Financial Dynamics
SCHEDULE 14A INFORMATION
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/ / Soliciting Material Pursuant to Section240.14a-12
SHIRE PHARMACEUTICALS GROUP PLC
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SHIRE PHARMACEUTICALS GROUP PLC
HAMPSHIRE INTERNATIONAL BUSINESS PARK
CHINEHAM, BASINGSTOKE
HAMPSHIRE RG24 8EP ENGLAND
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
Notice is hereby given that the Annual General Meeting of Shire
Pharmaceuticals 14 FebruaryGroup plc will be held at the offices of West LB Panmure Limited
at 35 New Broad Street, London EC2M 1SQ, England on 5 June 2001 Rolf Stahel [presentation with slides]: I would likeat 11.00 a.m.
for the purposes of considering and, if thought fit, passing the following
resolutions, which will be proposed as ordinary resolutions:
ORDINARY BUSINESS
1. To receive and consider the directors' Report and Accounts for the year
ended 31 December 2000.
2. To reappoint Arthur Andersen as Auditors and authorize the directors to say upfront that I
am absolutely delighted with what we can present to you today, and importantly,
I am very proudfix
their remuneration.
3. To re-elect Mr Angus Russell as Director.
4. To re-elect Dr Wilson Totten as Director.
5. To re-elect Dr Bernard Canavan as Director.
6. Conditional on completion of the entire management team who are responsible for these
results,Company's merger with BioChem Pharma Inc.,
to elect Dr Francesco Bellini as Director.
7. Conditional on completion of the Company's merger with BioChem Pharma Inc.,
to elect the Hon James Andrews Grant as Director.
8. Conditional on completion of the Company's merger with BioChem Pharma Inc.,
to elect Mr Gerard Veilleux as Director.
SPECIAL BUSINESS
9. That options may be granted under the Shire Pharmaceuticals Group plc 2000
Executive Share Option Scheme subject to satisfaction of performance
conditions prior to and not subsequent to grant as more particularly
during Q4 when they have been achieveddescribed in parallel with
negotiating the important Biochem proposed merger. IChairman's Letter to shareholders dated 27 April 2001.
By Order of the Board
Angus C. Russell
Secretary
27 April 2001
Registered office:
Hampshire International
Business Park
Chineham
Basingstoke
Hampshire
RG24 8EP
NOTES
1. A member entitled to attend and vote may appoint one or more proxies to
attend and, on a poll, vote instead of him/her. A proxy need not also be a
member. The appointment of a proxy will not go through the
detailspreclude a member of the forward-looking statement, but would like to refer youCompany
from attending and voting in person at the meeting if he or she so desires.
2. A form of proxy is enclosed for full
informationholders of ordinary shares in the report filedCompany.
To be valid the form of proxy (and the power of attorney or other authority,
if any, under which it is signed or a notarially certified copy of such
authority) must reach the Registrar, Lloyds TSB Registrars, The Causeway,
Worthing, West Sussex, BN99 6ZL not later than 11.00 a.m. on form 10K with the SEC.
The highlights3 June 2001 (or
48 hours before any adjournment of the results start with a 29% revenue growth, very closemeeting). A separate instruction card
for holders of American Depositary Receipts of the Company to three times industry growth rates. The operating income growing at 103%
reached 27.9% operating incomegive
instructions to sales, only about 2% away from the best
industry performance. EPS diluted on the ADS base of $1.13, and if you take out
the exceptional item, this is about two cents better than first call consensus
expectationdepositary for the year. Product highlights areAmerican Depositary Receipts is being
provided to such holders.
3. The Company, pursuant to Regulation 34 of the on-going Reminyl
Alzheimer's disease drug roll-outUncertificated Securities
Regulations 1995, specifies that only those shareholders registered in Europe, the
Adderall LA registration
ongoing sinceregister of members of the Company as at 6.00 p.m. on 3 October with expected launchJune 2001 (or, in Q4 this year, and of course, as
announced the proposed merger with Biochem on the 12 December.
The 29% revenue growth I have just referred to comes in a first line from
Adderall, our attention deficit and hyper-activity product, with a growth rate
at the sales level of 51%. We have given you on this key product sales chart the
script comparison in order that we can compare pull and push marketing. In
the case of Adderall,adjournment, as you can see,at 6.00 p.m. on the date two figures are more days preceding the
date of the adjourned meeting) shall be entitled to attend and vote at the
meeting in respect of the number of shares registered in their name at that
time. Changes to entries on the register after such time will be disregarded
in determining the right of any person to attend and/or less in line.
Agrylin, our second biggest product, achieved salesvote at the meeting.
4. There will be available for inspection at the Company's registered office at
Hampshire International Business Park, Chineham, Basingstoke, Hampshire RG24
8EP during normal business hours on any week day (excluding Saturdays,
Sundays and public holidays) from the date of around $58 million
growingthis notice until the date of
the Annual General Meeting and at 77%. Here you have a discrepancy between invoice salesthe meeting from 10.45 a.m. until the
close of the meeting:
- copies of the service contracts of the directors with the Company;
- the register of directors' share interests;
- copies of the existing Articles of Association;
- the rules of the Shire Pharmaceuticals Group plc 2000 Executive Share
Option Scheme; and
prescription growth,- the rules of the Shire Pharmaceuticals Group plc Long Term Incentive Plan.
SHIRE PHARMACEUTICALS GROUP PLC
HAMPSHIRE INTERNATIONAL BUSINESS PARK
CHINEHAM, BASINGSTOKE
HAMPSHIRE RG24 8EP
PROXY STATEMENT FOR THE
2001 ANNUAL GENERAL MEETING OF SHAREHOLDERS
------------------------
The letter from the Chairman of the Company (the "Chairman's Letter"), the
reasons for the resolutions and the reason whyNotice of Annual General Meeting, each
prepared in accordance with English practice, accompany this figure hereproxy statement and
are incorporated by reference herein.
SOLICITATION AND REVOCATION OF PROXIES
The Board of Directors of Shire Pharmaceuticals Group plc (the "Company") is
soliciting the accompanying proxy for use at the Annual General Meeting of
Shareholders (the "Meeting") to be held on invoiced growth5 June 2001 at the offices of West LB
Panmure Limited at New Broad Street House, 35 New Broad Street, London EC2M 1SQ,
England. If a proxy is higherreceived before the Meeting, as indicated below, the
shares represented by it will, on a poll, be voted unless the proxy is for two reasons. First, is the price increase implemented during 2000,
and secondly, the launch previously announced of the 1mg Agrylin extension.
1
On Pentasa and ProAmatine, we are coming backrevoked
by written notice prior to the de-stocking situation
and that is why invoice growth is lowerMeeting. If matters other than prescription growth for both
products. I am pleased to say that for all products we have now stabilized the
stock situationthose set forth in
the market, and weaccompanying Notice of Annual General Meeting are delighted to also to say that not only
did we have a brilliant Q4, but we also observed very exciting growth rates for
more or less all products on the list here, including Adderall in the first six
weeks of year 2001.
We also have good growth rates for Carbatrol with 60% and Dexastat growing
at 15%.
I would also like to take the opportunity of showing you pro-forma figures
that we can now add up between the two announced results from the two companies
- - Biochem that has recently reported, as well as today's Shire report. The
revenues have increased by 26% to total sales of $675 million. This figure is 3%
lower than the one I have just shown you for Shire standalone, but please
remember that Q4 for Biochem shows substantial acceleration in growth over the
rest of the year and to a large extent that was driven by two factors. First,
that you had a 6% growth for 3TC as opposed to a 3% which was collative up to
September and so you get an acceleration on the lead product, and secondly
Zeffix, showed total sales for the year 2000 at $100 million growing in excess
of 200%. It is that Zeffix growth that is increasing the overall growth rate of
Biochem, and therefore we look forward with confidence towards the growth
prospects of the combined company for the year 2001.
On the operating income, I really do not need to go much further in my
explanation than to say that the 81% growth and the $200 million is exciting in
its own right. This has a 30% operating margin for the full year, which I
understand compares with the best in the industry after spending more R&D to
revenue ratio, than the competitors with the 30% margin. In my view that is an
outstanding achievement and supports the statement that we made earlier that you
may well be looking at either the, or one of the, most profitable pharmaceutical
companies in the world which is growing at perhaps twice industry standard.
Also, EPS growth is at around 55%.
Let me come back to saying the deal that we are proposing is not a synergy
deal, but at the same time that of course there are going to be synergies. There
are two head offices with full head office functions and going forward, we do
not need the duplication of all of these functions.
I will now hand over to R&D, Wilson.
2
Wilson [Presentation with slides]: Good morning and good afternoon, ladies
and gentlemen. I will start, as usual, by showing you the R&D pipeline for Shire
standalone. As always I am not going to talk through each project in detail, but
I will talk you through the changes that have happened in the course of the last
twelve months.
The one change that is on this chart that is not on the follow-on slides,
which I will just highlight to you, is in the middle of this oncology section.
We started a new project, which has a code number ASD3427, which is a
formulation of an existing oncology product. As I am sure you are aware, we have
a history of not declaring what these projects are based on for competitive
reasons. I mention this just to point out a continuing element of our R&D
strategy to balance the high risk projects that we do take on with the
relatively lower risk re-formulation projects, which we usually run through our
advanced drug delivery business in the US, Shire Labs and so I am not going to
talk about that in any more detail.
Starting with ADHD franchise, again a lot of was big news in the latter
stages of last year with the registration filing in the US of a long-acting
version of Adderall, a once a day version, which previously has had the code
name SLI381. We hope the trade name will be Adderall LA. This was filed on 3
October, which was rather earlier than we planned and this was good news. The
Phase II was also presented at the endMeeting
for action, the proxy holders will vote the proxies as they think fit. The
approximate date on which a definitive proxy statement and the accompanying
proxy will first be mailed to shareholders is 27 April 2001.
SHAREHOLDERS ENTITLED TO VOTE AND SHARES OUTSTANDING
Only shareholders of October, I believe,record at the close of business on 3 June 2001 will be
entitled to ACAP -vote at the American AcademyMeeting. As of Child24 April 2001 there were 258,031,902
Ordinary Shares of the Company, nominal value 5p (the "Ordinary Shares"),
outstanding and Adolescent Psychiatryentitled to vote at the Annual General Meeting. Of these shares
26,384,010 were held in the US,name of Guaranty Nominees Limited, as nominee for
Morgan Guaranty Trust Company of New York, as depositary (the "Depositary"),
which issues Company-sponsored American Depositary Receipts ("ADRs") evidencing
American Depositary Shares which, in turn, each represent three Ordinary Shares.
Each registered holder of Ordinary Shares present in person at the Meeting
is entitled to one vote on a show of hands, and every holder present in person
or by proxy shall, upon a poll, have one vote for each Ordinary Share held by
such holder. In the event that the proxy card is executed but does not indicate
by marking a vote "FOR", "AGAINST" or "ABSTAIN," the proxy may vote or abstain
at his discretion. An abstention and a "broker non-vote" are counted only for
purposes of determining the presence of a quorum at the Meeting. "Broker
non-votes" are votes that brokers holding shares of record for their customers
(I.E., in "street name") are not permitted to cast under applicable regulations
because the brokers have not received clear voting instructions from their
customers.
A member entitled to attend and vote may appoint one or more proxies to
attend and, on a poll, vote instead of him. A proxy need not also be a member.
The appointment of a proxy will not preclude a member of the Company from
attending and voting in person at the meeting if he or she so desires.
Proxy voting cards from holders of Ordinary Shares must be received by the
Registrar not later than 11:00 A.M. on 3 June 2001 (or not less than forty-eight
hours before any adjournment of the Meeting).
A Deposit Agreement exists between Morgan Guaranty Trust Company and the
prophylactic efficacy studies -holders of ADRs pursuant to which holders of ADRs are entitled to instruct the
phase III studiesDepositary as to the exercise of voting rights pertaining to the Ordinary Shares
so represented. The Depositary has agreed it will endeavor, insofar as
practicable, to vote (in person or by delivery to the Company of a proxy) the
Ordinary Shares registered in its name in accordance with the instructions of
the ADR holders. Instructions from
the ADR holders should be sent to the Depositary so that the instructions are
received by no later than 3:00 P.M. New York City time on 30 May 2001.
Any holder of ADRs giving instructions to the Depositary has the power to
revoke the instructions by delivery of notice to the Depositary at Morgan
Guaranty Trust Company of New York, Depositary, P.O. Box 9383, Boston, MA
02205-9958 at any time so that the Depositary receives, by no later than
3:00 P.M. New York City time on 30 May 2001, duly executed instructions bearing
a later date or time than the date or time of the instructions being revoked.
The cost of soliciting proxies in the form enclosed will be borne by the
Company. In addition to the solicitation by mail, proxies may be solicited
personally, or by telephone, or by employees of the Company. The Company may
reimburse brokers, custodians, nominees, the Depositary and other recordholders
of the Company's Ordinary Shares or ADRs for their expenses in sending proxy
material to the beneficial owners of such Ordinary Shares or ADRs.
Shareholders may obtain copies of the Company's Annual Report on Form 10-K
as filed with the Securities and Exchange Commission without charge by writing
to the Company at Hampshire International Business Park, Chineham, Basingstoke,
Hampshire RG24 8EP England, attention Company Secretary.
Resolutions 1 to 8 represent the business of the Company which weis commonly
transacted at annual general meetings. Resolution 9 relates to the Shire
Pharmaceuticals Group plc 2000 Executive Share Option Scheme. Resolutions 1 to 9
will all be proposed as ordinary resolutions. Ordinary resolutions require
approval by a 50% plus vote of shareholders.
SHAREHOLDER PROPOSALS FOR THE 2002 ANNUAL GENERAL MEETING
The Company will, in future proxy statements, include shareholder proposals
complying with the applicable rules of the U.S. Securities and Exchange
Commission and any applicable U.S. state laws. In order for a proposal by a
shareholder to be included in the proxy statement relating to the Annual General
Meeting of shareholders to be held in 2002, that proposal must be received in
writing by the Secretary of the Company at the Company's principal executive
office no later than 2 January 2002. This requirement is without prejudice to
shareholders' rights under the U.K. Companies Act 1985 to propose resolutions
that may properly be considered at that meeting.
RESOLUTION 1. DIRECTORS' REPORT AND ACCOUNTS
Under English law, each company is required to present at a shareholders'
meeting copies of the company's audited annual financial statements, a report of
the directors and the report of the auditors on those financial statements.
Shareholders are being asked to adopt the financial statements. Adoption merely
means that the shareholders acknowledge that the financial statements have been
distributed and presented at the meeting; it does not yet
presented in publicanyway waive or limit
any rights shareholders may have obviouslywith respect to the financial statements.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ADOPTION OF THE
FINANCIAL STATEMENTS.
RESOLUTION 2. REAPPOINTMENT OF AUDITORS
The Board of Directors recommends that its appointment of the firm of Arthur
Andersen as the auditors of the Company for the fiscal year ended December 31,
2001, be approved and that the Board be given the authority to determine their
remuneration. Arthur Andersen has served as the Company's independent auditors
since January 1994. The Company is advised that no member of Arthur Andersen has
any direct financial interest or material indirect financial interest in the
Company or any of its subsidiaries or, during the past three years, has had any
connection with the Company or any of its
2
subsidiaries in the capacity of promoter, underwriter, voting trustee, director,
officer or employee. A representative of such firm is expected to be present at
the meeting, will be available to answer questions and will be afforded an
opportunity to make a statement if he or she so desires.
AUDIT FEES
The aggregate fees billed for professional services rendered for the audit
of the Company's annual financial statement for the fiscal year ended
December 31, 2000 and for the reviews of the financial statements included in
the Company's Quarterly Reports on Form 10-Q for that fiscal year were $530,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
Arthur Andersen did not render professional services relating to financial
information systems design and implementation for the fiscal year ended
December 31, 2000.
ALL OTHER FEES
The aggregate fees billed by Arthur Andersen for services rendered to the
Company, other than the services described above under "Audit Fees" for the
fiscal year ended December 31, 2000, were $2,110,000. The vast majority of these
fees relate to corporate and employee related tax matters.
The Audit Committee considered whether the provision of services described
above under "All Other Fees" is compatible with maintaining Arthur Andersen's
independence.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE
APPOINTMENT OF ARTHUR ANDERSEN AS INDEPENDENT AUDITORS OF THE COMPANY FOR THE
YEAR 2001.
RESOLUTIONS 3 TO 8. ELECTION AND RE-ELECTION OF DIRECTORS
The Company currently has ten Directors.
NAME AGE POSITION
- ---- -------- --------
Dr. James Cavanaugh....................... 63 Non-Executive Chairman
Rolf Stahel............................... 56 Chief Executive
Angus Russell............................. 44 Group Finance Director
Dr. Wilson Totten......................... 45 Group Research and Development Director
Dr. Barry Price........................... 57 Senior Non-Executive Director
Dr. Bernard Canavan....................... 65 Non-Executive Director
Dr. Zola Horovitz......................... 66 Non-Executive Director
Ronald Nordmann........................... 59 Non-Executive Director
Joseph Smith.............................. 62 Non-Executive Director
John Spitznagel........................... 59 Non-Executive Director
The Articles of Association of the Company provide that one-third of the
Directors who are subject to retirement by rotation, or if their number is not
three or a multiple of three, then the number nearest to but not exceeding
one-third shall retire at the Meeting. The Directors to retire by rotation at
the Meeting include, so far as necessary to obtain the number required, first, a
director who
3
wishes to retire and not offer himself for reappointment, and, second, those
Directors who have been longest in office since their last appointment or
reappointment.
The Articles of Association of the Company also allow the Board of Directors
of the Company to appoint a person who is willing to act as a Director. A
Director appointed in this way may, however, hold office only until the
dissolution of the next annual general meeting after his appointment unless he
is reappointed during the meeting.
In accordance with the Articles of Association, Mr Russell and Drs. Totten
and Canavan retire by rotation and offer themselves for re-election. Dr
Francesco Bellini, the Hon. James Andrews Grant and Mr Gerard Veilleux, who have
been appointed non-executive Directors conditional on completion of the merger
with BioChem Pharma Inc. ("BioChem"), will also offer themselves for election,
assuming that the Company's merger with BioChem has been completed by the
Meeting. Dr. Horovitz and Mssrs. Smith and Spitznagel have tendered their
resignations conditional on the completion of the merger with BioChem.
INFORMATION WITH RESPECT TO NOMINEES
The following information sets forth the name and age of each nominee, all
other positions or offices, if any, now held by him with the Company and his
principal occupation during the past five years.
ANGUS RUSSELL, 44, joined the Company in December 1999 as Group Finance
Director. He previously worked for Zeneca Group PLC as Group Treasurer from 1995
until April 1999 and as Vice President of Corporate Finance of AstraZeneca PLC
from April 1999 through December 1999. Mr. Russell is a chartered accountant,
having qualified with Coopers & Lybrand and is a member of the Association of
Corporate Treasurers.
DR. WILSON TOTTEN, 45, joined the Company as Group R&D Director in
January 1998 and joined the Board in January 1999. Dr. Totten is a medical
doctor. His last position was Vice President of Clinical Research & Development
with Astra Charnwood where he served from 1995 to 1997.
DR. FRANCESCO BELLINI, 53, was a co-founder of BioChem and has served as its
President and Chief Executive Officer since September 1986 and as Chairman of
the Board since May 2000. Dr. Bellini is a director of Molson Inc., Industrial
Alliance Life Insurance Co. and Fonds de recherche de l'Institut de Cardiologie
de Montreal.
DR. BERNARD CANAVAN, 65, joined the Board as a non-executive Director in
March 1999. Dr. Canavan is a medical doctor. He was employed by American Home
Products for over 25 years until he retired in January 1994. He was President of
that corporation from 1990 to 1994. Dr. Canavan is Chairman of the Audit
Committee.
THE HONORABLE JAMES A. GRANT, 63, has been a director of BioChem beginning
in 1986 and Lead Director beginning May 2000. He is a partner with the law firm
of Stikeman Elliott and has been with that firm since 1962. He is a director of
United Dominion Industries Ltd., CAE Industries Ltd. and Canadian Imperial Bank
of Commerce.
GERARD VEILLEUX, 58, has been a director of BioChem since July 1999. He has
been President of Power Communications Inc. and Vice-President of Power
Corporation of Canada, a diversified management and holding company, since
June 1994. Mr. Veilleux is additionally a member of the Board of Governors of
McGill University.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF EACH
NOMINEE AS DIRECTOR NAMED ABOVE.
4
CONTINUING DIRECTORS
DR. JAMES CAVANAUGH, 63, joined the Board on March 24, 1997 and was
appointed as Non-executive Chairman with effect from May 11, 1999.
Dr. Cavanaugh is the President of HealthCare Ventures LLC. Formerly he was
President of SmithKline & French Laboratories, the U.S. pharmaceutical division
of SmithKline Beecham Corporation. Prior to that, he was President of SmithKline
Beecham Corporation's clinical laboratory business and, before we filedthat, President
of Allergan International. Prior to his industry experience, Dr. Cavanaugh
served as Deputy Assistant to the drug. I amPresident of the U.S. for Health Affairs on
the White House Staff in Washington, D.C. He is a non-executive Director of
MedImmune, Inc. and Diversa Corporation. Dr. Cavanaugh is Chairman of the
Nomination Committee.
ROLF STAHEL, 56, joined the Group in March 1994 as Chief Executive from
Wellcome plc where he worked for 27 years. From April 1990 until February 1994,
he served as Director of Group Marketing reporting to the Chief Executive. A
business studies graduate of KSL Lucerne, Switzerland, he attended the 97th
Advanced Managers Program at Harvard Business School.
DR. BARRY PRICE, 57, joined the Board on January 24, 1996 having spent
28 years with Glaxo, holding a succession of key executive positions with Glaxo
Group Research. He is the Chairman of Antisoma plc and a director of Pharmagene
plc. Dr. Price is Chairman of the Remuneration Committee.
DR. ZOLA HOROVITZ, 66, has served as a non-executive Director since
December 1999. Dr. Horovitz has been self-employed as a consultant in the
biotechnology and pharmaceutical industries since 1994. Previously he held
various positions at Squibb Corporation and its successor corporation,
Bristol-Myers Squibb & Co., including that of Vice President, Business
Development and Planning.
RONALD NORDMANN, 59, joined as a non-executive director in December 1999 and
has been a financial analyst in healthcare equities since 1971. From
September 1994 until January 2000, he was a portfolio manager and partner at
Deerfield Management.
JOSEPH SMITH, 62, has served as a non-executive director since
December 1999. From 1989 to 1997, Mr. Smith served in various positions at
Warner-Lambert Company, including President of Park-Davis Pharmaceuticals and
President of the Shaving Products Division (Schick and Wilkinson Sword).
JOHN SPITZNAGEL, 59, joined the Board in December 1999 following service as
President and Chief Executive Officer of Roberts Pharmaceutical Corporation
since September 1997. He was Executive Vice President-Worldwide Sales and
Marketing from March 1996 to September 1997, having served as President of Reed
and Carnick Pharmaceuticals from September 1990 until July 1995.
Executive Officers
The following table sets forth as of the date hereof the executive officers
of the Company.
NAME POSITION
- ---- --------
Rolf Stahel.................................. Chief Executive
Angus Russell................................ Group Finance Director
Dr. Wilson Totten............................ Group Research and Development Director
5
SHARE OWNERSHIP OF DIRECTORS, OFFICERS AND CERTAIN BENEFICIAL OWNERS
Set forth in the following table is the beneficial ownership of Ordinary
Shares as of 24 April 2001 (both actual and after giving pro forma effect to the
merger with BioChem) for (i) each person (or group of affiliated persons) known
to the Company to be the beneficial owner of more than 5% of Ordinary Shares,
(ii) all current and proposed Directors, (iii) each of the Company's executive
officers, including the Company's Chief Executive and (iv) all current and
proposed Directors and executive officers as a group. Except as indicated by the
notes to the following table, the holders listed below have sole voting power
and investment power over the shares beneficially held by them. The address of
each of the Company's Directors and executive officers is that of the Company.
NUMBER OF
ORDINARY SHARES
BENEFICIALLY
NUMBER OF OWNED AS OF
ORDINARY SHARES 24 APRIL 2001,
BENEFICIALLY PERCENT OF PRO FORMA FOR PERCENT OF
OWNED AS OF OUTSTANDING THE MERGER WITH OUTSTANDING
NAME 24 APRIL 2001 SHARES BIOCHEM SHARES (2)
---- --------------- ----------- --------------- -----------
Putnam Investment Management, LLC & The
Putnam Advisory Company, Inc. 2 City
Center, 2nd Floor, Portland, ME
04101-6419(3)........................... 17,732,370 6.9% 17,732,370 3.6%
Dr. James Cavanaugh(4).................... 8,806,368(5) 3.4 8,806,368(5) 1.8
Rolf Stahel............................... 978,601 * 978,601 *
Angus Russell............................. -- * -- *
Dr. Wilson Totten......................... 150,000(6) * 150,000(6) *
Dr. Barry Price........................... 31,350 * 31,350 *
Dr. Bernard Canavan....................... 3,000 * 28,869(7) *
Dr. Zola Horovitz......................... 124,338(8) * 124,338(8) *
Ronald Nordmann........................... 46,968 * 46,968 *
Joseph Smith.............................. 203,320(9) * 203,320(9) *
John Spitznagel........................... 57,624 * 57,624 *
Dr. Francesco Bellini..................... -- * 13,758,451(10) 2.7
Hon. James Grant.......................... -- * 245,282(10) *
Gerard Veilleux........................... -- * 34,099(10) --
All Directors and Executive Officers as a
Group................................... 9,087,385 4.0% 24,079,988(11) 4.8%
- ------------------------
* Less than 1%
(1) For purposes of this table, a person or a group of persons is deemed to have
"beneficial ownership" as of a given date of any shares which that person
has the right to acquire within 60 days after that date. For purposes of
computing the percentage of outstanding shares held by each person or a
group of persons named above on a given date, any shares which that person
or persons has the right to acquire within 60 days after that date are
deemed to be outstanding, but are not goingdeemed to presentbe outstanding for the
purpose of computing the percentage ownership of any dataother person.
(2) Based on thisthe 101,607,536 outstanding shares of BioChem as of 24 April 2001.
Assumes that all BioChem shares are exchanged for new ordinary shares and,
based on the closing price of the Company's ADSs of $46.51 (being the
closing price of an ADS on 17 April 2001), that such shares are exchanged at
a rate of 2.3517 new ordinary shares for each BioChem Share. Also assumes
that no BioChem options are exercised prior to you today, but I can give youor in connection with the
merger.
6
(3) Based solely on information provided to the Company by Putnam Investment
Management, LLC & The Putnam Advisory Company, Inc. on 3 January 2001.
(4) Dr. Cavanaugh is the President of HealthCare Ventures LLC, which is the
management company for a qualitative commentnumber of limited partnerships which have interests
in 8,690,090 Ordinary Shares. Dr. Cavanaugh is also a general partner in
these partnerships. 8,690,090 of the shares in which Dr. Cavanaugh is
expressed to be interested represent shares held by those partnerships and
not by Dr. Cavanaugh personally. The remaining 116,278 shares are held by
Dr. Cavanaugh as beneficial owner.
(5) Includes 964,774 ordinary shares issuable upon exercise of options.
(6) All of Dr. Totten's shares are issuable upon exercise of options.
(7) Dr. Canavan is interested in 11,000 BioChem shares. Based on the closing
price of the Company's ADSs of $46.51 (being the closing price of an ADS on
17 April 2001), Dr. Canavan's shares would be exchanged at a rate of 2.3517
new ordinary shares for each existing BioChem share.
(8) Includes 121,210 ordinary shares issuable upon exercise of options.
(9) Includes 78,200 ordinary shares issuable upon exercise of options.
(10) Dr. Bellini and Mssrs. Grant and Veilleux have been appointed as Directors
of the Company conditional on completion of the Company's merger with
BioChem. The figures for their interests assume that, both ourselvesbased on the closing
price of the Company's ADSs of $46.51 (being the closing price of an ADS on
17 April 2001) and assuming each of them elects for new ordinary shares,
their shares would be exchanged at a rate of 2.3517 new ordinary shares for
each existing BioChem Pharma share they hold. The figure for their interests
include ordinary shares (7,055,100 for Dr. Bellini, 240,578 for Mr. Grant
and 34,099 for Mr. Veilleux) that would be issuable upon exercise of Shire
options received in exchange for their BioChem Pharma options based on the
2.3517 exchange ratio.
(11) This number does not include Dr. Horovitz and Mssrs. Smith and Spitznagel.
BOARD OF DIRECTORS' MEETINGS, COMMITTEES AND FEES
The Board of Directors held 10 meetings during 2000. Each incumbent director
attended at least 75% of the aggregate of the total number of meetings of the
Board of Directors and the investigatorstotal number of meetings held by all committees of
the Board of Directors on which the Director served during 2000 (including in
the studies are
very confident thatcase of each director for purposes of this drugcalculation only such committee
and Board meetings as occurred after such Director commenced service on the
Board of Directors).
The Board of Directors has a good strong profilestanding Remuneration Committee, a standing
Audit Committee and a standing Nomination Committee. The membership of these
committees is determined from time to time by the Board.
The Remuneration Committee, which will find an
important clinical use in ADHD.
We2000 consisted of Dr. Price as
Chairman, Drs. Cavanaugh and Canavan and Mr. Joseph Smith held 4 meetings during
2000. The Remuneration Committee meets regularly and acts within agreed terms of
reference. The Remuneration Committee reviews and authorizes salaries, bonuses
and other matters relating to compensation of the executive officers, including
the granting of options.
The Audit Committee, which consists of Dr. Canavan, as Chairman, Drs.
Cavanaugh and Price and Mr. Nordmann, held 4 meetings during 2000. In addition,
it has been our practice to provide detailed financial information at each
meeting of the Board of Directors. The principal functions of the Audit
Committee are still building onto review the earlier stagesscope of our pipeline in ADHD, and
you have known for some time that we have a project called SPD503, which again
is a re-formulation of an existing drug that is used off-label in ADHD. We are
investigating whether we can develop a registration package both for adults and
paediatric attention deficit hyperactivity disorderthe annual audit and the studies are up and
running.
3
At the opposite endannual audit
report of the risk spectrum, but in additionindependent auditors, recommend the firm of independent auditors
to this project
being non-scheduled - not a controlled drug, a new chemical entity,perform such audits, consider non-audit
7
functions proposed to be performed by the independent auditors, review the
functions performed by the internal audit staff, ascertain whether the
recommendations of auditors are satisfactorily implemented and recommend such
special studies or actions which we
hope also will not attract scheduled status and will not be a controlled drug -
SPD440 is one of our classless compounds called Ampakines. Ampakines is actually
our registered our trademark of our biotech company in the US called Cortex.
This is a drug that is already in Phase II for schizophrenia. We intend to
develop it for adult and paediatric ADHD.
Moving on to Alzheimer's disease - and in a moment I will talk about
Reminyl but first I would just like to put it in some context - clearly it is a
very important disease both because of morbidity and mortality, and it is the
fourth leading cause of death in the USA. There are two points to make on this
slide. First, is that as the population ages, so the incidence and prevalence of
Alzheimer's is increasing quite dramatically. My second point is actually a bit
of mental arithmetic if you can follow me for a second. The US healthcare costs
at the moment for Alzheimer's is about $80-90 billion and if you work that out
on a per capita basis it is about $47,000 per patient. If you divide these two
numbers you get to about 1.7 million and it is estimated that there is at least
four million Americans with ADHD (although possibly that is an underestimate)
and 12 million worldwide. What that tells you is there are an awful lot of
patients with Alzheimer's disease not being treated. Therefore, oneCommittee deems desirable. A copy of the
major
opportunitiesAudit Committee Terms of Reference is attached hereto as Appendix A.
The Board has delegated responsibility to a Nomination Committee made up of
two non-executive Directors and one executive director. The Nomination Committee
consists of Dr. Cavanaugh as Chairman, Joseph Smith and Rolf Stahel. The
Nomination Committee intends to adopt formal and transparent procedures for Reminyl is that it is going into a sector where the diagnosis
historically has not been made with any urgency and historically there have not
been many treatment options.
If we look at Reminyl specifically, the European launch started with the UK
on 21 September last year. We were very pleased to have a positive
recommendation by the NICE group - the National Institute for Clinical
Excellence. This is a government organisation set up to review and make
recommendations to the National Health Service in the UK as to which drugs
should be reimbursed, and there was a positive recommendation for Reminyl as for
the other two drugs for Alzheimer's disease. Importantly, the description within
that recommendation highlighted the dual mode of action for Reminyl. If you
remember this is already described in the European labelling and it is becoming
very well known in the scientific community that Reminyl has this
differentiating pharmacology which helps it stand out from Aricept and Exelon,
and we hope that will translate into an advantageous clinical profile.
4
The rest of the European launches are underway as we speak. In US we had an
approval letter in August, and in order to convert that into a approval two
things need to happen. One is that traditionally the review of additional subset
analysis which the FDL are interested in looking at, to make sure that they have
the most up-to-date safety database, and also to negotiate the final labelling.
These things happen outside the public domain and so I am not going to give you
any details about what is happening, but with our excellent partners, Janssen,
(part of J & J), we are optimistic that we should see approval sometime in the
first quarter, which means some time in the next six weeks or thereabouts and
this would support launches in the first half of 2001 - obviously quarter two -
based on that. What I am saying is subject to final approval and I cannot
guarantee it, but we remain optimistic.
Staying with our CNS portfolio, Dirame is simply acting analgesic
painkiller which is in late Phase III, for moderate and severe pain targeted at
post-operative pain, cancer pain, orthopaedic surgery and those type of
indications. Again this is a project which we acquired from Roberts and we are
underpinning the clinical programme by conducting some additional work, and we
expect to be in a position to launch this from 2003 onwards. One of the key
factors in determining the commercial value of this type of compound is the
categorisation it receives for scheduling because of its addiction potential.
For example a drug which is broadly similar in a pharmacology but unscheduled is
tramadol - J & J's drug Altram - that sells about $400 million, but a drug that
is similar in pharmacology like oxycodone and that is scheduled quite
restrictively does $100 million, so that helps give you a band for the value.
Again we have global rights for this project.
Moving away from the CNS to touch briefly on oncology and haematology, we
have Agrylin, which again is a drug that we inherited from Roberts for the
treatment of essential thrombocytopenia - elevated blood platelet count. This is
on the market in the US and Canada, but not yet in Europe or Japan. We have
received orphan drug designation in both of these regions, so we now have orphan
status in US, Europe and Japan. We are in the process of putting together the
registration packages in Europe and we are completing the Phase I programme in
Japan. Again we expect to be rolling this out over the next 18-24-36 months
throughout Europe and eventually into Japan. It is again a product that we have
worldwide rights.
5
?Defosnol, is the trade name for lanthanum carbonate, which is our drug to
treat elevated blood hypophosphatemia in patients with kidney failure. These
patients are on renal dialysis. The European submissions are being compiled even
as we speak, and they will go in the next few weeks. In the US we are completing
Phase III, and if you run these timings on we should find that launches in
Europe can take place from early 2002. The US is running roughly about 12 months
behind that in terms of registration, and the launch, you may remember, we
announced in the body of last year as a consequence of discussions with FDA
about additional long term safety data.
If you stand back from the individual projects, and if you go through the
R&D pipeline chart I showed you right at the beginning, you will find there are
some new kids on the block there. Just to highlight what they are, I mentioned
that we in-licensed this project from Cortex for ADHD. We have in-licensed a
drug called balzalazide from Salix, which is on the market in some parts of
Europe, for example the UK, and we are completing registration for other
companies. So, it is half an R&D project and half a commercial project. SPD421
is a pro-drug of valproate acid which we in-licensed from Depharm an Israeli
biotech company. SPD451 is the drug that we have most recently in-licensed for
Parkinson's disease, originated by a Cambridge biotech company called ?Zenith,
whom I am sure many of you know.
Again, standing right back from our pipeline I have two points. I continue
to believe that is a remarkably healthy pipeline for any company, and certainly
for a company of our size. I am very optimistic that it will drive the business
forward over the next several years. Seventeen projects, 10 CNS, 10 - a
different ten but also 10 - in what we would class as late stage development
at/or beyond the end of Phase II.
The other thing that is slightly unusual about that portfolio is that it is
relatively heavily weighted towards late stage development compounds. You would
normally see a pipeline with relatively more early stage feeding into relatively
fewer late stage because of attrition, and in fact that is one of the clues as
to why the Biochem merger from an R&D perspective is such
an elegant fit because
of course their pipeline is the exact mirror-image of that.
I would now like to hand over to Angus to go through the financial aspects.
6
Angus: Thank you very much, Wilson. I would like to return to the full
year's income statement in a bit more detail. Rolf gave you the headlines of 29%
growth in revenues and you can see the components of that between product sales
and other income. Product sales were also up 29% and so substantially the growth
of the business is being driven by products.
Operating income, as Rolf said, is up 103 and income before tax 102. You
can see the earnings go up 81% - slightly less growth there than the income
before tax - and that is really largely explained in the taxation charge. There
is a movement on effective tax rates and last year the effective tax rate was
29% in 2000, but the year before it was 24%. Therefore that increase in the
effective tax rate has just taken a bit off the income before tax.
As Rolf said, $1.13 per ADS. You will note on the front of the press
release we put out that there has been this one-off receipt of $8 million. It is
a legal settlement and we cannot say what it is in regard of as we are
confidentially bound by that agreement. However if you take that $8 million out
of the figures then the EPS per ADR or ADS would have been 107, and I believe
first call consensus was $1.05, so we are two cents ahead of the consensus.
If we look at the dispersion of products in the portfolio, you can see that
Adderall was 43% of our sales this year. I know of one analyst team whose stats
were absolutely right and so they will be taking pleasure in that I am sure.
Well done to them; they get the star prize! Obviously this is a significant
issue in the Biochem deal. After this deal, and certainly not on 2000 but on
pro-forma 1999 numbers, this figure would fall to about 30% of revenues.
Remember again the significant point is that at the net income, the reduction of
the concentration of Adderall is more significant because substantially what we
are getting from Biochem is royalty income with a 100% gross margin and no added
sales costs. It is therefore probably reducing the dominance of Adderall at the
net income level from 60-70% of the business to well below 50%.
Just looking at Q4, I apologise, as your slides probably do not have that
little subheading that this is pre-exceptionals and pre-APV25 charge. You can
see very good growth again. Revenue growth is very similar in Q4 to the full
year and is just a bit above the full year at 31% in Q4. Again this is
substantially driven by product sales. Other income looks like a large reduction
but it is based primarily on very small numbers there as you can see. Operating
income obviously shows a staggering increase. A lot of that is to do with the
Roberts business last year
7
where there was a big slow down in the fourth quarter. If you remember a feature
of this was the products sales pipeline stocking effects and the holding back of
the sales in the fourth quarter and then the significant reduction in expenses
as a result of that.
Let me just spend some time now going through my usual chart of financial
ratios. If we look at the full year first, you can see, and those of you who
have tracked the company for some time will know that Rolf and I always thought
that to maintain a company which is investing at 20-24% (that is our target
range of R&D to sales) and producing operating margins of 25-30%, you have to be
producing gross margins in excess of 80%. You can see that this year we have
finished up 2% above the 80% target and our R&D is in that range of 20-24%.
Also, I am pleased to say that our operating margin is in the upper end of the
25-30%, hence Rolf's comments about us now being one of the most profitable
speciality, if not one of the most profitable, pharmaceutical companies,
particularly when you consider that 28% is generated after this 21% charge of
R&D to sales.
Looking at the comparison of those ratios to where we were just one year
ago, you can see 6% improvement in the gross margin, a little bit more going
into R&D, and a significant improvement in the operating margin. That is a lot
to do with SG&A line and the benefits of the Roberts merger in terms of the cost
elimination. We set ourselves a synergy target with Roberts of $20 million of
cost savings in the year and I am pleased to say we did actually end the year at
just slightly above the $20 million target.
Q4 - the exit rate - you can see a higher gross margin of still 85%. A word
of warning on that; there are some one-off adjustments in that to do with our
costing systems and absorption of variances on cost of goods. We have ended up
with a very efficient result, particularly on products like Carbatrol and
Adderall, and those adjustments are being put through in the fourth quarter of
the year. We have also seen some change to ProAmatine on the royalty stream
where we have improved the income to Shire as a result of that.
The final point is on HMO contracts, again these were to do largely with
the Roberts products and the Shire team has renegotiated a lot of the HMO
contracts, particularly on products like Pentasa and ProAmatine, and again with
beneficial impact on gross margins. So, a word of warning that there are some
one-off items, and I would say that the 82% for the full year is a
8
better guide, with perhaps 82-83% for the margins going forward rather than that
exit rate of 85%.
Obviously R&D was quite low, as you can see, with below our trend rates in
the fourth quarter. This was really to do with the fact that a significant
amount of our trial expenditure occurred in the early quarters and it is just
really a phasing issue, and probably against where we originally thought ?Fognon
might be going in just at the end of the year. Clearly that has moved into Q1
2001, and there is just some small deferral of expense on that.
On the SG&A product sales, 27% again which looks very low compared to the
30% for year. Again, a word of caution there as you should remember Q4 is where
the one-time legal settlement of $8 million has gone through that SG&A line, so
you would have to add back the $8 million into the SG&A expense to get an
on-going figure. Therefore, all those factors being quite low means that we have
ended up with an excessively high operating margin but I would definitely
caution you against at 38%.
If we move on to cash flow, you can see here the cash generation. In order
that you can reconcile these numbers back to the press release, the cash flow in
there shows $61 million in round number of net cash flow from operations and all
I have done here is gross that back up in the first elements showing you the
gross cash generation less the tax and interest. Therefore, if you net those
first two boxes out you come back to the $61 million of net cash flow from
operations.
I always like to make the point that because Shire contracts out
substantially all of its manufacturing, it spends very little on fixed assets.
Normally it would be in the range of $5-10 million but again this is a little
bit higher because we have acquired a new headquarters site here in the UK in
Basingstoke, which we will be moving into in about three weeks time, and that is
a substantial component of that fixed asset spend. So, substantially most of the
money as you can see - $43 million - has gone on acquiring more projects and
products. Some of these are in Europe and some of them are the early stage
pre-clinical and phase I projects that Wilson and the team have brought in
throughappointments during the course of the year. FinancingThe Nomination Committee will
consider suggestions regarding candidates for election to the Board submitted by
shareholders in writing to the Company Secretary. With regard to the Annual
General Meeting in 2002, any such suggestion must be received by the Company
Secretary no later than the date by which shareholder proposals for such Annual
General Meeting must be received as described above under the heading
"Stockholder proposals for the 2002 Annual General Meeting."
Our non-executive Directors receive L20,000 (approximately $30,000) on an
annual basis for their services save for Dr. Cavanaugh, who, as non-executive
Chairman, received remuneration of L35,000 (approximately $53,000) for 2000. We
reimburse non-executive Directors for out-of-pocket travel expenditures relating
to their service on the Board.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires our executive
officers and Directors and persons who own more than 10% of a registered class
of our equity securities to file initial reports of ownership and changes in
ownership with the SEC and to furnish copies of these reports to the Company. To
the Company's knowledge, based solely on a review of the copies of such reports
furnished to us and representations that no other reports were required, the
Company believes that all persons subject to the reporting requirements of
Section 16(a) filed the required reports on a timely basis during the year ended
December 31, 2000.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In April 1999 Roberts Pharmaceutical Corporation made a loan in the sum of
$283,000 to Mr. Spitznagel. The loan was unsecured and bore interest at the rate
of 4.15%, per annum. 10% of the principal outstanding plus accrued interest was
repayable on each of the first four anniversaries of the loan and the balance of
principal plus accrued interest is repayable on the cash wefifth anniversary of the
loan. Mr. Spitznagel repaid the full outstanding balance of the loan on
March 29, 2000.
Mr. Spitznagel entered into a consultancy agreement with the Company in
December 1999, which provided that:
i. if he has good reason, as defined in his service agreement with Roberts,
to terminate his employment with Roberts under his service agreement,
the Company will cause Roberts to provide him with the payments and
benefits he is entitled to upon a "good reason' termination;
ii. Mr. Spitznagel would provide consulting services to the Company for at
least 42 months following the merger with Roberts, unless
Mr. Spitznagel terminates the consultancy agreement prior to the end of
the 42nd month; and
iii. the Company would pay Mr. Spitznagel at the rate of $400,000 per annum
for his consulting services, $150,000 per annum as an office holder,
$250,000 per annum to comply with certain restrictive covenants
contained therein and $150,000 per annum to be used for tax, financial
and estate planning advice, life insurance and health insurance.
8
EXECUTIVE COMPENSATION
The following table sets forth, for 2000, 1999 and 1998, the compensation of
the executive officers of the Company.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
--------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND POSITION(1) YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
- -------------------- -------- -------- -------- ------------ ------------ ------------
Rolf Stahel......................... 2000 $575,000 $316,000 -- -- $ 80,000(2)
Chief Executive 1999 $486,000 $195,000 -- -- $ 69,000
1998 $405,000 $191,000 -- -- $ 60,000
Angus Russell....................... 2000 $272,000 $136,000 -- -- $ 48,000(3)
Group Finance 1999 $ 17,000 -- -- -- $ 2,000
Director
Wilson Totten....................... 2000 $303,000 $151,000 -- -- $ 33,000(4)
Group Research and 1999 $230,000 $ 92,000 -- -- $ 39,000
Development Director
- ------------------------
(1) In addition to the Chief Executive, the Company has only two other executive
officers.
(2) Mr. Stahel's other compensation consists of Company pension contributions
and other benefits provided.
(3) Mr. Russell's other compensation consists of Company pension contributions
and other benefits provided.
(4) Dr. Totten's other compensation consists of Company pension contributions
and other benefits provided.
9
The following table sets forth information with respect to grants of stock
options to each of the executive officers during the year ended December 31,
2000.
OPTION GRANTS IN 2000
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL
NUMBER OF PERCENTAGE OF RATES OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE EXPIRATION --------------------
NAME GRANTED FISCAL 2000 PER SHARE DATE 5% 10%
- ---- ---------- ------------- --------- ---------- -------- ---------
Rolf Stahel........................ 54,189 2.1 16.224(2) 02/28/2007 339,000 789,000
32,241 1.3 19.124(3) 08/02/2007 267,000 621,000
Angus Russell...................... 6,422 * 16.224(2) 02/28/2007 40,000 94,000
Dr. Wilson Totten.................. 16,995 * 16.224(2) 02/28/2007 106,000 247,000
63,242 2.5 19.124(3) 08/02/2007 492,000 1,147,000
*Less than 1%.
- ------------------------
(1) The potential realizable value uses the hypothetical rates specified by the
SEC and is not intended to forecast future appreciation, if any, of the
Company's stock price. The Company did not use an alternative formula for
this valuation as the Company is not aware of any formula which will
determine with reasonable accuracy a present value based on future unknown
or volatile factors. In fact, the Company disavows the ability of this or
any other valuation model to predict or estimate the Company's future stock
price or to place a reasonably accurate present value on the stock options
because all models depend on assumptions about the stock's future price
movement, which is unknown. The value indicated is a net amount, as the
aggregate exercise price, translated at the rate of exchange at
December 31, 2000, has been deducted from the final appreciated value.
(2) The exercise price was L10.275 per share and has been translated at the rate
of exchange at the date of grant of $1.579: L1.00.
(3) The exercise price was L12.80 per share and has been translated at the rate
of exchange at the date of grant of $1.494: L1.00.
The following table sets forth information with respect to each of the
executive officers concerning the value of all exercised and unexercised stock
options of such individuals at December 31, 2000. Aggregated Option/SAR
Exercises in Last Fiscal Year and FY-End Option/SAR Values
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS(1)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
Rolf Stahel....................... -- -- 882,856 180,205 12,202,000 1,029,000
Angus Russell..................... -- -- -- 58,393 -- 261,000
Dr. Wilson Totten................. -- -- -- 256,376 -- 1,834,000
- ------------------------
(1) The value of unexercised in-the-money options is a net amount, as the
aggregate exercise price, translated at the rate of exchange at
December 31, 2001, has been deducted from the unexercised value.
10
EMPLOYMENT AGREEMENTS
The Company entered into an employment contract with Mr. Stahel on
October 21, 1996 which is terminable by either party on the giving of
12 months' notice. In connection with such agreement Mr. Stahel was paid a
salary of $575,000 for the year ended December 31, 2000 and is entitled to a
discretionary bonus of up to 55% of such salary as determined by the
Remuneration Committee on a yearly basis.
The Company entered into an employment contract with Mr. Russell on
October 29, 2000 which is terminable by either party on the giving of
12 months' notice. In connection with such agreement Mr. Russell was paid a
salary of $272,000 for the year ended December 31, 2000 and is entitled to a
discretionary bonus of up to 50% of such salary as determined by the
Remuneration Committee on a yearly basis.
The Company entered into an employment contract with Dr. Totten on
December 30, 1998 which is terminable by either party on the giving of
12 months' notice. In connection with such agreement Dr. Totten was paid a
salary of $303,000 for the year ended December 31, 2000 and is entitled to a
discretionary bonus of up to 50% of such salary as determined by the
Remuneration Committee on a yearly basis.
REPORT OF THE REMUNERATION COMMITTEE ON EXECUTIVE COMPENSATION
REMUNERATION POLICY
The Remuneration Committee's policy on the remuneration of executive
officers is directed at the retention and motivation of executive officers by
ensuring that their remuneration is competitive with companies within the sector
of emerging pharmaceutical companies, taking into account the interests of the
shareholders.
In developing remuneration policy and fixing remuneration, consideration is
given to the salary data of Directors of comparable companies of a similar size
in industry generally and, more specifically, in the emerging pharmaceuticals
sector. The Chief Executive also advises the Remuneration Committee on other
executive remuneration and on individual performance. External agencies are also
used to advise on levels of remuneration as appropriate. No Director is involved
in determining his own remuneration. The procedures and criteria for determining
remuneration policy are regularly reviewed by the Remuneration Committee.
ANNUAL BONUSES
The annual bonuses payable to executive officers are established on the
basis of objectives for the Company and personal objectives. They include
measurable and quantitative criteria related to financial performance. For the
year ended December 31, 2000, these included revenue and earnings targets. The
maximum annual bonus for each executive officer for the year ended December 31,
2000, was 55% of salary in respect of Mr. Stahel, 50% of salary in respect of
Mr. Russell and 50% of salary in respect of Dr. Totten.
SHARE OPTIONS
Share options are granted to executive officers as an incentive. The grant
of options is wholly discretionary. In granting share options, the Remuneration
Committee takes into account the advice and recommendations of the Chief
Executive and individual salary levels and positions within the Company.
11
RETIREMENT BENEFITS
The Company contributes 10% of salary to the personal pension of the
executive officers.
LONG-TERM INCENTIVE PLAN
The Long-Term Incentive Plan was adopted at the general meeting on June 30,
1998. Under this plan, the Company may at any time, with the approval of the
Remuneration Committee, grant, or request that trustees grant, an award to any
full-time employee of any member of the Company.
An award may be made to any full-time employee (including a Director who is
also such an employee) of the Company on the terms set out in the plan and upon
such other terms as the Board (or a committee appointed by the Board) may
specify, provided that no award may be granted to an employee who is within two
years of his or her contractual retirement age.
COMPENSATION OF THE CHIEF EXECUTIVE
The Remuneration Committee's policy on remuneration applies in all respects
to the Chief Executive, Mr. Stahel. Mr. Stahel's base salary of $575,000 for
2000 was based on the Company's need to retain and motivate its executive
directors. In developing remuneration policy and fixing remuneration,
consideration is given to salary data of directors of comparable companies of a
similar size in industry generally and, more specifically in the emerging
Pharmaceuticals Sector. Mr. Stahel was awarded a $316,000 bonus for the year
ended December 31, 2000 in connection with his individual performance and the
performance of the Company as a whole.
Dr. Barry Price, Chairman
Dr. James Cavanaugh
Dr. Bernard Canavan
Joseph Smith
12
PERFORMANCE GRAPH
The following graph compares the performance of the Company's Ordinary
Shares to the S&P 500 Index and the Nasdaq Biotechnology Index for the dates
indicated.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
15/2/96 TO 31/12/96 12/31/97 12/31/98 12/31/99 12/31/00
Shire 136 164 221 353 603
SP 500 Index 113 148 188 224 199
Nasdaq Biotech 94 94 136 274 125
Comparison of Cumulative Total Return of $100 invested on February 15,
1996(1) in Shire Ordinary Shares, the S&P 500 Index and the Nasdaq Biotechnology
Index.
2/15/96
TO
12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
-------- -------- -------- -------- --------
Shire.............................. $136 $164 $221 $353 $603
S&P 500 Index...................... $113 $148 $188 $224 $199
Nasdaq Biotechology Index.......... $ 94 $ 94 $136 $274 $125
- ------------------------
1 The Company's Ordinary Shares began trading on the London Stock Exchange on
February 15, 1996.
13
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board has reviewed and discussed the Company's
audited financial statements with the management of the Company. The Audit
Committee has discussed with Arthur Andersen, the Company's independent
auditors, the matters required to be discussed by Statement on Auditing
Standards 61. The Audit Committee also has received the written disclosures and
the letter from the independent accountants required by Independence Standards
Board Standard No. 1 (Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees) and has discussed with Arthur Andersen the
independence of such independent accounting firm. The Committee has also
considered whether the independent auditors' provision of information technology
and other non-audit services to the Company is compatible with the auditors'
independence.
Based on its review and discussions referred to in the preceding paragraph,
the Audit Committee recommended to the Board that the audited financial
statements for the fiscal year ended December 31, 2000 be included in the
Company's Annual Report on Form 10-K for the Company's fiscal year ended
December 31, 2000.
Dr. Bernard Canavan, Chairman
Dr. James Cavanaugh
Dr. Barry Price
Ronald Nordmann
RESOLUTION 9. AMENDMENT OF THE SHIRE PHARMACEUTICALS GROUP PLC 2000 EXECUTIVE
SHARE OPTION SCHEME
As explained in the Chairman's Letter, the Company has undertaken a review
of the performance conditions attaching to its long term equity incentive
arrangements in the light of its growth and the international environment in
which it operates.
As a result of this review the Company is seeking the approval of
shareholders to change the manner in which the Shire Pharmaceuticals Group plc
2000 Executive Share Option Scheme may be operated so that the Remuneration
Committee may impose performance conditions on the grant of options under the
Shire Pharmaceuticals Group plc 2000 Executive Share Option Scheme, in which
case there will be no further conditions governing the exercise of such options.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THIS
CHANGE TO THE WAY IN WHICH THE SHIRE PHARMACEUTICALS GROUP PLC 2000 EXECUTIVE
SHARE OPTION SCHEME MAY BE OPERATED.
By Order of the Board of Directors,
Angus C. Russell
SECRETARY
Dated: 27 April 2001
Your vote is important. Shareholders who do not expect to be present at the
Annual General Meeting and who wish to have their shares voted on a poll are
requested to sign and date the enclosed proxy and return it in the enclosed
envelope. No postage is required if mailed in the United States.
14
APPENDIX A
SHIRE PHARMACEUTICALS GROUP PLC
AUDIT COMMITTEE
TERMS OF REFERENCE
I. CONSTITUTION
The committee is established as a committee of the board ("Board") of Shire
Pharmaceuticals Group plc ("the Company") and shall be known as the Audit
Committee ("the Committee").
II. MEMBERSHIP
5.1. The Committee shall consist of not less than three members, each of
whom shall be appointed by the Board from amongst the non-executive
directors of the Company. Committee members will hold office subject to
continuing as a director of the Company as determined by the Board.
5.2. If any member of the Audit Committee is unable to act for any reason,
the Chairman of the Committee may appoint any other non-executive
director of the Company to act as alternate for that member.
5.3. The Board may elect a Chairman of the Committee and determine the
period for which he is to hold office. If no such Chairman shall have
been appointed, or if at any meeting the Chairman is not present within
five minutes of the time appointed for holding of the same, the members
present shall choose one of their number to act as chairman of the
meeting.
III. SECRETARY
The Company Secretary shall act as Secretary of the Committee.
IV. QUORUM
The quorum necessary for the transaction of the business of the Committee
shall be two members. A duly convened meeting of the Committee at which a quorum
is present shall be competent to exercise all or any of the authorities, powers
and discretions vested in or exercisable by the Committee.
V. FREQUENCY OF MEETINGS
5.1. Meetings shall be held not less than twice a year and shall be summoned
by the Secretary of the Committee.
5.2. In addition to the routine meetings of the Committee, any member of the
Committee, the external auditors or the Group Finance Director may at any
time request the Secretary of the Committee to summon a meeting if they
consider that one is necessary. Further, the external auditors and the
Group Financial Director may have access to the Chairman of the Committee
or any other member of the Committee as required in relation to any
matter falling within the remit of the Committee.
VI. CONDUCT OF BUSINESS
The Committee shall conduct its business as it thinks fit. Decisions of the
Committee shall be by majority decision. In the case of an equality of votes,
the Chairman of the Committee shall have a second or casting vote. Save as
otherwise required by these terms of reference or agreed by the
A-1
Committee all provisions relating to the conduct of business of the Board in the
articles of association from time to time of the Company shall equally apply to
the conduct of business of the Committee.
VII. ATTENDANCE AT MEETINGS
Subject as referred to in 8 below, the Group Finance Director, the Group
Financial Controller and representatives of the external auditors of the Company
will be entitled to and will normally be expected to attend and, if requested by
Committee members, shall attend meetings of the Committee. Other members of the
Board who are not members of the Committee shall also have the right to attend
such meetings.
VIII. ANNUAL MEETING WITH EXTERNAL AUDITORS
At least once a year the Committee shall meet with the external auditors
without any executive member of the Board in attendance.
IX. DUTIES
5.1. The duties of the Committee shall be:-
(a) to consider the appointment of the external auditors and any
questions of resignation or dismissal and to receive from the
Company's external auditors a formal written statement delineating
all relationships between the auditor and the Company and to consider
any such relationship, all in accordance with applicable laws and
regulations including, without limitation, the Listing Rules in the
United Kingdom and the NASD rules applicable to NASDAQ;
(b) to consider the audit fee and keep under review any other fees
payable to the auditors in respect of non-audit activities;
(c) to discuss with the external auditors before the audit commences the
nature and scope of the audit;
(d) to review the half-year financial statements, annual accounts and
accompanying reports to shareholders and preliminary announcement of
results and any other announcement regarding the Company's results or
other financial information to be made public, in any such case
before submission to the Board, focusing particularly on:
-- compliance with accounting standards and any changes in accounting
policies and practices
-- any important areas where judgment must be exercised
-- completeness, accuracy and fairness of disclosures
-- significant adjustments resulting from the audit
-- the going concern assumption
-- compliance with stock exchange and legal requirements
-- presentation of a balanced and understandable assessment of the
Company's position
(e) the submission of the documents referred to in (d) above to the Board
for its approval and the determination of what information in
connection with that submission should be brought to the Board's
attention;
(f) the discussion of issues and recommendations arising from the audit,
and any matters the auditors may wish to discuss (in the absence,
where requested by the Committee, of
A-2
executive members of the Board and other persons having a right to
attend meetings of the Committee but who are not members of the
Committee);
(g) review of the internal operational audit programme, consideration of
the major findings of internal operational audit reviews and
management's response, and effective coordination between the
internal and external auditors;
(h) review of any statement to be made by the Company in its Annual
Report and Accounts on internal control systems prior to endorsement
by the Board and general review of the effectiveness of internal
control systems;
(i) review of the external auditors' management letter and response;
(j) review of the effectiveness of the Company's internal control system
and of any statement on internal control to be included in the
directors' report before submission to the Board for its approval;
(k) review of the business risks faced by the Company and review of any
risk schedule on behalf of the Board at the half-year and prior to
submission to the Board at the year-end;
(l) consideration of the major findings of internal investigations and
management's response;
(m) the annual review and reassessment of the adequacy of these Terms of
Reference, the completion of which shall be certified to NASDAQ;
(n) the review and discussion of audited financial statements with
management; and
(o) consideration of other topics as notified from time to time by the
Board or as proposed by the Chairman of the Company or Group Chief
Executive.
X. AUTHORITY
5.1. The Committee is authorised to investigate any activity within its
terms of reference.
5.2. The Committee is authorised to seek any information it requires from
any employee of the Company in order to performs its duties.
5.3. In connection with the performance of its duties, the Committee is
authorised to obtain outside legal or other independent professional
advice and to secure the attendance of external professional advisers at
its meetings if it considers this necessary.
XI. MINUTES
11.1.The members of the Committee shall cause minutes to be made of all
resolutions and proceedings of the Committee including the names of all
those present and in attendance at meetings of the Committee.
11.2.The Secretary shall circulate the minutes of meetings of the committee
to all members of the Committee, to all members of the Board and to the
external auditors and other advisers of the Company where relevant.
XII. ANNUAL REPORT AND AGM
12.1.The membership of the Committee shall be listed each year in the
Company's Annual Report.
12.2.The Chairman of the Committee shall attend the Company's Annual General
Meeting to answer shareholders' questions about the work of the
Committee.
December 2000
A-3
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
- --------------------------------------------------------------------------------
SHIRE PHARMACEUTICALS GROUP PLC
- --------------------------------------------------------------------------------
PLEASE REFER TO THE REVERSE OF THIS CARD
FOR THE RESOLUTIONS TO BE VOTED AT THE MEETING.
Mark box at right if an address change or comment has been noted /_/
on the reverse of this card.
CONTROL NUMBER:
Please be sure to sign and date this Voting Instruction Card. Date _____________
- --------------------------------------------------------------------------------
___________ADR Holder sign here______________________Co-owner sign here_________
ORDINARY BUSINESS
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
Resolution 1 /_/ /_/ /_/ Resolution 5 /_/ /_/ /_/
Resolution 2 /_/ /_/ /_/ Resolution 6 /_/ /_/ /_/
Resolution 3 /_/ /_/ /_/ Resolution 7 /_/ /_/ /_/
Resolution 4 /_/ /_/ /_/ Resolution 8 /_/ /_/ /_/
SPECIAL BUSINESS
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
Resolution 9 /_/ /_/ /_/
Mark box at right if you wish to give a discretionary proxy to a /_/
person designated by the Company. PLEASE NOTE: Marking
this box voids any other instructions indicated above.
DETACH CARD DETACH CARD
TO THE REGISTERED HOLDERS OF AMERICAN DEPOSITARY RECEIPTS ("ADRS")
REPRESENTING ORDINARY SHARES OF
SHIRE PHARMACEUTICALS GROUP PLC
Morgan Guaranty Trust Company of New York (the "Depositary") has received advice
that the Annual General Meeting of Shareholders (the "Meeting") of Shire
Pharmaceuticals Group plc (the "Company") will be held at the offices of West LB
Panmure Limited, 35 New Broad Street, London EC2M 1SQ, on Tuesday, June 5, 2001,
beginning at 11:00 a.m., for the purposes set forth on the reverse of this card.
If you are desirous of having the Depositary, through its Nominee or Nominees,
vote or execute a proxy to vote the Ordinary Shares represented by your ADRs for
or against the Resolutions to be proposed at the Meeting, kindly execute and
forward to Morgan Guaranty Trust Company of New York, Depositary, the attached
Voting Instruction Card. The enclosed postage paid envelope is provided for this
purpose. This Voting Instruction Card should be executed in such manner as to
show clearly whether you desire the Nominee or the Nominees of the Depositary to
vote for or against each Resolution, as the case may be. You may include
instructions to give a discretionary proxy to a person designated by the
Company. The Voting Instruction Card MUST be forwarded in sufficient time to
reach the Depositary before 3:00 p.m., New York City time, May 30, 2001. Only
the registered holders of record at the close of business April 25, 2001 will be
entitled to execute the attached Voting Instruction Card.
Morgan Guaranty Trust Company of New York, Depositary
Dated: April 30, 2001
SHIRE PHARMACEUTICALS GROUP PLC
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, DEPOSITORY
P.O. BOX 9383, BOSTON, MA 02205-9958
VOTING INSTRUCTION CARD
The undersigned, a registered holder of American Depositary Receipt(s)
representing Ordinary Shares of Shire Pharmaceuticals Group plc, of record April
25, 2001, hereby requests and authorizes Morgan Guaranty Trust Company of New
York, Depositary, through its Nominee or Nominees, to vote or execute a proxy to
vote the underlying Ordinary Shares of the Company represented by such American
Depositary Receipts registered in the name of the undersigned at the Annual
General Meeting of Shareholders of the Company to be held at the offices of West
LB Panmure Limited, 35 New Broad Street, London EC2M 1SQ on Tuesday, June 5,
2001, beginning at 11:00 a.m., or any adjournment thereof.
These instructions, when properly signed and dated, will be voted in the manner
directed herein. If you mark the box to indicate that you wish to give a
discretionary proxy to a person designated by the Company, the underlying
Ordinary Shares represented by your American Depositary Receipt(s) will be voted
by such person in his discretion. If these instructions are properly signed and
dated but no direction is made, the underlying Ordinary Shares represented by
such American Depositary Receipt(s) will be voted by the Depositary FOR all
Resolutions at the Annual General Meeting.
NOTE: In order to have the aforesaid shares voted, this Voting Instruction Card
MUST be received before 3:00 p.m., May 30, 2001.
- --------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please sign this Voting Instruction Card exactly as your name(s) appear(s) on
the books of the Depositary. Joint owners should each sign personally. Trustees
and other fiduciaries should indicate the capacity in which they sign, and where
more than one name appears, a majority must sign. If a corporation, this
signature should be that of an authorized officer who should state his or her
title.
- --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- --------------------------------- -------------------------------------------
- --------------------------------- -------------------------------------------
- --------------------------------- -------------------------------------------
RESOLUTIONS
ORDINARY BUSINESS
1. To receive and consider the directors' Report and Accounts for the year
ended December 31, 2000.
2. To reappoint Arthur Anderson as Auditors and authorize the directors to
fix remuneration.
3. To re-elect Mr. Angus Russell as Director.
4. To re-elect Dr. Wilson Totten as Director.
5. To re-elect Dr. Bernard Canavan as Director.
6. Conditional on completion of the Company's merger with BioChem Pharma
Inc., to elect Dr. Francesco Bellini as Director.
7. Conditional on completion of the Company's merger with BioChem Pharma
Inc., to elect the Hon. James Andrews Grant as Director.
8. Conditional on completion of the Company's merger with BioChem Pharma
Inc., to elect Mr. Gerard Veilleux as Director.
SPECIAL BUSINESS
9. To permit the grant of options under the Shire Pharmaceuticals Group plc
2000 Executive Share Option Scheme subject to satisfaction of performance
conditions prior to grant.
[SHIRE LOGO]
Registered No. 2883758
ANNUAL GENERAL MEETING 2001
Notice of meeting and letter from the Chairman
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.
WHEN CONSIDERING WHAT ACTION YOU SHOULD TAKE YOU ARE RECOMMENDED TO SEEK YOUR
OWN FINANCIAL ADVICE FROM YOUR STOCKBROKER, BANK MANAGER, SOLICITOR, ACCOUNTANT
OR OTHER PROFESSIONAL ADVISER DULY AUTHORISED UNDER THE FINANCIAL SERVICES ACT
1986, IF YOU ARE IN THE UK, OR FROM ANOTHER APPROPRIATELY AUTHORISED INDEPENDENT
FINANCIAL ADVISER.
IF YOU HAVE SOLD OR TRANSFERRED ALL YOUR ORDINARY SHARES IN SHIRE
PHARMACEUTICALS GROUP PLC, PLEASE SEND THIS DOCUMENT AND THE ACCOMPANYING PROXY
CARD TO THE PURCHASER OR TRANSFEREE OR OTHER AGENT THROUGH WHOM THE SALE OR
TRANSFER WAS EFFECTED FOR TRANSMISSION TO THE PURCHASER OR TRANSFEREE.
ALL ENQUIRIES CONCERNING THIS DOCUMENT SHOULD BE ADDRESSED TO THE COMPANY
SECRETARY, SHIRE PHARMACEUTICALS GROUP PLC, HAMPSHIRE INTERNATIONAL BUSINESS
PARK, CHINEHAM, BASINGSTOKE, HAMPSHIRE RG24 8EP.
LETTER FROM THE CHAIRMAN OF SHIRE PHARMACEUTICALS GROUP PLC
REGISTERED OFFICE
Hampshire International Business Park
Chineham
Basingstoke
Hampshire
RG24 8EP
27 APRIL 2001
TO THE HOLDERS OF ORDINARY SHARES AND, FOR INFORMATION ONLY, TO PARTICIPANTS IN
THE SHIRE EMPLOYEE SHARE SCHEMES.
Dear Shareholder
NOTICE OF ANNUAL GENERAL MEETING
You will find the notice of the Annual General Meeting (the "AGM"), to be held
on 5 June 2001, with this letter together with an explanation of the resolutions
to be proposed at the AGM and a form of proxy. Shire Pharmaceuticals Group plc
(the "Company") is subject to additional US Securities and Exchange Commission
("SEC") rules which have meant that the Company is obliged to file a proxy
statement with the SEC. A copy of the statement is also enclosed with this
letter.
In addition to the business which is conducted at the AGM every year, for
example, the approval of accounts and the appointment of directors, this year
there is further special business which is detailed in the attached notice of
AGM.
The Company proposes to change the manner in which its existing equity incentive
arrangements can operate; in particular the Company is seeking your approval to
change the way in which it can operate the Shire Pharmaceuticals Group plc 2000
Executive Share Option Scheme (the "Executive Scheme") in respect of future
grants. The Company also proposes to amend the performance conditions applying
to the Shire Pharmaceuticals Group plc Long Term Incentive Plan (the "Long Term
Incentive Plan") in respect of future awards and is taking this opportunity to
advise you of the changes.
OVERVIEW
The Company introduced the Executive Scheme and the Long Term Incentive Plan in
order to link participants' remuneration to the Company's performance and
remains committed to maintaining a culture of employee share ownership as an
essential component of its global reward strategy. Since the introduction of
these plans, the size of the Company and the environment in which it operates
have continued to change substantially. In particular, the following
developments have led the Remuneration Committee to review the Company's long
term incentive arrangements and the performance conditions attached to the
Executive Scheme and the Long Term Incentive Plan:
o the North American focus of the business has increased further so that in the
financial year ended 31 December 2000 roughly 63% of our employees were based in
North America and 83% of our revenues were derived from North American markets;
o the globalisation and consolidation of the pharmaceuticals sector;
o the increasingly competitive and global market for talented people; and
o the Company's recent significant growth (leading to its inclusion in the
FTSE 100 index).
The Company believes that it will be difficult to compete for the talented
people it needs in order to continue delivering increased shareholder value
unless its long term incentive arrangements reflect practice in the markets in
which it operates.
The Company therefore considers that the manner in which performance conditions
are imposed on options granted under the Executive Scheme and the performance
conditions currently applied to awards made under the Long Term Incentive Plan
no longer meet the needs of the business. The proposals outlined below address
these issues and will enable the Company to tailor appropriate
performance-related long term remuneration for its employees. As a part of this
review, the Remuneration Committee has taken specialist advice from independent
consultants.
EXECUTIVE SCHEME
In the international markets in which the Company operates, share options
continue to be the most widely understood and operated form of long term
incentive arrangements. Share options are also an integral part of the Company's
reward strategy throughout the business in line with global market practice. The
Remuneration Committee believes that all options granted under the Executive
Scheme should continue to be subject to stretching performance targets.
The Company operates in a truly international environment and must take account
of North American practice when it seeks to recruit, retain and motivate its
employees and, in particular, its senior executives. Therefore, it is proposed
that, in respect of future grants of options, the Remuneration Committee will be
able to determine whether it is most appropriate to make the grant of options
based on the prior performance of the Company together with the performance of
the individual (in which case no additional conditions will govern their
exercise); or for the exercise of options to be based on the meeting of
performance targets prior to exercise. Under normal circumstances, options will
continue to be exercisable only after the third anniversary of the date of
grant.
Performance conditions to be applied to the grant of such options will be
determined by the Remuneration Committee prior to their grant. In making such a
determination, the Remuneration Committee will have regard to the guidance
issued from time to time by the bodies representing institutional shareholders.
They will seek to identify factors which represent a fair measure of overall
corporate performance such as share price growth, total shareholder return and
earnings per share.
The Remuneration Committee proposes that the performance condition determining
the next grant of such options will be tested over a three year measurement
period prior to their grant. The measure will be consistent with that currently
governing the exercise of options granted under the Executive Scheme: namely,
that growth in the Company's share price over a three year measurement period
must exceed 50% in order for 60% of options to vest and must exceed 75% for full
vesting.
LONG TERM INCENTIVE PLAN
The Long Term Incentive Plan will continue to be used to incentivise executive
directors and the most senior managers within the Company. The Remuneration
Committee will set appropriate performance conditions each time awards are made
under the Long Term Incentive Plan. The extent to which awards under the Long
Term Incentive Plan will vest will continue to be subject to the Company's
performance over a three year performance period.
It is intended that the performance conditions to be applied to the vesting of
the next award granted will be based on the total shareholder return of the
Company relative to the constituents of the FTSE 100 index, which is a more
appropriate comparator group now that the Company has gained entry into this
index. Awards will vest on a sliding scale so that an award will only vest in
full if the Company has delivered superior performance to shareholders and its
total shareholder return over the performance period is such as to rank it in
the top 10% of FTSE 100 companies. If the Company is not ranked in the top 50%
the award will not vest at all.
As is currently the case, if and to the extent that performance conditions are
met over the three year performance period, awards will continue to be deferred
for an additional 12 months.
DILUTION LIMITS
The existing dilution limits in the Executive Scheme and the Long Term Incentive
Plan will remain.
SHAREHOLDING POLICY
The Remuneration Committee is proposing to introduce a shareholding policy which
would require executive directors to build up a meaningful shareholding in the
Company over time. The Remuneration Committee will encourage executive directors
to retain a proportion of shares in the Company following exercise of options
and againrealisation of awards under the Long Term Incentive Plan. It is proposed
that is probably above trend on the basistarget for executive directors be to hold shares with a value
equivalent to their annual salary and that this has a lot to do with the Roberts
merger as after this we had a lot
9
of exercise of options from the Roberts employees, and they have to pay us the
option price so there was a windfall income stream of $50 million there. I
should have also mentioned that the cash generation is understated because that
is net of all the cash expenses of the merger, which were in excess of $80
million, and so the cash generation would have been substantially higher.
Net cash flow, therefore, for the year is $56 million, and if we just move
onto the balance sheet you can see what that has done for our net cash on the
balance sheet. Last year we had just $3 million of headroom, or net surplus cash
so, if you add the $56 you can see we have $59 million of cash, which is a nice
health cash balance. Again, looking forward to the Biochem transaction closing,
they are an extremely cash rich company and they will probably bring in
approximately $200 million of cash. The group is extremely well positioned and
we willtarget be repaying one of our more expensive credit facilities, which is one of
the synergy savings we have noted in our presentations on the Biochem
transactions as it should save us an interest charge of in-excess of $3 million
a year.
That is all I want to say at this stage and I will now hand back to Rolf
for some summing up comments.
Rolf Stahel: Thank you, Angus. Let us look at achievements once more for
the year 2000. You have observed the revenue line going up 29%. I repeat that Q4
is also outstanding but I am also delighted to report that the first six weeks
of the new year are also very exciting indeed. The operating income is up for
last year by 103%, and with a very healthy gross margin, as Angus pointed out,
of 82%. This is absolutely in line with our strategy to be able to afford a
higher than industry level in our R&D, two-thirds ratio to revenue, and still
achieving industry record kind of levels of operating profit.
We have integrated Roberts successfully, in fact I believe that it has
taken us about 120 days to implement 95% of the merger in early 2000, and that
included the closure of the ?Eatontown site and the sale of that particular
asset.
The Reminyl launch occurred in the first market in the UK on 21 September,
and we will now see the roll-out over the next six months in other major
countries in continental Europe.
10
On the US front, we have pointed towards the registration of Adderall LA on
3 October with expectations that we would hopefully get the approval from the
FDA in Q4 this year, with launch in Q4 2001. Also we announced on 11 December
the merger with Biochem.
Looking at the R&D objective for the year 2001 and 2002, you will see that
the related newsflow looks very exciting as well with Reminyl complete European
launches during the first half of the year. Reminyl - FDA approval first
quarter, and launch second quarter, is expected. Dirame completes a three study
second half, and then the same product US, and EU regulatory submisson by end of
Q4, or possibly early the following year. On our phosphate bind, Defosnol, the
European regulatory submissions in quarter one - and there are not many weeks
left in this quarter - SPG417 to complete phase III study second half. Again
back to the Defosnol, our phosphate bind, US regulatory submission by the end of
the year or early next year. Then, last but not least, the once-a-day Adderall
LA FDA approval and launch expected for the end of this calendar year.
If you now look at strategic objectives, first there is the clear
implementation of the Biochem merger. Then we have a continued focus on our
research and development strategy, particularly looking for further
strengthening our early phase development projects. So, we are looking for
in-licensing additional or starting even from within additional early phase
projects.
The merger is strengthening our position for research and development since
we are becoming an increasingly desirable partner for our core areas of focus
for early phase development or research boutiques who may have projects either
in central nervous system disorders, in oncology, or in the recombinant vaccine
manufacturing area, which may be as projects again applicable to CNS (Central
Nerve System Disorders) and to oncology. It may therefore help with this
technology base to add long-term additional projects in our two core areas of
focus now.
In terms of building our international infrastructure we are looking at
strengthening Europe and we are doing that on an ongoing basis. For example, in
Italy when we acquired the few subsidiaries in that country, they had employed
agents. We are now converting these agents into full-time employees because we
believe that when we launch our first R&D based Shire product in Italy that we
will be better off with fully committed, fully employed persons. We are
11
preparing the forthcoming launches of our key products, Defosnol, the phosphate
binder, and Agrylin, for essential thrombocytopenia, is probably the next
product for launch through our European subsidiary. By taking that approach, we
are hoping to reach peak sales for those products earlier than if we waited and
started building a company on the back of those exciting product launches.
On Japan, I need to correct one of the quotes that went round the world a
few minutes ago. We are at a very early phase, as we previously declared, and we
have scanned the market for potential targets. We are speaking to a number of
potential companies and they tend to be smaller companies. All of that is early
phase and in terms of risk assessment, or chances of success assessment, I have
made no secret that I believe we have no more than a 25% chance in pulling off
such a potential deal. If it ever occurs, then it is likely it will be a
smallish deal that is nowhere near the kind of proportions we looked at with the
proposed merger with Biochem. So, for instance, if there was a company out there
with a turnover in the order of $50-75 million revenue, or maybe even $100,000
million maximum, and if we had a chance of buying one of those companies, then
that would not be a massive investment.
Just to repeat that again, we are at very early stages on all of the
screening and investigation to see whether or not there could be a match
somewhere.
Last but not least, the aim of the company is to continue presenting to you
results that are very above industry growth, and once more I am delighted with
the results we have been able to present to you today, and I am proud that a
management team was once more able to deliver at these very high growth levels.
Thank you very much and we are now delighted to open the floor to
questions.
Question: .... Could you tell me what the average daily dose of Adderall is
now, and also what is the discount to Concerta currently? Then finally, what are
your publication plans for the phase III data on SLI381?
12
Wilson: With regard to the publication times for 381, obviously we will
roll out those data later on this year in support of the eventual launch later
on this year. I am not going to be more specific than that because we do not
want to telegraph to other people what we are doing; however, these data will be
in the public domain before the drug is launched.
In terms of the average dose of Adderall, there is not really any such
thing because it is very important that each patient has the individual dose
titrated in terms of the numerical dose and the frequency of administration.
However, for the most part patients are managed somewhere between the 10 and
25-30 mg/day, and half the patients are already treated with the drug once a
day, so 50% once-a-day and 43% or thereabouts twice-a-day. It is therefore
relatively uncommon for people to take it in big doses and with higher frequency
than twice-a-day.
Question: [Inaudible]
Rolf Stahel: That one is about 30% left. Your next question was on Agrylin
price increase. We have not declared that so I cannot give you that now but the
reason why I mention the price increase is because we have a sales growth of 77%
and the script growth of 38%, so obviously the invoice growth is ahead of the
script growth. There are two differences explaining that, one is the one
milligram launch, which resulted in stock levels higher than previously, and
secondly in a price increase of not declared size.
Question: With regard to Reminyl's launch in the UK what has the experience
has been so far, and also from what you have seen in the US with the launch of
Exelon last year and the penetration that it has achieved of new scripts, does
that have any bearing on the likely success of Reminyl?
Wilson: I can give you a qualitative response to the UK launch but not a
quantitative one because we are still in the process of getting individual trust
and formulary approval to get reimbursement, so it is not yet at the stage where
it is a like-for-like comparison between Reminyl, which is a non-responder and
Aricept, which may be.
13
Qualitatively it has been very well received. The physicians to whom we are
making it available are very pleased with it and our internal marketing people
are really quite happy with the way it is going. I cannot however give you any
quantitative numbers to back that up as it is an opinion rather than anything
factual.
In the US my understanding is that Exelon's has 25% penetration within a
very few months after launch, which bearing in mind it has some challenges to
its use compared to Aricept, for example, that is in my opinion a pretty good
performance. It encourages me really because of the point I made in the
presentation that there are a relatively large number of patients who are not
treated with anything at the moment.
The issue is not so much squabbling over which drug is better for any one
patient because it is quite likely that patients will respond to one drug better
than the other. The biological variability will do that never mind the different
pharmacology of the drug, so our interest is in making sure of increasing
awareness of the drugs and of Reminyl's different pharmacology and just making
sure that more patients get treated for Alzheimer's than are at the moment. That
is where the opportunity is rather than squabbling with Pfizer.
Tim Anderson (Prudential Bachs Securities): I have a question on Adderall.
Can you tell me how many weeks it is inventory on hand and at the wholesaler
level? Then, on the expense side, the $8 million gain was booked against SG&A,
so if I add that back to SG&A for the quarter that brings it up to around $44
million, which then on a margin basis brings that up to 32% of sales. Is that a
run rate that we should use going forward for SG&A?
Angus: Yes, it is a good point and thanks for raising it as it was
something that I was hoping to get an opportunity to mention today. The press
release does note that we started to increase our rep force during the fourth
quarter of 2000. Clearly this year we face the prospects of launching 381 in Q4.
Now, those of you who have tracked the industry for a long time know well that
companies say again and again that you do not start building your marketing
platform until about two weeks before you launch the product, but that you
actually start six to nine months before you launch the product, and that is
what we will be doing this year.
14
A word of caution when you come onto your quarterly phasing of our results
this year, yes, I would certainly encourage you to look for slightly higher SG&A
numbers in the first couple of quarters of this year. Then obviously as we
launch the product in the second half and we start to moderate those costs you
will see higher growth rates probably in Q3 & 4, so that is the sort of pattern
you should be looking at.
I should probably just add to that that the consensus is out there for the
year. I am not inferring that anybody goes out and downgrades because there is
suddenly huge extra marketing expense. This is, just to reiterate, a quarterly
phasing issue and in my mind we are very comfortable consensus view that we have
seen out there for 2001.
Tim Anderson: Okay. And my other question?
Rolf Stahel: Other levels are normal. I believe they are around three
weeks.
Tim Anderson: Okay. Your response was phasing in and out. Did you actually
say how many reps you added in the fourth quarter?
Rolf Stahel: We actually did not declare how many reps we have appointed.
That is slightly sensitive information on the commercial level.
Tim Anderson: Okay, great. Thank you.
Question (JP Morgan Chase): My question is also on the ADHD market. Now
that we are quite a bit away from launch I am just curious whether you have seen
more or less market expansion than you thought? Also in that regard, I am also
curious as to what you thought of Methadate going forward, and whether you
expected that to change the market? Finally, with regard to Adderall LA, Alpha
made a really big deal about getting approval in time for launch before kids
start going back to school, and I am just curious how you think a fourth quarter
launch will play into that market?
Rolf Stahel: Market expansion is within expectations. If you take a longer
term view I do believe, over the next
three to five years, you will see an a
greater penetrationyears.
2
FURTHER INFORMATION
SUBSTANTIAL SHAREHOLDINGS
As at 24 April 2001 the Company had been notified, in accordance with Sections
198 to 208 of the adult marketCompanies Act 1985, of the following substantial interests in
its issued share capital:
Number of
Notes ordinary shares Percentage
- --------------------------------------------------------------------------------
The Capital Group Companies, Inc. (i) 10,762,647 4.17
HealthCare Ventures LLC (ii) 8,690,090 3.37
Putnam Investment Management, LLC &
The Putnam Advisory Company, Inc. 17,732,370 6.87
- --------------------------------------------------------------------------------
NOTES
i) The Capital Group Companies, Inc. interest includes 1,779,600 ordinary
shares registered to Capital International Limited, 263,713 ordinary
shares registered to Capital International S.A., 3,700 ordinary shares
registered to Capital International, Inc. and I do believe it will start first8,715,634 ordinary shares
registered to Capital Research and Management Company.
ii) The HealthCare Ventures LLC interests include 5,508,032 ordinary shares
registered to HealthCare Ventures IV and 1,564,530 ordinary shares
registered to HealthCare Ventures V.
In addition to the above, the Company has been notified that as at 24 April 2001
Guaranty Nominees Limited held 26,748,792 ordinary shares which underlie
American Depositary Shares of the Company ("ADSs") (representing 10.4% of the
total share capital of the Company) in its capacity as the depositary of the
Company's ADS facility. Each ADS equates to three of the Company's ordinary
shares of 5 pence each.
On completion of the merger with BioChem Pharma Inc. ("BioChem Pharma") (based
on the issued share capital of BioChem Pharma on 24 April 2001 and assuming no
exercise of options outstanding under the Company's employee share plans, no
exercise of options or rights in respect of BioChem Pharma shares and an average
last reported sale price of the Company's ADSs on the Nasdaq National Market for
the 15 consecutive trading days ending on the third trading day immediately
preceding the closing of the merger (an "Average Shire ADS Price") of $46.51
(the closing price of an ADS on 17 April 2001) and assuming all existing BioChem
Pharma shareholders exchange their BioChem Pharma shares for new ordinary shares
of the Company pursuant to the terms of the merger), the following are expected
to have substantial interests in the US.
15Company's issued share capital (based on
the interests in the Company shown above and assuming no other changes in their
interests between 24 April 2001 and the closing of the merger with BioChem
Pharma):
Number of
ordinary shares Percentage
- --------------------------------------------------------------------------------
Putnam Investment Management, LLC
& The Putnam Advisory Company, Inc. 17,732,370 3.57
La Caisse des Depots 16,869,390 3.39
- --------------------------------------------------------------------------------
DIRECTORS' SHAREHOLDINGS*
The directors who held office at 31 December 2000, and the directors who will
hold office following completion of the Company's merger with BioChem Pharma,
had, or will (assuming no changes in their interests between 24 April 2001 and
the closing of the merger with BioChem Pharma) have following the closing of the
merger with BioChem Pharma, interests in the share capital of the Company as
follows:
Number of ordinary shares
------------------------------------------------------------
Following the
merger with 31 December 31 December
Name Notes BioChem Pharma 24 APRIL 2001 2000 1999
- ---------------------------------------------------------------------------------------
Dr J H Cavanaugh (i) 8,806,368 8,806,368 8,806,368 12,244,810
R Stahel 13,827 13,827 13,827 13,827
A C Russell -- -- -- --
Dr J W Totten -- -- -- --
Dr B J Price 31,350 31,350 31,350 31,350
Dr B Canavan (ii) 28,869 3,000 3,000 --
Dr Z P Horovitz (iii) 3,128 3,128 3,128 3,128
R M Nordmann (iv) 46,968 46,968 46,968 3,128
J E Smith 125,120 125,120 125,120 125,120
J T Spitznagel (v) 57,624 57,624 57,624 57,624
Dr F Bellini (vi) 13,758,451
The Hon J A Grant (vi) 245,282
G Veilleux (vi) 34,099
- ---------------------------------------------------------------------------------------
*All interests are beneficial unless otherwise stated.
3
Wilson: Methadate,NOTES
i) Dr Cavanaugh is the President of HealthCare Ventures LLC, which is the
next sustained release methylphenidate
product, I do not believe that will makemanagement company for a material impactnumber of limited partnerships which have
interests in 8,690,090 ordinary shares. Dr Cavanaugh is also a general
partner in these partnerships which acquired their ordinary shares
following the acquisition of Pharmavene, Inc. in March 1997. On 14
September 2000 Healthcare Ventures II, L.P. distributed 2,904,890 of its
ordinary shares to unrelated third parties, being the beneficial owners of
such shares, and 649,830 ordinary shares to HealthCare Partners II, L.P.
On 15 September 2000 HealthCare Partners II, L.P. distributed 533,552
ordinary shares to unrelated third parties, being the beneficial owners of
such shares, and 116,278 ordinary shares to Dr Cavanaugh personally as
beneficial owner.
ii) On 10 March 2000 Dr Canavan purchased 1,000 ADSs, the equivalent of 3,000
ordinary shares, for us. It maybe$65.56 per ADS. Dr Canavan is also interested in
11,000 BioChem Pharma shares. Based on an Average Shire ADS Price of
$46.51 (being the closing price of an ADS on 17 April 2001), Dr Canavan's
shares would be exchanged at a question you needrate of 2.3517 new ordinary shares for each
existing BioChem Pharma share. Dr Canavan can also expect to pose to Aldo.
Rolf Stahel: Also, please remember that there are already five once-a-day
release methylphenidatesreceive
payment of approximately $58,000 in respect of his ownership of BioChem
Pharma's deferred share units.
iii) On 8 March 2000 Dr Horovitz exercised 31,280 share options under the
Roberts Stock Option Plan at $3.68 per ordinary share and on the same day
exercised a further 31,280 share options at $3.64 per ordinary share. On 9
March 2000 all of the 62,560 resulting ordinary shares were sold realising
gross proceeds of (pound)743,213.
iv) On 9 and 10 March 2000 Mr Nordmann exercised 93,840 share options under
the Roberts Stock Option Plan at $6.02 per ordinary share. On 9 March 2000
Mr Nordmann sold 50,000 ordinary shares realising gross proceeds of
$956,250.
v) On 17 March 2000 Mr Spitznagel exercised 600,000 share options under the
Roberts Stock Option Plan at a total exercise price of $2,677,616. On 24
March 2000 Mr Spitznagel exercised a further 334,809 share options under
the Roberts Stock Option Plan for a total exercise price of $1,890,013.
During March 2000 Mr Spitznagel sold 934,809 ordinary shares realising
gross proceeds of $17,073,856. On 19 April 2000 Mr Spitznagel notified the
Company of a miscalculation of his shareholding in the market soCompany which the
Company was informed was 57,624 rather than 75,503 ordinary shares as
previously notified. On 31 October 2000 Mr Spitznagel exercised 255,490
share options under the Roberts Stock Option Plan at a total exercise
price of $528,632 and 177,290 share options under the Roberts Stock Option
Plan at a total exercise price of $1,067,285.5 and on 31 October 2000 sold
255,490 ordinary shares realising gross proceeds of $4,400,423. On 19
December 2000 Mr Spitznagel exercised 100,000 share options under the
Roberts Stock Option Plan at a total exercise price of $602,000. On 19
December 2000 Mr Spitznagel sold 100,000 ordinary shares realising gross
proceeds of $1,425,000.
vi) Dr Bellini, Mr Grant and Mr Veilleux have been appointed as directors of
the Company conditional on completion of the Company's merger with BioChem
Pharma. The figures for their interests assume that, based on an Average
Shire ADS Price of $46.51 (being the closing price of an ADS on 17 April
2001) and assuming each of them elects for new ordinary shares, their
shares would be exchanged at a rate of 2.3517 new ordinary shares for each
existing BioChem Pharma share they hold, and also assume that all their
options would be exercised.
Copies of the sixth,rules of the Executive Scheme and therethe Long Term Incentive Plan are
another ten instant release methylphenidatesavailable for inspection from the date hereof during normal business hours on
any week day at the Company's registered office at Hampshire International
Business Park, Chineham, Basingstoke, Hampshire RG24 8EP, and at the offices of
Arthur Andersen, 20 Old Bailey, London EC2M 7AN.
Copies will remain available up to and including the date of the AGM (or any
adjourned meeting) and will also be available for inspection at the offices of
West LB Panmure, 35 New Broad Street, London EC2M 1SQ, for at least 15 minutes
prior to and during the AGM.
RECOMMENDATION
The directors have considered Resolutions 1 to 9 which deal with, inter alia,
the proposals relating to the Executive Scheme to be put to shareholders and
believe they are in the market. It is thereforebest interests of shareholders as a pretty competitive market by nowwhole and
withaccordingly recommend that shareholders vote in favour of them at the exceptionAGM as
they intend to do in respect of their aggregate beneficial holdings of 9,087,385
ordinary shares, representing approximately 3.5% of the Alza launch, noneissued share capital of
the others affected Shire's growth rate.
Angus: The last question was about whether launching 381 in Q4Company.
Yours faithfully
/s/ Dr James H Cavanaugh
- ------------------------
DR JAMES H CAVANAUGH
Chairman
4
SHIRE PHARMACEUTICALS GROUP PLC
(REGISTERED IN ENGLAND AND WALES WITH REGISTERED NUMBER 2883758)
NOTICE OF ANNUAL GENERAL MEETING
Notice is going tohereby given that the Annual General Meeting of Shire Pharmaceuticals
Group plc will be deleterious. I do not particularly think so. It certainly isheld at the case that
more people tend to come off therapy inoffices of West LB Panmure Limited at 35 New Broad
Street, London EC2M 1SQ on 5 June 2001 at 11.00am for the middlepurposes of
the year during the school
holidays than at other times, but not all of them come off. There is a still a
significant number of patients who stay on therapy right through the summer. So,
yes, there is a little advantage at that particular time of the year in terms of
people visiting to restart therapy, and perhaps reviewing therapy. I do not
believe it is a particularly big deal to launch it later if you have a product
that is fundamentally advantageous.
Rolf Stahel: We are launching as soon as we get the approval and we can
physically launch the product!
Questioner: Okay, thanks.
Mark Becker (GIC): Can you comment on the relative cholinergic side effects
of perhaps Reminyl against Exelon? I have seen the Exelon scripts start trailing
off, and I believe that I read in the pink sheets that they have had to send out
a "Dear Doctor" letter regarding the very high levels of nausea and vomiting
that are showing up in patients in their third and four month of usage?
Wilson: All of these drugs and all cholinesterase inhibitors will cause
nausea and vomiting. Generally you see it most frequently in the first four to
six weeks when you are increasing the dose. You tend to start these patients off
on a relatively low dose and then treat it every one or two weeks,considering and, if you
are going to see it you will see it bythought fit, passing the time you get to four weeks and
onwards. Generally it goes away, and generally it is a feature of the dose that
you try
16
to get them on to and how aggressively you do it. So, that is the
pharmacological answer that it is an expected and unavoidable effect.
The next scientific answer to your question is that there have not been any
head to head comparisons between the drugs so I cannot give you a factual answer
as to how galantamine compares with the other drugs. I can give you a
qualitative answer - and that seems to be my favourite word today - but if you
look at the Washington Alzheimer's meetings from a few months ago there was a
meta-analysis of Exelon taking all their pivotal clinical trials rolled into one
and analysed from a safety standpoint. Certainly it looks, when comparing that
with the Aricept data set, that Exelon has a higher incidence of nausea and
vomiting particularly than Aricept. I must say that we were relatively
encouraged by that because we believe that Reminyl has a very good safety
profile and let us not forget that Reminyl has been around for 30 years for
indication, and it is actually a relatively well-established drug although it is
new to the Alzheimer's' area.
The specific letter that I believe you are referring to, the "Dear Doctor"
letter, was triggered I am not sure by what since I do not have access to the
confidential discussions, but it certainly made reference to one incidence of a
ruptured oesophagusfollowing resolutions, which is a well known feature of very elderly people who
vomit a lot. That is not particularly unexpected in patients who are vomiting
and is a mechanistic consequence of vomiting. It is not something that the drug
causes in itself. My own bet would be that if you make enough patients vomit
then sooner or later you are going to see that. When I was in practice I
certainly had old ladies die on me of ruptured oesophagus even without
cholinesterase inhibitors - it happens. I would not attribute that as being
anything uniquely deleterious about Exelon, although I do believe that the
overall incidence in nausea and vomiting is something to watch.
Mark Becker: Thank you.
Mark Goodman (Morgan Stanley Dean Witter): I have a couple of questions and
the first is could you just confirm your comfort with the quarterly progression
of the guidance for 01 as far as EPS? My second question has to do with pricing.
I believe you said there was a 30% discount to Concerta but we are having a
little problem with the call which is
17
breaking up a bit, so perhaps you could just confirm that, or tell us what is
the actual average RX price now for Adderall now that you have taken the 10%
price increase in January? Thirdly, could you give us some guidance on these
other revenues that are non-product sale related and non-licensing related from
royalties from Reminyl?
Angus: I do not think I was conserving EPS numbers for the quarterly
progression in 2001. In fact I have not seen many published numbers on that and
I am assuming that people are waiting until these results came out and will
be doingproposed as ordinary resolutions:
ORDINARY BUSINESS
1 To receive and consider the quarterly phasingdirectors' Report and releasing those shortly. I guess some of them
might be on pro-forma with Biochem numbers in there, but all I was really
indicating was that I was happy with the full year consensus forecasts for 2001.
They appear reasonable to me and what I was indicating was that as you progress
your gross earnings over this year, you should anticipate that there could be
slightly higher SG&A expenses in the first couple of quarters this year. It was
in response to Tim Anderson's point, the exit rate of SG&A spend was 32% of
product sales where it had been 30%Accounts for the year
ended 31 December 2000.
2 To re-appoint Arthur Andersen as Auditors and authorise the directors to
fix their remuneration.
3 To re-elect Mr Angus Russell as Director.
4 To re-elect Dr Wilson Totten as Director.
5 To re-elect Dr Bernard Canavan as Director.
6 Conditional on completion of the Company's merger with BioChem Pharma
Inc., to elect Dr Francesco Bellini as Director.
7 Conditional on completion of the Company's merger with BioChem Pharma
Inc., to elect the Hon James Andrews Grant as Director.
8 Conditional on completion of the Company's merger with BioChem Pharma
Inc., to elect Mr Gerard Veilleux as Director.
SPECIAL BUSINESS
9 That options may be granted under the Shire Pharmaceuticals Group plc 2000
Executive Share Option Scheme subject to satisfaction of performance
conditions prior to and not subsequent to grant as more particularly
described in the Chairman's letter to shareholders dated 27 April 2001.
By Order of the Board
ANGUS C RUSSELL
Secretary
27 April 2001
Registered office
Hampshire International Business Park
Chineham
Basingstoke
Hampshire
RG24 8EP
5
NOTES
1 A member entitled to attend and vote may appoint one or more proxies to
attend and, on a whole last year.
Rolf Stahel: Okay, the pricing differential is approximately on 30% below
the average price reported to us for Alza's daily price.
Mark Goodman: Okay. Ipoll, vote instead of him/her. A proxy need not also wondered as far as the other revenues are
concerned, which are the forecast for product sales when some of these other
revenues that come in - for instance payments for milestones and things like
that. Any guidance on that for next year?
Angus: Sure, one thing I caution people about again is licensing and
development income was quite high, approximately $14 million in 2000 I believe.
That was, obviously, used to recover R&D expenses from our development partner,
Janssen, or J & J, on Reminyl. So, given Reminyl is now in launch phase, there
will be a
significant reductionmember. The appointment of those expenses as we area proxy will not incurring that
R&D expense any more,preclude a member of the
Company from attending and voting in person at the meeting if he or she so
I would look to see some substantial reductiondesires.
2 A form of licensing and development income.
Clearly royalties will start to increase as the roll-out in Europe comes on
Reminyl and as we launchproxy is enclosed for holders of ordinary shares in the US. ThereCompany.
To be valid the form of proxy (and the power of attorney or other
authority, if any, under which it is one more milestone paymentsigned or a notarially certified copy
of such authority) must reach the Registrar, Lloyds TSB Registrars, The
Causeway, Worthing, West Sussex BN99 6ZL not later than 11.00am on Reminyl, which3 June
2001 (or 48 hours before any adjournment of the meeting). A separate
instruction card for holders of American Depositary Receipts of the
Company to give instructions to the depositary for the American Depositary
Receipts is slightly less than $1 million I believe,being provided to such holders.
3 The Company, pursuant to Regulation 34 of the Uncertificated Securities
Regulations 1995, specifies that only those shareholders registered in the
register of members of the Company as at 6.00pm on 3 June 2001 (or, in the
case of adjournment, as at 6.00pm on the date two days preceding the date
of the adjourned meeting) shall be entitled to attend and that isvote at the
meeting in respect of the FDA approval. When we getnumber of shares registered in their name at
that time. Changes to entries on the register after such time will be
disregarded in determining the right of any person to attend and/or vote
at the meeting.
4 There will be available for inspection at the Company's registered office
at Hampshire International Business Park, Chineham, Basingstoke, Hampshire
RG24 8EP during normal business hours on any week day (excluding
Saturdays, Sundays and public holidays) from the date of this full
18
notice until
the date of the Annual General Meeting and at the meeting from 10.45am
until the close of the meeting:
- copies of the service contracts of the directors with the Company;
- the register of directors' share interests;
- copies of the existing Articles of Association;
- the rules of the Shire Pharmaceuticals Group plc 2000 Executive
Share Option Scheme; and
- the rules of the Shire Pharmaceuticals Group plc Long Term Incentive
Plan.
EXPLANATION OF RESOLUTIONS
Resolutions 1 to 8 represent the business of the Company which is commonly
transacted at Annual General Meetings. Resolution 9 relates to the Shire
Pharmaceuticals Group plc 2000 Executive Share Option Scheme (the "Executive
Scheme"). Resolutions 1 to 9 will all be proposed as ordinary resolutions.
RESOLUTION 1: ANNUAL REPORT
This resolution receives the Company's Annual Report and Accounts for the year
ended 31 December 2000.
RESOLUTION 2: REAPPOINTMENT OF AUDITORS
The approval we can book that milestone payment and thatof shareholders is sought for the last one. After
that, then it is whatever your forecasts are on royalty income stream from
Reminylreappointment of Arthur Andersen
as the sales roll out.
Mark Goodman: Okay, thanks.
Chris Bass (First New York): Can you tell me aboutCompany's auditors for the next financial year and to provide the Board
with authority to determine their remuneration.
RESOLUTIONS 3 TO 8: ELECTION AND RE-ELECTION OF DIRECTORS
The Company currently has ten directors.
The Articles of Association of the Company provide that one-third of the
directors who are subject to retirement by rotation, or if their number is not
three or a multiple of three, then the number nearest to but not exceeding
one-third shall retire at the meeting. The directors to retire by rotation at
the meeting include, so far as necessary to obtain the number required,
first, a director who wishes to retire and not offer himself for
reappointment, and, second, those directors who have been longest in office
since their last twoappointment or three
price increasesreappointment.
The Articles of Association of the Company also allow the Board of Directors of
the Company to appoint a person who is willing to act as a director. A director
appointed in this way may, however, hold office only until the dissolution of
the next Annual General Meeting after his/her appointment unless he/she is
reappointed during the meeting.
In accordance with the Articles of Association, Mr Angus Russell, Dr Wilson
Totten and Dr Bernard Canavan retire by rotation and offer themselves for
re-election. Dr Francesco Bellini, the Hon James Andrews Grant and Mr GErard
Veilleux, who have been appointed non-executive directors conditional on
Adderall just to get a historycompletion of the merger with BioChem Pharma, will also offer themselves for
modelling purposes? I
believe there was one third quarter but when waselection, assuming that the last price increase prior
to that?
Angus: There were very little price increases - negligible. It wasCompany's merger with BioChem Pharma Inc. ("BioChem
Pharma") has been completed by the Annual General Meeting. The biographical
details of these directors are set out below.
6
RESOLUTION 9
As explained in the first three quartersChairman's letter, the Company has undertaken a review of
last year, late August or early September that I believe
we put up the price. There was a rumour out there that it was a 16% price
increase, but in fact we confirmed that was a gross list price. After the
various rebates and discounting that takes place on the big accountsperformance conditions attaching to its long term equity incentive
arrangements in the market, the net back to Shire is probably closer to 10%. So, there was one
around 10% in early September last year, and we have just confirmed that there
has been another price increase of a similar magnitude at the beginning of
January this year.
Chris Bass: Finally, the price increase in the third quarter - when was the
last price increase and what was the magnitude of that again just for modelling
purposes.
Angus: Can you say that again?
Chris Bass: The one prior to the third quarter of last year. You said there
were not any in the first three quarters of this year but was there one last
year in 1999, or ... two years ago?
Angus: Yes, in 1999 typically the price increases then used to be of the
order of 4-5% or something like that. I believe there was one in 1999 as there
was always an annual price increase.
Chris Bass: Okay.
Question (Nomura): I have two follow-on questions with respect to the ADHD
market. You talked longer term about what you thought about the growth dynamics,
but short
19
term over the last few months I have noticed a slowdown in the script growth and
I wonder if you could make some comments about the dynamics of that market?
Secondly, is it unreasonable to assume that following the NICE's committees
comments on Lithalin several weeks ago that you may be actively considering 381
Adderall LA to be submitted in the next year also?
Rolf Stahel: We know that in the US on a national basis, that there is
still under diagnosis and on the treatment of the disease, so I would not expect
a slow down in prescription growth going forward. In answer to the second part
of your question concerning the European ADHD strategy, this is still under
consideration and so I cannot give you a specific answer on that, however, as
you know from Wilson's presentation we have international aspirations for the
two projects that he presented to you earlier in the ADHD area.
John Senior (Credit Suisse First Boston): I have two questions, the first
on Reminyl and the dual action. When, if ever, are we going to get any clinical
data and when are you going to benefit from the dual action?
Wilson: When, if ever! There is a hope at the moment that the increasingly
positive profile that we are seeing in terms of activity, efficacy and in fact
side effect profile, may well be a consequence of the dual mode of action, so
the extended duration of effect that we have seen in the pivotal studies, the
breadth of effect not just on cognition but on some of the behavioural aspects
and patient functionality, I believe there is increasing confidence that that is
quite possibly, or even probably a consequence of the pharmacology.
When can I give you a joined up answer that says this pharmacology causes
these clinical effects? Well, if you read the European labelling that is
actually what it says. That is probably more positive than we had expected if I
am honest and I believe the simple answer to your question is that it would take
more than two years to run those types of clinical studies. We have already run
studies for one calendar year of patient therapy and that is not enough to
demonstrate conclusively that there is a difference, so therefore it would have
to take more than that. So therefore it is two years plus, which means that you
are not going to see the data for another one, or two years or possibly longer
than that, even if it was being generated at the moment.
20
John Senior: Just running on from that, are J & J doing those follow-up
studies?
Wilson: I would not like to answer that!
John Senior: Okay. Secondly on Dirame, can you just remind us why you are
doing the extra Phase III studies?
Wilson: Yes, the answer was actually in Angus's presentation although you
would not have spotted it! The Roberts run rate in R&D was around plus or minus
5% of R&D to revenue, and Dirame is a good drug with a lot of existing data and
the recent phase III package has been carved down to the bare minimum. We are
interested in having a drug that is adequately profiled, firstly to secure
registration but perhaps more importantly to give a good commercial platform
once it is launched.
Mr Divani (JP Morgan): In light of Q4's reduced R&D expenditure, can you
give us some guidance going forward as to whether you intend to still main
20-22% R&D expenditure as a proportion of revenue?
Angus: Yes, if I can go back to what we said before, it is really that we
have discretion. Our baseline is to try and spend 20% of sales, and then we have
always said that the range there we will invest up to 24% to the extent that the
business is delivering - and when I say delivering that is a function of the top
line salesits growth and the gross margins beinginternational environment in
excesswhich it operates.
As a result of 80%. So,this review the Company is seeking the approval of shareholders
to change the manner in which the Executive Scheme may be operated so that the
Remuneration Committee may impose performance conditions on the grant of options
under the Executive Scheme, in which case there will be no further conditions
governing the exercise of such options.
BIOGRAPHICAL DETAILS OF DIRECTORS STANDING FOR ELECTION AND RE-ELECTION
The following information sets forth the name and age of each nominee, all other
positions or offices, if any, now held by him with the Company and his principal
occupation during the past five years.
Angus Russell, 44, joined the Company in December 1999 as longGroup Finance
Director. Previously he worked for Zeneca Group PLC as we are meeting those two targets, then yes we can startGroup Treasurer from 1995
until April 1999 and as Vice President of Corporate Finance of AstraZeneca PLC
from April 1999 to incrementally spend
more. The way we do our budgeting processDecember 1999. Mr Russell is that we pluga chartered accountant, having
qualified with Coopers & Lybrand, and is a member of the Association of
Corporate Treasurers.
Dr Wilson Totten, 45, joined the Company as Group R&D Director in January 1998
and joined the Board in January 1999. Dr Totten is a R&D number and
probably 10-15%medical doctor. His last
position was Vice President of Clinical Research & Development with Astra
Charnwood, where he served from 1995 to 1997.
Dr Bernard Canavan, 65, joined the Board as a non-executive director in March
1999. Dr Canavan is a medical doctor. He was employed by American Home Products
for over 25 years until he retired in January 1994. He was President of that
corporation from 1990 to 1994. Dr Canavan is what we call unallocated. That means itchairman of the Audit Committee.
Dr Francesco Bellini, 53, was a co-founder of BioChem Pharma in 1986 and has
served as its President and Chief Executive Officer since September 1986 and as
Chairman of the Board since May 2000. Dr Bellini is not there
committeda director of Molson Inc.,
Industrial Alliance Life Insurance Co. and Fonds de Recherche de l'Institut de
Cardiologie de Montreal.
The Hon James Andrews Grant, 63, has been a director of BioChem Pharma since
1986. He is a partner with the law firm Stikeman Elliot in Montreal and has been
with that firm since 1962. He is a director of United Dominion Industries
Limited, CAE Industries Limited and Canadian Imperial Bank of Commerce.
Mr Gerard Veilleux, 58, has been a director of BioChem Pharma since 1999. He has
been President of Power Communications Inc. and Vice President of Power
Corporation of Canada, a diversified management and holding company, since June
1994. Mr Veilleux is additionally a member of the Board of Governors of McGill
University.
7
FORM OF PROXY
I/We, being a member/members of SHIRE PHARMACEUTICALS GROUP PLC, HEREBY APPOINT
the Chairman of the meeting or ________________________________ as my/our proxy
and on a poll to existing on-going clinical trialsvote for me/us and on my/our behalf at the Annual General
Meeting of the Company to be held on 5 June 2001 at 11.00am, and at any
adjournment thereof.
RESOLUTIONS
ORDINARY BUSINESS For Against Abstain
1 To receive and consider the directors' Report
and Accounts for the year ended 31 December 2000. / / / / / /
2 To reappoint Arthur Andersen as Auditors and
authorise the directors to fix their remuneration. / / / / / /
3 To re-elect Mr Angus Russell as Director. / / / / / /
4 To re-elect Dr Wilson Totten as Director. / / / / / /
5 To re-elect Dr Bernard Canavan as Director. / / / / / /
6 Conditional on completion of the Company's
merger with BioChem Pharma Inc., to elect Dr
Francesco Bellini as Director. / / / / / /
7 Conditional on completion of the Company's
merger with BioChem Pharma Inc., to elect the
Hon James Andrews Grant as Director. / / / / / /
8 Conditional on completion of the Company's
merger with BioChem Pharma Inc., to elect Mr
Gerard Veilleux as Director. / / / / / /
SPECIAL BUSINESS
9 To permit the grant of options under the Shire
Pharmaceuticals Group plc 2000 Executive Share
Option Scheme subject to satisfaction of
performance conditions prior to grant. / / / / / /
Signed this __________________ day of _____________________________________ 2001
Signature(s)____________________________________________________________________
Name(s) in full_________________________________________________________________
Address_________________________________________________________________________
Postcode________________________________________________________________________
NOTES
1 Please indicate by placing a single "X" in the appropriate space how you
wish your votes to be cast in respect of each of the resolutions referred
to above. If this form is duly signed and returned, but is there actuallywithout any
specific direction as to either
starthow you wish your votes to be cast, your proxy
may vote or initiate new trialsabstain, at his/her discretion. On any other business
(including a motion to adjourn the meeting or to amend any of the
resolutions) the proxy may vote at his/her discretion.
2 In the case of joint shareholders, the vote of the first named in the
register of members of the Company who tenders a vote, whether in person
or by proxy, shall be used to bring in new projects into the
early stage pipeline. So, I might develop that.
Just thinking about Biochem and the fact that probably in not too many
months now we will be a combined group, this is keyaccepted to the understandingexclusion of the economicsvotes of the Biochem transaction because historically they have been
spending at very, very high levelsother
joint holders.
3 This form must be executed by the shareholder(s) or their attorney duly
authorised in their R&D and when you look atwriting. In the pro-forma numbers for 1999, you would see that combined the two companies were
spending 26%case of sales in R&D for that year, and indeed in the year to date the
21
last numbers we have prior to today are actually to the end of September and
that has only come down to 25%.
Bearing in mind that if you look at the combined numbers we have shown you
here on the sales line as I see some models emerging people are looking at
something around $800 million of combined sales for this new entity in 2001. If
we are at our base point and the strategy is to say we will start at 20% and
then discretionarily spend above that and we are entering at 25%, you can save
that 5% straight away, and 5% on $800 million is $40 million. So, I can look at
$40 million,a shareholder which is a functioncorporate
body, this form must be executed either under its common seal, by the
signatures of discretion asa director and its secretary or of two directors or under
the hand of an officer or attorney duly authorised in writing on its
behalf.
4 Pursuant to where Wilson spends that
money. ThisRegulation 34 of the Uncertificated Securities Regulations
1995, the time by which a person must be entered on the register of
members of the Company in order to have the right to attend or vote at the
Annual General Meeting is instrumental6.00pm on 3 June 2001. If the Annual General
Meeting is adjourned, the time by which a person must be entered on the
register of members of the Company in order to have the right to attend or
vote at the adjourned meeting is 6.00pm on the date two days preceding the
date fixed for the adjourned meeting. Changes to entries on the register
of members of the Company after 6.00pm on 3 June 2001 will be disregarded
in determining the rights of any person to attend or vote at the meeting.
5 To be valid, this form must be completed, signed and deposited at, or
returned by post to, the whole story around earnings accretion going
forward on that transaction, and where we end up in the exchange ratio at the
endoffice of the day.
Obviously toCompany's registrars, Lloyds TSB
Registrars, The Causeway, Worthing, West Sussex BN99 6ZL, England, United
Kingdom not less than 48 hours before the extent that we end up in the upper end of the exchange
ratio with a high share price for Shire and we issue less shares, the dilution
is less in the transaction and we can therefore afford to spend more of that
discretionary money in R&D. However, to the extent we are in the lower end of
the exchange, conversely will pin the R&D back to perhaps the 20% level.
Jo Walker (Lehman): Are there any further cost savings coming from Roberts
that have yet to show through in the P&L? Also, can you give us the earliest
date at which you think the Biochem deal could be completed?
Angus: Yes, Rolf made the point that we have successfully integrated
Roberts probably by about 95% as he said within 120 days. So, I guess an
argument which says synergies that were incrementing in that first 120 days as
we reached somewhere like May last year then we were at the full annual run rate
and then we were hitting that month on monthtime appointed for the restmeeting.
Please note that shareholders returning this
form of proxy by post from outside the year. There is
probablyUnited
Kingdom should affix a tiny amount there for those first three or four months when we were
on a gradual trajectory up to the full annualised rate of saving but it is no
more than that. If I guessed at it, I would say you are looking at a couple of
million dollars maybe and even that may be used or disappear in the sense of the
increased marketing costs we are putting through so whether you actually see
that on the bottom line I would not know.
Turning to the Biochem transaction, as we have said in the press release we
are very pleased things are moving well. I believe at announcement date in
December we put what we
22
thought was a cautionary timeframe of second quarter and we were encouraging
people to think that perhaps middle or late during the second quarter, but
obviously that was recognising that we had a number of regularity hurdles to
overcome. Those have seemingly gone very well in the last few weeks and in the
press release we have noted that we have competition authority approval both in
Canada, and in the US. There was no EU competition approval submission and we
were not required to make that.
Basically we have some further discussions with the Canadian government to
take place and we need shareholder approval from both companies. However, as we
see it at the moment I believe our optimism has risen somewhat now, and we would
probably be willing to say that there is a chance we can close the transaction
early in the second quarter rather than middle or later.
Question (Goldman Sachs): Rolf, you mentioned you wanted to perhaps
strengthen the early phase pipeline and bring some products in. You mentioned
even having products from within. Can you expand on that a bit? Have you
specific therapeutic areas in mind at all? Presumably you are not talking about
your own in-house discovery and given the comments that Angus has just made how
should we therefore think, maybe a couple of years out in terms of the R&D spend
that the new company might be taking on?
Rolf Stahel: When I referred to projects from within, then I am referring
to projects particularly out from Shire Laboratories, the drug delivery company,
where you have little on, but remember that covered SLI381 or Adderall LA which
was one of those projects. It covered Carbatrol, which we launched from that
source, and obviously their technology can be applied for other projects. So,
that is one source where you have new projects starting without us laying
milestones and no future royalty outflow because it is all from within.
The other area is similarly that you have work on-going in very early phase
projects, which we have not even put on the presentation, that are on-going
within Biochem, and if any of those early phase projects ever makes it to be
upgraded to a project, then that will appear in our project list as well. On top
of that, we are looking for further acquisitions of projects from the
23
outside world, along the same lines as we have done with so many companies up to
now, such as the epilepsy product from Depharm in Israel, the Parkinson's
project from Zenith and so on.
In terms of the R&D commitment, I believe we are still thinking of 24 or
perhaps 25% to R&D to revenue ratio, and we hope that we can keep it within
that, with the first thought of looking to meet market expectations in terms of
EPS growth.
Mark Loustig (Yorktown Securities): Further to an earlier point, I would
like to know what the status of the transition into Biochem is and how you hope
to capture some of those synergies that you mentioned?
Angus: When you say transition you said synergies there - do you want to
clarify whether you want to know about synergies or do you want to know about
timing or both?
Mark Loustig: Both!
Angus: I am not sure I have anything more to say about timing as I believe
it was a relatively clear answer. However, just to reiterate, we said previously
closure in second quarter and we thought that would probably be middle or later
in the second quarter, however given that we have had significant movement on
the regulatory issues, I believe we are now willing to predict that we may be
able to see this transaction close earlier in the second quarter but that is the
most I can say. There is still a number of discussions to be had, and I cannot
be more precise than that.
As regards synergies, I would like to differentiate between something I was
just talking about in an R&D context that I would classify more as cost
avoidance going forward and then immediate cost cutting. Immediate cost cutting
is relatively small and there is not a huge overlap in this transaction. The
deal has certainly not been done on the basis of putting two companies together
and generating growth through enormous cost cutting. Shire is not in that game!
So, there is the obvious elimination of overlap of the fact that both companies
are public companies and we have head offices and there will therefore be the
removal of the corporate departments and functions overlaps. Also there are some
financing benefits that I mentioned earlier in my presentation in terms of
repaying debt facilities and saving interest costs.
24
Obviously I have had a chance to run through this in the last few weeks. We
have talked to Biochem and the integration is being well planned. I do not have
a problem in looking at probably savings of around $10 million or maybe in the
range of $10-15 million.
In terms of costs avoidance, as I just indicated the great interest of this
transaction with the very complimentary fits of skill sets in the two companies,
particularly when one looks at the R&D. Shire has effectively started its life
as a late stage development with sales and marketing, and then gradually we have
integrated back a little bit more into early stage R&D. Conversely, Biochem was
an out and out biotech company at one time and more recently they have stopped
doing discovery research and their money in the future from this year forward,
would have been committed more and more to building a late stage capability
which Shire already has on the ground, and so we do not need to spend that money
anymore by bringing the two companies together. In addition Shire had sales and
marketing forces, which again Biochem were looking to recruit. One quick example
of that is Troxatyl, the leukaemia product, which is the most advanced compound
in their portfolio and this needs to be marketed for haematologists. That is
exactly where we market Agrylin, so there is no need to take on a new
salesforce.
Nick Wilf (ABN Amro): I have two questions, first in terms of Adderall, and
looking at the quarter-on-quarter trend of sales. We saw a decline in the fourth
quarter, which was complicated by price rises in September and January, as well
by the holiday season, but could you indicate whether this decline shows some
sort of underlying downward trend? Secondly, on 381 and the launch at the end of
this year, can we have some guidance please on the level and pace of switching
from Adderall that we should anticipate? Also can you give us some indication on
the intended pricing level of 381? Should we anticipate a premium differential
to Adderall?
Angus: Okay Nick, thanks for raising your first question. There was a point
in the press release bit it may be a bit buried, so thank you for giving me the
opportunity of just emphasising the issue on the saving of Adderall sales
between Q3 and Q4. In the Q3 presentation I did highlight that I thought the
sales there were excessively high, probably of the order of $4-5 million I
believe I mentioned on that call at the time, due to advanced buying by
25
wholesalers, because once Alza launched their competitor product back in August
everybody knew there was a substantial premium of over 50% and obviously
intelligent people jumped to the conclusion that it would not be very long
before Shire would be putting through some sort of price increase. So, I did
indicate that the Q3 number was probably overstated by the order of $4-5 million
dollars, and therefore if you adjust for that then I believe the numbers are $59
and a bit - close to $60 million of sales value in Q3. If you knock off the $4-5
million and add that to the $55 and bit in Q4 then you end up with the trend
being the other way round where it was $55 in Q3 and $60 in Q4 and I believe
that is a much better progression of the sales and is the true underlying one
rather than the one that you have actually seen reported.
Rolf Stahel: In terms of your question on switching, you are addressing a
very important marketing challenge that is in front of us. We all know that
sooner or later generic competition will be there and therefore an early switch
target address potentially a 100% of all current instant release Adderall users,
is obvious. In terms of giving you any details on that that is commercially
sensitive and I will not and cannot. In terms of pricing, again we cannot give
you any help on that because the same answer applies here. For your model, I
believe you probably will be on safe ground if you just leave the price where it
is and work with that on instant release and on slow release on the same basis.
What we actually do maybe totally different but I do not believe you can do
anything else at the moment.
Nick Wilf: Thanks very much.
Patrick Shares (Premium Capital): Could you let us know whether you are
losing any market to Alza's Concerta? Also, I have another question which I may
have missed but can you comment on revenue or earnings guidance for the next
year and the quarter or if competence in the sheet consensus estimates?
Rolf Stahel: Let me answer your first question about whether we are losing
market share to Alza. My answer is that I do not believe so. I believe that what
is happening is that our growth rate in volume terms has slowed down because
Alza is picking up some of the growth we would have picked up if Alza was not
there. The second point is that because Alza launching at a higher price than we
did, the selling price per day, they gave us a price increase
26
opportunity, which we have already commented on. So, overall you back, as we
reported, to a 51% growth in invoicing on Adderall for the whole of 2000 and I
must say I am very happy with that growth rate.
Angus: Yes, market consensus I believe for the avoidance of doubt, and for
the third time, I am reasonably comfortable with 2001 annual forecasts.
Patrick Shares: Smashing.
Rolf Stahel: Okay Any last questions from the UK? [No reply] Anything left
in the US? [No]
Jeff Goldman (First Capital Alliance): Over the past year there has been
some uncertainty over R&D treatment on acquisitions by the SEC. Can you tell us
what kind of analysis has been done on this front with regard to the Biochem
transaction?
Angus: What you are referring to is what are called "off-balance sheet
financing vehicles" promoted - dare I say it - in the company in here by
investment banks but basically the construction was to take certain projects in
one's R&D pipeline and put them into a separate subsidiary together with some
upfront funding to fund those projects and attract third party finance. The
benefit to the company was that it can de-consolidate at that time that
subsidiary, and therefore get those costs out of its income statement. The way
the company keeps some control of the projects is that it has, for its upfront
payment, an option to repurchase those projects in the future if that is what it
wants to do, so it has a call option.
Now the SEC, as you right said, has frowned on these structures as quite
rightly in my view it believes it distorts the true underlying ratios, R&D
spends and the earnings progressions of these companies. Biochem did set up one
of these, and it was called Clinichem. It was repurchased and reconsolidated on
15 December 2000 and so it is no longer a feature of their accounts and will not
be on an on-going basis as it has already gone.
Rolf Stahel: I would just like to add that this is the reason why we are
presenting with next figures having eliminated, historically, the impact of
Clinichem. So, when you look at
27
1999 figures and 2000 figures and the way we have represented them, we have
taken out all these distorting effects and you are looking at the right basis to
compare it going forward.
Let me conclude by saying thank you to all of you attending for the very
interesting questions and I would like to say once again that I am delighted
with the growth rate achieved today and I am confident with the growth rates
going forward. Thank you very much.
[End of conference call]
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