Shire Still Wooing Baxalta, But Biogen Might Crash the Party

Shire Still Wooing Baxalta, But Biogen Might Crash the Party
December 14, 2015
By Mark Terry, Breaking News Staff

The courtship of Deerfield, Ill.-based Baxalta Inc. (BAX) by Dublin-based Shire Plc apparently is continuing, according to inside sources as reported to BloombergBusiness.

In July, Shire approached Baxalta about an acquisition, which was rebuffed. In early August, Shire went public with the offer in hopes of pressuring the Baxalta board and shareholders into considering the deal. In July 1, 2015, Baxalta spun off from Baxter International .

Although Baxalta has repeatedly declined Shire’s approaches, every few weeks rumors surface that Shire is sweetening the deal and talks are continuing. Baxalta from the beginning has argued that an acquisition so soon after the spinoff would be too disruptive and that Shire’s offers undervalued the company.

As recently as Nov. 25, inside sources indicated that Shire was preparing another bid. BloombergBusiness reported today that the two companies are still in talks. In addition to increasing the bid, the sources claim this new proposal would include significant cash. Previous bids haven’t included cash because of the nature of the Baxter-Baxalta spinoff, which would have incurred a tax penalty for a cash deal.

Although Shire hasn’t been willing to comment publicly, Mark Enyedy, head of corporate development for Shire told Bloomberg that Shire and its executes were “disciplined, highly experienced dealmakers. We have and will continue to show strong deal and price discipline and will only do deals that create value for our shareholders.”

Analyst Hannah Ishmael, writing for Bidnessetc., proposed today that Cambridge, Mass.-based Biogen, Inc. might consider acquiring Baxalta. Biogen has been making a lot of interesting, maybe perplexing, moves recently. It is shifting its focus away from multiple sclerosis (MS), where it has been enormously successful, to focus on the riskier area of Alzheimer’s research. It is restructuring, cutting several pipeline programs, and slashing 11 percent of its workforce despite an 11 percent increase in revenue in the third quarter of 2015. Despite layoffs, it seems to be expanding its facilities in Boston.

Biogen’s stock has struggled this year and analysts and investors are encouraging an acquisition in order to bump up its revenue. Prior to today’s story, potential targets have included Boston-based Vertex Pharmaceuticals and New York-based Acorda Therapeutics .

The idea of Baxalta-Biogen deal is new, but would lack the tax inversion incentive the company’s acquisition by a Dublin-based company would have. However, Baxalta is focused on hematology drugs, as well as treatments for hemophilia. Ishmael wrote, “A Bloomberg Intelligence analysis suggests that the company might be interested in the acquisition of companies that have hemophilia medication or have presence in the CNS field. For CNS, Biogen seems to be self-sufficient as it has a robust pipeline of drugs that target various nervous system disorders.”

If Biogen was interested in pursuing Baxalta, it would then enter a bidding war with Shire. To date, at least publicly, Shire has offered a deal worth $30 billion to Baxalta. Biogen has about $3.3 billion in free cash and according to analysts, a debt capacity of up to $20.4 billion. Which could cause problems if Shire is, as sources indicate, planning on upping the ante.

Baxalta also seems to be increasing its value as well. In the last month, three of its drugs were approved by regulatory bodies. Adynovate was approved for hemophilia by the U.S. Food and Drug Administration (FDA). Obizur for hemophilia A was approved by European authorities. The FDA approved Vonvendi for a rare clotting disorder, von Willebrand disease (VWD). In addition, the European Medicines Agency (EMA)'s Committee for Medicinal Products for Human Use (CHMP) gave a positive recommendation with GAMMAGARD LIQUID to treat patients with primary immune deficiency.

This certainly seems to bolster Baxalta’s argument that the company has plenty of value with a deep and promising pipeline.

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