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Half-yearly Report

August 4, 2017 - Shire plc (LSE: SHP, NASDAQ: SHPG), ("Shire" / the

"Group") in accordance with the Financial Conduct Authority's Disclosure

Guidance and Transparency Rules, is publishing its Half-yearly Report

for the six months ended June 30, 2017.

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On August 3, 2017, the Group announced its results for the same period.

Stephen Williams

Deputy Company Secretary

For further information please contact:

Investor Relations

Ian Karp ikarp@shire.com +1 781 482 9018

Robert Coates rcoates@shire.com +44 1256 894874

Media

Lisa Adler lisa.adler@shire.com +1 617 588 8607

Debbi Ford debbi.ford@shire.com +1 617 949 9083

NOTES TO EDITORS

About Shire

Shire is the leading global biotechnology company focused on serving

people with rare diseases. We strive to develop best-in-class products,

many of which are available in more than 100 countries, across core

therapeutic areas including Hematology, Immunology, Neuroscience,

Ophthalmics, Lysosomal Storage Disorders, Gastrointestinal / Internal

Medicine / Endocrine and Hereditary Angioedema; and a growing franchise

in Oncology.

Our employees come to work every day with a shared mission: to develop

and deliver breakthrough therapies for the hundreds of millions of

people in the world affected by rare diseases and other high-need

conditions, and who lack effective therapies to live their lives to the

fullest.

www.shire.com

Shire plc

Half-yearly Report 2017

Registered in Jersey, No. 99854, 22 Grenville Street, St Helier, Jersey

JE4 8PX

Contents

The "safe harbor" statement under the Private Securities

Litigation Reform Act of 1995

Trademarks

Chief Executive Officer's review

Business overview for the six months to June 30, 2017

Results of operations for the six months to June 30,

2017 and June 30, 2016

Principal risks and uncertainties

Directors' responsibility statement

Unaudited consolidated balance sheets at June 30,

2017 and December 31, 2016

Unaudited consolidated statements of operations for

the six months to June 30, 2017 and June 30, 2016

Unaudited consolidated statements of comprehensive

income for the six months to June 30, 2017

and June 30, 2016

Unaudited consolidated statement of changes in equity

for the six months to June 30, 2017

Unaudited consolidated statement of cash flows for

the six months to June 30, 2017 and

June 30, 2016

Notes to the unaudited consolidated financial statements

Independent review report to Shire plc

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, 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 conducts its own manufacturing operations for certain of its

products and is reliant on third party contract manufacturers to

manufacture other products and to provide goods and services. Some of

Shire's products or ingredients are only available from a single approved

source for manufacture. 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;

-- certain of Shire's therapies involve lengthy and complex processes, which

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;

-- Shire's products and product candidates face substantial competition in

the product markets in which it operates, including 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 the Group's revenues, financial condition or

results of operations;

-- inability to successfully compete for highly qualified personnel from

other companies and organizations;

-- failure to achieve the strategic objectives, including expected operating

efficiencies, cost savings, revenue enhancements, synergies or other

benefits at the time anticipated or at all with respect to Shire's

acquisitions, including of NPS Pharmaceuticals Inc. ("NPS"), Dyax Corp.

("Dyax") or Baxalta Incorporated ("Baxalta"), 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, as well as changes in foreign

currency exchange rates and interest rates, that adversely impact the

availability and cost of credit and customer purchasing and payment

patterns, including the collectability of customer accounts receivable;

-- failure of a marketed product to work effectively or if such a product is

the cause of adverse side effects could result in damage to Shire's

reputation, the withdrawal of the product and legal action against Shire;

-- investigations or enforcement action by regulatory authorities or law

enforcement agencies relating to Shire's activities in the highly

regulated markets in which it operates may result in significant legal

costs and the payment of substantial compensation or fines;

-- 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 incurred substantial additional indebtedness to finance the Baxalta

acquisition, which has increased its borrowing costs and may decrease its

business flexibility; 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 the Group or any person

acting on its 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, the

Group does not undertake any obligation to update or revise

forward-looking statements, whether as a result of new information,

future events or otherwise.

Trademarks

The Group owns or has rights to trademarks, service marks or trade names

that are used in connection with the operation of its business. In

addition, its names, logos and website names and addresses are owned by

the Group or licensed by the Group. The Group also owns or has the

rights to copyrights that protect the content of its solutions. Solely

for convenience, the trademarks, service marks, trade names and

copyrights referred to in this Quarterly Report on Form 10-Q are listed

without the (c), (R) and (TM) symbols, but the Group will assert, to the

fullest extent under applicable law, its rights or the rights of the

applicable licensors to these trademarks, service marks, trade names and

copyrights.

This Half-yearly Report may include trademarks, service marks or trade

names of other companies. The Group's use or display of other parties'

trademarks, service marks, trade names or products is not intended to,

and does not imply a relationship with, or endorsement or sponsorship of

the Group by, the trademark, service mark or trade name.

Chief Executive Officer's review

We are pleased to enclose our financial results for the six-month period

ended June 30, 2017. This Half-yearly Report includes condensed

consolidated financial statements prepared in accordance with generally

accepted accounting principles in the United States of America ("U.S.

GAAP").

Flemming Ornskov, M.D., M.P.H. Shire's Chief Executive Officer,

commented:

"Shire delivered strong top-line growth and significantly advanced our

pipeline during the first half of 2017. We saw significant contributions

from our broad and diverse portfolio and further realized cost synergies

from our integration with Baxalta, which continued ahead of schedule.

"Total reported product sales in the first half of 2017 were $7.0

billion, up 77% against first half of 2016, primarily due to the

inclusion of Baxalta product revenues. We also delivered product sales

growth in Shire's legacy business versus first half of 2016: Genetic

Diseases up 8% to $1,401 million and Internal Medicine up 12% to $903

million.

"We continued to drive the late-stage clinical pipeline, with milestones

achieved in programs across our core therapeutic areas. Most recently,

we announced positive topline data from our Phase 3 pivotal trial of

SHP643 in Hereditary Angioedema, and anticipate submission of the BLA in

late 2017 or early 2018. MYDAYIS, a once-daily treatment for patients

with ADHD, received US FDA approval and will be launched in September.

In addition, we were granted European Union (EU) Conditional Marketing

Authorisation for NATPAR (Parathyroid Hormone) for the treatment of

patients with chronic hypoparathyroidism, and received European

Medicines Agency (EMA) validation of the VEYVONDI [von Willebrand factor

(Recombinant)] Marketing Authorization Application for treatment of von

Willebrand Disease (VWD).

"We are at an exciting inflection point, with both our rare disease and

neuroscience businesses performing strongly and each having significant

growth potential over the coming years. The strength and scale of our

business provides us with the opportunity to further optimize our

franchise portfolio - one of our key priorities communicated earlier

this year. By year end, we expect to complete a formal evaluation of the

full range of strategic options for the neuroscience franchise,

including the potential for its independent public listing.

"As we enter the second half of 2017, we are focused on generating

strong organic growth while continuing to deliver on our key priorities

- launching more than 80 products globally by leveraging our expanded

commercial platform, progressing our late-stage pipeline, integrating

Baxalta, and paying down debt. We remain very confident about Shire's

long-term prospects."

Flemming Ornskov, M.D., M.P.H.

Chief Executive Officer

Business overview for the six months to June 30, 2017

The following discussion should be read in conjunction with the

unaudited condensed consolidated financial statements and related notes

appearing elsewhere in this Half-yearly Report.

Significant Events in the Six Months Ended June 30, 2017 and Recent

Developments

Corporate Strategy

Shire to assess strategic options for its Neuroscience franchise

-- As part of the Board's ongoing commitment to optimize Shire's portfolio

and strategic focus, Shire is assessing strategic options for our

Neuroscience franchise. These options may include the independent public

listing of the Neuroscience franchise. Shire intends to complete this

strategic review by year end.

Business Development

Shire entered into a licensing agreement for SHP659 (formerly known as

P-321)

-- On May 1, 2017, Shire announced it agreed to license the exclusive

worldwide rights to P-321 from Parion Sciences. P-321 is a Phase 2

investigational epithelial sodium channel inhibitor for the potential

treatment of dry eye disease in adults. Shire will develop, and if

approved, commercialize this compound which would expand our leadership

position in ophthalmics and provide another important treatment option

for patients with dry eye disease.

Shire entered into a licensing agreement for Novimmune bi-specific

antibody

-- On July 18, 2017, Shire entered into a licensing agreement with Novimmune

S.A. The license grants Shire exclusive worldwide rights to develop and

commercialize a bi-specific antibody in pre-clinical development for the

treatment of hemophilia A and hemophilia A patients with inhibitors.

Products

FIRAZYR for the treatment of Hereditary Angioedema ("HAE") in Japan

-- On July 6, 2017, Shire submitted a Japanese New Drug Application to the

Pharmaceutical and Medical Devices Agency in Japan for the treatment of

HAE.

VEYVONDI for the treatment of adults affected by Von Willebrand Disease

("VWD")

-- On June 22, 2017, Shire announced that the European Medicines Agency

("EMA") validated the Marketing Authorization Application for VEYVONDI to

prevent and treat bleeding episodes and peri-operative bleeding in adults

(age 18 and older) diagnosed with VWD.

MYDAYIS for the treatment of attention deficit hyperactivity disorder

("ADHD")

-- On June 20, 2017, Shire announced that the U.S. Food and Drug

Administration ("FDA") approved MYDAYIS (mixed salts of a single-entity

amphetamine product), a once-daily treatment comprised of three different

types of drug-releasing beads for patients aged 13 years and older with

ADHD.

NATPAR for the treatment of chronic hypoparathyroidism

-- On April 26, 2017, Shire announced the European Commission (EC) granted

Conditional Marketing Authorization for NATPAR (rhPTH[1-84]), the first

recombinant human protein with the full length 84-aminoacid sequence of

endogenous parathyroid hormone (PTH), as an adjunctive treatment for

adult patients with chronic hypoparathyroidism who cannot be adequately

controlled with standard therapy alone.

VYVANSE for the treatment of ADHD and Binge Eating Disorder ("BED")

-- On April 18, 2017, Shire announced that VYVANSE (lisdexamfetamine

dimesylate) CII is now available in the United States in a new chewable

tablet formulation, following FDA approval in January 2017.

INTUNIV for the treatment of ADHD in Japan

-- On March 30, 2017, Shire's partner in Japan, Shionogi & Co., Ltd,

received approval from the Japanese Ministry of Health, Labor and Welfare

to manufacture and market INTUNIV for ADHD in Japan.

-- On May 29, 2017, Shire's partner in Japan, Shionogi & Co., Ltd, launched

INTUNIV for the treatment of ADHD in children and adolescents from six to

17 years old.

CINRYZE for the treatment of HAE

-- On March 16, 2017, the EC approved a label extension for CINRYZE (C1

inhibitor [human]), broadening its use to children with HAE. CINRYZE is

now the first and only treatment indicated for routine prevention of

angioedema attacks in children aged six years or older who have severe

and recurrent attacks of HAE and cannot tolerate or are not adequately

protected by oral preventative treatments, or who are inadequately

managed with repeated acute treatment. CINRYZE is also now approved for

acute treatment and pre-procedure prevention of angioedema attacks in

children aged two years or older with HAE.

Pipeline

SHP654 for the treatment of hemophilia A

-- On July 6, 2017, Shire announced the submission of an Investigational New

Drug ("IND") application to the FDA for SHP654, an investigational factor

VIII (FVIII) gene therapy for the treatment of hemophilia A.

SHP643 for the treatment of HAE

-- On May 18, 2017, Shire announced positive topline Phase 3 results for the

HELP Study, which evaluated the efficacy and safety of subcutaneously

administered lanadelumab in patients 12 years of age or older with HAE.

The study met its primary endpoint and all secondary endpoints.

SHP647 for the treatment of ulcerative colitis

-- On May 17, 2017, Shire announced the publication of positive Phase 2

results for the TURANDOT Study. The study met its primary endpoint,

demonstrating significantly greater remission rates in patients receiving

the anti-MAdCAM antibody. Shire continues to work towards the initiation

of a pivotal Phase 3 trial for SHP647 in the second half of 2017.

SHP680 for the treatment of multiple neurological conditions

-- Shire is advancing clinical development of SHP680 targetting indications

for multiple neurological conditions with high unmet need. SHP680 is a

new chemical entity prodrug of d-amphetamine, which has previously been

studied in Phase 1 clinical trials, demonstrating a unique PK profile. It

belongs to a class of molecules with an established and well understood

safety profile.

SHP655 for the treatment of congenital thrombotic thrombocytopenic

purpura (cTTP)

-- On March 22, 2017, the FDA granted Fast Track Designation for recombinant

ADAMTS13 (SHP655) for the treatment of acute episodes of cTTP in patients

with a congenital deficiency of the von Willebrand factorcleaving

protease ADAMTS13.

SHP640 for the treatment of bacterial and adenoviral conjunctivitis

-- The global Phase 3 clinical development program will have clinical sites

in over 20 countries. Patient recruitment has started and the first

patient visit occurred in March 2017. The topline data is expected in Q2

2018.

SHP639 for the treatment of Glaucoma

-- In March 2017, Shire submitted an (IND) application for SHP639. The IND

is for the initiation of first in human clinical studies of SHP639 for

the reduction of elevated intraocular pressure in patients with primary

open-angle glaucoma or ocular hypertension.

Board Changes

In accordance with Shire's normal succession planning, the Group

announced that the following Non-Executive Directors will retire from

the Board with effect from the conclusion of the 2018 Annual General

Meeting ("AGM"):

-- William M. Burns, Senior Independent Director

-- David Ginsburg, Chairman of the Science & Technology Committee

-- Anne Minto, Chairman of the Remuneration Committee

Al Stroucken, Non-Executive Director, assumed the position of Chairman

of the Remuneration Committee effective August 3, 2017. Anne Minto will

continue to serve as a member of the Remuneration Committee to enable a

period of transition until her retirement from the Board. Anne will

fully support Al in the shareholder consultation process ahead of the

publication of the new Directors' Remuneration Policy that will be put

forward for shareholder approval at the 2018 AGM. The Board, supported

by the Nomination & Governance Committee, will continue to evaluate

Board and committee membership, including succession plans for the roles

of Senior Independent Director and Chairman of the Science & Technology

Committee, and will announce further changes once finalized.

Dividend

In respect of the six months ended June 30, 2017, the Board resolved to

pay an interim dividend of 0.0509 U.S. dollars per ordinary share (2016:

0.0463 U.S. dollars per ordinary share).

Dividend payments will be made in Pounds sterling to holders of ordinary

shares and in U.S. dollars to holders of ADSs. A dividend of 0.0385 (1)

Pounds sterling per ordinary share (2016: 0.0351 Pounds sterling) and

0.1527 U.S. dollars per ADS (2016: 0.1389 U.S. dollars) will be paid on

October 20, 2017, to shareholders on the register as of the close of

business on September 8, 2017.

Holders of ordinary shares are notified that, in order to receive UK

sourced dividends via Shire's Income Access Share arrangements ("IAS

Arrangements"), they need to have submitted a valid IAS Arrangements

election form to the Group's Registrar, Equiniti, by no later than 5pm

(BST) on September 22, 2017. Holders of ordinary shares are advised

that:

-- any previous elections made using versions of the IAS Arrangements

election form in use prior to February 16, 2016, and any elections deemed

to have been made prior to April 28, 2016, are no longer valid; and

-- if they do not elect, or have not elected using the newly formatted IAS

Arrangements election forms published on or after February 16, 2016, to

receive UK sourced dividends via Shire's IAS Arrangements, their

dividends will be Irish sourced and therefore incur Irish dividend

withholding tax, subject to applicable exemptions.

Internet links to the newly formatted IAS Arrangements election forms

can be found at:

http://investors.shire.com/shareholder-information/shareholder-forms.aspx

(1) Translated using a GBP:USD exchange rate of 1.3221.

Going Concern

As stated in Note 1 to the unaudited consolidated financial statements,

the Directors have a reasonable expectation that the Group has adequate

resources to continue in operational existence for the foreseeable

future. Accordingly, the Directors consider it appropriate to adopt the

going concern basis of accounting in preparing the Half-yearly Report.

Results of Operations for the Three and Six Months Ended June 30, 2017

and 2016

Product sales

The following table provides an analysis of the Group's Product sales:

(In millions,

except %) Three months ended June 30, Six months ended June 30,

Product Product

sales sales

Product sales: 2017 2016 growth 2017 2016 growth

HEMOPHILIA $ 743.9 $ 275.6 N/M $1,394.3 $ 275.6 N/M

INHIBITOR

THERAPIES 220.7 74.0 N/M 441.2 74.0 N/M

Hematology total 964.6 349.6 N/M 1,835.5 349.6 N/M

CINRYZE 175.9 173.0 2% 401.8 337.2 19%

ELAPRASE 161.0 154.0 5% 301.6 277.6 9%

FIRAZYR 137.4 136.7 1% 265.9 265.0 -%

REPLAGAL 122.1 118.4 3% 231.8 221.6 5%

VPRIV 87.9 88.0 -% 167.7 171.6 (2)%

KALBITOR 20.6 17.7 16% 32.3 28.1 15%

Genetic Diseases

total 704.9 687.8 2% 1,401.1 1,301.1 8%

IMMUNOGLOBULIN

THERAPIES 510.5 138.2 N/M 1,008.8 138.2 N/M

BIO THERAPEUTICS 172.2 51.3 N/M 350.1 51.3 N/M

Immunology total 682.7 189.5 N/M 1,358.9 189.5 N/M

VYVANSE 518.2 517.7 -% 1,081.9 1,026.9 5%

ADDERALL XR 71.4 101.8 (30)% 136.3 200.6 (32)%

MYDAYIS 15.7 - N/A 15.7 - N/A

Other

Neuroscience 30.1 35.7 (16)% 54.8 57.8 (5)%

Neuroscience

total 635.4 655.2 (3)% 1,288.7 1,285.3 -%

LIALDA/MEZAVANT 207.8 193.7 7% 382.9 361.7 6%

PENTASA 83.3 72.9 14% 152.4 136.9 11%

GATTEX/REVESTIVE 75.3 44.5 69% 144.3 96.2 50%

NATPARA 34.5 19.9 73% 64.2 35.5 81%

Other Internal

Medicine 83.4 88.7 (6)% 159.3 173.3 (8)%

Internal Medicine

total 484.3 419.7 15% 903.1 803.6 12%

Oncology total 62.5 20.3 N/M 120.8 20.3 N/M

Ophthalmology

total 57.4 - N/A 96.0 - N/A

Total Product

sales $3,591.8 $2,322.1 55% $7,004.1 $3,949.4 77%

N/M: Baxalta sales have only been included in the consolidated results

of the Group since the date of acquisition; therefore, Product sales

growth as a percentage is not meaningful.

Hematology

Hematology was acquired with Baxalta in June 2016 and includes sales of

recombinant and plasma-derived hemophilia products (primarily factor

VIII and factor IX) and inhibitor therapies. Hematology product sales,

totaling $964.6 million and $1,835.5 million, respectively, are included

in Product sales for the three and six months ended June 30, 2017,

representing 27% and 26% of Shire's reported Product sales,

respectively.

Genetic Diseases

Genetic Diseases product sales for the three and six months ended June

30, 2017 increased by 2% and 8%, respectively, compared to the

corresponding periods in 2016. Growth was primarily driven by the

Group's lysosomal storage diseases portfolio and CINRYZE.

ELAPRASE product sales for the three and six months ended June 30, 2017

increased by 5% and 9%, respectively, while REPLAGAL sales increased by

3% and 5%, respectively, compared to the corresponding periods in 2016.

Both products benefited from an increase in the number of patients on

therapy.

CINRYZE product sales for the three and six months ended June 30, 2017

increased by 2% and 19%, respectively. The growth in the three months

ended June 30, 2017 was primarily due to an increase in number of

patients, partially offset by destocking during the second quarter of

2017. The growth in the six months ended June 30, 2017 was primarily due

to an increase in number of patients and the impact of U.S. stocking in

the first half of 2017.

Immunology

Immunology was acquired with Baxalta in June 2016 and includes product

sales of antibody-replacement immunoglobulin and bio therapeutics

therapies. Immunology product sales, totaling $682.7 million and

$1,358.9 million, respectively, are included in Product sales for the

three and six months ended June 30, 2017, representing 19% of Shire's

reported Product sales, in each respective period.

Neuroscience

Neuroscience product sales for the three months ended June 30, 2017

decreased by 3% compared to the corresponding period in 2016, primarily

driven by ADDERALL XR. Product sales for the six months ended June 30,

2017 increased less than 1% compared to the corresponding period in

2016.

ADDERALL XR sales decreased by 30% and 32%, respectively, during the

three and six months ended June 30, 2017 compared to the corresponding

periods in 2016, primarily due to additional generic competition since

August 2016.

VYVANSE product sales increased by less than 1% and 5% for the three and

six months ended June 30, 2017, respectively, compared with the

corresponding periods in 2016. The three months ended June 30, 2017

growth was impacted by destocking in the second quarter of 2017 compared

to stocking in the corresponding period in 2016. During the six months

ended June 30, 2017, VYVANSE sales increased due to year-over-year

prescription growth in the U.S., the benefit of a price increase taken

since the first quarter of 2016 and growth in international markets,

partially offset by destocking.

MYDAYIS, approved by the FDA on June 20, 2017, contributed $15.7 million

of product sales related to launch stocking.

Internal Medicine

Internal Medicine product sales increased by 15% and 12%, respectively,

during the three and six months ended June 30, 2017, compared to the

corresponding periods in 2016, with growth primarily driven by

GATTEX/REVESTIVE and NATPARA.

GATTEX/REVESTIVE and NATPARA reported increased product sales of 69% and

73% during the three months ended June 30, 2017 and 50% and 81% during

the six months ended June 30, 2017, respectively, primarily due to an

increase in the numbers of patients on therapy.

During the second quarter of 2017, a generic version of LIALDA was

approved by the FDA; Shire expects generic competition to negatively

impact future LIALDA product sales.

Oncology

Oncology was acquired with Baxalta in June 2016 and includes sales of

ONCASPAR and ONIVYDE, the latter of which was approved in the EU on

October 18, 2016. Oncology product sales, totaling reported sales of

$62.5 million and $120.8 million respectively, are included in Product

sales for the three and six months ended June 30, 2017, representing 2%

Shire's reported Product sales, in each respective period.

Ophthalmology

Ophthalmology product sales relate to XIIDRA, which was made available

to patients starting on August 29, 2016. XIIDRA contributed $57.4

million and $96.0 million of product sales during the three and six

months ended June 30, 2017.

Royalties and other revenues

The following table provides an analysis of Shire's income from

royalties and other revenues:

Three months ended June

30, Six months ended June 30,

(In millions,

except %) 2017 2016 Change % 2017 2016 Change %

SENSIPAR

Royalties $ 46.4 $ 35.6 30% $ 85.3 $ 73.5 16%

ADDERALL XR

Royalties 13.4 5.2 158% 25.9 11.0 135%

FOSRENOL

Royalties 12.1 11.4 6% 20.7 20.6 -%

3TC and ZEFFIX

Royalties 8.2 12.1 (32)% 22.7 27.1 (16)%

Other

Royalties and

Revenues 73.9 42.7 73% 159.4 56.8 181%

Total

Royalties and

other

revenues $154.0 $107.0 44% $314.0 $189.0 66%

Royalties and other revenues increased 44% and 66%, respectively, during

the three and six months ended June 30, 2017 compared to the

corresponding periods in 2016, primarily due to the inclusion of

contract manufacturing revenue acquired with Baxalta.

Cost of sales

Cost of sales as a percentage of Total revenues decreased to 30% for the

three months ended June 30, 2017, compared to 32% for the corresponding

period in 2016, primarily due to lower expense related to the unwind of

inventory fair value adjustments. Cost of sales as a percentage of Total

revenues increased to 33% for the six months ended June 30, 2017,

compared to 25% in the corresponding period in 2016, primarily due to

the impact of the unwind of inventory fair value adjustments and

increased depreciation following the acquisition of Baxalta on June 3,

2016.

For the three and six months ended June 30, 2017, Cost of sales included

depreciation of $67.0 million and $139.1 million, respectively (2016:

$22.4 million and $30.7 million, respectively).

Research and development

In the three and six months ended June 30, 2017, Research and

development expenses increased by $247.6 million and $409.8 million, or

84% and 80%, respectively, compared to the corresponding periods in

2016, primarily due to milestone and upfront payments associated with

license arrangements and the inclusion of Baxalta costs.

For the three and six months ended June 30, 2017, Research and

development included depreciation of $12.8 million and $26.2 million,

respectively (2016: $5.8 million and $11.7 million, respectively).

Selling, general and administrative

In the three and six months ended June 30, 2017, Selling, general and

administrative expenses increased by $223.8 million and $637.8 million,

or 33% and 55%, compared to the corresponding periods in 2016, primarily

due to the inclusion of Baxalta related costs and increased XIIDRA

marketing costs.

For the three and six months ended June 30, 2017, Selling, general and

administrative expenses included depreciation of $40.9 million and $78.3

million, respectively (2016: $19.7 million and $39.8 million,

respectively).

Amortization of acquired intangible assets

For the three and six months ended June 30, 2017, Shire recorded

Amortization of acquired intangible assets of $434.1 million and $798.1

million, respectively, compared to $213.0 million and $347.6 million,

respectively, in the corresponding periods in 2016. The increase is

primarily related to amortization on the intangible assets acquired with

the acquisition of Baxalta.

Integration and acquisition costs

In the three and six months ended June 30, 2017, Shire recorded

Integration and acquisition costs of $343.7 million and $459.7 million,

respectively, compared to $363.0 million and $454.1 million,

respectively, in the corresponding periods in 2016.

In 2017, Integration and acquisition costs included a net charge of

$151.2 million, primarily relating to the change in fair value of

contingent consideration for SHP643, which was acquired from Dyax in

2016. The Baxalta integration and acquisition costs include $80.2

million and $117.1 million, respectively, of employee severance and

acceleration of stock compensation, $50.4 million and $85.6 million,

respectively, of third-party professional fees and $17.2 million and

$41.7 million, respectively, of expenses associated with facility

consolidations for the three and six months ended June 30, 2017. The

Group also recognized $33.6 million of expenses during the three and six

months ended June 30, 2017 related to asset impairments.

For the three and six months ended June 30, 2016, Integration and

acquisition costs primarily consist of $67.1 million and $125.6 million,

respectively, of acquisition costs including legal, investment banking

and other transaction-related fees, $254.5 million and $265.5 million,

respectively, of employee severance and acceleration of stock

compensation, $79.2 million and $89.2 million, respectively, of

third-party professional fees and $56.5 million and $45.1 million,

respectively, of change in fair value of contingent consideration.

Interest expense

For the three and six months ended June 30, 2017, Shire incurred

Interest expense of $141.3 million and $283.6 million, respectively,

primarily due to higher interest expense incurred on borrowings used to

fund the acquisitions of Dyax and Baxalta.

For the three and six months ended June 30, 2016, Shire incurred

Interest expense of $87.2 million and $131.9 million, respectively,

primarily related to the interest and amortization of financing fees

incurred on borrowings to fund the acquisition of Dyax and the

amortization of one-time upfront arrangement fees incurred on borrowings

associated with the acquisition of Baxalta.

Taxation

The effective tax rate on income from continuing operations for the

three and six months ended June 30, 2017 was 9% and 5% (2016: -427% and

2%), respectively.

The effective tax rate for the three and six months ended June 30, 2017

and 2016 was driven by the combined impact of the relative quantum of

profit before tax for the period by jurisdiction as well as acquisition

and integration costs in higher tax territories.

Discontinued Operations

The loss from discontinued operations for the three months ended June

30, 2017 was $1.2 million, net of taxes, and the gain for the six months

ended June 30, 2017 was $19.0 million, net of taxes. The loss during the

three months ended June 30, 2017 was primarily related to the divested

DERMAGRAFT business and the gain during the six months ended June 30,

2017 was primarily due to the return of funds previously held in escrow

related to the acquisition of the DERMAGRAFT business.

The loss from discontinued operations for the three and six months ended

June 30, 2016 was $248.7 million and $239.2 million, respectively, net

of taxes, primarily related to the establishment of legal contingencies

related to the divested DERMAGRAFT business.

Financial condition at June 30, 2017 and December 31, 2016

Cash and cash equivalents:

Cash and cash equivalents decreased by $265.1 million to $263.7 million

at June 30, 2017 (December 31, 2016: $528.8 million). The net decrease

was primarily related to $1,681.9 million of net cash provided by

operating activities, which was partially offset by net repayments of

debt ($1,416.0 million), purchases of fixed assets ($391.1 million), and

payment of dividends ($234.7 million).

Accounts receivable, net:

Accounts receivable, net increased by $138.7 million to $2,755.2 million

at June 30, 2017 (December 31, 2016: $2,616.5 million) due to higher

revenue, in part related to our newly launched product, MYDAYIS.

Inventories

Inventories decreased by $237.0 million to $3,325.3 million at June 30,

2017 (December 31, 2016: $3,562.3 million) primarily due to the

amortization of the unwind of inventory fair value adjustments ($625.4

million), offset by increases in inventory levels to support higher

demand of immunology and hematology products and expected demand for our

ophthalmology product.

Goodwill

Goodwill increased by $1,593.9 million to $19,482.1 million at June 30,

2017 (December 31, 2016: $17,888.2 million), principally due to

finalizing the purchase accounting related to the Baxalta acquisition.

Intangible assets, net

Intangible assets, net decreased by $1,263.2 million to $33,434.3

million at June 30, 2017 (December 31, 2016: $34,697.5 million),

principally due to finalizing the purchase accounting related to the

Baxalta acquisition. As of June 30, 2017, we completed our purchase

accounting. We had previously disclosed that the fair values of those

assets were preliminary and subject to change pending the completion of

our valuation work.

Accounts payable and accrued expenses

Accounts payable and accrued expenses decreased by $470.4 million to

$3,842.0 at June 30, 2017 (December 31, 2016: $4,312.4 million)

primarily related to the settlement of legal contingencies

(approximately $350 million) related to the divested Dermagraft

business.

Short and long term borrowings and capital leases

Short and long term borrowings and capital leases decreased by a net of

$1,407.8 million to $21,560.0 million at June 30, 2017 (December 31,

2016: $22,967.8 million) primarily related to the repayments of senior

notes and other long term debt ($1,701.0 million), partially offset by

an increase in short term borrowings under the revolving credit facility

($285.0 million).

Non-current deferred tax liabilities

Non-current deferred tax liabilities decreased by $534.7 million to

$7,788.0 million at June 30 2017 (December 31, 2016: $8,322.7 million)

primarily due to adjustments for the deferred tax liabilities arising on

intangible assets acquired with Baxalta. As of June 30, 2017 we

completed our purchase accounting related to the Baxalta transaction.

Other non-current liabilities

Other non-current liabilities increased by $224.6 million to $2,346.2

million at June 30, 2017 (December 31, 2016: $2,121.6 million)

principally due the increase in the fair value of contingent

consideration payable primarily associated with the SHP643 (lanadelumab)

IPR&D intangible asset acquired with the Dyax transaction, an increase

in income tax payable as well as an increase in pension liability.

Liquidity and Capital Resources

General

The Group's funding requirements depend on a number of factors,

including the timing and extent of its development programs; corporate,

business and product acquisitions; the level of resources required for

the expansion of certain manufacturing and marketing capabilities as the

product base expands; increases in accounts receivable and inventory

which may arise with any increase in product sales; technological

developments; the timing and cost of obtaining required regulatory

approvals for new products; the timing and quantum of milestone payments

on business combinations, in-licenses and collaborative projects; the

timing and quantum of tax and dividend payments; the timing and quantum

of purchases by the Employee Benefit Trust of Shire shares in the market

to satisfy awards granted under Shire's employee share plans and the

amount of cash generated from sales of Shire's products and royalty

receipts.

An important part of Shire's business strategy is to protect its

products and technologies through the use of patents, proprietary

technologies and trademarks, to the extent available. The Group intends

to defend its intellectual property and as a result may need cash for

funding the cost of litigation.

The Group finances its activities through cash generated from operating

activities, credit facilities, private and public offerings of equity

and debt securities and the proceeds of asset or investment disposals.

Shire's Consolidated Balance Sheets include $263.7 million of Cash and

cash equivalents as of June 30, 2017.

Shire has a revolving credit facility ("RCF") of $2,100.0 million, which

matures in 2021, $735.0 million of which was utilized as of June 30,

2017. The RCF incorporates a $250.0 million U.S. dollar and Euro

swingline facility operating as a sub-limit thereof.

In connection with the acquisition of Dyax, Shire entered into a $5.6

billion amortizing term loan facility in November 2015. As of June 30,

2017, $3.3 billion of this term loan facility was outstanding. The

facility matures in different tranches through November 2018 and $1.7

billion is due within the next twelve months.

In connection with the acquisition of Baxalta, Shire assumed $5.0

billion of unsecured senior notes previously issued by Baxalta, of which

$750.0 million is due within the next twelve months and issued $12.1

billion of unsecured senior notes in September 2016, of which none are

due for repayment in the next twelve months.

The details of these financing arrangements are included in Note 13,

Borrowings and Capital Leases, to these Unaudited Consolidated Financial

Statements.

In addition, Shire also has access to certain short-term uncommitted

lines of credit which are available to utilize from time to time to

provide short-term cash management flexibility. As of June 30, 2017,

these lines of credit were not utilized.

The Group may also engage in financing activities from time to time,

including accessing the debt or equity capital markets.

Financing

Shire anticipates that its operating cash flow together with available

cash, cash equivalents, and the RCF will be sufficient to meet its

anticipated future operating expenses, capital expenditures, tax and

interest payments, lease obligations, repayment of borrowings and

milestone payments as they become due over the next twelve months.

If the Group decides to acquire other businesses, it expects to fund

these acquisitions from cash resources, the RCF and through new

borrowings (including issuances of debt securities) or the issuance of

new equity, if necessary.

Sources and uses of cash

The following table provides an analysis of the Group's gross and net

debt position (excluding restricted cash), as of June 30, 2017 and

December 31, 2016:

(In millions) June 30, 2017 December 31, 2016

Cash and cash equivalents $ 263.7 $ 528.8

Long term borrowings (excluding

capital leases) (18,011.3) (19,552.6)

Short term borrowings (excluding

capital leases) (3,198.1) (3,061.6)

Capital leases (350.6) (353.6)

Total debt $ (21,560.0) $ (22,967.8)

Net debt $ (21,296.3) $ (22,439.0)

-- Net debt is a Non-GAAP measure. Net debt represents U.S. GAAP Cash and

cash equivalents less U.S. GAAP short and long term borrowings and

capital leases (see above). The Group believes that Net debt is a useful

measure as it indicates the level of borrowings after taking account of

the Cash and cash equivalents that could be utilized to pay down the

outstanding borrowings.

-- Substantially all of the Group's Cash and cash equivalents are held by

foreign subsidiaries (i.e., those subsidiaries incorporated outside of

Jersey, Channel Islands, the jurisdiction of incorporation of Shire plc,

Shire's holding company). The amount of Cash and cash equivalents held by

foreign subsidiaries has not had, and is not expected to have, a material

impact on the Group's liquidity and capital resources.

Cash flow activity

Net cash provided by operating activities increased by $701.5 million,

or 72%, to $1,681.9 million (2016: $980.4 million) during the six months

ended June 30, 2017, primarily due to increased cash receipts from

higher sales, partially offset by a payment of $351.6 million associated

with the settlement of the DERMAGRAFT litigation.

Net cash used in investing activities was $355.9 million during the six

months ended June 30, 2017, principally relating to cash paid for

purchases of PP&E and long term investments.

Net cash used in financing activities was $1,595.2 million during the

six months ended June 30, 2017. This includes $1,700.0 million of

scheduled and advance repayments under the November 2015 Facility B and

a dividend payment of $234.7, which was partially offset by $285.0

million of increased borrowings under the RCF and $79.5 million of cash

proceeds from the exercise of options.

Obligations and commitments

There were no material changes to the Group's contractual obligations

previously disclosed in Review of our Business in Shire's Annual Report

and Accounts for the year ended December 31, 2016.

Recent Accounting Pronouncements

A description of recently issued accounting standards is included under

the heading "New Accounting Pronouncements" in Note 1, Summary of

Significant Accounting Policies.

Principal risks and uncertainties

The Group's risk management strategy is to identify, assess and mitigate

any significant risks that it faces. Despite this, it should be noted

that no risk management strategy can provide absolute assurance against

loss.

The Group's processes for managing these risks are consistent with those

outlined in Shire's Annual Report and Accounts for the year ended

December 31, 2016, which is available on the Group's website,

www.shire.com.

The principal risks and uncertainties affecting the Group for the

remaining six months of 2017 are those described under the headings

below. It is not anticipated that the nature of the principal risks and

uncertainties disclosed in full in Shire's Annual Report and Accounts

for the year ended December 31, 2016, will change in respect of the

second half of 2017. The Group believes that these risk factors apply

equally and therefore all should be carefully considered before any

investment is made in Shire.

Shire's combination with Baxalta closed on June 3, 2016. All references

to the "Group," "Shire," "we," "us," or "our" used herein refer to Shire

plc and its subsidiaries, including Baxalta and its subsidiaries.

In summary, these risks and uncertainties are as follows:

Risks Related to Our Business

-- The Group'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 the Group's

future revenues, financial condition and results of operations.

-- The Group 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 the Group's products, or

any difficulties or delays in the manufacturing, distribution and sale of

its products may result in the Group being unable to continue marketing

or developing a product, or may result in the Group being unable to do so

on a commercially viable basis for some period of time.

-- The manufacture of the Group'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 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.

-- The Group 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 the Group's ability to sell

or market products profitably. Fluctuations in buying or distribution

patterns by such customers can adversely affect the Group'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.

-- The Group's products and product candidates face substantial

competition in the product markets in which it operates.

-- The Group's patented products are subject to significant competition from

generics.

-- Adverse outcomes in legal matters and other disputes, including the

Group's ability to enforce and defend patents and other intellectual

property rights required for its business, could have a material adverse

effect on the Group's revenues, financial condition or results of

operations.

-- The Group may fail to obtain, maintain, enforce or defend the

intellectual property rights required to conduct its business.

-- The Group faces intense competition for highly qualified personnel from

other companies and organizations.

-- Failure to successfully execute or attain strategic objectives from the

Group's acquisitions and growth strategy may adversely affect the Group'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 the Group does business, could have negative

consequences for the Group's business and increase the risk of

non-payment by the Group's customers.

-- Changes in foreign currency exchange rates and interest rates could have

a material adverse effect on Shire's operating results and liquidity.

-- The Group is subject to evolving and complex tax laws, which may result

in additional liabilities that may adversely affect the Group'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 the Group's reputation, the

withdrawal of the product and legal action against the Group.

-- The Group 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 the Group's revenues, financial condition or results of

operations.

-- Shire faces risks relating to the expected exit of the United Kingdom

from the European Union.

Risks Related to the Combination with Baxalta Incorporated

-- The Group may not successfully integrate the businesses of Shire

and Baxalta.

-- Shire has incurred significant additional indebtedness in connection with

the acquisition, which has decreased the Group's business flexibility and

increased its interest expense. All of the Group's debt obligations have

priority over the Group's Ordinary Shares and ADSs with respect to

payment in the event of a liquidation, dissolution or winding up.

-- Uncertainties associated with the combination may cause a loss of

employees and may otherwise affect the future business and operations of

Shire and the combined Group.

-- Baxalta only operated as an independent company from July 1, 2015 until

the consummation of its merger with Shire on June 3, 2016, and Baxalta's

historical financial information is not necessarily representative of the

results that Baxalta would have achieved as a separate, publicly traded

company, and may not be a reliable indicator of future results of

Baxalta. Moreover, any pro forma financial information published by

the Group is not necessarily representative of the results that the Group

would have achieved, and may not be a reliable indicator of

future results.

-- Baxter may not satisfy its obligations under various transaction

agreements that have been executed as part of the separation or Shire may

fail to have necessary systems and services in place when certain of the

transaction agreements expire.

-- The acquisition of Baxalta could result in significant liability to the

Group if the combination causes the spin-off of Baxalta from Baxter or a

Later Distribution to be taxable.

-- In connection with the merger with Baxalta, the separation and the Later

Distributions could result in significant liability to the Group due to

Baxalta's spin-off from Baxter.

-- Certain Baxalta agreements may contain change of control provisions that

may have been triggered by the merger that, if acted upon or not waived,

could cause the Group to lose the benefit of such agreement and incur

liabilities or replacement costs, which could have a material adverse

effect on the Group.

-- New regulations issued by the U.S. Department of Treasury may impact

the Group following the merger with Baxalta.

Directors' responsibility statement

The Directors confirm that, to the best of their knowledge, the

condensed consolidated set of financial statements has been prepared in

accordance with U.S. GAAP and that the Half-yearly Report herein

includes a fair review of the information required by DTR 4.2.7R and DTR

4.2.8R.

The Directors of Shire plc are listed in Shire's Annual Report and

Accounts for the year ended December 31, 2016.

Details of all current Directors are available on Shire's website at

www.shire.com

Approved by the Board of Directors and signed on its behalf by:

Flemming Ornskov, M.D., M.P.H.

Chief Executive Officer

August 3, 2017

Jeffrey Poulton

Chief Financial Officer

August 3, 2017

SHIRE PLC

CONSOLIDATED BALANCE SHEETS

(Unaudited, in millions, except par value of shares)

June 30, 2017 December 31, 2016

ASSETS

Current assets:

Cash and cash equivalents $ 263.7 $ 528.8

Restricted cash 34.2 25.6

Accounts receivable, net 2,755.2 2,616.5

Inventories 3,325.3 3,562.3

Prepaid expenses and other current assets 778.5 806.3

Total current assets 7,156.9 7,539.5

Investments 197.0 191.6

Property, plant and equipment ("PP&E"), net 6,554.5 6,469.6

Goodwill 19,482.1 17,888.2

Intangible assets, net 33,434.3 34,697.5

Deferred tax asset 132.2 96.7

Other non-current assets 233.9 152.3

Total assets $ 67,190.9 $ 67,035.4

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable and accrued expenses $ 3,842.0 $ 4,312.4

Short term borrowings and capital leases 3,204.9 3,068.0

Other current liabilities 389.6 362.9

Total current liabilities 7,436.5 7,743.3

Long term borrowings and capital leases 18,355.1 19,899.8

Deferred tax liability 7,788.0 8,322.7

Other non-current liabilities 2,346.2 2,121.6

Total liabilities 35,925.8 38,087.4

Commitments and contingencies

Equity:

Common stock of 5p par value; 1,500 shares authorized;

and 915.3 shares issued and outstanding (2016: 1,500

shares authorized; and 912.2 shares issued and outstanding) 81.5 81.3

Additional paid-in capital 24,951.2 24,740.9

Treasury stock: 8.4 shares (2016: 9.1 shares) (283.0) (301.9 )

Accumulated other comprehensive income/(loss) 200.1 (1,497.6 )

Retained earnings 6,315.3 5,925.3

Total equity 31,265.1 28,948.0

Total liabilities and equity $ 67,190.9 $ 67,035.4

The accompanying notes are an integral part of these Unaudited

Consolidated Financial Statements.

SHIRE PLC

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in millions, except per share amounts)

Three months ended June

30, Six months ended June 30,

2017 2016 2017 2016

Revenues:

Product sales $3,591.8 $2,322.1 $7,004.1 $3,949.4

Royalties & other revenues 154.0 107.0 314.0 189.0

Total revenues 3,745.8 2,429.1 7,318.1 4,138.4

Costs and expenses:

Cost of sales 1,108.9 778.1 2,435.9 1,026.7

Research and development 542.4 294.8 921.7 511.9

Selling, general and administrative 899.1 675.3 1,788.0 1,150.2

Amortization of acquired intangible assets 434.1 213.0 798.1 347.6

Integration and acquisition costs 343.7 363.0 459.7 454.1

Reorganization costs 13.6 11.0 19.1 14.3

Loss/(gain) on sale of product rights 4.8 (2.3) (0.7) (6.5)

Total operating expenses 3,346.6 2,332.9 6,421.8 3,498.3

Operating income from continuing operations 399.2 96.2 896.3 640.1

Interest income 1.1 1.6 4.2 2.6

Interest expense (141.3) (87.2) (283.6) (131.9)

Other income/(expense), net 2.5 6.0 7.0 (2.5)

Total other expense, net (137.7) (79.6) (272.4) (131.8)

Income from continuing operations before income taxes

and equity in earnings/(losses) of equity method investees 261.5 16.6 623.9 508.3

Income taxes (24.3) 70.9 (31.1) (11.2)

Equity in earnings/(losses) of equity method investees,

net of taxes 4.3 (0.9) 3.5 (1.0)

Income from continuing operations, net of taxes 241.5 86.6 596.3 496.1

(Loss)/gain from discontinued operations, net of taxes (1.2) (248.7) 19.0 (239.2)

Net income/(loss) $ 240.3 $ (162.1) $ 615.3 $ 256.9

The accompanying notes are an integral part of these Unaudited

Consolidated Financial Statements.

SHIRE PLC

CONSOLIDATED STATEMENTS OF OPERATIONS (continued)

(Unaudited, in millions, except per share amounts)

Three months ended June Six months ended June

30, 30,

2017 2016 2017 2016

Earnings/(loss)

per Ordinary

Share - basic

Earnings from

continuing

operations $ 0.27 $ 0.12 $ 0.66 $ 0.78

(Loss)/gain from

discontinued

operations - (0.36) 0.02 (0.38)

Earnings/(loss)

per Ordinary

Share - basic $ 0.27 $ (0.24) $ 0.68 $ 0.40

Earnings/(loss)

per Ordinary

Share - diluted

Earnings from

continuing

operations $ 0.26 $ 0.12 $ 0.65 $ 0.77

(Loss)/earnings

from

discontinued

operations - (0.36) 0.02 (0.37)

Earnings/(loss)

per Ordinary

Share -

diluted $ 0.26 $ (0.24) $ 0.67 $ 0.40

Weighted average

number of

shares:

Basic 906.4 682.8 905.3 637.3

Diluted 912.7 682.8 912.3 640.1

The accompanying notes are an integral part of these Unaudited

Consolidated Financial Statements.

SHIRE PLC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited, in millions)

Three months ended Six months ended June

June 30, 30,

2017 2016 2017 2016

Net income/(loss) $ 240.3 $(162.1) $ 615.3 $256.9

Other comprehensive income/(loss):

Foreign currency translation adjustments 1,431.0 (220.2) 1,696.5 (195.5)

Pension and other employee benefits (net of tax expense

of $1.3 and $0.9 for the three and six months ended

June 30, 2017 and $nil for both the three and six

months ended June 30, 2016) 3.2 - 10.6 -

Unrealized loss on available-for-sale securities (net

of tax benefit of $0.5 and tax expense of $1.7 for

the three and six months ended June 30, 2017 and tax

benefit of $1.4 for both the three and six months

ended June 30, 2016) (5.6) (4.4) (3.5) (4.7)

Hedging activities (net of tax benefit of $0.5 and

$3.2 for the three and six months ended June 30, 2017

and $1.6 for both the three and six months ended June

30, 2016) (1.4) (1.8) (5.9) (1.8)

Comprehensive income/(loss) $1,667.5 $(388.5) $2,313.0 $ 54.9

The components of Accumulated other comprehensive income/(loss) as of

June 30, 2017 and December 31, 2016 are as follows:

June

30, December 31,

2017 2016

Foreign currency translation adjustments $191.1 $(1,505.4)

Pension and other employee benefits, net of taxes 5.4 (5.2)

Unrealized holding gain on available-for-sale securities,

net of taxes 3.1 6.6

Hedging activities, net of taxes 0.5 6.4

Accumulated other comprehensive income/(loss) $200.1 $(1,497.6)

The accompanying notes are an integral part of these Unaudited

Consolidated Financial Statements.

SHIRE PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(Unaudited, in millions)

Common

stock Accumulated

number Additional other

of Common paid-in Treasury comprehensive Retained Total

shares stock capital stock income earnings equity

As of January 1, 2017 912.2 $ 81.3 $ 24,740.9 $(301.9) $ (1,497.6 )$5,925.3 $ 28,948.0

Net income - - - - - 615.3 615.3

Other comprehensive income net of tax - - - - 1,697.7 - 1,697.7

Shares issued under employee benefit plans and other 3.1 0.2 93.2 - - - 93.4

Cumulative-effect adjustment from adoption of ASU

2016-09 - - 10.7 - - 28.3 39.0

Share-based compensation - - 106.4 - - - 106.4

Shares released by employee benefit trust to satisfy

exercise of stock options - - - 18.9 - (18.9 ) -

Dividends - - - - - (234.7 ) (234.7)

As of June 30, 2017 915.3 $ 81.5 $ 24,951.2 $(283.0) $ 200.1 $6,315.3 $ 31,265.1

Dividends per share

During the six months ended June 30, 2017, Shire plc declared and paid

dividends of $0.257 U.S. per ordinary share (equivalent to $0.771 U.S.

per ADS) totaling $234.7 million.

The accompanying notes are an integral part of these Unaudited

Consolidated Financial Statements.

SHIRE PLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in millions)

Six months ended June 30,

2017 2016

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income $ 615.3 $ 256.9

Adjustments to reconcile net income to net cash provided

by operating activities:

Depreciation and amortization 1,041.7 429.8

Share based compensation 106.4 194.8

Amortization of deferred financing fees 6.8 50.1

Expense related to the unwind of inventory fair value

adjustments 625.4 293.5

Change in deferred taxes (293.3) (329.2)

Change in fair value of contingent consideration 147.7 (45.0)

Impairment of PP&E and intangible assets 53.6 8.9

Other, net 14.8 (17.6)

Changes in operating assets and liabilities:

Increase in accounts receivable (181.5) (181.0)

Increase in sales deduction accrual 57.1 66.4

Increase in inventory (171.6) (116.4)

Decrease in prepayments and other assets 104.6 26.5

(Decrease)/increase in accounts payable and other

liabilities (445.1) 342.7

Net cash provided by operating activities 1,681.9 980.4

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of PP&E and long term investments (391.1) (179.1)

Purchases of businesses, net of cash acquired - (17,476.2)

Proceeds from sale of investments 40.6 -

Movements in restricted cash (8.6) 67.2

Other, net 3.2 3.3

Net cash used in investing activities (355.9) (17,584.8)

The accompanying notes are an integral part of these Unaudited

Consolidated Financial Statements.

SHIRE PLC

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(Unaudited, in millions)

Six months ended June 30,

2017 2016

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from revolving line of credit, long term

and short term borrowings 2,111.9 18,895.0

Repayment of revolving line of credit, long term and

short term borrowings (3,527.9) (1,500.3)

Payment of dividend (234.7) (130.2)

Debt issuance costs - (112.3)

Proceeds from exercise of options 79.5 0.1

Other, net (24.0) 11.9

Net cash (used in)/provided by financing activities (1,595.2) 17,164.2

Effect of foreign exchange rate changes on cash and

cash equivalents 4.1 (1.9)

Net (decrease)/increase in cash and cash equivalents (265.1) 557.9

Cash and cash equivalents at beginning of period 528.8 135.5

Cash and cash equivalents at end of period $ 263.7 $ 693.4

Supplemental information:

Six months ended June 30,

2017 2016

Interest paid $ 267.0 $ 111.4

Income taxes paid, net $ 176.0 $ 253.7

For stock issued as purchase consideration for the acquisition of

Baxalta related to non-cash investing activities, refer to Note 2,

Business Combinations, to these Unaudited Consolidated Financial

Statements.

The accompanying notes are an integral part of these Unaudited

Consolidated Financial Statements.

SHIRE PLC

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Basis of Presentation

These interim financial statements of Shire plc and its subsidiaries

(collectively "Shire" or the "Group") are unaudited. They have been

prepared in accordance with generally accepted accounting principles in

the United States of America ("U.S. GAAP").

The Consolidated Balance Sheet as of December 31, 2016 was derived from

the Audited Consolidated Financial Statements as of that date.

These interim Unaudited Consolidated Financial Statements should be read

in conjunction with the Consolidated Financial Statements and

accompanying notes included in the Group's Annual Report and Accounts

for the year ended December 31, 2016, as filed with the SEC on February

22, 2017.

Certain information and footnote disclosures normally included in

financial statements prepared in accordance with U.S. GAAP have been

condensed or omitted from these interim financial statements. However,

these interim financial statements include all adjustments, consisting

of normal recurring adjustments, which are, in the opinion of management,

necessary to fairly state the results of the interim period and the

Group believes that the disclosures are adequate to make the information

presented not misleading. Interim results are not necessarily indicative

of results to be expected for the full year.

On June 3, 2016, the Group completed its acquisition of Baxalta for

$32.4 billion, representing the fair value of purchase consideration.

The Group's Unaudited Consolidated Financial Statements include the

results of Baxalta from the date of acquisition. For further details

regarding the acquisition, refer to Note 2, Business Combinations, of

these Unaudited Consolidated Financial Statements.

Use of Estimates

The preparation of Financial Statements, in conformity with U.S. GAAP

and SEC regulations, requires management to make estimates, judgments

and assumptions that affect the reported and disclosed amounts of assets,

liabilities and equity at the date of the Unaudited Consolidated

Financial Statements and reported amounts of revenues and expenses

during the period. On an on-going basis, the Group evaluates its

estimates, judgments and methodologies. Estimates are based on

historical experience, current conditions and on various other

assumptions that are reasonable under the circumstances, the results of

which form the basis for making judgments about the carrying values of

assets, liabilities and equity and the amounts of revenues and expenses.

Actual results may differ from these estimates under different

assumptions or conditions.

New Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the

Financial Accounting Standards Board ("FASB") or other standard setting

bodies that the Group adopts as of the specified effective date. Unless

otherwise discussed below, the Group does not believe that the impact of

recently issued standards that are not yet effective will have a

material impact on the Group's financial position or results of

operations upon adoption.

Adopted during the current period

Inventory

In July 2015, the FASB issued new guidance which requires an entity to

measure inventory at the lower of cost and net realizable value. Net

realizable value is defined as the estimated selling prices in the

ordinary course of business, less reasonably predictable costs of

completion, disposal and transportation. The Group adopted this standard

as of January 1, 2017, which did not impact the Group's financial

position or results of operations.

Share-Based Payment Accounting

In March 2016, the FASB issued Accounting Standards Update ("ASU") No.

2016-09, Compensation - Stock Compensation (Topic 718): Improvements to

Employee Share-Based Payment Accounting. The new standard requires

recognition of the income tax effects of vested or settled awards in the

income statement and involves several other aspects of the accounting

for share-based payment transactions, including the income tax

consequences, classification of awards as either equity or liabilities

and classification on the statement of cash flows and allows a one-time

accounting policy election to account for forfeitures as they occur. The

new standard was effective January 1, 2017.

The Group adopted ASU 2016-09 in the first quarter of 2017. Before

adoption, excess tax benefits or deficiencies from the Group's equity

awards were recorded as Additional paid-in capital in its Consolidated

Balance Sheets. Upon adoption, the Group recorded any excess tax

benefits or deficiencies from its equity awards in its Consolidated

Statements of Operations in the reporting periods in which vesting or

settlement occurs.

Amendments related to accounting for excess tax benefits have been

adopted prospectively, resulting in recognition of excess tax benefits

against Income taxes rather than Additional paid-in capital of $11.5

million for the six months ended June 30, 2017.

As a result of the adoption, the Group recorded an adjustment to

Retained earnings of $39.0 million to recognize net operating loss

carryforwards attributable to excess tax benefits on stock compensation

that had not been previously recognized to Additional paid-in capital.

Excess tax benefits for share-based payments are now included in Net

cash provided by operating activities rather than Net cash provided by

financing activities. The changes have been applied prospectively in

accordance with the ASU and prior periods have not been adjusted.

Upon adoption of ASU 2016-09, the Group elected to account for

forfeitures in relation to service conditions as they occur. The change

was applied on a modified retrospective basis with a cumulative effect

adjustment to Retained earnings of $10.7 million as of January 1, 2017.

Definition of a Business

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations

(Topic 805): Clarifying the Definition of a Business. This new standard

clarifies the definition of a business and provides guidance to

determine when an integrated set of assets and activities is not a

business. The Group adopted this standard prospectively on January 1,

2017.

To be adopted in future periods

Simplifying the Test for Goodwill Impairment

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill

and Other (Topic 350): Simplifying the Test of Goodwill Impairment. This

new standard simplifies how an entity is required to test goodwill for

impairment by eliminating Step 2 from the goodwill impairment test. Step

2 measures a goodwill impairment loss by comparing the implied fair

value of a reporting unit's goodwill with the carrying amount of that

goodwill. This standard will be effective for the Group as of January 1,

2020, with early adoption permitted for annual goodwill impairment tests

performed after January 1, 2017. The Group does not expect the adoption

of this standard to have a material impact on its financial position and

results of operations.

Revenue from Contracts with Customers

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts

with Customers (Topic 606), which supersedes all existing revenue

recognition requirements, including most industry-specific guidance. The

new standard requires a Group to recognize revenue when it transfers

goods or services to customers in an amount that reflects the

consideration that the Group expects to receive for those goods or

services. The new standard also requires additional qualitative and

quantitative disclosures.

In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts

with Customers (Topic 606): Deferral of the Effective Date, which

delayed the effective date of the new standard from January 1, 2017 to

January 1, 2018. The FASB also agreed to allow entities to choose to

adopt the standard as of the original effective date.

The FASB has subsequently issued five additional ASUs amending the

guidance in Topic 606, each with the same effective date and transition

date of January 1, 2018. This amended guidance has been considered in

the Group's overall assessment of the new standard.

Shire will adopt this standard on the effective date of January 1, 2018.

The Group is currently evaluating the method of adoption and the

potential impact on its financial position and results of operations of

adopting this guidance. The Group has identified two primary revenue

streams from contracts with customers as part of its initial assessment:

1) product sales and 2) licensing arrangements. Shire is in the process

of evaluating these contracts and is not yet able to estimate the

anticipated impact to the Group's financial statements from the

application of the new standard.

Financial Instrument Accounting

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments

- Overall (Subtopic 825-10): Recognition and Measurement of Financial

Assets and Financial Liabilities. The new standard amends certain

aspects of accounting and disclosure requirements of financial

instruments, including the requirement that equity investments with

readily determinable fair values be measured at fair value with changes

in fair value recognized in the results of operations. This standard

will be effective for the Group as of January 1, 2018. The Group is

currently evaluating the method of adoption and the potential impact on

its financial position and results of operations of adopting this

guidance.

Leases

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842).

The new accounting guidance will require the recognition of all lease

assets and lease liabilities by lessees and sets forth new disclosure

requirements for those lease assets and liabilities. The standard

requires lessees to recognize right-of-use assets and lease liabilities

on the balance sheet using a modified retrospective approach at the

beginning of the earliest comparative period in the financial

statements. This standard will be effective for the Group as of January

1, 2019. Early adoption is permitted. The Group is currently evaluating

the potential impact on its financial position and results of operations

of adopting this guidance.

Statement of Cash Flows

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows

(Topic 230): Classification of Certain Cash Receipts and Cash Payments.

The new standard clarifies certain aspects of the statement of cash

flows, and aims to reduce diversity in practice regarding how certain

transactions are classified in the statement of cash flows. This

standard will be effective for the Group as of January 1, 2018. Early

adoption is permitted. The adoption of this guidance is not expected to

have a significant impact on the Group's Consolidated Statement of Cash

Flows.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows

(Topic 230): Restricted Cash. The new guidance is intended to reduce

diversity in the presentation of restricted cash and restricted cash

equivalents in the statement. The guidance requires that restricted

cash and restricted cash equivalents be included as components of total

cash and cash equivalents as presented on the statement of cash flows.

This standard will be effective for the Group as of January 1, 2018. The

adoption of this guidance is not expected to have a significant impact

on the Group's Consolidated Statements of Cash Flows.

Income Taxes

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic

740): Intra-Entity Transfers Other than Inventory. This standard removes

the current exception in U.S. GAAP prohibiting entities from recognizing

current and deferred income tax expenses or benefits related to transfer

of assets, other than inventory, within the consolidated entity. The

current exception to defer the recognition of any tax impact on the

transfer of inventory within the consolidated entity until it is sold to

a third party remains unaffected. This standard will be effective for

the Group as of January 1, 2018, with the early adoption permitted. The

Group is currently evaluating the method of adoption and the potential

impact on its financial position and results of operations of adopting

this guidance.

Retirement Benefits Income Statement Presentation

In March 2017, the FASB issued ASU 2017-07 Compensation - Retirement

Benefits (Topic 715): Improving the Presentation of Net Periodic Pension

Cost and Net Periodic Postretirement Benefit Cost. The standard amends

the income statement presentation of the components of net periodic

benefit cost for defined benefit pension and other postretirement plans.

The standard requires entities to (1) disaggregate the

current-service-cost component from the other components of net benefit

cost (the "other components") and present it with other current

compensation costs for related employees in the income statement and (2)

present the other components elsewhere in the income statement and

outside of income from operations if such a subtotal is presented. The

standard also requires entities to disclose the income statement lines

that contain the other components if they are not presented on

appropriately described separate lines. This standard will be effective

for the Group as of January 1, 2018. The Group does not expect the

adoption of this standard to have a material impact on its financial

position and results of operations.

Share-Based Payment Accounting

In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock

Compensation (Topic 718): Scope Modification Accounting. The new

standard clarifies when changes to the terms or conditions of a

share-based payment award must be accounted for as modifications. This

standard will be effective for the Group as of January 1, 2018. Early

adoption is permitted. The adoption of this guidance is not expected to

have a significant impact on the Group's financial position and results

of operations.

Going concern

The Directors have a reasonable expectation that the Group has adequate

resources to continue in operational existence for the foreseeable

future. Accordingly, the Directors consider it appropriate to adopt the

going concern basis of accounting in preparing the Half-yearly Report.

2. Business Combinations

Acquisition of Baxalta

On June 3, 2016, Shire acquired all of the outstanding common stock of

Baxalta for $18.00 per share in cash and 0.1482 Shire American

Depository Shares ("ADSs") per Baxalta share, or if a former Baxalta

shareholder properly elected, 0.4446 Shire ordinary shares per Baxalta

share.

Baxalta was a global biopharmaceutical company that focused on

developing, manufacturing and commercializing therapies for orphan

diseases and underserved conditions in hematology, immunology and

oncology.

The purchase price consideration for the acquisition of Baxalta was

finalized in the second quarter of 2017. The fair value of the purchase

price consideration consisted of the following:

(In millions) Fair value

Cash paid to shareholders $ 12,366.7

Fair value of stock issued to shareholders 19,353.2

Fair value of partially vested stock options and RSUs

assumed 508.8

Contingent consideration payable 165.0

Total purchase price consideration $ 32,393.7

The acquisition of Baxalta was accounted for as a business combination

using the acquisition method of accounting. Shire issued 305.2 million

shares to former Baxalta shareholders at the date of the acquisition.

For a more detailed description of the fair value of the partially

vested stock options and RSUs assumed, refer to Note 27, Share-based

Compensation Plans, of the Group's Annual Report and Accounts for the

year ended December 31, 2016.

The assets acquired and the liabilities assumed from Baxalta have been

recorded at their fair value as of June 3, 2016, the date of

acquisition. The Group's Unaudited Consolidated Financial Statements

included the results of Baxalta from the date of acquisition.

The purchase price allocation for the acquisition of Baxalta was

finalized in the second quarter of 2017. The Group's allocation of the

purchase price to the assets acquired and liabilities assumed as of the

acquisition date, including measurement period adjustments, is outlined

below.

Measurement Values as

Preliminary value as of acquisition date (as previously period of June 30,

(In millions) reported as of December 31, 2016) adjustments 2017

ASSETS

Current assets:

Cash and cash equivalents $ 583.2 $ - $ 583.2

Accounts receivable 1,069.7 (96.4) 973.3

Inventories 3,893.4 81.2 3,974.6

Other current assets 576.0 5.3 581.3

Total current assets 6,122.3 (9.9) 6,112.4

Property, plant and equipment 5,452.7 (46.5) 5,406.2

Investments 128.2 - 128.2

Goodwill 11,422.4 1,076.2 12,498.6

Intangible assets

Currently marketed products 21,995.0 (830.0) 21,165.0

In-Process Research and Development ("IPR&D") 730.0 (570.0) 160.0

Contract based arrangements 42.2 - 42.2

Other non-current assets 155.0 69.7 224.7

Total assets $ 46,047.8 $ (310.5) $45,737.3

LIABILITIES

Current liabilities:

Accounts payable and accrued expenses $ 1,321.9 $ (2.7) $ 1,319.2

Other current liabilities 354.4 9.0 363.4

Long term borrowings and capital leases 5,424.9 - 5,424.9

Deferred tax liability 5,445.3 (315.0) 5,130.3

Other non-current liabilities 1,103.6 2.2 1,105.8

Total liabilities $ 13,650.1 $ (306.5) $13,343.6

Fair value of identifiable assets acquired and liabilities

assumed $ 32,397.7 $ (4.0) $32,393.7

Consideration

Fair value of purchase consideration $ 32,397.7 $ (4.0) $32,393.7

The measurement period adjustments for Intangible assets reflect changes

in the estimated fair value of currently marketed products and IPR&D.

Changes are mainly related to finalizing the unit of account judgments

and other changes in estimates including Cost of sales allocation and

royalty expense. The measurement period adjustments for Inventory

primarily reflect refinements in the estimated selling price of

inventory. The changes in the estimated fair values primarily are to

more accurately reflect market participant assumptions about facts and

circumstances existing as of the acquisition date. The measurement

period adjustments did not result from intervening events subsequent to

the acquisition date.

As a result of measurement period adjustments related to the change in

fair value of currently marketed products and inventory, a charge of

$85.2 million was recognized in Cost of sales and a benefit of $23.3

million was recognized in Amortization of acquired intangible assets,

respectively, in the Group's Unaudited Consolidated Statements of

Operations for the six months ended June 30, 2017. These adjustments

would have been recorded during the year ended December 31, 2016 if

these adjustments had been recognized as of the acquisition date.

Intangible assets

The fair value of the identifiable intangible assets has been estimated

using an income approach, which is a valuation technique that provides

an estimate of the fair value of an asset based on market participant

expectations of the incremental after tax cash flows an asset would

generate over its remaining useful life. The useful lives for currently

marketed products were determined based upon the remaining useful

economic lives of the assets that are expected to contribute to future

cash flows.

Currently marketed products totaling $21,165.0 million relate to

intellectual property ("IP") rights acquired for Baxalta's currently

marketed products. The estimated useful life of the intangible assets

related to currently marketed products range from 6 to 23 years

(weighted average 21 years), with amortization being recorded on a

straight-line basis.

IPR&D intangible assets totaling $160.0 million represent the value

assigned to research and development ("R&D") projects acquired. The

IPR&D intangible assets are capitalized and accounted for as

indefinite-lived intangible assets and will be subject to impairment

testing until completion or abandonment of the projects. Upon successful

completion of each project, the Group will make a separate determination

of the estimated useful life of the IPR&D intangible asset and the

related amortization will be recorded as an expense over the estimated

useful life.

Some of the more significant assumptions inherent in the development of

those asset valuations include the estimated net cash flows for each

year for each asset or product (including net revenues, cost of sales,

R&D costs, selling and marketing costs, working capital/asset

contributory asset charges and other cash flow assumptions), the

appropriate discount rate to select in order to measure the risk

inherent in each future cash flow stream, the assessment of each asset's

life cycle, the potential regulatory and commercial success risks,

competitive trends impacting the asset and each cash flow stream as well

as other factors.

The discount rate used to arrive at the present value at the acquisition

date of the IPR&D intangible assets was 9.5% to reflect the internal

rate of return and incremental commercial uncertainty in the cash flow

projections. No assurances can be given that the underlying assumptions

used to prepare the discounted cash flow analysis will not change. For

these and other reasons, actual results may vary significantly from

estimated results.

Goodwill

Goodwill of $12,498.6 million, which is not deductible for tax purposes,

includes the expected synergies that will result from combining the

operations of Baxalta with Shire, intangible assets that do not qualify

for separate recognition at the time of the acquisition, the value of

the assembled workforce, and impacted by establishing a deferred tax

liability for the acquired identifiable intangible assets which have no

tax basis.

Contingent consideration

The Group acquired certain contingent obligations classified as

contingent consideration related to Baxalta's historical business

combinations. Additional consideration is conditionally due upon the

achievement of certain milestones related to the development, regulatory,

first commercial sale and other sales milestones, which could total up

to approximately $1.5 billion. The Group may also pay royalties based on

certain product sales. The Group estimated the fair value of the assumed

contingent consideration to be $165.0 million using a probability

weighting approach that considered the possible outcomes based on

assumptions related to the timing and probability of the product launch

date, discount rates matched to the timing of first payment and

probability of success rates and discount adjustments on the related

cash flows.

Inventory

The estimated fair value of work-in-process and finished goods inventory

was determined utilizing the net realizable value, based on the expected

selling price of the inventory, adjusted for incremental costs to

complete the manufacturing process and for direct selling efforts, as

well as for a reasonable profit allowance. The estimated fair value of

raw material inventory was valued at replacement cost, which is equal to

the value a market participant would pay to acquire the inventory.

The fair value adjustment related to inventory is expensed based on the

expected product-specific inventory utilization, which is reviewed on a

periodic basis and is recorded within Cost of sales in the Group's

Unaudited Consolidated Statements of Operations.

Retirement plans

The Group assumed pension plans as part of the acquisition of Baxalta,

including defined benefit and post-retirement benefit plans in the U.S.

and foreign jurisdictions, which had a net liability balance of $610.4

million. As of June 3, 2016, the Baxalta defined benefit pension plans

had assets with a fair value of $358.5 million.

Integration and acquisition costs

In the three and six months ended June 30, 2017, the Group expensed

$192.4 million and $310.9 million, respectively, relating to the

acquisition and integration of Baxalta, which have been recorded within

Integration and acquisition costs in the Group's Unaudited Consolidated

Statements of Operations. Refer to Note 4, Integration and Acquisition

Costs, for further information regarding the Group's Integration and

acquisition costs for the three and six months ended June 30, 2017.

Supplemental disclosure of pro forma information

The following unaudited pro forma financial information presents the

combined results of the operations of Shire and Baxalta as if the

acquisition of Baxalta had occurred as of January 1, 2015. The unaudited

pro forma financial information is not necessarily indicative of what

the consolidated results of operations actually would have been had the

respective acquisitions been completed on January 1, 2015. In addition,

the unaudited pro forma financial information does not purport to

project the future results of operations of the combined Group.

Three

months

ended Six months

June ended June

30, 30,

(In millions, except per share amounts) 2016 2016

Revenues $3,484.1 $6,741.4

Net income from continuing operations 621.3 923.9

Per share amounts:

Net income from continuing operations per share -

basic $ 0.70 $ 1.04

Net income from continuing operations per share -

diluted $ 0.70 $ 1.04

The unaudited pro forma financial information above reflects the

following pro forma adjustments:

1. an adjustment to increase net income for the three and six months ended

June 30, 2016 by $371.8 million and $411.3 million, respectively, to

eliminate integration and acquisition related costs incurred by Shire and

Baxalta;

2. an adjustment to increase net income for the three and six months ended

June 30, 2016 by $218.5 million and $171.6 million, respectively, to

reflect the expense related to the unwind of inventory fair value

adjustments as inventory is sold;

3. an adjustment to increase amortization expense for the three and six

months ended June 30, 2016 by $121.8 million and $306.0 million,

respectively, related to the identifiable intangible assets acquired; and

4. an adjustment to decrease net income for the three and six months ended

June 30, 2016 by $33.8 million and $94.2 million, respectively, primarily

related to the additional interest expense associated with the debt

incurred to partially fund the acquisition of Baxalta and the

amortization of related deferred debt issuance costs.

The adjustments above are stated net of their tax effects, where

applicable.

Acquisition of Dyax

On January 22, 2016, Shire acquired all of the outstanding common stock

of Dyax for $37.30 per share in cash. Under the terms of the merger

agreement, former Dyax shareholders may receive additional value through

a non-tradable contingent value right worth $4.00 per share, payable

upon U.S. Food and Drug Administration ("FDA") approval of SHP643

(formerly DX-2930) in Hereditary Angioedema ("HAE").

Dyax was a publicly-traded, Massachusetts-based rare disease

biopharmaceutical company primarily focused on the development of plasma

kallikrein ("pKal") inhibitors for the treatment of HAE. Dyax's most

advanced clinical program was SHP643, a Phase 3 program with the

potential for improved efficacy and convenience for HAE patients. SHP643

has received Fast Track, Breakthrough Therapy, and Orphan Drug

Designations by the FDA and has also received Orphan Drug status in the

EU. Dyax's sole marketed product, KALBITOR, is a pKal inhibitor for the

treatment of acute attacks of HAE in patients 12 years of age and older.

The acquisition of Dyax was accounted for as a business combination

using the acquisition method. The acquisition-date fair value

consideration was $6,330.0 million, comprising cash paid on closing of

$5,934.0 million and the fair value of the contingent value right of

$396.0 million (maximum payable $646.0 million). The assets acquired and

the liabilities assumed from Dyax have been recorded at their fair value

as of January 22, 2016, the date of acquisition. The Group's Unaudited

Consolidated Financial Statements include the results of Dyax as of

January 22, 2016.

The purchase price allocation for the acquisition of Dyax was finalized

in the first quarter of 2017. The allocation of the total purchase price

is outlined below.

(In millions) Fair value

ASSETS

Current assets:

Cash and cash equivalents $ 241.2

Accounts receivable 22.5

Inventories 20.2

Other current assets 8.1

Total current assets 292.0

Property, plant and equipment 5.8

Goodwill 2,702.1

Intangible assets

Currently marketed projects 135.0

IPR&D 4,100.0

Contract based royalty arrangements 425.0

Other non-current assets 28.6

Total assets $ 7,688.5

LIABILITIES

Current liabilities:

Accounts payable and accrued expenses $ 30.0

Other current liabilities 1.7

Deferred tax liability 1,325.4

Other non-current liabilities 1.4

Total liabilities $ 1,358.5

Fair value of identifiable assets acquired and liabilities

assumed $ 6,330.0

Consideration

Fair value of purchase consideration $ 6,330.0

Currently marketed products

Currently marketed products totaling $135.0 million relate to

intellectual property rights acquired for KALBITOR. The fair value of

the currently marketed product has been estimated using an income

approach, based on the present value of incremental after tax cash flows

attributable to KALBITOR.

The estimated useful life of the KALBITOR intangible asset is 18 years,

with amortization being recorded on a straight-line basis.

IPR&D

The IPR&D asset of $4,100.0 million relates to Dyax's clinical program

SHP643, a Phase 3 program with the potential for improved efficacy and

convenience for HAE patients. The IPR&D intangible asset is capitalized

and accounted for as indefinite-lived intangible assets and will be

subject to impairment testing until completion or abandonment of the

projects. The fair value of this IPR&D asset was estimated based on an

income approach, using the present value of incremental after tax cash

flows expected to be generated by this development project. The

estimated cash flows have been probability adjusted to take into account

the development stage of completion and the remaining risks and

uncertainties surrounding the future development and commercialization.

The estimated probability adjusted after tax cash flows used to estimate

the fair value of intangible assets have been discounted at 9%.

Royalty rights

Intangible assets totaling $425.0 million relate to royalty rights

arising from licensing agreements of a portfolio of product candidates.

This portfolio includes two approved products, marketed by Eli Lilly &

Company, and various development-stage products. Multiple product

candidates with other pharmaceutical companies are in various stages of

clinical development for which the Group is eligible to receive future

royalties and/or milestone payments.

The fair value of these royalty rights has been estimated using an

income approach, based on the present value of incremental after-tax

cash flows attributable to each royalty right.

The estimated useful lives of these royalty rights range from seven to

nine years (weighted average eight years), with amortization being

recorded on a straight-line basis.

Goodwill

Goodwill of $2,702.1 million, which is not deductible for tax purposes,

includes the expected synergies that will result from combining the

operations of Dyax with Shire; intangible assets that do not qualify for

separate recognition at the time of the acquisition; the value of the

assembled workforce; and impacted by establishing a deferred tax

liability for the acquired identifiable intangible assets which have no

tax basis.

Integration and acquisition costs

Refer to Note 4, Integration and Acquisition Costs, for further

information regarding the Group's Integration and acquisition costs for

the three and six months ended June 30, 2017.

Supplemental disclosure of pro forma information

The following unaudited pro forma financial information presents the

combined results of the operations of Shire and Dyax as if the

acquisitions of Dyax had occurred as of January 1, 2015. The unaudited

pro forma financial information is not necessarily indicative of what

the consolidated results of operations actually would have been had the

respective acquisitions been completed at the date indicated. In

addition, the unaudited pro forma financial information does not purport

to project the future results of operations of the combined Group.

Six months ended June 30,

(In millions, except per share amounts) 2016

Revenues $ 4,144.3

Net income from continuing operations 490.2

Per share amounts:

Net income from continuing operations per share -

basic $ 0.77

Net income from continuing operations per share -

diluted $ 0.77

The unaudited pro forma financial information above reflects the

following pro forma adjustments:

1. an adjustment to increase net income for the three and six months ended

June 30, 2016 by $2.0 million and $101.2 million, respectively, to

eliminate acquisition related costs incurred by Shire and Dyax; and

2. an adjustment to increase amortization expense for the six months ended

June 30, 2016 by $1.3 million related to the identifiable intangible

assets acquired.

The adjustments above are stated net of their tax effects, where

applicable.

3. Collaborative and Other Licensing Arrangements

The Group is party to certain collaborative or licensing arrangements.

In some of these arrangements, Shire and the licensee are both actively

involved in the development and commercialization of the licensed

product and have exposure to risks and rewards dependent on its

commercial success.

During the second quarter of 2017, Shire entered into an agreement to

license the exclusive worldwide rights to SHP659 (formerly known as

P-321) from Parion Sciences ("Parion"). SHP659 is a Phase 2

investigational epithelial sodium channel inhibitor for the potential

treatment of dry eye disease in adults. Under the terms of the agreement,

Shire will develop, and if approved, commercialize this compound. Shire

made an initial $20.0 million upfront license payment, which was

included in Research and development expense in the Group's Unaudited

Consolidated Statements of Operations. Parion will be entitled to

receive additional potential milestone payments up to $515.0 million

based on clinical, regulatory and commercial milestones and Parion has

the option to co-fund through additional stages of development in

exchange for enhanced tiered low double-digit royalties. In addition,

Parion has the option to co-fund commercialization activities and

participate in the financial outcome from those activities.

4. Integration and Acquisition Costs

In the three and six months ended June 30, 2017, Shire recorded

Integration and acquisition costs of $343.7 million and $459.7 million,

respectively, primarily due to the acquisition and integration of

Baxalta and Dyax. In the three and six months ended June 30, 2017,

$151.2 million and $147.7 million is included in Integration and

acquisition costs relating to the change in fair value of contingent

consideration payable.

During the second quarter of 2017, Shire entered its second phase of

integration activities. The costs associated with this phase will

primarily relate to headcount reduction as The Group continues to

advance and complete activities related to exiting the transition

services agreements ("TSA") with Baxter, integrating legal entities and

rationalization of the Group's manufacturing facilities. The Group also

plans to drive savings through the continued prioritization of its

research and development programs and continued consolidation of its

commercial operations. The integration of Baxalta is estimated to be

completed by mid to late 2019.

The Baxalta integration and acquisition costs include $80.2 million and

$117.1 million, respectively, of employee severance and acceleration of

stock compensation, $50.4 million and $85.6 million, respectively, of

third-party professional fees and $17.2 million and $41.7 million,

respectively, of expenses associated with facility consolidations for

the three and six months ended June 30, 2017. The Group expects the

majority of these expenses, except for certain costs related to facility

consolidations, to be paid within the next 12 months. The Group also

recognized $33.6 million of expenses during the three and six months

ended June 30, 2017 related to asset impairments in Integration and

acquisition costs.

The following table summarizes the type and amount of integration costs

recorded as of June 30, 2017:

Severance and employee

(In millions) benefits Lease terminations Total

As of January

1, $ 74.0 $ - $ 74.0

Amount charged

to

integration

costs 97.7 41.7 139.4

Paid/utilized (74.6) (4.1) (78.7)

As of June 30, $ 97.1 $ 37.6 $134.7

For the three and six months ended June 30, 2016, Shire recorded

Integration and acquisition costs of $363.0 million and $454.1 million,

respectively, primarily related to the acquisition and integration of

Dyax and Baxalta. These costs primarily consist of $67.1 million and

$125.6 million, respectively, of acquisition costs including legal,

investment banking and other transaction-related fees, $254.5 million

and $265.5 million, respectively, of employee severance and acceleration

of stock compensation, $79.2 million and $89.2 million, respectively, of

third-party professional fees and offset by $56.5 million and $45.1

million, respectively, of change in fair value of contingent

consideration.

5. Results of Discontinued Operations

Following the divestment of the Group's DERMAGRAFT business in January

2014, the operating results associated with the DERMAGRAFT business have

been classified as discontinued operations in the Group's Unaudited

Consolidated Statements of Operations for all periods presented.

For the three and six months ended June 30, 2017, the Group recorded a

loss of $1.2 million and gain of $19.0 million (net of tax benefit of

$0.6 million and expense of $10.9 million), respectively, primarily

related to legal contingencies related to the divested DERMAGRAFT

business and the release of escrow to Shire, respectively.

In January 2017, Shire entered into a final settlement agreement with

the Department of Justice ("DOJ") in the amount of $350.0 million, plus

interest which was accrued in 2016 and paid during the six months ended

June 30, 2017.

After the civil settlement with the DOJ had been finalized, Shire and

ABH's equity holders entered into a settlement agreement and ABH's

equity holders released the $37.5 million escrow to Shire. Shire

released the claims against ABH equity holders upon receiving the entire

amount held in escrow.

For a more detailed description of the DERMAGRAFT legal proceedings,

refer to Note 25, Legal and Other Proceedings, of Shire's Annual Report

and Accounts for the year ended December 31, 2016.

For the three and six months ended June 30, 2016, the Group recorded a

loss of $248.7 million and $239.2 million (net of tax benefit of $100.9

million and $95.4 million), respectively, related to costs associated

with the divestment.

6. Accounts Receivable, Net

Accounts receivable as of June 30, 2017 of $2,755.2 million (December

31, 2016: $2,616.5 million), are stated at the invoiced amount and net

of reserve for discounts and doubtful accounts of $182.0 million

(December 31, 2016: $169.6 million).

Reserve for discounts and doubtful accounts:

(In millions) 2017 2016

As of January 1, $169.6 $ 55.8

Provision charged to operations 600.3 269.6

Payments/credits (587.9) (201.0)

As of June 30, $182.0 $124.4

As of June 30, 2017, accounts receivable included $99.0 million

(December 31, 2016: $102.2 million) related to royalty receivable.

7. Inventories

Inventories are stated at the lower of cost and net realizable value.

Inventories comprise:

(In millions) June 30, 2017 December 31, 2016

Finished goods $ 947.6 $ 1,380.0

Work-in-progress 1,672.7 1,491.0

Raw materials 705.0 691.3

$ 3,325.3 $ 3,562.3

For a more detailed description of inventories acquired, refer to Note

2, Business Combinations, to these Unaudited Consolidated Financial

Statements.

8. Property, Plant and Equipment, Net

Property, plant and equipment are recorded at historical cost, net of

accumulated depreciation. Components of Property, plant and equipment,

net are summarized as follows:

(In millions) June 30, 2017 December 31, 2016

Land $ 338.6 $ 337.9

Buildings and leasehold

improvements 1,931.3 1,915.4

Machinery, equipment and other 2,833.1 2,547.2

Assets under construction 2,640.6 2,632.5

Total property, plant and

equipment at cost 7,743.6 7,433.0

Less: Accumulated depreciation (1,189.1) (963.4)

Property, plant and equipment,

net $ 6,554.5 $ 6,469.6

Depreciation expense for the three and six months ended June 30, 2017

was $120.7 million and $243.6 million, respectively, and for the three

and six months ended June 30, 2016 was $47.9 million and $82.2 million,

respectively.

During the second quarter of 2017, the Group determined it would divest

certain facilities as part of the Group's integration efforts. The Group

classified $74.8 million of property, plant and equipment as held for

sale, which is reported in Prepaid expenses and other current assets.

The $74.8 million of property, plant and equipment is net of a $25.4

million impairment charge reported in Integration and acquisition costs

during the second quarter of 2017.

9. Intangible Assets

The following table summarizes the Group's intangible assets:

Currently Other

marketed intangible

(In millions) products IPR&D assets Total

June 30, 2017

Gross acquired

intangible

assets $ 31,389.2 $5,111.7 $ 840.3 $37,341.2

Accumulated

amortization (3,644.1) - (262.8) (3,906.9)

Intangible

assets, net $ 27,745.1 $5,111.7 $ 577.5 $33,434.3

December 31,

2016

Gross acquired

intangible

assets $ 31,217.5 $5,746.6 $ 842.2 $37,806.3

Accumulated

amortization (2,908.6 ) - (200.2) (3,108.8)

Intangible

assets, net $ 28,308.9 $5,746.6 $ 642.0 $34,697.5

Other intangible assets are comprised primarily of royalty rights and

other contract rights associated with Baxalta, Dyax and NPS.

The change in the net book value of intangible assets for the six months

ended June 30, 2017 and 2016 is shown in the table below:

(In millions) 2017 2016

As of January 1, $34,697.5 $ 9,173.3

Acquisitions (1,398.9) 32,222.2

Amortization charged (798.1) (347.6)

Impairment charges (20.0) (8.9)

Foreign currency translation 953.8 (148.7)

As of June 30, $33,434.3 $40,890.3

The decrease in Intangible assets, net during the six months ended June

30, 2017 relates to the measurement period adjustments of the

acquisition of Baxalta. For a more detailed description of measurement

period adjustments, refer to Note 2, Business Combinations, to these

Unaudited Consolidated Financial Statements.

In connection with the acquisition of Baxalta, the Group acquired IP

rights related to currently marketed products of $21,165.0 million,

IPR&D assets of $160.0 million and other contract rights of $42.2

million. For a more detailed description of this acquisition, refer to

Note 2, Business Combinations, to these Unaudited Consolidated Financial

Statements.

In connection with the acquisition of Dyax on January 22, 2016, the

Group acquired IP rights related to currently marketed products of

$135.0 million, IPR&D assets of $4,100.0 million and royalty rights of

$425.0 million. For a more detailed description of this acquisition,

refer to Note 2, Business Combinations, to these Unaudited Consolidated

Financial Statements.

The Group reviews its amortized intangible assets for impairment

whenever events or circumstances suggest that their carrying value may

not be recoverable. Unamortized intangible assets are reviewed for

impairment annually or whenever events or circumstances suggest that

their carrying value may not be recoverable.

Estimated amortization expense can be affected by various factors

including future acquisitions, disposals of product rights, regulatory

approval and subsequent amortization of acquired IPR&D projects, foreign

exchange movements and the technological advancement and regulatory

approval of competitor products. The estimated future amortization of

acquired intangible assets for the next five years is expected to be as

follows:

Anticipated

(In millions) future amortization

2017 (remaining six months) $ 955.0

2018 1,882.9

2019 1,659.8

2020 1,562.1

2021 1,528.6

2022 1,500.9

10. Goodwill

The following table provides a roll-forward of the Goodwill balance:

(In millions) 2017 2016

As of January 1, $17,888.2 $ 4,147.8

Acquisitions 1,076.2 8,834.3

Foreign currency translation 517.7 (19.7)

As of June 30, $19,482.1 $12,962.4

The increase in Goodwill during the six months ended June 30, 2017

related to the measurement period adjustments of the acquisition of

Baxalta. For a more detailed description of measurement period

adjustments, refer to Note 2, Business Combinations, to these Unaudited

Consolidated Financial Statements.

11. Fair Value Measurement

Assets and liabilities that are measured at fair value on a recurring

basis

As of June 30, 2017 and December 31, 2016, the following financial

assets and liabilities are measured at fair value on a recurring basis

using quoted prices in active markets for identical assets (Level 1);

significant other observable inputs (Level 2); and significant

unobservable inputs (Level 3).

Fair value

(In millions) Total Level 1 Level 2 Level 3

As of June 30,

2017

Financial assets:

Marketable equity

securities $ 63.8 $ 63.8 $ - $ -

Marketable debt

securities 15.9 3.5 12.4 -

Contingent

consideration

receivable 9.8 - - 9.8

Derivative

instruments 22.8 - 22.8 -

Total assets $ 112.3 $ 67.3 $ 35.2 $ 9.8

Financial

liabilities:

Joint venture net

written option $ 25.0 $ - $ - $ 25.0

Derivative

instruments 9.5 - 9.5 -

Contingent

consideration

payable 1,190.3 - - 1,190.3

Total liabilities $1,224.8 $ - $ 9.5 $1,215.3

(In millions) Total Level 1 Level 2 Level 3

As of December 31,

2016

Financial assets:

Marketable equity

securities $ 65.8 $ 65.8 $ - $ -

Marketable debt

securities 15.5 3.6 11.9 -

Contingent

consideration

receivable 15.6 - - 15.6

Derivative

instruments 18.0 - 18.0 -

Total assets $ 114.9 $ 69.4 $ 29.9 $ 15.6

Financial

liabilities:

Derivative

instruments $ 8.3 $ - $ 8.3 $ -

Contingent

consideration

payable 1,058.0 - - 1,058.0

Total liabilities $1,066.3 $ - $ 8.3 $1,058.0

Marketable equity and debt securities are included within Investments in

the Unaudited Consolidated Balance Sheets. Contingent consideration

receivable is included within Prepaid expenses and other current assets

and Other non-current assets in the Unaudited Consolidated Balance

Sheets. Contingent consideration payable is included within Other

current liabilities and Other non-current liabilities in the Unaudited

Consolidated Balance Sheets. For information regarding the Group's

derivative arrangements, refer to Note 12, Financial Instruments, to

these Unaudited Consolidated Financial Statements.

Certain estimates and judgments were required to develop the fair value

amounts. The estimated fair value amounts shown above are not

necessarily indicative of the amounts that the Group would realize upon

disposition, nor do they indicate the Group's intent or ability to

dispose of the financial instrument.

The following methods and assumptions were used to estimate the fair

value of each material class of financial instrument:

-- Marketable equity securities: the fair values of marketable equity

securities are estimated based on quoted market prices for those

investments.

-- Marketable debt securities: the fair values of debt securities are

obtained from pricing services or broker/dealers who either use quoted

prices in an active market or proprietary pricing applications, which

include observable market information for like or same securities.

-- Contingent consideration receivable: the fair value of the contingent

consideration receivable has been estimated using the income approach

(using a probability weighted discounted cash flow method).

-- Derivative instruments: the fair values of the swap and forward foreign

exchange contracts have been determined using the month-end interest rate

and foreign exchange rates, respectively.

-- Contingent consideration payable: the fair value of the contingent

consideration payable has been estimated using the income approach (using

a probability weighted discounted cash flow method).

Assets and Liabilities Measured at Fair Value on a Recurring Basis Using

Significant Unobservable Inputs (Level 3)

The following table provides a roll forward of the fair values of the

Group's contingent consideration receivable and payables which include

Level 3 measurements:

Contingent consideration receivable

(In millions) 2017 2016

Balance as of January 1, $15.6 $13.8

Change in fair value included in earnings (2.3) 2.1

Other (3.5) 1.6

Balance as of June 30, $ 9.8 $17.5

Contingent consideration payable

(In millions) 2017 2016

Balance as of January 1, $1,058.0 $475.9

Acquisitions (4.0) 562.5

Change in fair value included in earnings 147.7 (45.0)

Other (11.4) 0.4

Balance as of June 30, $1,190.3 $993.8

In 2017, the increase in contingent consideration payable was primarily

related to the Group's change in fair value of contingent consideration

resulting from positive topline data for SHP643. In 2016, the increase

in contingent consideration payable was related to the Group's

acquisition of Dyax and Baxalta. Other contingent consideration payable

primarily relates to foreign currency adjustments.

Of the $1,190.3 million of contingent consideration payable as of June

30, 2017, $67.4 million is recorded within Other current liabilities and

$1,122.9 million is recorded within Other non-current liabilities in the

Group's Unaudited Consolidated Balance Sheets.

Joint venture net written option

During the six months ended June 30, 2017, Shire executed option

agreements related to a joint venture that provides Shire with a call

option on the partner's investment in joint venture equity and the

partner with a put option on its investment in joint venture equity.

The Group has recorded a liability of $25.0 million for the net written

option based on the estimated fair value of these options as of June 30,

2017 and in the future will re-measure the instrument to fair value

through the Consolidated Statements of Operations.

Quantitative Information about Assets and Liabilities Measured at Fair

Value on a Recurring Basis Using Significant Unobservable Inputs (Level

3)

Quantitative information about the Group's recurring Level 3 fair value

measurements is as follows:

Financial

assets: Fair value as of the measurement date

As of June 30,

2017

(In millions, Valuation

except %) Fair value technique Significant unobservable inputs Range

Contingent

consideration Income approach (probability weighted discounted cash -- Probability weightings applied to different

receivable $ 9.8 flow) sales scenarios -- 10 to 90%

-- Future forecast consideration receivable based -- $0 to $20.7

on contractual terms with purchaser million

-- Assumed market participant discount rate -- 7.4%

Financial

liabilities: Fair value as of the measurement date

As of June 30,

2017

(In millions, Valuation

except %) Fair value technique Significant unobservable inputs Range

Contingent

consideration Income approach (probability weighted discounted cash

payable $ 1,190.3 flow) -- Cumulative probability of milestones being achieved -- 5 to 90%

-- Assumed market participant discount rate -- 1.8 to 10.5%

-- Periods in which milestones are expected to be

achieved -- 2017 to 2037

-- Forecast quarterly royalties payable on net sales -- $0.1 to $6.5

of relevant products million

Joint venture

net written Income approach (probability weighted discounted cash

option $ 25.0 flow) -- Cash flow scenario probability weighting -- 0 to 65%

-- Assumed market participant discount rate -- 16%

Contingent consideration payable represents future milestones and

royalties the Group may be required to pay in conjunction with various

business combinations and license agreements. Contingent consideration

receivable represents future royalties the Group may be entitled to

receive in conjunction with sales and purchase agreements. The fair

value of the Group's contingent consideration receivable and payable

could significantly increase or decrease due to changes in certain

assumptions which underpin the fair value measurements. Each set of

assumptions is specific to the individual contingent consideration

receivable or payable.

Financial assets and liabilities that are disclosed at fair value

The carrying amounts and estimated fair values as of June 30, 2017 and

December 31, 2016 of the Group's financial assets and liabilities that

are not measured at fair value on a recurring basis are as follows:

June 30, 2017 December 31, 2016

Carrying Fair Carrying

(In millions) amount value amount Fair value

Financial

liabilities:

SAIIDAC notes $12,044.7 $11,973.6 $12,039.2 $11,633.8

Baxalta notes 5,066.9 5,295.8 5,063.6 5,066.5

Capital lease

obligation 350.6 350.6 353.6 353.6

The estimated fair values of long-term debt were based upon recent

observable market prices and are considered Level 2 in the fair value

hierarchy. The estimated fair value of capital lease obligations is

based on Level 2 inputs.

The carrying amounts of other financial assets and liabilities

approximate their estimated fair value due to their short-term nature,

such as liquidity and maturity of these amounts, or because there have

been no significant changes since the asset or liability was last

re-measured to fair value on a non-recurring basis.

12. Financial Instruments

Foreign Currency Contracts

Due to the global nature of its operations, portions of the Group's

revenues and operating expenses are recorded in currencies other than

the U.S. dollar. The value of revenues and operating expenses measured

in U.S. dollars is therefore subject to changes in foreign currency

exchange rates. The main trading currencies of the Group are the U.S.

dollar, Euro, British pound sterling, Swiss franc, Canadian dollar and

Japanese yen.

Transactional exposure arises where transactions occur in currencies

different to the functional currency of the relevant subsidiary. It is

the Group's policy that these exposures are minimized to the extent

practicable by denominating transactions in the subsidiary's functional

currency. Where significant exposures remain, the Group uses foreign

exchange contracts (spot, forward and swap contracts) to manage the

exposure for balance sheet assets and liabilities that are denominated

in currencies different to the functional currency of the relevant

subsidiary.

The Group has master netting agreements with a number of counterparties

to these foreign exchange contracts and on the occurrence of specified

events, the Group has the ability to terminate contracts and settle them

with a net payment by one party to the other. The Group has elected to

present derivative assets and derivative liabilities on a gross basis in

the Unaudited Consolidated Balance Sheet. The Group does not have credit

risk related contingent features or collateral linked to the

derivatives.

Designated Foreign Currency Derivatives

Certain foreign currency forward contracts were designated as cash flow

hedges and accordingly, to the extent effective, any unrealized gains or

losses on these foreign currency forward contracts were reported in

AOCI. Realized gains and losses for the effective portion of such

contracts were recognized in revenue or cost of sales when the sale of

product in the currency being hedged was recognized. To the extent

ineffective, hedge transaction gains and losses were reported in Other

income/(expense), net.

The Group did not have any designated foreign currency contracts as of

June 30, 2017. As of December 31, 2016 the Group had designated foreign

currency forward contracts with a total notional value of $78.7 million,

a maximum duration of six months; the fair value of these contracts was

a net asset of $4.2 million.

The amount of ineffectiveness for the three and six months ended June

30, 2017 was immaterial.

As of June 30, 2017, the Group had a total of $0.4 million of deferred

gains included in AOCI which are expected to be recognized in earnings

during the next 12 months, coinciding with when the hedged items are

expected to impact earnings.

Undesignated Foreign Currency Derivatives

The Group uses forward contracts to mitigate the foreign currency risk

related to certain balance sheet positions, including intercompany and

third-party receivables and payables. The Group has not elected hedge

accounting for these derivative instruments as the duration of these

contracts is typically three months or less. The changes in fair value

of these derivatives are reported in earnings.

The table below presents the notional amount, maximum duration and fair

value for the undesignated foreign currency derivatives:

(In millions, except duration) June 30, 2017 December 31, 2016

Notional amount $ 1,495.1 $ 1,309.1

Maximum duration (in months) 3 months 3 months

Fair value - net asset $ 10.9 $ 6.7

The Group considers the impact of its and its counterparties' credit

risk on the fair value of the contracts as well as the ability of each

party to execute its contractual obligations. As of June 30, 2017,

credit risk did not materially change the fair value of the Group's

foreign currency contracts.

Interest Rate Contracts

The Group is exposed to the risk that its earnings and cash flows could

be adversely impacted by fluctuations in benchmark interest rates

relating to its debt obligations on which interest is set at floating

rates. The Group's policy is to manage this risk to an acceptable level.

The Group is principally exposed to interest rate risk on any borrowings

under the Group's various debt facilities and on part of the senior

notes assumed in connection with the acquisition of Baxalta. Interest on

each of these debt obligations is set at floating rates, to the extent

utilized. Shire's exposure under these facilities is to changes in U.S.

dollar interest rates. For further details related to interest rates on

the Group's various debt facilities, refer to Note 13, Borrowings and

Capital Leases, to these Unaudited Consolidated Financial Statements.

Designated Interest Rate Derivatives

The effective portion of the changes in the fair value of interest rate

swap contracts are recorded as a component of the senior notes assumed

in connection with the acquisition of Baxalta with the ineffective

portion recorded in Interest expense. Any net interest payments made or

received on the interest rate swap contracts are recognized as a

component of Interest expense in the Unaudited Consolidated Statements

of Operations.

The table below presents the notional amount, maturity and fair value

for the designated interest rate derivatives:

(In millions,

except maturity) June 30, 2017 December 31, 2016

Notional amount $ 1,000.0 $ 1,000.0

Maturity June 2020 and June 2025 June 2020 and June 2025

Fair value - net

asset/(liability) $ 2.4 $ (1.2)

For the three and six months ended June 30, 2017, the Group recognized

losses of $0.2 million and $1.4 million, respectively, as

ineffectiveness related to these contracts as a component of Interest

expense.

Undesignated Interest Rate Derivatives

As of June 30, 2017 and December 31, 2016, the Group did not have any

outstanding undesignated interest rate derivative instruments.

Summary of Derivatives

The following tables summarize the income statement locations and gains

and losses on the Group's designated and undesignated derivative

instruments:

Income Gain reclassified

Loss recognized Statement from AOCI into

(In millions) in OCI location income

Three months ended

June 30, 2017 2016 2017 2016

Designated

derivative

instruments

Cash flow hedges

Foreign exchange Cost of

contracts $(0.1) $(3.4) sales $ 1.7 $ -

Income Statement

(In millions) location Gain (loss) recognized in income

Three months ended

June 30, 2017 2016

Fair value hedges

Interest rate Interest

contracts, net (expense)/income $ (0.2) $ 2.1

Undesignated

derivative

instruments

Other

Foreign exchange income/(expense),

contracts net 35.9 (4.7)

Interest rate swap

contracts Interest expense - (2.6)

Income Gain reclassified

Loss recognized in Statement from AOCI into

(In millions) OCI location income

Six months

ended June

30, 2017 2016 2017 2016

Designated derivative

instruments

Cash flow

hedges

Foreign

exchange Cost of

contracts $(0.7) $(3.4) sales $ 8.3 $ -

Income Statement

(In millions) location Gain (loss) recognized in income

Six months

ended June

30, 2017 2016

Fair value

hedges

Interest rate

contracts, Interest

net (expense)/income $ (1.4) $ 2.1

Undesignated

derivative

instruments

Foreign Other

exchange income/(expense),

contracts net 20.7 (28.8)

Interest rate

swap

contracts Interest expense - (4.6)

Summary of Derivatives

The following table presents the classification and estimated fair value

of derivative instruments:

Asset position Liability position

Fair value Fair value

Balance Balance

Sheet June 30, December 31, Sheet June 30, December 31,

(In millions) location 2017 2016 location 2017 2016

Designated

derivative

Instruments

Prepaid Accounts

expenses payable

Foreign and other and

exchange current accrued

contracts assets $ - $ 4.3 expenses $ - $ 0.1

Interest rate Long term Long term

contracts borrowings 3.2 0.1 borrowings 0.8 1.3

$ 3.2 $ 4.4 $0.8 $ 1.4

Undesignated

derivative

instruments

Prepaid Accounts

Foreign expenses payable

exchange and other and

forward current accrued

contracts assets $19.6 $ 13.6 expenses $8.7 $ 6.9

Total derivative fair value $22.8 $ 18.0 $9.5 $ 8.3

Potential effect of rights

to offset (3.9) (1.7) (3.9) (1.7)

Net derivative $18.9 $ 16.3 $5.6 $ 6.6

13. Borrowings and Capital Leases

(In millions) June 30, 2017 December 31, 2016

Short term borrowings:

Baxalta notes (short term portion) $ 747.6 $ -

Borrowings under the Revolving

Credit Facilities Agreement 735.0 450.0

Borrowings under the November 2015

Facilities Agreement 1,696.9 2,594.8

Capital leases (short term

portion) 6.8 6.4

Other borrowings (short term

portion) 18.6 16.8

$ 3,204.9 $ 3,068.0

Long term borrowings:

SAIIDAC notes $ 12,044.7 $ 12,039.2

Baxalta notes (long term portion) 4,319.3 5,063.6

Borrowings under the November 2015

Facilities Agreement 1,595.0 2,391.8

Capital leases (long term portion) 343.8 347.2

Other borrowings (long term

portion) 52.3 58.0

$ 18,355.1 $ 19,899.8

Total borrowings and capital

leases $ 21,560.0 $ 22,967.8

For a more detailed description of the Group's financing agreements,

refer below and to Note 17, Borrowings and Capital Lease Obligations, of

Shire's Annual Report and Accounts for the year ended December 31, 2016.

SAIIDAC Notes

On September 23, 2016, Shire Acquisitions Investments Ireland Designated

Activity Company ("SAIIDAC"), a wholly owned subsidiary of Shire plc,

issued unsecured senior notes with a total aggregate principal value of

$12.1 billion ("SAIIDAC Notes"), guaranteed by Shire plc and, as of

December 1, 2016, by Baxalta. Below is a summary of the SAIIDAC Notes as

of June 30, 2017:

Carrying

Effective amount as

(In millions, Aggregate Coupon interest rate of June 30,

except %) amount rate in 2017 2017

Fixed-rate

notes due

2019 $ 3,300.0 1.900% 2.05% 3,289.7

Fixed-rate

notes due

2021 3,300.0 2.400% 2.53% 3,284.7

Fixed-rate

notes due

2023 2,500.0 2.875% 2.97% 2,488.7

Fixed-rate

notes due

2026 3,000.0 3.200% 3.30% 2,981.6

$12,100.0 $12,044.7

As of June 30, 2017, there was $55.3 million of debt issuance costs and

discount recorded as a reduction of the carrying amount of debt. These

costs will be amortized as additional interest expense using the

effective interest rate method over the period from issuance through

maturity. For further details on the SAIIDAC Notes, refer to Note 17,

Borrowings and Capital Lease Obligations, of Shire's Annual Report and

Accounts for the year ended December 31, 2016.

Baxalta Notes

Shire plc guaranteed senior notes issued by Baxalta with a total

aggregate principal amount of $5.0 billion in connection with the

acquisition of Baxalta ("Baxalta Notes"). Below is a summary of the

Baxalta Notes as of June 30, 2017:

Carrying

Effective amount as

(In millions, Aggregate interest rate of June

except %) principal Coupon rate in 2017 30, 2017

Variable-rate

notes due LIBOR plus

2018 $ 375.0 0.78% 2.50% $ 372.7

Fixed-rate

notes due

2018 375.0 2.000% 2.10% 374.9

Fixed-rate

notes due

2020 1,000.0 2.875% 2.80% 1,005.1

Fixed-rate

notes due

2022 500.0 3.600% 3.30% 507.6

Fixed-rate

notes due

2025 1,750.0 4.000% 3.90% 1,775.4

Fixed-rate

notes due

2045 1,000.0 5.250% 5.20% 1,031.2

Total assumed

Senior Notes $ 5,000.0 $5,066.9

The effective interest rates above exclude the effect of any related

interest rate swaps. The book values above include any premiums and

adjustments related to hedging instruments. For further details related

to the interest rate derivative contracts, please see Note 12, Financial

Instruments, to these Unaudited Consolidated Financial Statements.

Revolving Credit Facilities Agreement

On December 12, 2014, Shire entered into a $2.1 billion revolving credit

facilities agreement (the "RCF") with a number of financial

institutions. As of June 30, 2017, the Group utilized $735.0 million of

the RCF. The RCF, which terminates on December 12, 2021, may be used for

financing the general corporate purposes of Shire. The RCF incorporates

a $250.0 million U.S. dollar and Euro swingline facility operating as a

sub-limit thereof.

Term Loan Facilities Agreements

November 2015 Facilities Agreement

On November 2, 2015, Shire entered into a $5.6 billion facilities

agreement (the "November 2015 Facilities Agreement"), which is comprised

of three amortizing credit facilities with the following amounts

outstanding as of June 30, 2017, and their respective ultimate maturity

dates:

(In millions) Amount outstanding Maturity

November 2015 Facility A $ 400.0 November 2, 2017

November 2015 Facility B 500.0 November 2, 2017

November 2015 Facility C 2,400.0 November 2, 2018

Total November 2015 Facilities $ 3,300.0

For the six month period ended June 30, 2017, the Group made $1.7

billion of scheduled and advance repayments under the November 2015

Facility B; consequently, $3.3 billion is outstanding as of June 30,

2017.

Short-term uncommitted lines of credit ("Credit lines")

Shire has access to various Credit lines from a number of banks which

are available to be utilized from time to time to provide short-term

cash management flexibility. These Credit lines can be withdrawn by the

banks at any time. The Credit lines are not relied upon for core

liquidity. As of June 30, 2017, these Credit lines were not utilized.

Capital Lease Obligations

The capital leases are primarily related to office and manufacturing

facilities. As of June 30, 2017, the total capital lease obligations,

including current portions, were $350.6 million.

14. Retirement and Other Benefit Programs

The Group sponsors various pension and other post-employment benefit

("OPEB") plans in the U.S. and other countries. The net periodic benefit

cost associated with these plans consisted of the following components:

Three months ended June 30,

2017 2016

OPEB

U.S. International (U.S U.S. International OPEB

(In millions) pensions pensions .) pensions pensions (U.S.)

Net periodic

benefit cost

Service cost $ 3.7 $ 9.4 $0.4 $ 1.9 $ 2.6 $0.1

Interest cost 3.9 1.2 0.3 1.6 0.4 0.1

Expected

return on

plan assets (4.0) (1.8) - (1.3) (0.5) -

Net periodic

benefit cost $ 3.6 $ 8.8 $0.7 $ 2.2 $ 2.5 $0.2

Six months ended June 30,

2017 2016

OPEB

U.S. International (U.S U.S. International OPEB

(In millions) pensions pensions .) pensions pensions (U.S.)

Net periodic

benefit cost

Service cost $ 7.4 $ 18.8 $0.8 $ 1.9 $ 2.6 $0.1

Interest cost 7.8 2.4 0.6 1.6 0.4 0.1

Expected

return on

plan assets (8.0) (3.6) - (1.3) (0.5) -

Amortization

of actuarial

losses - 0.9 - - - -

Net periodic

benefit cost $ 7.2 $ 18.5 $1.4 $ 2.2 $ 2.5 $0.2

The majority of the Group's pension and OPEB plans were assumed with the

acquisition of Baxalta on June 3, 2016.

15. Accumulated Other Comprehensive Income/(Loss)

The changes in accumulated other comprehensive income/(loss) ("AOCI"),

net of their related tax effects, for the six months ended June 30, 2017

and 2016 are included below:

Foreign Pension and Accumulated

currency other other

translation employee Unrealized holding gain/(loss) on available-for-sale Hedging comprehensive

(In millions) adjustment benefits securities activities (loss)/income

As of January 1,

2017 $(1,505.4) $(5.2) $ 6.6 $ 6.4 $ (1,497.6 )

Other

comprehensive

income/(loss)

before

reclassifications 1,696.5 9.7 (2.3) (0.5 ) 1,703.4

Amounts

reclassified from

AOCI - 0.9 (1.2) (5.4 ) (5.7 )

Net current period

other

comprehensive

income / (loss) 1,696.5 10.6 (3.5) (5.9 ) 1,697.7

As of June 30,

2017 $ 191.1 $ 5.4 $ 3.1 $ 0.5 $ 200.1

Foreign Pension Accumulated

currency and other Unrealized holding loss other

translation employee on available-for-sale Hedging comprehensive

(In millions) adjustment benefits securities activities loss

As of January

1, 2016 $(182.1) $ - $ (1.7) $ - $ (183.8)

Net current

period other

comprehensive

loss (195.5) - (4.7) (1.8) (202.0)

As of June 30,

2016 $(377.6) $ - $ (6.4) $ (1.8) $ (385.8)

Reclassifications from AOCI to net income/loss during the three and six

months ended June 30, 2017 and 2016 were not material.

16. Taxation

For the three and six months ended June 30, 2017, the effective tax rate

on income from continuing operations was 9% (2016: -427%) and 5% (2016:

2%), respectively.

The effective tax rate for the three and six months ended June 30, 2017

was affected by the combined impact of the relative quantum of the

profit before tax for the period by jurisdiction as well as significant

acquisition and integration costs.

The effective tax rate for the three and six months ended June 30, 2016

was affected by the combined impact of the relative quantum of the

profit before tax for the period by jurisdiction and of the reversal of

deferred tax liabilities from the acquisition of Baxalta (including in

higher tax territories such as the U.S.) of inventory and intangible

assets amortization as well as significant acquisition and integration

costs.

17. Earnings Per Share

The following table reconciles net income and loss and the weighted

average ordinary shares outstanding for basic and diluted earnings per

share ("EPS") for the periods presented:

Three months ended June Six months ended June

30, 30,

(In millions) 2017 2016 2017 2016

Income from

continuing

operations,

net of taxes $ 241.5 $ 86.6 $ 596.3 $ 496.1

(Loss)/gain

from

discontinued

operations,

net of taxes (1.2) (248.7) 19.0 (239.2)

Numerator for

basic and

diluted

earnings per

share $ 240.3 $ (162.1) $ 615.3 $ 256.9

Weighted

average number

of shares:

Basic 906.4 682.8 905.3 637.3

Effect of

dilutive

shares:

Share-based

awards to

employees 6.3 - 7.0 2.8

Diluted 912.7 682.8 912.3 640.1

Weighted average number of basic shares excludes shares purchased by the

Employee Benefit Trust and those under the shares buy-back program,

which are both presented by Shire as treasury stock. Share-based awards

to employees are calculated using the treasury method.

The share equivalents not included in the calculation of the diluted

weighted average number of shares are shown below:

Three months ended Six months ended June

June 30, 30,

(Number of shares

in millions) 2017 2016 2017 2016

Share-based awards

to employees 13.2 8.3 10.3 4.4

Certain stock options have been excluded from the calculation of diluted

EPS for the three and six months ended June 30, 2017 and 2016 because

either their exercise prices exceeded Shire's average share price during

the calculation period, the required performance conditions were not

satisfied as of the balance sheet date or their inclusion would have

been antidilutive.

18. Share-based Compensation Plans

Total share-based compensation recorded by the Group during the three

and six months ended June 30, 2017 and 2016 by line item is as follows:

Three months ended June 30, Six months ended June 30,

(In millions) 2017 2016 2017 2016

Cost of sales $ 6.1 $ 4.5 $ 12.7 $ 7.6

Research and

development 9.7 13.6 19.7 25.2

Selling,

general and

administrative 31.9 14.4 63.2 23.6

Integration and

acquisition

costs 6.0 144.0 10.8 138.4

Total 53.7 176.5 106.4 194.8

Less tax (29.6) (41.5) (42.7) (46.3)

$ 24.1 $ 135.0 $ 63.7 $ 148.5

The table above includes pre-tax expense related to replacement and

other awards held by Baxalta employees. This includes integration

related expense during the three and six months ended June 30, 2017 from

the acceleration of unrecognized expense associated with certain

employee terminations.

For further details on existing share-based compensation plans, refer to

Note 27, Share-based Compensation Plans, of Shire's Annual Report and

Accounts for the year ended December 31, 2016.

The Group made immaterial equity compensation grants to employees during

the three months ended June 30, 2017. During the six months ended June

30, 2017, the Group made equity compensation grants to employees

consisting of 8.9 million of stock-settled share appreciation rights

("SARs"), 2.1 million of restricted stock units ("RSUs") and 0.5 million

of performance share units ("PSUs") equivalent in ordinary shares.

19. Commitments and Contingencies

Leases

The Group leases land, facilities, motor vehicles and certain equipment

under operating leases expiring through 2039. For the three and six

months ended June 30, 2017, lease and rental expense totaled $42.4

million and $85.0 million (2016: $22.8 million and $30.3 million,

respectively), which is predominantly included in Cost of sales and

Selling, general and administrative expenses in the Group's Unaudited

Consolidated Statements of Operations.

Letters of credit and guarantees

As of June 30, 2017 and December 31, 2016, the Group had irrevocable

standby letters of credit and guarantees with various banks and

insurance companies totaling $190.1 million and $139.7 million (being

the contractual amounts), respectively, providing security for the

Group's performance of various obligations. These obligations are

primarily in respect of the recoverability of insurance claims, lease

obligations and supply commitments.

Commitments

Clinical testing

As of June 30, 2017, the Group had committed to pay approximately

$1,108.3 million (December 31, 2016: $1,037.4 million) to contract

vendors for administering and executing clinical trials. The timing of

these payments is dependent upon actual services performed by the

organizations as determined by patient enrollment levels and related

activities.

Contract manufacturing

As of June 30, 2017, the Group had committed to pay approximately $458.3

million (December 31, 2016: $528.9 million) in respect of contract

manufacturing. The Group expects to pay $190.3 million of these

commitments in 2017.

Other purchasing commitments

As of June 30, 2017, the Group had committed to pay approximately

$1,774.4 million (December 31, 2016: $1,745.4 million) for future

purchases of goods and services, predominantly relating to active

pharmaceutical ingredients sourcing. The Group expects to pay $876.8

million of these commitments in 2017.

Investment commitments

As of June 30, 2017, the Group had outstanding commitments to purchase

common stock and interests in companies and partnerships, respectively,

for amounts totaling $58.5 million (December 31, 2016: $76.4 million)

which may all be payable in 2017, depending on the timing of capital

calls. The investment commitments include additional funding to certain

variable interest entities ("VIEs") for which Shire is not the primary

beneficiary.

Capital commitments

As of June 30, 2017, the Group had committed to spend $136.4 million

(December 31, 2016: $100.5 million) on capital projects.

Baxter related tax indemnification

Baxter International Inc. ("Baxter") and Baxalta entered into a tax

matters agreement, effective on the date of Baxalta's separation from

Baxter, which employs a direct tracing approach, or where direct tracing

approach is not feasible, an allocation methodology, to determine which

company is liable for pre-separation income tax items for U.S. federal,

state and foreign jurisdictions. With respect to tax liabilities that

are directly traceable or allocated to Baxalta but for which Baxalta was

not the primary obligor, Baxalta recorded a tax indemnification amount

that would be due to Baxter upon Baxter discharging the associated tax

liability to the taxing authority. As of June 30, 2017, the amount of

the net tax indemnification amount was $25.5 million.

20. Legal and Other Proceedings

The Group expenses legal costs when incurred.

The Group recognizes loss contingency provisions for probable losses

when management is able to reasonably estimate the loss. When the

estimated loss lies within a range, the Group records a loss contingency

provision based on its best estimate of the probable loss. If no

particular amount within that range is a better estimate than any other

amount, the minimum amount is recorded. Estimates of losses may be

developed before the ultimate loss is known, and are therefore refined

each accounting period as additional information becomes known. An

outcome that deviates from the Group's estimate may result in an

additional expense or release in a future accounting period. As of June

30, 2017, provision for litigation losses, insurance claims and other

disputes totaled $64.0 million (December 31, 2016: $415.0 million).

The Group's principal pending legal and other proceedings are disclosed

below. The outcomes of these proceedings are not always predictable and

can be affected by various factors. For those legal and other

proceedings for which it is considered at least reasonably possible that

a loss has been incurred, the Group discloses the possible loss or range

of possible loss in excess of the recorded loss contingency provision,

if any, where such excess is both material and estimable.

LIALDA

In May 2010, Shire was notified that Zydus Pharmaceuticals USA, Inc.

("Zydus") had submitted an ANDA under the Hatch-Waxman Act seeking

permission to market a generic version of LIALDA. Within the requisite

45-day period, Shire filed a lawsuit in the U.S. District Court for the

District of Delaware against Zydus and Cadila Healthcare Limited, doing

business as Zydus Cadila. A Markman hearing took place on January 29,

2015 and a Markman ruling was issued on July 28, 2015. A trial took

place between March 28, 2016 and April 1, 2016. On September 16, 2016

the court issued its ruling finding that the proposed generic product

would not infringe the asserted claims. Shire appealed the ruling to the

Court of Appeals for the Federal Circuit ("CAFC"). On May 9, 2017, the

CAFC affirmed the ruling of the district court.

In February 2012, Shire was notified that Osmotica Pharmaceutical

Corporation ("Osmotica") had submitted an ANDA under the Hatch-Waxman

Act seeking permission to market a generic version of LIALDA. Within the

requisite 45-day period, Shire filed a lawsuit in the U.S. District

Court for the Northern District of Georgia against Osmotica. A Markman

hearing took place on August 22, 2013 and a Markman ruling was issued on

September 25, 2014. The court issued an Order on February 27, 2015 in

which all dates in the scheduling order have been stayed.

In March 2012, Shire was notified that Watson Laboratories Inc.-Florida

had submitted an ANDA under the Hatch-Waxman Act seeking permission to

market a generic version of LIALDA. Within the requisite 45-day period,

Shire filed a lawsuit in the U.S. District Court for the Southern

District of Florida against Watson Laboratories Inc.-Florida and Watson

Pharmaceuticals, Inc., Watson Pharma, Inc. and Watson Laboratories, Inc.

(collectively, "Watson") were subsequently added as defendants. A trial

took place in April 2013 and on May 9, 2013 the trial court issued a

decision finding that the proposed generic product infringes the

patent-in-suit and that the patent is not invalid. Watson appealed the

trial court's ruling to the CAFC and a hearing took place on December 2,

2013. The ruling of the CAFC was issued on March 28, 2014 overruling the

trial court on the interpretation of two claim terms and remanding the

case for further proceedings. Shire petitioned the Supreme Court for a

writ of certiorari which was granted on January 26, 2015. The Supreme

Court also vacated the CAFC decision and remanded the case to the CAFC

for further consideration in light of the Supreme Court's recent

decision in Teva v. Sandoz. On June 3, 2015, the CAFC reaffirmed their

previous decision to reverse the District Court's claims construction

and remanded the case to the U.S. District Court for the Southern

District of Florida. A trial was held on January 25-27, 2016. A ruling

was issued on March 28, 2016 upholding the validity of the patent and

finding that Watson's proposed ANDA product infringes the

patent-in-suit. Watson appealed the ruling to the CAFC and oral argument

took place on October 5, 2016. The CAFC issued a ruling on February 10,

2017 reversing the trial court's ruling of infringement and remanding

the case to the lower court for entry of a ruling of non-infringement.

On May 18, 2017, the lower court entered judgment of non-infringement.

In April 2012, Shire was notified that Mylan had submitted an ANDA under

the Hatch-Waxman Act seeking permission to market a generic version of

LIALDA. Within the requisite 45-day period, Shire filed a lawsuit in the

U.S. District Court for the Middle District of Florida against Mylan. A

Markman hearing took place on December 22, 2014. A Markman ruling was

issued on March 23, 2015. Following a four-day bench trial in September

2016 in the U.S. District Court for the Middle District of Florida, the

court handed down a ruling that Mylan's proposed generic version of

LIALDA infringes claims 1 and 3 of the Orange Book listed patent for

LIALDA. In connection with this finding of infringement, the court also

entered an injunction prohibiting Mylan from making, using, selling,

offering for sale and/or importing their proposed ANDA product before

the expiration of the patent (June 8, 2020) and requiring that the

approval date for their ANDA be on or after the expiration of the

patent. On June 14, 2017, the U.S. District Court for the Middle

District of Florida granted Mylan's Motion for Reconsideration and

entered judgment of non-infringement. Shire filed an appeal on July 7,

2017.

In March 2015, Shire was notified that Amneal had submitted an ANDA

under the Hatch-Waxman Act seeking permission to market a generic

version of LIALDA. Within the requisite 45 day period, Shire filed a

lawsuit in the U.S. District Court for the District of New Jersey

against Amneal, Amneal Pharmaceuticals of New York, LLC and Amneal

Pharmaceuticals Co. India Pvt. Ltd. A Markman hearing took place on July

25, 2016. A Markman ruling was issued on August 2, 2016. No trial date

has been set.

In September 2015, Shire was notified that Lupin Ltd. had submitted an

ANDA under the Hatch-Waxman Act seeking permission to market a generic

version of LIALDA. Within the requisite 45 day period, Shire filed a

lawsuit in the U.S. District Court for the District of Maryland against

Lupin Ltd., Lupin Pharmaceuticals Inc., Lupin Inc. and Lupin Atlantis

Holdings SA. A Markman hearing originally scheduled to take place on

November 10, 2016, was cancelled and has not yet been rescheduled. No

trial date has been set.

VANCOCIN

On April 6, 2012, ViroPharma Incorporated ("ViroPharma") received a

notification that the United States Federal Trade Commission ("FTC") was

conducting an investigation into whether ViroPharma had engaged in

unfair methods of competition with respect to VANCOCIN which Shire

acquired in January 2014. Following the divestiture of VANCOCIN in

August 2014, Shire retained certain liabilities including any potential

liabilities related to the VANCOCIN citizen petition.

On August 3, 2012, and September 8, 2014, ViroPharma and Shire

respectively received Civil Investigative Demands from the FTC

requesting additional information related to this matter. Shire has

fully cooperated with the FTC's investigation.

On February 7, 2017, the FTC filed a Complaint against Shire alleging

that ViroPharma engaged in conduct in violation of U.S. antitrust laws

arising from a citizen petition ViroPharma filed in 2006 related to Food

& Drug Administration's policy for evaluating bioequivalence for generic

versions of VANCOCIN. The complaint seeks equitable relief, including an

injunction and disgorgement. The Group filed a motion to dismiss on

April 10, 2017.

At this time, Shire is unable to predict the outcome or duration of this

case.

ELAPRASE

On September 24, 2014, Shire's Brazilian affiliate, Shire Farmaceutica

Brasil Ltda, was served with a lawsuit brought by the State of Sao Paulo

and in which the Brazilian Public Attorney's office has intervened

alleging that Shire is obligated to provide certain medical care

including ELAPRASE for an indefinite period at no cost to patients who

participated in ELAPRASE clinical trials in Brazil, and seeking

recoupment to the Brazilian government for amounts paid on behalf of

these patients to date, and moral damages associated with these claims.

On May 6, 2016, the trial court judge ruled on the case and dismissed

all the claims under the class action, which was appealed. On February

20, 2017, the Court of Appeals in Sao Paulo issued the final decision on

merit in favor of Shire and dismissed all the claims under the class

action. The final decision can be appealed through the Superior Court of

Justice or through the Supreme Court; however, the likelihood of one of

those courts accepting the appeal is remote.

21. Agreements and Transactions with Baxter

In connection with Baxalta's separation from Baxter on July 1, 2015,

Baxalta and Baxter entered into several separation-related agreements

that provided a framework for Baxalta's relationship with Baxter after

the separation. These agreements, among others, included a manufacturing

and supply agreement, a transition services agreement and a tax matters

agreement. For further details on existing agreements with Baxter, refer

to Note 28, Agreements and Transactions with Baxter, of Shire's Annual

Report and Accounts for the year ended December 31, 2016.

The Group reported revenues associated with the manufacturing and supply

agreement with Baxter during the three and six months ended June 30,

2017 of approximately $30.4 million and $70.7 million, respectively, and

approximately $16.0 million during both the three and six months ended

June 30, 2016. The Group reported Selling, general and administrative

expenses associated with the transition services agreement with Baxter

during the three and six months ended June 30, 2017 of approximately

$14.8 million and $33.7 million, respectively, and approximately $8.4

million during both the three and six months ended June 30, 2016. Net

tax-related indemnification liabilities as of June 30, 2017 associated

with the tax matters agreement with Baxter are discussed in Note 19,

Commitments and Contingencies, of these Unaudited Consolidated Financial

Statements.

As of June 30, 2017, the Group had total amounts due from or to Baxter

of $72.5 million reported in Prepaid expenses and other current assets,

$33.6 million reported in Other non-current assets, $59.2 million

reported in Other current liabilities and $59.6 million reported in

Other non-current liabilities.

22. Segment Reporting

Shire operates as one operating and reportable segment engaged in the

research, development, licensing, manufacturing, marketing, distribution

and sale of innovative specialist medicines to meet significant unmet

patient needs.

In the periods set out below, revenues by major product were as follows:

Three months ended Six months ended

June 30, June 30,

(In millions) 2017 2016 2017 2016

Product sales:

HEMOPHILIA $ 743.9 $ 275.6 $1,394.3 $ 275.6

INHIBITOR

THERAPIES 220.7 74.0 441.2 74.0

Hematology total 964.6 349.6 1,835.5 349.6

CINRYZE 175.9 173.0 401.8 337.2

ELAPRASE 161.0 154.0 301.6 277.6

FIRAZYR 137.4 136.7 265.9 265.0

REPLAGAL 122.1 118.4 231.8 221.6

VPRIV 87.9 88.0 167.7 171.6

KALBITOR 20.6 17.7 32.3 28.1

Genetic Diseases

total 704.9 687.8 1,401.1 1,301.1

IMMUNOGLOBULIN

THERAPIES 510.5 138.2 1,008.8 138.2

BIO THERAPEUTICS 172.2 51.3 350.1 51.3

Immunology total 682.7 189.5 1,358.9 189.5

VYVANSE 518.2 517.7 1,081.9 1,026.9

ADDERALL XR 71.4 101.8 136.3 200.6

MYDAYIS 15.7 - 15.7 -

Other

Neuroscience 30.1 35.7 54.8 57.8

Neuroscience

total 635.4 655.2 1,288.7 1,285.3

LIALDA/MEZAVANT 207.8 193.7 382.9 361.7

PENTASA 83.3 72.9 152.4 136.9

GATTEX/REVESTIVE 75.3 44.5 144.3 96.2

NATPARA 34.5 19.9 64.2 35.5

Other Internal

Medicine 83.4 88.7 159.3 173.3

Internal Medicine

total 484.3 419.7 903.1 803.6

Oncology total 62.5 20.3 120.8 20.3

Ophthalmology

total 57.4 - 96.0 -

Total Product

sales 3,591.8 2,322.1 7,004.1 3,949.4

Royalties and

other revenues:

SENSIPAR

royalties 46.4 35.6 85.3 73.5

ADDERALL XR

royalties 13.4 5.2 25.9 11.0

FOSRENOL

royalties 12.1 11.4 20.7 20.6

3TC and ZEFFIX

royalties 8.2 12.1 22.7 27.1

Other royalties

and revenues 73.9 42.7 159.4 56.8

Total Royalties

and other

revenues 154.0 107.0 314.0 189.0

Total Revenues $3,745.8 $2,429.1 $7,318.1 $4,138.4

23. Subsequent Events

As part of the Board's ongoing commitment to optimize Shire's portfolio

and strategic focus, Shire is assessing strategic options for its

Neuroscience franchise. These options may include the independent public

listing of the Neuroscience franchise. Shire intends to complete this

strategic review by year end.

On July 18, 2017, Shire entered into a licensing agreement with

Novimmune S.A. ("Novimmune"). The license grants Shire exclusive

worldwide rights to develop and commercialize a bi-specific antibody in

pre-clinical development for the treatment of hemophilia A and

hemophilia A patients with inhibitors. Under the terms of the agreement,

Shire will develop, and if approved, commercialize the product. Shire

made an initial $5.0 million upfront license payment. Novimmune will be

entitled to receive additional potential milestone payments up to $335.0

million based on clinical, regulatory and commercial milestones and

single-digit royalties.

Independent Review Report to Shire plc

We have been engaged by Shire plc to review the condensed set of

financial statements for Shire plc and its subsidiaries (the "Group") in

the half-yearly financial report for the six months ended June 30, 2017

which comprises the consolidated balance sheets, consolidated statements

of operations, consolidated statements of comprehensive income,

consolidated statement of changes in equity, consolidated statements of

cash flows and related notes 1 to 23. We have read the other information

contained in the half-yearly financial report and considered whether it

contains any apparent misstatements or material inconsistencies with the

information in the condensed set of financial statements.

This report is made solely to the group in accordance with International

Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim

Financial Information Performed by the Independent Auditor of the

Entity" issued by the Auditing Practices Board. Our work has been

undertaken so that we might state to the group those matters we are

required to state to it in an independent review report and for no other

purpose. To the fullest extent permitted by law, we do not accept or

assume responsibility to anyone other than the group, for our review

work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been

approved by, the directors. The directors are responsible for preparing

the half-yearly financial report in accordance with the Disclosure

Guidance and Transparency Rules of the United Kingdom's Financial

Conduct Authority.

As disclosed in note 1, the annual financial statements of the Group are

prepared in accordance with accounting principles generally accepted in

the United States of America ("U.S. GAAP"). The condensed set of

financial statements included in this half-yearly financial report has

been prepared in accordance with the accounting policies the Group

intends to use in preparing its next financial statements.

Our responsibility

Our responsibility is to express to the Group a conclusion on the

condensed set of financial statements in the half-yearly financial

report based on our review.

Scope of review

We conducted our review in accordance with International Standard on

Review Engagements (UK and Ireland) 2410 "Review of Interim Financial

Information Performed by the Independent Auditor of the Entity" issued

by the Auditing Practices Board for use in the United Kingdom. A review

of interim financial information consists of making inquiries, primarily

of persons responsible for financial and accounting matters, and

applying analytical and other review procedures. A review is

substantially less in scope than an audit conducted in accordance with

International Standards on Auditing (UK and Ireland) and consequently

does not enable us to obtain assurance that we would become aware of all

significant matters that might be identified in an audit. Accordingly,

we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to

believe that the condensed set of financial statements in the

half-yearly financial report for the six months ended June 30, 2017 is

not prepared, in all material respects, in accordance with U.S. GAAP and

the Disclosure Guidance and Transparency Rules of the United Kingdom's

Financial Conduct Authority.

Deloitte LLP

London, United Kingdom

August 3, 2017

This announcement is distributed by Nasdaq Corporate Solutions on behalf

of Nasdaq Corporate Solutions clients.

The issuer of this announcement warrants that they are solely

responsible for the content, accuracy and originality of the information

contained therein.

Source: Shire plc via Globenewswire

(END) Dow Jones Newswires

August 04, 2017 03:05 ET (07:05 GMT)

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