7817 Annual Report 2009.qxd - Shire

More documents

Recommendations

Info

4 Shire plc Annual Report and Accounts 2009Chief Executive Officer’s reviewThe Shire storyPast, present and future.Angus Russell—Chief Executive OfficerLike most CEOs, I get my fair share of invitations to speakat conferences. The focus is usually on new trends in our ownindustry but some look more broadly at business strategy,marketing, or change management. Whatever the banner, there’sone single question I get asked more often than any other: howhave we managed to take a small specialty pharmaceutical startup,and turn it into one of the major world players in that field?It’s true that when you look at where Shire is today, and compareit with where we were even five years ago, the scale of the changeis pretty extraordinary, and those of us who have been part of thatchange can sometimes underestimate just how far we’ve come.2009 was an important year for us—in many ways a watershedyear—because the results we’ve achieved in the last twelvemonths are the direct result of a clear strategy that’s been inplace from the start, but has gained real momentum in the lastfive years. So it seems a good time to look again at the Shirestory, because the sort of thinking that’s producing strong resultstoday is also shaping the way we’re positioning the business forthe next phase of our growth.Phase I:Developing the modelOur business model has always been one of the most importantkeys to our success. The way we exploit that model is evolvingover time, especially as we grow internationally, but ourbasic approach has remained unchanged for many years:a focus on specialist physicians, niche markets, unmet needsand symptomatic conditions where the impact of a successfultreatment is immediate and tangible. This strategy started outas a positive response to a very practical business challenge—how do you build a successful pharmaceutical company whenyou have neither the resources to undertake large-scale high-riskresearch, nor the sales infrastructure to compete in mainstreamtherapy areas in primary care. Shire decided that the smartanswer was to focus on lower-risk research and development,and make maximum use of the oral drug delivery know-howwe already had in Pharmavene, a business we acquired in 1997and renamed Shire Laboratories.Shire Laboratories had the expertise to re-examine existing drugsand formulations like ADDERALL, and explore whether they couldbe delivered in a more efficient form. For example, if the requireddosage could be reduced to once a day from three or four times,
Shire plc Annual Report and Accounts 20095US GAAP highlightsRevenues$3,008MOperating income $620MNet income $492MDiluted earnings per ADS $2.69the drug would be more convenient for the patient—this wasthe genesis of ADDERALL XR. This approach proved to be anextremely effective way of developing new drugs for a company atour stage of development, because the chemical formulations wewere working on had already been through their safety trials, whichmeant we could get new versions to market quickly, and startgenerating the revenues we needed to re-invest in the business.ADDERALL became the world’s leading ADHD treatment in April2000, with over 30% of the then $1 billion US ADHD market.When ADDERALL XR was launched in 2001, it rapidly achieveda 26% share of a market that was worth around $4 billion by theend of 2008. Shire was becoming a significant industry player;but by 2002 it was obvious to us—if not to the rest of themarket—that the world was starting to change.With hindsight, it seems obvious that generics were going tohave an enormous and irreversible impact on the industry, but fewpeople could have anticipated how wide that impact would be,or how quickly it would take effect. The pharmaceutical sector hasalways worked within the constraints of limited-life patents, and itwas no secret that some of the world’s big blockbuster drugs weregoing to come off patent in the late ‘90s. What did surprise peoplewas the way the generic manufacturers used this opportunityto start challenging existing patents for the first time: the dynamicsof the entire pharmaceutical market were about to change.We soon saw exactly what this was going to mean in practice.We launched ADDERALL XR in 2001, but by 2003 we’d alreadyattracted a generic filing challenging its patents. By 2004approximately 60% of our product revenues came from ourADHD portfolio, and investors questioned how we would survivethe loss of exclusivity. At the same time Shire was also facing thefact that reformulated drugs only attracted a price premium inthe US. In the EU, reference pricing meant that health authoritieswould probably not pay more for a reformulated drug than theydid for the older version. So it became evident that the strategythat had initially worked well enough for Shire in the US wasgoing to prove more challenging in building a platform for growthin other international markets. This was a pivotal moment:if Shire could no longer benefit from reasonable exclusivity periodsfor drugs like ADDERALL XR, or sell them at a price that wouldrecover the investment, we would need a new approach.And we found it.Phase II:New technologies, new marketsIn 2003, the Board took a long hard look at where we were andhow we were going to grow the business going forward. Shiresold a range of reformulated drugs in the US, and a number ofother small-scale treatments on a market-by-market basis in theEU. There were no global drugs, which meant no internationaleconomies of scale. So we went back and re-evaluated thefeasibility of high-risk early-stage research, and dismissed it againfor the same reasons we had before. We then re-examined ourbasic ‘specialty pharma’ business model and decided that therationale behind it was still sound—but we needed another wayof delivering it. The challenge now was to sell our products ona global basis, at a price that made them economically viable.We also realized that reformulated products are vulnerableto generic challenges, and that new chemical entities havethe benefit of longer periods of US regulatory exclusivity. Trueinnovation and foresight in new therapies was the way forward.Around this time our work on developing anagrelide (AGRYLINin the US and XAGRID in the EU) gave us our first experienceof the ‘orphan’ drugs sector. Historically this has been lessattractive to very big competitors, because the numbers ofpatients affected is very small, which is the main reason whyregulatory exclusivity can be as much as seven years in theUS, and 10 years in Europe and some other parts of the world.
Page 1: Shire plc Annual Report and Account
Page 4 and 5: 2 Shire plc Annual Report and Accou
Page 12 and 13: 10 Shire plc Annual Report and Acco
Page 56 and 57:
54 Shire plc Annual Report and Acco
Page 58 and 59:
Page 60 and 61:
Page 62 and 63:
Page 64 and 65:
Page 66 and 67:
Page 68 and 69:
Page 70 and 71:
Page 72 and 73:
Page 74 and 75:
Page 76 and 77:
Page 78 and 79:
Page 80 and 81:
Page 82 and 83:
Page 84 and 85:
Page 86 and 87:
Page 88 and 89:
Page 90 and 91:
Page 92 and 93:
Page 94 and 95:
Page 96 and 97:
Page 98 and 99:
Page 100 and 101:
Page 102 and 103:
100 Shire plc Annual Report and Acc
Page 104 and 105:
Page 106 and 107:
Page 108 and 109:
Page 110 and 111:
Page 112 and 113:
Page 114 and 115:
Page 116 and 117:
Page 118 and 119:
Page 120 and 121:
Page 122 and 123:
Page 124 and 125:
Page 126 and 127:
Page 128 and 129:
Page 130 and 131:
Page 132 and 133:
Page 134 and 135:
Page 136 and 137:
Page 138 and 139:
Page 140 and 141:
Page 142 and 143:
Page 144 and 145:
Page 146 and 147:
Page 148:
Shire plc5 RiverwalkCitywest Busine
show all

7817 Annual Report 2009.qxd - Shire

Create successful ePaper yourself

Delete template?

Save as template?