Over the past 10 years Shire ($SHPG) has become a business model in the biotech world. It's added impressive new units to the company, built sales with new products and enjoyed high status in the red-hot field of rare diseases. And in this business at this time, what's admired is generally a topic of takeover rumors.
So it was this morning as traders attributed a surge in Shire's share price to warmed-up second and third helpings of the old buzz that AstraZeneca ($AZN) is prepping a bid for the company, according to Reuters. It's probably no coincidence that AstraZeneca should come back up as a potential suitor. In the wake of yesterday's high-level reorganization, which saw the departure of R&D chief Martin Mackay and head commercial honcho Tony Zook, new CEO Pascal Soriot has put his stamp of approval on the executive team that remains, including the troika now in charge of small molecules and biologics (Mene Pangalos, Bahija Jallal and Briggs Morrison).
AstraZeneca started the year as the Big Pharma company with the most to prove. Mackay was certainly able to pull off some deals last year, but AstraZeneca is widely expected to do something "big." And that means buying something with a new set of products and pipeline programs that can demonstrate that AstraZeneca can command future growth. Something like Shire, which just a week ago projected "sound" growth for 2013 and announced the acquisition of Lotus Tissue Repair, which has been at work on a new therapy for a rare skin disease.
As bolt-on buyouts go, though, it would be pricey. Today Shire has a market cap just over $18 billion. Price in a premium for the company, and you've moved well past the $20 billion limit on most analysts' sweet spot on buyouts. A year ago Reuters was reporting that Shire was expected to command something like $30 billion, naming Teva as the most likely bidder. But analysts were waiting for a setback to push share prices down ahead of any offer. And so far, the buzz never got past the rumor stage.
Soriot--whose first act as CEO was to stop share buybacks and conserve cash for acquisitions--is expected to at least indicate what AstraZeneca is planning this year as he maps out the new strategy at the end of this month.
- here's the Reuters story