NRPH:
Shire/Barr settlement on Adderall XR reduces PDUFA risk
Shire and Barr settled patent litigation regarding Adderall XR, NRP104’s soon to
be predecessor. The settlement will prevent Barr from launching a generic version
of Adderall XR until April 1, 2009. But, importantly, the settlement will give New
River and Shire more than 2 years to transition patients to NRP104 from Adderall
XR, assuming an early ’07 launch. We believe this significantly reduces the risk
related to the upcoming FDA decision and Shire’s commitment to the NRP104
launch and transition, which now must be completed by 1Q09. Reiterate BUY.
Settlement reduces commitment and transition risk
The bear case that Shire is not committed to NRP104 should be significantly
eroded by Shire’s settlement with Barr on Adderall XR generics. There will be
generic competition for Adderall XR by 2Q09, which increases the importance of
quickly transitioning patients from Adderall XR to NRP104 ahead of generic
launches. NRP104 should be less susceptible to generic erosion because of
differentiated safety, efficacy, abusability and overdose protection. We expect a
rapid launch and transition for Shire to ensure that its patients are on NRP104,
prior to generic Adderall XR launch.
Stock factoring in schedule 2 and 50% conversion
We continue to believe that NRP104 will be receive an approvable letter with
minor label revisions or full approval by its October 6 PDUFA date. Also, we
expect Shire will transition all of its patients from Adderall XR to NRP104, within
two years or less from launch. But, NRPH is pricing in only a ~50% conversion
and a nearly 100% probability of schedule 2, which is worse than we expect. As a
result, there should be upside on this event because it reduces the risk of
transition & the stock should start factoring in a higher conversion rate.
Drug scheduling risk reduced
NRP104 is a less abusable stimulant for ADHD & should receive schedule 3 or 4.
But, the scheduling risk is reduced by the settlement. NPR104 will not have to
compete against generic Adderall XR during its launch & transition period,
reducing the need for better scheduling. Also, we expect the abuse liability data to
be on the product label, which will differentiate NRP104 and better protect it from
market share losses to generic Adderall XR.
Pipeline still undervalued
We believe the street is not giving enough credit to the pipeline. Pipeline
catalysts, including an upcoming end of phase 2 meeting on NRP290, likely start
of phase III NRP290 trials by year end or early 07, & a potential partnership with a
large pharma company on NRP290 should create near term value for the pipeline. |
