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Shire CEO Russell Says Share Price is Best Bid Defense

April 26 (Bloomberg) -- Shire Plc Chief Executive Officer Angus Russell said the company’s earnings performance and share price are the best defenses against an unsolicited bid amid speculation that the drugmaker may become a takeover target.

“We have no special defensives” with the exception of the company’s rising price tag, Russell said on a conference call after reporting first-quarter earnings, without commenting on any possible approaches. “Like any company, we’re always prepared for any event. As a widely held public company, we’re subject to what’s best for our shareholders. That’s the nature of capital markets.”

Shire, based in Dublin with management offices in Basingstoke, England, plans instead to use the company’s growing cash pile for bolt-on acquisitions. The drugmaker today reported a 20 percent increase in first-quarter earnings per American depositary receipt as doctors prescribed more Vyvanse, a pill for attention-deficit disorder that it expects will bring in more than $1 billion this year.

Shire shares trade at about 16.3 times 2012 estimated earnings. The stock rose 1.9 percent to close at 2,040 pence in London, giving the company a market value of 11.5 billion pounds ($18.6 billion). Shire has gained 8.6 percent in the past 12 months.

First-quarter earnings excluding some items were $1.48 per American depositary receipt, compared with $1.23 a year earlier, Shire said today in a statement. The average estimate from 12 analysts surveyed by Bloomberg was $1.49.

Attention-Deficit Drugs

The maker of Adderall, a treatment for attention deficit hyperactivity disorder, has been benefiting from an expansion of the market for such drugs, helping lift sales 21 percent to $1.17 billion. The company has been widening the use of Vyvanse since the pill won U.S. approval to treat children ages 6 to 12 in 2007. Vyvanse is now also cleared to treat adolescents and adults with ADHD, and the company today said the drug looks promising in the treatment of binge-eating disorder.

“For a change, the upside versus consensus did not come from old ADHD drug Adderall XR but from its newer follow-on Vyvanse,” Mark Clark, an analyst at Deutsche Bank in London, wrote in a note to clients. “The fundamentals revealed by these results are excellent.”

Shire said sales of Vyvanse increased 29 percent to $260 million in the quarter. ADHD drug Intuniv brought in $68.5 million, while Adderall XR generated $111.4 million.

Rising Costs

Shire repeated a warning in February that 2012 gross margins would be “marginally lower,” reflecting costs from the $750 million acquisition of Advanced BioHealing Inc. Research, sales and administrative costs are expected rise between 12 percent to 14 percent higher than those in 2011, Shire said today.

The company had almost $900 million in cash at the end of the quarter, Russell said on a conference call.

Shire faced several setbacks in the quarter. The company in March dropped an application to gain Food and Drug Administration approval for Fabry disease therapy Replagal, leading one analyst to cut his peak sales forecast for the drug by $95 million. Last month, Shire’s Lialda for ulcerative colitis failed in a trial that would have expanded its use to new patients.

The company was also expecting U.S. approval by the end of the first quarter for a new plant outside of Boston that would have expanded capacity for the Vpriv treatment for Gaucher disease. The FDA sent Shire a complete response letter, and the company is working with the agency to address remaining questions.

“As is normal with regulators, they gave us a series of questions and we are in the process of answering those questions,” Russell said. “We can meet existing demand for the whole year. It doesn’t change any of our guidance or financial performance.”

Revenue from Replagal rose 28 percent to $134.4 million, beating an average estimate of $124.8 million. Sales of Vpriv climbed 22 percent to $71.7 million.

To contact the reporter on this story: Trista Kelley in London at tkelley2@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net

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