Shares in British drugs group Shire soared more than 6 per cent after it sealed a compromise deal with America’s Impax Laboratories that helps secure revenues for its top-selling drug, Adderall XR.
In a price rise that added more than £250 million to Shire’s market value, the shares were trading 51.5p higher at 886.5p after two hours of dealing this morning. The stock market now believes the British firm is worth nearly £4.37 billion.
The shares also gained yesterday following strong signals by the company that a settlement with Impax was pending.
The drug developer, based in Basingstoke, has been trying to uphold the patents to Adderall XR, its blockbuster medicine for hyperactive children, against a barrage of challenges from copycat manufacturers looking to launch a cheaper generic alternative.
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Yesterday the shares jumped 23p to 835p — a four-year high — as a US judge agreed to delay court proceedings between Shire and Impax Laboratories, one of its potential competitors, pending a possible settlement.
Later, after the market closed, the company was able to announce that all litigation with Impax had been settled. The agreement will allow Impax to sell generic versions of Adderall “no later than January 1, 2010” while paying Shire royalties.
The move will give Shire’s scientists time to finalise the launch of a new-generation hyperactivity treatment so far known only by the codename NRP104. The company hopes that the new treatment, currently before regulators for approval, will more than make up for any eventual loss of revenues from Adderall.
Today, Credit Suisse moved to “outperform” from “neutral” on Shire with a target price of £10.60. “This has a positive impact on margins for Shire over the next five years,” it told clients. “Shire may now be much less likely to use an aggressive price-switching strategy, but instead promote Adderall XR and NRP104 equally side by side for at least until early 2009.”
Merrill Lynch maintained its neutral rating on the stock and in a note sent to investors wrote: “While the deal removes the risk of a 2006 generic launch, in order to protect Adderall XR beyond 2007, Shire must still settle with Barr pharmaceuticals with whom it remains in talks. In our view, any deal terms are unlikely to be as favourable due to Barr’s ownership of the 180-day exclusivity period for Adderall XR.”
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Companies typically expect sales to slump by as much as 80 per cent when a generic version of a drug hits pharmacy shelves. Analysts had fretted over the impact of a copycat alternative to Adderall — the treatment is expected to generate sales of about £700 million this financial year and will make up as much as half of total profits.
Shire also faces challenges from three other generic makers. The company is holding settlement negotiations with Barr Laboratories, which is closest to seeking approval from regulators for its version of Adderall but further behind Impax in legal challenges to ownership rights to the drug.
A further two generic companies, Teva Pharmaceuticals and Colony, are planning to make their own versions of Adderall. However, Shire has stated that it does not plan to take legal action against either party.
Shire said that, in the event of a generic version being launched, Impax may be allowed to bring forward the launch of its own version as the British company’s “authorised generic”.
This week Matt Emmens, Shire’s chief executive, buoyed the group’s shares when he told American investors that talks were progressing well and that he was confident of reaching a deal.
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Analysts gave warning that the devil of any agreements could be in the detail, arguing that the pricing of NRP104 will be crucial if the treatment is to compete against cheap versions of Adderall.
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