Shire Pharmaceuticals: Astute Move for New River

The main driver of this Shire’s plan to acquire New River is Vyvanse, New River Pharmaceutical’s new ADHD drug and potential follow up to Shire’s Adderall XR, which is estimated to expire in 2009. If Vyvanse can live up to its potential, the deal will ensure that Shire maintains its market leading position in the ADHD treatment sector.

In January 2005, Shire Pharmaceuticals signed a collaborative agreement with New River Pharmaceuticals for the development of an ADHD drug Vyvanse, a potential follow up to Shire’s current ADHD treatment Adderall XR. With Adderall XR set to expire in 2009, Shire faces a very realistic threat of generic competition eroding its current top-line.

Adderall XR is the leading drug in the company’s current product portfolio and accounted for 73.7% of the company’s total ethical sales between 2002 and 2005. Datamonitor forecasts that Adderall XR will experience a significant hit on sales following patent expiry, demonstrated by an absolute annual sales decline of $901 million between 2005 and 2011.

From this, it is clear that the motivation behind the purchase of New River Pharmaceutical is the threat of patent expiry of Adderall XR. One of the key advantages of Vyvanse is its less addictive nature compared to Adderall XR and many other ADHD drugs. However, it is questionable as to whether or not Vyvanse will adequately compensate for the loss of patent protection on Adderall XR.

Adderall XR is the leading ADHD medication on the market today. If Vyvanse is able to gain the same level of success as Adderall has, then the purchase of New River Pharmaceutical will have proved a very astute strategic move for Shire. Although Vyvance has been developed for pediatric use, Shire will need to pursue a wider approval of the drug – perhaps as a treatment for both adults and teenagers – in order to gain maximum exposure in this market and boost its commercial potential. However, with the patent expiry of Adderall XR expected in 2009, the capture of Vyvance will enable Shire to continue its dominance over the ADHD market.