Description of operations

General

Shire Pharmaceuticals Group plc and its subsidiaries (collectively referred to as “Shire” or the “Company”) is a global pharmaceutical company with a strategic focus on meeting the needs of the specialist physician. The Company has a particular interest in innovative therapies that are prescribed by specialist doctors as opposed to primary care physicians. The Company is focused on the development of late stage projects and marketing products in the areas of central nervous system (CNS), gastrointestinal (GI) and general products (GP).

Geographically, the Company has operations in the world’s key pharmaceutical markets, namely North America and Europe. The Company’s business is organized across four operating segments: US, International (covering territories outside of the US), Research & Development (R&D) and Corporate. Revenues are derived primarily from three sources: sales of the Company’s own products, royalties (where Shire has out-licensed products to third parties) and licensing and development fees.

Strategic review and reorganization

In 2003, the Company conducted a detailed strategic review resulting in revised strategic priorities, namely that the Company will:

• search, develop and market but not invent;

• seek to acquire products with substantive patent protection rather than just three years Hatch-Waxman exclusivity; • focus its in-licensing and merger and acquisition efforts on the US market and obtain European rights whenever

possible.

As part of this process, Shire refocused its R&D efforts and technology to concentrate on areas where it had a commercial presence and to create the flexibility to add new therapeutic areas based on product acquisition opportunities. This approach aimed to deliver the combined benefit of increased returns and lower risks.

In connection with the refocused R&D efforts, the Company decided to exit from early stage therapeutic research (Lead Optimization) in 2003, to dispose of certain facilities in Canada (see Note 3) and announced the planned disposal of the vaccines business.

During 2004, the Company announced that it would continue to focus on its new business strategy, including taking the following actions:

• a North American site consolidation decreasing the number of operational sites from 14 to 6 in 2004 and the opening of a new US headquarters in Wayne, Pennsylvania;

• the disposal of the Company’s vaccines business to ID Biomedical Corporation (IDB), a Canadian biotechnology company, which was completed in the third quarter of 2004 (see Note 3); and

• the out-licensing of non-core projects including the acute myelogenous leukemia treatment TROXATYL (toxacitabine) to Structural GenomiX Inc. during the third quarter of 2004 and SPD754 for the treatment of HIV to Avexa Limited in January 2005.

These changes have had implications for both Shire’s organizational structure and operating sites. The Company has a new global management structure aimed at close interaction between development, marketing and sales, and new people in key positions reporting directly to the Chief Executive Officer.

The Company expects to complete the North American site consolidation in 2005. To date the Company has recorded $48.5 million of costs associated with this site consolidation. Substantial progress has been made and the Company anticipates completing the remaining actions in 2005. Remaining costs associated with the reorganization are estimated to be approximately $12 million (see Note 3).

There are inherent risks associated with any significant organizational change, including the possibility of disruption to the Company's business or the loss of key personnel. Although a project team has been set up to actively manage the process and the associated risks, delays to R&D projects, failure to attain sales targets or other disruption to the business could occur as a result of the reorganization.

Markets

• in the US, ADDERALL XR for the treatment of ADHD, AGRYLIN for the treatment of elevated blood platelets, PENTASA for the treatment of ulcerative colitis and CARBATROL for the treatment of epilepsy. In addition, the Company receives royalties on sales of REMINYL for the treatment of Alzheimer’s disease, marketed by Janssen Pharmaceutica NV (Janssen), and on EPIVIR, COMBIVIR and TRIZIVIR for the treatment of HIV/AIDS, marketed by GSK;

• in the UK and the Republic of Ireland, the CALCICHEW range, used primarily as adjuncts in the treatment of osteoporosis, and REMINYL, which was co-promoted with Janssen-Cilag until May 3, 2004. On May 3, 2004, the Company acquired from Janssen-Cilag the exclusive commercialization rights to REMINYL in the UK and Ireland; • in Canada, 3TC and COMBIVIR for the treatment of HIV/AIDS, HEPTOVIR for the treatment of hepatitis (all marketed in

partnership with GSK) and AGRYLIN for the treatment of elevated blood platelets; and

• in the Rest of the World, royalties on the sales of ZEFFIX for the treatment of Hepatitis B, marketed by GSK, and royalties on sales of REMINYL, marketed by Janssen.

In addition to the above, the Company has a number of products that have been recently approved and projects that are currently in registration or late stage development. These include:

Recently approved

• PENTASA for the treatment of ulcerative colitis. On July 8, 2004 the Shire received FDA approval to market the 500mg dosage strength of PENTASA in the US;

• ADDERALL XR for the treatment of adults with ADHD. On August 12, 2004, the FDA approved a once-daily treatment for adults with ADHD;

• FOSRENOL for the treatment of high blood phosphate levels associated with end-stage renal disease. On October 26, 2004 Shire received FDA approval to market FOSRENOL in 250mg and 500mg dosage strength in the US. Approval was also gained in Sweden on March 19, 2004, and further regulatory approvals have been sought in a number of other EU Member States pursuant to the Mutual Recognition Process. Following pricing and reimbursement discussions with individual countries, the launch of FOSRENOL in Europe will be phased during 2005;

• ADDERALL XR for the treatment of ADHD. On October 28, 2004 the FDA granted an additional six months of market exclusivity in the US under the Hatch-Waxman regulations. The additional exclusivity period will expire on April 11, 2005. The extension followed submission of data from a clinical program examining the effects of ADDERALL XR in adolescent pediatric patients. This data was submitted in response to a Written Request by the FDA;

• XAGRID (trade name for AGRYLIN in EU) for the treatment of elevated blood platelets. EU approval was received in November 2004; launch commenced in January 2005 and will be phased through certain countries in Europe in 2005; and

• EQUETRO (previously called SPD417 and BIPOTROL) for bipolar disorder. FDA approval was granted in December 2004.

Registration

• MTS/METHYPATCH, a transdermal delivery system for the once daily treatment of ADHD. In April 2003 Shire received a “not approvable” letter from the FDA. A program has been agreed with the FDA to address issues raised in this letter and this work is currently ongoing; and

• ADDERALL XR adolescent. In September 2004 a supplemental new drug application for the use of ADDERALL XR in the adolescent population was submitted to the FDA. It is anticipated that a response to this submission will be received during the second half of 2005.

Late stage development

• SPD503 (guanfacine) for ADHD, which is in Phase III clinical trials; • SPD476 for ulcerative colitis, which is in Phase III clinical trials; • SPD465 for ADHD, which is in Phase II clinical trials;

• SPD480, which is a 5-ASA based product formulated in a single dose, 2g and 4g, foam for rectal delivery in the treatment of ulcerative colitis. Rights to key global markets were licensed from Giuliani SpA in October 2002. This product will provide an alternative treatment for distal/rectal ulcerative colitis and has reached Phase II development; and