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Shire switches from target to predator with $5.2 billion NPS buy

Shire Plc's U.K. Offices As Drugmaker Rejects Abbvie Inc.'s $46.5 Billion OfferShire Plc's U.K. Offices As Drugmaker Rejects Abbvie Inc.'s $46.5 Billion Offer
Shire has paid a high premium for a kindred spirit in NPS.Photograph by Chris Ratcliffe — Bloomberg via Getty Images

Pharma group Shire Plc (SHP), which spent most of last year being wooed unsuccessfully by Abbvie Inc. (ABBV), has turned predator with the $5.2 billion acquisition of NPS Pharmaceuticals Inc. (NPSP), bolstering its position as a specialist in drugs for treating rare diseases.

In a joint statement, the two companies called the merger “a natural fit”, given that Bedminster, N.J.-based NPS is also focused on rare diseases, cures for which can offer higher margins than drugs for more mainstream conditions. The deal will allow NPS to benefit from Shire’s bigger presence in Europe as it rolls out its drugs there.

Shire, which is headquartered in Dublin for tax purposes, has offered $46 a share, a hefty 51% premium to NPS’s market value at the end of last year. It said the deal will start adding to per share earnings from next year. NPS lost $6.2 million in the first nine months of 2014. Shire is using cash, an existing $2.1 billion credit line and $850 million in new debt to pay for the deal.

NPS currently only has U.S. FDA approval for only one drug–Gattex, a treatment for Short Bowel Syndrome. SBS usually occurs in people who have had a part of their bowel removed by surgery for other complaints such as cancer, Crohn’s disease or, in some cases, obesity. It has been designated by the FDA as a rare disease Gattex is consequently eligible for the higher prices offered under regulations for ‘orphan drugs’ both in the U.S. and E.U. It is being launched in Europe under the name Revestive.

NPS also has another drug, Natpara, for trading hypoparathyroidism (HPT), under review for approval in the U.S. and Europe. HPT is a rare condition in which the parathyroid glands fail to produce enough of the parathyroid hormone, which can a range of physiological problems.

The stock market appeared to think that Shire had paid, if anything, too much for the deal. Its shares in London were up 0.2% in early trading, lagging a 0.6% rise in the broader market.

CORRECTION: the original version of this article confused the conditions “hypoparathyroidism” and “hyperparathyroidism”. The article has now been corrected.