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Shire Drug to Face Added Competition

Zacks Equity Research

Shire (SHPG) recently announced that the US Food and Drug Administration (:FDA) has approved the abbreviated new drug application (ANDA) filed by Actavis for its generic version of Adderall XR. Adderall XR is indicated for attention-deficit/hyperactivity disorder (:ADHD).

The FDA responded to a citizen petition filed by the company for Adderall XR. The FDA said that all the companies filing an ANDA should establish bioequivalence using partial area under the curve measurements for both d- and l- amphetamine at 5 hours and beyond. The citizen petition was filed by Shire in October 2005.

We note that, at present, Iceland-based Actavis is in the process of being acquired by Watson Pharmaceuticals Inc. (WPI).

Our Take

Adderall XR, with $111.4 million revenues in the first quarter of 2012, is one of the top revenue grossers at Shire. As per data provided by IMS Health National Prescription Audit, Adderall XR enjoys a 7% share of the US ADHD market.

Apart from this, the company has two authorized generic partners – Teva Pharmaceuticals (TEVA) and Impax Laboratories (IPXL). We believe that the entry of additional generic versions of Adderall XR will eat into Adderall XR revenues.

Shire in engaged in several lawsuits for Adderall XR. On November 1, 2010, Impax filed a suit against Shire claiming a breach of contract regarding the supply of the generic version of Adderall XR. Shire has been supplying Impax with the generic version of the ADHD drug since October 2009. Shire has filed a counterclaim against Impax.

The company is also entangled in a legal battle with Watson Pharma, which is also seeking to market generic versions of the drug in multiple doses. In April 2011, Shire filed a patent infringement lawsuit and breach of contract against Watson Pharma following the ANDA filed by Watson with the FDA for its generic version of the drug.

We currently have a Neutral recommendation on Shire. The stock carries a Zacks #3 Rank (Hold rating) in the short run.

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