It may be a new year, but in the world of frenzied manoeuvring in which pharmaceutical companies appear to operate, little seems to have changed.

Tangled Takeover History

2014 saw the collapse of a $55 billion tie-up between AbbVie and Shire after the US tightened up its tax rules.  Shire made $1.5 billion out of the collapse of the deal, with AbbVie’s withdrawal triggering a hefty break clause. At the time, the CEO of Shire went on record talking about the additional ‘firepower’ that the extra money would provide when focussing on ‘targets we think will drive our growth’.

Fast-forward to mid-2015, and Shire’s role was reversed. Instead of being on the receiving end of a takeover offer from a US-based company, Shire was making an offer of its own, for American pharma firm Baxalta. The Baxalta board rejected the first offer in July and when Shire decided to go for the hostile takeover option on its second attempt, this was rejected by shareholders. Now, in January 2016, it would appear that third time has proven to be the charm for Shire.

Shire’s Move Into Rare Diseases

Shire is perhaps known best for its flagship drug, Adderall – but in recent years the company has widened its focus to include a strong emphasis on rare disease medicines, which Baxalta also concentrates on. Nor is this Shire’s only such purchase recently; in January of last year it took over rare drugs specialist NPS pharma, while it bought Dyax, another company focused on finding rare disease cures, in November. However, both of those purchases were around the $5 billion range; the takeover of Baxalta is approximately six times at large – a $32 billion agreement, with a mixture of both cash and stock.

Whilst the merger is predicted to send Shire’s annual revenues soaring to around the $20 billion mark by the end of the decade, there’s another important element to the move – as a significantly larger company, Shire will itself be less susceptible to takeover attempts from larger pharma outfits, leaving it freer to focus on growing and expanding its own offering.

Investor Reaction

So far it would seem that the reaction of investors to the move has been generally positive; Shire stock closed at 4,308.00 on the 18th January, almost 10% up on the 3925.00 it was hovering at when news of the deal was announced just a few days ago on January 11th. 2015 was a rather choppy year for Shire in terms of its share price; while August saw its stock worth over 20% more than it had at the start of the year, by the end of December it had given up all of those gains. Possibly the unsuccessful attempts to purchase Baxalta played a part in that drop – will the story’s happy ending also have longer-lasting ramifications for the stock price? The answer is unclear.

In any event, the latest purchase by Shire suggests that the pharma merger frenzy is far from over. In 2015 we saw over $500 billion worth of pharmaceutical merger deals, which leaves us with another question; what might 2016 bring?