Commentary

Shire Buying NPS Pharmaceuticals, Increasing Presence In Rare Diseases

Dublin, Ire.-based Shire Plc will pay $5.2 billion in cash for NPS Pharmaceuticals, a Bedminster-N.J.-based company that has one rare-disease medication on the market and another one pending approval by the Food and Drug Administration.

“The takeover continues the breakneck pace of deal-making in 2014 in the pharmaceuticals sector, as companies jockey for promising assets amid a wave of new drugs emerging from research laboratories,” observes Reuters’ Ben Hirschler. 

“This is about growth and rare diseases, and it fits hand in glove with our strategy and our franchise,” says Shire CEO Flemming Ornskov, telling Hirschler that he would keep looking for more deals to build the company “into a biotech powerhouse.”

Shire walked away with $1.64 billion in breakup fees in October when a proposed acquisition by U.S.-based AbbVie fell apart after the Treasury Department “reinterpreted longstanding tax principles” governing so called tax-inversion deals, and new legislation was introduced in the House of Representatives that would further curtail the activity, as Bloomberg’s Cynthia Koons and Caroline Chen reported.

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“NPS has just one product on the market and reported $57 million in revenue during its most recent quarter,” reports David Gelles in the New York Times. “Its second product is under review in the United States and Europe. Both drugs are intended not to cure patients, but to improve the quality of their lives.”

The company was founded in 1986 by Dr. Hunter Jackson and Dr. Thomas Parks, “two dedicated research scientists from the University of Utah School of Medicine studying the medicinal effects of spider venom,” according to a timeline on its website. In 1999, it acquired Allelix Pharmaceuticals, “including assets key to the company’s current success — investigational medicines for the treatment of Short Bowel Syndrome and Hypoparathyroidism.”

It underwent a massive restructuring in 2006, as Ben Fidler relates on Xconomy.com, after a treatment for osteoporosis was not approved in the United States. In the following two years, it “[re-invented] itself as a rare disease company with a new strategic outsourcing business model.” 

NPS takes a “patient-centric approach” to “pioneer and deliver innovative therapies that transform the lives of patients with rare diseases worldwide,” according to its mission statement.

Dr. Francois Nader, who holds both a French Doctorate in Medicine and Physician Executive MBA, has been president and CEO of NPS since February 2008. In a statement, he said that the deal with Shire “will accelerate our ambition of creating a world where every person living with a rare disease has a therapy.”

NPS’ Gattex is an injection that treats Short Bowel Syndrome — “a potentially deadly … disorder that diminishes the body’s ability to absorb nutrients and fluids," report Jonathan D. Rockoff, Shayndi Raice and Dana Mattioli in the Wall Street Journal. It costs $376,200 a year and generated $67.9 million in sales during the first nine months of 2014.

“The market for rare-disease treatments is considered attractive, despite a small number of patients, because companies can command prices in the hundreds of thousands of dollars — as is the case with Gattex,” the WSJ story points out. “Sales of so-called specialty drugs are forecast to reach $162 billion in 2018, up from $108 billion in 2013 and $81 billion in 2008, according to Credit Suisse.”

The “timing of the deal is critical,” writes Bruce Horovitz in USA Today. The FDA is scheduled to rule on Natpara, which is used to treat a potentially fatal disorder called hypoparathyroidism, by Jan. 24. It “would be the first treatment marketed for the disease,” Horovitz reports.

“It was worth the risk to move ahead of the FDA’s Natpara decision, Ornskov tells Bloomberg’s Manuel Baigorri, Simeon Bennett and Caroline Chen in a phone interview. “Shire’s due diligence included looking at the correspondence with the FDA and, by moving early, Shire can also help with the drug’s introduction, he said,” they report.

NPS “fits right into what Shire wants to do and where they have infrastructure,” Morningstar analyst Stefan Quenneville tells the Bloomberg reporters.  

“Shire, best known for drugs to combat hyperactivity, was founded in the U.K., but is managed in Boston, headquartered in Dublin, and generates most of its sales in the U.S.,” Jennifer Rankin writes in The Guardian. It markets treatments in the areas of neuroscience, rare diseases, gastrointestinal and internal medicine in more than 50 countries; it’s most familiar brand is probably the amphetamine Adderall XR, which is used to treat ADHD.

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