Not so long ago Shire (NASDAQ:SHPG) was under fire for over-reliance on its ADHD portofolio; now, as the company sharpens its focus on rare diseases, the neuroscience business could be jettisoned altogether. During its second-quarter results the group revealed plans for a "strategic review" of the division, which could be worth $9bn, according to EvaluatePharma's consensus-based NPV (see table below).

The company will give more concrete details of its plans by the end of the year, but said options for the unit could include an independent public listing. This seems a more likely outcome than a trade sale, with any potential buyers surely wary about a shrinking franchise grappling with patent expiries.

Nevertheless, in the near term Shire's neuroscience products will remain highly profitable, and Vyvanse is still forecast to be its top seller in 2022, although it is set to lose patent protection the year after.

10 years ago that concern about the company's reliance on ADHD was well founded - in 2006 sales of its stimulants business accounted for two thirds of group revenues, which amounted to $1.5bn in total.

By 2015, in the wake of moves into enzyme-replacement therapies and hereditary angiedema (HAE), the neuroscience division was bringing in just over a third of the company's $6bn in total revenues. And this year, with the huge Baxtalta acquisition bedded in, the unit will represent only a fifth of the company's projected $14.6bn of total sales.

Shire's Chief Executive, Flemming Ornskov, said several times during a media call that the neuroscience unit was strong, adding that the group's decision was part of a "natural evolution" in its shift towards rare diseases, which had seen it buy Baxalta last year.

"Both businesses are thriving, both have significant opportunities for growth in the future, but both are very distinct," he said.

Last year Bernstein analysts mooted Allergan (NYSE:AGN) as a potential buyer for the neuroscience unit.

In spite of its new focus, Shire has sought to wring as much life as possible out of its neuroscience franchise, which chiefly comprises the older ADHD therapy Adderall XR, the amphetamine prodrug Vyvanse and, most recently, Mydayis, which got FDA approval in June for patients aged 13 and older.

However, it is unclear how these newer products will fare as Adderall XR generics become more dominant in the market. Several versions are already on the market, and the drug's last patents are set to expire in 2019, which could lead to another wave of cheaper products and even more pressure on the next-generation therapies.

Splitting off its ADHD portfolio could make sense for Shire if the markets reward it with a premium for being a pure-play orphan company - and it could also use the proceeds to acquire more rare disease businesses to hone its focus further. However, it will escape no one that Glaxosmithkline (NYSE:GSK) recently said it was "considering its options" in rare diseases.

"I'm a believer in focus and building a business that's leader in its category," Mr. Ornskov said. A few years ago this was ADHD, but Shire has finally become big enough to sacrifice its first cash cow.

Original post:
No Room For Neuroscience In New-Look Shire - Seeking Alpha