SAN FRANCISCO — Several years ago, executives at Takeda concluded the 237-year-old pharmaceutical firm's pipeline of experimental drugs was lacking.
"We just were not competitive," Andy Plump, the Japanese drugmaker's head of research and development, said in an interview. "It was so obvious, it made the case for change so clear."
In response, CEO Christophe Weber and his team led a major overhaul of Takeda's R&D and operations, aiming to recast as a global competitor what had historically been a more regional company.
With a $62 billion takeover of Shire now complete, that process has sped up considerably. Now among the top 10 drugmakers by revenue, Takeda gains a rare disease business from Shire that earned nearly $7 billion in sales last year.
"Shire accelerates us by five years," Plump said, speaking to BioPharma Dive at the J.P. Morgan Healthcare Conference in San Francisco.
"We were five years out from reaching the profit margins we felt we needed to have to be sustainable," Plump added. "Shire gets us there. We were three to five years out from creating the diversified, patient-focused rare disease pipeline that our research organization will eventually [become]. Shire brings us there almost immediately."
Before Shire, for example, roughly a third of Takeda's experimental drugs carried an Orphan Drug Designation in the U.S., the standard regulatory marker of a rare disease therapy. Half of those were in oncology, which due to genetic segmentation of cancer types tends to feature many Orphan Drug Designations.
Adding Shire takes that figure up to roughly 50% of the new Takeda's pipeline, including 5 drugs in Phases 2 and 3.
The biotech's rare disease experience, Plump said, will also help Takeda further build in neuroscience, where it already sells Trintellix (vortioxetine) and now, from Shire, Vyvanse (lisdexamfetamine).
Post-Shire, Takeda's business is more heavily weighted to rare disease
|Therapeutic area||FY2017 sales||% of total sales||Key brands|
|Rare disease||$6.7 billion||23%||Takhyzro, Vonvendi|
|Gastrointestinal||$5.3 billion||18%||Entyvio, Lialda|
|Neuroscience||$3.8 billion||13%||Vyvanse, Trintellix|
|Oncology||$3.4 billion||11%||Ninlaro, Alunbrig|
|Plasma-derived therapies*||$3.2 billion||11%||Gammagard, Cuvitru|
|Other||$7.5 billion||25%||Natpara, Xiidra|
*Does not include Feiba, Cinryze and other rare hematological therapies (included in rare disease instead) SOURCE: Company
Perhaps more importantly for Takeda's ambitions, Shire gives Takeda scale in the U.S. — crucial as Japan's share of the global pharmaceutical market declines. Just under half of the combined company's revenue will come from the U.S.
"The rationale for the Shire acquisition wasn't to drive R&D," noted Plump. "It was financial drivers — the financial health that Shire brings, the profit margins that Shire brings — and then the skills sets and capabilities that Shire brings in plasma-derived therapies and rare diseases."
Plump's point is that Takeda has spent the past several years creating an R&D framework the company believes Shire can be incorporated into rather than remake.
"For an acquisition of this size, the integration will have minimal disruption on the business and the pipeline," said Weber in a Tuesday presentation to investors.
Making good on that bet is essential, as the track record of large-scale M&A in the pharmaceutical industry is mixed. Knitting together two companies, particularly of Takeda's and Shire's size, comes with a very real risk of slowing down momentum, as well as the opportunity cost of money spent on the buyout.
Takeda borrowed about $30 billion to finance the acquisition. Paying that down will take up resources and restrict the company's freedom to some degree.
The pharma aims to reduce its net debt to two times earnings before interest, taxes, depreciation and amortization (EBITDA) over the next three to five years — a timeline that could change depending on the degree to which Takeda divests assets.
Under Weber, Takeda's pulled off one of the larger acquisitions in industry history. Completing that deal marks the start, not the end, of the Japanese drugmaker's transformation.