What's going on?

The Wall Street Journal (WSJ) is reporting that Shire, the pharmaceutical company that makes Adderall, is considering improving its bid for US biotech firm Baxalta. Shire�s attempted takeover of Baxalta had previously been rejected by Baxalta�s management, who say that Shire�s offer price is too low.

What does this mean?

This is probably good news for Baxalta�s stock, in the short term at least. Shire�s initial offer was to pay for the acquisition by giving Baxalta�s shareholders shares in Shire, but the WSJ report suggests that Shire is exploring ways to pay at least some cash to Baxalta�s shareholders � which makes the deal less risky for Baxalta�s shareholders. Shire might also raise its offer price, which would of course be good for Baxalta�s shareholders.

Why should I care?

1. Both Shire and Baxalta focus on making drugs that combat rare diseases, for example Hunter syndrome (Shire) and rare cancers (Baxalta). The strategic rationale of combining the two companies seems to make sense: it would create a global, rare-disease pharmaceutical powerhouse and could benefit the combined entity�s share price over the long term.
2. In the short term, this report is likely to be positive for Baxalta�s stock price, while it might be negative for Shire�s stock if investors feel Shire could overpay.