James Moore: Shire’s retail therapy eases heartache over AbbVie

Outlook: Shire is intent on playing predator not prey and for the foreseeable future

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Having been jilted at the altar by AbbVie, Shire has decided, in time honoured fashion, to get over its disappointment with a bit of retail therapy.

The Irish drug group thinks a shiny new acquisition is just the thing to get over the heartache. It’s true that the $5.2bn (£3.4bn) it’s rung up at the checkout to pay for NPS Pharmaceuticals hardly represents a bargain. For a start it represents a 50 per cent plus premium on the price at which it was trading before rumours of the deal started to circulate. Moreover, NPS only has one product on the market and reported revenues of just $57m during its most recent financial quarter. However, that’s the price of doing business with biotechs. If they hit big, you look very clever, and if not … well, the acquisition is just about small enough that any future write offs will be bearable. Happily for Shire, it is at least cheap to borrow right now, so funding the deal isn’t a problem.

It looks as though the two men who occupy its dinky little office in Luxembourg where financing issues are mostly handled will be having a busy few days of it. If the company is wise, it might like to investigate hiring a temp or two. Wielding rubber stamps can quite repetitive and payouts for repetitive strain industry can get quite costly.

But I’m forgetting myself. Even though they’re very modestly paid, the company assured the House of Commons Public Accounts Committee when it was investigating the company’s use of Luxembourg’s ultra-low and ultra-lax tax regime that the pair make real decisions, with a bit of help and advice from their senior colleagues.

For those senior colleagues, the attractions of NPS are clear. While it might have only one product on the market, a second is on its way through the approvals process. As with Shire, NPS works on rare conditions. Neither of its drugs are cures; they are aimed at improving the quality of patients’ lives. These sorts of treatments can generate considerable fees, particularly if Shire can widen their distribution. 

Perhaps more important, however, is the message that it sends out with this deal. It represents something of a statement of intent: Shire is intent on playing predator not prey and for the foreseeable future. So it’s going to need its Luxembourg financing centre more than ever.

Anyone got a fresh rubber stamp? This one’s starting to look a bit worn.