A near $30 billion bid for Shire could emerge as the stand-out deal in the European pharmaceutical universe this year, a highlight for bankers in a market otherwise likely to be dominated by bolt-on acquisitions.

Shire -- an Anglo-American specialist in hyperactivity and rare genetic diseases -- has been tipped as the hottest takeover target in the sector since French drugmaker Sanofi acquired U.S. biotech firm Genzyme early last year, a deal that showed there was appetite for rare disease drug specialists.

Since then Shire, which last week posted a 47 percent jump in fourth quarter earnings, has been rumoured frequently as a takeover target. 2012 could be the year a bidder finally pounces.

Shire's CEO Angus Russell declined to comment when asked about speculation of a bid approach when the group presented results on Feb 9.

Bankers expect a steady flow of smaller deals from cash-rich drugmakers in 2012 after Roche kicked off the year with a $5.7 billion hostile bid for Illumina . But large-scale deals are expected to be rare. Shire would be one of the bigger prizes, with a market capitalisation of $19.7 billion.

The London-listed group is expected to draw attention from seasoned consolidators, such as Israel's Teva and any cash-rich Big Pharma companies that have not done a significant deal recently, such as U.S.-based Pfizer


Teva, the world's largest generic drugmaker and a true M&A machine, is bold enough and would likely have shareholder support for such a large acquisition, and buying Shire would bring it an impressive line-up of marketed and experimental drugs in specialty medicine, bankers and analysts said.

The Israel-based firm committed in 2008 to increase revenues to $31 billion by 2015 and is still far below the target with $16 billion in 2011.

Asked to comment for this article, Teva said it never commented on market speculation.

Unlike some Big Pharma firms, Teva would likely feel comfortable with Shire's attention deficit hyperactivity disorder (ADHD) drugs as these treatments are already popular in Israel, its domestic market, and in the United States.

Although Teva is still digesting its $6.3 billion purchase of U.S. specialty drugmaker Cephalon last year, the recent appointment as CEO of Jeremy Levin - an ex Bristol-Myers Squibb executive - emphasises its commitment to building a strong branded pharmaceutical business alongside generics.

Now may be too soon for action. But in the second half of the year, when Levin has settled in, Teva could start preparing a hostile bid for Shire, a source familiar with the group's strategy and a sector banker said.

Price could be a sticking point, as any bid for Shire would likely have to include a 40 percent premium on its already high valuation, bankers and arbitrageur funds said.

Teva would likely wait until a setback sent Shire shares down, repeating opportunistic tactics deployed by Sanofi on Genzyme and by Roche on Illumina, one source added.

Given the lengthy trials needed to bring drugs to the market, setbacks in the industry are common but hard to predict.


Other large potential deals are harder to identify, although heart and lung drug specialist Actelion , with a market cap of $5 billion, remains a possible target.

Despite past interest from Amgen , Actelion founder and CEO Jean-Paul Clozel has so far resisted calls from activist shareholder Elliott Advisers to consider selling the business.

The company's future is now hanging on the results of a decisive trial for lung drug, macitentan, to replace Actelion's flagship treatment Tracleer, whose patent expires in 2015.

The fortunes of the European sector are diverging, creating different needs for M&A among different players.

An advance guard of Big Pharma names - Roche, Novartis , and GlaxoSmithKline - are increasingly confident about the future and can do bolt-on deals.

AstraZeneca , by contrast, is trailing the pack badly. In the past that might have made it a takeover target for a cost-cutting tie-up. This time around, its lack of pipeline, and investor disillusion with value-destroying combinations of large pharma groups is likely to mean rivals steer clear.

I can't see any major pharmaceutical company having the acquisition of AstraZeneca well received by its own investors, said one industry consultant who works closely with a number of European drugmakers.

When it comes to making acquisitions itself, CEO David Brennan is cautious. He says is ready for deals in a range of $1 billion or a few billion dollars. But few in the industry believe that would be enough to put AstraZeneca back on track.

Astrazeneca desperately needs to do big M&A but they are so slow to realise it. This is because shareholders continue telling Brennan -- don't do anything stupid, don't do big M&A, a banker who recently approached the company said.


Most other big drugmakers, meanwhile, are sticking with what Bristol-Myers once branded the string of pearl strategy.

GSK, which last week set a lower-than-expected buyback plan for 2012, clearly has room for bolt-on deals. It could pick up innovative cardiovascular and anti-infectious specialists, as well as expanding in emerging markets, bankers said.

Novartis is also eyeing bolt-on acquisitions in the range of $1 billion to $2 billion.

The Swiss company could increase its scale in animal health and is expected to look at Pfizer's animal health division when it comes to the market, bankers said.

French company Virbac , an animal health specialist with a market value of $1.3 billion, would typically be an attractive target for Novartis and Sanofi, bankers said.

But the Dicks family, which has a 47 percent controlling stake in Virbac, has so far been reluctant to sell and would likely aim for a high price if they were to change their mind.

European Big Pharma could also tap some U.S. biotech firms such as Onyx , Cubist , Celgene or Alexion , bankers and analysts said.

But bid speculation has also inflated the share price of many potential targets in the healthcare space, making it harder for deal-makers to add value with M&A. [ID:nL1E8CA03K]

The problem is everybody looks at the same thing and you've got bankers coming in your door every day, Chris Viehbacher, CEO of Sanofi , recently told Reuters. Now when a banker sits down with the inevitable book, I say 'If you got this, this or this company, then let's not even discuss it.'

(Reporting by Sophie Sassard; additional reporting by Ben Hirschler; Editing by Jodie Ginsberg)

(This story was corrected to remove an incorrect market cap. figure in paragraph 13)