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Shire's Stock Continues to Rise as Takeda Sets Eyes On it

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Shire plc’s shares have been rallying since Japan-based Takeda Pharmaceutical announced its takeover intentions. Shire’s stock has gained almost 16% since closing on Mar 27.

In the press release issued by Takeda, it has confirmed that it is considering a possible offer to buy out Shire to boost its core therapeutic areas. The acquisition will also help Takeda to have greater presence in the United States. However, there is no certainty that Takeda will make an offer, which needs to be confirmed by no later than Apr 25, 2018.

Shire’s shares have lost 3.7% so far this year, underperforming the industry’s decline of 0.7% in that period.

Investors are speculating a bidding war following Takeda’s announcement. Previously, several companies have been rumored to acquire Shire including Pfizer, Inc. (PFE - Free Report) .

Shire has a strong hold in the attention deficit hyperactivity disorder (ADHD) market, a major revenue generator for the company. The company has three drugs in its ADHD portfolio. However, the company faces competition as a result of the presence of generics of Johnson & Johnson’s (JNJ - Free Report) Concerta, Novartis’ (NVS - Free Report) Ritalin LA, and Adderall XR. Moreover, sales of Shire’s ulcerative colitis drug, Lialda, are also falling due to generic competition.

Meanwhile, Shire is also looking for strategic alternatives for its neuroscience franchise, which includes the ADHD portfolio of drugs.

Hence, Shire may consider the offer, as and when made by Takeda. It will likely create a company with sales to the tune of $30 billion.

However, many analysts are skeptical about the impact of the deal on Takeda’s finances as both the companies have similar market cap. Also, there remains a concern about the benefit of adding Shire’s haemophilia portfolio to Takeda’s product line.

Investors are likely to remain focused on any further announcements made by Takeda.

Zacks Rank

Shire currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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