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Shire suffers pipeline failure as takeover speculation builds

Several big pharma companies are reportedly considering bids

Shire

Shire Pharmaceuticals has suffered a setback with the failure of its therapy for Hunter syndrome to meet its objectives in a pivotal trial, but the bigger news could be a big pharma takeover – if City rumour-mongers are to be believed.

The rare disease specialist revealed yesterday that its intrathecal formulation of idursulfase – already approved in an intravenous formulation called Elaprase – was unable to improve cognition scores in children with Hunter syndrome (also known as mucopolysaccharidosis II) after 12 months of treatment.

Analysts at Jefferies said the failure to address the central nervous system symptoms of Hunter syndrome was “not a major surprise…given the need to deliver the enzyme intrathecally in a difficult, aggressive patient population”.

The setback removes around $200m in potential sales of the drug, which the analysts says has $700m global sales potential as a non-CNS treatment. Sales of the current IV version of Elaprase were just over $450m in the first nine months of the year.

Shire’s share price did fall back a little after the announcement, but quickly regained ground to top the FTSE 100 index as investors reacted to media reports – originating in The Telegraph – that “several” pharma multinationals are considering takeover bids for the company as its share price languishes at a near 15-month low.

Shire was well on the way to be acquired by AbbVie back in 2014 for £32bn ($43bn), but that deal was scuppered by a US crackdown on tax inversion deals, and the company’s “dominant franchises and strong cash flow generation” could make it an attractive target, say the analysts.

Changes to US rules on repatriation of overseas cash – part of President Trump’s tax reform package that is on the brink of making it onto the statute – could make a second overture from AbbVie or another US company likely.

“In our view, US tax reform legislation – which includes far lower US corporate tax rates and access to ex-US cash via repatriation – could drive an M&A reacceleration in the broader healthcare arena,” according to Jefferies, although they think the number of parties interested in Shire will be “very limited”.

Article by
Phil Taylor

20th December 2017

From: Research, Sales

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