Big Risks, Big Deals
Being brave in business means taking risks. With its patent cliff safely crossed and a pride of fresh new products filling
the coffers, Shire is sitting pretty. That's a fairly new seat for the company, and one that Russell doesn't entirely trust.
"The greatest danger to Shire is not in our business—it's ourselves," he says. "We could screw up if we get arrogant and complacent.
We could fall into the trap of thinking we're going to be eternally successful and stop taking risks."
One of Shire's next big risks is going global. Russell says that by 2015, he wants the company to cut its dependence on the
US and EU markets—currently 95 percent of sales—to 50 and 25 percent, respectively. No one is downplaying the difficulties.
"It's a big leap to go from being US-centric to truly global," Mike Cola says. "The differences are subtle but big. Global
approvals, global launches, and global brand platforms require different skills."
The HGT franchise, with its high margins and light infrastructure, will likely lead the way, focusing on Latin America and
Eastern Europe. Already Gregoire estimates that Brazil will be HGT's third-biggest market in a year or two. While foreign
approvals and coverage and generally expected to go smoothly, the extravagant prices of these lifelong, lifesaving treatments—a
$200,000 annual price tag is not uncommon—may meet pushback in emerging nations with fixed healthcare budgets. (Many already
set aside a fixed pool of money for orphan diseases.) Even in the US, advocates point out that under current insurance coverage,
patients quickly reach lifetime caps.
Shire's cheaper small-molecule portfolio offers an alternative route to geographical diversification. While the global ADHD
market is packed with generics, the specialty division's gastrointestinal and renal drugs may provide a more profitable fit.
Ex-US sales of Fosrenol, a phosphate binder used mainly by people with kidney disease, doubled in 2008. And plans for an international
launch of Lialda, the first oral anti-inflammatory for ulcerative colitis (aka Pentasa for Crohn's disease) are underway.
Becoming a global enterprise will take years, and Shire is nothing if not restless. Inquiring minds want to know: Will Shire
take a third leap into the unknown by making a TKT- or New River–sized acquisition?
Barbara Deptula's lips are sealed—almost. "We're always looking for a niche that the rest of the industry is either neglecting
Such as? "Well, Big Pharma is moving out of hospitals because prices are down due to generics and commodity purchasing," she
says. "That makes us wonder if there might not be some areas in the hospitals opening up where spending is still not restricted."
The hospital-as-new-niche clue may be no more than a curve ball. But it gains credence in the light of Shire's 2007 acquisition
of Juvista, a Phase II growth factor for scar reduction for which it paid British biotech Renovo $125 million. Analysts, who
were accustomed by then to Shire's far-flung deals, were quick to conclude that cosmetic medicine—specialist, low risk, out-of-pocket—was
Shire's next big thing. And while Juvista has garnered some glowing headlines, the actual data have been, at best, mixed.
"Juvista itself remains a wild card, but part of the strategy is to gain access to surgeons and hospitals," says Nachman,
adding that if Shire does a big acquisition, it will likely be in GI disease.
Angus Russell delivers a definitive no to a big deal. "People expect us to do a major acquisition every few years because
that's our history," he says. "But that was driven by the need to do something about the Adderall patent loss. Our current
needs are different." The next big thing, he says, is internationalizing Shire's diverse portfolio.
Yet now that Shire is shining, Russell may have a new motive for a major acquisition: to preserve its independence. As Big
Pharma increasingly lunges about for top-line growth, the takeover target on Shire's own back only grow larger. British behemoth
GlaxoSmithKline has been frequently rumored to be a possible suitor, and last year analyst ears buzzed that Teva might bite,
making a bid to rule the global ADHD market. Shire's independence could be bought for an estimated $11 billion to $13 billion.
But buyer beware. Says Angus Russell: "Big Pharma would pay a high price for acquiring Shire—and it would be quite easy for
them to destroy the company. Without our leadership, I don't think they have the cultural attitude to run the business."