Advertisement

If you have an ACS member number, please enter it here so we can link this account to your membership. (optional)

ACS values your privacy. By submitting your information, you are gaining access to C&EN and subscribing to our weekly newsletter. We use the information you provide to make your reading experience better, and we will never sell your data to third party members.

ENJOY UNLIMITED ACCES TO C&EN

Business

Shire Goes After Baxalta

Pharmaceuticals: Hostile bid is designed to create a rare diseases powerhouse

by Lisa M. Jarvis
August 4, 2015

[+]Enlarge
Credit: Shire
Flemming Ornskov, CEO of Shire.
Photograph of Flemming Ornskov.
Credit: Shire
Flemming Ornskov, CEO of Shire.

Shire has made an unsolicited bid worth roughly $30 billion for Baxalta, the specialty pharmaceuticals company spun-off last month from Baxter. The deal is designed to create a global leader in rare diseases, while also bringing tax savings to Baxalta’s revenues.

Shire first approached Baxalta on July 10 with a proposal for the all-stock deal that values the Deerfield, Ill.-based firm’s shares at $45.23, but was rebuffed. In a letter to Baxalta chief executive officer Ludwig N. Hantson, Shire’s CEO Flemming Ornskov said that Hantson’s “lack of engagement has been surprising,” adding that, “you have left us with no choice but to make our proposal known to your shareholders.”

Currently, each company has roughly $6 billion in annual sales. According to Shire, by 2020 the combined companies could achieve $20 billion in sales, 65% of which would come from rare disease treatments. About $5 billion of that sales growth would come from new products.

But the deal could also bring cost savings. The combined company would wield more buying power with contract manufacturers, while also streamlining research operations. Moreover, the deal would ease taxes on Baxalta’s earnings. Because Shire is with headquarters in the U.K., the combined company is expected to see a tax rate of 16-17% in 2017 instead of Baxalta’s latest rate of about 23%.

Last year, AbbVie agreed to buy Shire for $54 billion in cash and stock, a deal motivated in large part by the possibility of shifting its headquarters to the U.K. to lower its tax base. But changes to the U.S. tax code to discourage such deals—known as “inversions”—prompted AbbVie to abandon its bid.

Shire scored a $1.65 billion break-up fee from AbbVie that has helped fuel acquisitions, which are intended to help Shire achieve its goal of hitting $10 billion in sales by 2020. So far this year, Shire has bought NPS Pharmaceuticals, adding a marketed drug for a rare disease called short bowel syndrome; rare gastrointestinal disease firm Meritage Pharma, and eye disease-focused Foresight Biotherapeutics.

Advertisement

Article:

This article has been sent to the following recipient:

0 /1 FREE ARTICLES LEFT THIS MONTH Remaining
Chemistry matters. Join us to get the news you need.