Rumor Alert: This Big Pharma Has Hired Bankers to Fend Off Deal-Hungry Suitors

Published: Jul 28, 2017

Rumor Alert: This Big Pharma Have Hired Bankers to Fend Off Deal-Hungry Suitors July 27, 2017
By Mark Terry, Breaking News Staff

Rumors are spreading that Dublin, Ireland-based Shire plc might be the target of an acquisition.

The gossip suggests that some of the larger drug companies in the U.S. and Europe have hired advisers in preparation for a bid. They also claim that Shire, fearing low bids, has hired advisers to deal with those bids.

In June, Shire announced plans to consolidate more than 3,000 workers spread out over half-a-dozen locations in Massachusetts to two campuses in Cambridge and Lexington. The consolidation is expected to take four years.

In addition, by 2021, Shire plans to move its U.S. headquarters from the current Lexington location to Cambridge, Mass. Cambridge’s Kendall Square site will be a “Center of Excellence” for Shire’s research and U.S. business operations. Another site in Lexington will focus on manufacturing and sales. The Alewife site, which is a manufacturing facility, will shift to a larger plant in Lexington.

On May 2, at the company’s first-quarter report, Flemming Ornskov, Shire’s chief executive officer, said, “Our priorities for the rest of 2017 remain unchanged: launching new products while driving commercial excellence, generating operational efficiencies, and advancing our pipeline of novel therapies. Additionally, we continue to prioritize paying down debt, and we are on track to achieve our full-year financial guidance.”

At the first quarter, Shire reported quarterly product sales of $3.4 billion, with a 14 percent growth in genetic diseases. The Baxalta business grew at 8 percent on a pro forma basis and its most recent launch, Xildra, for dry eye disease, created a 22 percent market share. Net income for the quarter was $375 million.

At the first quarter, Shire reported its non GAAP net debt as of March 31, 2017 was $22.176 billion.

According to the EveningStandard “Earlier this month, the FTSE 100 company’s chief executive Flemming Ornskov hinted that investors were valuing Shire too low after a 10 percent fall from the share price this year. He pointed to the healthy pipeline of drugs, including for ADHD and hemophilia, which came as part of the 22-billion-pound acquisition of Baxalta.”

Shire will release its second-quarter financials on Thursday, August 3.

Shire is currently trading up at $169.68, which is down significantly from its year high of $205.56 on September 20, 2016.

Seeking Alpha suggested yesterday that Shire’s stock weakness is misplaced, and largely focused on perceived competition for the hemophilia market. Hemophilia is a key driver for Shire, estimated to bring in around $4 billion in sales this year. HealthBlogger wrote, “This franchise has been under scrutiny by investors because it’s likely to face increasing competition over the coming years, especially by ACE910 which has recently reported very storng Phase III data in the inhibitor segment. Since this news, Shire shares have fallen more than 10 percent, reflecting a negative revision on 2018 and 2019 numbers and a deteriorating sentiment on the long-term outlook for the name.”

Competition, or potential threats, in this area, come from Roche , which has reported strong Phase III data for its ACE910 for hemophilia, BioMarin (BMRN), which has presented positive data from a Phase I/II trial of hemophilia A gene therapy BMN 270, and Alnylam (ALNY), has reported positive data from a Phase II trial for Fitusiran, which it is developing in partnership with Sanofi ’s Genzyme unit.

Although recent acquisition rumors don’t specify a buyer, previous speculation has focused on Pfizer or Biogen . Biogen seems unlikely, since it already spun off its hemophilia business into Bioverativ , even though Biogen has indicated it’s on the market. Pfizer, for its part, seems to always be on the market for an acquisition, and investors have recently speculated on a larger merger.

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