AbbVie and Shire Agree to Merge in Approximate $55-Billion DealBy
After months of negotiations, the boards of AbbVie and Shire have agreed to a recommended combination of the two companies for approximately $54.7 billion. Under the proposed merger, Shire shareholders would receive for each Shire share Â£24.44 ($41.79) in cash and 0.8960 New AbbVie (i.e., the combined company) shares for an indicative value of Â£52.48 ($89.74) based on AbbVie’s closing share price of $52.52 on July 17, 2014 and an exchange rate of $1.00 to Â£0.5848. Upon closing of the deal, Shire shareholders will own approximately 25% of the combined company and AbbVie stockholders 75%.
Both AbbVie and Shire said they will recommend to their respective shareholders to vote in favor of the adoption of the merger agreement. If approved, the deal, which is subject to closing conditions, will be completed in the fourth quarter of 2014. To execute the transaction, AbbVie has formed a new company, New AbbVie, which is incorporated in Jersey, the UK, Shire’s current place of incorporation. Following the completion of the deal, New AbbVie will become the holding company of the Shire Group and the AbbVie Group. Through its incorporation in the UK, the AbbVie board expects the transaction to reduce New AbbVie’s effective tax rate to approximately 13% by 2016. The new company will retain operational headquarters in Chicago with a presence in both the US and UK and be listed on the New York Stock Exchange.
Richard A. Gonzalex, chairman and chief executive officer (CEO) of AbbVie said in a company statement: “By combining AbbVie and Shire, we are creating a unique, diversified biopharmaceutical company. The combined company would benefit from a best-in-class product development platform, a stronger pipeline, and more enhanced R&D capabilities.”
Susan Kilbsy, chairman of Shire, said in a company statement. “We believe that this offer reflects the substantial value that we have already created for Shire’s shareholders and the strength of our future prospects. We believe that the combined group represents an exciting fit of two complementary businesses that will create a market leader in specialty pharmaceuticals with a portfolio of fast-growing products, a promising pipeline, and enhanced growth prospects.”
Kilbsy and Dominic Blakemore, non executive director of the Shire board and chairman of Shire’s Audit, Compliance & Risk Committee, will join the New AbbVie board following completion of the deal. Fleming Ornskov, CEO of Shire, will lead the integration on behalf of Shire and oversee the creation of a rare disease business unit that will report to Gonzalez. Ornskov will be based in Switzerland.
In acquiring 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. 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 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).
AbbVie’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 US commercialization in 2014 and European approval in early 2015.
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 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 million, +16%).
Iâ€‹n 2013, Shire repositioned itself as a specialty biopharmaceutical company with a primary focus on specialized and rare diseases. The company named Ornskov as its new CEO 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, and internal medicine) as well as creating a single R&D unit.
See related story, “AbbVie, Shire Move Closer to a Nearly $54 Billion Merger.”
Source: Shire and AbbVie