Shire bolsters rare disease focus with deal to buy NPS Pharmaceuticals for $5.2 billion

Shire announced Sunday a merger agreement under which it will acquire NPS Pharmaceuticals for $46.00 per share in cash, or approximately $5.2 billion, boosting its focus on rare diseases. The transaction, which has been unanimously approved by the boards of both companies, is expected to close in the first quarter.

Flemming Ornskov, Shire's CEO, noted that NPS has "a rare-disease focus and in addition it builds on our strong expertise in gastrointestinal diseases. So it's a strategic fit, growth enhancing, and we can afford it. It ticks almost all the boxes." He added that the drugmaker will look "to drive the continued success" of NPS' Gattex (teduglutide), which is approved in the US and Europe, where it is sold as Revestive, to treat adults with short bowel syndrome who are dependent on parenteral support. The product generated sales of $67.9 million in the nine months ending September 30, 2014.

NPS is awaiting FDA approval for hypoparathyroidism treatment Natpara (rhPTH[1-84]). An advisory panel recommended approval of the drug in September 2014, but later extended its review of the application by three months to January 24. Ornskov remarked that "based on what we saw in the regulatory filings and with the correspondence with the FDA, we feel confident that it is a risk worth taking." He added that "what was absolutely key for us was to get in as early as possible."

Analysts expect the two NPS drugs to reach annual revenues of $509 million and $534 million, respectively, by 2019, although Ornskov believes they may bring in more. "Both of them have significant sales potential and some have mentioned the word 'blockbuster,'" he noted.

The price of the acquisition represents a 51 percent premium to NPS' share price on December 16, the day before sources suggested that Shire was considering a bid for the company. For related analysis, see ViewPoints: Spurned by AbbVie, Shire may be looking to get back to its roots by buying NPS.

According to Shire, the purchase is expected to be accretive to earnings from 2016 onward. The drugmaker added that it will "realise operating synergies" beginning in 2016 and growing "substantially thereafter."

Commenting on the news, Morningstar analyst Stefan Quenneville said NPS "fits right into what Shire wants to do and where they have infrastructure," but added that "it's a full price for two commercially unproven assets."

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