TAKEDA SEALS THE DEAL; buys Shire for $62bn
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.