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Shire LLC, a subsidiary of Shire plc (SHPG - Analyst Report) recently announced that it has entered into a settlement agreement with Anchen Pharmaceuticals, Inc., Anchen, Inc. and TWi Pharmaceuticals, Inc. Shire has resolved all pending litigation related to TWi’s abbreviated new drug application (ANDA) for a generic version of Shire’s Intuniv (guanfacine hydrochloride) for the treatment of attention deficit hyperactivity disorder. Anchen is TWi’s filing agent in the US and authorized distributor.

Under the terms of the settlement agreement, Anchen can launch TWi’s generic versions of Intuniv in the US on July 1, 2016 or earlier under certain circumstances. Shire will receive royalties on the sales of TWi’s generic versions of Intuniv.

However, under certain conditions, Shire can permit Anchen to market an authorized generic version of Intuniv. Shire will receive significant royalties on the sale of the authorized generic version of Intuniv.

However, Shire’s Intuniv worries do not end here. The company is fighting patent infringement lawsuits with several other companies including Teva Pharmaceuticals (TEVA - Analyst Report) and Actavis Inc., who have filed ANDAs for their generic versions of Intuniv.

A trial is expected to commence on September 17, 2012. Impax Laboratories, Inc. (IPXL - Snapshot Report), Mylan Pharmaceuticals, Inc. (MYL - Analyst Report), Watson Pharmaceuticals, Inc. and Sandoz, the generic pharmaceuticals division of Novartis (NVS - Analyst Report), have also filed ANDAs seeking to market their generic versions of Intuniv.

Our Recommendation

We currently have a Neutral recommendation on Shire. The stock carries a Zacks #3 Rank (Neutral rating) in the short run.

The threat of generic competition, which several of Shire’s products are already facing or are likely to face, puts immense pressure on the company’s pipeline.

Shire is seeking to boost its pipeline through acquisitions and collaborations. Even though encouraged by Shire’s efforts to develop its pipeline, we prefer to remain on the sidelines until we gain more visibility on its progress with the pipeline.

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