Drugs firms on defensive as 27 billion pound Shire bid rebuffed

Having rejected no fewer than three bids from US rival AbbVie, today Shire attempts to persuade investors that it's worth more to them as an independent.

by Andrew Saunders
Last Updated: 26 Aug 2014

AbbVie’s third bid - £46.26 a share – was dismissed by Shire on Friday with the usual claim that it ‘significantly undervalues’ the business. Given that the day before the market reckoned Shire shares were worth only £37 that’s quite a bold claim.  AbbVie now has until July 18 to make another bid or walk away.
 
Shire – best known as a manufacturer of drugs for rare disorders including ulcerative colitis and Hunter syndrome – will present ambitious plans to double sales by 2020 to getting on for £6bn. Chief exec Flemming Ornskov will take the unusual step of telling analysts in some detail exactly how he expects its top selling drugs to perform over the next five years, in particular its Attention Deficit Disorder treatment Vyvanse which accounts for around 25% of current revenues.
 
All this in an effort to convince shareholders that jam tomorrow is better than jam today – not always an easy task.
 
AbbVie’s bids are the latest in a series of attempted acquisitions by US companies of Brit pharma businesses, most notably Pfizer’s recent unsuccessful tilt at AstraZeneca. Of the four drugs companies in the FTSE 100, only giant GSK has yet to be the target of a takeover bid.
 
What’s going on? Well some will say it’s the continuation of the great British tradition of failing to make the most of our home grown talent and ideas. Others that we do not provide sufficient protection to vital skills and industries to keep them out of the clutches of foreign predators.
 
But in the case of Shire it’s hard to make much of a case on either count. It’s a minnow by comparison to AZ, and as it’s RnD is US based already and it moved its HQ to low-tax Ireland since 2008 it is unlikely to gain much following amongst even the most avid of national interest supporters.  
 
The truth is that the flurry of drugs bids is a classic case of unintended consequences emanating – as usual - from Whitehall. On the one hand the Government says it is keen to nurture and protect our strategically important pharmaceutical skills base, on the other it has cut taxes to encourage foreign corporations to shift their headquarters here (and help to reduce the national debt, natch).
 
What ministers apparently failed to foresee was that the second point would have such immediate ramifications for the first. Sounds like the cabinet could do with some ADD treatment of its own…

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