Wed, Jan 09, 2019 - Page 10 News List

How Takeda-Shire deal reshapes the pharma world

Bloomberg

The rapidly changing global pharmaceutical landscape reached another milestone yesterday, as Takeda Pharmaceutical Co completed its US$62 billion acquisition of Shire PLC.

Takeda’s purchase was the world’s biggest announced acquisition of last year, transforming the 237-year-old Japanese company into a top 10 drugmaker with lucrative therapies for rare diseases and a sizable footprint in the US.

It is part of a larger shift in the industry as drugmakers scramble to consolidate, seeking to bulk up to survive increasing pressure from stricter regulations on drug prices and looming patent expirations.

Already this year, the Takeda deal has been trumped in size by Bristol-Myers Squibb Co’s US$74 billion agreement last week to buy Celgene Corp.

Here is how the supersized Takeda is to look in the increasingly evolving pharmaceutical landscape:

Takeda and Shire’s combined revenue catapult it into the ranks of the global pharmaceutical majors — the first Japanese company to reach the top 10.

The new Takeda would have ranked No. 9 among the biggest drugmakers by revenue, but Bristol-Myers’ deal with Celgene, if it succeeds, would push it down one notch.

The company would also hold a unique position in being a big pharmaceutical company with a focus on rare diseases acquired from Shire’s portfolio.

One of the key drivers for the acquisition was to gain further exposure to the US, the world’s most profitable drug market. Japan has not become a dependable source for growth because of a shrinking population and regulatory pressure that has pushed down drug prices nearly every year.

Although the US also poses a drug-pricing risk, it is one most pharma giants are willing to take for the revenue stream.

Takeda would contribute further to the dealmaking frenzy, thanks to the heavy debt load it has taken on.

The company has laid out a scenario of a potential US$10 billion in divestments in an effort to deleverage. Investors should expect asset sales this year, chief executive officer Christophe Weber said on Monday.

The company is looking to divest non-core businesses outside Japan where the company is not an industry leader and does not have critical mass in the market.

Takeda’s debt load was the issue that drew the biggest fire from critics of the deal, and caused S&P Global Ratings to downgrade the drugmaker yesterday, saying that the company is unlikely to recover quickly from worsening financial ratios. Moody’s Investors Service lowered its rating last month.

Net borrowings would more than double to nearly five times earnings after it takes on about US$30 billion in debt to acquire Shire, plus the debt on that company’s books. That is compared with an industry average multiple of about one.

The company has said it intends to deleverage to a debt ratio multiple of about two within five years.

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