Shire's core portfolio experienced strong growth in the first quarter, with a minimal hit from U.S. health-care reform and a boost from Genzyme's continued manufacturing problems. The firm is on track to meet our expectations for the full year, and we're maintaining our fair value estimate.
Revenue of $816 million was flat with the first quarter of 2009, as the negative impact from the entrance of generic Adderall XR competition in April 2009 was balanced by strong sales performance of newer attention-deficit hyperactivity disorder drugs Vyvanse and Intuniv, as well as royalties on an Adderall XR authorised generic. Intuniv sales should benefit from data on co-administration with stimulants in May, and management said it has already seen some combination use. We should also see data applying Vyvanse's abuse-resistant technology to Intuniv in the second half of the year, which could be particularly important for success in Europe. Also in the second half of the year, if midstage data on Vyvanse in depression and schizophrenia are positive, we could slightly boost our fair value estimate.
In the human genetic therapies segment, Elaprase sales continue to grow steadily, up 22% to $101 million in the first quarter. Replagal sales grew 69% to $68 million, and Shire now has a 60% share of the European market as Genzyme struggles to supply its competing drug Fabrazyme. Shire added almost 200 patients to Replagal therapy in each of the past two quarters. We continue to believe that most of these patients will gradually switch back to Fabrazyme once supply is restored, which should limit Replagal's growth beyond 2011. Shire recorded only $5.8 million in Vpriv sales in the first quarter, but with 13% of US Gaucher disease patients now on the therapy and approval in Europe expected in the second half of the year, we think Shire will report sales north of $100 million for the year.
Shire's cash generation was up 19% to $278 million, and the firm now has almost $700 million in cash on it books. Shire has seen only minimal impact of US health-care reform, given its low exposure to government reimbursement and high exposure to rare disease drugs (which are exempt from the annual drug tax starting in 2011, and 12-year data exclusivity on biologics will add five years to the seven-year orphan drug market exclusivity). Management expects reform to create a $25 million-$30 million hit in 2010, a little less than 1% of our total revenue estimate for the year; we expect the 2011 impact will be slightly larger because of the annual drug tax, but it should remain below 2% of revenue.
Karen Andersen, CFA is an equity analyst for Morningstar.
