Putting it into practice
We organize our business around our patients, and around the type and prevalence of the diseases we treat.
The key difference between Specialty Pharma and HGT is the prevalence of the conditions they treat.
As Mike Cola, the President of Specialty Pharma, says, "A typical product for us will treat a condition that affects around 100,000 people in a major market like the US; in HGT's case there may be less than 10,000 patients across the whole world." Such small patient populations mean that HGT is, in effect, an 'orphan drug' enterprise. The volumes for such a business will always be low, but it does have special advantages of its own. Approval processes can often be quicker and smoother, and many governments will offer tax advantages to offset the high development costs. Add to that strong intellectual property and regulatory protections and you see a stronger deterrent to the development of generic alternatives. The result is good investment returns, even though volumes are low. And because there is often no other treatment available, a drug that can offer genuine benefits will not only generate very good returns, but make an enormous difference to the people who use it.
Working in the orphan drug field also differs markedly from operating in the more mainstream Specialty Pharma business. Not just the regulatory and approval structure but the sales model is quite different, and most healthcare providers have a very different approach to paying for these drugs. Many orphan treatments are reimbursed straightaway, for example, without the sometimes protracted pricing negotiations that can apply to more conventional products.
This is one key reason why we organize ourselves into two businesses. There are also other practical factors that make the two business models quite distinct. For example, HGT drugs tend to cost less to develop and less to sell; as a result the reinvestment rate in R&D in HGT will be something like the 25% typical of a biotech venture, whereas in Specialty Pharma it will be closer to the 14% you might expect in a big pharma operation. This results in quite different sales structures, and a different approach to R&D that starts with the science and extends right through the approval process.
2008 key developments
Q1
Reaffirming our full year 2008 guidance- 2008 revenue growth expected to be in the mid to high teens range and positive revenue growth through 2010
LIALDA co-promotion agreement with TAP Pharmaceutical Products, Inc. ('TAP')
Global expansion continues with product approvals in Spain, Russia, Mexico, Australia, South Korea and Hong Kong
Q3
Voluntary public takeover of Jerini AG
-FIRAZYR approved in EU
-FIRAZYR launched by Jerini in Austria,
Germany and the UK
New product portfolio* representing 39% of Q3 product sales and exceeding ADDERALL XR sales for the first time
VYVANSE now third highest prescribed ADHD brand
ELAPRASE sales driven by swift geographic expansion and strong patient demand
Discontinuation of DYNEPO
-Redirecting resources into faster growing
core products
Q2
New UK/US listed holding company to protect Shire's tax position
VYVANSE approved for treatment in adults
Acquisition of new orphan drug for Metachromatic Leukodystrophy ('MLD')
VYVANSE for adults launched in June
- Two million VYVANSE Rx written since
product launched
Q4
Strong portfolio of new high growth
products with long patent protection and
regulatory exclusivity
-Achieved $1 billion of combined annual sales
Shire now has over 98% of Jerini's shareholding and has initiated squeeze out of minority shareholders
Robust pipeline with focus on orphan
drugs and specialist products treating
symptomatic disorders
-Eight products acquired since beginning of 2007
FOSRENOL approved in Japan
-Shire will receive royalties via an exclusive
agreement with Bayer
-Bayer are responsible for product development,
approval and commercialization