AbbVie, Shire Move Closer to a Nearly $54-Billion Merger
As a deadline nears under UK’s Takeover Rules, AbbVie and Shire are moving toward common ground in a nearly $54-billion proposal that would combine the two companies. But what would a combined AbbVie and Shire be? DCAT Value Chain Insights examines the product and manufacturing positions of the proposed combined company.
With a July 18th deadline looming under UK Takeover Rules, AbbVie and Shire are moving closer to a possible deal to combine the two companies. Following discussions with AbbVie, Shire said it requested and received a revised proposal from AbbVie on July 13 for an indicative value of £53.20 ($91.10) per Shire share or approximately $53.7 billion. Under the revised proposal, Shire shareholders would own approximately 25% of the combined new AbbVie. DCAT Value Chain Insights examines the product and manufacturing positions of the proposed combined company.
AbbVie on the pursuit
AbbVie publicly announced its pursuit of Shire in June 2014, stating that it first offered an initial cash and share proposal in early May 2014 that represented an indicative offer of £39.50 for each Shire share. Shire rejected that proposal and subsequent revisions until July 13 when Shire confirmed that AbbVie had revised its proposal for an indicative value of £53.20 ($91.10) per Shire share or approximately $53.7 billion. As of July 14, 2014, Shire said it had indicated to AbbVie that it would be willing to recommend an offer at the level of this revised proposal to Shire shareholders subject to satisfactory resolution of the other terms of the offer. As of press time, Shire said its board is in detailed discussions with AbbVie in relation to these terms.
In seeking to acquire Shire, AbbVie is looking to diversify its commercial portfolio, which is heavily reliant on Humira (adalimumab), which accounted for nearly $10.7 billion or 57% of the company’s total revenues of $18.79 billion in 2013 (see Table I). Humira is indicated for treating rheumatoid arthritis, juvenile idiopathic arthritis, psoriatic arthritis, ankylosing spondylitis, Crohn’s disease, ulcerative colitis, and plaque psoriasis. The United States composition of matter (i.e., the compound) patent covering adalimumab is expected to expire in December 2016, and the equivalent European Union patent is expected to expire in the majority of European Union countries in April 2018.
After Humira, other key products for AbbVie (see Table I) are: AndroGel (testosterone gel), a replacement therapy in males for conditions associated with a deficiency or absence of endogenous testosterone due to primary hypogonadism or hypogonadotropic hypogonadism (2013 revenues of $1.035 billion); the antiretroviral agent Kaletra (Iopinavir/ritonavir) (2013 revenues of $962 billion); Synagis (palivizumab), a drug to prevent of serious lower respiratory tract disease caused by respiratory syncytial virus (RSV) in children at high risk of RSV disease (2013 revenues of $827 million); and Lupron (leuprolide), a drug for palliative treatment of advanced prostate cancer and for treating endometriosis and fibroid tumors in women and premature puberty in children (2013 revenues of $785 million) (see Table I) (1).
|Table I: AbbVie’s Top-Selling Products, 2013
(active pharmaceutical ingredient)
|Humira (adalimumab)||$10.659 billion||Rheumatoid arthritis, juvenile idiopathic arthritis, psoriatic arthritis, ankylosing spondylitis, Crohn’s disease, ulcerative colitis, and plaque psoriasis|
|AndroGel (testosterone gel)||$1.035 billion||Replacement therapy in males for conditions associated with a deficiency or absence of endogenous testosterone due to primary hypogonadism or hypogonadotropic hypogonadism|
|Kaletra (Iopinavir/ritonavir)||$962 billion||In combination with other antiretroviral agents for the treatment of HIV-1 infection in adults and pediatric patients (14 days and older).|
|Synagis (palivizumab)||$827 million||Prevention of serious lower respiratory tract disease caused by respiratory syncytial virus (RSV) in children at high risk of RSV disease.|
|Lupron (leuprolide)||$785 million||Palliative treatment of advanced prostate cancer, endometriosis and fibroid tumors in women, and premature puberty in children.|
|Synthroid (levothyroxine)||$622 million||Hypothyroidism|
|Ultane (sevoflurane)||$568 million||Anesthetic|
|Creon (pancrelipase)||$412 million||Exocrine pancreatic insufficiency due to cystic fibrosis, chronic pancreatitis, pancreatectomy, or other conditions.|
|Duodopa (levodopa/carbidopa intestinal gel)||$178 million||Parkinson’s disease|
|Dyslipidema products*||$1.076 billion|
|Other products||$1.667 billion|
| Dylipidema products include TriCor (fenofibrate), Trilipix (fenofibric acid), and Niaspan (niacin).
Source: AbbVie (2013 10-K Annual Filing, US Securities and Exchange Commission).
AbbVie’s pipeline includes more than 20 compounds or indications in Phase II or III development individually or under collaboration or license agreements, as of March 31, 2014. Its Research and development (R&D) is focused on therapeutic areas that include immunology, virology, oncology, renal disease, neurological diseases, and women’s health. The company’s key pipeline product is an all-oral, interferon-free regimen for the treatment of adult patients with chronic genotype 1 (GT1) hepatitis C virus (HCV) infection. The AbbVie investigational regimen consists of the fixed-dose combination of ABT-450/ritonavir co-formulated with ombitasvir (ABT-267) and dasabuvir (ABT-333) with or without ribavirin. The combination of three different mechanisms of action interrupts the HCV replication process with the goal of optimizing sustained virologic response rates across different patient populations, The drug is under accelerated assessment by the European Medicines Agency and priority review by the US Food and Drug Administration. The company expects U.S. commercialization in 2014 and European approval in early 2015.
On the manufacturing front, earlier this year, AbbVie announced it is investing $320 million to establish operations in Singapore for small-molecule and biologics drug-substance manufacturing. The completed facility will provide manufacturing capacity for emerging compounds within AbbVie’s oncology and immunology pipeline to serve markets globally. The investment will establish the first manufacturing presence in Asia by AbbVie. AbbVie anticipates that the new facility will be fully operational by 2019.
In May 2014, AbbVie opened the company’s newly expanded manufacturing facility in Sligo, Ireland. The expansion provides increased manufacturing capacity for the company’s existing product portfolio as well as new therapies within the company’s pipeline, including its HCV treatment. Since the initial announcement of the expansion in 2012, AbbVie has invested EUR 85 million ($116 million) in the Sligo facility. AbbVie’s current global manufacturing network includes sites across the United States (including Puerto Rico) and Europe as well as strategic partnerships with third-party manufacturers. Its principal US manufacturing sites are in: Abbott Park and North Chicago Illinois; Barceloneta and Jayuya, Puerto Rico; and Worcester, Massachusetts. In Europe, the company’s principal manufacturing sites are in: Cork and Sligo, Ireland; Campoverde di Aprilia, Italy; and Ludwigshafen, Germany. AbbVie also has four US research and development (R&D) facilities located at: Abbott Park, Illinois; North Chicago, Illinois; Redwood City, California; and Worcester, Massachusetts. Outside the United States, AbbVie’s principal R&D facilities are located in Shanghai, China and Ludwigshafen, Germany (1).
Shire: A focus on rare and specialized diseases
Shire posted 2013 revenues of $4.93 billion; product sales accounted for 96% of total revenues, or $4.76 billion. The company’s lead product (see Table II) is Vyvanse (lisdexamfetamine dimesylate), a drug to treat attention deficit hyperactivity disorder (ADHD), which had 2013 revenues of $1.23 billion, up 19% over 2012. In addition to Vyvanse, four other Shire’s products posted double-digit growth in 2013: Elaprase (idursulfase) for treating Hunter Syndrome (2013 revenues of $545.6 million, +10% year over year); Lialda/Mezavant (mesalamine) for induction and/or remission of ulcerative colitis (2013 revenues of $528.9 million, +32%); Vpriv (velaglucerase alfa), a long-term enzyme replacement therapy for treating Type 1 Gaucher disease (2013 revenues of $342.7 million, +12%); and Intuniv (guanfacine) for treating ADHD (2013 revenues of $334.9, +16%). Two of the company’s products, Replagal (agalsidase alfa) for treating Fabry disease and Adderall (mixed salts of a single-entity amphetamine product) for treating ADHD, had sales declines. Sales of Replagal declined 6% to $467.9 million due to increased competition, and Adderall sales declined 12% to $375.4 million due to increased generic competition.
|Table II: Shire’s Top-Selling Products, 2013|
|Proprietary name (active pharmaceutical ingredient)||2013 sales
|Vyvanse (lisdexamfetamine dimesylate)||$1,227.8||Attention deficit hyperactivity disorder|
|Elaprase (idursulfase)||$545.6||Hunter syndrome (Mucopolysaccharidosis II, MPS II)|
|Lialda/Mezavant (mesalamine)||$528.9||Induction and/or remission of ulcerative colitis|
|Replagal (agalsidase alfa)||$467.9||Fabry disease|
|Adderall XR (mixed salts of a single-entityamphetamine product: dextroamphetamine sulfate,dextroamphetamine saccharate, amphetamine aspartate monohydrate, amphetamine sulfate capsules, CII)||$375.4||Attention deficit hyperactivity disorder|
|Vpriv (velaglucerase alfa)||$342.7||Long-term enzyme replacement therapy for treating Type 1 Gaucher disease|
|Intuniv (guanfacine)||$334.9||Attention deficit hyperactivity disorder|
|Pentasa (mesalamine)||$280.6||Anti-inflammatory agent for gastrointestinal use|
|Firazyr (icatibant)||$234.8||Acute hereditary angioedema|
|Fosrenol (lanthanum carbonate)||$183.4||End-stage renal disease|
|Xagrid (anagrelide)||$99.4||Essential thrombocytosis or overproduction of blood platelets|
|Other product sales||$136.1|
| Source: Shire PLC (2013 10-K Annual Filing, US Securities and Exchange Commission).
In 2013, Shire repositioned itself as a specialty biopharmaceutical company with a primary focus on specialized and rare diseases. The company named a new CEO, Flemming Ornskov, on April 30, 2013. Ornsko set forth a new strategic focus for Shire, which included integrating three separate segments (Specialty Pharmaceuticals, Human Genetic Therapies, and Regenerative Medicine) into four business units based on the therapeutic area of the company’s in-line products (rare disease, neuroscience, gastrointestinal (GI), and internal medicine) as well as creating a single R&D unit. In November 2013, Shire announced that its preclinical pipeline would focus only on rare diseases, and it discontinued other programs that were not within that purview. The company also changed the way it managed its businesses internally by reconstituting its Executive Committee (formerly known as the Leadership Team) as well as establishing two new management committees: the In-line Committee and the Pipeline Committee. The Executive Committee manages the business of Shire. The In-line Committee is responsible for ensuring the optimal performance of the company’s current portfolio of marketed products, and the Pipeline Committee is responsible for overseeing and driving the development of the companies’ pipeline and future products.
To strengthen its pipeline and in-line products, Shire announced four acquisitions in 2013. In January 2014, it closed on its $4.2-billion acquisition of ViroPharma, a company based in Exton, Pennsylvania, and specializing in drugs to treat orphan diseases. ViroPharma’s lead product is Cinryze (C1 esterase inhibitor [human])), an injectable prescription medicine that is used to help prevent swelling and/or painful attacks in teenagers and adults with hereditary angioedema. Shire’s other three acquisitions in 2013 (Lotus Tissue Repair, Premacure, and SARcode Biosciences) also focused on building the company’s position in specialized and rare diseases. Lotus Tissue Repair’s key product is a preclinical protein-replacement therapy for dystrophic epidermolysis bullosa, a rare, genetic disease characterized by the presence of extremely fragile skin and recurrent blister formation. The Premacure acquisition provided Shire a Phase II protein-replacement therapy for the prevention of retinopathy of prematurity, a rare and potentially blinding eye disorder that primarily affects premature infants and is one of the most common causes of visual loss in childhood. With SARcode, Shire further enhanced its position in ophthalmology by gaining Lifitegrast (SHP606), a drug in Phase III development to treat dry-eye disease. As part of its efforts to focus on rare disease, Shire divested its Dermagraft assets to Organogenesis in January 2014. Dermagraft is a living skin substitute for treating full-thickness diabetic foot ulcers.
In 2014, to strengthen its GI pipeline, Shire acquired Lumena Pharmaceuticals, Inc., a biopharmaceutical company with rare-disease pipeline assets. In acquiring Lumena, Shire is gaining experience in liver disease with the opportunity to leverage its existing GI commercial infrastructure. The move also provides a good fit with Shire’s recent pending acquisition of Fibrotech, which has brought pipeline programs to address unmet patient need in other fibrotic conditions, including renal impairment. Lumena Pharmaceuticals brings to Shire two new oral therapeutic compounds; LUM001, in Phase II development with four potential orphan indications and LUM002, ready to enter Phase II trials later in 2014. LUM001 and LUM002 are both inhibitors of the apical sodium-dependent bile acid transporter (ASBT), which is primarily responsible for recycling bile acids from the intestine to the liver. Blocking bile acid transport with ASBT inhibitors reduces bile-acid absorption and has the potential to improve liver function and relieve disease symptoms (such as extreme itching associated with cholestatic liver diseases), and may slow disease progression.
On the manufacturing front, Shire’s major manufacturing facilities are in Cambridge and Lexington Massachusetts. The Cambridge site also includes warehouse facilities. The Lexington site also includes laboratories, warehousing, and distribution operations. The company also has a warehousing and distribution facility in Florence, Kentucky, a warehousing facility in North Reading, Massachusetts, and laboratory and office space in Sao Paulo, Brazil. Its other offices are in: Dublin, Ireland; Wayne, Pennysylvania; Basingstoke, UK; Nyon, Switzerland; and Exton, Pennsylvania (secured through its acquisition of ViroPharma). The prioritization and rationalization of Shire’s development portfolio meant that many of the R&D programs that were being run from Basingstoke, UK ceased, which resulted in R&D roles in Basingstoke being eliminated and some positions being re-located. In addition, in 2013, the company announced plans to re-locate its international commercial hub from Nyon, Switzerland to Zug, Switzerland. In October 2013, Shire also announced that it will discontinue the construction of new manufacturing facility in San Diego and also closed its site in Turnhout, Belgium.
On a sourcing basis, the company sources active pharmaceutical ingredients (APIs) from third-party suppliers for Vyvanse (lisdexamfetamine dimesylate), Intuniv (guanfacine), Adderall XR (mixed salts of a single-entity amphetamine product), Lialda (mesalamine), Forsenol (lanthanum carbonate), Pentasa (mesalamine), Xagrid (anagrelide), and Firazy (icatibant). Shire has in-house manufacturing capability for Replagal (agalsidase alfa), Elaprase (idursulfase), and Vpriv (veglucerase alfa) at its protein-manufacturing plants in Cambridge and Lexington, Massachusetts. To support the growth of Vpriv and Replagal and clinical development, the company added manufacturing capacity at its Lexington site. Both the US Food and Drug Administration and the European Medicines Agency have approved the Lexington facility for the purification of Replagal and the manufacture and purification of Vpriv (2).
1. AbbVie, 10-K Annual Filing 2013, US Securities and Exchange Commission.
2. Shire, 10-K Annual Filing 2013, US Securities and Exchange Commission.