Tags: Shire | NPS | Rare Disease | Drugs

Shire to Buy NPS for $5.2 Billion to Add Rare-Disease Drugs

Sunday, 11 January 2015 06:44 PM

Shire Plc, the drugmaker seeking to boost growth after its proposed sale to AbbVie Inc. collapsed, agreed to buy NPS Pharmaceuticals Inc. for about $5.2 billion to add medicines used to treat rare diseases.

Shire will pay $46 a share in cash, the Dublin-based company said today in a statement. That’s a 9.8 percent premium to NPS’s closing price on Jan. 9 and more than 50 percent higher than its close on Dec. 16, before news broke of Shire’s interest. The deal has been approved by both companies’ boards.

Adding Bedminster, New Jersey-based NPS will enable Shire to expand in rare diseases such as gastrointestinal and endocrine disorders. The deal comes before NPS learns whether its Natpara medicine to treat hypoparathyroidism wins approval from the U.S. Food and Drug Administration. A decision on the drug, which would be the first marketed treatment for the potentially fatal disorder, is scheduled to be made by Jan. 24.

NPS has “a rare-disease focus and in addition it builds on our strong expertise in gastrointestinal diseases,” Shire Chief Executive Officer Flemming Ornskov said in a telephone interview. “So it’s a strategic fit, growth enhancing, and we can afford it. It ticks almost all the boxes.”

It was worth the risk to move ahead of the FDA’s Natpara decision, Ornskov said. Shire’s due diligence included looking at the correspondence with the FDA and, by moving early, Shire can also help with the drug’s introduction, he said.

NPS “fits right into what Shire wants to do and where they have infrastructure,” Stefan Quenneville, an analyst at Morningstar Inc., said in an interview today.

‘Full Price’

The New Jersey drugmaker also sells Gattex, a treatment for short-bowel syndrome that analysts predict will garner more than $300 million in sales in 2016. That would complement Shire’s existing stable of drugs for gastrointestinal diseases.

In biotechnology takeovers since the beginning of 2014, about one-third of the buyers paid a premium of between 25 percent and 50 percent, according to data compiled by Bloomberg.

“It’s a full price for two commercially unproven assets,” Quenneville said.

Ornskov had said in November that the company was revisiting some of the deals it was considering before AbbVie’s abandoned $52 billion takeover. Shire was considering a bid for NPS, Bloomberg News reported on Dec. 17, citing people familiar with the matter. Shire is based for tax purposes in Dublin, and Ornskov and other top executives work in Lexington, Massachusetts.

Additional Deals

While Shire needs to focus first on completing the NPS deal, “given the amount of cash we generate and our ability to take on further debt, this does not put any restrictions of significance on our strategy to become a leader in the biotech area,” Ornskov said in the interview. “Obviously that will require further M&A.”

Acquisitions work best when they’re in a disease area “you know very well,” he said, which for Shire includes rare diseases, gastrointestinal diseases, and opthalmology, he said.

Natpara treats a rare disorder in which a diminished amount of parathyroid hormone causes calcium deficiencies, causing muscle pain, tingling, an inability to focus, and anxiety or depression. In extreme cases, it can cause seizures.

Shire’s pipeline of experimental drugs will add $3 billion to revenue by 2020, and acquisitions may further boost sales, the company said on Dec. 10.

The NPS offer comes after Merck & Co.’s $8.4 billion agreement to buy Cubist Pharmaceuticals Inc., which had also been a potential target for Shire.

Cash Resources

Shire said it will be fund the NPS through its cash resources as well as existing and new bank facilities. The company received a breakup fee from AbbVie of $1.64 billion, giving it extra cash for takeovers. The company’s London shares have risen 63 percent in 12 months to 4,741 pence.

The purchase should add to non-GAAP earnings starting in 2016, Shire said. The company reported adjusted net income of $2.93 per American depositary share for the third quarter in October, beating analyst’s estimates, while sales rose 32 percent to $1.6 billion. The drugmaker then raised its profit forecast a third time.

NPS reported an adjusted loss of 2 cents a share in the third quarter as sales climbed to $57.2 million.

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Shire Plc, the drugmaker seeking to boost growth after its proposed sale to AbbVie Inc. collapsed, agreed to buy NPS Pharmaceuticals Inc. for about $5.2 billion to add medicines used to treat rare diseases.
Shire, NPS, Rare Disease, Drugs
Sunday, 11 January 2015 06:44 PM
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