shire pharmaceuticals group plc annual review and summary financial...

Shire Pharmaceuticals Group plcAnnual review and summary financial statement 2000

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Contents2 2000 at a glance4 Chairman’s statement5 Chief Executive’s review

Operating review:6 Central nervous system

disorders10 Oncology/haematology12 Gastroenterology14 Metabolic diseases

and other areas16 Financial review18 Board of Directors and

Executive Committee20 Five-year review

21 Remuneration report27 Corporate governance29 Statement of directors’

responsibilities30 Report of Independent

Public Accountants31 Consolidated balance sheets32 Consolidated statements

of income33 Consolidated statements

of changes in shareholders’equity

33 Consolidated statements of comprehensive income

34 Consolidated statements of cash flows

35 Notes to the consolidatedfinancial statements

52 Summary financial statement:Auditors’ statement

53 Report of the directors54 Consolidated profit and

loss account 55 Consolidated balance sheet56 Consolidated cash flow

statement57 Notes to the summary

financial statement

58 Summary of significantdifferences between US GAAP followed by the Group and UK GAAP

59 Shareholders’ information60 Glossary

Shire is an international specialty pharmaceutical companywith a strategic focus on four therapeutic areas: centralnervous system disorders, metabolic diseases, oncology and gastroenterology.

The Group has a global sales and marketing infrastructurewith a broad portfolio of products, with its own directmarketing capability in the US, Canada, UK, Republic ofIreland, France, Germany, Italy and Spain, with plans to add Japan by 2004. Shire also covers the other significantpharmaceutical markets indirectly through distributors, andsales coverage continues to grow.

Shire’s global search and development expertise has to date successfully provided eight marketed products, whilethe current pipeline of 17 projects includes ten that are post Phase II.

Shire is actively searching to acquire further marketedproducts and development projects to enhance the potentialfor future growth. Shire’s M&A activity has resulted in five completed mergers and acquisitions during the past six years.

2000 at a glance

Business highlights

> In-licensing of three new early stage compounds

> Successful integration of Roberts

> ReminylTM launch in Europe

> US regulatory submission of SLI 381 (proposed Trade Mark Adderall XR)

> Proposed merger with BioChem

2 Shire Pharmaceuticals Group plc

Financial highlights After APB 25charge andexceptional Before APB 25 charge and

charges exceptional charges2000 2000 1999 %

$m $m $m change

Revenues 517.6 517.6 401.5 +29Operating income* 122.3 144.2 71.1 +103Income before tax* 116.2 138.1 68.2 +102EPS (diluted)*– ordinary shares $0.29 $0.38 $0.21 +81– ADS $0.88 $1.13 $0.64 +81

*2000 figures include the positive impact of a one-off legal settlement of $8 million ($0.06 per ADS)USD: GBP average exchange rate – 2000: 1.51, 1999: 1.62

Shire Pharmaceuticals Group plc 3

Geographic markets■ Key markets: US, Canada, UK, Republic of Ireland, France, Germany, Italy, Spain

■ Markets served by distributors: Australia, Denmark, Finland, Hong Kong, Israel,Malaysia, Norway, Philippines, Singapore, South Africa, South Korea, Thailand

Sales by geographic area1 US 83%2 Europe 12%3 ROW 5%

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Sales by therapeutic area1 Central nervous system 50%2 Oncology 12%3 Gastroenterology 11%4 Metabolic diseases 8%5 Other 19%

Sales by product1 Adderall 43%2 DextroStat 2%3 Agrylin 12%4 Pentasa 11%5 Carbatrol 5%6 ProAmatine 5%7 OTC 5%8 Others 17%

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ResultsShire has had another successful year. Group revenues andoperating income (pre APB 25 and exceptional charges)increased by 29% and 103% respectively. Diluted earnings per share (pre APB 25 and exceptional charges) are 38 cents,up 81% on 1999.

Much of this impressive growth is firstly attributed to theCompany’s merger with Roberts Pharmaceutical Corporation in December 1999. Shire successfully integrated Roberts withinthree months and finished the year exceeding its original $20 million cost savings target. Additional growth arose from the expansion of the Company’s sales and marketing operationsinto Europe.

In October 2000, Shire gained entry into the FTSE 100 andfinished the year with a market capitalisation of around $4 billion,making it the UK’s fourth-largest pharmaceutical company.

OperationsSignificant growth was achieved in respect of the majority of keyproducts. Total product sales increased by 29% to $498.1 million.Reminyl, for the treatment of Alzheimer’s disease, was launchedin the UK and the Republic of Ireland in September 2000.Colazide, in-licensed from Salix Pharmaceuticals Ltd for thetreatment of ulcerative colitis, was also launched in the UK in September 2000.

Shire continues to establish its global coverage with a presencein seven of the eight major pharmaceutical markets. During the course of 2000 Shire opened a Representative Office inSingapore to manage the Pacific Rim markets as well as a salesand marketing subsidiary, Shire Pharmaceuticals Iberica S.L.,in Spain.

The submission of SLI 381 (Adderall XR) to the Food and DrugAdministration (FDA) in October represents another importantmilestone to maintain Shire’s current position as the marketleader in Attention Deficit Hyperactivity Disorder (ADHD).

Mergers and acquisitions Over the past six years, the Company has expanded bothorganically and through acquisitions and mergers. On11 December 2000, Shire announced it had entered into a merger agreement with BioChem Pharma Inc., a Canadian-based pharmaceutical company. The merger, which is expectedto close in the second quarter of 2001, will be achieved throughan exchange of shares.

The BoardDr Robert Vukovich resigned from the Board on 14 February2000 to pursue other business interests. Upon completion of the BioChem merger, three non-executive directors of Shire,Dr Zola Horovitz, Mr Joseph Smith and Mr John Spitznagel,will be leaving the Board. I would like to take this opportunity to

Chairman’s statement


The Shire management team is confident that growth opportunitieswill continue to drive the business forward.

thank each of them for their contribution to Shire. Further, uponcompletion of the merger, three BioChem directors, Dr FrancescoBellini, the Honourable James Andrews Grant and Mr GerardVeilleux will join Shire’s Board.

PeopleShire believes in the importance of hiring well-qualified,experienced staff with proven records of success. The Company’sfuture success depends on its ability to attract and retain suchindividuals. Shire has a strong focus on staff development at all levels.

Future prospectsThe existing product sales base is growing strongly, whilst theR&D pipeline has a significant number of projects post Phase II.

The merger with BioChem Pharma will expand both the productand project portfolios and bring together the complementary skillsof two of the most profitable specialty pharmaceutical companies.

The Shire management team is confident that these growthopportunities will continue to drive the business forward.

Notice of Annual General MeetingDue to the ongoing merger with BioChem Pharma, the Boardhas decided to prepare the notice convening the Company’sAGM separately from the Annual Report and Accounts. Thefinal notice will be sent to all shareholders in due course.

Dr James Cavanaugh Chairman

Chief Executive’s review


Shire focuses on specific functional areas of the business, such as“search and development” and marketing, these are identified as beingkey drivers for success.

Shire, as an international specialty pharmaceutical company,seeks to selectively in-license, develop and market therapies in key areas of strategic focus.

Shire’s business model has four levels of focus: business,functional, geographic, and therapeutic.

BusinessShire is an international specialty pharmaceutical company which has a particular interest in innovative therapies. The term “specialty” refers to products used by specialist doctors as opposed to those prescribed by primary care or generalpractitioners. Such a strategy allows the Company to target a limited but specific audience and to maximise sales through a comparatively small sales force. Shire’s strategy has resulted in an enviable revenue per employee figure for 2000 of $506,000(based on 1,023 employees at 31 December 2000 and totalrevenues of $517.6 million).

Our financial goals include high gross profit and operatingmargin targets, above industry average annual sales growth andinvestment in R&D above industry average.

FunctionalShire focuses on specific functional areas of the business thatare identified as being key drivers for success, such as “searchand development” and marketing.

In order to reduce financial and business risk, Shire does notundertake discovery research and consequently has no such in-house capability in contrast to most fully integrated multinationalpharmaceutical companies. Instead, we selectively in-licenseprojects, usually at the pre-clinical or early stages of clinicaldevelopment, thus achieving a balanced R&D portfolio with lowerrisk. The proposed merger with BioChem Pharma will add seven pre-Phase II projects to our portfolio, making a valuablecontribution in planning towards the long-term success of Shire.The merger will also strengthen our in-house early phasedevelopment capabilities.

Shire’s strategy also includes the identification of off-patentproducts that could be enhanced using the drug deliveryexpertise of Shire’s US-based drug delivery company, ShireLaboratories Inc. Shire seeks to obtain patent protection for drug delivery systems wherever possible.

Shire has demonstrated that it can grow organically but has also achieved growth through merger and acquisition (“M&A”)activities, adding products and projects to the portfolio. A keyresponsibility of Shire’s “search” function is to identify andnegotiate M&A opportunities.

Sales and marketing is another key functional area for Shire.The Company takes pride in its well-trained and highly-motivatedsales forces that have, once again, achieved above-industry salesgrowth this year.

Geography Shire’s aim is to market its products using its own sales forces in all eight major pharmaceutical markets of the world. In 1999we acquired a presence in four markets, France, Germany, Italyand Canada, to add to our existing territories of the US, the UKand the Republic of Ireland. In 2000 we entered Spain and we also set up a Representative Office in Singapore to manageShire’s presence in the Pacific Rim markets. The outstandingmarket is Japan, and it is our intention to build a presence thereby 2004, either by launching Shire’s own products, or through M&A activities.

This increased geographic coverage has already enhancedShire’s ability to attract potential licensors. The Company aims to capitalise on this in the future as well as on the widergeographic rights it holds for existing products and projects.

Therapeutic areasIn 2000, Shire continued to focus on four therapeutic areas:central nervous system disorders, metabolic diseases, oncologyand gastroenterology. The proposed merger with BioChemPharma will add anti-virals and vaccines to Shire’s therapeuticfocus. However, Shire’s overriding strategy of targeting specialtypharmaceutical markets remains unchanged.

Rolf Stahel Chief Executive


In clinical studies Adderall has beenshown to have beneficial effects onacademic performance and socialbehaviour.

Estimates indicate that between 3% and 5% of children in the USsuffer from ADHD.

Shire has made a longstanding contribution to the effectivetreatment of ADHD. Two products, Adderall and DextroStat, arealready available in the US and there are a further three projects in development.

Operating review: Central nervous system disorders


Attention deficit hyperactivitydisorderAttention deficit hyperactivity disorder(“ADHD”) has a profound effect on thelives of those affected and their families.It causes varying degrees of inattention,impulsiveness and hyperactivity, makingconcentration very difficult and causinglearning and behavioural problems inschool, together with general disruptionto normal family life.

Historically, treatment has focused onchildren, although increasingly it is beingrecognised that the disorder can continuethrough adolescence and into adulthood,albeit with slightly different symptoms.Estimates indicate that between 3% and5% of children in the US suffer from thiscondition. The adult population is less well defined, although there have beensuggestions that up to 50% of thesechildren will continue to have ADHD asadults1.

Shire has made a longstanding contributionto the effective treatment of ADHD. Twoproducts, Adderall and DextroStat, arealready available in the US for childrenwith this disorder, and there are a furtherthree projects in development; SLI 381,SPD 503 and SPD 420. Treatment for adultswith ADHD is likely to be considered as partof the development of these projects.

Adderall is a unique combination offour amphetamine salts and is currentlythe most widely used branded product in the US for the treatment of ADHD.In December, three additional strengths were launched to enable even greaterflexibility and precision of dosing.

Future development of Adderall is nowtargeted at a once-daily formulation.

SLI 381 (proposed Trade Mark AdderallXR). Pivotal efficacy studies for thisproduct were completed ahead of schedule,enabling a New Drug Application (“NDA”)to be submitted to the US Food and DrugAdministration (“FDA”) in September 2000.The first clinical results for SLI 381 werepresented in late October 2000. Theinvestigators concluded that the productdemonstrated significant efficacy as a treatment for ADHD.

DextroStat is a branded genericcontaining dextroamphetamine, and ismarketed by Shire in the US. Although notas widely used as Adderall, it still providesdoctors with a useful alternative therapy in the treatment of ADHD.

In addition to SLI 381, Shire has twofurther projects under development forADHD. SPD 503 is a non-scheduledcompound, which will not be subject to the more rigorous controls on its saleand supply, unlike Adderall and othermajor competitors currently on the marketfor ADHD. SPD 503 is in Phase I clinicaltrials and is being developed for all majormarkets.

SPD 420, an AMPAKINE®2 that is atPhase I for ADHD, was brought into the Shire portfolio in April 2000, under an option agreement with CortexPharmaceuticals, Inc. As with SPD 503,SPD 420 is not expected to be classifiedas a scheduled product. SPD 420 andSPD 503 are thought to be complementaryto the rest of the Shire ADHD portfolio,

rather than replacements, as it is likely that they will treat specific sub-sets of symptoms and may be used incombination therapy.

AnalgesiaPain can have a very debilitating effect onpeople and the quality of their lives. Shireis developing Dirame, an oral treatmentfor moderate to moderately severe painsuch as that associated with cancer,advanced osteoarthritis and post surgicalpain. Phase III clinical trials in osteoarthritisare in progress and a further study inacute pain is planned.

StrokeStroke is reported to be the third mostcommon cause of death in the westernworld and is one of the major causes of adult disability.

Shire’s project under development for the treatment of stroke, SPD 502, is at the first stage of clinical development.

Parkinson’s diseaseParkinson’s disease is a relatively commondisease with a higher incidence in theelderly. There is a gradual onset ofsymptoms, including progressive loss of movement and rigidity, posturalabnormality and tremor.

Shire has only recently initiated developmentinto this area, following the in-licensing of a dopamine D1 agonist programme in December 2000 from CeNeSPharmaceuticals plc. A deficit in theproduction of dopamine is one of thecauses of Parkinson’s disease. Currenttreatments aim to address this deficit but

1 IMS data 1999

2 AMPAKINE® is a trademark of Cortex


Alzheimer’s disease affects some12 million people worldwide.

Reminyl has been shown to have positive effects on memory,language and orientation, the ability to perform daily activities such as washing and dressing, and behavioural problems like anxiety and hallucinations.

Reminyl contains a compound called galantamine, which isextracted from daffodil bulbs.

have limitations in terms of efficacy andside effects. The use of dopamine D1

agonists is a new approach that isanticipated to have advantages over thesecurrent treatments. This project, which hasbeen designated SPD 451, is at a veryearly stage and formal preclinical studieshave not yet begun.

Alzheimer’s diseaseThere are 12 million people with Alzheimer’sdisease worldwide. Initially symptoms aremild, with gradual memory loss, confusionand disorientation. As the diseaseprogresses it affects intellect, changes the personality and will eventually lead to death.

Shire has developed Reminyl(galantamine), a new treatment forAlzheimer’s disease, with the JanssenResearch Foundation. During 2000,marketing approvals were gained withinthe EU, Norway, Iceland and Switzerlandand the product was launched in the UK.This launch was strengthened by therecommendation from the NationalInstitute for Clinical Excellence (NICE) that treatments for Alzheimer’s diseaseshould be made available as part of themanagement of the disease within the UK.In August 2000, the US FDA issued anapprovable letter. This was followed inFebruary 2001 by the full approval tomarket Reminyl.

A new five month study showing positiveresults for Reminyl on cognitive, functionaland behavioural symptoms was presentedfor the first time at the InternationalStockholm/Springfield symposium in April 2000.

EpilepsyEpileptic seizures may be caused by anyabnormal process that affects the vitalactivities of nerve cell function. The typeof epilepsy that most people are familiarwith is the generalised seizure that causesthe individual to fall to the floor and convulse,although there are many other types. Thecondition affects about 2.5 million people in the US. The degree to which they areaffected will vary but successful treatmentcan make a significant difference to thequality of their lives.

Shire has developed Carbatrol,an extended release formulation ofcarbamazepine, one of the most widelyused first line treatments for epilepsy.Carbatrol can be administered twice a day, an advantage over the immediaterelease tablets on the market whichrequire administration three or four times a day. An estimated 30–40% of patients donot follow their dosage regimes correctlyand many breakthrough seizures can beattributed to missed or forgotten tablets.A breakthrough seizure may cause theindividual to lose their driving licence andpossibly also their job. Carbatrol, thereforemay offer clinical benefits in complianceas well as improved patient convenience.

Shire has two projects in development forepilepsy. Both projects are currently in theearly stages of development, undergoingPhase I clinical trials. SPD 418 is a verysimilar development programme toCarbatrol, using Shire Laboratories Inc’s(“SLI”) drug delivery expertise to developan extended release formulation of anexisting anti-epileptic agent. The other

project, SPD 421, is a pro drug of valproicacid, which was in-licensed during 2000from D-Pharm Ltd. Despite the excellentefficacy profile of valproic acid, a varietyof adverse effects limit its usage. Thepreclinical data indicate that SPD 421 mayhave potential advantages in safety andefficacy over valproic acid.

Bipolar disorderPatients with bipolar disorder experiencealternating episodes of mania anddepression. Typical symptoms of maniainclude rapid speech, increased energyand activity, reduced need for sleep, poorjudgment, aggressiveness and possiblyhostility. Approximately 3.5 million peopleare affected by bipolar disorder in the US.

Carbamazepine is used by doctors to treat bipolar disorder, although it is notcurrently approved by the FDA for thetreatment of this condition. Based on thisanecdotal use, Shire is conducting clinicaltrials with Carbatrol (project SPD 417) with the intention of gaining approval forthis indication. This would be in addition to the existing indications for epilepsy (as described above) and trigeminalneuralgia. During the first half of 2000,SPD 417 progressed into Phase III, thelast phase of clinical development prior to an application for marketing approval.

Operating review: Central nervous system disorders


Development pipeline: Central nervous system disordersProduct Indication Pre-clinical Phase I Phase II Phase III Registration Marketed

Reminyl (galantamine) Alzheimer’s diseaseDirame AnalgesiaSLI 381 ADHDSPD 503 ADHDSPD 420 ADHDSPD 417 Bipolar disorderSPD 418 EpilepsySPD 421 EpilepsySPD 502 StrokeSPD 451 Parkinson’s disease


Development continues to gainmarketing approvals for anagrelide inthe EU and Japan.

Agrylin is the only product approvedfor the treatment of essentialthrombocythaemia in the US andCanada.

Anagrelide is intended to inhibit excessive platelet production and reduce the risk of potentially life threatening events such as gastrointestinal haemorrhaging, heart attack and stroke.

ThrombocythaemiaThrombocythaemia is a chronic disorderassociated with an increased andabnormal production of blood platelets.As platelets are involved in the bloodclotting mechanism, this can result in theinappropriate formation of blood clots or bleeding. The consequence for patientsis an increased risk of potentially lifethreatening events such as gastrointestinalhaemorrhaging, heart attack and stroke.

Anagrelide is successfully marketed in the US and Canada for the treatment ofthrombocythaemia, under the trademarkAgrylin, where it is the only approvedmedicine for this condition. It has alsobeen registered and is available throughdistributors in South Korea, Switzerland,Israel, South Africa and Australia.Development for other countries continueswith the preparation of the regulatorydossier for the EU and Phase I clinicaltrials in Japan.

This will provide up to ten years marketexclusivity for the product once it hasbeen approved for marketing in the EU.Orphan drug status has already beengranted to the product in the US andJapan.

Breast cancerApproximately 150,000 women die eachyear from breast cancer in Europe, Japanand the US. Women over the age of 50are most commonly affected, although it can affect all ages.

Fareston is available from Shire, in theUS, for the treatment of advanced breastcancer in post-menopausal women withunknown or hormone dependent tumours.It is known that hormones can stimulatethe growth of certain cancers. Farestoncompetes with estrogen for binding sitesin the tumour, blocking the growthstimulating effects of this hormone.

Prostate cancerProstate cancer is the most commondisease that charcteristically affects menin their old age. As the proportion ofelderly men in society increases, so willthe prevalence of prostate cancer.

SPD 424 is a subcutaneous implantcontaining a GnRH agonist underdevelopment by Shire for the hormonaltreatment of prostate cancer. It releasesthe therapeutic agent at a controlled andconstant rate over the period of a year.A Phase III study into the safety andefficacy of SPD 424 was initiated duringthe first half of 2000.

Oncology productFormulation work has started at SLI usingits expertise and proprietary technologiesto develop a patent protected, extendedrelease version of an existing product.This new project will be described as SPD 427.

Operating review: Oncology/haematology


Development pipeline: Oncology/haematologyProduct Indication Pre-clinical Phase I Phase II Phase III Registration Marketed

Agrylin ThrombocythaemiaSPD 424 Prostate cancerSPD 427 Oncology product


Ulcerative colitis is initially diagnosedmost often in young adults betweenthe ages of 15 and 25 years.

A 500mg Pentasa tablet is underdevelopment to aid patients whooften take doses of up to 4g per day.

Pentasa is available through Shire in the US. A second treatmentfor ulcerative colitis, Colazide, has been in-licensed by Shire formarketing in a number of European countries.


Ulcerative colitisUlcerative colitis (“UC”) is a chronic,relapsing disease in which part or all of the large intestine becomes inflamedand often ulcerated. In itself this is anunpleasant disease. However, a significantproportion of patients can also developcomplications such as malnutrition,strictures, perforations and an increasedrisk of cancer of the colon. Suchcomplications are responsible for most of the severe illness and fatalities arisingfrom UC. The peak incidence is in youngadults aged between 15 and 25 years,when it can cause significant disruption to their education and social lives.

Shire has two products for the treatment of UC. The first, Pentasa, is availablethrough Shire in the US. Although it is onlyapproved by the FDA for the treatment of UC, over 70% of its usage by doctors is in Crohn’s disease, another inflammatorybowel disease, where the inflammationand ulceration can be anywhere in thegastrointestinal tract, rather than confinedto the large intestine.

In May 2000, Shire in-licensed Colazide(balsalazide), a second treatment for UC,from Salix Pharmaceuticals Ltd, for anumber of European countries. The firstlaunch was in the UK in September 2000.Once the necessary regulatory approvalshave been gained, Shire intends to marketColazide in France and Germany, whilstother countries covered by the agreementwill be handled by distributors.

Gastrointestinal productIn November 2000, a furthergastrointestinal product was acquired for the Spanish market from SolvayPharma S.A.

Diabetic gastroparesisDiabetic gastroparesis is an unpleasantfeeling of fullness experienced by a number of people with diabetes. Thesepatients have frequent episodes of nauseaand vomiting, which affects food intakeand complicates insulin requirements. Thereis anecdotal evidence that metoclopramidecan improve the symptoms by bothincreasing gastric emptying and decreasingthe central nervous system recognition ofnausea and vomiting.

To treat this condition Shire has completedPhase II clinical trials with Emitasol, anintranasal formulation of metoclopramide.Metoclopramide is currently only availablein oral and injectable dosage forms.

Operating review: Gastroenterology

Development pipeline: GastroenterologyProduct Indication Pre-clinical Phase I Phase II Phase III Registration Marketed

Pentasa 500mg Ulcerat ive colitisBalsalazide Ulcerat ive colitisEmitasol Diabetic gastroparesis


Patients with kidney disease have tomaintain very strict diets to balancethe levels of nutrients in their body.One of these nutrients, phosphate,cannot be sufficiently reduced by dietalone and most patients will need totake ‘phosphate binding’ medicines.

There are an estimated 650,000patients worldwide who have end stage kidney disease.

Foznol is a phosphate binder designed to reduce blood phosphatelevels. Adequate long term control of phosphate is essential toreduce the risk of cardiovascular complications and renal bonedisease in patients with end stage kidney disease.

Foznol


Operating review: Metabolic diseases and other areas

HyperphosphataemiaAn abnormally high level of phosphate in the blood is described ashyperphosphataemia. It arises from theinability of damaged kidneys to eliminateany excess phosphate that enters thebody in food. Conventional dialysis and a phosphate restricted diet are generallyunable to reduce these phosphate levels sufficiently, without the addition ofphosphate binding agents. Adequatecontrol of blood phosphate is essential to reduce the risk of cardiovascularcomplications, which can be fatal, and tomanage secondary hyperparathyroidismand the many related disorders of boneand mineral metabolism resulting in renal bone disease.

Foznol, Shire’s treatment for this conditionis designed to be administered with food and act as a “phosphate binder”.Administration of Foznol with food resultsin the formation of lanthanum phosphate,a compound that cannot easily passthrough the gut wall. As a consequence,phosphate absorption from the diet isdecreased and the insoluble phosphatesalt is passed harmlessly through thebody rather than being absorbed into the blood stream. Calcium basedproducts are currently the most widelyavailable treatment for this condition,however they can cause hypercalcaemia.As Foznol does not contain calcium itenables the physician to separate thecontrol of calcium from phosphate andreduces the problem of hypercalcaemia.

The first regulatory submission for Foznolwas delivered to a reference member statein the EU Mutual Recognition Procedureon 14 March 2001. Clinical development is ongoing in the US and Japan, where it is at Phase III and Phase I respectively.

OsteoporosisOsteoporosis is a major cause of illnessand death in the elderly. It results in lowbone mass, leading to an increased risk of fracture, particularly of the spine, hipand wrist. One in three women and one in five men surviving to 80 years of age will suffer a hip fracture. With the increasein life expectancy the number of hipfractures is likely to double over the next50 years.

The Calcichew range of calcium andcalcium/vitamin D3 supplements is Shire’scontribution to this disease area. They are used as adjuncts to other therapiesand are of particular benefit in the elderly.Vitamin D controls calcium absorption and its deficiency may contribute toosteoporotic fractures. A high proportionof the elderly, particularly those living ininstitutions, are found to be vitamin Ddeficient. This may be because olderpeople have reduced exposure to sunlightand are less able to produce vitamin D.The Calcichew range is available throughShire in the UK and Ireland, and in various export markets via distributors and agents.

Postural hypotensionLow blood pressure on standing resultsfrom impaired cerebral circulation.It can cause dizziness, weakness andunconsciousness.

The Shire product ProAmatine is the only medication approved by the FDA forthe treatment of this condition. The sameproduct marketed by Shire in Canada hasthe trademark Amatine.

Drug delivery technologiesSLI is the only drug delivery company tohave patented and proven technologies inall three areas of oral controlled releasedrug delivery; microparticulate, matrix andosmotic systems. They have successfullydeveloped Carbatrol and SLI 381 (AdderallXR). Promising results have also beenseen with their reformulation ofsampatrilat, a potential treatment forhypertension and congestive heart failure.As it does not fall within Shire’s coretherapeutic and specialty strategy,discussions are being held with a view toout-licensing this project in all marketsexcluding Japan.

In addition to working on Shire’s projects,SLI has begun to market its technologiesto other companies. During 2000, thisresulted in four partnership agreementswhich cover the application of Shire’sadvanced drug delivery technologies to specific products, and range fromimproving oral bioavailability, to thedevelopment of oral controlled releaseformulations.

Development pipeline: Metabolic diseasesProduct Indication Pre-clinical Phase I Phase II Phase III Registration Marketed

Foznol Hyperphosphataemia

The following review should be read in conjunction with theCompany’s consolidated financial statements and related notesappearing elsewhere in this report.

Business combinations and divestitures The proposed merger with BioChem, announced in December2000, will bring together two of the most profitable and fastgrowing specialty pharmaceutical companies. The combinedgroup, which will continue to focus on innovation within its search,development and marketing strategy, has an exciting and broadrange of growth drivers for the future.

Results of operationsThe Group recorded income before tax and APB 25 charge of $138.1 million (1999: $68.2 million) and diluted earnings perordinary share pre APB 25 charge of 38 cents or 113 cents perADS, up 81% (1999: 21 cents or 64 cents per ADS).

Total revenues For the year ended 31 December 2000, total revenue increasedby 29% to $517.6 million. Product sales in the US continue torepresent a significant percentage of worldwide sales, 83% in 2000 comparable with 81% in 1999. The Company managesand controls the business on geographic lines. The threereportable segments are the US, Europe and the rest of theworld. Additional information regarding segments is provided in note 20 to the consolidated financial statements.

Product sales For the year ended 31 December 2000, total product salesincreased by 29% to $498.1 million, compared with $385.2 millionin the prior year. Of the Company’s total product sales, 45%related to Adderall and DextroStat, the Company’s productsmarketed in the US for the treatment of ADHD. On a combinedbasis, these products increased their share of the total US ADHDprescriptions written from 30.5% in December 1999 to 35.9% in December 2000. Agrylin, which is the only product approvedfor the treatment of essential thrombocythaemia in the US andCanada, increased its revenue to $57.7 million in 2000 from $32.6 million in 1999, prescriptions increased 38% in 2000 over 1999.

Cost of sales and operating expensesHigher margin products such as Adderall and Agrylin havecontinued to grow at a faster rate than lower margin products,contributing to a higher proportion of sales in 2000 over thepreceding year. Cost of sales decreased by 6% to $88.2 million(1999: $93.5 million). Gross margin on product sales increasedfrom 76% in 1999 to 82% in 2000.

Research and development expenditure increased from$77.5 million in 1999 to $106.1 million in 2000, representing an overall increase of 37%. Shire incurred higher developmentcosts due to having progressed a significant proportion ofprojects to Phase II or later.

Selling, general and administrative expenses, pre depreciationand amortisation excluding the effects of an APB 25 charge of$21.9 million (1999: $11.9 million), increased by $17.9 millionfrom $130.9 million in 1999 to $148.7 million in 2000. As apercentage of product sales, selling, general and administrativeexpenses fell by 4% to 30%.

Interest income and expense In the year ended 31 December 2000 the Company receivedinterest income of $6.2 million compared with $7.3 million in 1999.Interest expense increased from $9.7 million to $12.2 million

reflecting an increase in underlying rates of interest ofapproximately 1% and a full year’s interest charge on theconvertible loan notes.

Income taxesFor the year ended 31 December 2000, income taxes increased$23.9 million from $16.1 million to $40.0 million. The Company’seffective tax rate in 2000 was 29% (1999: 24%). The Companyhas recorded net deferred tax assets of approximately$33.3 million.

Liquidity and capital resources The Company has financed its operations since inception throughprivate and public offerings of equity securities, the issuance of loan notes, collaborative licensing and development fees,product sales and investment income. The Company’s fundingrequirements depend on a number of factors, including theCompany’s product development programmes, business andproduct acquisitions, the level of resources required for theexpansion of marketing capabilities as the product baseexpands, increased investment in accounts receivable andinventory which may arise as sales levels increase, competitiveand technological developments, the timing and cost ofobtaining required regulatory approvals for new products, andthe continuing revenues generated from sales of key products.Net cash inflow from operating activities of $60.8 million includedone-time cash outflows in respect of the Roberts merger of$83.6 million. Cash inflow from financing activities, excludingpayments on long-term debt, of $54.1 million arose primarily from the exercise of employee stock options. Other minor cashinflows totalled $0.9 million. These combined cash flows fundedthe purchase of several new products ($43.4 million) andinvestment in fixed assets of $16.4 million, including the Group’snew UK-based head office facility in Basingstoke, Hampshire.

Cash, cash equivalents and marketable securities and othercurrent assets at 31 December 2000 amounted toUS$186.3 million (1999: US$138.4 million). After deduction ofborrowings this gives a net cash position of US$58.5 million.

Debt In 1998, Roberts acquired the product rights to Pentasa. Themajority of the purchase price was financed through a creditagreement between Roberts, Credit Suisse First Boston (“CSFB”),previously known as DLJ Capital Funding Inc, and various otherlenders. Under this credit agreement, the acquisition of Robertsby Shire constituted a change of control, which triggered theacceleration of the repayment of the principal amounts outstanding.On 19 November 1999 Roberts, Shire’s US subsidiaries and Shire entered into an agreement with CSFB to replace the creditagreement with a $250.0 million credit facility consisting ofa $125.0 million revolving credit facility of which none has beendrawn on, and a $125.0 million five-year term loan facility.

Concentration of credit risk Financial instruments that potentially expose the Company toconcentrations of credit risk consist primarily of short-term cash investments and trade accounts receivable. As revenuesare mainly derived from agreements with major pharmaceuticalcompanies and relationships with drug distributors, and suchclients typically have significant cash resources, any credit riskassociated with these transactions is considered minimal. TheCompany operates credit evaluation procedures. Excess cash is invested in short-term money market instruments, includingbank and building society term deposits and commercial paperfrom a variety of companies with strong credit ratings. Theseinvestments typically bear minimal risk.

Financial review


Market risk Shire’s principal treasury operations are managed by the Group’streasury function based in the UK in accordance with the Group’streasury policies and procedures which are approved by Shire’sBoard. As a matter of policy, Shire does not undertake speculativetransactions that would increase its currency or interest rateexposure. The Company is subject to market risk exposure in the following areas:

Interest rate market risk The Company has cash and cash equivalents on which interest income is earned at variable rates. The financing andcash management requirements of the operating subsidiaries are transacted within the Group’s treasury function, whereappropriate, in order to improve the return on liquid assets,manage any currency exposure on non-sterling-denominateddeposits and maintain internal controls. The applicable interestrate on the Company’s credit facility with CSFB ranges between0.5% and 1.5% over the prime rate of CSFB or the Federal FundsRate plus 0.5% or between 1.5% and 2.5% over the LondonInterbank Overnight rate, in each case depending on Shire’scredit rating. The facility is secured by all material propertyowned by Shire and its subsidiaries and the capital stock ofShire’s subsidiaries. If Shire’s credit rating reaches specifiedlevels, the facility will not be secured. The facility containscustomary covenants and additional maintenance tests thatrequire Shire to maintain a minimum net worth, a specifiedleverage ratio and a specified coverage ratio. At 31 December2000 the Company satisfied the aforementioned covenants andmaintenance tests.

Foreign exchange market risk A number of subsidiary operations are located outside the UK. As such, the consolidated financial results are subject tofluctuations in exchange rates, particularly between the US dollarand Canadian dollar against the pound sterling. The financialstatements of foreign entities are translated using the accountingpolicies described in note 1 of the consolidated financialstatements. The exposure to foreign exchange market risk ismanaged by the Group’s treasury function, using forecastsprovided by the operating units. Derivative instruments in the form of average rate options are used to hedge Shire’s currencyexposures. The premium paid for the options is amortised overthe hedging period. There were no derivatives outstanding at31 December 2000 or 1999.

Inflation Although at reduced levels in recent years, inflation continues toapply upward pressure on the cost of goods and services usedby the Company. However, management believes that the neteffect of inflation on the Company’s operations has been minimalduring the past two years.

Euro conversion On 1 January 1999, the European Economic and Monetary Union(the “EMU”) introduced the euro as the official currency of the11 participating member countries. On that date, the currencyexchange rates of the participating countries were fixed againstthe euro. There is a three-year transition to the euro, and at theend of 2001 the currency will come into circulation and nationalcurrencies will be withdrawn by July 2002. The UK did notparticipate in the EMU at the commencement of the third stageon 1 January 1999 and it is uncertain whether or on what termsthe UK would be permitted to join at a later date. There can beno prediction as to whether the UK will participate in the EMU or as to the rate at which the pound sterling would be convertedinto the euro. Furthermore, there can be no prediction as to thelikely impact on the US dollar/sterling exchange rate of adecision by the UK to participate in the EMU. It is anticipated that the pricing of goods and services will be more transparentthrough the use of a single currency within the participatingmember states. Competition is likely to increase with the greaterprice transparency and removal of exchange rate risk. In thelonger term more general price convergence is likely, assumingthe EMU leads to greater harmonisation of healthcare policiesacross the participating member states. Shire has sales andmarketing operations in the Republic of Ireland, France, Germany,Spain and Italy and therefore there may be some impact on theCompany’s business and competitive position as a result ofthe increased price transparency. The Company has reviewed its financial and operating systems and is satisfied that theintroduction of the euro will not cause any disruption to thebusiness, and that the systems are in place to receive and makepayments in euros. Shire will continue to monitor the UK’s stancein relation to participation in the euro and assess the impact of any significant changes in policy.

Angus Russell Group Finance Director


For the year ended 31 December2000, total revenue increased by 29% to $517.6 million.

Dr James Cavanaugh (63)Chairman and non-executive Director

Joined the Board on 24 March 1997and was appointed as non-executiveChairman with effect from May 1999.Dr Cavanaugh is the President ofHealthCare Ventures LLC. He wasPresident of SmithKline & FrenchLaboratories, the US pharmaceuticaldivision of SmithKline BeechamCorporation.

Rolf Stahel (56)Chief Executive

Joined the Group in March 1994 asChief Executive from Wellcome plcwhere he worked for 27 years.From April 1990 until February 1994,he served as Director of GroupMarketing reporting to the ChiefExecutive. A business studiesgraduate of KSL Lucerne,Switzerland, he attended the 97thAdvanced Managers Program atHarvard Business School.

Angus Russell (44)Group Finance Director

Joined Shire in December 1999 asGroup Finance Director. Previously he worked for ICI, Zeneca andAstraZeneca for a total of 19 years.Mr Russell is a chartered accountant,having qualified with Coopers &Lybrand, and is a member of theAssociation of Corporate Treasurers.His last position was Vice PresidentCorporate Finance at AstraZeneca PLC.

Dr Wilson Totten (45)Group R&D Director

Has served as Group R&D Directorsince January 1998. Dr Totten is amedical doctor. His last position wasVice President of Clinical Research &Development with Astra Charnwood,where he served from 1995 to 1997.

Dr Bernard Canavan (65)Non-executive Director(Chairman Audit Committee)

Joined the Board as a non-executivedirector in March 1999. Dr Canavanis a medical doctor. He wasemployed by American HomeProducts for over 25 years until heretired in January 1994. He wasPresident of that corporation from1990 to 1994.

Ronald Nordmann (59)Non-executive Director

Joined as a non-executive director in December 1999 and has been a financial analyst in healthcareequities since 1971. From September1994 until January 2000, he was a portfolio manager and partner atDeerfield Management.

Dr Zola Horovitz (66)Non-executive Director

Has served as a non-executivedirector since December 1999.Dr Horovitz has been self-employedas a consultant in the biotechnologyand pharmaceutical industries since1994. Previously he held variouspositions at Squibb Corporation andits successor corporation, Bristol-Myers Squibb & Co, including that of Vice President, BusinessDevelopment and Planning.

Dr Barry Price (57)Senior non-executive Director(Chairman Remuneration Committee)

Joined the Board on 24 January 1996having spent 28 years with Glaxoholding a succession of keyexecutive positions with Glaxo GroupResearch. He is Chairman ofAntisoma plc. Dr Price is Chairman of the Remuneration Committee.

Board of Directors and Executive Committee


Joseph Smith (62)Non-executive Director

Has served as a non-executivedirector since December 1999. From1989 to 1997, Mr Smith served invarious positions at Warner-LambertCompany, including President ofParke-Davis Pharmaceuticals andPresident of the Shaving ProductsDivision (Schick and WilkinsonSword).

John Spitznagel (59)Non-executive Director

Joined the Board in December 1999following service as President andChief Executive Officer of Robertssince September 1997. He wasExecutive Officer of Roberts fromSeptember 1997. He was ExecutiveVice President Worldwide Sales andMarketing from March 1996 toSeptember 1997, having served asPresident of Reed and CarnickPharmaceuticals from September1990 until July 1995.

William Nuerge (48)*President and Chief Executive, SRI

Joined SRI in 1994 as ChiefOperating Officer. He currently holdsthe positions of President and ChiefExecutive Officer of SRI. Prior tojoining SRI in 1994 he served asGeneral Manager and Vice Presidentof Operations for LafayettePharmaceuticals, Inc., from 1988.

Jack Khattar (39)*President and Chief Executive, SLI

Joined Shire as President and CEO ofShire Laboratories Inc. in May 1999.Mr Khattar came to Shire from CIMA,a drug delivery company, where helast served as an Executive Officerand the Chairman of the OperatingManagement Committee with afunctional role as Vice President of Business Development.

Jeff Devlin (48)*Director Corporate Affairs

Joined Shire in January 2000 asDirector of Corporate Affairs. Prior to joining Shire he was a Partner atErnst & Young and also a member ofits Global Executive Steering Groupfor Life Sciences. He was previouslywith Arthur D Little, ManagementConsultancy, where he was aEuropean Director in its Healthcareand Pharmaceuticals practice.

Richard de Souza (48)*Director International

Joined Shire in September 2000 asDirector International. Prior to this heworked as President, PharmaceuticalsEurope and Asia in Warner Lambert/Parke-Davis. He was previously withSmithKline Beecham for 22 years,where he was Chairman,Pharmaceuticals Europe.

Neil Harris (46)*Company Secretary

A barrister with 14 years’ experiencein the pharmaceutical industry.He joined Shire in November 1995from the group legal department ofWellcome plc, where he had beenSenior Legal Advisor following itsintegration with Glaxo plc.


Executive Committee

Rolf StahelDr Wilson TottenAngus RussellWilliam NuergeJack KhattarNeil HarrisRichard de SouzaJeff Devlin* Member of the Executive Committee but not the Board

Year ended 31 December

1996 1997 1998 1999 2000$000 $000 $000 $000 $000

US GAAPRevenues 127,772 191,554 308,984 401,532 517,608Operating expenses (183,086) (277,395) (285,748) (477,600) (395,344)

(Loss)/income from operations (55,314) (85,841) 23,236 (76,068) 122,264Interest and other, net 3,236 3,109 327 (2,868) (6,076)

(Loss)/income from continuing operations before taxes (52,078) (82,732) 23,563 (78,936) 116,188Income taxes 15,815 (1,420) (2,991) (16,062) (40,017)

(Loss)/income from continuing operations (36,263) (84,152) 20,572 (94,998) 76,171Income from discontinued operations, net of tax 556 – – – –

Net (loss)/income (35,707) (84,152) 20,572 (94,998) 76,171(Loss)/income from continuing operations per share – basic ($) (0.30) (0.45) 0.09 (0.39) 0.30(Loss)/income from continuing operations per share – diluted ($) (0.30) (0.45) 0.08 (0.39) 0.29Net (loss)/income per share – basic ($) (0.30) (0.45) 0.09 (0.39) 0.30Net (loss)/income per share – diluted ($) (0.30) (0.45) 0.08 (0.39) 0.29Weighted average number of shares outstanding – basic 118,766 185,153 234,045 244,699 252,497Weighted average number of shares outstanding – diluted 118,766 185,153 242,806 244,699 260,345

Cash and cash equivalents 95,056 59,868 52,973 54,082 46,598Total assets 435,338 664,930 873,605 887,763 1,004,732Long-term debt 10,639 10,327 126,774 126,314 126,364Shareholders’ equity 361,365 565,920 663,314 587,284 752,759

Five-year review


The Company has applied the UK Principles of Good Governance (see pages 27 to 29) relating to directors’ remuneration and hascomplied with the provisions of the UK Code of Best Practice as set out below and as disclosed in the corporate governancestatements. This information is included in this annual review, as the Company believes it is useful for all readers.

The Board has considered whether to invite the AGM to approve the remuneration policy and has decided that in the circumstances it is not appropriate to do so.

The Remuneration CommitteeThe Remuneration Committee (the “Committee”) comprises four non-executive directors; Dr James Cavanaugh, Dr Bernard Canavan,Mr Joseph Smith and is chaired by Dr Barry Price. The Chief Executive attends meetings of the Committee at its invitation.

Remuneration policyThe Committee’s policy on the remuneration of executive directors is directed at the retention and motivation of executive directors byensuring that their remuneration is competitive with companies within the sector of emerging pharmaceutical companies, taking intoaccount the interests of shareholders.

The Committee meets regularly and acts within agreed terms of reference. In developing remuneration policy and fixing remuneration,consideration is given to salary data of directors of comparable companies of a similar size in the industry generally and, morespecifically, in the specialty pharmaceuticals sector. The Chief Executive also advises the Committee on other executive remunerationand on individual performance. External agencies are also used to advise on levels of remuneration as appropriate. No director isinvolved in determining his own remuneration. The procedures and criteria for determining remuneration policy are regularly reviewedby the Committee.

a) Annual bonusesThe annual bonuses payable to executive directors are established on the basis of objectives for the Group and personal objectives.They include measurable and quantitative criteria related to financial performance. For the year ended 31 December 2000 theseincluded revenue and earnings targets. The maximum annual bonus for each executive director for the year ended 31 December 2000was 55% of salary in respect of Mr Rolf Stahel, 50% in respect of Mr Angus Russell and 50% in respect of Dr Wilson Totten.

b) Share optionsDetails of the share option schemes are set out below and in note 24 to the financial statements. Except as mentioned below, none ofthe executive directors who served during the year was granted additional options under any of the Company’s share option schemesin the year ended 31 December 2000.

Share options under the Sharesave Scheme (see note iv on page 26) are offered at a discount as permitted by paragraph 13.31 of the listing rules of the United Kingdom listing authority. Share options are not otherwise offered at a discount.

The following share options were granted to executive directors during the year:Number of Exercise price

Executive director Share option scheme Date of grant ordinary shares £

R Stahel Executive Scheme (Part B) 01.03.00 54,189 10.2752000 Executive Scheme 03.08.00 34,241 12.80

Dr J W Totten Executive Scheme (Part B) 01.03.00 16,995 10.2752000 Executive Scheme 03.08.00 63,242 12.80

A C Russell Executive Scheme (Part B) 01.03.00 6,422 10.275

Share options are granted to executive directors and senior executives as an incentive. The grant of options is wholly discretionary.In granting share options, the Committee takes into account the advice and recommendations of the Chief Executive and individualsalary levels and positions within the Group.

c) Retirement benefitsThe Company contributes 10% of salary to the personal pension plans of the executive directors.

d) Fees for non-executive directorsThe remuneration of each of the non-executive directors was determined by the Board.

e) Long Term Incentive Plani) StructureThe Long Term Incentive Plan (the “Plan”) was adopted at the Company’s Annual General Meeting on 30 June 1998. Under the Plan,the Company may at any time, with the approval of the Committee, grant, or request that trustees grant, an award to any full-timeemployee of any member of the Group.

ii) EligibilityAn award may be made to any full-time employee (including a director who is also such an employee) of a member of the Group onthe terms set out in the Plan and upon such other terms as the Board (or a committee appointed by the Board) may specify, providedthat no award may be granted to an employee who is within two years of his/her contractual retirement age.

Remuneration report


Directors were granted an award under the Plan (as a “Conditional Allocation”, as defined in the Plan) in respect of the total number of ordinary shares in the Company, upon the terms set out in the Plan, as follows:

Value of Total Earliest dateaward at number of on which

Date of grant date ordinary award canaward £000 shares be made

R Stahel 01.03.00 360 35,785 28.02.04Dr J W Totten 01.03.00 200 19,881 28.02.04A C Russell 01.03.00 18 1,789 28.02.04

f) Service contractsOf the directors proposed for election and re-election Dr Totten’s and Mr Russell’s service contracts are terminable on 12 months’notice. No director has a notice period of more than 12 months. Non-executive directors have been appointed for fixed two-year termswhich will not continue automatically.

g) Related party transactionsMr 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 Pharmaceutical Corporation, to terminate hisemployment with Roberts Pharmaceutical Corporation under his service agreement that the Company will cause RobertsPharmaceutical Corporation 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 RobertsPharmaceutical Corporation, unless Mr Spitznagel terminates the consultancy agreement prior to the end of the 42nd monthupon 30 days’ notice; 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 anoffice holder, $250,000 per annum to comply with certain restrictive covenants contained therein and $150,000 per annum for tax,financial and estate planning advice, life insurance and health insurance.

Directors’ emoluments Total TotalYear to Year to

Directors’ 31 December 31 DecemberSalary Bonus fees Benefits Pension 2000 1999

Executive directors Notes $000 $000 $000 $000 $000 $000 $000

R Stahel (i) 575 316 – 23 57 971 749A C Russell 272 151 – 21 27 471 19S A Stamp – – – – – – 406Dr J W Totten 303 136 – 3 30 472 360

1,150 603 – 47 114 1,914 1,534

Non-executive directors

Dr J H Cavanaugh – – 54 – – 54 –Dr H Simon – – – – – – 20Dr B J Price – – 30 – – 30 32Dr B Canavan – – 30 – – 30 26Dr Z Horovitz – – 31 – – 31 1R Nordmann – – 31 – – 31 1J Smith – – 31 – – 31 1J Spitznagel (ii) – – 31 – – 31 1Dr R Vukovich (iii) – – – – – – 1

– – 238 – – 238 83

Total 1,150 603 238 47 114 2,152 1,617

Details of exercise of share options are disclosed on pages 23 and 24.

Notesi) Highest-paid director in 1999.ii) Please see notes above relating to Mr Spitznagel’s consultancy agreement with the Company. Including gains on exercise of share options, Mr Spitznagel was the highest-paid director

for 2000.iii) Dr Vukovich resigned from the Board on 14 February 2000 and waived a directors fee of £20,000 per annum (approximately $30,000) pro rata £2,500 (approximately $3,725) due to him

for the period to 14 February 2000.

Remuneration report


Directors’ shareholdings*Directors who held office at the end of the year had interests in the share capital of the Company as follows:

Number of ordinary shares of 5 pence each

31 December 31 DecemberNotes 2000 1999

Dr J H Cavanaugh (i) 8,806,368 12,244,810R Stahel 13,827 13,827A C Russell – –Dr J W Totten – –Dr B Price 31,350 31,350Dr B Canavan (ii) 3,000 –Dr Z Horovitz (iii) 3,128 3,128R Nordmann (iv) 46,968 3,128J Smith 125,120 125,120J Spitznagel (v) 57,624 57,624

*All interests are beneficial unless otherwise stated.Notesi) Dr Cavanaugh is the President of HealthCare Ventures LLC, which is the management company for a number 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 2000HealthCare 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 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 ordinaryshares to Dr Cavanaugh personally as beneficial owner.

ii) On 10 March 2000 Dr Canavan purchased 1,000 American Depositary Receipts (“ADR”s), the equivalent of 3,000 ordinary shares, for $65.56 per ADR.iii) On 8 March 2000 Dr Horovitz exercised 31,280 share options under the Roberts Plan (as defined below) at $3.68 per share and on the same day exercised a further 31,280 share

options at $3.64 per share. On 9 March 2000 all of the 62,560 resulting shares were sold realising gross proceeds of £743,213.iv) On 9 and 10 March 2000 Mr Nordmann exercised 93,840 share options under the Roberts Plan at $6.02 per 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 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 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 Company 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 Plan at a total exercise price of $1,595,917.80.On 31 October 2000 Mr Spitznagel exercised 78,200 share options under the Roberts Plan at a total exercise price of $528,632 and 177,290 share options under the Roberts Plan at a totalexercise 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 shareoptions under the Roberts 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.

Directors’ share optionsDirectors and employees have been granted options over ordinary shares under the Shire Pharmaceuticals Group plc 2000 ExecutiveShare Option Scheme (“2000 Executive Scheme”), the Shire Holdings Limited Share Option Scheme (“SHL Scheme”), the ImperialPharmaceutical Services Limited Employee Share Option Scheme (Number One) (“SPC Scheme”), the Pharmavene 1991 Stock OptionPlan (“SLI Plan”), the Shire Pharmaceuticals Executive Share Option Scheme (Parts A and B) (“Executive Scheme”), the ShirePharmaceuticals Sharesave Scheme (“Sharesave Scheme”), the Shire Pharmaceuticals Group plc Employee Stock Purchase Plan(“Stock Purchase Plan”), the Richwood 1993 and 1995 Stock Option Plans (‘SRI Plan’) and the Roberts Stock Option Plan (“Roberts Plan”).

On 28 February 2000, the Remuneration Committee of the Board exercised its powers to amend the terms of the Executive ShareOption Scheme so as to include a cliff vesting provision.

Number of ordinary shares Exercise dates

At At Exercise1 January 31 December price

Notes 2000 Granted Exercised Lapsed 2000 £ Earliest Latest

R Stahel SHL (i) 89,840 – – – 89,840 1.00 24.11.96 23.11.0289,840 – – – 89,840 1.00 24.11.97 23.11.0289,840 – – – 89,840 1.00 24.11.98 23.11.0290,160 – – – 90,160 1.00 24.01.97 23.01.0390,160 – – – 90,160 1.00 24.01.98 23.01.0390,160 – – 90,160 1.00 24.01.99 23.01.03

Executive Scheme A (iii) 13,761 – – – 13,761 2.18 15.02.99 14.02.06Executive Scheme B (iii) 329,095 – – – 329,095 1.75 15.02.99 14.02.03

81,918 – – – 81,918 3.385 09.02.01 08.02.05– 54,189 – – 54,189 10.275 01.03.03 28.02.07

2000 Executive Scheme (ix) – 34,241 – – 34,241 12.80 03.08.03 02.08.07Sharesave Scheme (iv) 9,857 – – 9,857 1.75 01.04.01 30.09.01

974,631 88,430 – – 1,063,061

Dr J W Totten Executive Scheme A (iii) 8,862 – – – 8,862 3.39 09.02.01 08.02.08Executive Scheme B (iii) 141,138 – – – 141,138 3.385 09.02.01 08.02.05

25,000 – – – 25,000 4.705 12.05.02 11.05.06– 16,995 – – 16,995 10.275 01.03.03 28.02.07

Sharesave Scheme (iv) 1,139 – – – 1,139 8.56 01.06.03 30.11.032000 Executive Scheme (ix) – 63,242 – – 63,242 12.80 03.08.03 02.08.07

176,139 80,237 – – 256,376


Number of ordinary shares Exercise dates

At At Exercise1 January 31 December price

Notes 2000 Granted Exercised Lapsed 2000 £ Earliest Latest

A C Russell Executive Scheme A (iii) 4,181 – – – 4,181 7.175 13.12.02 12.12.09Executive Scheme B (iii) 45,819 – – – 45,819 7.175 13.12.02 12.12.06

– 6,422 – – 6,422 10.275 01.03.03 28.02.07Sharesave Scheme (iv) 1,971 – – – 1,971 8.56 01.06.05 30.11.05

51,971 6,422 – – 58,393

Dr Z Horovitz Roberts Plan (viii) 31,280 – (31,280) – 3.64 – 23.10.0231,280 – (31,280) – 3.68 – 16.12.0231,280 – – 31,280 3.38 – 13.01.0411,730 – – 11,730 5.60 – 10.06.0431,280 – – 31,280 5.24 – 01.09.0431,280 – – 31,280 6.00 – 21.01.0515,640 – – 15,640 6.02 – 27.05.05

183,770 – (62,560) – 121,210

R Nordmann Roberts Plan (viii) 93,840 – (93,840) – – 6.02 – 27.05.05

J Smith Roberts Plan (viii) 31,280 – – – 31,280 5.24 – 01.09.0531,280 – – – 31,280 6.00 – 21.01.0515,640 – – – 15,640 6.02 – 27.05.05

78,200 – – – 78,200 –

J Spitznagel Roberts Plan (viii) 93,840 – (93,840) – – 3.64 – 04.03.0278,200 – (78,200) – – 3.68 – 16.12.02

109,480 – (109,480) – – 4.08 – 10.09.0078,200 – (78,200) – – 4.38 – 10.04.04

164,220 – (164,220) – – 5.60 – 10.06.04312,800 – (312,800) – – 5.24 – 01.09.0478,200 – (78,200) – – 6.76 – 11.12.04

375,360 – (375,360) – – 6.02 – 27.05.05

1,290,300 – (1,290,300) – –

The middle market price of Share Pharmaceuticals Group plc’s ordinary shares was £10.55 as at 31 December 2000. The high and low mid-market prices during the year to 31 December 2000 were £14.92 and £5.98 respectively.

Except as disclosed above, no director who served during the year under review has been granted or exercised any options duringthe period between 1 January 2000 and 17 April 2001.

Remuneration report


In addition to those options granted to executive directors disclosed above, employees and former employees of the Group have beengranted options over the following ordinary shares:

Number of Exerciseordinary price Exercise dates

Scheme Notes shares £ Earliest Latest

SHL Scheme (i) 9,680 1.00 01.07.97 30.06.01290,480 1.00 24.11.98 23.11.02272,000 1.00 24.01.99 23.01.03

SPC Scheme (ii) 14,400 0.31 – 30.06.0133,600 0.31 – 16.08.02

Executive Scheme A (iii) 59,283 2.18 15.02.99 14.02.0615,000 1.90 30.09.99 29.09.067,620 2.69 26.08.00 25.08.07

154,195 3.385 09.02.01 08.02.088,275 3.625 13.08.01 12.08.08

27,194 4.17 11.12.01 10.12.0817,765 4.735 15.03.02 14.03.0910,618 5.65 26.07.02 25.07.095,623 5.335 23.08.02 22.08.094,181 7.175 13.12.02 12.12.09

132,788 10.275 01.03.03 28.02.1021,426 10.275 27.04.03 26.04.1013,007 10.275 06.06.03 05.06.109,612 12.48 03.08.03 02.08.107,239 12.43 19.09.03 18.09.101,500 12.69 27.11.03 26.11.10

Executive Scheme B (iii) 526,287 1.75 15.02.99 14.02.0310,000 1.90 30.09.99 29.09.03

153,313 2.185 25.03.00 24.03.04370,475 2.69 26.08.00 25.08.0410,000 2.60 31.10.00 30.10.04

970,331 3.385 09.02.01 08.02.05631,725 3.625 13.08.01 12.08.0517,806 4.17 11.12.01 10.12.0540,000 4.26 12.01.02 11.01.062,000 4.20 10.03.02 09.03.06

932,735 4.735 15.03.02 14.03.06185,000 4.705 12.05.02 11.05.0619,382 5.65 26.07.02 25.07.0614,377 5.335 23.08.02 22.08.0645,819 7.175 13.12.02 12.12.06

1,211,791 10.275 01.03.03 28.02.0735,000 10.275 25.04.03 24.04.07

194,824 10.275 27.04.03 26.04.0775,743 10.275 06.06.03 05.06.0795,888 12.48 03.08.03 02.08.0734,261 12.43 19.09.03 18.09.078,000 12.69 27.11.03 26.11.07

Sharesave Scheme (iv) 71,752 1.75 01.04.01 30.09.0135,842 1.54 01.12.01 31.05.0216,463 2.20 01.11.02 30.04.0315,065 2.20 01.11.00 30.04.0145,802 8.56 01.06.03 30.11.0326,075 8.56 01.06.03 30.11.05


Number of Exerciseordinary price Exercise dates

Scheme Notes shares £ Earliest Latest

SLI Plan (v) 2,265 1.2955 – 10.04.046,421 1.2955 – 21.05.05

986 1.2955 – 11.07.051,098 1.2969 – 22.01.06

10,581 1.2955 – 05.03.06939 1.2953 – 13.05.06

1,243 1.2955 – 07.08.062,508 1.7270 – 06.11.06

24,253 1.7274 – 10.12.06

SRI Plan (vi) 388,852 0.45 – 13.03.01148,899 1.2345 – 12.03.02209,316 1.64 – 12.03.02

Roberts Plan (vii) 11,254 3.22 – 31.07.031,564 3.277 – 02.12.03

130,537 3.28 – 02.12.0331,280 3.38 – 12.01.044,692 3.637 – 30.11.01

47,232 3.64 – 30.11.0179,895 3.68 – 15.12.02

938 4.24 – 21.01.03382,249 5.24 – 31.08.0411,730 5.60 – 09.06.042,972 5.88 – 16.05.05

62,560 6.00 – 20.01.05196,448 6.02 – 26.05.05

1,564 6.754 – 10.12.0474,754 6.76 – 10.12.048,140 7.00 – 23.03.05

2000 Executive Scheme (viii) 2,417 12.41 19.09.03 18.09.10320,248 12.80 03.08.03 02.08.07157,583 12.41 19.09.03 18.09.10

4,000 13.20 27.11.03 26.11.07

Notesi) These options have been granted over shares in Shire Holdings Limited, a previous holding company of the Group. Exercise of these options results in the optionholder receiving

ordinary shares in the Company as set out above.ii) These options have been granted over shares in SPC, a company acquired by the Group in September 1995. Exercise of these options results in the optionholder receiving ordinary

shares in the Company as set out above. As a result of the acquisition of SPC in September 1995, and in accordance with the terms of the SPC Scheme, all options granted under theSPC Scheme became immediately capable of exercise.

iii) Options granted under the Executive Scheme are subject to performance criteria and cannot be exercised in full, unless the Company’s share price increases at a compound rate of atleast 20.5% per annum over a minimum three-year measurement period. If the Company’s share price increases at a compound rate of at least 14.5% per annum over a minimum three-year measurement period, 60% of the options may be exercised. If these conditions are not met after the initial three years, they are thereafter tested quarterly by reference to shareprice growth over the extended period. If the share price does not meet these conditions at any time, none of the options will become exercisable.

iv) Options granted under the Sharesave Scheme are granted with an exercise price equal to 80% of the mid-market price on the day before invitations are issued to employees. Followingchanges in the Inland Revenue rules governing such schemes, employees may now enter into three or five-year savings contracts.

v) These options have been granted over shares in SLI, formerly Pharmavene, Inc., the company acquired by the Group on 23 March 1997. Exercise of these options results in theoptionholder receiving ordinary shares in the Company as set out above. As a result of the acquisition of SLI, and in accordance with the terms of the original share option plan,all options granted under that plan became immediately capable of exercise.

vi) These options have been granted over shares in SRI, formerly Richwood Pharmaceutical Company, Inc., the company acquired by the Group on 22 August 1997. Exercise of theseoptions results in the optionholder receiving ordinary shares in the Company as set out above. As a result of the acquisition of SRI, and in accordance with the terms of the original shareoption plan, all options granted under that plan became immediately capable of exercise.

vii) These options have been granted over shares in Roberts Pharmaceutical Corporation, the company that merged with the Group on 23 December 1999. Exercise of these options resultsin the optionholder receiving ordinary shares in the Company as set out above. As a result of the merger and in accordance with the terms of the original Roberts share option plan,all options granted under that plan became immediately capable of exercise.

viii) Options granted under the 2000 Executive Scheme are subject to criteria and cannot be exercised in full, unless the Company’s share price increases at a compound rate of at least20.5% per annum over a minimum three-year period. If the Company’s share price increases at a compound rate of at least 14.5% per annum over a minimum three-year measurementperiod, 60% of the options will become exercisable. If their conditions are not met after the initial three-year measurement period, they will thereafter be tested quarterly by reference to compound annual share price growth over an extended period. If the share price does not meet these conditions at any time, none of these options will become exercisable.

Remuneration report


The Company is positively committed to high standards of corporate governanceThe Combined Code: Principles of Good Governance and Code of Best Practice (“the Combined Code”) was published in the UK by the Committee on Corporate Governance. The Company, which is admitted to the official list of the United Kingdom ListingAuthority and then to trading on the London Stock Exchange, is required to report on compliance with the Combined Code.Throughout the financial year the Company has sought to comply fully with the Combined Code and has, in the directors’ opinion,done so. The following statement together with the Remuneration Report on pages 21 to 26 sets out the manner in which the Companyhas applied the principles contained in Section 1 of the Combined Code.

The BoardThe directors bring a wide range of expertise and experience to the Board. Their biographical details are shown on pages 18 and 19.

The Board meets at least four times a year and meetings are well attended. The Board has formally reserved specific matters to itselffor determination. Specific powers and authorities are also delegated to an Executive Committee and to various other Boardcommittees set out below.

All directors have access to the advice and guidance of the Company Secretary and are encouraged to seek independent advice at the Company’s expense, where they feel it is appropriate. No such independent advice was sought during the year.

Chairman and Chief ExecutiveThe offices of Chairman and Chief Executive are held separately. The non-executive Chairman, Dr James Cavanaugh, is responsiblefor the running of the Board and the Chief Executive, Mr Rolf Stahel, is responsible for running the business and chairs the ExecutiveCommittee.

Senior and non-executive directorDr Barry Price is the nominated senior independent non-executive director.

Board balanceThe Board comprises three executive and seven non-executive directors. Five of the non-executive directors (Dr Barry Price,Dr Bernard Canavan, Mr Ronald Nordmann, Dr Zola Horovitz and Mr Joseph Smith) are viewed as independent of management andfree from any business or other relationship which could materially interfere with the exercise of their independent judgment. TheCompany has no intention to grant options to its non-executive directors. The Chairman ensures that Board discussions are conductedin such a way that all views are taken into account, so that no individual director or small group of directors dominates proceedings.

Supply of informationThe executive directors and the Company Secretary are responsible for ensuring that detailed information is provided to the Board at least one week before any scheduled meeting of the Board. Before decisions are made, consideration is given to the adequacy of information available to the Board and, if necessary, decisions are deferred if further information is required.

Appointments to the BoardThe Board has delegated responsibility for nominations to the Board to a Nomination Committee made up of two non-executivedirectors, Dr James Cavanaugh and Mr Joseph Smith, and one executive director, Mr Rolf Stahel. The Chairman of the NominationCommittee is Dr James Cavanaugh, the non-executive Chairman of the Board.

Re-electionNon-executive directors are appointed for a maximum period of two years. Re-appointment of non-executive directors following theexpiry of such two-year period is subject to Board approval.

Board committeesThe Board reviewed its structure of standing committees during the year. Their written terms of reference (with the exception of theNomination Committee) have been approved by the Board. The principal standing committees are as follows:

a) Audit CommitteeThe Audit Committee meets at least four times a year and comprises four non-executive directors, namely Dr James Cavanaugh,Dr Barry Price, Mr Ronald Nordmann and Dr Bernard Canavan. Dr Bernard Canavan is the Chairman and the majority of theCommittee is independent. Its function and working practice are set out below.

b) Remuneration CommitteeThe Remuneration Committee meets at least three times a year and comprises four non-executive directors, namely Dr JamesCavanaugh, Dr Bernard Canavan, Mr Joseph Smith and Dr Barry Price. Dr Barry Price is the Chairman. The Remuneration Report appears on pages 21 to 26 and gives details of each director’s remuneration together with policy and procedures regarding seniormanagement remuneration. The remuneration of non-executive directors is determined by the Chief Executive together with theexecutive directors.

c) Nomination CommitteePlease see above under the heading “Appointments to the Board”.

Corporate governance


d) Executive CommitteeThe day-to-day management of the Company and its subsidiaries has been delegated by the Board to the Executive Committee which operates within clear and formal parameters. Mr Rolf Stahel is the Chairman of the Committee which consists of eight senioremployees including the three executive directors. The Executive Committee reports to and seeks guidance from the Board on a regular basis.

Directors’ remunerationThe Company’s remuneration policy appears on page 21. The policy details the levels of remuneration for directors and the basisupon which executive remuneration is fixed.

Relations with shareholdersThe Company is committed to maintaining good relations with its shareholders through the provision of regular interim and annualreports and other trading statements, as well as through the Annual General Meeting. The Company arranges individual and groupmeetings with its institutional shareholders in order to discuss relevant communications.

The Company’s website at www.shire.com provides Company information and is regularly updated.

Constructive use of the Annual General MeetingThe Company holds its Annual General Meeting once a year in London and all shareholders are given the opportunity to askquestions of the Board.

Balanced and understandable assessment of position and prospectsThe Company strives to give full, timely and realistic assessment of matters that impact on its business and financial position and topresent scientific and other price-sensitive data in a balanced way. The Company voluntarily adopted quarterly financial reporting,which is not obligatory in the UK and before it was required under SEC rules.

Financial reportingThe Board has ultimate responsibility for the preparation of accounts and for the monitoring of systems of internal financial control.The Board strives to present a balanced and understandable assessment of the Company’s position and its prospects andendeavours to present scientific and other price-sensitive information in a balanced way. The Company publishes quarterly financialreports so that the Company’s financial position can be monitored regularly by its shareholders.

On behalf of the Board, the Audit Committee examines the effectiveness of systems of internal financial control on a regular basis.This includes considering independent access to the Auditors throughout the year in addition to presentations from the Auditors on aquarterly basis. Any significant findings or identified risks are closely examined and are reported to the Board with recommendationsfor action.

Internal controlIn applying the principle that the Board should maintain a sound system of internal control to safeguard shareholders’ investment andthe Company’s assets, the directors recognise that they have overall responsibility for the Company’s system of internal control and forreviewing its effectiveness.

The directors believe that the Company has applied this principle during the year under review. However, there are limitations in anysystem of internal control and accordingly even the most effective system can provide only reasonable and not absolute assurance.Such a system is designated to manage rather than eliminate the risk of failure to achieve business objectives and can only providereasonable and not absolute assurance against material misstatement or loss.

The Company has an ongoing process for identifying, evaluating and managing the significant risks that it faces. This has been in operation throughout the period under review. This process is regularly reviewed by the Board.

At the start of the year, external consultants worked with senior managers to review the schedule of risks and how these aremanaged. In July, the Company appointed a Group Risk Manager who has continued this work and developed the Company’sapproach towards risk management. In October, the Board agreed a new risk management strategy for the Company. This allocatedresponsibility for the management of certain risks to senior executives, delegated responsibility to the Audit Committee that requiresquarterly reviews of key risks and confirmed that the Board will review the schedule of risks at the last Board meeting of each year.

In December, the Board considered the latest schedule of risks. This included analysis of the impact of the operation of individualrisks and the action being taken to avoid or reduce each risk. This review, together with regular reports on financial performancerepresent the main elements in establishing the effectiveness of the system of internal control. In addition, the Company has a systemof control procedures and compliance with these procedures is monitored through a system of internal review. Any significant issuesarising are reported to the Board for review.

In October, the Board also considered the need for an internal audit function. At present, the Company has no formal arrangementsfor internal audit. Audits or reviews are carried out as deemed necessary by senior management. The Board agreed that, as theCompany continues to grow, this position needs reviewing. A detailed proposal for the establishment of an internal audit function willbe considered during 2001.

Corporate governance


Audit Committee and auditorsThe Board has, through the Audit Committee, established formal and transparent arrangements for financial reporting, internal controland external auditing. All employees can raise any concerns in these areas with the Chairman of the Audit Committee in the strictestconfidence. The Audit Committee’s terms of reference have been extended to cover the Group’s risk management activities as awhole and not just the financial aspects of internal control. The Audit Committee reviews the scope and results of the audit and non-audit services, the cost effectiveness and the independence and objectivity of the auditors.

Shire in the communityThe Group recognises that its business activities have an influence on the community and accepts that it has a duty to carry these outin a responsible manner. During 2000, and in conjunction with external consultants, the Company has re-assessed the Group’sposition on social, economic and environmental issues.

This led to the development of a new environmental policy that was approved by the Board in December 2000. The policy reflects the key activities of the Group at each of our office sites, our production sites and our suppliers’ sites. An action plan has beenestablished that will implement the new policy during 2001. This will also enable us to measure our performance in the future.

The Group’s approach to broader sustainability issues is continuing to develop. The Company is currently looking at how it can bestdevelop and implement policies that will enable measurement of performance in the future in all areas of the Group’s involvementwithin the community.

Statement of directors’ responsibilities

Accounts and adoption of going-concern basisCompany law requires the directors to prepare accounts for each financial year which give a true and fair view of the state of affairs of the Company and Group as at the end of the financial year and of the profit or loss of the Group for the financial year.

The directors consider that in preparing the accounts on pages 31 to 51 the Company has used appropriate accounting policies,consistently applied and supported by reasonable and prudent judgments and estimates that all accounting standards which they consider to be applicable have been followed. The directors are satisfied that the Group has sufficient resources to continueoperations for the foreseeable future. Accordingly, they consider that it is appropriate to adopt the going-concern basis in preparingthe accounts.

Other mattersThe directors have responsibility for ensuring that the Company keeps accounting records which disclose with reasonable accuracythe financial position of the Company and Group and which enable them to ensure that the financial statements comply with therelevant legislation. They also have general responsibility for taking such steps as are reasonably open to them to safeguard the assetsof the Company and Group and to prevent and detect fraud and other irregularities.

The directors, having prepared the accounts, are required to provide to the auditors such information and explanation as the auditorsthink necessary for the performance of their duty.


We have audited the accompanyingconsolidated balance sheets of ShirePharmaceuticals Group plc and itssubsidiaries as of 31 December 2000 and 1999, and the related consolidatedstatements of income, comprehensiveincome, shareholders’ investment andcash flows for the years ended31 December 2000, 1999 and 1998.These financial statements are theresponsibility of the Company’smanagement. Our responsibility is toexpress an opinion on these financialstatements based on our audits.

We did not audit the financial statementsfor the year ended 31 December 1998 of Roberts Pharmaceutical Corporation,a company acquired during 1999 in a transaction accounted for as a pooling of interests. Such statements are includedin the consolidated financial statements of Shire Pharmaceuticals Group plc andreflect total assets and total revenues of 60% and 57% respectively for the year ended 31 December 1998. Thesestatements were audited by other auditors whose report has been furnishedto us and our opinion, insofar as it relates to amounts included for RobertsPharmaceutical Corporation for the yearended 31 December 1998, is based solelyupon the report of the other auditors.

We conducted our audits in accordancewith auditing standards generallyaccepted in the United States. Thosestandards require that we plan and performthe audit to obtain reasonable assuranceabout whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,evidence supporting the amounts anddisclosures in the financial statements.An audit also includes assessing theaccounting principles used and significantestimates made by management, as wellas evaluating the overall financial statementpresentation. We believe that our auditsand the report of the other auditors providea reasonable basis for our opinion.

In our opinion, based on our audit and thereport of the other auditors, the financialstatements referred to above present fairly,in all material respects, the financialposition of Shire Pharmaceuticals Groupplc and subsidiaries as of 31 December2000 and 1999, and the results of theiroperations and their cash flows for theyears ended 31 December 2000, 1999and 1998 in conformity with accountingprinciples generally accepted in theUnited States

Our audit opinion was made for thepurpose of forming an opinion on thebasic financial statements taken as a whole. The schedule listed in the index of financial statements is presented for the purposes of complying with theSecurities and Exchange Commission’srules and is not part of the basic financialstatements. This schedule has beensubjected to the auditing proceduresapplied in the audit of the basic financialstatements and, in our opinion based on our audit and reports of other auditors,fairly states in all material aspects, thefinancial data required to be set forththerein in relation to the basic financialstatements taken as a whole.

Arthur AndersenChartered AccountantsReading, England14 February 2001

Report of Independent Public AccountantsTo the shareholders of Shire Pharmaceuticals Group plc


31 December 31 December2000 1999

Notes $000 $000

AssetsCurrent assets:Cash and cash equivalents 8 46,598 54,082Marketable securities and other current asset investments 4 139,745 84,344Accounts receivable, net 5 93,830 59,018Inventories, net 6 47,109 39,538Deferred tax asset 26,971 5,312Prepaid expenses and other current assets 7 9,736 9,012

Total current assets 363,989 251,306

Investments 8 6,139 2,604Property, plant and equipment, net 9 49,685 37,484Intangible assets, net 10 556,013 557,934Deferred tax asset 6,298 31,799Other assets 11 22,608 6,636

Total assets 1,004,732 887,763

Liabilities and shareholders’ equityCurrent liabilities:Current instalments of long-term debt 12 1,448 9,608Accounts and notes payable 13 99,437 114,509Other current liabilities 14 10,528 48,703

Total current liabilities 111,413 172,820

Long-term debt, excluding current instalments 15 126,364 126,314Other non-current liabilities 16 14,196 1,345

Total liabilities 251,973 300,479

Shareholders’ equityCommon stock, 5 pence par value;

400,000,000 shares authorised (1999: 400,000,000);and 257,088,451 shares issued and outstanding (1999: 244,519,024) 21,035 20,063

Additional paid-in capital 938,493 832,650Accumulated other comprehensive losses (27,814) (10,303)Accumulated deficit (178,955) (255,126)

Total shareholders’ equity 752,759 587,284

Total liabilities and shareholders’ equity 1,004,732 887,763

The accompanying notes are an integral part of these consolidated financial statements.

Consolidated balance sheets


Year to Year to Year to31 December 31 December 31 December

2000 1999 1998Notes $000 $000 $000

RevenuesProduct sales 498,092 385,203 291,785Licensing and development 14,147 10,772 11,821Royalties 4,107 3,562 3,697Other revenues 1,262 1,995 1,681

Total revenues 20 517,608 401,532 308,984

Costs and expensesCost of revenues 88,158 93,475 95,013Research and development 106,131 77,503 59,253Selling, general and administrative 201,055 171,386 131,702

Other charges 21Asset impairments and restructuring charges – 97,132 –Merger transaction expenses – 32,279 –Loss/(profit) on sale of product rights – 5,825 (220)

Total operating expenses 395,344 477,600 285,748

Operating income/(loss) 20 122,264 (76,068) 23,236

Interest income 6,216 7,349 6,398Interest expense (12,187) (9,742) (6,511)Other (expenses)/income (105) (475) 440

Total other (expenses)/income (6,076) (2,868) 327

Income/(loss) before income taxes 116,188 (78,936) 23,563

Income taxes 23 (40,017) (16,062) (2,991)

Net (loss)/income 76,171 (94,998) 20,572

Net income/(loss) per shareBasic $0.30 $(0.39) $0.09Diluted $0.29 $(0.39) $0.08Weighted average number of sharesBasic 252,497,255 244,698,721 234,044,732Diluted 260,344,932 244,698,721 242,806,410


Consolidated statements of income


AccumulatedCommon Common Additional other Total

stock stock paid-in Accumulated comprehensive shareholders’amount number of capital deficit losses equity

$000 shares $000 $000 $000 $000

Balances as of 31 December 1997 10,345 124,531 738,637 (180,666) (2,396) 565,920Net income – – – 20,572 – 20,572Dividends paid by pooled entity – – – (34) – (34)Foreign currency translation – – – – (840) (840)Issuance of common stock 905 10,861 57,110 – – 58,015Issuance of common and preferred stock by pooled entity – – 9,220 – – 9,220Issuance costs – – (2,124) – – (2,124)Options exercised 475 5,700 3,607 – – 4,082Stock option compensation – – 5,497 – – 5,497Tax benefit associated with exercise of stock options – – 3,006 – – 3,006

Balances as of 31 December 1998 11,725 141,092 814,953 (160,128) (3,236) 663,314Net loss – – – (94,998) – (94,998)Foreign currency translation – – – – (7,067) (7,067)Issuance of common stock for acquisitions 8,123 100,767 (8,123) – – –Issuance of common and preferred stock by pooled entity – – 8,615 – – 8,615Options exercised 215 2,660 3,308 – – 3,523Stock option compensation – – 11,933 – – 11,933Tax benefit associated with exercise of stock options – – 1,964 – – 1,964

Balances as of 31 December 1999 20,063 244,519 832,650 (255,126) (10,303) 587,284Net income – – – 76,171 – 76,171Unrealised holding loss on marketable securities – – – – (48) (48)Foreign currency translation – – – (17,463) (17,463)Issuance of common stock 137 1,843 11,720 – – 11,857Issuance of costs – – (3,385) – – (3,385)Options exercised 835 10,726 44,812 – – 45,647Stock option compensation – – 21,914 – – 21,914Tax benefit associated with exercise of stock options – – 30,782 – – 30,782

Balances as of 31 December 2000 21,035 257,088 938,493 (178,955) (27,814) 752,759


Consolidated statements of comprehensive income/(loss)


2000 1999 1998$000 $000 $000

Net income/(loss) 76,171 (94,998) 20,572Foreign currency translation adjustments (17,463) (7,067) (840)Unrealised holding (loss)/gain on marketable securities and non-current investments (48) (411) 96

Comprehensive income/(loss) 58,660 (102,476) 19,828

There are no tax effects related to the items included above.


Consolidated statements of changes in shareholders’ equity



2000 1999 1998$000 $000 $000

Cash flows from operating activitiesNet income/(loss) 76,171 (94,998) 20,572

Adjustments to reconcile net income/(loss) to net cash provided by operating activitiesDepreciation and amortisation 30,475 28,598 25,249Stock option compensation 21,914 11,933 5,459Tax benefit of stock option compensation, charged directly to equity 30,782 1,967 3,046Non-cash exchange gains and losses (1,676) (664) (1,816)(Gain)/loss on sale of fixed assets – (828) 16Loss on sale of intangible assets 1,514 5,825 –Write-down of investment – 7,546 –(Increase)/decrease in accounts receivable (54,433) 16,269 (20,568)Increase in inventory (7,571) (6,543) (5,170)Decrease/(increase) in deferred tax asset 3,842 743 (4,420)Increase in accounts payable 43,373 37,083 12,186Reserve for restructuring charges (83,608) 83,608 –

Net cash provided by operating activities 60,783 90,539 34,554

Cash flows from investing activities(Investment in)/redemption of marketable securities (1,997) (7,940) 3,825Increase in cash placed on short-term deposit (53,404) (4,677) (35,664)Purchase of long-term investment (3,591) – (10,000)Purchase of subsidiary undertakings – (32,000) –Expenses of acquisition (1,461) – (551)Net cash acquired with subsidiary undertakings – 1,979 –Purchase of intangible assets (38,379) (57,848) (142,258)Purchase of fixed assets (28,359) (4,786) (13,871)Proceeds from sale of intangible fixed assets – 6,575 1,033Proceeds from sale of fixed assets 12,007 1,413 60Collection on notes receivable 766 7,195 1,751

Net cash used in investing activities (114,418) (90,089) (195,675)

Cash flows from financing activitiesLong-term debt issued – – 125,000Payments on long-term debt, capital leases and notes (8,110) (11,499) (11,708)Payment of debt issuance costs – – (2,528)Proceeds from issue of common stock, net 8,472 8,615 35,027Proceeds from exercise of options 45,647 3,523 4,082Proceeds from issue of preferred stock – – 4,494Cash dividends paid – – (150)

Net cash provided by financing activities 46,009 639 154,217

Effect of foreign exchange rate changes on cash and cash equivalents 142 20 9Net (decrease)/increase in cash and cash equivalents (7,484) 1,109 (6,895)Cash and cash equivalents at beginning of period 54,082 52,973 59,868

Cash and cash equivalents at end of period 46,598 54,082 52,973

Supplemental cash flow informationInterest paid 12,156 11,612 3,948Income taxes paid 6,650 11,356 5,285

Non-cash activitiesNotes issued for product acquisitions – 11,800 –Notes received for sale of product rights – – 218Common stock issued for product acquisitions 3,085 – 11,572Common stock issued on conversion of zero-coupon note 8,772 – 14,042Debt assumed on acquisition of subsidiaries – 3,300 –Capitalised leases – – 131


Consolidated statements of cash flows


1 Summary of significant accounting policiesa) Description of operations and principles of consolidationShire Pharmaceuticals Group plc is an international specialty pharmaceutical company with a strategic focus on four therapeuticareas: central nervous system disorders, metabolic diseases, oncology and gastroenterology. The Company’s principal productsinclude Adderall, for the treatment of Attention Deficit Hyperactivity Disorder, Agrylin, for the treatment of thrombocythemia, andPentasa, for the treatment of ulcerative colitis.

The Group has operations in the United States, the United Kingdom, Europe and the rest of the world. Within these geographicoperating segments, revenues are derived from three sources: sales of products by the Company’s own sales and marketingoperations, licensing and development fees, and royalties.

The accompanying consolidated financial statements include the accounts of Shire Pharmaceuticals Group plc and all its subsidiaryundertakings after elimination of intercompany accounts and transactions.

b) Use of estimates in financial statementsThe preparation of financial statements in conformity with generally accepted accounting principles requires management to makeestimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilitiesat the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual resultscould differ from those estimates.

c) Revenue recognitionThe Company’s principal revenue streams and their respective accounting treatments are discussed below. This is in accordance withSAB 101, under which revenue is recognised when:

– there is persuasive evidence of an arrangement;– delivery of products has occurred or services have been rendered;– the seller’s price to the buyer is fixed or determinable; and– collectability is reasonably assured.

i) Product salesRevenue for the sales of products is recognised as net revenue upon shipment to customers. Provisions for certain rebates,product returns and discounts to customers are provided for as reductions to net revenue in the same period as the related salesare recorded.

ii) Licensing and development feesLicensing and development fees represent revenues derived from licence agreements and from collaborative research anddevelopment arrangements.

Initial licence fees are not considered to be separable from the associated research and development activities, even where suchfees are non-refundable and not creditable against research and development services to be rendered. Initial licence fees arethus deferred and recognised over the period of the licence term or the period of the associated research and developmentagreement. In circumstances where initial licence fees are not for a defined period, revenues are deferred and recognised overthe period to the expiration of the relevant patent to which the licence relates.

Where licensing arrangements are accompanied by an equity subscription agreement, the series of transactions are accountedfor as a multiple elements arrangement. Accordingly, the aggregate consideration is allocated to the two elements of thearrangement as described below.

The fair value of the equity subscription is calculated as being the aggregate number of shares issued at the average of theopening and closing share prices on the date of issue.

During the term of certain research and development agreements, the Company receives non-refundable milestones as certaintechnical targets are achieved. Revenues are recognised on achievement of milestones.

The Company also receives non-refundable clinical milestones when certain targets are achieved during the clinical phases ofdevelopment, such as the submission of clinical data to a regulatory authority. These clinical milestones are recognised whenreceived. If milestone payments are creditable against future royalty payments, the milestones are deferred and released over theperiod in which the royalties are anticipated to be received.

iii) Royalty incomeRoyalty income relating to licenced technology is recognised when receivable.

Where applicable, all revenues are stated net of value added tax and similar taxes, trade discounts and intercompany transactions.

No revenue is recognised for consideration, the value or receipt of which is dependent on future events, future performance, or refundobligations.

The SEC issued Staff Accounting Bulletin (“SAB”) No.101, “Revenue Recognition in Financial Statements,” which re-emphasises existingguidance related to revenue recognition, including criteria specified in the Financial Accounting Standards Board (“FASB”) conceptualframework on timing of revenue recognition, and presentation and disclosure of revenue in the financial statements. SAB No.101 waseffective for the 2000 fourth quarter. The implementation of SAB No.101 did not have a material impact on the Company’s results ofoperations, cash flows or financial position.

Notes to the consolidated financial statements


1 Summary of significant accounting policies continuedd) Research and developmentResearch and development expenditures include funded and unfunded expenditure and are charged to operations in the period in which the expense is incurred. Milestones payable in respect of research and development work are charged to the incomestatement on achievement of these milestones.

e) Leased assetsThe cost of operating leases is charged to operations on a straight-line basis over the lease term, even if rental payments are notmade on such a basis.

Assets acquired under finance leases are included in the balance sheet as tangible fixed assets and are depreciated over the shorterof the period of lease or their useful lives. The capital elements of future lease payments are recorded as liabilities, while the interestelements are charged to the income statement over the period of the leases to produce a level yield on the balance of the capitallease obligation.

f) PensionsThe Group contributes to personal defined contribution pension plans of employees. Contributions are charged to the income statementas they become payable. These contributions are detailed in note 22. Details of the Supplemental Executive Retirement Plan operatedby the Group are also given in note 22.

g) Finance costs of debtFinance costs of debt are recorded as a deferred asset and then amortised to the income statement over the term of the debt usingthe level yield method. Deferred financing costs relating to debt terminated early are written off to the income statement in that period.

h) Income taxesThe Company provides for income taxes in accordance with Statement of Financial Accounting Standards (“SFAS”) No.109, “Accountingfor Income Taxes”. Deferred tax assets and liabilities are provided for differences between the financial statement and tax bases ofassets and liabilities that will result in future taxable or deductible amounts. The deferred tax assets and liabilities are measured usingthe enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Income taxexpense is computed as the tax payable or refundable for the period plus or minus the change during the period in deferred taxassets and liabilities.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that someportion or all of the deferred tax assets will not be realised.

i) Advertising expenseThe Company expenses the cost of advertising as incurred. Advertising costs amounted to $6,810,000, $6,646,000 and $6,715,000for the years ended 31 December 2000, 1999 and 1998 respectively.

j) Foreign currencyMonetary assets and liabilities in foreign currencies are translated into US dollars at the rate of exchange ruling at the balance sheetdate. Transactions in foreign currencies are translated into US dollars at the rate of exchange ruling at the date of the transaction.Transaction gains and losses are recognised in arriving at operating income

The results of overseas operations are translated at the average rates of exchange during the period and their balance sheets at the rates ruling at the balance sheet date.The cumulative effect of exchange rate movements is included in a separate component of other comprehensive income.

The consolidated financial statements are prepared from records maintained in the country in which the subsidiary is located and are translated into US dollars according to the above policy.

Foreign currency transaction gains and losses on an after-tax basis included in consolidated net income in the years ended 31 December2000, 1999 and 1998, pursuant to SFAS No.52, “Foreign Currency Translation”, amounted to $67,000 loss, $880,000 loss and $457,000gain respectively.

k) Employee stock plansThe Company accounts for stock options in accordance with the provisions of Accounting Principles Board (“APB”) Opinion No.25,“Accounting for Stock Issued to Employees”, and related interpretations.

l) Cash equivalents and marketable securitiesCash and cash equivalents include cash in banks and bank short-term investments with original maturities of less than 90 days.Marketable securities classified as available for sale consist primarily of debt instruments with maturities of more than three months.They are marked to market at each balance sheet date, with gains and losses recorded in a separate component of other comprehensiveincome. Other than temporary impairments in value are recorded through the income statement.

m) InventoriesInventories, consisting primarily of finished goods, are stated at the lower of cost and net realisable value. Cost incurred in bringingeach product to its present location and condition is based on purchase costs calculated on a first-in, first-out basis, includingtransport. Net realisable value is based on estimated normal selling price less further costs expected to be incurred to completionand disposal. Provision is made for obsolete, slow-moving or defective items where appropriate.

n) InvestmentsInvestments which are accounted for under the cost method are stated at cost, less provisions for other than temporary impairment invalue. Impairment is assessed by reference to the fair value of the securities as determined using established financial methodologies.Investments in equities with readily determinable market values are marked to market. The fair value of investments in private entitiesand non-traded securities of public entities are measured by valuation methodologies including discounted cash flows.



1 Summary of significant accounting policies continuedo) Intangible assetsIntangible assets comprise goodwill and intellectual property rights.

Goodwill arising on the acquisition of subsidiary undertakings and businesses, representing any excess of the fair value of theconsideration given over the fair value of the identifiable assets and liabilities acquired, is capitalised and written off on a straight-linebasis over its useful economic life.

Goodwill recognised in each significant business combination is being amortised over a period of five to 30 years on a straight-linebasis depending on the nature of the goodwill, and is evaluated periodically for realisability based on expectations of undiscountedcash flows and earnings from operations for each subsidiary having a material goodwill balance.

The following factors are considered in estimating the useful lives. Where an intangible asset is a composite of a number of factors,the period of amortisation is determined from considering these factors together:

– regulatory and legal provisions, including the regulatory approval and review process, patent issues and actions by governmentagencies;

– the effects of obsolescence, changes in demand, competing products and other economic factors, including the development of competing drugs that are more effective clinically or economically; and

– actions of competitors, suppliers, regulatory agencies or others that may eliminate current competitive advantages.

Impairments to goodwill are recognised if expected undiscounted cash flows are not sufficient to recover the goodwill. If a materialimpairment is identified, goodwill is written down to its fair value. Fair value is determined based on the present value of expected net cash flows to be generated by the business, discounted using a rate commensurate with the risks involved.

Intellectual property, including trademarks for products with an immediate defined revenue stream and acquired for valuable consideration,is recorded at cost and amortised in equal annual instalments over the estimated useful life of the related product which range fromfive to 40 years. Intellectual property with no defined revenue stream where the related product has not yet completed the necessaryapproval process is written off on acquisition. Amounts recorded as intangible assets are reviewed for impairment on a periodic basisusing expected undiscounted cash flows.

Continuing milestone payments on intellectual property with no defined revenue stream are charged to operations. Royalty paymentsdue on sales of products are charged to operations when a liability has been incurred.

p) Property, plant and equipmentProperty, plant and equipment is shown at cost less accumulated depreciation and any provision for impairment. Depreciation isprovided on a straight-line basis at rates calculated to write off the cost less estimated residual value of each asset over its estimateduseful life as follows:

Years

Land and buildings 50Office furniture, fittings and equipment 4 to 5Warehouse, laboratory and manufacturing equipment 4 to 5

Expenditures for maintenance and repairs are charged to expense as incurred; costs of major renewals and improvements arecapitalised. At the time property, plant and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are eliminated from the asset and accumulated depreciation accounts and the profit or loss on such disposition is reflected in income.

q) Concentration of credit riskRevenues are mainly derived from agreements with major pharmaceutical companies and relationships with drug distributors.Significant customers are disclosed in note 20(d). Such clients have significant cash resources and therefore any credit riskassociated with these transactions is considered minimal.

Excess cash is invested in bank and building society term deposits and commercial paper from a variety of companies with strongcredit ratings. These investments typically bear minimal risk.

r) Related partiesTransactions with related parties are conducted on the same basis as they would have been with unrelated parties.

s) New accounting pronouncementsIn June 1998, the FASB issued Statement No.133, “Accounting for Derivative Instruments and Hedging Activities”. This Statementrequires that all derivatives be recorded in the balance sheet as either an asset or a liability measured at its fair value and thatchanges in the derivative’s fair value be recognised currently in earnings unless specific hedge accounting criteria are met. In June1999, the FASB issued SFAS No.137, “Accounting for Derivative Instruments and Hedging Activities – Deferral of the Effective Date of FASB Statement No.133”. This Statement defers for one year the effective date of SFAS 133 to all fiscal quarters of all fiscal yearsbeginning after 15 June 2000.

In June 2000, the FASB issued Statement No.138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities – anAmendment of FASB Statement No.133”. SFAS 138 amends SFAS 133 to (a) exclude from the scope of SFAS 133 non-financial assetsthat will be delivered in quantities expected to be used or sold by the Company over a reasonable period in the normal course ofbusiness and for which physical delivery is probable, (b) permit hedging of a benchmark interest rate, (c) allow hedging of foreign-currency-denominated assets and liabilities and (d) allow for limited hedging of net foreign currency exposures.

The Company has reviewed its existing contracts and has put procedures in place to monitor and evaluate transactions in accordancewith FASB Statement No.133. The Company does not believe the adoption of this statement will have a material impact on the resultsof operations or its financial position going forward. There is no impact on the financial position as at 31 December 2000.


1 Summary of significant accounting policies continuedt) Companies Act 1985The financial statements for the years ended 31 December 2000, 1999 and 1998 do not comprise statutory accounts within the meaningof Section 240 of the Companies Act 1985.

Statutory accounts for the year ended 31 December 2000 will be delivered to the Registrar of Companies for England and Walesfollowing the Company’s AGM. The auditors’ report on those accounts was unqualified.

2 Business combinations and reorganisationsYear ended 31 December 2000No significant acquisitions or dispositions of businesses took place during the year ended 31 December 2000.

On 11 December 2000 the Company announced that it has entered into an agreement to merge with BioChem Pharma Inc. (“BioChem”),an international specialty pharmaceutical company based in Laval, Canada. It is intended that the merger will be achieved through an exchange of shares. The merger, which is expected to close in the second quarter of 2001, is subject to the approval of Shire andBioChem shareholders, the absence of any material change affecting BioChem, the accounting of the merger as a pooling ofinterests, the obtaining of regulatory approvals, and other customary terms and conditions.

Year ended 31 December 1999a) Acquisition of Laboratoires Murat S.A., Fuisz Pharma GmbH & Co KG and Istoria Farmaceutici S.p.AOn 22 October 1999, the Company completed the acquisition of all the assets and liabilities of Laboratoires Murat S.A. and FuiszPharma GmbH and the Cebutid trademark for $33 million, including the costs of acquisition. The purchase price consisted of$29.7 million in cash and the assumption of a $3.3 million liability due to Knoll AG.

On 17 November 1999, the Company completed the acquisition of all the assets and liabilities of Istoria Farmaceutici S.p.A for$6.5 million, including the costs of acquisition. The purchase consideration was $6.5 million in cash.

The above transactions provided Shire with marketing and distribution operations in France, Germany and Italy respectively. Theseacquisitions were accounted for using purchase accounting. Total goodwill of $22.4 million was recorded and is being amortised on a straight-line basis over a period of 20 years, the expected economic life of the underlying assets acquired. The results of operationsof the acquired subsidiaries have been included in the consolidated results of the Company since their respective dates ofacquisition.

The purchase price of $3.3 million for Laboratoires Murat S.A. was allocated as follows:

$000

Property, plant and equipment 19Intangible assets 1,073Current assets 1,614Accounts payable (1,292)

Net assets acquired 1,414Goodwill 1,886

Purchase consideration 3,300

$7.5 million was in respect of the Cebutid trademark.

The purchase price of $22.2 million for Fuisz Pharma GmbH was allocated as follows:

$000

Property, plant and equipment 23Intangible assets 3,331Current assets 1,891Accounts payable (1,108)



The purchase price of $6.5 million for Istoria Farmaceutici S.p.A. was allocated as follows:

$000

Property, plant and equipment 166Intangible assets 3,268Current assets 1,515Accounts payable (897)





2 Business combinations and reorganisations continuedb) Merger with Roberts Pharmaceutical CorporationOn 23 December 1999 the Company acquired 100% of the outstanding stock of Roberts Pharmaceutical Corporation (“Roberts”) in exchange for 100,767,482 ordinary shares.

This transaction was accounted for by the pooling of interests method. Following the consummation of the transaction, the Companydecided to restructure the enlarged business and accordingly recorded approximately $97.1 million in non-recurring asset impairmentand restructuring charges.

The accompanying consolidated financial statements have been retroactively restated to reflect the combined operations of Robertsand Shire as if the merger was consummated on 1 January 1998.

c) DispositionsOn 13 January 1999 Shire disposed of its Indianapolis manufacturing plant for a net consideration after expenses of $1.5 millionincluding a loan note of $0.5 million. The net gain of $0.8 million was recorded in the Consolidated Statement of Income.

During November 1999, the Company sold the product Tigan for $6.4 million. The Company recorded a loss on disposal of $5.8 million.

d) Pro forma informationThe pro forma effect in 1999 and 1998 of significant acquisitions if acquired on 1 January 1999 and 1 January 1998 respectivelywould have resulted in revenues, income before extraordinary items, net income and per share data as follows:

1999 1998$000 $000

Revenues 417,948 330,346(Loss)/income before extraordinary items (95,463) 19,039Net (loss)/income (95,463) 19,039

Net (loss)/income per share – basic ($0.39) $0.08Net (loss)/income per share – diluted ($0.39) $0.08

Year ended 31 December 1998There were no significant acquisitions or dispositions of businesses during the year ended 31 December 1998.

3 Cash and cash equivalents 31 December 31 December2000 1999$000 $000

Cash at bank and in hand 46,598 54,082

4 Marketable securities and other current assets investments 31 December 31 December2000 1999$000 $000

Marketable securities 46,000 44,003Commercial paper 28,000 39,200Institutional cash fund 65,745 1,141

139,745 84,344

There are no restrictions on the sale of marketable securities and no amounts have been pledged as collateral.

There have been no significant changes in market value subsequent to 31 December 2000.

The Company recorded losses on sales of marketable securities during the years ended 31 December 2000, 1999 and 1998 of$nil, $227,000 and $30,000.

Unrealised holding gains and losses on available for sale marketable securities, as disclosed in the Statement of ComprehensiveIncome, amounted to $nil, $411,000 loss and $96,000 gain at 31 December 2000, 1999 and 1998 respectively.

Maturity dates of marketable securities held at 31 December 2000 ranged from one to three months (31 December 1999: three to six months).

5 Accounts receivable 31 December 31 December2000 1999$000 $000

Trade receivables 92,204 55,953Notes receivable 334 678Other receivables 1,292 2,387

93,830 59,018

Trade receivables included above are stated net of a provision for doubtful debts of $819,000; (31 December 1999: $565,000).At 31 December 2000 other receivables were in respect of accrued royalty income. At 31 December 1999 other receivables included $1,144,000 of accrued royalty income.

Notes receivable are in respect of the divestment of certain products.Shire Pharmaceuticals Group plc 39

6 Inventory 31 December 31 December2000 1999

Inventory consists of: $000 $000

Finished goods 23,066 26,573Work in process 11,776 6,389Raw materials 12,267 6,576

47,109 39,538

7 Prepaid expenses and other current assets 31 December 31 December2000 1999$000 $000

Prepaid expenses 3,807 6,621Deferred financing costs 500 1,098Tooling costs 1,000 –Other current assets 4,429 1,293

9,736 9,012

The deferred financing costs are in respect of the $125 million long-term loan (see note 15) and are being amortised over the five-yearterm of the loan.

Tooling costs are not currently being amortised as the manufacturing equipment to which they relate is not yet in use. It is anticipatedthat production will commence during 2001, and based on expected production volumes, $1 million of the costs are classified ascurrent at 31 December 2000. The Company does not own the tools but has a non-cancellable right to use the tools during thecontract period.

Included within other current assets at 31 December 2000 is valued added tax recoverable of $1,899,000.

8 Investments 31 December 31 December2000 1999$000 $000

RiboGene, Inc. 2,604 2,604Cortex Pharmaceuticals Inc. 836 –D-Pharm Ltd 2,000 –CeNeS Pharmaceuticals plc 699 –

6,139 2,604

The Company has an investment in the convertible preferred stock of RiboGene, Inc., a drug-discovery company targeting infectiousdiseases. The shares have no voting rights. One-third of the preferred stock is convertible at the option of the Company to commonstock of RiboGene at each of the first three anniversary dates of the investment. The investment is classified as held to maturity.

In April 2000, the Company entered into an option agreement with Cortex Pharmaceuticals Inc. under which Shire will evaluate the useof Cortex’s Ampakine CX516 for the treatment of ADHD. Under the terms of the agreement, the Company will undertake a double-blind, placebo-controlled evaluation of CX516 in ADHD patients. If the study proves effective, Shire has the right to convert its optioninto an exclusive worldwide licence for the Ampakines for ADHD under a development and licensing agreement. In exchange for theoption, Cortex received approximately $0.8 million and issued common stock to Shire.

In March 2000, the Company entered into a licence agreement with D-Pharm Ltd, under which Shire has undertaken to develop andmarket DP-VPA for the treatment of epilepsy. DP-VPA, which Shire has designated SPD 421, is a unique new chemical analogue ofvalproic acid which has successfully completed Phase I studies. The terms of the agreement included an upfront fee payable to D-Pharm comprising cash and an equity investment, as well as clinical and commercial milestone payments. The cash payment wasexpensed as incurred in accordance with the Company’s accounting policies. The equity investment has been recorded at cost.

In December 2000, Shire signed a research, development and licensing agreement with CeNeS Pharmaceuticals plc for the developmentof CeNeS’ dopamine D1 agonist programme for the treatment of Parkinson’s disease. Shire will make milestone payments and payCeNeS royalties on products developed under the agreement. Shire has made an equity investment in CeNeS of approximately$0.7 million and will fund all development work.

The Company recorded an unrealised holding loss of $48,000 in respect of non-current investments marked to market at 31 December 2000. This is shown in the Statement of Comprehensive Income. There were no unrealised holding gains or losses at 31 December 1999 in respect of non-current investments.



9 Property, plant and equipment 31 December 31 December2000 1999$000 $000

Land and buildings 34,597 25,498Office furniture, fittings and equipment 12,575 14,527Warehouse, laboratory and manufacturing equipment 13,272 10,595

60,444 50,620Less: Accumulated depreciation (10,759) (13,136)

49,685 37,484

Depreciation expense for the years ended 31 December 2000, 1999 and 1998 was $3,814,000, $4,243,000 and $3,281,000respectively.

Included within land and buildings at 31 December 2000 is a new office facility purchased for $17.4 million, which will become theGroup’s new worldwide headquarters effective from March 2001. The building, purchased in October 2000, has not been depreciatedas it will not become operational until March 2001.

Included within land and buildings at 31 December 1999 is approximately $12 million relating to the Company’s Eatontown, New Jersey,office facility that was classified as available for sale. The Company completed the sale of the Eatontown facility during the year ended31 December 2000.

10 Intangible assets 31 December 31 December2000 1999$000 $000

Intellectual property rights acquired 433,049 394,640Goodwill arising on businesses acquired 222,865 238,897

655,914 633,537Less: Accumulated amortisation (99,901) (75,603)

556,013 557,934

Included in intellectual property above is $15.9 million for the purchase from Salix Pharmaceuticals Ltd (“Salix”) of the exclusive rightsto balsalazide, a treatment for ulcerative colitis. The exclusive rights apply to certain European and Nordic countries. Under the termsof the agreement, the Company has undertaken to pay Salix up to a total of $24.0 million, including approximately $12.0 million in upfront fees and up to $12.0 million upon the achievement of certain milestones.

In November 2000, the Company entered into an agreement with Nycomed Austria GmbH (“Nycomed”) under which Shire extendedthe term of its exclusive distributor rights to the product ProAmatine in North America and the UK and Republic of Ireland forapproximately $21.1 million. Shire had previously marketed the product and paid Nycomed royalties on sales of ProAmatine. Underthe terms of the agreement, Nycomed repaid all royalties received from Shire in respect of the year ended 31 December 2000 andhas waived all rights to future royalties. The net cost to Shire of approximately $17.5 million is included as an addition to intangibleassets in the year ended 31 December 2000.

Other significant additions to intellectual property during the year ended 31 December 2000 included a gastrointestinal productpurchased for marketing and distribution in Spain for approximately $4.8 million.

Amortisation expense for the years ended 31 December 2000, 1999 and 1998 was $26,661,000, $24,355,000 and $21,968,000respectively.

11 Other non-current assets 31 December 31 December2000 1999$000 $000

Notes receivable – 422Deferred financing costs 2,341 4,393Tooling costs 3,218 –SERP investment 16,115 –Other assets 934 1,821

22,608 6,636

The deferred financing costs and tooling costs represent the non-current portion of the total assets respectively. For further details seenote 7 above.

For further details of the SERP investment, see note 22. The amount shown above is the gross asset represented by non-currentmarketable securities. A liability of approximately $13.6 million is included within note 16.


12 Current portion of long-term debt 31 December 31 December2000 1999$000 $000

Current portion of notes payable 1,448 9,573Current portion of capital leases – 35

1,448 9,608

13 Accounts and notes payable 31 December 31 December2000 1999$000 $000

Trade accounts payable 39,755 31,540Accrued expenses 59,682 79,520Notes payable – 3,449

99,437 114,509

The notes payable at 31 December 1999 were in respect of the divestment of certain products and were repaid in full during the yearended 31 December 2000. The weighted average interest rate for these notes payable at 31 December 1999 was 6%.

14 Other current liabilities 31 December 31 December2000 1999$000 $000

Income taxes payable 4,263 6,727Payment for termination of licence agreement 747 806Other accrued liabilities 5,518 41,170

10,528 48,703

Included within other accrued liabilities at 31 December 2000 is $1,024,000 for value-added taxes, $818,000 for social securityliabilities and $930,000 payable to Knoll AG related to the acquisition of the Fuisz subsidiaries (see note 2).

At 31 December 1999 other accrued liabilities primarily related to restructuring costs incurred as a result of the merger with RobertsPharmaceutical Corporation.

15 Long-term debt 31 December 31 December2000 1999$000 $000

Notes payable 127,812 135,887Less: current instalments (1,448) (9,573)

126,364 126,314

Capital leases payable – 35Less: current instalments – (35)

– –

126,364 126,314

Principal payments in each of the next five years and thereafter on long-term debt outstanding at 31 December 2000 amount to:

31 December2000$000

2001 1,4482002 1,3642003 –2004 125,0002005 –Thereafter –

127,812



15 Long-term debt continued$125 million five-year term loanThe Company entered into a $125 million five-year term loan with Credit Suisse First Boston (“CSFB”), previously known as DLJ Capital Funding, Inc. on 19 November 1999. This loan replaced an existing $125 million loan facility in the name of RobertsPharmaceutical Corporation that had been taken out to finance the acquisition of Pentasa in 1998. The new loan is in the name ofthe parent company, Shire Pharmaceuticals Group plc. The applicable interest rate ranges between 0.5% and 1.5% over the higher of the prime rate of CSFB or the Federal Funds Rate plus 0.5% or between 1.5% and 2.5% over the London Interbank Overnight Rate (as adjusted in accordance with the loan agreement), in each case depending on the Company’s credit rating.

All obligations under the facility are jointly and severally guaranteed by the Company and by its subsidiaries and initially secured by allmaterial property owned by the Company and its subsidiaries and the capital stock of the subsidiaries. If the Company’s credit ratingreaches specified levels, the facility will not be secured. The facility contains covenants and maintenance tests that require the Companyto maintain a minimum net worth, a specified leverage ratio and a specified coverage ratio. At 31 December 2000 the Company satisfiedthe aforementioned covenants and maintenance tests.

$11.8 million Unsecured Convertible Zero Coupon Loan NoteThe Company financed the purchase of intellectual property relating to the manufacture of Adderall from Arenol Corporation by a totalof $11.8 million in loan notes. On 5 March 1999 the Company issued a $5.8 million principal amount Unsecured Convertible ZeroCoupon Loan Note due 30 July 2001 (the “First Loan Note”) and a $6.0 million principal amount Unsecured Convertible Zero CouponLoan Note due 30 July 2004 (the “Second Loan Note”). Both loan notes are in the name of the parent company, Shire PharmaceuticalsGroup plc.The agreement provides for the cancellation of certain specified amounts of the aggregate principal amount of the FirstLoan Note and of such amounts of the Second Loan Note on certain dates to the extent of certain indemnified losses or, to the extentthat such amounts of the First Loan Note or the Second Loan Note (together “the Loan Notes”) are not so cancelled, for their conversioninto ordinary shares. The number of ordinary shares is calculated by dividing the amount not cancelled by the lower of £3.565(approximately $5.75) and the midweek closing price of the ordinary shares on the London Stock Exchange on the relevant date.Translation from pounds sterling to US dollars is made using the exchange rate on the relevant date. The Company issued 533,279,560,076 and 541,478 ordinary shares on 13 March 2000, 3 August 2000 and 6 November 2000, respectively to Arenol Corporation (or its nominee broker) in consideration of the conversion of part of each of the Loan Notes in the Company.

16 Other non-current liabilities 31 December 31 December2000 1999$000 $000

Payable for termination of licence agreement 373 1,209Other liabilities 13,823 136

14,196 1,345

Other accrued liabilities at 31 December 2000 include $13,609,000 in relation to the SERP (see note 22).

17 Financial instrumentsThe following methods and assumptions were used to estimate the fair value of each material class of financial instrument:

Cash and cash equivalents – carrying amount approximates fair value due to the short-term nature of these instruments.

Marketable securities and other current asset investments – the fair value of marketable securities is estimated based on quotesobtained from brokers.

Investments – non-current investments with readily determinable market values are marked to market. The fair value of investments in private entities and non-traded securities is measured by valuation methodologies including discounted cash flows.

Accounts receivable – carrying account approximates fair value due to the short-term nature of these instruments.

Accounts and notes payable – carrying amount approximates fair value due to the short-term nature of these instruments.

Long-term debt – the fair value of long-term debt is estimated, based on the discounted future cash flows using currently availableinterest rates.


17 Financial instruments continuedThe carrying amounts and corresponding fair values of financial instruments at 31 December 2000 and 1999 were as follows:

Carryingamount Fair value

31 December 2000 $000 $000

Financial assets:Cash and cash equivalents 46,598 46,598Marketable securities and other current asset investments 139,745 139,745Investments 6,139 6,139

Financial liabilities:Accounts and notes payable 99,437 99,437Long-term debt 127,812 127,812

31 December 1999

Financial assets:Cash and cash equivalents 54,082 54,082Marketable securities and other current asset investments 84,344 83,933Investments 2,604 2,604

Financial liabilities:Accounts and notes payable 114,509 114,487Long-term debt 135,922 135,922

The carrying amounts in the table are included in the consolidated balance sheet under the indicated captions.

18 Leases and other commitmentsa) LeasesThe Company leases facilities, motor vehicles and certain office equipment under operating leases. The Company’s commitmentsunder the non-cancellable portion of all operating leases for the next five years and thereafter as of 31 December 2000 are as follows:

31 December2000$000

2001 4,0272002 3,4372003 2,2672004 1,1542005 689Thereafter 2,299

13,873

Lease and rental expenses included in selling, general and administrative expenses in the accompanying statements of operationsamounts to approximately $4,250,000, $3,155,000 and $1,555,000 for the fiscal years ended 31 December 2000, 1999 and 1998respectively.



18 Leases and other commitments continuedb) Contingent liabilities:Until April 1998, Shire Richwood, Inc. (“SRI”) distributed products containing phentermine, a prescription drug approved in the US as a single agent for short-term use in obesity. Contrary to the approved labelling of these products, physicians in the US co-prescribedphentermine with fenfluramine or dexfenfluramine for management of obesity. This combination was popularly known as the “fen/phen”diet. In mid 1997, following concerns raised about cardiac valvular side effects alleged to be associated with this diet regime, thefenfluramine and dexfenfluramine elements of the “fen/phen” diet were withdrawn from the US market. Although SRI has ceased to distribute phentermine, the drug remains both approved and available in the US. SRI and a number of other pharmaceuticalcompanies are being sued for damages for personal injury and medical monitoring arising from phentermine used either alone or in combination. As of 31 December 2000 SRI was named as a defendant in approximately 3,729 lawsuits and had been dismissedfrom approximately 2,178 of these cases. There were approximately 1,120 additional cases pending dismissal as of 31 December2000. In only 171 cases has it been alleged in the complaint of subsequent discovery that the plaintiff had used SRI’s particularproduct and SRI has been dismissed from 105 of these cases as well. Although there have been reports of substantial jury awardsand settlements in respect of fenfluramine and/or dexfenfluramine, to date Shire is not aware of any jury awards made against, or anysettlements made by, any phentermine defendant. Shire denies liability on a number of grounds including lack of scientific evidencethat phentermine, properly prescribed, causes the alleged side effects and that SRI did not promote phentermine for long-termcombined use as the “fen/phen” diet. Accordingly, Shire intends to defend vigorously any and all claims made against the Group in respect of phentermine and believes that a liability is neither probable nor quantifiable at this stage of the litigation.

Legal expenses have been paid by Eon Labs Manufacturing Inc. (“Eon”), the suppliers to SRI, or Eon’s insurance carriers but such insurance is now exhausted. Eon has agreed to defend and indemnify SRI in this litigation pursuant to an agreement dated30 November 2000 between Eon and SRI.

On 31 August 2000 Shire entered into an agreement (the “Termination Agreement”) with the former shareholders of SRI, pursuant towhich the ordinary shares placed into escrow at the time of the purchase of SRI by Shire were released and the escrow agreementand the escrow fund were terminated. The escrow agreement with the SRI shareholders was initially established by Shire in 1997 inanticipation of possible phentermine-related claims against the Company. Under the terms of the Termination Agreement, monies inthe approximate amount of $7 million were received by Shire and the escrow fund was terminated. The remaining ordinary shareswere distributed to the former SRI shareholders.

At the present stage of the litigation, Shire is unable to estimate the level of future legal costs after taking into account any availableproduct liability insurance and enforceable indemnities. To the extent that any legal costs are not covered by insurance or availableindemnities, these will be expensed as incurred.

19 Net income/(loss) per shareBasic net income/(loss) per share is based upon the income available to common stockholders divided by the weighted-averagenumber of common shares outstanding during the period. Diluted earnings/(loss) per share is based upon income available tocommon stockholders divided by the weighted-average number of common shares outstanding during the period and adjusted for the effect of all dilutive potential common shares that were outstanding during the period.

The following table sets forth the computation for basic and diluted net income/(loss) per share:

Year ended Year ended Year ended31 December 31 December 31 December

2000 1999 1998$000 $000 $000

Numerator for basic and diluted net income/(loss) per share 76,171 (94,998) 20,572

Number of shares Number of shares Number of shares2000 1999 1998

Weighted average number of shares (basic) 252,497,255 244,698,721 234,044,732Effect of dilutive stock options 7,847,677 – 8,761,678

Weighted average number of shares (diluted) 260,344,932 244,698,721 242,806,410

Basic net income/(loss) per share $0.30 $(0.39) $0.09Diluted net income/(loss) per share $0.29 $(0.39) $0.08

The calculation of weighted average number of shares for the year ended 31 December 2000 does not include convertible debtbecause, after eliminating interest charged in the income statement from the numerator, the inclusion would be anti-dilutive.

The calculation of weighted average number of shares for the year ended 31 December 1999 does not include potentially dilutivestock options and convertible debt because their inclusion would be anti-dilutive in a loss-making year.


20 Analysis of revenue, operating income/(loss), assets and reportable segmentsThe Company has disclosed segment information for the individual operating areas of the business, based on the way in which the business is managed and controlled. Shire’s principal reporting segments are geographic, each being managed and monitoredseparately and serving different markets. The Company evaluates performance based on operating income or loss before interest and income taxes. All intercompany items are eliminated. The accounting policies of each reportable segment are the same as thoseof the Group.

US Europe Rest of world Total$000 $000 $000 $000

Year ended 31 December 2000Product sales 414,624 60,798 22,670 498,092Licensing and development 1,326 12,821 – 14,147Royalties 266 3,816 25 4,107Other revenues 20 – 1,242 1,262

Total revenue 416,236 77,435 23,937 517,608

Cost of revenues 53,393 23,601 11,164 88,158Research and development 69,252 36,799 80 106,131Selling, general and administrative 120,713 72,660 7,682 201,055

Total operating expenses 243,358 133,060 18,926 395,344

Operating income/(loss) 172,878 (55,625) 5,011 122,264

Total assets 567,113 406,780 30,839 1,004,732Long-lived assets 13,444 21,431 14,810 49,685Capital expenditure on long-lived assets 7,931 20,070 358 28,359

Year ended 31 December 1999Product sales 313,582 55,194 16,427 385,203Licensing and development 1,097 9,675 – 10,772Royalties – 3,562 – 3,562Other revenues 517 – 1,478 1,995

Total revenue 315,196 68,431 17,905 401,532

Cost of revenues 62,375 20,958 10,142 93,475Research and development 50,544 26,904 55 77,503Selling, general and administrative 108,682 55,986 6,718 171,386Costs of restructuring 93,603 3,529 – 97,132Merger transaction expenses 9,312 22,967 – 32,279Loss on sale of product rights 5,825 – – 5,825


Operating (loss)/income (15,145) (61,913) 990 (76,068)

Total assets 546,849 313,113 27,801 887,763Long-lived assets 19,003 2,656 15,825 37,484Capital expenditure on long-lived assets 2,621 768 1,397 4,786



20 Analysis of revenue, operating income/(loss), assets and reportable segments continued

US Europe Rest of world Total$000 $000 $000 $000

Year ended 31 December 1998Product sales 266,988 50,261 14,536 291,785Licensing and development 622 11,199 – 11,821Royalties – 3,697 – 3,697Other revenues 306 – 1,375 1,681

Total revenue 227,916 65,157 15,911 308,984

Cost of revenues 67,889 19,378 7,746 95,013Research and development 27,556 31,647 50 59,253Selling, general and administrative 80,854 45,208 5,640 131,702Profit on sale of product rights (220) – – (220)


Operating income/(loss) 51,837 (31,076) 2,475 23,236

Total assets 542,799 307,309 23,497 873,605Long-lived assets 25,653 2,764 14,265 42,682Capital expenditure on long-lived assets 4,902 1,201 8,665 14,768

Material customersIn the periods set out below, certain customers accounted for greater than 10% of total revenue:

2000 1999 1998Year ended 31 December $000 $000 $000

Customer A 132,913 100,267 53,599Customer B 80,293 54,498 31,387Customer C 58,776 40,045 35,314

21 Other chargesYear ended 31 December 1999As a result of the acquisition of Roberts Pharmaceutical Corporation on 23 December 1999, which was accounted for as pooling of interests, the Company recorded charges totalling $135.2 million pre-tax for asset impairments ($48.5 million), merger-relatedtransaction expenses ($32.3 million), restructuring ($43.6 million), loss on product dispositions ($5.8 million) and other charges($5.0 million). These charges are disclosed separately within operating expenses in the Consolidated Statements of Income.

The Company recorded an impairment charge of $34.2 million to adjust intangible asset values, primarily product rights, to theirestimated fair value. These charges are consistent with the Company’s accounting policy to review periodically the carrying value ofthe intangibles and evaluate whether there has been any impairment in the value of those intangibles, as compared with estimatedundiscounted future cash flows of the products. Other asset impairments consisted of the write-off of inventory held for research anddevelopment work and duplicate equipment ($3.2 million), adjustments to the carrying value of the RiboGene Investment to marketvalue at 31 December 1999 ($7.6 million) and write down of notes receivable to their estimated realisable value ($3.5 million).

The components of the restructuring charges were as follows:

$m

Employee termination costs 37.9Property 5.7

43.6

In December 1999, the decision was made to close the office in Eatontown, New Jersey, and consolidate the sales and marketingoperations into the existing facility in Florence, Kentucky, and to transfer the research and development activities to Shire’s facility in Rockville, Washington. Similarly, Roberts’ sales and marketing operation in the UK was combined with Shire’s established operationin Andover, Hampshire. The property at Eatontown was written down to its estimated fair value.

As a result of the restructuring and elimination of duplicate facilities, the Company identified a number of sales and marketing,research and development and administrative positions to be terminated.

These employees were notified of their termination prior to 31 December 1999. The employee termination costs consisted ofpayments for severance, medical and other benefits, outplacement counselling, acceleration of pension benefits and excise taxes.

The Company completed the restructuring programme during the fourth quarter of 2000, and the restructuring reserve of$43.6 million was fully utilised by 31 December 2000. Merger cost savings for the year ended 31 December 2000 exceeded the initial target of $20 million.

Year ended 31 December 1998During the year ended 31 December 1998 a gain of $220,000 was credited to the income statement in respect of the disposition of certain products.


22 Retirement benefitsa) Personal defined contribution pension plansThe Company makes contributions to defined contribution retirement plans that together cover substantially all employees within theGroup. For the defined contribution retirement plans, the level of Company contribution is fixed at a set percentage of employees’ pay.

Company contributions to personal defined contribution pension plans totalled $2,580,000, $1,558,000 and $1,124,000 for the yearsended 31 December 2000, 1999 and 1998 respectively, and were charged to operations as they became payable.

b) Defined benefit pension plansRoberts Pharmaceutical Corporation, a company with whom Shire merged in December 1999, operated a defined SupplementalExecutive Retirement Plan (“SERP”) for certain US employees, which was established in 1998. This plan was available to formeremployees of Roberts who met certain age and service requirements.

As part of the restructuring of the Group following the merger, the SERP was closed to new members and contributions have ceasedbeing paid into the plan for existing members. As part of this arrangement, the Company paid a lump sum contribution into the plan of $18 million, the result of which is that the Company has no future liabilities under the plan.

In accordance with EITF 97-14, the asset and liability of $16.1 million and $13.6 million respectively are shown on the balance sheetwithin the categories investments and other non-current liabilities. See notes 11 and 16 above.

23 Income taxesThe (provision)/benefit for income taxes consists of:

2000 1999 1998Years ended 31 December $000 $000 $000

CurrentFederal (26,534) (14,007) (7,375)State and foreign (9,641) (1,556) 118

Total current (36,175) (15,563) (7,257)

DeferredFederal (4,268) (622) 3,808State and foreign 426 123 458

Total deferred (3,842) (499) 4,266

(40,017) (16,062) (2,991)

Approximate net operating loss carry forwards against future federal tax liabilities 60,451 40,418 43,089Approximate net operating loss carry forwards against future state and foreign tax liabilities 146,933 185,458 150,572

The tax losses shown above have the following expiration dates:

31 December2000$000

2002 1,8852003 1,3272004 3,1002005 80,373Available indefinitely 120,699

207,384

The losses stated above include approximately $78 million of state tax losses for which relief is available at state tax rates ofapproximately 3%.



23 Income taxes continuedA comparison of the (provision)/benefit for income taxes as reported to a provision based on federal statutory rates and consolidatedincome before income taxes is as follows:


(Provision)/benefit at federal statutory rates (40,666) 27,628 (8,247)Adjusted for:Permanent differences 669 (6,474) 18Difference in taxation rates 9,100 (1,200) 1,300Adjustment to prior year liabilities (1,950) 4,004 –Goodwill amortisation (3,783) (9,758) (4,232)Other 2,335 (337) (464)Valuation allowance (1,052) (29,925) 8,634

Provision for income taxes (40,017) (16,062) (2,991)

An analysis of the deferred taxation asset is as follows:2000 1999

As of 31 December $000 $000

Losses carried forward 47,596 39,411Amounts deductible when paid 34,307 28,835Valuation reserves and provisions 7,100 3,259Other 1,446 1,568

90,449 73,073Valuation allowance (37,014) (35,962)

Deferred tax assets 53,435 37,111Excess of tax value over book value of assets (20,166) –

Net deferred tax assets 33,269 37,111

Valuation allowances against deferred tax assets have not been provided to the extent that it is more likely than not that future incomeand tax planning strategies will enable losses brought forward to be utilised.

The income/(loss) before taxes by tax jurisdiction is as follows:2000 1999 1998

Years ended 31 December $000 $000 $000

US 77,974 (33,924) 30,972UK (37,577) (33,996) 5,763Other 75,791 (11,016) (13,172)

116,188 (78,936) 23,563

24 Stock incentive plansThe Company has adopted the disclosure only provisions of SFAS No. 123, Accounting for Stock-Based Compensation, but appliesAccounting Principles Board Opinion No. 25 and related interpretations in accounting for its plans.

In the years ended 31 December 2000, 1999 and 1998 the Company recognised a charge under APB25 of $21,914,000, $11,933,000and $5,497,000 respectively.

Had compensation for stock options awarded under the plans been determined in accordance with SFAS 123, the Company’s netincome/(loss) and per share data would have been changed to the pro forma amounts indicated below:


24 Stock incentive plans continued


Net income/(loss)As reported 76,171 (94,998) 20,572Pro forma 88,854 (106,246) 17,439Income/(loss) per shareAs reported – basic $0.30 $(0.39) ($0.09)As reported – diluted $0.29 $(0.39) ($0.08)Pro forma – basic $0.35 $(0.43) ($0.07)Pro forma – diluted $0.34 $(0.43) ($0.07)

The fair value of stock options used to compute pro forma net income/(loss) and per share disclosures is the estimated present valueat grant date using the Black-Scholes option-pricing model with the following weighted average assumptions:

Years ended 31 December 2000 1999 1998

Risk-free interest rate 5.68%–6.58% 4.67%–6.25% 4.55%–6.57%Expected dividend yield 0% 0% 0%Expected life 4 years 4 years 4 yearsExpected volatility 64.2% 53.4% 53.2%

Directors and employees have been granted options over ordinary shares under the following stock option plans: the ShirePharmaceuticals Group plc 2000 Executive Share Option Scheme (“2000 Executive Scheme”), the Shire Holdings Ltd Share OptionScheme (“SHL Scheme”), the Imperial Pharmaceutical Services Ltd Employee Share Option Scheme (Number One) (“SPC Scheme”),the Pharmavene 1991 Stock Option Plan (“SLI Plan”), the Shire Pharmaceuticals Executive Share Option Scheme (Parts A and B)(“Executive Scheme”), the Shire Pharmaceuticals Sharesave Scheme (“Sharesave Scheme”), the Shire Pharmaceuticals Group plcEmployee Stock Purchase Plan (“Stock Purchase Plan”), the Richwood Stock Options Plan (“Richwood Plan”) and the Roberts StockOption Plan (“Roberts Plan”).

On 28 February 2000, the Remuneration Committee of the Board exercised its powers to amend the terms of the Executive ShareOption Scheme so as to include a cliff vesting provision.

No further options will be granted under the SHL Scheme, SPC Scheme, SLI Plan, Richwood Plan, Roberts Plan and the ExecutiveScheme. In a period of ten years, not more than 10% of the issued share capital of the Company may be placed under option underany employee share scheme. In addition, the following terms apply to options that may be granted under the various plans:

Stock Purchase Plan: up to 2,000,000 ordinary shares.

The Company has granted options through 31 December 2000 under the various plans as follows:

Scheme Number of options Expiry period from date of issue Vesting period

SHL Scheme 572,160 7 years, or 3 months after end of employment 1 to 3 years

SPC Scheme 48,000 7 years, or 6 months after end of employment 2 years

Executive Scheme 6,080,083 10 years 3 years, subject toperformance criteria

2000 Executive Scheme 484,248 10 years 3 years, subject toperformance criteria

Sharesave Scheme 210,999 6 months after vesting 3 or 5 years

Stock Purchase Plan 50,294 Automatic exercise 27 months

Richwood Plan 747,067 5 years Immediate on acquisition by Shire

Roberts Plan 1,047,809 6 years Immediate on merger with Shire

9,240,660

2000 Executive Scheme: the maximum number of shares over which incentive stock options may be granted under Part B of theScheme is 25,000,000.



24 Stock incentive plans continuedA summary of the status of the Company’s stock option plans as of 31 December 2000, 1999 and 1998 and the related transactionsduring the periods then ended is presented below:

Weighted averageYear ended 31 December 2000 exercise price $ Number of shares

Outstanding at beginning of period 4.39 17,637,142Granted 16.17 2,556,001Exercised 4.19 (10,726,407)Forfeited/expired 12.72 (226,076)

Outstanding at end of period 7.42 9,240,660

Exercisable at end of period 2.94 3,632,373


Outstanding at beginning of period 3.38 20,784.312Granted 6.86 2,952,734Exercised 2.37 (4,552,618)Forfeited/expired 4.90 (1,547,286)




Outstanding at beginning of period 2.30 21,002,886Granted 5.51 7,170,801Exercised 1.32 (6,628,884)Forfeited/expired 4.01 (760,491)



All options granted under the Executive and 2000 Executive Schemes were issued with exercise prices equivalent to the fair marketvalue of the Company’s common stock on the date of grant as these options were granted at market prices.

79,424 options were granted under the Sharesave Scheme at a price of £8.56 (approximately $12.79). These options were grantedwith an exercise price equal to 80% of the mid-market price on the day before invitations were issued to employees.

The average fair value of options granted in the year ended 31 December 2000 is $16.26.

For the years ended 31 December 1999 and 1998 the weighted average fair value equates to the weighted average exercise prices of $6.86 and $5.51 respectively as all options were granted at market prices.

Options outstanding at 31 December 2000 have the following characteristics:

Number Weighted average Weighted averageof options Weighted average exercise price of Number of options exercise price ofoutstanding Exercise prices remaining life options outstanding exercisable options exercisable

436,852 $0.45–$0.46 0.3 $0.45 436,852 $0.45980,669 $1.23–$1.73 1.8 $1.49 980,669 $1.49658,881 $2.30–$2.84 2.0 $2.61 551,287 $2.61939,611 $3.22–$4.24 3.2 $3.64 923,148 $3.642,509,049 $5.06–$6.75 4.4 $5.32 657,523 $5.561,218,394 $6.76–$7.07 5.2 $7.05 82,894 $6.78100,000 $7.97–$10.72 6.4 $9.48 – –2,397,204 $12.79–$19.72 6.6 $16.21 – –

9,240,660 4.4 $7.42 3,632,373 $2.94


Summary financial statement


This summary financial statement does notcontain sufficient information to allow for a full understanding of the results andstate of affairs of the Company or Group.For further information the full UK statutoryannual accounts, the auditors’ report onthose accounts and the directors’ reportshould be consulted.

In accordance with Section 239 of theCompanies Act 1985 shareholders have a right to obtain the full reports andaccounts free of charge by writing to:

The Company SecretaryShire Pharmaceuticals Group plcHampshire International Business ParkChinehamBasingstokeHampshireRG24 8EP.

The full UK statutory annual accounts are signed on behalf of the Board byA C Russell, Group Finance Director.

The Company’s auditors have given an unqualified report on the statutoryaccounts for the year ended 31 December2000. The report did not contain astatement under Section 237 (2) or (3) of the Companies Act 1985.

Auditors’ statement to the shareholdersof Shire Pharmaceuticals Group plcWe have examined the summary financialstatement set out on pages 53 to 57.

Respective responsibilities of directorsand auditorsThe directors are responsible for preparingthe annual statutory accounts inaccordance with applicable UnitedKingdom law and accounting standards.Our responsibility as established in theUnited Kingdom by Statute, the AuditingPractices Board, and our profession’sethical guidance, is to report to you ouropinion on the consistency of the summaryfinancial statement within the annual reviewwith the full UK statutory accounts and thedirectors’ report, and its compliance withthe relevant requirements of Section 251 of the Companies Act 1985 and theregulations made thereunder. We also readthe other information contained in theannual review and consider the implicationsfor our report if we become aware of anyapparent misstatements or materialinconsistencies with the summary financialstatement.

Basis of opinionWe conducted our work in accordance withBulletin 1999/6, “The auditors’ statement onthe summary financial statement”, issuedby the Auditing Practices Board.

OpinionIn our opinion the summary financialstatement is consistent with the full annualaccounts and directors’ report of ShirePharmaceuticals Group plc for the yearended 31 December 2000 and complieswith the applicable requirements of Section251 of the Companies Act 1985, and theregulations made thereunder.

Arthur AndersenChartered Accountants and Registered AuditorsAbbots HouseAbbey StreetReading RG1 3BD

27 February 2001

General Auditors’ statement


Report of the directors

Results and dividendsThe profit on ordinary activities beforetaxation of the Group was £76.8 million(1999: £21.0 million). The directors do notrecommend the payment of a dividend.

Business reviewA review of the Group’s business andimportant events during the year and likelyfuture developments is set out in theChairman’s review, the Chief Executive’sreview, the operating review and thefinancial review in the full UK statutoryannual accounts.

DirectorsThe directors who served during the yearwere as follows:

Dr James CavanaughChairman and non-executive Director

Rolf StahelChief Executive

Angus RussellGroup Finance Director

Dr Wilson TottenGroup R&D Director

Dr Barry PriceSenior non-executive Director(Chairman Remuneration Committee)

Dr Bernard CanavanNon-executive Director(Chairman Audit Committee)

Dr Zola HorovitzNon-executive Director

Ronald NordmannNon-executive Director

Joseph SmithNon-executive Director

John SpitznagelNon-executive Director

Dr Robert VukovichResigned 14 February 2000

Year ended Year ended31 December 31 December

2000 1999£000 £000

Turnover 343,624 133,878Cost of sales (58,596) (22,811)

Gross profit 285,028 111,067Other operating expenses (205,371) (80,695)

Operating profit 79,657 30,372Costs of a fundamental restructuring – (11,516)

Profit on ordinary activities before finance charges 79,657 18,856Finance charges, net (2,885) 2,153

Profit on ordinary activities before taxation 76,772 21,009Tax on profit on ordinary activities (3,570) (8,439)

Profit on ordinary activities after taxation 73,202 12,570

Earnings per share – basic 29.0p 8.7pEarnings per share – diluted 28.1p 8.3p

Consolidated profit and loss account





31 December 31 December2000 1999£000 £000

Fixed assetsIntangible assets – Intellectual property 247,278 214,856Tangible assets – Goodwill 446,983 469,531Tangible assets 33,261 23,256Fixed asset investments 4,142 1,617

731,664 709,260

Current assetsStocks 31,536 24,532Debtors – due within one year 69,107 45,488– due after one year 15,358 1,392Investments 93,550 49,850Cash at bank and in hand 31,194 36,038

240,745 157,300Creditors: amounts falling due within one year (including convertible debt) (74,580) (107,140)

Net current assets 166,165 50,160

Total assets less current liabilities 897,829 759,420Creditors: amounts falling due after more than one year (including convertible debt) (94,186) (80,133)

Net assets 803,643 679,287

Capital and reservesCalled-up share capital 12,854 12,226Share premium 873,567 839,026Capital reserve 2,755 2,755Other reserves 24,247 24,247Profit and loss account (109,780) (198,967)

Equity shareholders’ funds 803,643 679,287

Consolidated balance sheet

Year ended Year ended31 December 31 December

2000 1999£000 £000

Net cash inflow from operating activities 52,925 39,863Returns on investments and servicing of finance Interest received 4,125 2,334Interest paid (7,009) (149)Interest element of finance lease rentals (1) (32)

Net cash inflow from returns on investments and servicing of finance (2,885) 2,153

TaxationCorporation tax paid (4,397) (3,707)

Capital expenditure and financial investmentsPurchase of long-term investment (2,398) –Purchase of intangible fixed assets (25,776) (11,500)Purchase of tangible fixed assets (19,251) (1,303)Sale of intangible fixed assets 1,027 106Sale of tangible fixed assets 7,903 1,521

Net cash outflow for capital expenditure and financial investments (38,495) (11,176)

Acquisitions and disposalsPurchase of subsidiary undertakings – (17,355)Expenses of acquisitions (964) (7,448)Net cash acquired with subsidiary undertakings – 24,149

Net cash outflow from acquisitions (964) (654)

Net cash inflow/(outflow) before management of liquid resources and financing 6,184 26,479

Management of liquid resourcesIncrease in cash placed on short-term deposit (39,171) (1,033)

FinancingIssue of ordinary share capital 7,904 –Exercise of share options 29,085 2,180Expenses of share issues (2,089) (6,799)Capital element of finance leases (22) (705)Net increase in loans during the year (9,329) 7,439

Net cash inflow from financing 25,549 2,115

Increase/(decrease) in cash in the year (7,438) 27,561

Consolidated cash flow statement




Notes to the summary financial statement

1 Basis of preparationThe summary financial statement has been prepared in accordance with the accounting policies set out in the full UK statutory annualaccounts for the year ended 31 December 2000. The summary financial statement does not constitute statutory accounts within themeaning of Section 240 of the Companies Act 1985.

2 Directors’ remuneration, interests and transactionsAggregate remunerationThe total amounts for directors’ remuneration and other benefits were as follows:

2000 1999Years ended 31 December £000 £000

Emoluments 1,332 934Gains on exercise of share options 11,053 2,527Money purchase pension contributions 76 62

Total 12,461 3,523

Directors’ emolumentsFees/basic Taxable Annual

salary benefits bonuses 2000 1999Name of director Notes £000 £000 £000 £000 £000

ExecutiveR Stahel 380 15 209 604 432A C Russell 180 14 90 284 10S A Stamp – – – – 235Dr J W Totten 200 2 100 302 209

Non-executiveDr J H Cavanaugh 20.0 – – 20.0 –Dr H Simon – – – – 12Dr B J Price 20.0 – – 20.0 20Dr B Canavan 20.0 – – 20.0 16Dr Z Horovitz 20.5 – – 20.5 –R Nordmann 20.5 – – 20.5 –J Smith 20.5 – – 20.5 –J Spitznagel 20.5 – – 20.5 –Dr R Vukovich (i) – – – – –

Aggregate emoluments 902 31 399 1,332 934

i) Dr R Vukovich resigned from the Board on 14 February 2000 and waived his director’s fee of £20,000 per annum,(pro rata £2,500).

3 Earnings per shareEarnings per share has been calculated by dividing the profit on ordinary activities after taxation for each year by the weightedaverage number of shares in issue during those years, in accordance with FRS 14. The weighted average number of shares used incalculating fully diluted earnings per share has been adjusted for the effects of all dilutive potential ordinary shares in accordancewith FRS 14.

2000 1999Years ended 31 December £000 £000

Basic earnings per share 29.0p 8.7pDiluted earnings per share 28.1p 8.3pBasic earnings per share – weighted average shares 252,497,255 145,202,383Effect of dilutive stock options 8,411,015 6,326,876

Diluted earnings per share – weighted average shares 260,908,270 151,529,259

The Group’s consolidated financial statements set out in the annual review have been prepared under US GAAP, which differs incertain respects from UK GAAP. The principal differences between the Group’s accounting policies under US GAAP and UK GAAPare set out in the tables below:

Reconciliation of net profit/(loss) from US GAAP to UK GAAP2000 1999 2000 1999

Years ended 31 December $000 $000 £000 £000

Net income/(loss) as reported under US GAAP 76,171 (94,998) 51,837 (59,046)Adjustments to conform to UK GAAPMerger accounting adjustments– elimination of pooled profits and losses – (16,437) – (10,196)– restructuring costs charged to income (240) 87,877 (157) 54,513– merger transaction costs capitalised – 22,967 – 14,247Amortisation of capitalised goodwill 10,277 11,004 6,792 6,802Amortisation under acquisition accounting (34,538) (919) (22,824) (570)Recognition of deferred tax asset 3,842 (2,878) 2,626 (1,771)Stock option compensation costs 21,914 11,933 13,633 7,362Tax benefit from exercise of non-qualified stock options 30,782 1,967 20,488 1,229Amortisation of loan note 470 – 298 –NIC on share options – charge under UK GAAP (111) – (75) –Elimination of foreign exchange on US$ liabilities – – 584 –

Net income as reported under UK GAAP 108,567 20,516 73,202 12,570

Shareholders’ equity2000 1999 2000 1999

As of 31 December $000 $000 £000 £000

As reported under US GAAP 752,759 587,284 503,922 364,387Adjustments forCapitalisation of goodwill (200,914) (216,769) (134,499) (134,497)Goodwill amortisation 34,393 26,161 23,024 16,232Acquisition accounting for Roberts Pharmaceutical Corporation 646,942 735,242 433,085 456,191CorporationDeferred tax (33,269) (37,111) (22,271) (23,026)Loan note 465 – 311 –Difference in valuation of fixed asset investments 48 – 32 –Restructuring accrual disallowed under UK GAAP 170 – 114 –NIC on share options – charge under UK GAAP (111) – (75) –

As reported under UK GAAP 1,200,483 1,094,807 803,643 679,287


Summary of significant differences between US generally accepted accountingprinciples followed by the Group and UK generally accepted accounting principles.


Shareholders’ information

Registered office addressHampshire International Business ParkChineham, BasingstokeHampshire RG24 8EPRegistered in EnglandNo. 2883758

Investor relationsCléa RosenfeldInvestor Relations Manager

Tel +44 (0)1256 894000Fax +44 (0)1256 894716

Email [email protected] http://www.shire.com

Registrars and transfer officeAll administrative enquiries relating toshareholdings should be addressed toLloyds TSB Registrars, clearly stating the registered shareholder’s name andaddress.

Lloyds TSB RegistrarsThe CausewayWorthingWest SussexBN99 6DAEngland

US shareholdersi) ADSsThe Company’s American DepositaryShares (ADSs each representing threeordinary shares) are listed on Nasdaqunder the symbol “SHPGY”. The Companyfiles reports and other documents with the Securities and Exchange Commissionwhich are available for inspection andcopying at the SEC’s public referencefacilities or can be obtained by writing tothe Company Secretary.

ii) ADR DepositaryMorgan Guaranty Trust Company ofNew York is the depositary for ShirePharmaceuticals Group plc. All enquiriesconcerning American Depositary Receiptsrecords, certificates or transfer of ordinaryshares into ADSs should be addressed to:

Morgan Guaranty TrustCompany of New YorkPO Box 8205, BostonMA 02266-8205, USA

Tel +(1) 781 575 4328Fax +(1) 781 575 4088

Cautionary statementStatements included herein which are not historical facts are forward-looking statements. The 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 materialise, theCompany’s results could be materially affected. The risks and uncertainties include, but are not limited to, risks associated with theinherent uncertainty of pharmaceutical research, product development and commercialisation, the impact of competitive products,government regulation and approval, product liability claims and the lack of adequate insurance.

Acetylcholinesterase an enzyme thatbreaks down acetylcholine to choline and acetate.

Acetylcholinesterase inhibitora compound that inhibits the activity of acetylcholinesterase (see above).

Acne a common inflammatory disorder ofthe pilo-sebaceous glands. It involves theface, back and chest and is characterisedby the presence of blackheads andwhiteheads, papules and, in more severecases, cysts and scars.

Attention Deficit Hyperactivity Disorder(“ADHD”) a CNS disorder characterisedby inattention, impulsiveness andhyperactivity. It is primarily diagnosed inchildren.

Alzheimer’s disease a condition firstdescribed by the German physician,Alois Alzheimer. The term Senile Dementiaof the Alzheimer Types (“SDAT”) is used to cover dementias related to specificdegenerative changes in the braindescribed by Alzheimer.

AMPA antagonist an antagonist of theAMPA sub-type of glutamate receptorwithin the CNS.

Amyloid plaques an area of glycoproteinthat is found in the brains of Alzheimer’sdisease patients and appears to beinvolved in the disease process.

Angina a constrictive pain usually felt in the chest, which results from lack ofoxygen to the heart muscles.

Bioavailability an absolute term thatindicates measurement of both the rateand total amount (extent) of drug thatreaches the general circulation from an administered dosage form.

Central nervous system (“CNS”) thebrain and spinal cord.

Cocaine craving the craving which resultsfrom an addiction to cocaine.

Cocaine overdose administration ofan excessive dose of cocaine.

Epilepsy an episodic disturbance ofconsciousness during which seizureactivity occurs in the brain.

Hormone a chemical agent usuallyproduced by a specific gland or tissueand transported by blood to parts of thebody where it affects specific action ontarget organs.

Hormone replacement therapy (“HRT”)a medicament that replaces the naturalhormones lost by women at menopause(estrogens/progesterones).

Hyperphosphataemia an excessiveamount of phosphate in the blood.

Hypertension high blood pressure,ie elevation of the arterial blood pressureabove the normal range expected.

In vitro fertilisation the fertilisation ofa human egg outside the body which is then transferred back into the uterus to allow further development in the mother. The resultant baby is often known as a “test-tube baby”.

Metabolic bone disease an overall termembracing several distinct bone disorderswhich arise from disturbances in thebody’s metabolism of bone.

Osteoporosis a disease in which calciumand protein are progressively lost frombones until they become liable to fracture.

Parkinson’s disease a slowly progressivedisease characterised by a mask-like face,a characteristic tremor of resting muscles,muscle rigidity, a slowing of voluntarymovements and an abnormal gait andposture.

Phase I clinical trials normally conductedin healthy human volunteers following pre-clinical trials.

Phase II clinical trials to assess short-termsafety and preliminary efficacy in a limitednumber of patients with the relevantdisease.

Phase III clinical trials to undertake acomprehensive evaluation of safety andefficacy in patients with the relevantdisease.

Placebo an inactive agent used in clinicalstudies as a control with which tocompare a presumed active compound.

Post-surgical apnoea temporarycessation of breathing following surgery.

Pre-clinical trials studies of compoundsundertaken in the laboratory, in isolatedtissues or in living animals.

Premenstrual syndrome (“PMS”)a condition of irritability, emotionaldisturbance, headache and/or depressionaffecting some women for up to ten daysbefore menstruation. It usually disappearssoon after menstruation begins.

Stroke sudden damage to the tissue of the central nervous system which is usually the consequence of aninterruption to the flow of blood to thebrain. This damage often results from a primary disease in the heart or bloodvessels. A stroke can vary in severity froma passing weakness or tingling in a limb to a profound paralysis, coma and death.

Transdermal transcutaneous, passingthrough, entering or penetrating the skin.

Transdermal patch a device in which adrug is incorporated in the device (patch)applied to the skin to deliver the drugthrough the skin into the bloodstream.

Urinary incontinence a loss of urinewithout warning often associated withageing.


Glossary

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Printed in England by Litho-Tech

Shire Pharmaceuticals Group plc

Hampshire International Business ParkChinehamBasingstokeHampshireRG24 8EP

Tel +44 (0) 1256 894000Fax +44 (0) 1256 894708

http://www.shire.com

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