Shire divvies up its operations to prime neuroscience unit for future sale or spinoff

SAN FRANCISCO—Shire has a penchant for making headlines at the J.P. Morgan Healthcare Conference, and it did so again early Monday.

The company, which has been weighing options for its neuroscience unit since last August, said it would hang onto the business for the time being and create two operating divisions within the company—one for neuroscience and one for rare diseases.

“The neuroscience business warrants additional focus and investment,” the company said in a statement, adding that “each division will benefit from sharper management focus, greater strategic clarity, and an increased ability to deploy resources to key growth priorities.”

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Of course, the decision doesn’t preclude a divestment down the line; on the contrary, it primes the neuroscience division for a future sale or spinoff. The Irish drugmaker intends to keep evaluating “all strategic alternatives, including the merits of an independent listing for each of the two divisions,” and it’ll update investors in the second half of this year.

In the meantime, though, Shire will “use 2018 to optimize the portfolio for each of these two divisions,” it said, meaning partnerships, licensing agreements, and bolt-on acquisitions could be on the horizon. It sees international growth opportunities and also prospects for expanding into other areas under the neuropsychiatry umbrella.

Shire’s stable of neuroscience product was once the company’s bread and butter, with its ADHD products Adderall and Vyvanse leading the way. But thanks to a growing focus on rare-disease drugs—led by the company’s pre-JPM buyout announcements for NPS Pharma in 2015 and Baxalta in 2016—about 70% of Shire’s revenues these days come from rare-disease products, Shire says.

Unfortunately for the company, shares have sagged since the Baxalta pickup, prompting activists to jump into the mix. In October, reports said U.S. hedge fund Sachem Head Capital Management, newly armed with a small Shire stake, had met with the company privately to discuss a larger breakup.

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Shire CEO Flemming Ornskov, though, said investors "that have been with us for many years fully appreciate” Shire’s situation and the tack it’s taking to get back on track.

“I don’t think there’s a call from our major shareholders of any rash decisions on the part of Shire or its board of directors,” he said in a December interview with FiercePharma.

Meanwhile, Shire is touting its progress in paying down debt from the $32 billion Baxalta deal, and it expects its debt total to continue to dwindle over the course of this year. Monday, it unveiled a new debt-to-earnings ratio of below 2.5x by the end of 2018, excluding effects of any smaller buys or licensing pacts to come.

On the revenue side, the company expects the deal to generate between $17 billion and $18 billion by 2020.