Shire Delivers Q2 2018 Product Sales Growth of 6% and Continued Regulatory and Pipeline Progress

July 31, 2018

Product sales grew to $3.8 billion driven by Immunology, recently launched products, and international expansion

Innovative pipeline continued to advance with 7 programs in registration and 16 in Phase 3

U.S. Food and Drug Administration (FDA) approval received for state-of-the-art plasma manufacturing facility

$0.9 billion in net operating cash flow enabled continued debt pay-down

July 31, 2018 – Shire plc (Shire) (LSE: SHP, NASDAQ: SHPG), the leading global biotech company focused on rare diseases, announces unaudited results for the three months ended June 30, 2018.

Flemming Ornskov, M.D., M.P.H., Shire Chief Executive Officer, commented:

“Shire continued to deliver on its key priorities of commercial execution, pipeline advancement, debt pay-down, and portfolio optimization during the second quarter. We drove product sales growth of 6% over the prior year period led by the strong performance of our Immunology franchise, continued uptake of our recently launched products, and expansion in international markets.

“During the quarter, our Board reached an agreement with the Takeda Board on the terms of a recommended offer for Takeda to acquire Shire. The acquisition is expected to close in H1 2019, subject to shareholder approval of both companies and additional regulatory approvals. In the meantime, we remain resolutely focused on execution as these results demonstrate.

“We also achieved important regulatory milestones and continued to advance our robust late stage pipeline. We received U.S. FDA approval for CINRYZE for pediatric use and a positive opinion from the Committee for Medicinal Products for Human Use (CHMP) recommending marketing authorization for VEYVONDI in Europe. In addition, we gained U.S. FDA approval for our state-of-the-art plasma manufacturing facility near Covington, Georgia supporting the continued growth of our immunoglobulin portfolio."

Financial Highlights	Q2 2018	Reported Growth	Non GAAP CER⁽¹⁾
Product sales⁽²⁾	$3,809 million	+6%	+4%
Total revenues⁽²⁾	$3,920 million	+5%	+3%

Operating income from continuing operations	$830 million	+108%
Non GAAP operating income⁽¹⁾	$1,492 million	+0%	-1%

Net income margin⁽³⁾⁽⁴⁾	16%	+10ppc
Non GAAP EBITDA margin^(1)(3)(4)	42%	-1ppc

Net income	$616 million	+156%
Non GAAP net income⁽¹⁾	$1,186 million	+4%

Diluted earnings per ADS⁽⁵⁾	$2.01	+154%
Non GAAP diluted earnings per ADS⁽¹⁾⁽⁵⁾	$3.88	+4%	+2%

Net cash provided by operating activities	$940 million	-23%
Non GAAP free cash flow⁽¹⁾	$756 million	-29%

⁽¹⁾ The Non GAAP financial measures included within this release are explained on pages 27 – 28, and are reconciled to the most directly comparable financial measures prepared in accordance with U.S. GAAP on pages 20 – 23.
⁽²⁾ In Q2 2018, we returned to a single segment approach to managing our business. This decision was precipitated by our Board's acceptance of Takeda's offer to acquire Shire and reflects our focus on the performance of the entire business as it operates in this current environment.
⁽³⁾ Percentage point change (ppc).
⁽⁴⁾ Calculated as a percentage of total revenues.
⁽⁵⁾ Diluted weighted average number of ordinary shares of 917.5 million.

Product sales growth

Achieved product sales growth of 6% driven primarily by Immunology, Internal Medicine, and Ophthalmics. Excluding the impact of Established Brands, defined on page 8, product sales increased 10%.
Delivered growth of recently launched products of 67%, primarily due to ADYNOVATE, CUVITRU, GATTEX, and XIIDRA.
Strong demand for our Immunology products which delivered 13% growth, including significant contributions from our subcutaneous immunoglobulin portfolio.

Operating performance

Generated Non GAAP diluted earnings per ADS of $3.88, an increase of 4%, as Q2 2018 benefited from higher product sales, partially offset by lower gross margins as Q2 2017 reflected favorability from the timing of changes in the costs to manufacture certain products.
Reported Non GAAP EBITDA margin of 42%, a slight decline from Q2 2017, with continued benefit from operating efficiencies in SG&A offset by lower gross margins as explained above.

Cash flow

Strong free cash flow enabled a $1,414 million reduction in Non GAAP net debt since December 31, 2017.

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For further information please contact:

Investor Relations
Christoph Brackmann	[email protected]	+41 41 288 4129
Sun Kim	[email protected]	+1 617 588 8175
Scott Burrows	[email protected]	+41 41 288 4195

Media
Katie Joyce	[email protected]	+1 781 482 2779

Dial in details for the live conference call for investors at 14:00 BST / 9:00 EDT on July 31, 2018:

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The quarterly earnings presentation will be available today at 13:00 BST / 8:00 EDT on:

- Shire.com Investors section

- Shire's IR Briefcase in the iTunes Store

NOTES TO EDITORS

Stephen Williams, Deputy Company Secretary, is responsible for arranging the release of this announcement.

Inside Information

This announcement contains inside information.

About Shire

Shire is the global biotechnology leader serving patients with rare diseases and specialized conditions. We seek to push boundaries through discovering and delivering new possibilities for patient communities who often have few or no other champions. Relentlessly on the edge of what’s next, we are serial innovators with a diverse pipeline offering fresh thinking and new hope. Serving patients and partnering with healthcare communities in over 100 countries, we strive to be part of the entire patient journey to enable earlier diagnosis, raise standards of care, accelerate access to treatment, and support patients. Our diverse portfolio of therapeutic areas includes Immunology, Hematology, Genetic Diseases, Neuroscience, Internal Medicine, Ophthalmics, and Oncology.

Championing patients is our call to action - it brings the opportunity - and responsibility - to change people’s lives.

www.shire.com

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

Statements included herein that are not historical facts, including without limitation statements concerning future strategy, plans, objectives, expectations and intentions, projected revenues, the anticipated timing of clinical trials and approvals for, and the commercial potential of, inline or pipeline products, are forward-looking statements. Such forward-looking statements involve a number of risks and uncertainties and are subject to change at any time. In the event such risks or uncertainties materialize, Shire’s results could be materially adversely affected. The risks and uncertainties include, but are not limited to, the following:

Shire’s products may not be a commercial success;
increased pricing pressures and limits on patient access as a result of governmental regulations and market developments may affect Shire’s future revenues, financial condition and results of operations;
Shire depends on third parties to supply certain inputs and services critical to its operations including certain inputs, services and ingredients critical to its manufacturing processes. Any disruption to the supply chain for any of Shire’s products may result in Shire being unable to continue marketing or developing a product or may result in Shire being unable to do so on a commercially viable basis for some period of time;
the manufacture of Shire’s products is subject to extensive oversight by various regulatory agencies. Regulatory approvals or interventions associated with changes to manufacturing sites, ingredients or manufacturing processes could lead to, among other things, significant delays, an increase in operating costs, lost product sales, an interruption of research activities or the delay of new product launches;
the nature of producing plasma-based therapies may prevent Shire from timely responding to market forces and effectively managing its production capacity;
Shire has a portfolio of products in various stages of research and development. The successful development of these products is highly uncertain and requires significant expenditures and time, and there is no guarantee that these products will receive regulatory approval;
the actions of certain customers could affect Shire’s ability to sell or market products profitably. Fluctuations in buying or distribution patterns by such customers can adversely affect Shire’s revenues, financial conditions or results of operations;
failure to comply with laws and regulations governing the sales and marketing of its products could materially impact Shire’s revenues and profitability;
Shire’s products and product candidates face substantial competition in the product markets in which it operates, including competition from generics;
Shire’s patented products are subject to significant competition from generics;
adverse outcomes in legal matters, tax audits and other disputes, including Shire’s ability to enforce and defend patents and other intellectual property rights required for its business, could have a material adverse effect on Shire’s revenues, financial condition or results of operations;
Shire may fail to obtain, maintain, enforce or defend the intellectual property rights required to conduct its business;
Shire faces intense competition for highly qualified personnel from other companies and organizations;
failure to successfully execute or attain strategic objectives from Shire’s acquisitions and growth strategy may adversely affect Shire’s financial condition and results of operations;
Shire’s growth strategy depends in part upon its ability to expand its product portfolio through external collaborations, which, if unsuccessful, may adversely affect the development and sale of its products;
a slowdown of global economic growth, or economic instability of countries in which Shire does business, could have negative consequences for Shire’s business and increase the risk of non-payment by Shire’s customers;
changes in foreign currency exchange rates and interest rates could have a material adverse effect on Shire’s operating results and liquidity;
Shire is subject to evolving and complex tax laws, which may result in additional liabilities that may adversely affect Shire’s financial condition or results of operations;
if a marketed product fails to work effectively or causes adverse side effects, this could result in damage to Shire’s reputation, the withdrawal of the product and legal action against Shire;
Shire is dependent on information technology and its systems and infrastructure face certain risks, including from service disruptions, the loss of sensitive or confidential information, cyber-attacks and other security breaches or data leakages that could have a material adverse effect on Shire’s revenues, financial condition or results of operations;
Shire faces risks relating to the expected exit of the United Kingdom from the European Union;
Shire incurred substantial additional indebtedness to finance the Baxalta acquisition, which has increased its borrowing costs and may decrease its business flexibility;
the potential uncertainty among our employees, customers, suppliers, and other business partners resulting from the announcement by Takeda Pharmaceutical Company Limited on May 8, 2018 of a recommended offer for Shire under the U.K. Takeover Code; and

a further list and description of risks, uncertainties and other matters can be found in Shire’s most recent Annual Report on Form 10-K and in Shire’s subsequent Quarterly Reports on Form 10-Q, in each case including those risks outlined in “ITEM 1A: Risk Factors”, and in subsequent reports on Form 8-K and other Securities and Exchange Commission filings, all of which are available on Shire’s website.

All forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by this cautionary statement. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof. Except to the extent otherwise required by applicable law, we do not undertake any obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise.

PROFIT FORECASTS

In its FY 2017 results announcement on February 14, 2018 (FY 2017 Announcement), Shire published its full year 2018 outlook for total revenue⁽¹⁾ of $15.4-$15.9 billion, GAAP diluted EPS of $7.30-$7.90, and non-GAAP diluted EPS of $14.90-$15.50 (Full Year 2018 Outlook). Shire also announced “We are committed to achieving our projected revenue target of $17-$18 billion in 2020” and “With the already disclosed manufacturing and SG&A cost reduction initiatives, we are on track to achieve mid-forties Non-GAAP EBITDA margin by 2020” (Mid-Term Outlook).

Certain of the statements on pages 4 and 23 of this announcement include a “profit forecast” for the purposes of Rule 28 of the City Code on Takeovers and Mergers (the “Code”) which was first contained in the FY 2017 Announcement.

In accordance with Rule 28.1(c) of the Code, the directors of Shire confirm that: (i) each of the Full Year 2018 Outlook and the Mid-Term Outlook remains valid and has been properly compiled on the basis of the assumptions stated in the FY 2017 Announcement; and (ii) the basis of accounting used for each of the Full Year 2018 Outlook and the Mid-Term Outlook is consistent with Shire’s accounting policies.

The Full Year 2018 Outlook and the Mid-Term Outlook do not take into account, and exclude the impact of, the anticipated completion of the sale of the Oncology franchise to Servier S.A.S. (as announced by Shire on April 16, 2018).

⁽¹⁾ Management is providing guidance for total revenue. Total revenue is comprised of total product sales and royalties & other revenues. Pursuant to a change in U.S. GAAP related to accounting for revenue, certain revenue formerly classified as royalties are now recorded as product sales.

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