Shire share price: Company takes leaf out of AstraZeneca’s playbook

Written by: Alice Young
April 9, 2020

iNVEZZ.com, Tuesday, June 24: Shire Plc (LON:SHP) has highlighted the potential of its drug pipeline in an attempt to prove that the £27 billion bid from US drugmaker AbbVie Inc (NYSE:ABBV) substantially undervalues the company. The move mirrors AstraZeneca Plc’s (LON:AZN) successful defence against Pfizer Inc (NYSE:PFE) which walked away empty-handed last month.

As with the Anglo-Swedish drugmaker, Shire has also disclosed long-term revenue forecasts, promising to double its annual sales to $10 billion (£6 billion) by 2020.
Shire’s share price has added more than one percent in London so far this morning.
**Shire builds defence around pipeline**
In a presentation held for analysts and investors yesterday, Shire’s chief executive Flemming Ornskov said that the biopharma company’s current products would generate sales of at least $7 billion by 2020, with $3 billion more coming from drugs still in the group’s pipeline. In the medium term, Shire is targeting annual product sales of $6.5 billion by 2016.

Ornskov pointed to the company’s best-selling drug Vyvanse, which is now being tested as a treatment for binge eating disorder (BED). The Telegraph quoted Shire’s chief executive as forecasting that the drug could be on the market for BED as early as 2015, potentially bringing in an additional $300 million on top of its regular sales in 2020.
Shire also singled out its dry eye treatment Lifitegrast, which is expected to fetch more than $1 billion in sales by 2020. In addition, the company plans to seek approval for SHP 465, an attention deficit hyperactivity disorder (ADHD) drug for use in the adult market.

Shire, which is most famous for its ADHD treatments for children and adolescents, last week confirmed that it had rejected AbbVie’s merger offer, noting that it “fundamentally undervalued” the company “and its prospects as a leader in rare diseases and specialty markets”. The North Chicago-based drugmaker had approached Shire with a cash-and-share proposal of £46.26 per share. (Shire share price jumps 14% as US suitor confirms takeover approach)

The takeover proposal bears similarities to Pfizer’s £69 billion bid for AstraZeneca, which was rejected as the directors thought it significantly undervalued the company. AstraZeneca’s chief executive Pascal Soriot built his defence around the drugmaker’s pipeline of promising new treatments, while the company released long-term sales forecasts, noting that it was targeting growth leading to annual revenues of over $45 billion by 2023.

**Chief executive open to sale at right price**
Ornskov, however, has signalled that he is open to a takeover at the right price. Shire’s chief executive told the Financial Times yesterday that he had no philosophical objection to a deal while insisting that AbbVie’s offer substantially undervalued the company.
“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,” he said.

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His stance appears less confrontational than the attitude of AstraZeneca’s Soriot, who argued that a tie-up with Pfizer could disrupt the Anglo-Swedish company’s operations and delay getting life-saving drugs to market.
“Everybody can show up and bid for Shire,” Ornskov told the FT. “It is an open capitalist market. I’m an acquirer myself.”
**Analysts on Shire’s defence**
The Telegraph has quoted Mick Cooper, an analyst at Edison Investment Research, as praising Shire’s defence as “credible and robust”.
“The targets may appear a stretch, but Shire has dominant positions in very attractive niche markets and these should be achievable,” he said.
The FT has reported that some analysts consider the targets over-optimistic and lacking detail.
“There were some areas where the assumptions were aggressive versus our estimates,” Ronny Gal at Bernstein told the newspaper, adding that the forecasts were a “missed opportunity” to win over investors.
**As of 09:44 BST, buy Shire shares at 4352.00p.**
**As of 09:44 BST, sell Shire shares at 4351.00p.**