Drug Giant Shire Snaps Up Biotech Dyax for $5.9 Billion
While signalling that it remains interested in Baxalta (BXLT) , Shire has clinched a $5.9 billion deal to buy Burlington, Mass.-based biotech Dyax (DYAX) in its latest attempt to bolster its portfolio of treatments for rare diseases.
Dublin-based Shire failed to snare Baxter (BAX) - Get Report spinoff Baxalta over the summer with a $33.9 billion offer, but reiterated last month and again on Monday that the Deerfield, Ill. company is still on its radar.
In the meantime, it has agreed to offer $37.30 per share for Dyax, or $5.9 billion in total, up front, representing a 35% premium to Dyax's $27.53 closing price on the Nasdaq on Friday.
Another $4 per share, or $646 million in total, could come Dyax shareholders' way if the biotech's key compound, DX-2930, gets approval for use to treat hereditary angioedema, or HAE. That's a rare and potentially life-threatening genetic disease that causes a swelling of the skin and mucous membranes.
DX-2930 is an injectable compound that has been given fast track, breakthrough therapy and orphan drug designations by the Food and Drug Administration. Shire said the drug could achieve annual revenue of $2 billion a year for HAE alone, as CEO Flemming Ornskov described the purchase as a "calculated risk."
Amid concern that the new arrival could cannibalize sales of Shire's existing HAE treatments, particularly Cynrize, Ornskov said the compound would help expand the overall market for HAE treatments, in part by increasing awareness and therefore diagnosis of the condition.
"Cynrize will continue to grow from having new indications, so we have a number of additional opportunities for Cynrize, and we think it is a segmented market," he said on a conference call.
Executives also said they expected DX-2930 as a treatment for HAE to command better gross margins than Cynrize.
In clinching 20-year-old Dyax before its key product is on the market, Shire may have been encouraged by its January agreement to pay $5.2 billion for Bedminster, N.J.-based NPS Pharmaceuticals, which paid off when NPS later that month gained FDA approval for its Natpara treatment for a rare endocrine disorder known as hypoparathyroidism. NPS already had its Gattex injectable treatment for adults with short bowel syndrome on the market, though that drug is now the target of a patent dispute.
"When we look at opportunities in many deals where we don't have approval you have to take a certain amount of risk but tend to do so in areas where we have in-house expertise," said Ornskov.
Shire's agreed £32 billion ($49.5 billion) takeover by AbbVie (ABBV) - Get Report collapsed a year ago after U.S. tax changes caused the bidder to think again.
Shire expects the Dyax deal to generate $50 million of synergies starting in 2017, growing to at least $100 million in 2019.
Shire has secured a $5.6 billion fully underwritten term loan bank facility, to help finance the purchase. It also has $2.1 billion undrawn under a revolving credit facility.
"Even with this transaction, we will continue to have the financial firepower to pursue other value-added strategic acquisitions, including Baxalta," said Ornskov.
Dyax employs 150 staff and had 2014 revenue of $81.7 million and a net loss of $11.7 million It has one approved product, Kalibitor, also for HAE.
In a statement, Dyax President and CEO Gustav A. Christensen said the offer delivers "substantial value to our shareholders and highlights our shared commitment to bringing innovative medicines to patients who suffer from the devastating effects of HAE."
Its shares by late morning were up more than 31% at $36.09.
Shire's shares were down only marginally in London at 4,885 pence.
Executives on the conference call declined to say whether the deal resulted from a competitive process or a unilateral approach.
The transaction is expected to close in the first half of 2016. Hurdles include clearance by Dyax shareholders.