7817 Annual Report 2009.qxd - Shire

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94 Shire plc Annual Report and Accounts 2009Notes to the consolidated financial statements In millions of US dollars, except where indicated10 INVENTORIESInventories are stated at the lower of cost or market and are analyzed as follows:December December31, 2009 31, 2008$’M$’MFinished goods 50.9 41.4Work-in-progress 102.1 78.7Raw materials 36.7 34.4189.7 154.5At December 31, 2009 inventories included $18.8 million (December 31, 2008: $11.5 million) of costs capitalized prior to the regulatory approval of therelevant product.11 ASSETS HELD-FOR-SALEAt December 31, 2009 assets held-for-sale had a carrying value of $1.7 million, represented by intangible assets and attributed goodwill for certainproducts divested to Almirall in 2007 (December 31, 2008: $16.6 million). The recognition of the gains arising on the disposal of these products andthe de-recognition of the related assets have been deferred pending the completion of the transfer of the relevant regulatory and other consentsto the acquirer (see Note 6). These assets divested to Almirall form part of the Specialty Pharmaceuticals operating segment.At December 31, 2008 assets held-for-sale also included $14.9 million for the operations of JOI and JPT. In May 2009, JPT was divested for cashconsideration of $6.7 million, and a loss on disposal of $0.5 million has been recognized within discontinued operations for the year to December 31,2009. During the second quarter of 2009 the Group closed JOI and recorded a re-measurement adjustment of $5.9 million to record the JOI assetsat the lower of their fair value and carrying value (see Note 4).12 PREPAID EXPENSES AND OTHER CURRENT ASSETSDecember December31, 2009 31, 2008$’M$’MPrepaid expenses 44.9 47.6Income tax receivable — 33.2Value added taxes receivable 37.3 19.3Other current assets 31.3 41.3113.5 141.413 INVESTMENTSDecember December31, 2009 31, 2008$’M$’MInvestments in private companies 3.9 19.3Available-for-sale securities 87.0 6.1Equity method investments 14.8 17.5105.7 42.9Disposal of Virochem Pharma Inc. (’Virochem’)On March 12, 2009 the Group completed the disposal of its cost investment in Virochem to Vertex in a cash and stock transaction. The disposal was partof a transaction entered into by all the shareholders of Virochem with Vertex. The carrying amount of the Group’s investment in Virochem on March 12,2009 was $14.8 million. Shire received total consideration of $19.2 million in cash and two million Vertex shares (valued at $50.8 million) from the disposal,recognizing a gain on disposal of $55.2 million which has been recognized in Other income/(expense), net during the year to December 31, 2009.Additional consideration of $2.0 million in cash and 0.2 million Vertex shares is being held in escrow until March 11, 2010 pending any warranty claimsand breaches of representations made by Virochem and by all selling shareholders, including Shire. The escrow conditions are considered substantiveand hence a gain has not been recognized relating to these amounts in the year to December 31, 2009. The Vertex stock received has beenaccounted for as an available-for-sale investment.Disposal of Questcor Pharmaceutical Inc. (‘Questcor’)For the year to December 31, 2008 Other (expense)/income net includes a gain of $9.4 million from the sale of Shire’s available-for-sale investmentin Questcor, a specialty pharmaceutical company focused on providing prescription drugs for central nervous system disorders. Shire received cashconsideration of $10.3 million on the sale of this investment.
Shire plc Annual Report and Accounts 20099513 INVESTMENTS continuedOther-than-temporary impairment of available-for-sale securitiesThe Group recorded other-than-temporary impairments of $0.8 million, $58.0 million and $3.0 million against its available-for-sale securities in the yearsto December 31, 2009, 2008 and 2007 respectively.During the year to December 31, 2008 the Group recognized impairment charges of $44.3 million relating to its investment in Renovo Group plc,representing unrealized holding losses that were reclassified out of other comprehensive income into earnings in 2008, as management concluded thatthe impairment was other-than-temporary. The decline in the market value of the Group’s investment in Renovo Group plc initially arose from the resultsof clinical trials for JUVISTA which were announced over 2007 and 2008. During the third quarter of 2008, in considering whether the decline in valuewas temporary or ‘other-than-temporary’ the Group considered the following factors: the severity of the decline from historical cost (87%) and itsduration (eleven months); market analysts’ targets of Renovo Group plc’s share price for the next 18–24 months; and the revised expected filing datefor JUVISTA due to the adoption of a sequential rather than parallel Phase 3 development plan.These factors, together with the significant decline in global equity markets during the third quarter of 2008 meant that the Group was unable toreasonably estimate the period over which a full recovery in the value of its investment in Renovo Group plc could occur. As such, the Group concludedthat the decline in value was ‘other-than-temporary’. Therefore the full difference between the book value of the investment and the fair (market) valuewas recognized as an other-than-temporary impairment. Accordingly the Group recognized an impairment charge of $44.3 million for its investment inRenovo Group plc through the consolidated statements of operations in the third quarter of 2008. For purposes of computing the impairment chargefair value was assumed to be £0.26 per share, representing the closing price of Renovo Group plc securities on the London Stock Exchange onSeptember 30, 2008.14 PROPERTY, PLANT AND EQUIPMENT, NETDecember December31, 2009 31, 2008$’M$’MLand and buildings 398.7 267.6Office furniture, fittings and equipment 280.5 228.2Warehouse, laboratory and manufacturing equipment 114.5 80.1Assets under construction 193.2 164.3986.9 740.2Less: Accumulated depreciation (310.1) (206.0)676.8 534.2Depreciation expense for the years to December 31, 2009, 2008 and 2007 was $105.0 million, $77.2 million, and $65.3 million respectively. Theexpense included impairment losses of $6.3 million, $2.2 million and $1.8 million in the years to December 31, 2009, 2008 and 2007 respectively.15 GOODWILLDecember December31, 2009 31, 2008$’M$’MGoodwill arising on businesses acquired 384.7 350.8During the year to December 31, 2009 the Group acquired the worldwide rights (excluding the US, Canada and Barbados) to EQUASYM IR and XLfor a total consideration of $91.0 million, which resulted in goodwill of $13.2 million (see Note 4). The goodwill has been assigned to the SpecialtyPharmaceuticals segment.During the year to December 31, 2008 the Group acquired a 98.6% voting interest in Jerini for cash consideration of $556.5 million which resultedin goodwill of $148.0 million (see Note 4). This goodwill has been attributed to the HGT reporting segment.At December 31, 2009 goodwill of $214.5 million (2008: $202.4 million) is held in the Specialty Pharmaceuticals segment and $170.2 million (2008:$148.4 million) in the HGT segment.2009 2008$’M$’MAs at January 1, 350.8 219.4Acquisitions (including finalisation of purchase price allocation) 27.1 148.0Foreign currency translation 6.8 (16.6)As at December 31, 384.7 350.8
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