WASHINGTON, Feb. 21 (UPI) -- Shire's plans to acquire New River for $2.6 billion to gain full control of Vyvanse, a potential treatment for attention-deficit/hyperactivity disorder, is a good move, according to analysts on both sides of the deal.
The move was not unexpected, as Shire had previously been collaborating on the development of Vyvanse with New River, which would have controlled approximately 65 percent of the future economics of the drug. Shire sees Vyvanse as important to its future success because it hopes it can replace lost revenue from the patent expiration of its current ADHD drug Adderall XR in 2009.
R.W. Baird analyst Lawrence Neibor saw the acquisition as a positive for Shire's bottom line.
"This move enhances the future earnings power of Shire, assuming a successful transition from Adderall XR to Vyvanse, but at the cost of dilution in 2007-2008," Neibor stated in a research report issued Wednesday.
Shire plans to accept earnings-per-share dilution in 2007-2008 so it can derive the full economic benefit from Vyvanse going forward. The patent of the drug expires in 2024.
Neibor expects Vyvanse will win approval and be launched in May. That would give the company nearly two years to transition patients to Vyvanse from Adderall XR, which generated sales of $864 million last year.
Shire, which expects the acquisition deal to close in April, said it intends to proceed with its plans to launch the drug for the pediatric indication and file a supplemental new drug application for the adult indication in the second quarter of 2007.
The acquisition "will enable us to drive the launch and future development of Vyvanse and gain the full economic benefits of the drug," said Matthew Emmens, Shire's chief executive officer.
"Based on Vyvanse's expected profile, we believe it has the potential to be the next generation stimulant product to Adderall XR," Emmens added.
Neibor also liked Shire's fourth-quarter numbers and the year ahead for the company.
"Though lost in the news concerning the tender offer to acquire (New River), the fourth quarter was a very solid period for Shire," he stated.
Shire reported a nearly 7-percent increase in sales to $497 million and an EPS of $0.41, falling short of Wall Street's consensus estimate of $0.47. The sales increase was driven by strong performances from Carbatrol/Equetro, Pentasa, Fosrenol and Elaprase.
Shire said it anticipates revenue growth of approximately 20 percent this year and plans to roll out several new products in addition to Vyvanse, including Daytrane for ADHD and Lialda for ulcerative colitis. Also, Dynepro is expected to be launched in Europe.
In addition, Connexyn and SPD465 -- both for ADHD -- are expected to win approval by mid-year.
"The costs of these product launches has depressed near-term margins but are propelling the stock to new highs as Shire has one of the most compelling new product stories in the Specialty Pharma space," Neibor stated.
R.W. Baird told United Press International Neibor was unavailable for comment.
On the other end of the acquisition deal, Robert Uhl, an analyst with Friedman, Billings & Ramsey, said the move benefited New River as well.
"I think it's a good one," Uhl told UPI. He noted that it was expected because R.J. Kirk, the founder of New River, has a history of growing companies to a point where they are attractive to outside buyers.
Uhl said he thinks the FDA will approve Vyvanse this Friday because the deadline for action is Saturday.
Another issue that remains to be decided is how the Drug Enforcement Administration will classify the drug, but so far the market is assuming it will be a schedule 2, just like the other amphetamine ADHD treatments, Uhl said.
He thinks Shire will try to use aggressive marketing that highlights the superiority of Vyvanse over Adderall XR to convince doctors to switch to the new drug.
Uhl also said he thinks Shire will be successful in getting formularies to carry Vyvanse.
"I don't think it will be a battle to get it on the formularies," he said, adding that formularies are often more open to including drugs for children because they want to avoid parental outcry.
The other big players in the market include Novartis with Ritalin, Eli Lilly with Strattera and Johnson & Johnson with Concerta, but the Shire acquisition is not expected to have much impact on them.
"I don't see it having much effect on the market," Uhl said.
