Shire Finds Riches in Orphan Drugs

In 2005, Shire faced a scenario now familiar to most of the world’s drugmakers. Its best-selling pill, an attention-deficit treatment called Adderall XR, was about to lose patent protection, jeopardizing half its revenue. Shire’s response was to pay $1.6 billion for Transkaryotic Therapies, an unprofitable company with more debt than sales, and a handful of drugs for rare genetic diseases that afflict as few as 2,000 people globally.

Shire’s stock fell 11 percent in two days as investors questioned the wisdom of the deal. Since then, however, shares have more than tripled, making Shire the second-best stock performer among the world’s 30 biggest drugmakers. The medicines it got from Transkaryotic, some of which cost more than $300,000 a year per patient, are among the world’s most expensive. The products have raked in almost $3 billion in sales and are growing more than 10 percent a year. “It’s been a fantastic acquisition for Shire,” says Adrian Howd, a Berenberg Bank analyst who was cool to the deal when it was announced. “At the time it looked like quite a bold step away from their area of expertise. I don’t think anyone saw the full potential upside initially.”