Shire plans to exit cancer drug development through a deal to sell its oncology unit to a French company, Servier, for $2.4 billion cash.
Dublin, Ireland-based Shire (NASDAQ: [[ticker:SHPG]]), which operates a U.S. headquarters in Lexington, MA, says the deal helps it tighten its rare disease drug focus. Meanwhile, privately held Servier says adding Shire’s cancer drugs will give it a commercial presence in the U.S. while also strengthening its portfolio in the parts of the world where the France-based company is already established.
Shire says its board of directors first broached the possibility of selling the oncology business in December, then started looking for buyers in January. The company says it found multiple suitors in the U.S., Europe and Japan.
The deal comes as Japan’s largest drug company, Takeda Pharmaceutical, weighs a potential takeover of Shire. Late last month, Takeda confirmed that it is considering an acquisition, though at the time, it said no offer had been made. But Takeda laid out a case for a tie-up, saying in part that Shire would strengthen the Japanese company’s core therapeutic areas of oncology, gastrointestinal disease, and neuroscience.
Besides cancer, Shire’s portfolio includes therapies for disorders of the blood, the brain, and the eyes. But the company has emphasized that its focus is on rare diseases. The deal to sell its cancer business to Servier could be a sign of more transactions to come. In a prepared statement, Shire CEO Flemming Ornskov said that though the cancer business—which includes two marketed drugs—was profitable, the company concluded it is not core to Shire’s long-term strategy. He added that the company will review its portfolio for other assets to sell “to unlock further value and sharpen our focus on rare disease.”
Noting that the oncology business was one of the Shire assets that Takeda viewed as attractive, the Wall Street Journal suggests the sale of that business could be a move to discourage the Japanese company from its takeover bid. But Bloomberg takes the opposite view, saying that selling off a non-core asset could be an effort to streamline the company for an acquisition potentially valued at as much as $50 billion.
Of the $14.4 billion in revenue that Shire reported for 2017, immunology accounted for the largest share at 30.2 percent, followed by hematology and neuroscience at 26.2 percent and 18.4 percent respectively. Oncology ranked sixth out of Shire’s seven therapeutic areas by revenue, with $261.7 million accounting for 1.8 percent of the company’s 2017 sales. Shire’s cancer drugs include pegaspargase (Oncaspar), which is approved in the U.S. as a first-line treatment for acute lymphoblastic leukemia. The company also holds rights to pancreatic cancer drug Onivyde everywhere in the world except the U.S. and Taiwan.
Don’t expect the sale of the oncology business to spark a cash infusion into Shire’s R&D. Ornskov said in the prepared remarks that Shire will consider using the sale proceeds for share buybacks after the period to review Takeda’s possible acquisition offer has ended. This comment could be a sign that Shire intends to remain independent.
Image of pancreatic cancer cells by the National Cancer Institute.
