Prescriptions for attention-deficit/hyperactivity disorder (ADHD) have steadily risen over the past decade in the United States. Back in 2003, less than 8% of children between the ages of 4 and 17 had been diagnosed with ADHD, according to the Centers for Disease Control and Prevention. By 2012, that percentage had risen to 11%. The CDC also claims that over two-thirds of children diagnosed with ADHD take medication for it.
But ADHD treatments aren't just for children anymore. According to ADHD drugmaker Shire (NASDAQ: SHPG), 53% of ADHD prescriptions in 2014 were for adults, up from 39% in 2007. Pharmacy benefit manager Express Scripts also reported that U.S. prescriptions for ADHD drugs among women between the ages of 26 and 34 surged 85% between 2008 and 2012.
Shire's Vyvanse. Image source: Wikimedia Commons, Magnus Manske.
Those statistics sparked concerns that doctors were overdiagnosing ADHD and overprescribing its treatments. Yet supporters of ADHD treatments state that the rise in prescriptions was merely fueled by a broader awareness of the condition. While the topic remains a controversial one, it's important to recognize the key drugmakers in the ADHD industry and the treatments they produce.
The primary player: Shire
Shire sells three ADHD treatments: Vyvanse, Adderall XR, and Intuniv. Those three drugs generated $520 million in sales last quarter and accounted for 35% of Shire's revenue.
Sales of Vyvanse rose 18% to $425 million, thanks to rising prescription demand and higher prices. The drug, which is approved for children and adults, finished the quarter with a 16% share of the U.S. ADHD market. The FDA also approved Vyvanse as a binge-eating treatment earlier this year, which could moderately boost sales. Sales of Adderall XR, an extended-release version of its previous top-selling ADHD drug Adderall, declined 14% to $86 million due to higher sales deductions offsetting a 12% increase in prescription demand.
Sales of Intuniv plunged 91% to $9.5 million due to generic competition. Intuniv's patent was originally set to expire this September, but generic versions arrived earlier this year due to a settlement agreement between Shire and generic drugmaker Actavis, which is now part of Allergan.
To reduce its dependence on ADHD drugs, Shire has invested in treatments for rare diseases like Fabry disease, Hunter syndrome, Gaucher disease, and Hereditary Angioedema (HAE). Most of these other drugs posted positive year-over-year growth last quarter. However, Shire's total sales growth remained flat last quarter, and net income fell 69% due to higher operating expenses and various acquisition costs.
The secondary players: Eli Lilly and Johnson & Johnson
Eli Lilly (LLY +10.01%) is best known for making antidepressants like Prozac and Cymbalta, which are both now available in generic form. But Lilly also sells one of the most popular ADHD drugs in the world, Strattera. Sales of Strattera dipped 3% annually to $192 million last quarter, but the drug accounted for less than 4% of Lilly's overall revenue. Strattera remains patent protected in the U.S. until 2017.
Johnson & Johnson's (JNJ +1.10%) Concerta, a long-acting formulation of the older ADHD drug Ritalin, is another popular ADHD treatment. Worldwide sales of Concerta rose 42% annually to $206 million, but the drug accounted for less than 3% of Johnson & Johnson's pharmaceutical unit's top line. Concerta already faces generic competition, but the FDA only deemed one generic version, from Actavis/Allergan, to be equivalent to J&J's version.
Not all ADHD drugs are created equal
A key thing to remember when discussing ADHD drugs is the difference between stimulants and non-stimulants. Stimulants -- like Adderall, Vyvanse, Ritalin, and Concerta -- are generally considered more potent ADHD treatments, but they are prone to abuse and can aggravate cardiovascular conditions. Vyvanse was notably designed to be less addictive than Adderall and other stimulant-based treatments, which likely fueled its stronger sales growth.
Strattera and Intuniv are both less potent non-stimulants which have fewer side effects and are less likely to be abused. Stimulants are still more widely prescribed than non-stimulants for ADHD, but non-stimulants have been gaining ground ever since the FDA approved Strattera over a decade ago.
The key takeaway
In my opinion, the easiest way to play the growing ADHD market is to invest in Shire. Other companies like Eli Lilly and J&J sell popular ADHD drugs, but the treatments generate very small percentages of their overall revenues. However, ADHD drugs are still a hot-button topic, and they remain vulnerable to shifts in public perception or increased regulations.
