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

Health­care Dis­par­i­ties and Sick­le Cell Dis­ease

In the complicated U.S. healthcare system, navigating a serious illness such as cancer or heart disease can be remarkably challenging for patients and caregivers. When that illness is classified as a rare disease, those challenges can become even more acute. And when that rare disease occurs in a population that experiences health disparities, such as people with sickle cell disease (SCD) who are primarily Black and Latino, challenges can become almost insurmountable.

Jacob Van Naarden (Eli Lilly)

Ex­clu­sives: Eli Lil­ly out to crash the megablock­buster PD-(L)1 par­ty with 'dis­rup­tive' pric­ing; re­veals can­cer biotech buy­out

It’s taken 7 years, but Eli Lilly is promising to finally start hammering the small and affluent PD-(L)1 club with a “disruptive” pricing strategy for their checkpoint therapy allied with China’s Innovent.

Lilly in-licensed global rights to sintilimab a year ago, building on the China alliance they have with Innovent. That cost the pharma giant $200 million in cash upfront, which they plan to capitalize on now with a long-awaited plan to bust up the high-price market in lung cancer and other cancers that have created a market worth tens of billions of dollars.

Endpoints Premium

Premium subscription required

Unlock this article along with other benefits by subscribing to one of our paid plans.

The End­points 11: They've got mad mon­ey and huge am­bi­tions. It's time to go big or go home

These days, selecting a group of private biotechs for the Endpoints 11 spotlight begins with a sprint to get ahead of IPOs and the M&A teams at Big Pharma. I’ve had a couple of face plants earlier this year, watching some of the biotechs on my short list choose a quick leap onto Nasdaq or into the arms of a buyer.

Vividion, you would have been a great pick for the Endpoints 11. I’m sorry I missed you.

Endpoints Premium

Premium subscription required

Unlock this article along with other benefits by subscribing to one of our paid plans.

Dave Lennon, former president of Novartis Gene Therapies

So what hap­pened with No­var­tis Gene Ther­a­pies? Here's your an­swer

Over the last couple of days it’s become clear that the gene therapy division at Novartis has quietly undergone a major reorganization. We learned on Monday that Dave Lennon, who had pursued a high-profile role as president of the unit with 1,500 people, had left the pharma giant to take over as CEO of a startup.

Like a lot of the majors, Novartis is an open highway for head hunters, or anyone looking to staff a startup. So that was news but not completely unexpected.

Endpoints Premium

Premium subscription required

Unlock this article along with other benefits by subscribing to one of our paid plans.

FDA+ roundup: Bs­U­FA III ready for show­time, court tells FDA to re-work com­pound­ing plan, new guid­ance up­dates and more

The FDA has now spelled out what exactly will be included in the third iteration of Biosimilar User Fee Act (BsUFA) from 2023 through 2027, which similarly to the prescription drug deal, sets fees that industry has to pay for submitting applications, in exchange for firm timelines that the agency must meet.

This latest deal includes several sweeteners for the biosimilar industry, which has yet to make great strides in the US market, with shorter review timelines for safety labeling updates and updates to add or remove an indication that does not contain efficacy data.

Endpoints Premium

Premium subscription required

Unlock this article along with other benefits by subscribing to one of our paid plans.

Who are the women su­per­charg­ing bio­phar­ma R&D? Nom­i­nate them for this year's spe­cial re­port

The biotech industry has faced repeated calls to diversify its workforce — and in the last year, those calls got a lot louder. Though women account for just under half of all biotech employees around the world, they occupy very few places in C-suites, and even fewer make it to the helm.

Some companies are listening, according to a recent BIO survey which showed that this year’s companies were 2.5 times more likely to have a diversity and inclusion program compared to last year’s sample. But we still have a long way to go. Women represent just 31% of biotech executives, BIO reported. And those numbers are even more stark for women of color.

Maureen Hillenmeyer, Hexagon Bio CEO

Hexa­gon Bio rais­es $61M to con­tin­ue ef­forts to turn fun­gi in­to drugs

A year after raising a $47 million launch round, the fungi-loving drug hunters at Hexagon Bio have more than doubled their coffers.

Hexagon announced today that it raised another $61 million for its efforts to design cancer and infectious disease drugs based on insights mined from the DNA in millions of species of fungi. The new financing brings Hexagon’s committed funding to over $108 million.

Paul Hudson, Sanofi CEO (Raphael Lafargue/Abaca/Sipa USA; Sipa via AP Images)

In­side look: How a po­ten­tial part­ner­ship turned in­to a $1.9B buy­out for Sanofi

A couple of months before the FDA was set to make a decision on Kadmon’s so-called “knock-your-socks-off kind of results” for its chronic graft-versus-host disease drug, Sanofi put out feelers for a potential collaboration. But an early approval triggered an offer to buy the company outright — and Sanofi didn’t win without a fight, according to an inside look.

Sanofi’s head of business development and licensing Matthieu Merlin reached out to Kadmon on June 26 with a simple request: He wanted to introduce himself and explore potential partnerships, according to an SEC filing. It had been several months since Kadmon’s belumosudil arrived on the FDA’s doorstep, and after delaying their decision once, regulators said they’d have an answer by Aug. 30. But Sanofi wasn’t the only company interested in getting to know the execs over at Kadmon.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 117,900+ biopharma pros reading Endpoints daily — and it's free.

Jean Bennett (Brent N. Clarke/Invision/AP Images)

Lux­tur­na in­ven­tor Jean Ben­nett starts a new gene ther­a­py com­pa­ny to tack­le rare dis­eases left be­hind by phar­ma, VCs

A few years ago Jean Bennett found herself in a surprising place for a woman who invented the first gene therapy ever approved in the United States: No one, it seemed, wanted her work.

Bennett, who designed and co-developed Luxturna, approved in 2018 for a rare form of blindness, had kept building new gene therapies for eye diseases at her University of Pennsylvania lab. But although the results in animals looked promising, pharma companies and investors kept turning down the pedigreed ophthalmology professor.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 117,900+ biopharma pros reading Endpoints daily — and it's free.