Shire Plc, weighing whether to increase its $30 billion bid for Baxalta Inc., wants a better understanding of the U.S. drugmaker’s growing optimism over its sales projections, according to a person familiar with the matter.
The current offer, 0.1687 of Shire’s American depositary receipts for each share of Baxalta, was extended privately on July 10. Twenty days later, Baxalta reported second-quarter earnings, raising its forecast for revenue growth this year to as much as 7 percent, up from 4 percent.
Shire then took its proposal public on Aug. 4 without changing its terms to account for the new growth projection. The all-stock offer currently values Baxalta at $41.81 a share. Baxalta stock rose less than 1 percent to $38.25 at the close in New York.
Baxalta has said its higher sales forecast is the result of its hemophilia division growing faster than expected and of new product launches and strong international demand for its products. Shire wants further details on the revised outlook to help shape a new offer, said the person familiar with the matter, who asked not to be identified discussing private information.
A Baxalta spokesman pointed to Chief Executive Officer Ludwig Hantson’s comments earlier this week that Shire’s proposal is “no different from what we think we can achieve on our own in the next six to 12 months.” That makes the bid “not compelling,” he said on a call hosted by Cowen & Co.
Hantson has also argued that investors haven’t had time to properly assess Baxalta’s value just a month after it became a standalone company in a spinoff from Baxter International Inc.
Shire prefers to negotiate a deal with Baxalta and is willing to remain patient and spend several months getting the deal done, the person familiar with the matter said.
Royal London Asset Management, one of Shire’s 20 biggest investors, supports the drugmaker’s bid so long as the asking price doesn’t rise much above $50 a share, said Joe Walters, a senior portfolio manager.
Shire is also pursuing other deals to support its ambition to become a leader in rare-disease drugs, the person said. That could result in multiple smaller deals, or one or more large transactions, the person said.
Shire’s $30 billion bid values Baxalta at 5 times 2015 sales, a discount to the median 7.2 times valuation other biotechnology deals have drawn in the last decade, Bloomberg Industries analyst Asthika Goonewardene wrote in an Aug. 4 note. The peer group consisted of deals ranging from $10 billion to $50 billion, including assets such as cancer drug maker Genentech Inc. and rare-disease specialist Genzyme Corp., he said.
“Hostile bids typically come with a premium to entice shareholders, so Shire’s offer suggests it may concede that Baxalta is a lower-quality asset,” Goonewardene wrote.