Takeda Shares Drop as Drugmaker Forecasts Loss After Shire Deal

(Bloomberg) -- Takeda Pharmaceutical Co. shares fell the most this year after the Japanese drugmaker forecast a surprise operating loss due to acquisition costs and related charges from its $62 billion purchase of Shire Plc.

  • The company forecast an operating loss of 193 billion yen ($1.8 billion) for the year ending March 2020. Analysts had predicted a profit. Annual sales are seen at 3.3 trillion yen, compared with analysts’ estimates for 3.45 trillion yen.

Market Performance

  • The stock dropped as much as 6.6% in early Tokyo trading on Wednesday, the biggest intraday decline since Dec. 18.
  • Takeda shares gained 16% this year through Tuesday, but are still down more than 20% from the level before it expressed interest in buying Shire in March 2018.

Key Insights

  • This is the report analysts and investors have been most eagerly awaiting, as it’s the most complete picture yet of the combined operations of Takeda and Shire. The deal closed in January, bringing the Japanese company lucrative therapies for rare diseases and vaulting it into the ranks of the world’s 10 biggest drugmakers.
  • Integration costs of 154 billion yen from the Shire acquisition cast a shadow over the underlying business, but the Japanese drugmaker said the deal will result in bigger-than-projected cost savings. Takeda raised its annual cost savings target to $2 billion from $1.4 billion by the end of fiscal 2021.
  • “We are not worried about this result, we were expecting it,” Chief Executive Officer Christophe Weber said at a news conference, adding that “the integration of Shire is progressing as planned.”
  • Takeda’s business this year will be hurt by the loss of exclusivity for several products, including Velcade, a treatment for multiple myeloma that has been its second-best-selling drug. The company expects momentum from its key businesses to offset the impact.

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  • While Takeda’s report shows debt has more than doubled because of Shire, the company is working toward deleveraging. It has laid out a scenario of a potential $10 billion in divestments, and earlier this month took its first step toward that goal, agreeing to shed $3.8 billion in assets.
  • See statement here.

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