DUBLIN – Shares in Dublin-based Shire plc rose as much as 26 percent Wednesday on news of a possible bid from Takeda Pharmaceutical Co. Ltd. Under U.K. takeover rules, Osaka, Japan-based Takeda is bound to make an offer by 5 p.m. U.K. time on April 25.

By not unveiling an initial opening price, Takeda has allowed the market to arrive at its own estimate of Shire's value. That is obviously a moving target now. Wednesday's frenzy of buying and selling at one point lifted Shire's market cap to £35.3 billion (US$47.8 billion), as the company's stock peaked at £38.80 on the London Stock Exchange. After some inevitable profit-taking, that had dropped to about $45 billion when the market closed. Adding in Shire's net debt, which stood at just over $19 billion on Dec. 31, puts the company's current enterprise valuation at about $64 billion.

Shire's initial response to Takeda's overture was of the "come-and-get-me" variety. While noting the announcement and confirming that it had yet to receive an offer, it simply reminded shareholders, in classic investor relations boilerplate, that there "can be no certainty that any firm offer for the company will be made nor as to the terms on which any firm offer might be made."

But make no mistake about it, Shire is back in play – after just a brief absence from the M&A spotlight. Almost four years ago, North Chicago-based Abbvie Inc. offered $55 billion in cash and shares, which valued Shire at £52.48 per share. Even the recent past is a different country, of course, and the agreed deal was subsequently undone by changes in U.S. Treasury rules governing the treatment of corporate tax inversion deals. (See BioWorld Today, Oct. 17, 2014.)

Shire is a much larger entity now than it was when Abbvie came courting, having splashed out $32 billion in cash and shares to acquire Deerfield, Ill.-based Baxalta Inc. and another $5.9 billion in cash to take over Cambridge, Mass.-based Dyax Corp. to bolster its hereditary angioedema portfolio.

The Baxalta transaction was heralded as marking the creation of a global rare diseases powerhouse, with a target of $20 billion in revenues by 2020 (which has since been lowered to between $17 billion and $18 billion). The enlarged entity has made credible progress toward that goal, posting $4.3 billion in net income on turnover of $15.2 billion in 2017. Their combined revenues for 2015, when the transaction was first mooted, were $12.5 billion.

Until Takeda showed its hand, Shire's share price had been on a steadily downward trend for the past 18 months, however. Although profitable and growing, most of its cash flow is channeled toward paying down the debt it took on to fund its M&A spree. The hemophilia franchise it acquired through Baxalta is facing competitive pressure from Hemlibra (emicizumab-kxwh), the bispecific antibody developed by Roche Holding AG and its Japanese affiliate Chugai Pharmaceutical Co. Ltd. for treating hemophilia A with factor VIII inhibitors. Ironically, shares in Basel-based Roche dipped on Wednesday following the confirmation the deaths of five patients who received the drug.

A combination of Takeda and Shire would bring together two companies of a roughly similar scale. Takeda is valued at about $41 billion, which, according to Jefferies analysts, creates doubts about its ability to complete an outright acquisition. "We presume Takeda would need a significant equity raise to acquire Shire, suggesting a 'merger' is perhaps better terminology, which may raise hurdles to the successful completion of any future deal," he wrote in an information note.

But the deal has some logic nevertheless. "We see the possible strategic fit given the Japanese pharma's focus therapeutic areas of oncology, gastrointestinal [disease] and neuroscience, with Shire bolstering the latter two franchises," he stated.

Shire's position in rare disease is also attractive, given the long life cycles of enzyme replacement therapies and plasma-derived human immunoglobulin products. By Jefferies reckoning, Shire is currently trading "at a substantial discount" to its valuation of the company, which comes in at about £43 per share.

Its late-stage pipeline includes multiple phase III programs, such as: SHP-621 (budesonide oral suspension, or BOS) in development for eosinophilic esophagitis; SHP-647, an anti-MAdCAM-1 antibody in development for ulcerative colitis; maribavir (SHP-620) for treating cytomegalovirus infection in transplant patients. "We believe many of these are underappreciated and could drive longer-term upside," Welford stated.

The stock (London:SHP) closed Wednesday at £35, up £4.30, or 14 percent, on Tuesday's close. Takeda's stock (Tokyo:4502) closed at ¥5,532 (US$51.74), down ¥108, or 1.9 percent.