Shire's Daytrana Patch Recall Is 8th So Far: Time to Pull the Plug?

Shire (SHPGY) has voluntarily recalled the Daytrana ADHD patch citing problems with patients removing the liner on the back. It is not a safety issue, the company says. Daytrana is for children with ADHD; it is the only patch product to treat the condition. "Sudden death" is one of the side effects of Daytrana, because ADHD products raise patients' blood pressure.

This is the eighth recall of the Daytrana patch, a product on which Shire's manufacturer, Noven (NOVN), makes no profit because recall costs far exceed the revenues it gets from selling the thing, according to Noven's most recent 10-Q. Daytrana's marketing is already under investigation by the feds (see below).

It's time to say it out loud: The Daytrana ADHD patch does not work, never has done, and should be quietly ditched by Shire and Noven before the FDA wakes up. Here's what Shire had to say today:

Shire is taking this action because some Daytrana patches do not meet or in the future may not meet their release liner removal specification, and as a result, patients and caregivers could have difficulty removing the liners.

This action is not due to safety issues. All Daytrana patches can continue to be used unless the release liner cannot be removed or the patches are damaged while being opened.

Already this year, Noven has paid Shire $3.4 million in recall-triggered fees and written off $4.2 million in charges over Daytrana recalls. There has been no period in the last three years in which Daytrana has been a functional product. Here's the timeline:

Q1 2007: Noven discloses to the SEC that the patch has been improved to reduce liner problems. (Meaning that it had prior liner problems.)

July 2007: Noven receives FDA letter containing "observations" regarding its patch manufacturing.

Q3 2007: Two patch recalls. Noven pays $3.3 million to Shire in trigger payments.

January 2008: FDA sends Noven a warning letter re "peel force issues."

June 2008: Two recalls of Daytrana.

August 2008: Two more recalls of Daytrana. Noven pays Shire $3.7 million in trigger payments.

March 2009: Another recall. Shire gets $3.4 million in trigger payments.

February 2009: Noven receives another FDA "observations" letter regarding the patch.

December 2009: Another Daytrana recall announced by Shire.

To quote Noven's own 10-Q:

For the three and six months ended June 30, 2009, DaytranaÂ® cost of products sold exceeded Noven's DaytranaÂ® net revenues by $3.7 million and $4.4 million, respectively.

Given that axing Daytrana would actually make Noven more profitable, what would the effect on Shire be? Minimal: Shire made only $17.4 million on the drug in Q3 2009, a decline of 4 percent.

The bell may be tolling for Daytrana already. On Sept. 23, Shire received a subpoena from US Department of Health and Human Services Office of Inspector General in coordination with the US Attorney for the Eastern District of Pennsylvania, looking into marketing of all Shire's ADHD products, according to Shire's Q3 earnings release.

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