By Jonathan D. Rockoff, Shayndi Raice and Dana Mattioli
Shire PLC is buying NPS Pharmaceuticals Inc., a maker of
treatments for rare diseases, for $5.2 billion, returning to
deal-making with the help of the breakup fee it received from
one-time suitor AbbVie Inc.
The all-cash deal, for $46 a share, would hasten the Irish
company's pivot to drugs for rare conditions and bolster its
portfolio of therapies for gastrointestinal disorders like the ones
treated by NPS's two drugs, said Flemming Ornskov, Shire's chief
executive.
"It is another step in the direction of becoming a biotech," he
said in an interview.
The agreement is Shire's first major deal after AbbVie's
attempts to acquire Shire fell apart last October. Dublin-based
Shire received a breakup fee of $1.6 billion after AbbVie walked
away from the so-called tax-inversion deal. AbbVie scrapped the
acquisition after the Obama administration took steps to deter such
tax-lowering deals.
Dr. Ornskov indicated Shire would keep hunting for more
deals.
The company has been aiming to use the breakup fee to restart
its shift from drugs for common conditions like attention-deficit
disorder toward drugs for rarer diseases. Dr. Ornskov said
combining NPS's two drugs with Shire's existing sales force could
eventually yield blockbuster sales for each of the NPS
therapies.
NPS, of Bedminster, N.J., specializes in rare-disease drugs. Its
Gattex injections treat a potentially deadly bowel disorder that
diminishes the body's ability to absorb nutrients and fluids.
Gattex, which costs $376,200 a year, had $67.9 million in sales
during the first nine months of 2014. NPS earned $157.4 million in
total revenue during the period.
The market for rare-disease treatments is considered attractive,
despite a small number of patients, because companies can command
prices in the hundreds of thousands of dollars--as is the case with
Gattex. Sales of so-called specialty drugs are forecast to reach
$162 billion in 2018, up from $108 billion in 2013 and $81 billion
in 2008, according to Credit Suisse.
Despite the cost, insurers are usually willing to pay for the
therapies because they have few members who need them and the drugs
can be lifesaving. Also making the market attractive is a lack of
competition for the drugs.
NPS also has another rare-disease drug that could generate
hundreds of millions of dollars in revenue. The drug, which treats
a hormone condition called hypoparathyroidism, is already approved
in Europe; the U.S. Food and Drug Administration is due to decide
soon whether to approve the drug, under the name Natpara.
One risk that Shire could be taking by buying NPS before the
FDA's decision: the agency could potentially limit patient use of
Natpara to two years, which could limit sales. Dr. Ornskov said
Shire reviewed NPS's discussions with the FDA. "We are very
confident in what we've seen, and that was a risk worth taking," he
said.
The acquisition of NPS would be accretive to Shire in 2016 and
is expected to close in the first quarter of this year, Dr. Ornskov
said.
Last week, The Wall Street Journal reported that NPS was looking
for a buyer.
Dr. Ornskov said he believes sales of Gattex's two drugs could
benefit from the bigger heft of Shire's sales force. Shire has
about 100 sales representatives selling its own gastrointestinal
treatments, including Lialda for ulcerative colitis, one of Shire's
top-selling drugs.
Shire, which has a market capitalization of $42 billion,
reported $4.4 billion in total revenue during the first nine months
of 2014.
A Shire-NPS deal suggests 2014's record year of deal-making in
the biotechnology and pharmaceutical industries remains strong in
the new year. In 2014, biotech and pharmaceutical companies
announced deals valued at $265.7 billion, the biggest sum since at
least 2000, according to Dealogic.
Many analysts expect the mergers and acquisitions to continue as
long as debt remains cheap and companies try to reposition
themselves in a changing health-care market.
Write to Jonathan D. Rockoff at Jonathan.Rockoff@wsj.com,
Shayndi Raice at shayndi.raice@wsj.com and Dana Mattioli at
dana.mattioli@wsj.com
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