Shire Investors Can Profit From Takeda Skepticism

Mae Love
May 9, 2018

Takeda Pharmaceutical Co. of Japan has finalized an agreement to buy Shire PLC, the second-biggest biotech employer in MA, for $62 billion in the largest-ever worldwide takeover by a Japanese company. Shire, on the other hand, earns about two-thirds of its product revenue from the USA - a fact Takeda highlighted in its rationale for pursuing the biotech.

Japan's Takeda Pharmaceutical is about to become a major global player on the biopharma scene, with its purchase of larger Irish rival Shire (shpg).

Representatives for Takeda and Shire declined to comment.

It's also the largest takeover ever carried out by a Japanese company, according to data provider Dealogic. That is about $66.22 per share, made up of $30.33 per share in cash and 0.839 shares of Takeda stock.

Analysts have described Shire as an attractive target for Takeda, with a portfolio of existing treatments in fields where the barriers to entry are high and profits large. Last year Weber bought USA cancer specialist Ariad Pharmaceuticals for $5 billion. Buying Shire bolsters its offerings in gastroenterology and neuroscience, while adding a slate of rare disease drugs that include the Irish biotech's seven hemophilia medicines.

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The companies expect to complete the deal in the first half of 2019. Shire shares rose as much as 5.7 per cent early on Tuesday in London, while Takeda rose 4 per cent in Tokyo before the deal was announced.

Enhancing Takeda's cash flow profile.

The deal has been approved by the boards of both companies and is expected to close following shareholder and regulatory approval in the first half of next year. Takeda's stock is down 25% in a little more than two months as investors fretted over how this would play out if the smaller Japanese company prevailed.

But some of the expected savings will also come from job cuts.

Dr. Andrew Plump, Takeda's chief medical and scientific officer since 2015, said acquiring Shire will raise from three to 10 the number of late-stage clinical drugs that Takeda has in its pipeline. "That's where you could have some portfolio assessment and potentially some disposals". The agreement comes more than three years after U.S. drugmaker AbbVie scrapped its agreed takeover of the London-listed rare disease specialist, following a clampdown on tax inversion deals by the Obama administration.

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