Shire Q4: Bad News Lurks Behind the Good News

Shire revealed its Q4 2008 results today in a press release that uses a cunning new transparency trick: It gives so much information, in so many different forms, that it's difficult to figure out quickly what exactly is going on at this company.

Here's Shire's official take on its own results:

New product sales were up 34% to $270 million including strong growth for VYVANSE (up 57% to $103 million); ?€? Sales of ADDERALL XR were down 1% compared to Q4 2007 and total prescriptions were down 4%; ?€? Total revenues were up 6% to $766 million ...

Sounds fantastic, no? Dig around a bit more and the bad news emerges: Net income declined from $156 million to $141.3 million, and there was a loss of $255 million on the cashflow statement, mostly due to legal expenses.

In addition, the company's sales and marketing expenses increased, making the company a less-efficient generator of its own revenues. The company gets $2.26 in revenues for every dollar its spends on reps. That's up from the same period the prior year, but down from Q3 2008 when it got $2.43. The danger is that Shire's overall level of productivity is plateauing.

That's a problem, because Shire might want to consider reducing its sales force ahead of the crash of Adderall XR, which goes generic in April of this year.

The company's strategy has been to hike the price of Adderall in order to force patients onto its new, cheaper but still branded ADHD drug Vyvanse, while denying that the two drugs are interchangeable or that a "switch" is taking place. As you can see, that seems to be working -- Vyvanse is growing and Adderall is declining.

The risk is that when reimbursers see generic Adderall on the market in the second half of 2009, they'll switch all their Vyvanse patients to that -- in which case Shire will be left with a massive sales force selling something that nobody wants.

• See BNET's previous coverage of Shire:
• The Pfizer-Shire Deal Worst-Case Scenario
• AZ, Roche and Shire: U.S. DTC Is Awful -- Can We Have It in Europe Too?
• Our Favorite Drug Company Conference Call Tap Dancers
• Shire's Big Gamble on ADHD Drug Vyvanse