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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.
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.
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"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)
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