After recent bids by US suitors, both Shire (LSE: SHP) (NASDAQ: SHPG.US) and AstraZeneca (LSE: AZN) (NYSE: AZN.US) are now bolstering their defences to fend off further hostile takeover attempts. That said, both companies are still open to negotiations, although only at the right price. Shire’s management for example, has stated that the £27bn approach from AbbVie falls far short of the what the company is worth. According to management, the £46.11-a-share cash and stock offer “substantially undervalued” Shire. In the words of Flemming Ornskov, Shire’s CEO: “…This is a premium asset and if someone wants to shorten the life of this company they will have…
That said, both companies are still open to negotiations, although only at the right price. Shire’s management for example, has stated that the £27bn approach from AbbVie falls far short of the what the company is worth.
According to management, the £46.11-a-share cash and stock offer “substantially undervalued” Shire. In the words of Flemming Ornskov, Shire’s CEO:
“…This is a premium asset and if someone wants to shorten the life of this company they will have to pay a price that reflects that…”
So, to fend off further opportunistic, low-ball takeover attempts, Shire and Astra are now working to make themselves unattractive to predators.
Shire is taking a similar route to the route Astra took immediately after Pfizer’s takeover attempt. In particular, Shire’s management is now forecasting that the company will achieve double-digit sales growth from now until 2020. Management is targeting sales of $6.5bn by 2016 and $10bn by 2020.
These forecasts have been bolstered by the news released today revealing that Shire’s leading ADHD treatment Vyvanse is still under patent protection. There were concerns that five generic producers were gearing up to release a cheaper version of the hyperactivity drug, which would have cut into Shire’s sales. The drug is protected under patent until 2023.
Meanwhile, Shire continues to hunt for acquisitions, in an attempt to make itself too big to be brought out.
There is talk that Shire could pay up to $4bn in cash for US-based NPS pharma. These rumours have been fanned by the news that Shire recently inked a deal with Citigroup, which will see the bank provide a war chest of $5bn to the company.
NPS’s lead product, Gattex — designed for the treatment of short bowel syndrome — fits across both Shire’s rare disease and gastrointestinal platforms.
Elsewhere, rumours that Astra could still become a buyout target continue to swirl. Indeed, under UK takeover rules, Pfizer could return and make another bid for Astra as soon as August, if shareholders pressure Astra back to the negotiation table.
Without shareholder consent, Pfizer could return with a hostile bid in November.
It’s likely that if Pfizer did return, any offer would have to be significantly higher than the £70bn offered beforehand. Many believe that this offer was, in the words of legendary fund manager Neil Woodford, “very distant” from the right price.
However, Astra, like Shire, is working to make itself look unattractive to potential buyers. Specifically, the company is currently working with bankers to explore the sale of future income streams from some of its existing medicines.
A deal of this kind would bring in billions for the pharmaceutical giant. What’s more, a deal of this kind would prevent any company that acquired Astra from gaining access to these income streams.
Back in the real world
While big pharma companies thrash out billion-dollar deals, back in the real world the UK's economy is roaring back to life and so is the stock market.
Indeed, the UK investment management industry has reported that equity funds have been the best-selling asset class for the past eleven consecutive months.
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Rupert does not own any share mentioned within this article. The Motley Fool has recommended shares in Shire.