Is Shire worth a 25% premium?

Tracy Staton — Mon, 16 Jun 2008 09:38:46 -0400

Can Shire weather the upcoming loss of Adderall XR to the off-patent wildnerness? Company execs say it can: They point out that 60 percent of the company's revenues derive from other products. And they say Vyvase, their new ADHD med, will pick up the Adderall slack--despite the fact that its uptake so far hasn't met expectations. But as Barron's points out, Shire is trading now at 15 times earnings, a 25 percent premium to the current industry multiple of 12 times. If the FDA doesn't listen to Shire's petition--which calls for XR copycats to undergo clinical trials--then generics will hit the market next year. And if Vyvanse doesn't step up to the plate, "Shire wouldn't merit its 25 percent premium," Barron's bluntly states. That's a lot of "ifs"--on either side.

- see the Barron's analysis