3:55 PM
May 11, 2018
 |  BioCentury  |  Strategy

Takeda hits the gas

Why Takeda says Shire accelerates execution of Weber’s globalization strategy

Editor's Note: This article was updated on May 14, 2018 at 4:30 PM PDT

Takeda Pharmaceutical Co. Ltd.’s proposed acquisition of Shire plc is an acceleration of -- not a departure from -- CEO Christophe Weber’s stated strategy to build a top-tier global pharma, according to management.

On May 8, after two months and several rejected bids, Shire accepted Takeda’s proposed takeout offer of £46 billion ($62 billion). The consideration is a 46/54 split between cash and stock, comprised of $30.33 in cash per Shire share and either 0.839 new Takeda shares or 1.678 Takeda ADSs. Takeda closed at ¥4,638 ($42.67) in Tokyo on May 8 before the final deal terms were announced. Takeda shareholders will own about 50% of the combined company.

“The idea with Shire is not to change course, but to accelerate what we’ve already started. It gives us the financial capability and commercial infrastructure to implement the strategy that we’ve built,” Chief Medical and Scientific Officer Andrew Plump told BioCentury.

The proposed acquisition would nearly double Takeda’s revenues and would move the pharma’s commercial center of gravity toward the U.S. On this metric, the deal would satisfy a major pillar of Weber’s strategy -- and his mandate from the board when he joined in 2014 -- to build a global pharma company.

Shire reported 2017 total revenues of $15.2 billion and Takeda posted $15.5 billion in revenues for the fiscal year ended March 31, 2017.

For calendar year 2017, the U.S. and Japan each accounted for 34% of Takeda’s revenues. The addition of Shire’s commercial business would increase the U.S. share to 48% and decrease Japan’s share to 19%.

“The idea with Shire is not to change course, but to accelerate what we’ve already started.”

Andrew Plump, Takeda

Plump said the deal also satisfies Weber’s goal to be a leader in its core therapeutic areas and -- despite analysts’ commentary about the debt required -- to maintain its financial discipline.

Weber and Plump have spent their four years at Takeda focusing the company’s pipeline on the core areas of cancer, GI and CNS. They’ve shed non-core programs, and used licensing and external collaborations to supplement Takeda’s internal R&D and add new modalities in the core areas. The pharma now has 180 active partnerships, Plump said.

But Takeda’s Phase III pipeline is thin, with only three assets, and its low profit margins compared with its peers have constrained its ability to invest in R&D.

“We have a gap, and as we’re trying to go out and build innovative partnerships to drive our R&D, it eventually becomes a problem financially,” Plump said.

At 43%, Shire’s EBITDA margins are more than twice Takeda’s, which Takeda said should help fund its early stage pipeline. Shire also has seven programs in Phase III or registration, including two in GI...

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