Why are Shire's shares struggling? Some investors just don't understand, says CEO

Shire has the strongest pipeline it's ever had, its CEO says.

ATLANTA—Some of Shire’s investors don’t fully grasp the transition the company is currently making, its CEO said. And he acknowledges he could have done more to help them in that department.

“When companies go through a transition, I think sometimes we as management team could do a better job guiding our investor through that transition and have people maybe better understand that we are becoming a biotech company,” Shire chief Flemming Ornskov said in an interview at the American Society of Hematology (ASH) annual meeting.

While Ornskov acknowledged that Shire has run into some speed bumps—such as the genericization of Lialda, which came close to touching the billion-dollar sales mark—he figures the company can come out stronger on the other side, thanks to its pivot to rare diseases and “the strongest pipeline we’ve ever had.”

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Investors haven’t seemed to see it that way, however. Shares have sagged since the company scooped up hemophilia specialist Baxalta, a move Ornskov said at the time would transform Shire into a rare-disease behemoth.

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Shire's shareholders "that have been with us for many years fully appreciate” what Shire is going through, Ornskov said. But rumor has it one of the company’s newer investors is a bit less patient. Sachem Head Capital Managment, founded by Bill Ackman protégé Scott Ferguson, has crafted a list of divestments it wants to see and has broached the possibility of a break-up, reports said over the summer.

But activists or no activists, “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,” Ornskov said. And so far, Shire’s been taking its time with its strategic decisions. In August, the company said it would weigh its options for its neuroscience franchise—including its flagship ADHD drugs—and Ornskov says it’ll “give the street guidance about where our thinking is ... in due time.”

“People are saying to us, ‘with that shift in focus to biologics and rare diseases, what role does ADHD and neuroscience play in your overall portfolio?’" he added. "It’s a good strategic challenge to have, and the board and I are in the process of assessing what’s the best solution mid- to long-term.”