Shire Snubs AbbVie Offer Again, Favorable Ruling for Vyvanse - Analyst Blog

Shire SHPG recently announced that it continues to maintain its stance against AbbVie ABBV's acquisition offer.

AbbVie proposed to acquire Shire for £20.44 in cash and 0.7988 AbbVie shares per Shire share, reiterating its earlier offer.

This proposal was initially made on May 30, 2014. However, Shire reiterated that its board has already considered the proposal in detail and unanimously rejected it as it believes that the proposal fundamentally undervalues Shire and its prospects.

The acquisition proposal also included a new listed holding company in the U.S. post acquisition with a UK tax domicile. We remind investors that this was the third offer by AbbVie rejected by Shire.

Shire also had reservations about the proposed inversion structure, as AbbVie would redomicile in the UK for tax purposes. Shire once again urged its shareholders to not take any action in relation to the proposal. 

Vyvanse Receives a Boost

Meanwhile, Shire received positive news in a patent infringement lawsuit case from the U.S. District Court for the District of New Jersey. The court ascertained that Shire's claims of the patents protecting attention deficit and hyperactivity disorder ADHD drug Vyvanse were both infringed and valid.

As a result, five pharmaceutical manufacturers who have filed Abbreviated New Drug Applications (ANDAs) for Vyvanse cannot launch generics versions of the drug until one of the following – either a successful appeal to the U.S. Court of Appeals for the Federal Circuit or the expiration of these patents in 2023 takes place, whichever is earlier. Moreover, the ANDA-defendants should also be able to overturn the court's rulings for each of the 18 patent claims.

Our Take

The news is a major boost for Shire as Vyvanse is its growth engine. Shire recently agreed to conduct pediatric clinical studies following FDA's request to investigate the potential use of Vyvanse for the treatment of ADHD in children aged between 4 and 5 years. Shire is currently evaluating Vyvanse for additional indications such as binge eating disorder and expects to submit a Supplemental New Drug Application (sNDA) to the FDA by the third quarter of 2014.

We expect investor focus on further updates from the acquisition proposal.

Shire currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader healthcare sector include Allergan AGN and Regeneron Pharmaceuticals, Inc REGN. Both carry a Zacks Rank #1 (Strong Buy).

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