Like the February weather in its home city of Dublin, Ireland, Shire (Nasdaq:SHPGY) is cool to the idea of losing its independence. But with outstanding sales growth and an attractive product line, the company is going to have a hard time hiding its light under a bushel. Shire may be just what the doctor ordered for several members of Big Pharma seeking to shake off the draconian-like impact of generic competition for some of their best-selling drugs.
A number of potential suitors are rumored to be lining up to making a run at Shire. Among those prominently mentioned are Pfizer (NYSE:PFE), Glaxo SmithKline (NYSE:GSK), Teva ( Nasdaq:TEVA ) and AstraZeneca (NYSE:AZN).
One thing is certain, though: Anyone who wants Shire is going to have to belly up to the bar with some serious cash. The company’s share price is up more than 50% in the past year and now trades near its all-time high of $96.77. This gives Shire a hefty market cap, just north of $50 billion.
In a recent interview, Shire Chief Executive Officer Angus Russell said the company is doing fine on its own, and its prospects look bright. However, Russell certainly left to door open to a union, noting the company is obligated to “entertain approaches that are significantly value-enhancing.”
Some analysts think Shire is too pricey for a takeover. They point out that the company sells for more than 16 times profit, somewhat higher than most buyers have been willing to pay for acquisitions in recent history.
But even at a premium, Shire looks highly desirable. Last month, the company reported a 24% increase in first-quarter sales. At the same time, Shire said its sales growth in 2011 should be in line with last year’s 16% increase, when the company broke the $3 billion mark for the first time.
Shire’s best-selling drug is Vyvanse, for treating Attention Deficit Hyperactive Disorder. In the field of ADHD, Shire is a world leader, offering a portfolio of products in various markets.
Sales of Vyvanse climbed 31% to more than $200 million in the first quarter. As part of the company’s strategy for finding new uses for its drugs, Shire is testing Vyvanse for schizophrenia, and early data has looked good. Russell says the drug may be useful in combination with currently used anti-psychotics, because it reduces what are known as “negative” symptoms — such as lack of emotion and diminished social skills — but doesn’t exacerbate other symptoms such as hallucinations and delusions. The company also plans to study the drug’s effectiveness in treating binge eating disorder.
Vyvanse, along with the company’s other ADHD treatment Intuniv, are aimed at replacing sales of Adderall XR, which has been in decline since 2009, when Teva and Impax (Nasdaq:IPXL) launched generic versions of the drug.
Shire also embraces what many large pharmaceutical companies have avoided in the past: drugs to treat rare diseases. The company’s Transkaryotic Therapies unit near Boston specializes in drugs to treat enzyme disorders, and it is responsible for some of Shire’s biggest winners.
