Shire to set out AstraZeneca-style defence against AbbVie

Mon Jun 23, 2014 5:17am EDT

* Long-range forecasts for drugs a central plank of defence

* Focus on expanded uses and new drugs coming to market

* $46 bln offer from AbbVie rejected as undervaluing group

* Shire to update investors Monday afternoon

By Ben Hirschler

LONDON, June 23 (Reuters) - Shire is to take a leaf out of AstraZeneca's playbook by giving long-range forecasts for its drugs as it seeks to convince shareholders that AbbVie's $46 billion offer undervalues the business.

Flemming Ornskov, Shire's chief executive, will update investors on prospects for key medicines on Monday afternoon, mirroring the approach of disclosing long-range internal forecasts used by fellow London-listed drugmaker AstraZeneca in its successful defence against Pfizer.

The market is already looking for AbbVie to sweeten its offer to win its prize, with analysts at Jefferies estimating it could make the deal pay at a price of up to 55 pounds a share, or $55 billion, against AbbVie's most recent rejected cash-and-shares offer on May 30 of just over 46 pounds.

The two companies confirmed a series of approaches after Reuters revealed the talks last week.

However, there is no bid on offer at the moment, putting pressure on Shire to either squeeze a better deal out of AbbVie or prove to shareholders it can drive growth faster than already upbeat consensus forecasts suggest.

Shares in Shire, which hit a all-time high on Friday, were trading 1.4 percent lower by 0845 GMT.

After declaring last week that annual product sales were set to more than double by 2020 to $10 billion, Ornskov will flesh out this forecast with details on specific drugs, according to people familiar with the matter.

These include its best-selling hyperactivity medicine Vyvanse, which is now also being tested as a treatment for binge eating, as well as therapies for various rare diseases and eye disorders.

Shire's strategy copies AstraZeneca's in another way, too, by highlighting the execution risks associated with AbbVie's plan to cut its tax bill through redomiciling in Britain for tax purposes - an industry-wide ploy that has sparked growing political concerns.

Such so-called "inversions" by U.S. companies have moved centre-stage in the pharmaceuticals sector this year, with those firms still paying high tax rates anxious to strike deals that will help them compete with rivals now enjoying lower taxes.

VALUED TARGET

Whether Shire, long viewed as a likely takeover target, escapes the clutches of a larger predator is uncertain and the company is widely seen as more vulnerable to a takeover by AbbVie - or another company - than AstraZeneca.

That reflects both its smaller size, which makes it a more manageable target for a wider range of players, and the lack of attendant political issues in Britain, where the company has a relatively small workforce.

Although established in Britain in 1986 and listed in London, Shire conducts most of its business in the United States and has been resident in Ireland for tax purposes since 2008.

Other companies that industry sources say have looked at Shire in the past include Allergan, itself the target of a takeover approach by Valeant. Banking sources suggest Shire could also appeal to groups such as Bristol-Myers Squibb and Gilead Sciences.

One senior banker described Shire as a "valued inversion target" but he stressed that potential bidders still needed to demonstrate a tie-up also made strategic sense.

For AbbVie CEO Richard Gonzalez, Shire fits the bill in one important respect: it offers a way to reduce his firm's over-reliance on rheumatoid arthritis drug Humira, the world's top-selling medicine, which accounted for 58 percent of the company's sales in the first quarter.

Humira's U.S. patent lapses in late 2016, although it may take years for other drugmakers to develop their own versions of the antibody treatment.

Officials at Shire and AbbVie declined to comment on the situation on Monday. ($1 = 0.5876 British Pounds) (Editing by Tom Pfeiffer)

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