Shire shares dive as competition bites

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Shire Pharmaceuticals, the FTSE 100 drug development group, warned yesterday that the costs of fighting off competition to its main product could leave it with no profit growth at all this year.

The profit warning, contained in its annual results statement, sent the company's shares nosediving, eventually closing down more than 30 per cent and wiping £1bn from its market value.

Adderall, Shire's blockbuster treatment for hyperactive children, brought in revenues of $317.7m (£224.5m) in 2001, up 48 per cent over the previous year and accounting for 36 per cent of group sales. But Shire said it will need to spend more on marketing its new improved version, Adderall XR, to keep growing the brand.

Barr Laboratories, a US company, launched a copycat earlier this week, and more rivals could be on the market.

Rolf Stahel, chief executive, said Shire had made great progress switching its patients to Adderall XR, which needs only one dose a day and is protected by an 18-year patent.

"We knew five years ago when we bought Adderall that generic competition would arrive, which is why we developed Adderall XR. There has been long-term planning, but the generic has been launched four months earlier than we and analysts expected," he said.

"This is a short-term impact. Within weeks or months the market will forget about this."

Shire is also to increase its marketing spending on Foznol, a drug for lowering blood phosphate levels, which is due for launch in Europe this year and the US in 2003. Mr Stahel said that unpublished clinical data gave him confidence that Foznol can be a bigger-selling drug than Adderall has been.

The higher marketing costs, combined with a higher than expected tax bill and disappointing sales of Reminyl, for Alzheimer's disease, forced analysts to substantially revise their forecasts for the coming year. The shares closed down 240p at 520p.

Mr Stahel said the board had considered, but unanimously rejected, cutting drug development spending to hit the existing market forecasts.

Adderall sales were the main contributor to a 31 per cent growth in revenues in 2001. Shire's sales were $877.6m, with a 45 per cent increase in income before tax and exceptional charges to $295.4m.

Shire paid $3.6bn for BioChem of Canada last year to broaden its portfolio of drugs and its development facilities.