Shire to buy NPS Pharmaceuticals for $5.2B

FBN's Ashley Webster breaks down Shire's $5.2 billion acquisition of NPS Pharmaceuticals.

Shire to Buy NPS for $5.2 Billion to Boost Rare Disease Drugs

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Shire Plc has agreed to buy U.S. group NPS Pharmaceuticals Inc for $5.2 billion, the Dublin-based drugmaker's biggest acquisition yet as it seeks to strengthen its position in the lucrative field of medicines for rare diseases.

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The takeover continues the breakneck pace of deal-making seen last year in the pharmaceuticals sector, as companies jockey for promising assets amid a wave of new drugs emerging from research laboratories, and Shire's chief executive, Flemming Ornskov, told Reuters he would keep looking for more deals to grow the company into a biotech powerhouse.

Shire will pay $46 per NPS share, representing a premium of nearly 10 percent to NPS's Friday close, the two companies said on Sunday.

The move will not come as a huge surprise, since Shire was first linked to NPS in May 2014. When plans for Shire to sell itself to AbbVie Inc fell apart in October, Shire said it could take another look at previous deal prospects and reports of Shire's interest resurfaced in mid-December.

"This is about growth and rare diseases, and it fits hand in glove with our strategy and our franchise," Ornskov said.

Shire expects the all-cash deal to add to its adjusted earnings from 2016 onward. It believes it can achieve cost savings of approximately 25 percent to 35 percent of consensus forecasts for NPS's standalone future operating cost base from 2017.

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Analysts at Jefferies said the deal could boost earnings per share from 2016 by at least 12 percent. Shares in Shire edged slightly lower in morning trade on Monday, however, since the NPS deal is likely to reduce talk of Shire as a takeover target.

CALCULATED RISK

The acquisition of New Jersey-based NPS will give Shire two significant new drugs. Gattex, a treatment for short-bowel syndrome (SBS), is already on the market, while Natpara, for hypoparathyroidism, is awaiting approval from the U.S. Food and Drug Administration.

The FDA is expected to decide on the Natpara application by Jan. 24. "I am confident that Natpara will be approved on the 24th, however ... there is absolutely no guarantee," said NPS's chief executive, Francois Nader. "Given our interactions with the FDA, I believe it will be approved."

Nader called Shire's decision to conclude a deal before a decision a calculated risk on their part that nevertheless "would provide the joint company the opportunity to deploy the most resources in supporting the launch".

The consensus of analysts' forecasts for the two NPS medicines point to annual sales of $509 million and $534 million respectively by 2019, according to Thomson Reuters Cortellis, although Ornskov believes they may bring in more.

"Both of them have significant sales potential and some have mentioned the word 'blockbuster'," he said. The term blockbuster applies to a drug with sales of $1 billion or more.

The drugs treat serious but rare disorders, which means they can command high prices. SBS is a potentially fatal gastrointestinal disorder that can leave patients dependent on intravenous feeding, while hypoparathyroidism is an endocrine disease cause by absent or damaged parathyroid glands.

"ALWAYS CONSIDERING NEXT DEAL"

Shire, which will make a tender offer for NPS shares, has secured an $850 million bank loan which, together with cash reserves and an existing $2.1 billion five-year revolving credit facility, will pay for the deal.

Even though NPS is a record acquisition for Shire, Ornskov expects the deal, which could close in the first quarter of this year, to be paid off quickly.

"We are incredibly cash-generative and this will add to that, so this does not prevent us from considering further deals," he said. "Shire is always considering the next deal."

Shire's coffers were boosted by more than $1.6 billion when it got a windfall break-up fee after AbbVie abandoned its $55 billion takeover deal.

Citigroup and Lazard acted as joint financial advisers to Shire, with Goldman Sachs and Leerink advising NPS.

(Additional reporting by Natalie Grover and Deena Beasley; Editing by Jeffrey Benkoe and Greg Mahlich)