Shire bolsters defences against AbbVie
Shire will on Monday step up its defence against a £27bn takeover approach by AbbVie amid a growing sense of siege surrounding Britain’s healthcare sector.
The UK-listed drugmaker is the third FTSE 100 healthcare company to be targeted by a US rival so far this year after AstraZeneca fought off Pfizer and Smith & Nephew attracted tentative interest from Stryker.
All three are now rushing to bolster defences against further potential bids, as cash-rich American companies hunt for overseas assets to help them escape high US corporate tax obligations.
Of the four pharmaceutical and medical device manufacturers among Britain’s 100 biggest listed companies, GlaxoSmithKline is the only one whose independence has not so far been called into question.
While Shire is much smaller and less important to the UK economy than AstraZeneca or GSK, its takeover would nonetheless highlight concern over Britain’s failure to translate its strong science base into a deeper stock of globally competitive medical companies.
If sold to AbbVie or another predator, Shire would follow promising UK biotech companies such as Celltech, Powderject and Amersham that have been bought by bigger foreign groups in the past 15 years.
However, while Shire was founded in Basingstoke, southern England, in 1986 and has been listed in London since 1996, it will not be able to call on UK political support of the kind that helped AstraZeneca head off Pfizer.
The company shifted its headquarters to Dublin in 2008 to take advantage of Ireland’s low corporate tax rate and has moved its research and development to the US, leaving less than 500 mostly administrative employees in the UK.
Instead of nationalistic arguments, Shire will make a hard financial case for independence when Flemming Ornskov, chief executive, holds a conference call with investors on Monday to explain the company’s stance.
He will highlight Shire’s status as one of the fastest-growing companies in the pharmaceuticals sector to argue that AbbVie’s £46.11 per share cash and stock proposal falls well short of what would be required to bring the board to the negotiating table.
The offer represented a 23 per cent premium over Shire’s share price the day before news of AbbeVie’s interest became public on Friday, although the stock is up 60 per cent since takeover speculation intensified in April.
AbbVie plans to spell out its rationale for a takeover to its shareholders this week, while many analysts expect the US company to return with a higher bid. The company is attracted not only by the potential to move its tax domicile out of the US but also by its need to reduce dependence on its Humira rheumatoid arthritis drug.
Shire has increased sales at an average compound rate of 11.6 per cent since 2008 and earnings by 14.7 per cent and the pace has picked up since Danish-born Mr Ornskov took over a year ago.
Telling investors there is more growth ahead, he will flesh out his forecast made on Friday to more than double revenues to $10bn by 2020.
Shire’s expansion has been driven by surging US demand for its Vyvanse treatment for attention deficit hyperactivity disorder, which generated a quarter of last year’s $4.8bn in sales.
Meanwhile, Mr Ornskov has stepped up diversification into treatments for rare diseases – a fast-growing part of the pharmaceuticals sector that involves small patient numbers but high prices.
Several other US drugmakers have been touted as potential rival bidders for Shire ranging from Pfizer to Allergan, the Botox maker resisting a $53bn takeover by Valeant.