TIP OF THE YEAR 2009: Shire (SHP)

Shire's presentation in November on its human genetic therapy (HGT) products generated plenty of hype. But the company's nearer-term performance will be dominated by its attention-deficit and hyperactivity disorder (ADHD) treatments. And there is plenty to take comfort from there.

In particular, Vyvanse - Shire’s replacement drug for its ADHD blockbuster, Adderall XR - is proving to be a success and should generate revenues in 2008 of £350m-£400m. Indeed, Vyvanse has important therapeutic benefits over Adderall XR - which is a pure amphetamine. Specifically, its effects last longer and the drug is only activated once it reaches the stomach. That latter point should prove a decent selling point for parents with hyperactive children - when a child returns home from school, for instance, he or she won't need a second dose. That reduces the possibility of misuse of the drug.

But, for all its benefits, Vyvanse will face a generic threat. From April, US-based Barr Pharmaceuticals plans to launch a generic version of Adderall XR. And, while Vyvanse is a new product, generic versions of cheaper drugs are usually preferred by consumers over their successors.

But that situation may not be as threatening as it seems. The extent to which Shire has to market Vyvanse as a replacement to Adderall XR will depend on the rate of deterioration in Adderall XR's sales. But that will depend on whether Barr is successful in breaking Shire's Citizen's Petition - a form of US patent for drugs that are deemed sensitive by the US Food & Drug Administration because of their impact on the brain.

"Right now, any drug that tries to replace Adderall XR has to show 100 per cent bio-equivalence or be supplied by Shire," says analyst Mick Cooper of broker Blue Oar. But he believes that Shire's Citizen's Petition is likely to hold, citing the success of Johnson & Johnson's petition with its ADHD treatment, Concerta. And if that proves to be the case, it will be tougher for Barr and other manufacturers to offer generic versions of Adderall XR.

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But irrespective of what happens in the ADHD arena, Shire's HGT products are also worth considering. They generate about $500m in sales (15 per cent of the total) and management thinks that this area will be a robust long-term growth engine. Indeed, Shire estimates that sales here could grow at about 15 per cent a year to $1.5bn - or 30 per cent of revenues - by 2015.

Such estimates sound realistic. Crudely speaking, these therapies involve the replacement of a defective enzyme and, while products in this category often target relatively small patient groups, revenues can also prove to be more resilient than with other types of drugs. Take Shire's Elaprase product, for the treatment of Hunter Syndrome, for instance. This is a debilitating genetic disorder which affects only about 2,000 young people in the US, but revenues - while relatively small at about $100m - hold up well. And, after having in-licensed six HGT products, Shire can boast a broad and deep pipeline in this field, leaving it as one of the world's leading HGT companies.

Shire's relatively healthy financial position also leaves it well placed to bolster its portfolio in the future with more purchases. And with Vyvanse, as well as a growing book of HGT products, the prospect that Shire itself could become a bid target can't be ruled out either.