2 Analysts Continue to Like Shire-Baxalta Deal Pursuit

Health and Healthcare

Published: August 10, 2015 1:45 pm

Last Updated: August 10, 2015 1:47 pm

Baxalta Inc. (NYSE: BXLT) has not been public as a standalone entity very long at all, when you consider that Shire PLC (NASDAQ: SHPG) is now interested in it. After the company’s proposal, we have seen several analysts opine on the matter.

In Shire’s own words, the company sees a strong strategic fit and industry-leading portfolio that would immediately create value and generate $20 billion in product sales by 2020. It also called it creating a leading platform for growth with over 30 coming product launches and with 50-plus projects in rare diseases.

The company would also, in its own view, see double-digit revenue growth, with the deal being accretive to earnings after the first year of the deal’s closing. Another benefit is that the $30 billion or so transaction size has 36% upside, and the stock-swap proposed allows future upside participation.

In recent days, Cowen’s analyst Ken Cacciatore highlighted the strategic fit and benefits of a Shire-Baxalta deal:

Baxalta’s platform will allow this strengthened combined entity to deploy the increased cash flow and increased leverage to be available into various orphan assets. We view this as value-creating and appropriately aggressive… At this point we simply don’t believe that investors have been creative enough about what this proforma entity could accomplish and the value it could create.

Another positive was from David Steinberg of Jefferies:

Shire projects double digit topline growth for the combined company, with likely significant revenue synergies as Baxalta’s commercial platform in 100+ countries would enable greater opportunities for Shire’s rare disease business that currently has a presence in 60 countries.

Monday’s trading was positive in both companies in New York. Baxalta shares were last seen up 4% at $39.10, against a new trading range of $29.83 to $39.75. Shire shares were last seen up 0.6% to $251.40.

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