Sector News

Shire CEO eyes $10B sales goal with more M&A deals in mind

December 12, 2014
Life sciences
Shire is enjoying the single life post-AbbVie breakup, touting its newly independent status and beefing up R&D. But if the company wants to beat its already ambitious sales goals, some strategic dealmaking could be on the horizon, CEO Flemming Ornskov says.
 
At the company’s annual investor presentation, Ornskov said he’s not in a hurry to spend the $1.7 billion AbbVie owed for nixing their $55 billion merger. The company plans to increase its product sales to $10 billion by 2020 and is counting on $7 billion from existing products and $3 billion from its pipeline to help it on its way. That goal excludes recent and future M&A. But deals could help Shire find its footing as it tries to boost its numbers northward, Ornskov told investors.
 
“The goal was developed without thinking that we would be needing to do additional deals, but I can assure you that we will be doing additional deals before 2020,” Ornskov said (as quoted by Reuters). “That’s in our DNA. It’s how we grow business, so that will be on top of this goal.”
 
Ornskov also reassured investors that Shire will remain committed to R&D. The company will concentrate on rolling out drugs for rare diseases, especially those aimed at pediatric populations, according to today’s presentations.
 
But M&A and R&D aren’t the only tricks Shire has up its sleeve for post-AbbVie profits. Last month, the company moved 500 Pennsylvania-based employees up to Boston to “streamline operations and drive further efficiencies,” Ornskov said. As part of its “One Shire” cost-cutting program, the drugmaker will establish U.S. operational headquarters in Lexington, MA, housing its R&D and commercial teams under one roof and saving $25 million a year beginning in 2016.
 
AbbVie, on the other hand, could face a tougher road ahead sans Shire. The company is set to lose patent protection on blockbuster Humira in 2016, and no longer has the cushioning of Shire’s rare disease portfolio to soften the blow. Immediately following its breakup with Shire, the company increased its quarterly dividend by 17% and announced a $5 billion share buyback plan.
 
“We recognize that without a transaction the size of Shire, our cash position will build quickly, [and] it has always been our commitment to return cash to shareholders,” AbbVie CEO Richard Gonzalez said in a conference call following the breakup (as quoted by Bloomberg).
 
By Emily Wasserman
 

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