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Shire plc (SHPG - Analyst Report) recently settled its pending litigation with Impax Laboratories, Inc. (IPXL - Snapshot Report).

The litigation is related to Shire's supply of an authorized generic version of Adderall XR.  Both the parties entered into a supply agreement in Oct 2009 pursuant to which Shire has been supplying Impax with authorized generic Adderall XR.

However, in Nov 2010, Impax filed a suit against Shire claiming that the latter had violated its supply contract for the authorized generic version of Adderall XR.  Impax sought specific performance, equitable relief and damages from Shire.

Subsequently, Shire filed a counterclaim against Impax seeking damages along with a declaratory judgment affirming that Shire satisfied its obligations under the supply contract.

Shire stated that its ability to supply Adderall XR is restricted by quota limits imposed by the US Drug Enforcement Administration on amphetamine, an active ingredient of Adderall XR.

Nevertheless, as per the settlement agreement, both Impax's claim and Shire's counterclaim will be dismissed. The settlement also requires Shire to make a one-time cash payment of $48.0 million to Impax.

In addition, Shire and Impax entered into an amended supply agreement, which shall monitor the supply of authorized generic Adderall XR from Shire to Impax up to Sep 30, 2014, when the original supply contract expires.

We note that Shire reached an agreement in principle earlier in Feb 2013 to resolve the previously disclosed civil investigation into Shire's sales and marketing practices in the US.

The investigation was related to key drugs in the Attention Deficit Hyperactivity Disorder (ADHD) market – Adderall XR, Vyvanse and Daytrana.

Currently, Shire carries a Zacks Rank #3 (Hold). Other stocks in the pharma sector that are currently well placed include Bayer (BAYRY - Analyst Report) and Eli Lilly and Company (LLY - Analyst Report). Both carry a Zacks Rank #2 (Buy).

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