Pharma Giant Shire to acquire Dyax for Up to $6.5 Billion
Wednesday, November 04, 2015
Shire PLC has struck an all-cash deal valued at as much as $6.5 billion for U.S. biotech Dyax Corp., demonstrating the company’s unwavering focus on midsize acquisitions even as it chases a $30 billion deal for rare-disease rival Baxalta Inc.
The London-listed pharmaceutical company said Monday that it will pay an initial $37.30 a share, or a total of $5.9 billion for Dyax, a premium of about 35% to the U.S. biotech’s price at Friday’s close. It has also agreed to pay a potential $4 a share, or $646 million, dependent on approval for Dyax’s experimental drug for hereditary angioedema, a rare and potentially life-threatening disease that causes swelling.
The drug in question, DX-2930, is a long-acting injectable treatment that aims to lower the rate of hereditary angioedema, or HAE, attacks. It recently completed early-stage clinical trials, which showed it reduced attacks by more than 90% in patients who had suffered from two or more flare-ups in the previous three months. U.S. regulators have given the drug various priority designations, meaning it can enter phase-three trials without the intermediate step of a phase-two program. It could be launched in 2018 and bring in as much as $2 billion in peak annual sales, according to Shire. The additional $646 million payment is contingent on DX-2930 winning approval by the end of 2019.
“DX-2930 is a strategic fit within our HAE domain expertise, and we are well-positioned to advance the development, registration, and commercialization of DX-2930 for the benefit of HAE patients,” said Shire Chief Executive Flemming Ørnskov.
Although the Dyax deal is Shire’s biggest to date, topping the $5.2 billion acquisition of NPS Pharmaceuticals Inc. earlier this year, Dr. Ørnskov said the company still has the “financial firepower to pursue other value-added strategic acquisitions, including Baxalta.” The hemophilia specialist in August rejected an unsolicited offer from Shire on the grounds it undervalued the company. Shire’s offer was worth $30.6 billion at the time, but its value has declined significantly amid a rout in biotech stocks, spurred by increasing political and media scrutiny of drug prices and concerns the sector has become overvalued.
At the same time, the Shire chief executive has emphasized he won’t stop pursuing smaller deals while he seeks to acquire Baxalta. Dr. Ørnskov has presided over a string of small-to-midsize acquisitions since becoming CEO 2½ years ago, aimed at bolstering the company’s rare-disease and ophthalmology portfolios, diversifying the company away from its historically dominant hyperactivity business.
Hereditary angioedema has become an important focus for Shire in recent years. Its existing portfolio comprises two medicines: Firazyr, which is injected immediately after an attack, and Cinryze, which is taken by patients on a continuing basis to prevent attacks. Shire acquired Cinryze as part of its $4.2 billion purchase of ViroPharma Inc., a deal that closed last year.
The two drugs are among the fastest-growing in Shire’s portfolio. Revenue from Cinryze increased 29% in the third quarter while sales of Firazyr climbed 25%.
Before the deal, DX-2930 was one of the biggest competitive threats to Shire’s hereditary angioedema franchise, because it is significantly more convenient to take than Shire’s Cinryze, according to Bernstein analyst Ronny Gal. DX-2930 is taken once every two weeks by simple injection, whereas Cinryze is taken twice a week intravenously. Mr. Gal said the deal “makes complete sense given Shire’s capabilities in [hereditary angioedema] and threat of competition.”
Chief Financial Officer Jeff Poulton said he expects DX-2930 to take market share from existing emergency treatments, including Firazyr, as well as other long-acting preventative therapies such as Cinryze. But he added that the overall market is expanding, because 30% to 40% of hereditary angioedema sufferers in the U.S. and the European Union remained undiagnosed. “Even if we have to encounter some cannibalization, that’s manageable,” said Dr. Ørnskov. “We want as a leader in rare diseases to bring the best product to market.”
The deal will also add Dyax’s already-marketed hereditary angioedema treatment Kalbitor, taken after an attack, to Shire’s portfolio. Kalbitor generated $68.3 million in revenue last year, according to company filings. Dyax is also conducting early-stage research into two other drugs, one for autoimmune diseases and another for blood-clotting disorders.
Shire said the transaction would be “slightly dilutive” to earnings in 2016 and 2017, and accretive from 2018, assuming U.S. approval of DX-2930 that year. It also said it could make $50 million in cost savings starting in 2017, rising to at least $100 million a year in 2019 and beyond.
wsj.com
