Shire's not giving up on target Baxalta, it says amid Q3 beat

Shire CEO Flemming Ornskov

Shire's ($SHPG) been quiet on the Baxalta front for a while now, but that doesn't mean its quest to buy the newly formed Illinois drugmaker is over.

On the contrary, the Irish pharma "continues to believe the proposed Baxalta acquisition represents a highly strategic combination" that can help it pump out $20 billion in sales by 2020, it said on Friday.

The way Shire sees it Baxalta, a recent Baxter spinoff and a leader in hemophilia, can help it toward its "ambition to be a rare diseases leader," CEO Flemming Ornskov said in a statement. But Baxalta hasn't been so enthusiastic about a tie-up. Over the summer, it dismissed the company's $30 billion buyout proposal as a "lowball" bid, with CEO Ludwig Hantson pointing out that the two companies' rare-disease units bear little overlap.

"An acquirer like Shire isn't just going to find easy savings from a combination with dissimilar assets," he told investors on an August conference call.

Aside from Baxalta's reluctance, Shire's facing another problem with its all-stock bid, too. Its share price has taken a 20% beating since it went public with its offer, making its bid much less appealing to Baxalta shareholders. In September, reports said Shire was looking around for ways to sweeten its proposal without compromising the spinoff's tax-free status--a key point for Baxalta investors. But with few spinoffs this new involved in M&A deals, there's not exactly a clear-cut path.

Meanwhile, though, Shire is making strides in the revenue department without its latest M&A target. In the third quarter, sales rose 4% to $1.66 billion, helping grow non-GAAP diluted EPS by 11% to a $3.24 mark that topped analyst estimates. Shire credited some of the top-line rise to ADHD treatment Vyvanse; The med, which Ornskov said continued to perform strongly in the adult market, earlier this year won an FDA nod for binge eating disorder, an indication Shire has said could tack on between $200 million and $300 million to its sales potential.

Some of Shire's rare-disease standouts put up strong performances, too; its hereditary angioedema portfolio, which it bolstered with 2013's agreement to pick up ViroPharma, stood out, and products Natpara and Gattex--from recent buy NPS Pharma--are coming along, too, the Dublin drugmaker said.

But the company can forget about seeing any contributions from dry-eye prospect lifitegrast in the near future. Earlier this month, the FDA handed down a rejection for the drug; now, Shire's planning to resubmit its application in the first quarter of next year if forthcoming data from a recently completed Phase III study turn up positive. The agency's move puts a prospective approval about 9 months behind the original schedule, to next year's third quarter, Leerink Partners analyst Jason Gerberry estimated in a recent note to clients.

- read Shire's release

Special Report: The 25 most influential people in biopharma in 2015 - Flemming Ornskov - Shire

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