Shire share price: CEO flags higher cost savings from Baxalta deal

Written by: Tsveta van Son
March 11, 2020

Shares in Shire (LON:SHP) extended their recent rally in yesterday’s session, finding support in comments by chief executive Flemming Ornskov who said that the company could achieve higher savings than currently expected from its £22-billion tie-up with Baxalta (LON:BXLT) announced this week. The comments followed an upbeat note from Credit Suisse which forecast that the enlarged group set to become a leader in the profitable rare diseases sector.

Shire’s share price rose 3.77 percent to 4,269p yesterday. This morning, the shares have slipped into the red, slightly underperforming the broader London market.
Shire’s chief executive Flemming Ornskov told the annual JP Morgan Healthcare Conference in San Francisco this week that the company could achieve much higher cost savings from its planned acquisition of Baxalta than what was announced with the deal on Monday.

“Our internal synergy goals are much higher,” Ornskov said, as quoted by Reuters. The London-listed rare diseases specialist has flagged more than $500 million in annual cost synergies and over $20 billion in anticipated annual revenues by the end of the decade. Shire’s boss added, however, that the deal, which ended a six-month pursuit of Baxalta was not driven by cost savings or lower taxes.
“This is a growth play,” he pointed out, as quoted by Reuters.
The comments are a boost for Shire, whose shares were under pressure earlier this week amid investor concerns over Baxalta’s reliance on its haemophilia business. Analysts at Credit Suisse, however, have been more upbeat on the enlarged company’s prospects, arguing that the proposed tie-up will mitigate the risk from cheaper generics to some of Shire’s top-selling drugs. UBS analysts, meanwhile have cautioned that Baxalta could actually dilute Shire earnings from 2019 to 2023 before being accretive again from 2024.
As of 08:17 GMT, Thursday, 14 January, Shire PLC share price is 4,269.00p.