Shire made considerable progress in 2005 in positioning itself for success in a global pharmaceutical industry that faces unprecedented challenges and opportunities in the coming years. The challenges are multifaceted, and therefore require a disciplined and co-ordinated response on several fronts.
One challenge faced by Shire during 2005 was the Canadian government decision to withdraw ADDERALL XR, our medicine for treating Attention Deficit and Hyperactivity Disorder (ADHD), from the Canadian market. Shire's team demonstrated incredible success by reinstating ADDERALL XR in Canada during 2005, following a review by independent experts.
The traditional investment and commercialization model of the pharmaceutical industry that hinges on blockbuster brands could face considerable challenges in the coming years. This reaffirms the value of Shire's strategy of diversifying our product portfolio with a focus on the development and marketing of smaller, specialty products. With our operating model of cross-functional, global teams responsible for each of our main therapeutic areas, nimble sales forces dedicated to building relationships with specialist physicians and their patients, and a deep pipeline of innovative products with strong patent protection, we are best positioned to respond to changing marketplace dynamics.
Increasing competition from generic drugs and patent expirations present another major challenge to the pharmaceutical industry. We are responding by focusing R&D in the specialty area with products for smaller populations and biologics as well as inlicensing or developing drugs with strong intellectual property. Our success has been built on innovative products that focus on areas of unmet medical need and we will continue to pursue this proven formula.
In today's market, pharmaceutical companies need to look to additional partnering, licensing, mergers and acquisitions as ways to fill their product pipelines as well as to minimize challenges created by the industry's recent low productivity. Almost 75% of New Chemical Entities (NCEs) entering the market are specialty products and/or biologics, showing that the smaller, more nimble biotech model has proved particularly effective to date in yielding NCEs.
Our acquisition in 2005 of Transkaryotic Therapies Inc. (TKT), a US-based biopharmaceutical company specializing in therapies for the treatment of rare genetic diseases caused by protein deficiencies, fits this profile. The acquisition significantly builds our pipeline while bringing us a new, sustainable area of specialty pharmaceutical expertise in a market where there are only a small number of players. We continue to actively look at other acquisition opportunities involving companies with good products to fill our pipeline and pursue our growth strategy.
We have strengthened our European focus and we also have established a presence in emerging markets through relationships with distributors. We are well positioned to serve the growing needs of these markets.
We are adapting our development and sales processes to support a diverse product portfolio and global markets, to realize financial gains and continued growth.
2005 results under US GAAP
Shire's highly-focused growth strategy continued to produce superior results in 2005. Revenues were up 17% to $1,599.3 million (2004: $1,363.2 million). Although there were diluted losses per ordinary share for the year of 82.1¢ (2004: diluted earnings per share of 53.3¢), these included the write-off of $673 million of in-process R&D following the acquisition of TKT. Excluding this write-off, earnings per ordinary share would have been 51.8¢ in 2005.
On November 25, 2005, Shire plc, a Company incorporated in England and Wales ('Shire'), became the holding Company of Shire Pharmaceuticals Group plc (SPG) pursuant to a scheme of arrangement under Section 425 of the United Kingdom Companies Act 1985 ('the Scheme'). As a result of the Scheme, SPG is now a wholly-owned subsidiary of Shire.
New Board member
We are continuing to strengthen our Board of Directors with the appointment during 2005 of Patrick Langlois as a Non-executive Director and member of our Audit Committee. Mr Langlois, who held senior positions at Aventis S.A. and the Rhone-Poulenc Group, brings additional expertise to our Board, including a wealth of experience in financial and operational management within the global pharmaceutical industry.
Positioned for growth
Our industry offers significant growth opportunities for medium-sized specialty pharmaceutical companies like Shire. The global pharmaceuticals market is forecast to reach an annual growth rate of 8.2% from 2004 - 2011 and achieve $967 billion in sales in 2011. Such expansion is expected, however, to be based on the ability of pharmaceutical companies to adapt to changes in patient population, and target diseases of unmet medical need to maximize revenue potential. I am confident that we have the right strategy and the right people to be able to benefit from this future growth.
Dr James Cavanaugh