More Rare Disease Dealmaking to Follow Horizon's Raptor Deal

Though Horizon Pharma plc's (HZNP) $800 million purchase of Raptor Pharmaceutical Corp. (RPTP) is pegged by some as an expensive deal for the rare-disease drug company, it's a nice strategic fit and leaves the company with the flexibility to continue its aggressive M&A strategy, CEO and Chairman Tim Walbert told The Deal, a sister publication of TheStreet, on Monday. 

"We are very disciplined and very critically focused on becoming a rare disease company," Walbert said by phone. "Six of our last seven medicines we have acquired have been in rare disease and put us in a great position to do the next transaction." 
 
With increasing deal capacity and cash generation expected to continue, Horizon will look at both larger transactions—those which the company would consider doing using different creative financing structures—as well as acquisitions of Phase 3 or pre-approved assets.
 
For its latest purchase, Horizon said Monday that it would pay $9 a share for Novato, Calif.-based Raptor, or a premium of nearly 21% over the target's most recent price of $7.45 before its share's suspended trading. 
 
Raptor's lead drug candidate is Procysbi, which treats a rare metabolic disorder called nephropathic cystinosis. It also markets Quinsair for cystic fibrosis-related lung infections. 
 
Having spent more than three years on Raptor's board beginning in 2011, Walbert said his dialogue with the target's CEO, Julie Anne Smith, his relationships with Raptor directors, and insight into the company, paired with Horizon's existing metabolic disease platform, positioned it as a natural buyer. 
 
More specifically, Walbert explained that Procysbi strategically aligns with Ravicti, the drug that treats children and adults with urea cycle disorders, which Horizon inherited through its $1.1 billion acquisition of Hyperion Therapeutics Inc. last year.
 
EDITORS' NOTE: A version of this article was originally published by The Deal, a sister publication of TheStreet that offers sophisticated insight and analysis on all types of deals, from inception to integration on Monday, Sept. 13. Click here for a free trial.

  

The sale of Raptor comes as little surprise given rumors earlier this year about its possible sale, not to mention the fact that the company had tapped a banker to explore a transaction. Even so, the $9 per share price tag is notably higher-than-anticipated, David Nierengarten of Wedbush Securities Inc. said by phone Monday.
 
Based on his prior analysis, the analyst had projected a sale of the company would fetch no more than $7 a share.
 
"Horizon is seeing something there that we're not," he said.

That's likely a factor of management's higher-than-expected peak sales estimates of $300 million for Procysbi, Nierengarten suspects. 

"They're [Horizon] presumably thinking they can raise its price and find more patients," Nierengarten said. "I think that's a bit of a stretch. I think the population is already known."

While officials with Raptor declined to comment on Monday, Nierengarten said a sale of Raptor made sense after the failure of its trial last fall evaluating its drug for non-alchoholic steatohepatitis (NASH) in children. 

For Dublin-based Horizon, the acquisition comes in the wake of the company in November withdrawing its $3.4 billion bid for Depomed Inc. (DEPO) after a judge in the Superior Court of California for the County of Santa Clara in San Jose issued a preliminary injunction suspending Horizon's proposed exchange offer and proxy contest for the Newark, Calif., target.

Just weeks after backing out of the deal, the drugmaker announced an all-cash deal to acquire Crealta Holdings LLC, a marketer of gout treatment Krystexxa, for $510 million.

Horizon, formerly based in Deerfield, Ill., moved to Dublin through a $660 million merger with Irish drug company Vidara Therapeutics International Ltd. completed in September 2014. The company maintains operations in Lake Forest, Ill. 

David Marcus contributed to this report. 

EDITORS' NOTE: A version of this article was originally published by The Deal, a sister publication of TheStreet that offers sophisticated insight and analysis on all types of deals, from inception to integration on Monday, Sept. 13. Click here for a free trial.

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