Shire says no deal to AbbVie
Shares of Irish drugmaker Shire are up over 10% in premarket this morning after news hit the Street that the company rejected a $46.5 billion merger offer from AbbVie. Per Shire's response, this is the third offer from AbbVie in the last two months. The latest proposal comes at roughly a 25% premium compared to Shire's closing price yesterday and a 30% premium relative to the company's average share price over the last 30 days.
Shire decided to nix the deal primarily because it believes it significantly undervalues the company's recent acquisitions in the orphan drug market, which are expected to see sales reach $10 billion by 2020.
AbbVie's interest in Shire apparently centers on lowering its current tax rate. According to the press release, AbbVie planned on forming a new U.S. listed entity that would be domiciled overseas. In other words, Shire's Dublin address is attracting interest from potential buyers, not necessarily its rapidly growing product portfolio.
What's particularly interesting is that AbbVie and Shire don't have many synergies portfolio-wise, further suggesting this offer was almost exclusively about taxes. If that's the case, we will more than likely hear other offers come Shire's way in the near future. So, stay tuned.
Sanofi bids farewell to Merrimack's once promising cancer treatment
Merrimack shares plummeted by 11% in after hours trading yesterday following an announcement that the company reached a deal with Sanofi (NYSE:SNY) to regain worldwide rights to develop and commercialize MM-121. MM-121 is a monoclonal antibody that blocks ErbB3 activation in patients with heregulin-positive tumors and has been tested in a number of cancer types. In a particularly disappointing turn of events, however, MM-121 failed to show a clinical benefit last year for patients afflicted with treatment-resistant or refractory-advanced ovarian cancer.
Sanofi will still fund the ongoing midstage trials for MM-121 for the next six months, which are highlighted by a triple-negative breast cancer study that the company hopes could lead to a regulatory filing down the road. That being said, the clinical update provided yesterday as part of the press release showed that the adverse event rate was nearly double in the treatment compared to the control group (28.1% vs. 15.6%).
What's key to understand is that Merrimack is losing a major long-term partner for one its most closely watched clinical products. Moreover, Merrimack will have to take on the added expense of furthering MM-121's clinical development at a time when it's preparing for a key regulatory filing for MM-398 as a second line pancreatic cancer treatment. In short, I don't think this news bodes well for MM-121's prospects going forward and could present problems for the company from a financial standpoint as well.
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