Shire’s cancer unit sale brings new twist to takeover bid by Japanese firm

The consolidation fever gripping American corporates has become more widespread this year, with more and more industries turning to M&As to ramp up their product portfolios and boost profitability. Continuing last year’s trend, the healthcare sector is preparing for more such deals, after Celgene Corp. (CELG) set the mood by acquiring two biotech companies at the beginning of the year.

It is believed that 2018 will be a uniquely favorable year for acquisition and divestiture activities for multinational companies that got empowered by the income tax reform rolled out last year, lowering the tax rates for repatriating cash held abroad.

Biotech firm Shire Plc. (SHPG) has been in the spotlight for quite some time for being the target of a high-value takeover bid by Japanese drugmaker Takeda Pharmaceutical Company. Valued around $50 billion, it is one of the more closely-watched deals in recent times.

Meanwhile, giving a new twist to the Takeda bid, Shire has signed an agreement to sell its oncology unit to French pharmaceuticals giant Servier Laboratories for about $2.4 billion. Bringing cheer to investors, the Irish company that develops therapeutic solutions for rare diseases said it would use the sale proceeds for share-repurchase, after Takeda’s offer period expires on April 25.

The transaction, which is part of Shire’s strategy to focus more on its rare-disease drugs, is expected to close in the second or third quarter. The agreement includes the company’s leukemia drug Oncaspar, lymphoblastic leukemia medicine Calaspargase Pegol that is currently being reviewed by the FDA, and the overseas rights to sell pancreatic cancer drug Onivyde.

Shire said it intends to use the sale proceeds to return capital to shareholders

The sale has cast a shadow over the prospects of the bid by Takeda, which is apparently looking to benefit from Shire’s lucrative cancer division and specialty drugs, besides the neuroscience and gastroenterology businesses. The fact that the non-oncology areas of Shire’s business continue to be a lure for Takeda gives hope that the mega-deal would materialize.

In any case, acquiring Shire would not be an easy task for Takeda as its market value is much lower compared to that of the former. Also, the Japanese firm would have to explore every option at its disposal to fund the transaction. Shire shares made some notable gains in the London Stock Exchange after Takeda made the announcement and had remained steady since then.