Can Take­da ac­tu­al­ly close its $65B deal to buy Shire? Maybe, but an­a­lysts aren't sure they should

Take­da has upped its of­fer to buy Shire $SH­PG for a mix of stock and cash worth close to $65 bil­lion, which is good enough for the Lex­ing­ton, MA-based biotech to ex­tend the dead­line on their talks to May 8 af­ter de­ter­min­ing they were close to fi­nal­iz­ing a pact.

Late Tues­day Shire re­port­ed that Take­da had upped its bid to £27.26 in new Take­da shares and £21.75 in cash, com­ing to £49 a share. That rings up at 0.839 new Take­da shares and $30.33 for each Shire share — or close to $65 bil­lion, with Take­da tack­ing about $2.5 bil­lion on its pre­vi­ous of­fer.

In a state­ment, Shire not­ed that its board said they would rec­om­mend the of­fer, pro­vid­ed they can get through some re­main­ing hur­dles, in­clud­ing their due dili­gence work.

But it’s not a done deal yet, and there are con­sid­er­able doubts whether it’s in Take­da’s best in­ter­est — or Shire’s — to com­plete the process. Those doubts were height­ened af­ter in­vestors drove Take­da’s shares down 7% in the wake of the agree­ment, leav­ing the stock down about 20% since talks were dis­closed — hard­ly a ring­ing en­dorse­ment.

Will a 44% cash/56% eq­ui­ty deal suf­fi­cient­ly en­tice Shire’s grum­bling share­hold­ers? Maybe, says Jef­feries an­a­lyst David Stein­berg. He not­ed:

While this of­fer rep­re­sents a sol­id im­prove­ment over Take­da’s third bid (38% cash), we still won­der if it is enough to sat­is­fy SH­PG share­hold­ers, who would still bear some not in­signif­i­cant risk go­ing for­ward as ~50% own­ers of New­Co. Of in­ter­est, SH­PG now seems to be en­gag­ing – and step­ping away from pri­or com­men­tary that a sim­i­lar (4% low­er) bid “sig­nif­i­cant­ly un­der­val­ues the com­pa­ny”. And we be­lieve that the lat­est of­fer of ~$205/ADR by Take­da will be con­sid­ered at­trac­tive to many SH­PG share­hold­ers, par­tic­u­lar­ly if it has a greater com­po­nent of cash vs stock.

Bern­stein’s Ron­ny Gal looked at the risks to the deal and still es­ti­mat­ed a like­ly com­ple­tion at 80% to 90%, giv­en a will­ing buy­er and a will­ing sell­er at the ta­ble. But he’s not so sure that Take­da’s in­vestors are on board.

The risk to the deal is un­like­ly in our view to come from Shire share­hold­ers or an­ti-trust au­thor­i­ties. How­ev­er, Take­da share­hold­ers (and po­ten­tial­ly the board) may prove re­sis­tant giv­en the stock de­cline.

Nei­ther Gal nor Stein­berg think a hos­tile bid­der is like­ly to come along at the last minute, giv­en all the at­ten­tion to this deal as it brewed, though the pos­si­bil­i­ty re­mains. Any­body who has thought of do­ing it has prob­a­bly de­cid­ed to stay out of it. (GSK chief Em­ma Walm­s­ley al­so got her chance to­day to brush off the ques­tion, rul­ing out a bid no one thought pos­si­ble in any case.) And Al­ler­gan CEO Brent Saun­ders isn’t like­ly to change his mind af­ter get­ting slapped down quick for men­tion­ing an in­ter­est.

This is what Take­da CEO Christophe We­ber has been work­ing to­wards since he was named to the top job — aim­ing at build­ing a glob­al op­er­a­tor with roots in Japan — and in­vestors are clear­ly fret­ting about the re­al­i­ty of it. With a lit­tle more than $4 bil­lion in cash on hand, the idea of the small­er Take­da buy­ing up Shire and leav­ing Shire in­vestors with half of the stock in the post-merg­er bio­phar­ma com­pa­ny is not sit­ting well with every­one.

Some an­a­lysts have been won­der­ing why Take­da would pay a pre­mi­um for a com­pa­ny that is fac­ing stiff head­winds on key fran­chis­es as Roche ad­vances Hem­li­bra for he­mo­phil­ia and its AD­HD group con­fronts the even­tu­al loss of con­trol over their Vy­vanse IP.

We­ber, though, shows no signs of wa­ver­ing in his de­ter­mi­na­tion to com­plete this deal.

There are a few key is­sues that will need to be com­plet­ed:

— Agree­ment of cer­tain oth­er (un­spec­i­fied) terms of the re­vised pro­pos­al.
— Sat­is­fac­to­ry com­ple­tion of a con­fir­ma­to­ry due dili­gence re­view by Take­da.
— The unan­i­mous and un­con­di­tion­al rec­om­men­da­tion of the board of Shire.
— And fi­nal ap­proval by the board of Take­da.

Take­da fol­lowed with a re­lease of its own stat­ing:

Take­da and its Board have re­mained dis­ci­plined with re­spect to the terms of the Re­vised Pro­pos­al and Take­da in­tends to main­tain its well-es­tab­lished div­i­dend pol­i­cy and in­vest­ment grade cred­it rat­ing.

A matchup with Shire would give Take­da a huge Boston/Cam­bridge re­search group — even af­ter some pre­sumed deep cuts in per­son­nel — ex­pand­ing on Shire’s move to con­cen­trate its forces in Lex­ing­ton and Cam­bridge fol­low­ing its Bax­al­ta buy­out. Take­da has al­so been gath­er­ing its R&D forces in the big Boston hub. A deal would al­so like­ly sig­nal a fur­ther wrench­ing re­or­ga­ni­za­tion for lo­cal Shire staffers, who have been through re­peat­ed re­vamp­ing un­der CEO Flem­ming Orn­skov while Take­da has spent much of the past two years re­struc­tur­ing and cut­ting re­search.

A mega-merg­er like this, dwarf­ing a se­ries of ac­qui­si­tions in Q1, would al­so leave bio­phar­ma in­vestors hunt­ing for the next big tar­get, with 2018 shap­ing up as a big year for buy­outs.

Im­age: Christophe We­ber, pres­i­dent and chief ex­ec­u­tive of­fi­cer of Take­da Get­ty

Tower Bridge in London [Shutterstock]

#UK­BIO19: Join GSK’s Hal Bar­ron and a group of top biotech ex­ecs for our 2nd an­nu­al biotech sum­mit in Lon­don

Over the past 10 years I’ve made a point of getting to know the Golden Triangle and the special role the UK biopharma industry plays there in drug development. The concentration of world class research institutes, some of the most accomplished scientists I’ve ever seen at work and a rising tide of global investment cash leaves an impression that there’s much, much more to come as biotech hubs are birthed and nurtured.

Deborah Dunsire. Lundbeck

UP­DAT­ED: Deb­o­rah Dun­sire is pay­ing $2B for a chance to leap di­rect­ly in­to a block­buster show­down with a few of the world's biggest phar­ma gi­ants

A year after taking the reins as CEO of Lundbeck, Deborah Dunsire is making a bold bid to beef up the Danish biotech’s portfolio of drugs in what will likely be a direct leap into an intense rivalry with a group of giants now carving up a growing market for new migraine drugs.

Bright and early European time Monday morning the company announced that it will pay up to about $2 billion to buy Alder, a little biotech that is far along the path in developing a quarterly IV formulation of a CGRP drug aimed at cutting back the number of crippling migraines patients experience each month. In a followup call, Dunsire also noted that the company will likely need 200 to 250 reps for this marketing task on both sides of the Atlantic. And analysts were quick to note that the dealmaking at Lundbeck isn’t done, with another $2 billion to $3 billion available for more deals to beef up the pipeline.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 59,400+ biopharma pros reading Endpoints daily — and it's free.

It’s fi­nal­ly over: Bio­gen, Ei­sai scrap big Alzheimer’s PhI­I­Is af­ter a pre­dictable BACE cat­a­stro­phe rais­es safe­ty fears

Months after analysts and investors called on Biogen and Eisai to scrap their BACE drug for Alzheimer’s and move on in the wake of a string of late-stage failures and rising safety fears, the partners have called it quits. And they said they were dropping the drug — elenbecestat — after the independent monitoring board raised concerns about…safety.

We don’t know exactly what researchers found in this latest catastrophe, but the companies noted in their release that investigators had determined that the drug was flunking the risk/benefit analysis.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 59,400+ biopharma pros reading Endpoints daily — and it's free.

Scott Gottlieb, AP Images

Scott Got­tlieb has a new board po­si­tion to add to the re­sume — and this one is fo­cused on a fa­vorite sub­ject

Scott Gottlieb has another position to add to his lengthy roster of boards and advisory roles in the wake of his departure from the helm of the FDA.

He’ll be joining the advisory board of FasterCures, a think tank which former junk bond king Michael Milken set up to help drive more drugs to the market, looking to accelerate drug R&D. That’s a subject close to the heart of Gottlieb, who blazed a trail at the FDA focused on hustling up the process. That helped endear him to the industry, making him one of the most popular commissioners in FDA history.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 59,400+ biopharma pros reading Endpoints daily — and it's free.

Karyopharm lines up $150 mil­lion cash in­jec­tion to back con­tro­ver­sial drug launch

Karyopharm has entered into a royalty agreement worth up to $150 million to back the launch of their multiple myeloma drug — recently approved by the FDA over the objections of a majority of the agency’s outside experts.

The deal with HealthCare Royalty Partners, worth $75 million now and $75 million once certain regulatory and commercial milestones have been reached, will fund the commercialization of Karyopharm’s oral SINE compound Xpovio (selinexor) for patients with multiple myeloma who have already had at least four prior therapies. The money will help Karyopharm as it markets its newly approved drug and pushes through clinical trials testing the drug on refractory multiple myeloma patients with one to three therapies and patients with treatment-resistant diffuse large B-cell lymphoma. It will give Karyopharm a cushion through mid-2021.

Af­ter a run of CT­LA-4 com­bo fail­ures, sci­en­tists spot­light a way to make it work — in se­lect pa­tients

CTLA-4/PD-(L)1 combinations have been one of the El Dorados of oncology, its promise forever behind that next hill but apparently unattainable after a series of pivotal clinical failures. But researchers at New York’s Memorial Sloan Kettering Cancer Center and the Technical University of Munich think they may know how to fix what’s wrong and boost the drive to next-gen cancer combos.

In a preclinical animal research program, researchers found that within a cell, checkpoints rely on a specific molecule — RNA-sensing molecule RIG-I — to work. If that sounds familiar, it’s because it has already been identified as a target for boosting immune responses and was subject to at least one Phase I/II trial. Pfizer in December allied itself with Kineta with $15 million upfront and $505 million in potential milestones to develop RIG-I immunotherapies, and three years ago Merck purchased German upstart Rigontec for $137 million upfront and over $400 million in potential milestones for the same purpose.

Pur­due Phar­ma files for bank­rupt­cy as first step in $10B opi­oid set­tle­ment

It’s settled. Purdue Pharma has filed for bankruptcy as part of a deal that would see the OxyContin maker hand over $10 billion in cash and other contributions to mitigate the opioid crisis — without acknowledging any wrongdoing in the protracted epidemic that’s resulted in hundreds of thousands of deaths.

The announcement came two weeks after news of a proposed settlement surfaced and largely confirm what’s already been reported.

Lisa M. DeAngelis, MSKCC

MSK picks brain can­cer ex­pert Lisa DeAn­ge­lis as its next CMO — fol­low­ing José Basel­ga’s con­tro­ver­sial ex­it

It’s official. Memorial Sloan Kettering has picked a brain cancer expert as its new physician-in-chief and CMO, replacing José Baselga, who left under a cloud after being singled out by The New York Times and ProPublica for failing to properly air his lucrative industry ties.

His replacement, who now will be in charge of MSK’s cutting-edge research work as well as the cancer care delivered by hundreds of practitioners, is Lisa M. DeAngelis. DeAngelis had been chair of the neurology department and co-founder of MSK’s brain tumor center and was moved in to the acting CMO role in the wake of Baselga’s departure.

Penn team adapts CAR-T tech, reengi­neer­ing mouse cells to treat car­diac fi­bro­sis

After establishing itself as one of the pioneer research centers in the world for CAR-T cancer therapies, creating new attack vehicles to eradicate cancer cells, a team at Penn Medicine has begun the tricky transition of using the basic technology for heart repair work.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 59,400+ biopharma pros reading Endpoints daily — and it's free.