SHIRE PHARMACEUTICAL has provided a rare safe haven for investors in troubled times. Shares in the drug company, at £10.04, are double their value of four years ago, and despite continuing market volatility they have held their value so far this year.

The group’s full-year results this week are expected to deliver a further tonic to shareholders with strong revenue growth from new drugs.

The company has thrived by carving out an alternative business model to the pharma giants Glaxo Smith Kline and Astra Zeneca.

Historically, Shire’s biggest success story was Adderall XR, a drug prescribed to manage attention-deficit hyperactivity disorder. This represents about a third of sales, but from April the group loses exclusivity on the drug and a copycat version will enter the market which will dent revenues.

The group has spent years preparing for this eventuality and developed a well-thought out business plan to deliver alternative revenue streams.

It has deliberately shied away from the model used by Astra and Glaxo, which are competing on heavy usage drugs for common conditions like high cholesterol, heart disease and cancer. These businesses require sales forces running into thousands to market drugs to GPs and a vast marketing budget to back them up.

Competing with these “me-too drugs”, where there are several different versions to treat the same condition, is a hugely expensive game.

More cash is splurged on “blue-sky” work – early-stage research and development – which often leads to nothing.

For Shire this business model was a nonstarter. Instead it has focused on developing drugs for rare diseases which can be marketed directly to a few hundred consultants across the world by a much smaller sales force.

Because many of the drugs are for conditions which may affect only a few thousand people – they are typically costly, but highly necessary – Shire develops close working relationships with the consultants who specialise in these conditions.

Many of the drugs have an immediate and observable impact on the patient’s symptoms. This makes it much easier to persuade doctors to prescribe and pay for them.

Some of the products are granted “orphan drug status”. This in effect mimics a patent by granting the maker a guaranteed seven- or ten-year spell to exclusively market the drug, which gives the company enough time to recoup its costs before rivals are allowed to enter the field.

Shire has also focused on developing drugs using naturally occurring animal or human cells rather than synthesised chemicals, reducing toxicity risks for patients.

The move followed the acquisition of a US biotech company called TKT in July 2005, which Shire renamed Human Genetic Therapies.

In 2008 it represented 16% of Shire’s business and the company believes that by 2015 it could account for more than a third.

In the third quarter, revenue from some of Shire’s new products – such as drugs for the metabolic disorder Hunter syndrome and the intestinal condition ulcerative colitis – collectively overtook sales from Adderall XR. Analysts expect further momentum in the latest figures.

At a time when the culture is to bemoan a lack of British progress in this sector, Shire remains a rare success story.

Just 12 years ago it was a £100m float. Today it is Britain’s third-biggest drugmaker with a market capitalisation of £5.6 billion. The shares are trading within a whisker of their 52-week high. They aren’t cheap but are probably worth it.

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