Shire shows game face in fending off takeover bid

Flemming Ornskov, CEO of Shire, during an interview in London on Thursday.
Flemming Ornskov, CEO of Shire, during an interview in London on Thursday. (CHRIS RATCLIFFE / Bloomberg)
Posted: June 25, 2014

Drugmaker Shire P.L.C., which is trying to fend off a $46.5 billion takeover offer from AbbVie, told investment analysts Monday that it hopes to double its revenue by 2020.

Shire is officially headquartered in Ireland, but has operations in Wayne and Exton.

The Irish base is a big part of why Shire is being pursued by AbbVie. Companies, especially in health care, have been scrambling of late to buy other companies so they can reregister in Ireland, which has lower corporate tax rates than the United States. Relatively few employees move to Ireland in such acquisitions. In the language of accounting, this is called tax inversion.

Shire chief executive officer Flemming Ornskov said Shire has done very well as a stand-alone company in the 13 months since he took over and will succeed on its "journey to be the world leader" in medication for rare diseases. Calling his pitch and presentation "10x20," Ornskov told analysts in a conference call and slide show that Shire expects to double its yearly revenue from nearly $5 billion to $10 billion by 2020. Ornskov said current products would account for $7 billion and drugs in the pipeline would bring in $3 billion.

Shire is registered on the London Stock Exchange, but its American depository receipts (ADR) trade on the NASDAQ. The U.S. traded shares closed Monday at $227.40, up $4.51 or 2 percent.

"We don't think the value [of Shire] is reflected in the current share price or in the current AbbVie proposal," Ornskov said in the conference call, which began after trading opened in London but before it opened in New York.

On Monday, AbbVie also raised its earnings expectations for 2014, which might make its cash-and-stock offer to Shire more appealing.

Though it has tried to diversify its product lineup, Shire gets nearly 41 percent of its current revenue from three drugs approved to treat attention deficit hyperactivity disorder.

Shortly after Ornskov took over in 2013, he canceled plans to move the main U.S. headquarters from Wayne to a new building in Malvern. He also more often works from Shire's facility in Lexington, Mass. On Monday, Ornskov declined to comment on other plans to cut costs.

Ornskov perhaps was borrowing from AstraZeneca, which also promised big increases in future revenue during its successful defense against Pfizer's takeover attempt.

"The perspective is well-appreciated, but was not supported by factual argument beyond what we already know about the business," Bernstein Research analyst Ronny Gal wrote of Shire in a note to clients. "There were some areas where the assumptions were aggressive vs. our estimates."



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