UCBJF UCB NPV (PK)

Shire (SHPG) recently announced that the company settled its pending litigation with Actavis, Inc (ACT), formerly known as Watson Pharmaceuticals.

The litigation was primarily related to Actavis’ Abbreviated New Drug Applications (ANDAs) for generic versions of Shire's Attention Deficit Hyperactivity Disorder (ADHD) drug, Intuniv.

As per the settlement, Actavis is licensed to manufacture and market its generic versions of Intuniv in the US from Dec 1, 2014 or earlier subject to certain limited circumstances. 

Additionally, Shire is entitled to a  25% royalty on gross profits from the sales within the 180 day period of Actavis' exclusivity.

Meanwhile, the settlement also resolves outstanding litigation against Watson's ANDA. The ANDA is still pending approval at the US Food and Drug Administration (FDA).

We note that the FDA approved Actavis' ANDA for a generic version of Intuniv in Oct 2012 and awarded Actavis 180 days of ANDA market exclusivity.

The launch of Intuniv’s generic by Actavis will impact Shire’s sales. We note that Intuniv is one of the three key drugs in the ADHD market, the two others being Vyvanse and Adderall XR. As per IMS Health, Intuniv generated sales of approximately $475 million for the twelve months ending Jan 31, 2013.

Shire holds a strong position in the ADHD market. We note that Vyvanse generated approximately 22% of total revenues in 2012. Vyvanse (EU trade name: Elvanse) was approved in the EU in Dec 2012. Shire is currently developing Vyvanse for additional indications such as the treatment of negative symptoms of schizophrenia and binge eating disorder.

However, we are concerned about the increasing competition in the ADHD market due to the entry of generics. Shire’s share of the US ADHD prescription market declined to 26.6% in Dec 2012 from 27.9% in the year-ago period.

Shire currently carries a Zacks Rank #4 (Sell). Right now, stocks which look well placed include UCB SA (UCBJF) and WuXi PharmaTech (Cayman) Inc. (WX). Both stocks carry a Zacks Rank #1 (Strong Buy).

 
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