Shire Q1: The Big Fight Against Teva's Generics Begins

(MoneyWatch)  Shire, the maker of ADHD drugs Adderall XR and Vyvanse had an excellent Q1 but now faces a challenge: Its two top products are threatened by a generic that Teva brought to market on April 2. The company is also persisting in the U.S with its Daytrana ADHD patch, which was forced off the market in Europe following manufacturing problems.

The basics: Revenues up 16 percent to $818 million from $702 million; net income up 66 percent to $214 million from $129 million.

Shire also became a more efficient company, apparently by taking BNET's advice, offered in February:

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

Sales costs were reduced by $26m, down to $319 million for the quarter.

Here's what Shire has to lose in the battle against Teva's generic Adderall:

• Adderall XR sales were $295 million, up 13 percent.
• Vyvanse sales were $117 million, up 114 percent.

In its conference call, CFO Graham Hetherington said Adderall sales might decline to $150 million this year. But the company didn't give a specific prediction on sales of Vyvanse, Shire's Adderall replacement product.

The big unanswered question about Shire is whether Vyvanse sales will collapse alongside Adderall's, or whether they will hold up on their own. Shire's sales are atop a mighty peak right now: The Adderall growth came from price increases meant to drive people to the cheaper Vyvanse. It will be easy for Teva to start a price war in this environment.

The company is predicting overall revenue growth in the teens, but, interestingly, said its SG&A costs would be flat -- suggesting that it doesn't want/need to hire more people to get that growth.

In the next four quarters, the damage Teva will inflict on Shire will become clear.

Also: Even though Daytrana sales are only $20 million in the U.S., Shire is pushing on with it. The product was kicked out of Europe and has had two recalls in the U.S. because customers couldn't peel the backs off the stickers.

Shire supplier Noven said it expected the problem to continue. Shire probably doesn't care too much because every time Noven screws up it triggers a penalty payment to Shire!

• See BNET's previous coverage of Shire:
• Shire CEO Compensation Report Successfully Conceals CEO Compensation
• Shire Q4: Bad News Lurks Behind the Good News
• 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