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When Shire bought New River Pharmaceuticals for $2.6bn in 2007 it did so with major hopes for its main product, the drug Vyvanse.
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Vyvanse is Shire's replacement for its blockbuster attention deficit and hyperactivity disorder (ADHD) treatment Adderall XR which will run out of patent life in April 2009. Such "line extensions" are common in the pharmaceutical world and, if you believe the marketing, the replacements are a significantly improved version of the original.
Indeed, Collins Stewart analyst Navid Malik says there are two key improvements Vyvanse offers over its predecessor. The first is that patients only need to take one pill a day compared with the two Adderall XR pills required for the same effect. Secondly, Vyvanse is a much safer product. Unlike Adderall XR, those taking it cannot overdose and it cannot be abused. In the US, academic tests have shown that 20 per cent of patients are crushing Adderall XR pills in order to create a stimulant. This cannot happen with Vyvanse.
Another positive for Shire's fans is that the group has built up a tremendous reputation as an ADHD specialist, which was enhanced by its success in converting customers from Adderall to its then line extension Adderall XR.
But in the current climate of depressed share prices due to the growing presence of generic drugs, many high-profile brokers and investors are extremely sceptical about Shire's ability to perform this feat again. Indeed, Shire's share price has fallen 25 per cent in the past six months.
There's a lot at stake. Sales of Adderall XR are expected to be in the region of $850m in 2008. But these sales will literally fall of a cliff when a flood of generic substitutes hit the market next year - unless Vyvanse can take up the slack. Several brokers, including the respected team at Goldman Sachs, have said doctors are not prescribing Vyvanse at a rate that would generate sales any where near to those of Adderall.
However, sentiment was boosted by Shire's full year results presentation in late February where chief executive Matthew Emmens said he expected sales of Vyvanse should be in the region of $400m this year, which was well above many analysts' expectations. The consensus forecast is for Vyvanse to exceed $1bn of annual sales from 2010 - more than Adderall XR ever achieved. So Shire has plenty to prove in the face of the mounting generic competition that has blighted the prospects of the blockbuster.
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-IC-1.9.0c-prod - 15/05/2009 11:00:33 - stuart.turner
