Baxalta Said in Talks to Buy Ariad to Boost Cancer Offerings

Updated on
  • Ariad has drugs in development for leukemia, lung cancers
  • Discussions continue and may not result in a deal being done

Baxalta Inc., the drugmaker fending off a $30 billion takeover offer from Shire Plc, is in talks to acquire Ariad Pharmaceuticals Inc. to boost its oncology business, people with knowledge of the matter said.

Discussions with the developer of leukemia and lung-cancer treatments continue and there is no certainty a deal will be reached, said the people, who asked not to be identified because the information is private. Baxalta could also choose to pursue other targets.

It’s unclear how any deal by Baxalta would affect Shire’s pursuit of the Deerfield, Illinois-based company, which was spun off from Baxter International Inc. in July.

Ariad shares surged 42 percent Friday to $9.89 in New York, valuing the company at $1.87 billion. In April, Ariad’s outgoing Chief Executive Officer Harvey Berger said the company is open to “strategic alternatives” after activist investor Alex Denner successfully pushed for his ouster.

Baxalta shares slid 3.2 percent to $35.25, valuing the company at about $24 billion.

Representatives for Baxalta and Ariad declined to comment.

Shire Interest

Shire is interested in Baxalta to bolster its focus on rare diseases, whose treatments have become one of the hottest properties for drugmakers because of the potential for high-priced products and incentives offered by regulators, including tax breaks and seven years of market exclusivity. The FDA defines rare diseases as those that affect fewer than 200,000 people in the U.S.

Since Shire went public with its all-stock takeover proposal, Baxalta’s management has sought to paint the Irish drugmaker as trying to buy it cheaply.

“Is it trying to opportunistically acquire our attractive hemophilia, immunology and growing oncology platforms without true synergies?” Baxalta Chief Executive Officer Ludwig Hantson said in an interview earlier this month. “We have an attractive set of franchises and it would be a shame to hand it over for a low-ball valuation.”

Deal Pursuit

Baxalta’s management has made public its interest in pursuing deals in the hematology sector. Oncology is also ripe for deal activity, with pharmaceutical companies seeking out the newest therapies in an area that’s seen significant scientific advances in recent years.

AbbVie Inc. beat out Johnson & Johnson in March with a $21 billion bid for Pharmacyclics Inc., the maker of a blockbuster blood cancer therapy that sells for $100,000 a year. Companies such as Juno Therapeutics Inc., Kite Pharma Inc. and Bluebird Bio Inc. are viewed as possible takeover targets as well. They are working on experimental medicines called chimeric antigen receptors, or CAR, that engineers the body’s T-cells, which normally fight infections or abnormal cells, so they can recognize and destroy tumors. These therapies are being studied in a range of hematologic cancers.

Immuno-oncology has also seen significant advances in recent years, with the approval of drugs such as Merck & Co.’s Keytruda and Bristol-Myers Squibb Co.’s Opdivo. Those treatments stimulate the immune system to help fight cancer and are being studied in a number of different types of tumors. Bristol-Myers has done a number of deals recently, spending $1.6 billion earlier this year for Flexus Biosciences Inc. and Rigel Pharmaceuticals Inc., both in the area of cancer immunotherapy.

— With assistance by Beth Jinks, Aaron Kirchfeld, and Makiko Kitamura

(Updates with closing share prices in fourth and fifth paragraphs.)
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