Shire's oncology exit weighs on potential Takeda bid
- Shire plc is backing out of cancer drugs, announcing Monday the sale of its oncology business to French pharma Servier S.A.S. for $2.4 billion in cash.
- Servier adds two marketed medicines, Oncaspar and Onivyde, to its portfolio through the transaction, as well as a treatment for acute lymphocytic leukemia under review at the Food and Drug Administration. Last year, Shire raked in $261.7 million from oncology product sales.
- In a statement, Shire CEO Flemming Ornskov said his company could pursue share buybacks with the deal's proceeds, though they would have to wait until the offer period for Takeda’s potential takeover bid expires. In late March, Takeda revealed it was in the early stages of putting together a proposal to acquire the Irish pharma.
Servier's acquisition is arguably just as impactful to Takeda as it is to Shire.
When Takeda made its interest in a potential takeover known, part of the rationale was that Shire would strengthen the Japanese pharma in several therapeutic areas, one being oncology. Indeed, cancer drugs have become a main theme in Takeda's dealmaking strategy — in 2017, it inked oncology-focused agreements with Nektar Therapeutics, Exelixis Inc. and Maverick Therapeutics Inc.
But Shire, in contrast to many other large drugmakers, hasn't invested heavily in oncology, instead keeping its attention on rare diseases. The acquisition of Baxalta Inc. boosted Shire on that front, yet also stuck it with a slew of other products — such as Oncaspar (pegaspargase) and Onivyde (irinotecan liposomal) — that haven't been as easy to integrate.
Oncology products accounted for about 2% of Shire's total product sales last year. Unloading those non-core assets for billions in cash not only fits with the company's long-term strategy, it also provides a better negotiating position with Takeda.
"We see the possible strategic fit given the company's focus therapeutic areas of oncology, gastrointestinal and neuroscience, with Shire bolstering the latter two franchises," Jefferies analyst Peter Welford wrote in reference to Takeda in an April 16 note.
"Furthermore, Shire's leading global position in rare diseases would likely be attractive for most large pharma/biotech, particularly given the long duration assets in immunoglobulin and enzyme replacement therapy," he added. "However, given the ongoing complex integration of Baxalta since June 2016, an acquisition at this time carries incremental risks, in our view."
Takeda has until April 25 to decide whether it's putting in a formal bid for Shire.
The company declined to comment on how Shire's latest sale will affect that decision. Others, however, reasoned that it's unlikely to scare the suitor off.
"[I]t is difficult for us to believe that selling 2% of Shire's revenues — whether it was strategic to Takeda or not — would alter a contemplated transaction/approach by Takeda of this magnitude. Either standalone, or acquired, we continue to believe SHPG shares are undervalued," Cowen & Co. analyst Ken Cacciatore wrote in an April 16 note.
Shire expects its transaction with Servier to close in the second or third quarter.
Shire stock opened at $156.11 per share on Monday, up 2.6% from Friday's close.
- Shire plc Statement
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