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Shire plc Elvanse Approved in Europe, Expect a Measured Launch, Maintain Market Perform

This morning, Shire announced the European approval of Elvanse (Vyvanse in the United States and Canada) for the treatment of ADHD in children age 6 and older when response to previous methylphenidate treatment, the current standard of care in Europe, is considered clinically inadequate.

The specific citing of previous methylphenidate use is unique to the EU, as the U.S./Canada label mentions that Vyvanse “should be used as part of a total treatment program which may include counseling and other therapies,” but never mentions the need for previous use of a specific therapy or requirement for counseling. Given the specific language regarding methylphenidate use, as well as historically cautious views on stimulant use in pediatric ADHD, we continue to believe the launch of Elvanse in Europe will be measured in 2013. We currently estimate worldwide sales of Vyvanse in 2013 of $1.223 billion, with EU sales accounting for only $36 million of the total estimate.

In addition, we believe peak sales in Europe will approach only $100 million to $200 million given the historical sales trends of the brand Concerta in the region. In 2010, all international sales of Concerta, which is currently the standard of care in the European market with no other stimulant competitor, were $390 million. In the United States, where Concerta ended 2010 with only about 16% market share, according to IMS Health, sales of the therapy were $929 million.

We continue to believe the nonstimulant Intuniv may have a greater appeal to the European market, where the company is urrently completing a Phase III trial. In contrast to the IP concerns with Intuniv in the United States, with both Teva (TEVA
$38.73) and Actavis/Watson (WPI $88.93) looking to launch a generic in 2013, Intuniv in the EU will be granted 10 years of market exclusivity upon launch.

We maintain our price target of $93, applying a 14 times multiple (above the company’s growth rate of 9% in 2013) to our 2013 estimate of $6.67. Although we believe Shire is a high quality company, as a market leader in the U.S. ADHD market that is growing at a low-double-digit rate, we maintain our Market Perform rating.

We continue to believe Shire is a company in transition, with increased competition to the company’s core ADHD franchise from both generics and new brand competitors such as the oral methylphenidate formulation to be marketed by Pfizer
(PFE $25.56) in 2013. We would be opportunistic buyers ahead of several catalysts set to occur in the second half of 2013 that could reinvigorate growth, namely readouts from expanded indications for Vyvanse (major depressive disorder) and the first data readout from a comparator study of Vyvanse and versus Concerta, which could suggest superiority of Vyvanse if previous data hold.

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