TAKEDA SEALS THE DEAL; buys Shire for $62bn

BioSpectrum (Asia) - - Analysis - Aish­warya Venkatesh aish­warya.venkatesh@mmac­tiv.com

Ja­pan’s Takeda has ac­quired Ir­ish drug­maker Shire, a global rare dis­ease drug giant for $62 bil­lion. The ac­qui­si­tion, say ex­perts, will gen­er­ate a global phar­ma­ceu­ti­cal pow­er­house worth over $80 bil­lion with $30 bil­lion in an­nual sales. The deal po­si­tions Takeda among the ranks of top 10 global phar­ma­ceu­ti­cal com­pa­nies and would be the third big­gest ac­qui­si­tion of a UK­traded com­pany in his­tory.

Takeda Phar­ma­ceu­ti­cals is all set to re­write his­tory! The deal, is touted to be one of the big­gest Ja­panese take-over of a west­ern ri­val. But the deal wasn’t easy. Rare dis­eases drug giant Shire re­jected four bids from Takeda, be­fore set­tling for the fifth of­fer of $62 bil­lion made by the Ja­panese drug­maker. The mega-deal is ex­pected to gen­er­ate a global phar­ma­ceu­ti­cal pow­er­house with $30 bil­lion in an­nual sales. The deal po­si­tions Takeda among the ranks of top 10 global phar­ma­ceu­ti­cal com­pa­nies, helps re­plen­ish its dry­ing pipe­lines with promis­ing drug can­di­dates, boosts its po­si­tion in the United States and makes it a global leader in the fields of on­col­ogy, gas­troin­testi­nal dis­eases and neu­ro­science.

The trans­ac­tion has been ap­proved by both com­pa­nies’ boards of di­rec­tors, and is ex­pected to close in the first half of cal­en­dar year 2019. Upon the clos­ing of the trans­ac­tion, Takeda share­hold­ers will own ap­prox­i­mately 50 per cent of the com­bined group.

Christophe We­ber, pres­i­dent and chief ex­ec­u­tive of­fi­cer of Takeda, said, “Shire’s highly com­ple­men­tary prod­uct port­fo­lio and pipe­line, as well as ex­pe­ri­enced em­ploy­ees, will ac­cel­er­ate our trans­for­ma­tion for a stronger Takeda. To­gether, we will be a leader in pro­vid­ing tar­geted treat­ments in gas­troen­terol­ogy, neu­ro­science, on­col­ogy, rare dis­eases and plasma-de­rived ther­a­pies.”

The ac­qui­si­tion of Shire is ex­pected to ac­cel­er­ate Takeda’s trans­for­ma­tion by bring­ing to­gether Takeda and Shire’s com­ple­men­tary po­si­tions in GI and neu­ro­science. It will also pro­vide the com­bined group with lead­ing po­si­tions in rare dis­eases and plasma-de­rived ther­a­pies to com­ple­ment strength in on­col­ogy and fo­cused ef­forts in vac­cines.

Why is Shire so im­por­tant for Takeda?

Shire’s pipe­line was the clear draw for Takeda. It fo­cuses on de­vel­op­ing and sell­ing medicines that treat rare dis­eases and can­cers. Its main mar­kets are in the United States, China and Ja­pan. Though head­quar­tered in Ire­land, most of its em­ploy­ees are in the United States. Shire mar­kets over 40 prod­ucts and that raked up $14.4 bil­lion in 2017, up 8 per cent from 2016. In longer term, Shire be­lieves its sales could reach be­tween $17 bil­lion and $18 bil­lion in 2020. The com­pany re­cently sold its on­col­ogy unit to un­listed French drug­maker Servier for $2.4 bil­lion.

Shire is a global leader or­phan drug devel­op­ment and com­mer­cial­iza­tion. Its re­cent $32 bil­lion ac­qui­si­tion of Bax­alta has fur­ther ex­panded its po­si­tion as a leader in rare dis­eases. That deal landed Shire with Bax­alta’s top-sell­ing he­mophilia prod­uct lineup; as a re­sult, Shire’s hema­tol­ogy drug sales were $3.8 bil­lion in 2017.

As per The Mot­ley Fool, a global lead­ing in­vest­ments an­a­lyst firm, Shire has well-es­tab­lished im­munol­ogy and neu­ro­sciences busi­nesses that gen­er­ate bil­lions of dol­lars in an­nual rev­enue. Last year, im­munol­ogy con­trib­uted $4.4 bil­lion to sales, and neu­ro­sciences, which in­cludes top-sell­ing At­ten­tion-deficit/ hy­per­ac­tiv­ity dis­or­der (ADHD) med­i­ca­tions such as Vy­vanse, added $2.7 bil­lion to the top line. Prod­ucts for in­ter­nal

medicine, in­clud­ing gas­troin­testi­nal drugs, added $1.7 bil­lion to rev­enue last year, too.

The ac­qui­si­tion will add to Takeda’s rare-dis­ease drug port­fo­lio that of­ten face lit­tle com­pe­ti­tion and com­mand premium prices. Last year, Shire’s rare-dis­ease drug sales were $1.4 bil­lion, thanks to de­mand for its en­zyme-re­place­ment drugs Elaprase, Re­pla­gal, and Vpriv.

Takeda has only two new drugs with block­buster po­ten­tial in late-stage clinical tri­als: a vac­cine for dengue fever and a ther­apy for Crohn’s dis­ease. Shire’s late-stage pipe­line con­tains more than a dozen treat­ments for rare dis­eases.

Takeda’s aims to go global

With a mar­ket value of over $41 bil­lion Takeda has been ac­tively seek­ing for growth in overseas mar­kets to trans­form the com­pany into a global player. Cur­rently, the 233 year old com­pany, has sales in nearly 70 coun­tries. Un­der the lead­er­ship of its first non-Ja­panese CEO Christophe We­ber, Takeda has made some strate­gic ac­qui­si­tions and fi­nal­ized some big deals in­clud­ing the lat­est ac­qui­si­tion of US on­col­ogy group Ariad Phar­ma­ceu­ti­cals for over $5 bil­lion.

Apart from Shire, Takeda made a slew of deals in 2018. It an­nounced an of­fer to ac­quire TiGenix

NV, a Bel­gian maker of stem-cell ther­a­pies, for €520 mil­lion ($645 mil­lion) in Jan­uary, as well as a $150 mil­lion ini­tial pay­ment to De­nali Ther­a­peu­tics Inc. for a part­ner­ship to de­velop drugs for neu­rode­gen­er­a­tive dis­eases. In Fe­bru­ary, Takeda promised an­other $230 mil­lion to Wave Life Sciences for a pact on treat­ments for disor­ders of the cen­tral ner­vous sys­tem.

Takeda’s best sell­ers in­clude drugs that treat meta­bolic dis­eases, can­cers and car­dio­vas­cu­lar prob­lems. It has three lead­ing drugs in its kitty that makes around 100 bil­lion yen each per year. This deal with Shire will help the Ja­panese giant beef up its prod­uct port­fo­lio and of­fer op­er­at­ing lever­age and cross-sell­ing op­por­tu­ni­ties within its core in­di­ca­tions. Also, more than two thirds (nearly 60 per cent) of Shire’s sales come from the US. Buy­ing Shire will give Takeda a broader port­fo­lio in the US, pro­pel its pres­ence in the world’s big­gest mar­ket, and open its gate­ways to the he­mophilia mar­ket.

Chang­ing poli­cies and pric­ing pres­sures have prompted Ja­panese giants to look for growth overseas. Takeda is ramp­ing up its takeover am­bi­tions un­der We­ber, who’s seek­ing growth overseas as patent ex­pi­ra­tions and a slump­ing do­mes­tic sales limit op­por­tu­ni­ties at home.

Shire too big to swal­low?

While an ac­qui­si­tion of Shire might make strate­gic sense, the po­ten­tial size of the deal will make Shire dif­fi­cult for Takeda to swal­low, opine an­a­lysts.

Judge by mar­ket cap­i­tal­iza­tion, both com­pa­nies have a nearly sim­i­lar mar­ket share. But it would be a big fi­nan­cial stretch for Takeda since Shire, with a mar­ket value of more than 36.6 bil­lion pounds ($51.5 bil­lion), is worth a lot more than Ja­panese drug­maker, which has a mar­ket cap­i­tal­iza­tion of

$41 bil­lion. And since Shire owes $19 bil­lion in debt fol­low­ing its Bax­alta ac­qui­si­tion, its en­ter­prise value is ap­proach­ing $70 bil­lion, which is about $25 bil­lion big­ger than Takeda’s. The sim­i­lar­ity in size has raised ques­tions on whether the dam­age to Takeda’s fi­nances would be worth the boost to its port­fo­lio and pipe­line.

An­a­lysts think Takeda will need to sub­stan­tially raise the cash com­po­nent to make the of­fer at­trac­tive to Shire share­hold­ers. In­vestors in Takeda are also cau­tious. The takeover news has sent the com­pany’s shares div­ing and the Ja­panese firm lost al­most 5 per cent of their value re­cently as in­vestors fret­ted over the record break­ing deal in Ja­pan’s pharma his­tory.

And fi­nally af­ter a lengthy cam­paign, Takeda seals this deal. Ex­perts say, this deal is We­ber’s bold­est move so far, sig­nif­i­cantly boost­ing Takeda’s po­si­tion in rare dis­eases, block­buster hae­mophilia fran­chise, ADHD drug, gas­troin­testi­nal disor­ders and neu­ro­science.

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