Shire says Treasury rules won't nix deal for US-based Baxalta

federal building exterior
(Treasury Department)

The pharma world may be abuzz with news of Pfizer's ($PFE) cancelled merger with Allergan ($AGN) in the wake of a tax crackdown. But make no mistake--Shire's merger with Baxalta is still on.

Shire CEO Flemming Ornskov

The transaction between the two, agreed upon in January, will proceed as planned, Ireland-based Shire ($SHPG) said Wednesday, and it expects to seal the deal by the middle of this year.

The tie-up "is based on a strong strategic rationale to create the leading global biotechnology company focused on rare diseases," Shire said--rather than on tax savings that could be curtailed by a new slate of rules the U.S. Treasury Department rolled out Monday.

That's not to say tax savings didn't figure into Shire's pursuit of the U.S.-based Baxalta ($BXLT). When it made its first bid for the Illinois pharma, it cited "benefits from our tax structure"--which it gained with a 2008 move to Ireland--among reasons Baxalta should want to join forces.

But Shire knew better than to structure a deal on tax benefits alone. After all, the company itself was the victim of new Treasury tax rules back in 2014, when buyer AbbVie ($ABBV) pulled the plug on its $55 billion Shire acquisition.

Instead, Shire sees Baxalta helping it build a global rare-disease leader, even if analysts--and at one time, Baxalta itself--have harbored their fair share of doubts. Baxalta specializes in hemophilia, a competitive market where new drugs could decimate its business going forward, Bernstein analyst Ronny Gal wrote late last year. Even if they don't, that hemophilia focus may not translate into easy savings when combined with the rest of Shire's rare-disease portfolio.

"An acquirer like Shire isn't just going to find easy savings from a combination with dissimilar assets," Baxalta CEO Ludwig Hantson told investors last August.

- read Shire's release 

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