Shire share price outperforms as group offloads oncology business

Shire are displayed at a chemist's in northwest London Britain

Shire are displayed at a chemist's in northwest London Thomson Reuters

The London-listed rare diseases specialist announced today that it would consider returning proceeds from the sale to shareholders through a buyback and that further selective disposals of non-strategic assets were possible.

Takeda clearly stated that strengthening its core therapeutic area of oncology (alongside gastrointestinal and neuroscience) was a key reason it wanted to gobble up Shire.

Shire's board of directors started looking at offloading the oncology business in December, and said that the process considered "multiple potential strategic buyers" across Europe, Japan and the US. Under U.K. regulations governing mergers and acquisitions, Takeda has until April 25 to make a formal bid or pass on Shire.

Takeda told numerous news outlets it had no comment on the Servier-Shire deal.

Britain has strict rules about the conduct of bids, including defensive actions taken by target companies. A pursuit of Shire would be one of the biggest attempts by a Japanese company to buy a Western rival. Launched in 19 countries, Lonsurf generated €62 million ($76.8 million) in revenue during 2016-2017, according to a Servier announcement that did not furnish revenues for Pixuvri.

Two sources with direct knowledge of the matter said last week that Takeda had sounded out its major creditors for loans to fund a potential Shire bid.

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"While the oncology business has delivered high growth and profitability, we have concluded that it is not core to Shire's longer-term strategy", said Flemming Ornskov, Shire's chief executive.

Jefferies analysts said the sale "should boost Shire's negotiating position on asking price in the current offer period with Takeda".

Servier would shell out 9.2 times 2017 revenues for Shire's oncology business.

Oncaspar is a component of multi-agent treatment for acute lymphoblastic leukemia, while Onivyde is a component of multi-agent treatment for metastatic pancreatic cancer post gemcitabine based therapy.

Servier believes that the acquisition will help the firm to establish direct commercial presence in the USA, in addition to expanding its oncology pipeline and portfolio of in-market drugs.

The deal also covers Calaspargase Pegol (Cal-PEG), which is under FDA review for the treatment of ALL, and early stage immuno-oncology pipeline collaborations.

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