Sector movers: Pharma, healthcare stocks sink with Shire takeover at risk

Pharmaceutical and healthcare stocks were sold off sharply on Wednesday after Abbvie said it was reconsidering its multibillion-pound offer for Shire, quashing hopes for further tax-inversion deals across the industry.

The share price of Shire had collapsed after American drugmaker Abbvie said it was having second thoughts about its planned $54bn acquisition in light of the US Treasury’s new rules regarding the takeover of foreign companies, specifically tax inversion deals.

Shire pointed out it would be due a break-up fee of roughly $1.64bn if the deal falls through, but that didn't stop the latter's shares from sinking 24% by the afternoon in London.

Pharma giant Astrazeneca and medical device maker Smith & Nephew were also firmly lower on Wednesday.

The companies had both attracted interest earlier in the year from Pfizer and Stryker respectively - two US groups looking to move their tax bases overseas - but concerns about tax-inversion deals prompted investors to scale back the M&A premium priced into both stocks.

"Astra’s deal looks equally uncertain now, since the loss of tax benefits will result in Pfizer lowering its price, diminishing the attractiveness of the deal to Astra shareholders," said Chris Beauchamp from IG.

Pharma peers GW Pharmaceuticals, Glaxosmithkline and BTG were registering steep losses, along with healthcare counterparts Synergy Health and Consort Medical.

Synergy's shares had surged on Monday after US firm Steris Corp agreed to buy the UK company for £1.2bn through a tax inversion deal.

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