AbbVie Bolsters Rare Disease Drug Pipeline with Shire Merger

July 25, 2014

AbbVie’s persistent courtship of Irish drugmaker Shire paid off with a roughly $54 billion merger that gives the U.S. company access to a promising rare disease drug pipeline and a more tax-friendly climate.

AbbVie said it would merge with Shire for a price of $90.77 per Shire share. The price was the fifth bid AbbVie has made for Shire since announcing its intentions for a merger last month.

The deal grants AbbVie access to “leading franchises in specialty areas including rare disease and neuroscience,” spokeswoman Jennifer Smoter said.

Highlights include Shire’s popular attention deficit hyperactivity disorder drug Vyvanse (lisdexamfetamine dimesylate), which generated $360 million in sales in the second quarter of this year, according to Shire’s second quarter financial statement.  Shire also is in the late stages of developing its dry eye disease treatment lifitegrast. The drugmaker said it plans to submit an NDA in the first quarter of 2015.

The pipeline boost comes a few years before AbbVie is expected to lose patent protection on its blockbuster drug Humira (adalimumab). AbbVie has said its U.S. patents expire in December 2016 and its European patents in April 2018.

The anti-inflammatory treatment generated $10.6 billion in sales last year, accounting for more than half of the company’s revenue.

The Illinois-based drugmaker will form a new company and re-incorporate in the UK, which will offer a 13 percent tax rate in 2016, Smoter said. That is a steep decline from the 21 percent rate AbbVie pays now.

Abbvie is the latest drugmaker seeking a better tax rate overseas. Earlier this month Mylan agreed to buy much of Abbott’s generic drug business for $5.3 billion in part to re-incorporate in the Netherlands. Pfizer made an unsuccessful $118 billion bid to acquire AstraZeneca with the hopes of moving to the UK.

Lawmakers have noticed the pharmaceutical industry’s push to move overseas and some aren’t happy about it.

Treasury Secretary Jack Lew wrote to House and Senate committees earlier this month asking them to ban inversions, the process of moving overseas to get a better tax rate. Sen. Orrin Hatch (R-Utah), ranking member of the Senate Finance Committee, responded to Lew on Thursday sharing his concern, noting that comprehensive tax reform can address the issue.

Despite this recent talk, experts believe that any inversion legislation won’t happen this year.

In 2015 there could be comprehensive tax reform legislation that “lowers the corporate tax rate and moves the U.S. towards a territorial tax system, making inversions legislation unnecessary because the U.S. then would have a friendlier and more competitive tax system,” said Terry Haines, analyst with International Strategy and Investment in an investment note.

The AbbVie-Shire deal is expected to close in the fourth quarter of this year, Smoter said. — Robert King

Originally appeared in Drug Industry Daily, the pharmaceutical industry’s number one source for regulatory news and information. Click here for more information.