14 July 2014Americas

Patent box key to AbbVie takeover bid for Shire

The UK government’s “patent box” was a key factor behind the multi-billion pound cash-plus-shares takeover bid for the Irish-headquartered global specialty biopharmaceutical company Shire by US-based drugs company AbbVie.

The deal is nearing completion after Shire board members said this morning (July 14) that they would be willing to recommend AbbVie’s latest offer, worth £31 billion ($53 billion), to Shire shareholders.

The latest proposal would see AbbVie pay £53.20 ($91.20) per share following demands from Shire for an improvement on its previous approach. Shire has its tax base in Ireland and is managed from the US, where it has most of its sales.

But Chicago-based AbbVie, which has until the end of the week to confirm the offer, plans to move its domicile to the UK if the deal is completed so that it can profit from the UK tax break known as the “patent box”.

The scheme allows innovations to be taxed at 10 percent, instead of the standard rate of 23 percent.

It has previously prompted speculation that multinationals will be diverted away from other countries to the UK.

In April, LSIPR’S sister publication WIPR reported that Barry Heavey, head of life sciences at IDA Ireland, the agency responsible for industrial development there, said it was keeping a “watching brief” on developments.

At the time, he was referring to pharmaceutical company GlaxoSmithKline's intended €500 million (£680 million) investment in research facilities in Scotland, which had been linked to the patent box. Heavey said it was a “significant” win.

"We're keeping a watching brief on this but so far this is the only significant project that has gone elsewhere as a direct result of the patent box," Heavey told the Irish Independent.

Implemented by the UK Treasury, the patent box has provided €367 million ($500 million) in tax breaks since it was introduced last year. Ireland’s own version of the scheme, implemented five years ago, has provided €205 million ($279 million) in tax relief on new patent applications.

Under the revised AbbVie proposal, Shire shareholders would own approximately 25 per cent of the new combined company.

“The board of Shire has indicated to AbbVie that it would be willing to recommend an offer at the level of the revised proposal to Shire shareholders subject to satisfactory resolution of the other terms of the offer,” a Shire spokesperson said in a statement.

“Accordingly, the Board is in detailed discussions with AbbVie in relation to these terms. There can be no certainty that any firm offer will be made,” the spokesperson added.

Earlier this year, UK drugs company AstraZeneca fought off a takeover bid worth £69 billion ($118 billion) from its US rival Pfizer, in which a UK domicile was said to be an important factor because of the patent box scheme.

Already registered?

Login to your account

To request a FREE 2-week trial subscription, please signup.
NOTE - this can take up to 48hrs to be approved.

Two Weeks Free Trial

For multi-user price options, or to check if your company has an existing subscription that we can add you to for FREE, please email Adrian Tapping at atapping@newtonmedia.co.uk