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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Securities registered pursuant to Section 12(b) of the Act:

None
(Title of class)

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

Yes [X]     No [   ]

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

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

Yes [X]     No [   ]

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As of June 30, 2003, the last business day of the Registrant’s most recently completed second quarter, the aggregate market value of the ordinary shares, £0.05 par value per share of the Registrant held by non-affiliates was approximately $3,203 million. This was computed using the average bid and asked price at the above date.

As of March 1, 2004, the number of outstanding ordinary shares of the Registrant was 478,922,099.

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

Statements included herein that are not historical facts, are forward-looking statements. Such forward-looking statements involve a number of risks and uncertainties and are subject to change at any time. In the event such risks or uncertainties materialize, Shire’s results could be materially affected. The risks and uncertainties include, but are not limited to, risks associated with the inherent uncertainty of pharmaceutical research, product development, manufacturing and commercialization, the impact of competitive products, including, but not limited to, the impact on Shire’s Attention Deficit Hyperactivity Disorder (ADHD) franchise, patents, including but not limited to, legal challenges relating to Shire’s ADHD franchise, government regulation and approval, including but not limited to the expected product approval dates of lanthanum carbonate (FOSRENOL^®), METHYPATCH^®, XAGRID^® and the adult indication for ADDERALL XR^®, the implementation of the planned reorganization and other risks and uncertainties detailed from time to time in Shire’s filings, including this Annual Report filed on Form 10-K for the year ended December 31, 2003 by Shire, with the Securities and Exchange Commission.

The following are trademarks, either owned or licensed by Shire or companies within the Shire Group, which are the subject of trademark registrations in certain territories.

ADDERALL XR^® (mixed amphetamine salts)
ADDERALL^® (mixed amphetamine salts)
AGRYLIN^® (anagrelide hydrochloride)
ALERTEC^® (modafinil)
AMATINE^® (midodrine hydrochloride)
CALCICHEW^® (calcium carbonate)
CARBATROL^® (carbamazepine)
COLAZIDE^® (basalazide)
ETHMOZINE^® (moracizine hydrochloride)
FOSRENOL^® (lanthanum carbonate)
FLUVIRAL^® S/F (split virion influenza vaccine)
INDURGAN^® (omeprazole)
METHYPATCH^® (methylphenidate)
PERMAX^® (pergolide mesylate)
PROAMATINE^® (midodrine hydrochloride)
SOLARAZE^® (diclofenac sodium 3%)
TROXATYL^® (troxacitabine)
XAGRID^® (anagrelide hydrochloride)
VANIQA^® (eflornithine hydrochloride)

The following are trademarks of third parties.

3TC (trademark of GlaxoSmithKline (GSK))
ADEPT (trademark of ML Laboratories)
COMBIVIR (trademark of GSK)
EPIVIR (trademark of GSK)
EPIVIR-HBV (trademark of GSK)
FARESTON (trademark of Orion)
HEPTOVIR (trademark of GSK)
PENTASA (trademark of Ferring AS)
REMINYL (trademark of Johnson & Johnson)
TRIZIVIR (trademark of GSK)
ZEFFIX (trademark of GSK)

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SHIRE PHARMACEUTICALS GROUP PLC

2003 Form 10-K Annual Report

Table of contents

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PART I

ITEM 1: Business

General

Shire Pharmaceuticals Group plc and its subsidiaries (collectively referred to as Shire, the Company or the Group) is a global pharmaceutical company with a strategic focus on meeting the needs of the specialist physician. The Company has a particular interest in innovative therapies that are prescribed by specialist doctors as opposed to primary care physicians.

Shire was incorporated under the laws of England and Wales on January 1, 1994 and is a public limited company.

In May 2001, Shire merged with BioChem Pharma, Inc. (BioChem), an international pharmaceutical company based in Laval, Canada. This brought anti-infective projects to Shire as well as a royalty stream on sales of 3TC and ZEFFIX, out-licensed to GlaxoSmithKline (GSK).

In September 2002, Shire acquired Atlantic Pharmaceutical Services, Inc. (APS), subsequently renamed Shire US Manufacturing Inc. (SUMI), which includes a state-of-the-art manufacturing facility located in Owings Mills, Maryland. It is expected that the SUMI facility will become a primary or secondary manufacturer for ADDERALL XR, CARBATROL, PENTASA and DEXTROSTAT in 2004. This will mitigate Shire’s supply risk in the US, in line with the Company’s policy of dual sourcing key products.

In February 2003, the Company acquired the worldwide sales and marketing rights to METHYPATCH, a methylphenidate transdermal delivery system for the once-daily treatment of attention deficit hyperactivity disorder (ADHD) from Noven Pharmaceuticals Inc. Also during 2003, the Company acquired five products for the Canadian market from DRAXIS Health Inc. and certain international rights to VANIQA from Women First Healthcare, Inc.

Recent developments

As a result of Shire's rapid growth, a complex operational structure was created. In order to better integrate, coordinate and rationalize our business activities, Shire has embarked on a wide reaching strategic change program. The aim is to move the Company from a silo structure to a globally integrated organization composed of cross-functional teams with clear accountability for delivering results. The business will also be serviced by support functions that will be global in their outlook. The management model has been changed to accomplish this.

The introduction of Portfolio Teams and the housing of research and development (R&D) and US commercial functions under one roof will improve communication and focus, and speed up the process of making decisions.

The US is the world’s largest pharmaceuticals market, where the Company already generates 68% of its revenues and where more than 50% of employees are based. In recognition of this the Company will establish a new corporate office on the East Coast; Pennsylvania is being considered in this regard. In addition to the vaccine sites in Canada and the US that will be exited, the Company will close its Newport, Kentucky and Rockville, Maryland sites. The Company foresees having just four major North American facilities by the end of 2005 compared with fourteen at the beginning of 2003.

The International division will continue to be led from the UK and appropriate R&D presence will also be mainained in Basingstoke to serve the European markets.

The cost of the change program in 2004 is estimated at approximately $55 million, split between retaining and relocating key staff to the new US headquarters, site closure costs and other relocation expenses. Whilst the change program will improve the operational efficiency of the Company, operational cost savings are also anticipated.

On March 10, 2004, Shire announced the appointment of David Kappler as a Non Executive Director, who will join the Shire Board in April 2004 and will take over the Chairmanship of the Audit Committee in June 2004. Mr Kappler, who is retiring in April 2004 from his present position as Chief Financial Officer of Cadbury Schweppes plc, the FTSE and NYSE listed global confectionery and beverages group, has held a range of senior finance positions during his almost 40 year career with that group.

Financial information about operating segments

Substantially, all of the Company’s revenues, operating profits or losses and net assets are attributable to the acquisition, research and development, manufacture, sale and distribution of pharmaceutical products within five operating segments: US, International, R&D, Biologics, and Corporate. Segment revenues, profits or losses and assets for 2003, 2002 and 2001 are presented in note 21 of the notes to the Company’s consolidated financial statements contained in Part IV of this Annual Report.

Strategy

Shire’s goal is to become a market leader in meeting the needs of the specialist physician in targeted segments within its core therapeutic focus areas; central nervous system (CNS), gastrointestinal (GI), renal and possibly other therapeutic areas as opportunities present themselves. Shire believes that a carefully selected portfolio of products with a strategically aligned relatively small sales force, will deliver strong results. The Company’s sales and marketing expertise as well as drug development competence is vital to deliver on this strategy.

Following a detailed strategic review conducted in 2003, the Company has revised its strategic priority. Shire will search, develop and market but will not invent. The Company will seek to acquire products with substantive patent protection rather than just three years’ Hatch-Waxman exclusivity. The Company will also focus its in-licensing and merger and acquisition (M&A) efforts on the US market, and obtain European rights whenever possible.

Shire has refocused its R&D efforts and technology to concentrate on areas where it has a commercial presence and is creating the flexibility to add new therapeutic areas based on project acquisition opportunities. The strategic review thoroughly evaluated the Group’s pipeline and refocused resources on four projects, which are currently in Phase II and III of development. This approach aims to deliver the combined benefit of increased returns and lower risks.

The implementation of these actions has resulted in:

• The exit from early stage research, therapeutic research which was completed in the third quarter of 2003;
  
• The planned exit from the vaccines business, which Shire is targeting to achieve around mid-year 2004.
  

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These changes have implications for both the Group’s organizational structure and operating sites. The Company has a new global management structure aimed at close interaction between development, marketing and sales, and new people in key positions reporting directly to the Chief Executive Officer.

Recognizing Shire’s strategic intent to focus on North America and Europe, the Company has sought out-licensing partners to cover the Japanese market. The Company has successfully out-licensed the Japanese marketing and development rights to AGRYLIN and FOSRENOL to the Pharmaceutical Division of the Kirin Brewery Company Limited and Bayer Yakuhin Limited, respectively, each being companies with an established presence in this market.

Sales and marketing

At December 2003, the Company employed 767 sales and marketing staff to service its operations in the US, the UK, the Republic of Ireland, Germany, France, Spain, Italy and Canada. The Company believes that its sales and marketing infrastructure can be expanded quickly, if required, to meet current and new product opportunities.

Currently marketed products

The table below lists the Company’s key currently marketed products by therapeutic area, indicating the owner, licensor and marketer of the product and the territory in which the product is being marketed.

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Treatments for central nervous system disorders

ADDERALL XR and ADDERALL

ADHD is estimated to affect between 3% and 7% of children in the US. Symptoms present themselves as impulsivity/hyperactivity, inattention or both. In approximately 66% of children affected by the disorder, symptoms will persist into adulthood, with estimates of up to 8.2 million adults in the US having ADHD. According to IMS Health, a leading global provider of business intelligence for the pharmaceutical and healthcare industries, the US market for ADHD treatments was approximately $2.0 billion for the year ended December 31, 2003.

Shire’s products, ADDERALL XR and ADDERALL, contain a combination of mixed amphetamine salts. ADDERALL was launched in 1996 and was the ADHD brand leader at the end of 2001. ADDERALL XR is a patented formulation of ADDERALL that uses Shire Laboratories’ Microtrol® drug delivery technology and is designed to provide an all day treatment with one morning dose. It can be administered as a capsule or sprinkled on soft food. In the ADHD market, a once-a-day formulation provides the following important patient benefits:

• provides all day control of symptoms;
  
• avoids the need for medication to be taken at school;
  
• reduces the risk of diversion;
  
• allows parental control of medication; and
  
• offers potential for improved compliance.

ADDERALL XR was approved by the US Food and Drug Administration (FDA) in October 2001. In November 2001 a formulation and pharmaceutical composition patent relating to ADDERALL XR was issued by the US Patent and Trademark Office, providing coverage through 2018. The product was launched by promotion to doctors in November, 2001. According to IMS Health, ADDERALL XR achieved a 22.6% share of the US prescription ADHD market for the month of December 2003.

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In May 2003, at the request of the FDA to submit data relating to ADDERALL XR in adolescents (pediatric Written Request), Shire is evaluating ADDERALL XR in adolescents. This could extend the existing three year marketing exclusivity under the Hatch-Waxman Act (Hatch Waxman) from October 2004 to April 2005.

On February 11, 2002, Barr Laboratories Inc. (Barr) announced FDA approval to market a generic version of the original ADDERALL formulation, which is not patent protected. Since then, several other companies have also obtained approval and launched generic versions of ADDERALL. However, much of the ADDERALL business has been switched to ADDERALL XR, a protected, longer acting formulation.

Shire’s extended release “once daily” ADDERALL XR, is covered by two US patents. Shire has been notified that Barr has submitted an abbreviated new drug application (ANDA) under the Hatch-Waxman Act seeking permission to market a generic version of ADDERALL XR prior to the expiration dates of the two US patents and alleging that one patent is invalid and one is not infringed by Barr’s mixed amphetamine salt product. The Company has filed two suits against Barr seeking a ruling that Barr’s product infringes both of Shire’s US patents. See ITEM 3: Legal Proceedings, for further information.

Shire was also notified in November 2003 that Impax Laboratories Inc. (Impax) has submitted an ANDA under the Hatch-Waxman Act seeking permission to market a generic version of ADDERALL XR, prior to the expiry of Shire’s two US patents and alleging that the patents are not infringed by Impax’s mixed amphetamine salt product. In December 2003, the Company filed suit against Impax seeking a ruling that Impax’s product infringes Shire’s two US patents. See ITEM 3: Legal Proceedings, for further information.

Two new life cycle management projects for the ADDERALL franchise are currently under development (SPD465 and SPD483).

CARBATROL

Approximately 2.3 million people in the US suffer from epilepsy, a disorder that is characterized by a propensity for recurrent seizures and is defined by two or more unprovoked seizures. CARBATROL is an extended release formulation of carbamazepine that uses Shire Laboratories’ Microtrol technology. It can be administered as a capsule or sprinkled on food and delivers consistent blood levels of drug over 24 hours, when taken twice daily. When administered in an immediate release formulation, carbamazepine requires dosing three to four times a day. CARBATROL’s extended release formulation therefore provides potential compliance advantages for patients. Carbamazepine is one of the most widely prescribed antiepileptic drugs, and is considered to be the gold standard molecule¹ in the treatment of partial seizures. In the US prescription numbers for CARBATROL increased from approximately 900,000 in 2002 to nearly one million in 2003. A new 100mg strength was also launched in the US at the end of 2003.

1. For the treatment of systematic localized-entry epilepsy, (simple partial, complex partial, secondary generalized).

The FDA approved CARBATROL on September 30, 1997 for marketing in the US and it was launched in the US in June 1998. CARBATROL is covered by two US patents, with expiration dates of 2011 and 2016 respectively. Patent applications covering this technology are pending in other countries.

Following FDA approval of a second source of supply in 2002, Shire relaunched CARBATROL to the US epilepsy market in January 2003.

In August 2003, Shire received a notice that Nostrum Pharmaceuticals, Inc. (Nostrum) had filed an ANDA for CARBATROL 300mg. See ITEM 3: Legal Proceedings, for further information.

REMINYL

Alzheimer's disease is the most common form of dementia in the US. It affects the ability to carry out normal daily activities and affects memory, language and behavior. It is progressive, with death usually occurring within eight to ten years following the onset of symptoms. It is estimated that approximately 4 million people in the US suffer from Alzheimer's disease.

REMINYL is used for the symptomatic treatment of mild to moderately severe dementia of the Alzheimer type. The Company is licensed to develop, manufacture and sell REMINYL for use in the treatment of Alzheimer’s disease and related dementias throughout the world, excluding North America, Japan, Korea, Taiwan, Thailand and Singapore. The Company in turn has granted a sub-license to Janssen to develop, manufacture and sell REMINYL in all territories licensed to the Company, except the UK and the Republic of Ireland. Janssen has been separately licensed to develop, manufacture and sell REMINYL in North America, Japan, Korea, Taiwan, Thailand and Singapore.

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REMINYL was launched by Shire in the UK in September 2000 followed by launches in a number of other countries during late 2000 and 2001. In the US, REMINYL was approved by the FDA in February 2001 and launched in May 2001 by Janssen.

REMINYL was launched using natural galantamine extracted from daffodil bulbs. Regulatory approval for the manufacture of synthetic galantamine was gained in 2001 in Europe and the US.

Treatments for gastrointestinal diseases

PENTASA

Ulcerative colitis, a type of inflammatory bowel disease, is a chronic, relapsing disease in which part or all of the large intestine becomes inflamed and often ulcerated. This condition is estimated to affect upwards of 1.2 million people worldwide. The mainstay of treatment for inflammatory bowel disease is 5-aminosalicylate-based (mesalamine) products.

PENTASA controlled-release capsules are indicated for the induction of remission and for the treatment of patients with mildly to moderately active ulcerative colitis. PENTASA is an ethylcellulose-coated, controlled release capsule formulation of mesalamine designed to release therapeutic quantities of mesalamine throughout the gastrointestinal tract.

Treatments and preventatives for viral infections

3TC/EPIVIR, COMBIVIR, TRIZIVIR

The Human Immunodeficiency Virus (HIV) is a retrovirus that has been isolated and recognized as the causative agent of Acquired Immunodeficiency Syndrome (AIDS). There are many strains of HIV throughout the world, although they all exhibit the same disease mechanism.

Lamivudine was originally discovered by BioChem Inc., a wholly-owned subsidiary of Shire, and out-licensed to Glaxo Wellcome in 1990. Shire receives royalties on worldwide sales of lamivudine (now marketed in various single and combination formulations, including 3TC/EPIVIR, COMBIVIR and TRIZIVIR), except in Canada, where a commercialization partnership with GlaxoSmithKline (GSK) exists. These products are sold worldwide.

According to UNAIDS, in December 2003 there were 40 million adults and children living with the HIV infection worldwide. Estimates suggest that there were 5 million new infections in 2003.

ZEFFIX

Hepatitis B (HBV) virus is the causative agent of both acute and chronic forms of hepatitis B, a liver disease which is a major cause of death and disease throughout the world. Over 2 billion people worldwide have, at some point, been infected with the HBV virus. Of these 2 billion, there are over 350 million people chronically infected. Vaccines to prevent infection by HBV are currently available, however, they have not been shown to be effective in those already infected with the virus.

Lamivudine has also been shown to be effective against the HBV virus and is marketed as ZEFFIX and various other trademarks around the world. The Company has also entered into agreements with GSK in connection with this indication and the Company receives royalties on sales of lamivudine by GSK for treatment of chronic infection by HBV except in Canada, where a commercialization partnership with GSK exists.

Treatments for other diseases

ANAGRELIDE HYDROCHLORIDE (AGRYLIN/XAGRID)

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

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Licensed from Bristol Myers Squibb in 1991, AGRYLIN (anagrelide hydrochloride) was approved by the FDA for the treatment of ET in 1997 with an expanded indication for thrombocytosis (elevated platelet count) secondary to all MPDs granted in 1998. AGRYLIN is marketed in a number of countries outside of the US and is in registration in the EU for ET under the trade name XAGRID.

Orphan drug exclusivity for AGRYLIN in the US expires in March 2004 although the Company has received a pediatric Written Request from the FDA that could extend this period by a further six months to September 2004.

In December 2003, the Company granted rights to the Pharmaceutical Division of Kirin Brewery Company Ltd to develop, market and sell AGRYLIN in Japan, the world’s second largest pharmaceuticals market.

The Company holds patents and patent applications in the US and other selected countries including Europe relating to processes for producing the active ingredient, anagrelide.

PROAMATINE

In 1996, PROAMATINE was approved by the FDA for the treatment for orthostatic hypotension. This is a condition involving low blood pressure upon assuming an upright posture, resulting in dizziness, weakness or unconsciousness. A seven year period of market exclusivity in the US expired in September 2003 and generic competitors have since entered the market.

CALCICHEW range

Osteoporosis is characterized by a progressive loss of bone mass that renders bone fragile and liable to fracture. More than 3 million people in the UK are estimated to suffer from this condition. Osteoporosis affects both sexes but is more rapid and profound in women, largely as a result of the decline in estrogen production following menopause.

Shire’s principal products for the adjunctive treatment of osteoporosis are the CALCICHEW range of calcium and calcium/vitamin D supplements which are sold mainly in the UK and the Republic of Ireland. The CALCICHEW range includes, CALCICHEW 500mg, CALCICHEW FORTE, CALCICHEW-D₃ and CALCICHEW-D₃ FORTE.

FARESTON

Shire currently licenses the US marketing rights to FARESTON (toremifene) from Orion Corporation. FARESTON is indicated for the treatment of metastatic breast cancer in postmenopausal women with estrogen-receptor positive or unknown tumors. FARESTON is available as a 60mg once-a-day oral tablet and received marketing approval in the US in May of 1997.

Products under development

Shire’s R&D activities are designed to support the Company’s commercial success in key global markets with particular emphasis on the US, which represents approximately one-half of the world market. This requires R&D investment in a number of areas including supporting the extension of the life-cycle of existing marketed products, the development of new medicinal products and the identification and assessment of new product opportunities.

Shire has more recently refocused its R&D efforts towards later-stage opportunities, recognizing that in-licensing of later-stage development projects reduces financial and technical risks associated with earlier stage research. This is compatible with the “search, development, sell” strategy and has led to the closure of Lead Optimization in Canada. In parallel, Shire has narrowed its current development focus to three core therapeutic areas – CNS, GI and renal. This reduced breadth of development would also make room for the possibility of new therapeutic areas that could be introduced through business development activities.

To further focus R&D support on late-stage development activities for key global markets in core therapeutic areas, Shire is in the process of out-licensing and/or partnering a number of development programs. Shire has recently out-licensed the rights to develop and market two late-stage projects in Japan (AGRYLIN and FOSRENOL), in order to allow it to focus its R&D activities on US and European markets. Out-licensing discussions continue for TROXATYL. In addition, partnering discussions are underway for SPD754 (HIV); the remaining antiviral projects SPD756 (HIV) and SPD760 (Hepatitis C) are also now available for partnering. In addition, work on the disposal of Shire’s vaccines business is continuing.

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Shire is currently part-way through re-structuring its R&D resources to support this re-focusing of R&D activity. Shire plans to continue its virtual R&D approach - extensively utilizing external clinical research organizations – with R&D support for key markets in US and EU locations.

The table below lists the Company’s key products under development by therapeutic area, indicating the most advanced development status in any market for each project and Shire’s territorial rights.

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Treatments for central nervous system disorders

ADDERALL XR (Adult)

A supplemental New Drug Application (sNDA) filing was made in December 2002 for use of ADDERALL XR in adults. An approvable letter was sent by the FDA in October 2003 following its review of this application and Shire is working with the FDA to address the questions raised in this letter. Under Hatch Waxman, upon approval, the adult indication will qualify for three years of marketing exclusivity.

METHYPATCH

On February 27, 2003, Shire announced the acquisition of the worldwide sales and marketing rights of METHYPATCH, from Noven Pharmaceuticals Inc. (Noven).

A methylphenidate transdermal delivery system, for the once-daily treatment of ADHD, METHYPATCH will enable Shire to develop a new presence in the methylphenidate segment of the market, which currently represents nearly half of the US ADHD prescription volume.

In April 2003, Noven received a ‘not approvable’ letter from the FDA in response to its June 27, 2002 NDA. Noven has an ongoing dialogue with the FDA and Shire is working with Noven to resolve issues raised by the FDA.

METHYPATCH has a technology patent until 2012 and composition patents in the US and other key markets until December 2018.

BIPOTROL (SPD417) for bipolar disorder

There are an estimated 1.5 million adults with this disorder in the US alone. Shire has investigated BIPOTROL for use in bipolar disorder. Phase III studies have been conducted and in February 2004 Shire filed an NDA for this indication. If approved, BIPOTROL would be the first US carbamazepine product indicated for the acute treatment of manic and mixed episodes in patients with bipolar disorder and will qualify for 3-years exclusivity under Hatch-Waxman.

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SPD503

SPD503 (guanfacine) is a non-scheduled compound that has been developed for use in ADHD. Phase III development commenced early in 2003 where utility in both pediatrics and adults is being investigated. SPD503 is patented through 2015.

SPD473

SPD473 is a mixed monoamine reuptake inhibitor, affecting three neurotransmitters that may be implicated in ADHD (noradrenaline, serotonin and dopamine). Initially investigated for the indications of Parkinson’s disease and depression, development was switched to ADHD and the first Phase II (Proof of Concept) study in ADHD commenced in August 2003. SPD473 is patented through 2015.

SPD465 and SPD483

SPD465 and SPD483 are new life-cycle projects for the ADDERALL franchise. SPD465 offers an augmented duration of effect and is currently in Phase I of development, while SPD483 has reached Pre-clinical development.

SPD451

Parkinson’s disease causes a progressive loss of movement, rigidity, postural abnormalities and tremors. SPD451, a dopamine D₁ agonist, was in-licensed from CeNeS Pharmaceuticals plc in December 2000.

Treatments for gastro intestinal diseases

Ulcerative colitis is a serious chronic inflammatory bowel disease of the colon. Typically patients go through periods of relapse and remission over a number of years. 5-aminosalicylic acid (5-ASA) based products are the first line treatment for ulcerative colitis. Existing treatments generally require the patients to ingest a large volume of pills and are differentiated by the manner of release of the active drug in the colon.

PENTASA

PENTASA 250mg is a 5-ASA based product marketed by Shire in the US for ulcerative colitis. The formulation patent expired in 2002. A 500mg dosage form is being developed to aid patients who often need to take large doses of this medication. A 500mg dosage will reduce the volume of pills they are required to ingest. A sNDA for this project was filed with the FDA March 8, 2004.

SPD476

SPD476 is being developed as a high strength (1200mg) 5-ASA based product for ulcerative colitis using a unique formulation and delivery platform. Rights to SPD476 in key global markets were licensed from Giuliani SpA on May 6, 2002. The formulation of this product is patented through 2020.

Following encouraging Phase II results of SPD476 versus Asacol 4g rectal suspension, (study conducted and reported by Giuliani SpA), Shire progressed SPD476 into Phase III development in September 2003.

SPD480

SPD480 is a 5-ASA based product formulated in a single dose, 2g and 4g, foam for rectal delivery in the treatment of ulcerative colitis. Rights to key global markets were licensed from Giuliani SpA in October 2002. This product will provide an alternative treatment for distal/rectal ulcerative colitis and is currently in Phase II development.

Treatments for renal diseases

FOSRENOL for hyperphosphatemia

It is estimated that there are nearly one million patients worldwide with end-stage renal disease. In this condition the kidneys are unable to regulate the balance of phosphate in the body. If untreated, the resultant retention and elevated blood phosphate levels (hyperphosphatemia) can combine with other biochemical disturbances and result in bone disorders described as renal osteodystrophy. Recent research also suggests that hyperphosphatemia is associated with the development of cardiovascular disease which accounts for nearly 50% of deaths in dialysis patients.

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FOSRENOL is Shire’s phosphate binder for use in end-stage renal failure patients receiving dialysis. FOSRENOL binds dietary phosphate in the stomach to prevent it from passing through the gut lining. Based upon this mechanism of action, phosphate absorption from the diet is decreased. FOSRENOL is formulated as a convenient chewable tablet. Shire’s clinical package now includes data from four years of use of FOSRENOL in patients in clinical trials.

Approval of FOSRENOL for use in the US is now being sought and a NDA was submitted to the FDA. In February 2003 Shire received an approvable letter. A dialogue has been initiated with the FDA to resolve the FDA’s questions and Shire is hopeful of approval during 2004.

Approval of FOSRENOL has also been sought in Europe for the treatment of hyperphosphatemia and following submission to the European Marketing Authorization Application (MAA), Shire entered into discussions with the Reference Member State (RMS) reviewing the data package, and Shire is hopeful of approval during 2004.

In December 2003, the rights to develop, market and sell FOSRENOL in Japan were out-licensed to Bayer AG, in line with Shire’s strategy to focus its resources on its core markets in North America and Europe.

Treatments for viral infections

The Shire portfolio contains two antiretroviral compounds; SPD756 (formerly BCH 13520) and SPD754 (formerly BCH 10618) currently in Phase I and II of development respectively.

SPD754

SPD754 is a cytidine analogue nucleoside reverse transcriptase inhibitor (NRTI) in development for the treatment of HIV, including HIV resistant to other NRTIs.

The first Phase II study with SPD754 was presented at the 2nd International AIDS Society (IAS) meeting in Paris (July 2003). This study evaluated the anti-viral activity and safety of four doses of SPD754 versus placebo in treatment-naïve, HIV infected subjects. SPD754 was shown to have potent anti-viral activity and to be well tolerated with an adverse event profile similar to that of placebo.

As a result of the recent strategic decision to focus on its three core therapeutic areas, Shire is seeking partnership opportunities for SPD754.

SPD756

SPD756 is a guanosine NRTI in development for the treatment of HIV.The project has entered Phase I development.

As a result of the recent strategic decision to focus on its three core therapeutic areas, Shire is seeking partnership opportunities for SPD756.

SPD760

SPD760 is a project for the treatment of Hepatitis C Virus (HCV). As a result of the recent strategic decision to focus on its three care therapeutic ideas, Shire is seeking partnershp opportunities for SPD760.

Preventatives for viral infections

As mentioned previously, the Company is in the process of disposing of its vaccines business. The influenza and antibacterial products referred to below form part of the vaccines business and would not be retained by the Company following a disposal.

Influenza vaccines

SPD707

SPD707, a split-virion egg-derived influenza vaccine, was introduced as a development project during the third quarter of 2001. It is already manufactured and marketed by the Company in Canada as FLUVIRAL S/F. Shire is now capitalizing on its global rights to FLUVIRAL S/F by investigating the potential for other markets, primarily the US and Europe. This project is considered to be at the end of Phase II.

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SPD701

SPD701 is a cell-based influenza vaccine. Prior to the merger, BioChem announced in its first quarter 2001 financial results that its agreement with GSK to develop SPD701 had been terminated. In Shire’s third quarter 2001 financial results it was confirmed that development of SPD701 would not continue until a new partner has been found.

Antibacterial vaccines

There is a great need for new antibacterial vaccines, especially given the increasing resistance of many bacteria to current antibiotics. As existing vaccines often do not provide effective immunization against many bacteria, the Company is developing a new generation of antibacterial vaccines based on innovative recombinant protein technology.

In April 2000, the Company concluded a partnership agreement with the Canadian government through Technology Partnerships Canada (TPC). Under the agreement, the Canadian government has agreed to contribute up to CAN$80 million (approximately $62 million) to the development of recombinant protein vaccines over a period of approximately six years. For the year ended December 31, 2003, the contributions due from the Canadian government amounted to CAN$5.0 million (approximately $3.4 million) based on eligible research and development expenditure. This contribution is accounted for as a reduction against research and development costs charged to operations.

Shire has three vaccines in development against the following bacteria: Streptococcus pneumoniae, Neisseria meningitidis and Pseudomonas aeruginosa.

SPD703 - Streptococcus pneumoniae vaccine

The Company believes that its protein-based vaccine, SPD703, should more effectively stimulate the immune system and has the potential to provide improved protection for both infants and older people across all S. pneumoniae strains. This project is at Phase I of development.

SPD704 - Neisseria meningitidis vaccine

The Company’s meningococcal vaccine candidate, SPD704, is designed to protect against infection by N. meningitidis. Two of the most common outcomes of infection by N. meningitidis are meningococcal meningitis and septicemia.

Existing polysaccharide vaccines and current and future polysaccharide conjugate vaccines against N. meningitidis only protect against four of the 12 serogroups of N. meningitides. Furthermore, none protect against serogroup B, the most common strains of the bacteria in industrialized countries. SPD704 appears to have the potential to induce a potent and long-lasting immunity against all strains of N. meningitidis, including group B. If these properties are confirmed in clinical trials, the Company’s recombinant protein vaccine against N. meningitidis will be a significant medical advance. This vaccine has been in Phase I clinical trials.

SPD705 - Pseudomonas aeruginosa vaccine

P. aeruginosa is one of the leading causes of life-threatening nosocomial (hospital acquired) infections. It causes chronic degenerative pulmonary disease in cystic fibrosis patients and can cause death in 30% of immunocompromised patients. There is a high and increasing level of antibiotic resistance to this bacteria.

The Company is collaborating with Cytovax Biotechnologies Inc. (Cytovax) in the development of a vaccine against P. aeruginosa, known as SPD 705. This project moved into Phase I of development in February 2002, for which Cytovax Biotechnologies has conducted the initial Phase I trial.

Treatments for other diseases

ANAGRELIDE HYDROCHLORIDE (AGRYLIN/XAGRID)

Anagrelide hydrochloride is marketed in a number of territories including the US where it has the trade name AGRYLIN. and is being developed in Europe (XAGRID) for the reduction of elevated platelet count in the chronic disorder essential thrombocythemia. Platelet reduction is associated with a reduced risk of blood clots and other bleeding events and research indicates that a key benefit of XAGRID is its platelet selectivity, targeting only those cells that develop into platelets.

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An MAA filing was made in March 2002 and in July 2003 a positive opinion was received from the Committee for Proprietary Medicinal Products (CPMP), the scientific committee of the European Medicines Evaluation Agency (EMEA). XAGRID has Orphan Drug designation in Europe and, upon marketing authorization approval, will be granted up to 10 years market exclusivity in Europe.

TROXATYL for acute myeloid leukemia (AML) and pancreatic cancer

TROXATYL is a dioxolane nucleoside analogue that acts as a complete DNA chain terminator and DNA polymerase inhibitor. This mechanism of action interferes with the ability of cancer cells to replicate. In addition, data suggests that unlike other cytidine analogues used in oncology, TROXATYL is not degraded by cytidine deaminase, an enzyme used by cancer cells to resist a number of other cancer treatments.

TROXATYL is initially being clinically evaluated for two types of cancer; AML and pancreatic cancer. Both projects are currently studying combination use with other agents (Ara-C in AML and gemcitabine in pancreatic cancer). This project is currently in Phase II development.

Following Shire’s strategic review, oncology will no longer be a therapeutic area of focus in research and development. The Company is seeking to out-license TROXATYL for the treatment of AML and pancreatic cancer and activities associated with this initiative are ongoing.

Drug delivery technologies

Shire has developed several drug delivery technologies that can be applied to drugs in order to enhance their effectiveness or their convenience to patients. Generally, this involves reformulating the drug into a new delivery system designed either to enhance the absorption of the drug into the blood stream or, alternatively, to delay absorption of the drug into the bloodstream, thereby requiring the patient to take fewer daily doses.

The Company’s portfolio of drug delivery technologies includes technologies to predict and enhance bioavailability of drugs as well as technologies to develop oral controlled release profiles. The Company has employed these technologies selectively to develop its own unique products such as CARBATROL and ADDERALL XR.

Principal licensing and collaborative agreements

Various Galantamine agreements

Pursuant to an agreement with Synaptech Inc., the owner of the patents on galantamine for use in the treatment of Alzheimer's disease, the Company has undertaken technical, pre-clinical and clinical work on the use of REMINYL in Alzheimer's disease and related dementias and has agreed to pay royalties on sales of REMINYL. The Company has also entered into a co-development agreement with Janssen (part of the Johnson & Johnson Group) under which it licensed to Janssen all of its clinical data and know-how relating to the use of galantamine in Alzheimer's disease and related dementias worldwide, except for the UK and the Republic of Ireland. Under these arrangements, Janssen undertook to finance substantially all the future research and development costs of REMINYL as a treatment for Alzheimer's disease and related dementias, conduct clinical trials, obtain regulatory approvals and manufacture and market REMINYL.

The Company’s rights to develop, manufacture and sell REMINYL for use in the treatment of Alzheimer's disease and related dementias under the patents of Synaptech extend throughout the world, but exclude North America, Japan, Korea, Taiwan, Thailand and Singapore. The Company, in turn, entered into a sub-license with Janssen under which it granted Janssen exclusive rights to develop, manufacture and sell REMINYL for use in Alzheimer's disease in all territories licensed to the Company, except the UK and the Republic of Ireland. The Company also has the right to reacquire the rights to sell REMINYL in one of a specified group of major European countries five or 10 years after commercial launch. Janssen has entered into a separate license agreement with Synaptech covering North America, Japan, Korea, Taiwan, Thailand and Singapore. Synaptech authorized the Company to enter into the above co-development agreement and the above sub-license agreement with Janssen, under which, among other things, the Company will receive royalties on sales of REMINYL by Janssen in the US. As a result, the Company is dependent on Janssen for revenues derived from REMINYL.

The co-development agreement and sub-license granted to Janssen may be terminated by Janssen on 90 days' notice. If Janssen exercises its right to terminate the license and co-development agreement under this provision, the licenses granted to Janssen, terminate and Janssen is obligated to transfer to the Company data and other information and

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responsibility for the management of continuing development and registrations of the product. The costs of ongoing studies will be shared by Janssen and the Company in the proportions prescribed in the agreement for three months after the date of termination, except for the costs payable for clinical trials, which will be shared equally until they can be properly terminated. Under the agreement, the Company has the right to complete the registration of the products and seek alternative partners.

Lamivudine

By agreement between Shire BioChem and GSK dated January 31, 1990 and amended as of November 20, 1995, Shire BioChem licensed to GSK the worldwide rights, with the exception of Canada, to develop, manufacture and sell the nucleoside analogue lamivudine marketed as 3TC, ZEFFIX, HEPTODIN, HEPTOVIR, EPIVIR, EPIVIR-HBV, COMBIVIR and TRIZIVIR (together referred to in this section as “lamivudine”). A partnership exists between GSK’s Canadian subsidiary, GSK Inc., and Shire BioChem to supply, market and sell lamivudine in Canada. GSK has agreed to manufacture all the required lamivudine to be supplied in Canada by the partnership.

In consideration for the grant of such rights, GSK agreed to undertake and fund the development of lamivudine and to pay Shire BioChem a royalty on sales of lamivudine. The amount of relevant patent prosecution costs and certain contractual and litigation costs may be deducted from royalties payable to Shire BioChem by GSK. If GSK terminates the license agreement, as a result of a default by Shire, GSK will retain a non-exclusive, paid-up license from Shire BioChem to make, have made, use and sell lamivudine worldwide.

PROAMATINE

By agreement dated November 23, 2000, the Company re-negotiated the terms and duration of its distribution agreement with Nycomed Austria GmbH for the supply of PROAMATINE in the US, Canada, the UK and the Republic of Ireland. Shire now has exclusive rights to supply PROAMATINE in these countries until 2010.

FLUVIRAL

In 2001, the Company signed a ten-year non-cancelable contract with the Government of Canada (GOC) to assure a state of readiness in the case of an influenza pandemic (worldwide epidemic) and to provide influenza vaccine for all Canadian citizens in such an event (hereinafter referred to as the Pandemic contract).

The concept of a state of readiness against an influenza pandemic requires the development of sufficient infrastructure and capacity in Canada to provide for domestic vaccine needs in the event of an influenza pandemic. The Company is committed to provide 32 million doses of single-strain (monovalent) influenza vaccine within a production period of 16 weeks. The Company has therefore begun a process of expanding its production capacity in order to meet this objective within a five-year period ending January 2006.

In addition, under another GOC contract, the Company is required to supply the GOC with a substantial proportion of its annual influenza vaccine requirements over a ten-year period ending March 2011. Subject to mutual agreement, the contract can be renewed for a further period of between one and ten years.

The Company is committed to approximately $11.3 million (CAN$18.0 million) of capital expenditure for the purpose of achieving the level of pandemic readiness required in the Pandemic contract. The GOC has agreed to reimburse the Company $8.6 million (CAN$13.5 million). At the end of the contract, the Company is committed to buy back any unused and unexpired materials and capital assets reimbursed by the GOC (at net book value) that can be used for production of trivalent vaccine or other products.

The Company is also committed to the expansion of its vaccine production facility located in Quebec City. A new building will be located alongside the existing vaccine production facility in the Quebec Metro High Tech Park for an estimated $35.3 million (CAN$46.5 million). Construction of this facility commenced in November 2003. It is expected that this facility will be operational in 2006.

TPC funding

In March 2000, the Company entered into a funding agreement with TPC, a Canadian governmental agency, (hereinafter referred to as the TPC agreement) relating to the research and development of recombinant protein vaccines. The TPC agreement has as its objective the creation in Canada of skilled scientific and technological jobs in the research and development field, the local manufacture of developed products, capital investment and financial return on investment.

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TPC agreed to a total contribution not to exceed $61.9 million (CAN$80.0 million). Such contribution is repayable to TPC in form of royalties on the net sales value (gross invoiced amounts less discounts, taxes and delivery costs) if the products become commercialized. The Company is obligated to pay such royalties in the period up to December 31, 2016. No amounts have been accrued with respect to this obligation as the conditions for repayment have not yet been met.

As a condition of the TPC agreement, the Company has an obligation to build a vaccine research facility in Canada. The construction of the vaccine research center in Laval, Canada will represent an investment of approximately $21.7 million (CAN$28.0 million) and should be completed in December 2004.

FOSRENOL

Johnson Matthey plc has been granted patents in the US and Europe and pending applications elsewhere for pharmaceutical compositions containing lanthanum carbonate and the use of these compositions for the treatment or prevention of hyperphosphatemia. In February 1996, the Company entered into an agreement with Johnson Matthey under which Johnson Matthey granted to the Company an exclusive license agreement to develop, manufacture, use and sell FOSRENOL worldwide in consideration for an upfront payment and a royalty on sales of FOSRENOL. The Company has consented to the assignment by Johnson Matthey of its patents to AnorMed Inc., a Canadian company, which is partially owned by Johnson Matthey. As part of these arrangements the Company entered into an agreement with Johnson Matthey whereby the Company received an exclusive worldwide license to use Johnson Matthey's manufacturing know-how in return for up front payments and future royalties.

By an agreement between the Company and Bayer Yakuhin Limited (“Bayer”) dated December 8, 2003, Shire granted Bayer the exclusive right to develop, register, formulate, package, label, market and sell lanthanum carbonate under the brand name FOSRENOL in Japan. In consideration of the grant of these rights, Bayer has agreed to undertake and fund the development of lanthanum carbonate in Japan and pay the Company a royalty on sales of lanthanum carbonate and to make a contribution to the royalties payable to Johnson Matthey plc and AnorMed Inc by the Company. Bayer has granted the Company a non-exclusive, royalty-free, perpetual license to use any know how or data developed or generated by Bayer during its development activities under the agreement for the registration, marketing, sale and use of FOSRENOL in any country outside Japan. Johnson Matthey and AnorMed Inc. have each consented to the grant of this sub-license.

Manufacturing and distribution

ADDERALL XR is manufactured, on behalf of Shire, by DSM Pharmaceuticals Inc. (DSM). Shire manufactured and packaged ADDERALL and DEXTROSTAT at its facility in Valley Stream, New York throughout 2002. Shire received approval from the FDA to transfer production of ADDERALL to DSM in 2002.