Shire Plc became a hot property in health care by buying promising drugs, not developing them in-house. That may help AbbVie Inc. avoid the political hurdles that hurt Pfizer Inc.’s bid for AstraZeneca Plc.
U.S. drugmakers AbbVie and Pfizer planned to use their proposed acquisitions to redomicile in a country with lower taxes. Pfizer’s $117 billion bid was criticized as a potential job killer that would hinder the U.K.’s reputation as a science center. AbbVie’s push for Shire, which has already rejected a $46.5 billion offer, shouldn’t face the same attacks.
For AbbVie and Shire it’s all about the price. Shire employs less than 500 people in the U.K., where its executive offices are, and only about 100 in Ireland, where the company is domiciled for tax purposes, according to the company’s annual report. Chief Executive Officer Flemming Ornskov and Phil Vickers, Shire’s research head, work in the U.S.
“Political issues would be limited as the majority of U.K. employees are administration, business development or corporate functions,” said Peter Welford, an analyst with Jefferies Plc in London, by e-mail.
Shire, with a market value of 25.8 billion pounds ($43.9 billion), is a perennial subject of takeover speculation though this is the first time it has disclosed a formal offer. The company’s chairwoman, Susan Kilsby, said AbbVie’s offer undervalued the company. Kilsby is a former Credit Suisse M&A banker who specializes in defensive strategies, said Michael Leuchten, an analyst at Barclays Plc in London.
“You’re talking about someone who is very well plugged in, experienced in takeover scenarios,” Leuchten said in a telephone interview. “That matters.”
Shire touted its prospects in specialty-drug markets in rejecting North Chicago, Illinois-based AbbVie’s offer. By 2020, the company said in its statement, sales will double to $10 billion, helped by growth of medicines such as Elaprase for a genetic disorder called Hunter syndrome and Replagal to treat Fabry disease.
Drugmakers covet medicines for rare diseases, which affect no more than 5 in 10,000 people, because of incentives offered by governments that can include market exclusivity and tax incentives. Additionally, they can draw high prices, based on the amount of money used to develop them compared with the small number of patients who need them.
Shire started building its rare disease business in 2005 with the $1.6 billion acquisition of Transkaryotic Therapies Inc. The drugmaker has made at least six acquisitions since Chief Executive Officer Flemming Ornskov’s appointment was announced in October 2012. The biggest was the purchase of ViroPharma Inc., valued by Shire at about $4.2 billion, which added the treatment Cinryze for a rare swelling disease.
In 2007, Shire also gained its top-seller, Vyvanse for attention deficit hyperactivity disorder, with the $2.6 billion purchase of New River Pharmaceuticals Inc.