Please ensure Javascript is enabled for purposes of website accessibility

Why Shire PLC Fell 15% in January

By Brian Feroldi – Feb 10, 2016 at 10:23AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

News of a monster acquisition gives investors pause.

What: Shares of Shire PLC (NASDAQ: SHPG), a biotechnology company focused on creating drugs that treat rare diseases, fell by more than 15% in January, according to data from S&P Global Market Intelligence.

SHPG Chart

So what: Despite the stock's downward movement, Shire gave investors plenty of reason to cheer during the month

  • Shire completed its $5.9 billion acquisition of Dyax.
  • Shire resubmitted its NDA for Lifitegrast to the FDA as a potential treatment for dry eye disease in adults. Shire originally received a complete response letter from the FDA in October, and this new submission was aimed at addressing the agency's request for additional information.
  • Two credit rating agencies assigned Shire an investment-grade credit rating.

However, these news releases pale in comparison to the announcement that Shire would be spending $32 billion to acquire Baxalta (NYSE: BXLT), a huge biotechnology company with a strong presence in the hematology and immunology markets. The deal has already been blessed by Baxalta's board of directors. Once completed, it will turn Shire into the biggest rare-disease-focused biotech company in the world.

Now what: The market was taken off guard by the Baxalta acquisition news -- shares fell nearly 10% after the news broke of the deal, likely over possible tax ramifications for shareholders. While Shire's executive team was confident that the deal would remain tax free for shareholders, it's possible that the IRS could play hardball and demand a tax huge payment.

Assuming regulators and shareholders approve the deal, then the transaction is expected to be completed sometime during the summer. However, until we get a definitive answer to the lingering tax question, it's tough for me to get excited about this deal's potential.

Brian Feroldi has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
326%
 
S&P 500 Returns
102%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/02/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.