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11 Jan 2016

Shire to combine with Baxalta, creating the global leader in rare diseases

Combination creates leading global biotechnology company projected to deliver double-digit top-line growth with over $20 billion in annual revenues by 2020.

Shire and Baxalta have announced that the boards of directors of both companies have reached an agreement under which Shire will combine with Baxalta. Under the agreement, Baxalta shareholders will receive $18.00 in cash and 0.1482 Shire ADS per Baxalta share. Based on Shire's closing ADS price on January 8, 2016, this implies a total current value of $45.57 per Baxalta share, representing an aggregate consideration of approximately $32 billion. The exchange ratio is based on Shire's 30-day trading day volume weighted average ADS price of $199.03 as of 8 January 2016, which implies a total value of $47.50 per Baxalta share.

The value of the offer, as of Shire's 8 January 2016 closing ADS price, represents a premium of approximately 37.5% to Baxalta's unaffected share price on 3 August 2015, the day prior to the public announcement of Shire's initial offer for Baxalta. This will provide Baxalta shareholders with approximately 34% ownership in the combined company. The parties expect the transaction to close mid-2016.

The combination of Baxalta and Shire will create the number one rare diseases platform in revenue and pipeline depth, with best-in-class products in each of the following growing, multi-billion-dollar franchises: hematology; immunology; neuroscience; lysosomal storage diseases; gastrointestinal/endocrine; and hereditary angioedema (HAE). The combined company will also possess a growing franchise in oncology, with approved products and innovative compounds in development, as well as a robust late-stage ophthalmics pipeline.

The combined portfolio will have an expanded range of therapeutic areas with more than 60 programs in development, including over 50 that will address rare diseases and the newly-approved Baxalta products ADYNOVATE, VONVENDI and OBIZUR. Shire anticipates more than 30 recent and planned product launches from the combined pipeline, contributing approximately $5 billion in annual revenues by 2020.

Further, the combined company will benefit from expanded geographic reach across more than 100 countries, with a high-quality commercial organization and world-class manufacturing operations. Through a balanced portfolio and expanded therapeutic expertise and capabilities, the combination will enhance revenue diversification and optionality for the business, while strong cash flows will increase financial and operational scale. In total, the proposed combination will create a sustainable platform for future innovation and growth, yielding projected near- and long-term value for shareholders.

Shire CEO, Flemming Ornskov, commented: "This proposed combination allows us to realize our vision of building the leading biotechnology company focused on rare diseases. Together, we will have leadership positions in multiple, high-value franchises and become the clear partner of choice in rare diseases. Our expanded portfolio and presence in more than 100 countries will drive our growth to over $20 billion in anticipated annual revenues by 2020. Our due diligence has reinforced our belief in the combination, and we look forward to welcoming Baxalta colleagues to a shared entrepreneurial, patient-driven culture."

Susan Kilsby, Chairman of Shire, commented: "Together, Shire and Baxalta create a platform for sustainable innovation, growth and value creation. Shire is an experienced and disciplined acquirer with a track record of delivering shareholder value. Stakeholders of both companies are expected to benefit from the enhanced growth prospects, superior operational scale and efficiency and the strong financial and organizational profile of the combined entity."

Baxalta CEO, Ludwig N. Hantson, commented: "Today's announcement marks a new path forward for our organization and is a testament to the significant progress we have made in achieving our strategic business priorities. This transaction presents a unique opportunity for Baxalta shareholders, who will receive substantial immediate value as well as an ongoing stake in a combined global leader in rare diseases with strong growth prospects. We bring to Shire a strong portfolio and pipeline of market-leading products, high-quality manufacturing capabilities and a talented global workforce that places patients at the center of everything we do. The combined organization will be well positioned to accelerate innovation and deliver enhanced value for all stakeholders."

Wayne T. Hockmeyer, Chairman of Baxalta, commented: "We launched Baxalta to focus on purpose-driven performance, sustainable growth, and continuing our leadership in developing treatments for orphan and underserved diseases. While we have made great progress to date and have had a measurable impact across all our businesses, I look forward to joining the board of the combined company to help ensure that we infuse the best of both organizations and foster a new shared culture that has the resources, the passion, and the commitment to continue to make a meaningful difference in the lives of our patients and their families."

Baxter International Chairman and CEO, José E. Almeida commented: "Baxter fully supports the proposed combination of Shire and Baxalta, which will create a major biotechnology company and global leader in rare diseases. Baxter is pleased to support this value enhancing transaction."

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