
`110
`111
`112
`113
`115
`117
`
`166
`173
`174
`175
`176
`197
`
`Tom Garthwaite
`Patient with Hunter syndrome
`
`We are committed to leading the way in treatments for
`rare diseases such as Hunter syndrome, with the goal
`of helping patients like Tom lead better lives. We take
`inspiration from patients like Tom, continuing to research
`and develop innovative treatments for diseases that are
`often unheard of and unrecognized, providing hope for a
`better tomorrow.
`
`ANNUAL REPORT 2014 SHIRE PLC 01
`
`

`

`At Shire we focus on people.
`Those that work for us, partner
`with us, invest in our strategy
`and, above all, those who
`depend on the medicines we
`make every day. Our purpose is
`to help people with life-altering
`conditions lead better lives. We
`ask the questions that are raised
`by rare and specialty diseases and
`pursue new possibilities through
`thoughtful and innovative science.
`
`Creating exceptional value
`When we do what is good, we believe good follows. Value
`is created not just for the patients, but for physicians,
`caregivers, employees, communities, payers, policymakers,
`and shareholders—for anyone or any institution that our
`global company can touch. And value, we were reminded
`this year, can be created—and recognized—in so many ways.
`
`Chairman’s review
`
`Susan Kilsby
`Chairman
`
`
`
`02 SHIRE PLC ANNUAL REPORT 201402 SHIRE PLC ANNUAL REPORT 2014
`
`

`

`Strategic Report
`
`Governance
`
`Financial Statements
`
`Other Information
`
`Extraordinary results
`We had an eventful year in 2014. We had unprecedented
`fi nancial results as you’ll see in the pages to come. We
`completed our acquisition of ViroPharma and successfully
`integrated this organization, serving new patients with the
`product CINRYZE®, a medicine for the infl ammatory condition
`known as Hereditary Angioedema. At the same time, we
`acquired two rare diseases entities—Lumena and Fibrotech.
`We fortifi ed our presence in established therapies and opened
`doors to new ones, including Ophthalmics. We moved into
`our new International Operational Headquarters in Zug,
`Switzerland and reinvigorated our presence in Europe, Asia
`and Latin America. We continued to streamline operations
`and to put the right people into the right jobs to complement
`the immediate impact of mergers and acquisitions with our
`focus on continuing organic growth. On behalf of adults with
`Binge Eating Disorder, we fi led in the US for a supplemental
`new drug application for VYVANSE® which the Food and Drug
`Administration (“FDA”) approved on January 30, 2015 as the
`fi rst and only medication for the treatment for this disorder.
`And, most recently, we acquired NPS Pharma bringing two
`exciting rare disease therapies into our product portfolio.
`
`We were again recognized as a constituent of the FTSE4Good
`Index Series, a leading responsibility investment index, and
`also earned the distinction from Corporate Knights in their
`ranking of the 2015 Global 100 Most Sustainable
`Corporations in the World.
`
`We accomplished all this while responding to AbbVie as
`it considered the role that Shire might play within its own
`strategic framework. We never lost sight of the company
`that Shire is throughout the process.
`
`We have a strong, independent future. And we’re passionate
`about building it.
`
`Executing our strategy
`Our plan moving forward is to emerge as a leading global
`biotech focused on rare diseases and other speciality
`conditions. To get there, we’ll continue our investment in
`our four key strategic drivers: growth, innovation, effi ciency,
`and people. Under the leadership of our Chief Executive
`Offi cer, Dr. Flemming Ornskov, we’ll strengthen—and
`sustain—our platform through our focused approach to
`mergers and acquisitions, pipeline advancement, and cash
`management. We’ll rely on the people who make Shire what
`it is—a diversifi ed team representing many skills and broad
`experiences.
`
`Outstanding contributions
`Our Board of Directors made signifi cant contributions to Shire
`throughout 2014—going far above and beyond expectations
`to render opinions and weigh choices. I have the distinct
`pleasure of working with Board members who bring the full
`complement of scientifi c, medical, fi nancial, organizational
`and commercial insights to bear on complex opportunities.
`
`In closing, I would like to extend my gratitude to the people
`of Shire who remained focused on what mattered most
`throughout the year—our patients. The world is a healthier
`place, thanks to Shire. Our people are the reason.
`
`Susan Kilsby
`Chairman
`
`We have a strong,
`independent future.
`And we’re passionate
`about building it.
`
`ANNUAL REPORT 2014 SHIRE PLC 03
`
`

`

`
`HeadingChief Executive Offi cer’s review
`Sub heading
`
`In 2014 we delivered record sales
`and profi tability, and continued
`to strengthen our pipeline of
`to s
`important medicines to enable
`imp
`people with life altering conditions
`peo
`to lead better lives.
`to le
`
`At the same time we embarked on our course with the aim of At the
`becoming a leading global biotech building on the foundation
`becom
`laid by our One Shire reorganization. For us, it was a year
`laid by
`of delivering outstanding results and superior shareholder
`of deli
`returns, setting a clear direction and gaining momentum.
`returns
`
`
`Moving forwardMovin
`
`One of the highlights of 2014 for me was the ongoing journey One o
`to transform Shire into a high-growth, more effi cient, more
`to tran
`innovative organization with a streamlined structure.
`innova
`
`We made great progress in this regard and our success was
`We ma
`the result of a tremendous team effort to achieve a step
`the res
`change in growth, profi tability, cash generation and to
`chang
`increase the value of our pipeline.
`increa
`
`We were also focused. A prime example was our rapid and
`We we
`effective integration of ViroPharma following completion of
`effecti
`the $4 billion acquisition early in the year. We successfully
`the $4
`accelerated the growth of CINRYZE which came to us
`accele
`through the ViroPharma acquisition while obtaining
`throug
`operational synergies and advancing the acquired pipeline.
`operat
`
`Dr. Flemming Ornskov
`Chief Executive Offi cer
`
`
`
`
`
`
`
`04 SHIRE PLC ANNUAL REPORT 20144044400 SSHSHSHISHSSSSHIRE RERE PLCPLCPLCPLCPPLL04 SHIRE PLC ANNUAL REPORT 2014AAANANNNUANUANUAL RL RL REPOEPOEPOPORT RT RT RTRR 2012012012014444
`
`
`
`

`

`Strategic Report
`
`Governance
`
`Financial Statements
`
`Other Information
`
`A clear direction
`Our aspiration is to become a leading global biotech
`delivering innovative medicines to patients with rare diseases
`and other specialty conditions. We are prioritizing those areas
`that enable us to realize our purpose and maintain leading
`positions in the therapeutic areas in which we compete.
`Our commercial excellence is driving superior top-line results
`and our operational effi ciency is enabling us to reinvest for
`the future. We have highly effective business development
`capabilities and a robust and innovative pipeline. Simply put,
`we are a high-growth, highly innovative company making a
`real difference in people’s lives.
`
`The best of two worlds
`We are uniquely placed to make a difference in people’s lives
`due to our distinctive mix of complementary business units
`and capabilities. I like to think of it as a triangle with our
`Rare Diseases business unit at the center, where we are
`increasingly focusing our R&D dollars, supported by the
`strength of the products in our specialty business units –
`Neuroscience, Gastrointestinal (GI) and Internal Medicine,
`and our recently added Ophthalmics business unit. Through
`this combination we get the best of two worlds – the future
`long-term growth and opportunities of Rare Diseases, which
`was our fastest growing business (+46%1) in 2014, and the
`continued foundation and growth of our cash-generating
`specialty products, which contribute signifi cantly to our
`Rare Disease R&D dollars.
`
`Moreover, there is an interplay between our business units
`that aids our current and future innovation and growth as we
`adapt our existing therapeutic area expertise to a rare disease
`focus. We are leveraging our domain expertise in rare
`diseases in the development of an intrathecal delivery device
`for enzyme replacement therapies and this year we partnered
`with ArmaGen to conduct research into therapies that can
`cross the blood-brain barrier for Hunter syndrome. We have
`added to our Ophthalmics pipeline with the acquisition of the
`specialist biotech company BIKAM Pharmaceuticals with its
`preclinical asset, SHP630, in development for the potential
`treatment of autosomal dominant retinitis pigmentosa. In
`addition, through our acquisition of Lumena we have added
`late stage pipeline assets for rare GI/hepatic conditions, and
`through our acquisition of Fibrotech we added an antifi brotic
`agent for focal segmental glomerulosclerosis. Our most
`recent acquisition of NPS Pharma further builds upon our rare
`disease expertise with therapies for Short Bowel Syndrome
`(“SBS”) and Hyperparathyroidism (“HPT”).
`
`Our domain expertise in rare diseases is a key differentiator
`for Shire. It enables us to make the most of our belief that
`those living with rare conditions are just as deserving of
`treatment as those living with more common conditions.
`
`To build on our distinctive focus and strengths, we have four
`strategic drivers: growth, innovation, effi ciency and people.
`In 2014 we hit signifi cant milestones across all four.
`
`Driving strong growth across all our businesses
`Shire delivered growth through commercial excellence across
`all of our business units.
`
`In Rare Diseases, through our acquisition of ViroPharma,
`we added and accelerated the sales growth of CINRYZE
`(+30%) on a pro forma basis2, an innovative product for
`the prophylactic treatment of Hereditary Angiodema (HAE)
`attacks. FIRAZYR®, our treatment for acute HAE attacks,
`also grew strongly (+55%). In our GI business, LIALDA®
`has become the number one prescribed 5-ASA in the US3 in
`2014 and gained an additional 5% of market share in 2014.
`In Neuroscience, VYVANSE sales grew 18% as more patients
`continued to use VYVANSE to treat their Attention Defi cit
`Hyperactivity Disorder (“ADHD”).
`
`Our distinctive mix of complementary
`business units and capabilities
`
`Ophthalmics
`
`Rare
`Diseases
`
`GI & Internal
`Medicine
`
`Neuroscience
`
`1 Product sales growth including CINRYZE products sales acquired
`in January 2014 with ViroPharma.
`2 2013 CINRYZE product sales reported by ViroPharma.
`3 IMS SFSS Attribute Ranking Table Study.
`
`ANNUAL REPORT 2014 SHIRE PLC 05
`
`

`

`Chief Executive Offi cer’s review
`(continued)
`
`We grew around the world too – continuing to expand our
`footprint with products available in 68 countries including
`the launch of two products, VPRIV® and AGRYLIN®, in Japan.
`Sales outside of the US were $1.75 billion, an increase of
`11% versus 2013.
`
`Much of our growth outside of the US was driven by our Rare
`Diseases business unit, particularly in Europe and the Middle
`East and Africa, with these regions accounting for more than
`50% of our revenues outside the US. Despite the clinical,
`regulatory, and commercial challenges with bringing a rare
`disease treatment to market, we reached eight new
`international markets in 2014. In addition, the launch of
`ELVANSE® (marketed as VYVANSE in the US) has been
`a success launching in four countries this year, making
`the product available in 12 markets outside of the US. Our
`international GI business unit has also shown strong growth
`this year, with MEZAVANT® (marketed as LIALDA in the US)
`net sales growing by 12% and RESOLOR® net sales
`increasing by 26%.
`
`Enhancing our innovation
`Through 2014 we continued to concentrate our R&D on rare
`diseases – the majority of our research dollars now goes into
`this area. Overall, we invested $840 million on a Non GAAP
`basis in R&D2 and we hosted our fi rst R&D Day showcasing
`the innovation in our pipeline. In 2014, we have 27 programs
`in clinical development, 22 of them distinct, the balance
`relating to new markets or new indications – the most in
`Shire’s history.
`
`Mixing internal and external innovation, we have built a strong
`rare diseases platform in several areas, including enzyme
`replacement, plasma-derived products, kidney and fi brotic
`related conditions, and now in rare gastrointestinal/hepatic
`diseases, with the acquisition of Lumena. This enables us
`to develop products that can be brought to market in new
`areas where there is a high medical need.
`
`Alongside our strong research capability in rare diseases, we
`made excellent progress in enhancing our specialty pipeline.
`In Neuroscience for example, we explored product
`candidates such as SHP465, a potential treatment for ADHD
`in adults. We are also entering new markets with VYVANSE,
`having received FDA approval on January 30, 2015 for the
`treatment of Binge Eating Disorder (“BED”) in adults. BED
`affects an estimated 2.8 million1 US patients and VYVANSE
`is the only FDA approved treatment for this condition.
`
`Increasing effi ciency throughout our organization
`Our ongoing drive to increase effi ciency gained momentum
`through the year as we took advantage of the signifi cant
`reorganization undertaken in 2013 to streamline and simplify
`Shire. This was a contributor to our achievements in the year,
`notably our profi tability, which is at an all-time high with a Non
`GAAP EBITDA margin of 44%2 ; our ability to generate cash,
`with cash generation of $2.4 billion2 in 2014; and our sales
`per employee, $1.2 million. We also simplifi ed our global
`footprint by establishing our US Operational Headquarters in
`Lexington, Massachusetts and our International Operational
` Headquarters in Zug, Switzerland.
`
`Attracting, rewarding and retaining great people
`Throughout 2014 we continued to hire and retain excellent
`talent at all levels. Our performance in a year which included
`the uncertainty and distraction resulting from the offer from
`AbbVie, is a testament to the great commitment, skills and
`resilience of our people, who continued to focus on their work
`and delivered record revenue and Non GAAP earnings. This
`refl ects not only the dedication of our people but also the
`strength of our patient-focused culture. I’m proud that we are
`increasingly recognized as a company where great people do
`great work to help transform lives around the world.
`
`Product sales; Percent CAGR
`
` In-line
` Existing Pipeline
` Upside
`
`$10+bn
`
`$3bn
`
`$7bn
`
`+10% CAGR
`
`$5bn*
`
`2013
`
`2020
`
`* $5bn represents sales from
`continuing operations.
`
`10 x 20 Details
` > In-Line: $7 billion expected
`from on-market products3
`
` > Pipeline: $3 billion
`expected from existing
`pipeline3
`
` > Upside: NPS Pharma,
`Lumena, Fibrotech, BIKAM,
`CINRYZE new uses, early
`stage pipeline and future
`business development
`provide additional upside
`to 10 x 20
`
`1 Hudson JI, Hiripi E, Pope HG, Kessler RC. The prevalence and correlates of
`eating disorder in the National Comorbidity Survey Replication. Biol Psychiatry.
`2007;61(3):348-358. Erratum in Biol Psychiatry. 2012;72(2):164 and Howden
`LM, et al. Age and sex composition: 2010. US Census Bureau; 2011.
`2 This is a Non GAAP fi nancial measure. For reconciliation to US GAAP please
`see page 166.
`3 Shire announced its 10x20 aspiration on June 23, 2014 and seeks to achieve
`2020 product sales of $10 billion from its In-line and Pipeline portfolio as at
`May 2014.
`
`06 SHIRE PLC ANNUAL REPORT 2014
`
`

`

`Strategic Report
`
`Governance
`
`Financial Statements
`
`Other Information
`
`I am thankful for the leadership of our employees and their
`outstanding contributions through such a successful and
`eventful year. Shire has become a place that attracts people
`because it has the things they are looking for – low hierarchy,
`quick decision making, interesting products, and collaborative
`colleagues. As we continue to grow and pursue our goal to be
`a leader in biotech, Shire is a place which offers increasing
`opportunities and rewards for everyone involved.
`
`I would also like to thank our investors for their continued
`loyalty. I am very pleased and proud of the fact that we attract
`investors who continue to support us on our journey.
`
`10 x 20: a journey and a goal
`To guide and encourage us, we have set the target of achieving
`$10 billion in product sales by 2020. Our 10 x 20 goal acts as
`our compass as we navigate excellent commercial execution
`across our business units, and strong innovation in our
`pipeline. This is the direction we have set for ourselves.
`
`10 x 20 is a new and galvanizing target for us, but in many
`ways it is very much in character – we are a high performance
`company setting another high bar to meet and exceed. It is
`also as much about the journey as the goal. I like both the
`ambition of 10 x 20 and the adventure of getting there.
`
`Aiming to lead in biotech
`Our four strategic drivers – growth, effi ciency, innovation and
`people – are the engines propelling us forward on our journey
`to become a leading global biotech with a focus on rare
`diseases and specialty conditions. We have made signifi cant
`progress this year but we also recognize that we are still in the
`early stages of our journey. We remain committed to being
`a lean, streamlined, innovation-driven and growth-focused
`company. A company that is big on ideas and value, rather
`than simply big. This is as much a mentality shift as an
`operational shift – it’s about thinking differently and acting
`differently to get where we want to go.
`
`Transforming lives
`Looking ahead, we will continue to build on our strong
`foundation and achievements. We have a clear growth
`strategy and a streamlined organization. We know where we
`are heading and, in great measure, how we are going to get
`there. But we also know that the year ahead will feature new
`opportunities and challenges that we are ready to make the
`most of so we continue to strive to strengthen and improve.
`
`Through all of our change and progress one thing above all
`remains constant – our patients. We’re on this journey for
`them and we are inspired to make a difference because we
`want to deliver innovative medicines that have the potential
`to transform their lives.
`
`Flemming Ornskov, MD, MPH
`Chief Executive Offi cer
`
`$5.8bn
`
`2014 record product sales
`
`44%
`
`Non GAAP EBITDA margin1
`
`Sales in 68 countries
`
`We’ve continued to expand our footprint
`
`$840m
`
`Investment in Non GAAP R&D1
`
` 1
`
` This is a Non GAAP fi nancial measure. For reconciliation to US GAAP please
`see page 166.
`
`ANNUAL REPORT 2014 SHIRE PLC 07
`
`
`
`

`

`Financial highlights
`
`Shire delivered record sales
`and earnings in 2014 and is
`well positioned for continued
`growth and success.
`
`Total revenues
`($Billion)
`
`$6bn
`
`2014
`
`2013*
`
`2012*
`
`* From continuing operations.
`
`Non GAAP EBITDA1
`($Billion)
`
`$2.8bn
`
`2014
`
`2013
`
`2012
`
`Non GAAP adjusted ROIC1
`(%)
`
`14.7%
`
`2014
`
`2013
`
`2012
`
`Product sales
`
`$5.8bn
` 23%
`
`People
`
`5,016
` 6%
`
`6.0
`
`4.9
`
`4.5
`
` Non GAAP cash generation1
`
`Non GAAP EBITDA margin1
`
`$2.4bn
` 35%
`
`44%
` 6
`
`percentage
`points
`
`2.8
`
`2.0
`
`1.6
`
`Countries with sales
`
`Non GAAP operating income1
`
`14.7
`
`15.6
`
`13.8
`
`68
`
`
`$2.6bn
` 39%
`
`1 This is a Non GAAP fi nancial measure. For reconciliation to US GAAP please
`see page 166.
`
`08 SHIRE PLC ANNUAL REPORT 2014
`
`

`

`Strategic Report
`
`Governance
`
`Financial Statements
`
`Other Information
`
`Where we are
`
`We market our products in
`68 countries around the world.
`We have offi ces in 34 countries
`and employ more than 5,000
`talented people.
`
`$5.8bn
`
`2014 Product sales
`
`2014 product sales by region
` USA
`
` Europe
`
` Latin America
`
` Other regions
`
`70%
`
`20%
`
`4%
`
`6%
`
`2014 Employee numbers
`Total = 5,000+
`
`North America
`
`3,532
`
`Europe
`
`1,168
`
`Key location
`Lexington, MA
`US Operational
`Headquarters
`
`Latin America
`
`187
`
`Key location
`Zug, Switzerland
`International
`Operational
`Headquarters
`
`Other
`regions
`
`129
`
`ANNUAL REPORT 2014 SHIRE PLC 09
`
`

`

`Strategy and business model
`
`We focus on researching, developing
`and marketing innovative medicines that
`have the potential to transform the lives
`of people around the world with rare
`and other specialized conditions.
`
`Where we are heading
`
`How we are going to get there
`
`Transforming lives
`Our purpose is to enable people with life altering
`conditions to lead better lives.
`
`Four strategic drivers
`To realize our aspiration to become a leading biotech,
`we will concentrate our efforts on four strategic drivers:
`
`A leading global biotech
`We aspire to be a leading, global biotech delivering
`innovative medicines to patients with rare diseases
`and other specialty conditions.
`
`10 x 20
`To guide and motivate us on our journey we seek
`to achieve product sales of $10 billion by 2020.
`
`Product sales; Percent CAGR
`
` In-line
` Existing Pipeline
` Upside
`
`$10+bn
`
`$3bn
`
`$7bn
`
`+10% CAGR
`
`$5bn*
`
`2013
`
`2020
`
`* $5bn represents sales from
`continuing operations.
`
`10 x 20 Details
` > In-line: $7 billion expected
`from on-market products1
`
` > Pipeline: $3 billion
`expected from existing
`pipeline1
`
` > Upside: NPS Pharma,
`Lumena, Fibrotech, BIKAM,
`CINRYZE new uses, early
`stage pipeline and future
`business development
`provide additional upside
`to 10 x 20
`
`1 Shire announced its 10 x 20
`aspiration on June 23, 2014 and
`seeks to achieve 2020 product sales
`of $10 billion from its In-line and
`Pipeline portfolio as at May 2014.
`
`10 SHIRE PLC ANNUAL REPORT 2014
`
`Growth
` > Optimize In-line assets via commercial excellence
`
` > Advance late-stage pipeline and launch
`new products
`
` > Accelerate top and bottom-line growth through
`the acquisition of core / adjacent assets
`
`Innovation
` > Expand our rare diseases expertise and offerings
`
` > Reinvest in R&D
`
` > Extend our portfolio to new indications and
`therapeutic areas
`
` > Collaborate globally to advance our scientifi c
`and commercial priorities
`
`Effi ciency
` > Operate a lean and agile organization
`
` > Concentrate operations in Lexington and Zug
`
` > Execute to a high standard by meeting
`milestones and delivering on our commitments
`
`People
` > Foster and reward a high-performance culture
`
` > Attract, develop and retain the best talent
`
` > Live our values
`
`

`

`Strategic Report
`
`Governance
`
`Financial Statements
`
`Other Information
`
`In-line – commercial excellence
`Our In-line focus is on marketing
`products to meet the needs of
`patients today.
`
`Our business units focus exclusively on the commercial
`execution of our marketed products in the areas of Rare
`Disease, Neuroscience, Gastrointestinal, and Internal
`Medicine. In addition, we have recently added an
`Ophthalmics business unit to support the development
`of our pipeline candidates.
`
`Pipeline – innovation excellence
`Our Pipeline focus is on the products
`we are developing to meet the needs
`of patients tomorrow.
`
`We have a single Research and Development (R&D)
`organization that focuses on enhancing our pipeline of
`innovative treatments to address unmet patient needs with an
`increasing emphasis on rare diseases. We are also adapting
`our expertise in existing therapeutic areas to that of a rare
`disease focus. This focus ensures we explore and develop
`opportunities built upon our core strengths and also enables
`us to explore related and emerging areas.
`
`Our growth is also fueled by the acquisition of new
`companies, licensing agreements and new product
`development opportunities through partnerships. Our global
`Corporate Development team searches for new technologies,
`innovative products and strategic partnerships that have the
`potential to address unmet medical needs and provide new
`growth opportunities for Shire. The team is engaged in
`conversations with scientists and entrepreneurs around the
`world, while collaborating daily with commercial and R&D
`experts throughout the Company.
`
`ANNUAL REPORT 2014 SHIRE PLC 11
`
`We are on a dynamic journey
`characterized by high growth,
`ongoing innovation and leadership
`in the areas in which we choose
`to compete.
`
`Our business model
`To drive our growth, we have a unifi ed, global business model
`focused on our strategic drivers. We lead our business
`through our Executive Committee which, supported by
`our In-line and Pipeline Committees, ensures we allocate
`resources and make decisions across the enterprise in the
`best interests of all our stakeholders – patients, employees,
`physicians, payers, policy makers and investors.
`
`This streamlined way of working means we can quickly adapt
`and change our business around the world as we pursue
`and make the most of opportunities to develop and market
`innovative treatments that have the potential to transform
`the lives of people around the world.
`
`One culture
`We have a clear and strong patient-focused, performance-
`based culture which is grounded in our purpose of enabling
`people with life altering conditions to lead better lives:
`
` > We have the courage to lead the way
`
` > We are agile and adaptable to meet the changing needs
`of our stakeholders
`
` > We deliver on our promises to all of our stakeholders
`
` > We fearlessly innovate to address unmet patient need
`
` > We do the right thing, in the right way
`
`We value and invest in our employees to ensure they have the
`capabilities and support to implement our strategy, achieve
`our vision and deliver value to all our stakeholders.
`
`

`

`Key performance indicators
`
`In 2014, we measured our
`performance against our strategic
`priorities through both fi nancial
`and non-fi nancial KPIs.
`
`Growth
`Drive performance from our
`currently marketed products
`to optimize revenue growth
`and cash generation.
`
`Innovation
`Build our future assets through
`both R&D and business
`development to deliver innovation
`and value for the future.
`
`Net product sales $’bn
`
`Number of products in pipeline (excluding preclinical assets)
`
`2014
`
`2013
`
`2012
`
`$5.81
`
`$4.82
`
`$4.32
`
`2014
`
`2013
`
`2012
`
`0
`
`5
`
`10
`
`15
`
`20
`
`25
`
`30
`
` Phase 1
` Phase 2
` Phase 3
`
` Registration
` Approved
`
`During 2014, Shire focused its R&D efforts, investing $840
`million to drive pipeline innovation. In 2014, Shire had 27
`programs (excluding preclinical) in our pipeline – 22 distinct
`programs with the balance relating to new markets and new
`indications – the most in Shire’s history.
`
`Pipeline highlights included:
`Pipeline enhanced through business development with new
`rare disease investments in Lumena (GI), Fibrotech (Renal),
`ArmaGen (Hunter syndrome) and BIKAM (Ophthalmics).
`
`Fast track and orphan drug designation granted for SHP607
`for the prevention of retinopathy of prematurity (“ROP”).
`
`Fast track designation granted for SHP609 for the
`treatment of Hunter syndrome with Central Nervous
`System (“CNS”) symptoms.
`
`Top-line results announced from OPUS2 & SONATA trials for
`Lifi tegrast (SHP606).
`
`Held fi rst ever R&D Day during 2014.
`
`Product sales grew strongly in 2014, up 23% to $5.8 billion.
`This included sales from products acquired through the
`acquisition of ViroPharma, primarily $503 million from
`CINRYZE. Product sales excluding products acquired with
`ViroPharma were up 11% in 2014.
`
`Product sales growth was achieved from across Shire’s
`portfolio with six products delivering double digit growth
`in 2014 at constant exchange rates (“CER”).
`
`Sales outside the US grew 11% to $1.75 billion.
`
`Shire expanded its presence in the Japanese market with the
`approval of both VPRIV for the improvement of symptoms
`of Gaucher disease and AGRYLIN for essential thrombocythemia.
`
`Non GAAP cash generation $’bn3
`
`2014
`
`2013
`
`2012
`
`$2.4
`
`$1.8
`
`$1.6
`
`Shire delivered record Non GAAP cash generation of
`$2.4 billion in 2014 up 35% from 2013. This was driven by
`strong product sales growth combined with the continued
`delivery of operating leverage.
`
`1 Includes CINRYZE product sales which were up 30% on a pro forma basis
`compared with 2013. 2013 sales were recorded by ViroPharma prior to the
`acquisition of ViroPharma by Shire.
`2 Restated to exclude DERMAGRAFT® sales from continuing operations.
`3 This is a Non GAAP fi nancial measure. For reconciliation to US GAAP please
`see page 166.
`
`12 SHIRE PLC ANNUAL REPORT 2014
`
`

`

`Strategic Report
`
`Governance
`
`Financial Statements
`
`Other Information
`
`We believe that these KPIs
`represent meaningful and relevant
`measures of our performance and
`are an important illustration of our
`ability to achieve our objectives.
`
`Effi ciency
`Operate a lean and agile
`organization and reinvest
`for growth.
`
`People
`Foster a high performance culture
`where we attract and retain talent.
`
`Non GAAP EBITDA margin 1
`
`Sales per employee $’m
`
`2014
`
`2013
`
`2012
`
`44%
`
`2014
`
`2013
`
`2012
`
`38%
`
`32%
`
`Non GAAP EBITDA margin was 44%, up 6 percentage points
`when compared to 2013 (38%).
`
`Non GAAP EBITDA Margin growth delivered in 2014
`demonstrates our ability to drive top line growth whilst
`delivering operating leverage.
`
`Operating expenditure in 2014 benefi ted from the
`reorganization undertaken in 2013 which streamlined and
`simplifi ed Shire. These efforts enabled Shire to deliver margin
`improvement whilst continuing to invest for the future.
`
`Shire announced plans to streamline its business globally
`through two principal locations – Massachusetts and
`Switzerland – with support from regional and country
`based offi ces around the world.
`
`Non GAAP adjusted ROIC1
`
`2014
`
`2013
`
`2012
`
`14.7%
`
`15.6%
`
`13.8%
`
`Signifi cant business development activity, particularly the
`acquisition of ViroPharma, led to slightly lower Non GAAP
`Adjusted ROIC to 14.7% in this year of investment.
`
`Record earnings in 2014 has enabled Shire to continue to
`deliver Non GAAP Adjusted ROIC well in excess of its cost
`of capital whilst continuing to make signifi cant investment in
`future growth.
`
`1 This is a Non GAAP fi nancial measure. For reconciliation to US GAAP please
`see page 166.
`
`$1.16
`
`$0.90
`
`$0.82
`
`5,016
`
`5,336
`
`5,367
`
`Number of employees
`
`2014
`
`2013
`
`2012
`
`Our success as a business depends on having highly
`motivated, experienced and capable employees. We are
`committed to maintaining a high-performing and committed
`workforce, providing a safe working environment that
`welcomes a diversity of experiences and perspectives,
`nurtures talent, and rewards those who deliver results.
`
`Throughout 2014 Shire continued to hire and retain talent
`at all levels.
`
`Shire delivered record product sales performance in 2014
`despite uncertainty and distraction resulting from the offer
`from AbbVie.
`
`During 2014 Shire continued to streamline and simplify its
`business while continuing to deliver improvements in sales
`per employee.
`
`Shire improved performance against all OHI (Organizational
`Health) priority practices in 2014.
`
`Shire achieved a 97% job acceptance rate amongst
`new hires.
`
`ANNUAL REPORT 2014 SHIRE PLC 13
`
`

`

`In-line products
`
`In-line
`
`Our business units
`
`To drive continued growth we
`focus on commercial excellence
`across our business units.
`In 2014 we achieved strong
`results for all our top products.
`
`Ophthalmics
`
`Rare
`Diseases
`
`GI & Internal
`Medicine
`
`Neuroscience
`
`Year on year product growth
`
`+18% VYVANSE
`
`2014
`2013
`
`+7% VPRIV (+8% at CER)
`
`2014
`2013
`
`+20% LIALDA/MEZAVANT
`
`+55% FIRAZYR
`
`2014
`2013
`
`-2%
`
`2014
`2013
`
`INTUNIV®
`
`+3% PENTASA®
`
`2014
`2013
`
`0%
`
`2014
`2013
`
`Other products
`
`2014