Blog June 18, 2018

Creating a New Global Pharmaceutical Giant: Takeda to Acquire Shire

takeda-shireThe fifth try was the charm for Takeda Pharmaceuticals. On May 8, Takeda announced that their fifth offer to acquire Shire Pharmaceuticals had been accepted, subject to regulatory and shareholder approvals. This is the largest deal yet in 2018, and the largest ever for a Japanese pharmaceutical firm. If successfully completed as planned in the first half of 2019, the combined company will become the ninth largest pharmaceutical company in the world.


The merger immediately boosts Takeda’s global presence. Takeda has traditionally been a powerhouse in Japan, with one-third of its sales coming from the Japanese market place and one-third from the United States. About two-thirds of Shire’s revenue, in contrast, come from the United States, but the company has sales in about 100 countries worldwide. The merger also strengthens Takeda’s product portfolio and pipeline in the areas of neuroscience, oncology and gastroenterology, and expands its capabilities to new areas including hematology, immunology, genetic diseases and ophthalmology. Takeda CEO Christophe Weber calls the deal “transformational” and says it especially strengthens Takeda’s position in the global market for drugs to treat rare diseases — one of Shire’s defining strengths.


The acquisition is a major stretch for Takeda. The company needs to borrow more than $30 billion to complete it and to cut more than $1.4 billion in costs within three years, including deep cuts to its newly enlarged pipeline and workforce to make the merger pay off. Weber has said that they plan to cut 6-7% of the combined workforce, based on current employee head count. Some of this is likely to come in the areas of gastrointestinal therapeutics and the company’s neuroscience business, where the two companies have overlapping operations, as well as in R&D and manufacturing. But analysts point out that the cuts may not necessarily be brutal: Takeda has spun out 10 companies in the past, rather than just dump development efforts.


The fate of Shire’s oncology portfolio also remains to be confirmed. In April, Servier, a privately-owned French pharmaceutical company, penned a $2.4 billion deal to acquire Shire’s oncology assets. However, although oncology represents just under 2% of Shire’s revenue, Takeda has included it as one of the synergistic areas in the merger.


Will the Shire-Servier deal, key for Servier to expand to the US, go through as planned? Or will Takeda absorb Shire’s oncology assets? And what other areas and products will Takeda pursue in the combined business and which will be sold off or spun out into new ventures? We also wonder if Takeda will continue to enjoy Shire’s success in the rare disease space, given the very different parameters for success in marketing orphan drugs versus drugs for larger markets (see our past article, “Orphans Should Live Alone.”).