Shire to Buy New River Pharmaceuticals for $2.6 Billion

Includes: NRPH, SHPG
by: Judith Levy

Shire Pharmaceuticals will acquire New River Pharmaceuticals for $2.6 billion. This will give it control over Vyvanse, New River's pediatric ADHD [attention deficit hyperactivity disorder] drug, which is expected to receive FDA approval this week. The purchase is likely meant to hedge pending declines in sales for Adderall XR, Shire's existing ADHD drug, which will lose patent protection in 2009. Adderall, the most-prescribed ADHD drug in the U.S., accounts for 40% of Shire's profits. The ADHD market in the U.S. is $4 billion. Some analysts doubt the acquisition will adequately compensate Shire for the loss of patent protection on Adderall, since the drug's customer base is so loyal: many parents might be more inclined to seek out generic versions of Adderall than to try a new medication, even though Vyvanse is said to be less addictive. Shire's shares rose 4.5% to reach a 5-1/2 year high and New River shares rose 8.8% to $63.50 on the news. Shire will pay $64.00 a share for New River and finance the transaction with $2.3 billion of new debt and a new share placement. The deal is likely to enhance Shire's attractiveness as a takeover target, since it adds to its series of drug launches.

Sources: Bloomberg, Red Herring, Reuters, Smart Money,
Commentary: Analysis of a Ten Bagger Stock: New River PharmaceuticalsFDA Approvable Letters for New River Pharmaceuticals, Shire, Allergan and PerrigoSAC Capital: Notable Portfolio Changes
Stocks/ETFs to watch: New River Pharmaceuticals, Inc. (NRPH), Shire plc [ADR] (SHPGY). Competitors: Novartis AG (NYSE:NVS), Abbott Laboratories (NYSE:ABT), Eli Lilly & Co. (NYSE:LLY), Celgene Corp (NASDAQ:CELG). ETFs: Biotech HOLDRs (NYSEARCA:BBH), iShares Nasdaq Biotechnology (NASDAQ:IBB)

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