Date: Nov 11, 2013 Author: Trista Kelley and Makiko Kitamura Source: Bloomberg (
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By Trista Kelley and Makiko Kitamura Nov 11, 2013 4:08 PM ET
Shire Plc (SHP) agreed to buy ViroPharma Inc. (VPHM) for about $4.2 billion to gain treatments for rare diseases and ease dependence on its best-selling Vyvanse pill for attention deficit hyperactivity disorder.
Shire will pay $50 a share in cash, 27 percent more than the closing price of ViroPharma on Nov. 8, the Dublin-based drugmaker said today in a statement.
The acquisition gives Shire access to Cinryze, a medicine for the inflammatory condition hereditary angioedema, which complements Shire's Firazyr for the same malady, the company said. The purchase marks the company's third this year under Flemming Ornskov, who became chief executive officer in April, and is Shire's biggest, topping the $3.6 billion takeover of Canada's BioChem Pharma Inc. in 2001.
"This is the big deal the market had been waiting for," Savvas Neophytou, an analyst at Panmure Gordon & Co., said in a note to investors today. The purchase is "clearly at an eye-watering multiple but strategically very sound."
Based on the price of $4.2 billion, Shire is paying about 58 times earnings before interest, tax, depreciation and amortization for ViroPharma, according to data compiled by Bloomberg. Buyers paid a median of 23 times Ebitda for biotechnology companies in transactions valued at more than $100 million in the past five years.
Photographer: Chris Ratcliffe/Bloomberg
Shares Gain
The purchase will add to Shire's per-share earnings immediately after completion, the company said. Shire rose less than 1 percent to 2,822 pence in London trading, giving the company a market value of 15.6 billion pounds ($25 billion). Exton, Pennsylvania-based ViroPharma surged 26 percent to $49.42 in New York.
Medicines for rare diseases, known as orphan drugs, get exclusive marketing rights as an incentive for their development in the U.S. and Europe, while small patient populations mean fewer participants are needed for clinical trials. They've drawn the interest of large pharmaceutical companies looking to fend off a drop in sales as patents on blockbuster drugs expire.
Cinryze treats hereditary angioedema, characterized by reoccurring bouts of severe swelling, which affects about 18,000 patients in the U.S. and Europe. The condition is caused by a flaw in the immune system that leads to rapid swelling of the throat, intestines and other parts of the body. It can be deadly because the swelling can close off a person's airways.
Growth Engine
"With Cinryze, we will add another growth engine to our portfolio," Ornskov said on a conference call, adding that the acquisition will help create a rare-disease business with $2 billion in annual sales. "It's a deal that fits with our strategy of increased focus on high-growth specialty markets, particularly rare diseases."
Shire has been eliminating some jobs and discontinuing projects to better focus on its rare disease medicines. Last week the company announced plans to trim some U.K. research positions and move Swiss operations to Zug from Eysins. Shire shares rose to a record two days earlier, helped by data that showed its Vyvanse pill proved effective for binge-eating disorder.
"They're basically saying, ‘Our research and development does not give us enough return. Let's shrink it and grow by acquisitions,'" Guillaume van Renterghem, an analyst at UBS AG in London, said in an interview. He estimated that today's purchase cost 4.5 times Shire's entire R&D budget.
