Following Shire’s confirmed rejection of Abbvie’s offer on June 20, AbbVie has outlined its strategic rationale for, and background to, its proposal to the board of Shire of $34.74 in cash and 0.7988 ordinary shares of New AbbVie for each Shire share. The proposal represented an indicative value of $78.63 on May 29 (the latest practicable date before the proposal was made). While this cash and share mix is valued at $77.57 per share as of June 24, any firm offer made by AbbVie under Rule 2.7 of the Code will need to be equivalent to $78.63 per share.
AbbVie believes a merger of AbbVie and Shire would potentially accelerate growth and profitability by leveraging AbbVie's capabilities and infrastructure to make Shire's pipeline and products more successful than its standalone prospects. AbbVie believes the merger would result in incremental sustainable leadership positions within high-value market segments of significant unmet need, including immunology, rare diseases, neuroscience, metabolic diseases and liver disease (HCV), as well as multiple emerging oncology programs.
AbbVie said Shire's platform has a strong complementary fit with AbbVie's existing specialty focus, including physician access relationships, regulatory and market access capabilities and patient-centric focus. AbbVie's existing experience and development capabilities across areas such as GI, neuroscience and rare oncology indications combined with AbbVie's resources and scale could develop global franchises from Shire's platform and utilize M&A to supplement organic growth.
AbbVie believes Shire could achieve immediate broader geographic penetration and scale by leveraging AbbVie's existing global infrastructure across more than 170 countries, including existing commercial, regulatory and medical affairs and market access in key emerging markets. It said a combination would provide Shire with the desired scale and infrastructure, along with a diversified portfolio of leading marketed products, stronger growth platforms with the potential for further development and a complementary specialty focus combined with global pharma capabilities.
The combination, AbbVie said, would enhance innovation and end-to-end R&D capabilities, generating a best-in-class product development platform with near-term, new product launches in liver disease (HCV), neuroscience, immunology, oncology, rare diseases, ophthalmology and renal; and experience and infrastructure, including regulatory, health economics and outcomes research and market access to expand product indications to meet patient needs.
The new AbbVie group would operate under a new holding company, New AbbVie, and would retain operational headquarters in Chicago, as well as a strong presence in the U.S. and the U.K. It is expected New AbbVie would have a U.K. tax domicile.
The enhanced financial profile of New AbbVie would offer greater strategic and financial flexibility, enabling the opportunity to maximize Shire's rare disease and neuroscience franchises, including resources to fully globalize Shire's planned launches; the potential for strengthened sustainability of top-tier EPS growth, attractive free cash flow and enhanced return of capital policy; and a business development group to drive continued portfolio expansion with access to cash and financial wherewithal not available on a standalone basis.
While AbbVie appreciates and values the potential of Shire's pipeline, AbbVie believes the recent appreciation in Shire's share price already incorporates a meaningful premium resulting from M&A market speculation and AbbVie believes its proposal is reflective of this appreciation.
AbbVie has a successful track record for investing in R&D and commercialization to develop blockbuster medicines and build global franchises with category leadership within multiple therapeutic areas. Key products include Humira (the world's top selling medicine globally in 2013), Duodopa, Synagis, Kaletra, Synthroid, AndroGel, Creon and Lupron, amongst others.
AbbVie said it is offering meaningful up-front value to Shire shareholders via the significant cash component. In addition, Shire shareholders will receive an attractive stock currency, which AbbVie anticipates will provide meaningful upside potential via approximately 23% participation in a compelling equity story.
AbbVie is willing to move quickly and cooperatively to engage with Shire.