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Shire LLC (SHPG - Analyst Report) recently announced the settlement of its patent infringement lawsuit against Teva Pharmaceuticals (TEVA - Analyst Report) for Shire's attention deficit hyperactivity disorder (ADHD) drug Intuniv.

Teva was looking to launch its generic version of Intuniv and had filed an abbreviated new drug application (ANDA) with the FDA in 2010.

Shire subsequently filed a lawsuit against Teva for infringement of certain patents related to Intuniv, resulting in a stay of approval on the ANDA for up to 30 months.

As per the settlement, Teva has now obtained a license to market either its own generic version of Intuniv or authorized generic versions of Intuniv supplied by Shire in the US.

However, the license will be effective only after the expiration of the 180 day exclusivity period granted to Actavis (ACT - Analyst Report).

Actavis was the first to submit an ANDA for a generic version of Intuniv. We remind investors that in Apr 2013 Shire settled its patent infringement lawsuit against Actavis for Intuniv.

As per the settlement, Actavis is licensed to manufacture and market its generic versions of Intuniv in the US from Dec 1, 2014 or earlier subject to certain limited circumstances.

Shire holds a strong position in the ADHD market. Apart from Intuniv, key drugs in Shire’s ADHD portfolio include Vyvanse and Adderall XR.

The settlement of the Intuniv lawsuits removes an overhang on Shire’s shares. However, the launch of generic versions of Intuniv by Actavis will impact sales going forward. We note that Intuniv generated sales of $287.8 million in 2012, up 29% from a year ago.

We are concerned about the increasing competition in the ADHD market due to the entry of generics. Shire’s share of the US ADHD prescription market declined to 26.6% in Dec 2012 from 27.9% in the year-ago period.

Shire currently carries a Zacks Rank #3 (Hold). Right now, Salix Pharmaceuticals (SLXP - Analyst Report) looks attractive with a Zacks Rank #1 (Strong Buy).

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