It’s been rumored for awhile that NPS Pharmaceuticals was on the verge of a buyout. So perhaps it’s no surprise that the Bedminster, NJ-based company just cut a $5.2 billion deal with Shire on the eve of the healthcare industry’s biggest annual conference—the JP Morgan Healthcare Conference, which kicks off tomorrow in San Francisco.
Dublin-based Shire (NASDAQ: SHPG) agreed to acquire NPS (NASDAQ: NPSP) today for $46 per share in cash, or $5.2 billion. It’s just a roughly 10 percent premium to NPS’s closing price on Friday, but then again, NPS’s share price has been climbing ever since published reports resurfaced indicating Shire was weighing a bid. Shares traded at $30.47 apiece on Dec. 16, before rumors hit of a potential deal.
A potential Shire-NPS deal has popped up in various media reports for months, particularly since Shire got a $1.64 billion breakup fee after its $55 billion megamerger with AbbVie fell apart in October. It’s a logical fit; Shire develops drugs for rare diseases, and NPS is close to having two FDA approved therapies for such conditions—short bowel syndrome (teduglutide, sold as Gattex in the U.S. and Revestive in Europe) and hyperparathyroidism (to be sold as Natpara if approved by regulators). Gattex generated about $68 million in revenue in the first nine months of 2014.
The deal is the culmination of a lengthy turnaround project at NPS engineered by president and CEO Francois Nader and former CEO Tony Coles (both are Xconomists). The NPS of today looks nothing like the company it was originally founded as. More than two decades ago, it was spun out of the University of Utah to look at the medicinal benefits of spider venom (it was named NPS for “Natural Product Services”). Within a few years, though, it dumped that strategy to develop osteoporosis drugs—a plan it kept for many years, leading to a drug called Preos. Coles was named the CEO of the company in 2005, and shortly thereafter, the FDA rejected Preos, and asked for another clinical trial—one the company couldn’t afford. Coles and Nader then helped engineer a massive restructuring, cutting costs and slashing the company’s workforce significantly.
Coles left in 2008 to run Onyx Pharmaceuticals, but Nader continued NPS’ overhaul. The company was reshaped into a developer of orphan drugs, and has steadily built value. It won FDA approval of its first product, teduglutide, for a rare condition known as short bowel syndrome—resulting from the partial or complete surgical removal of the intestine, trauma, or Crohn’s disease—in 2012 (the drug is also approved in Europe). NPS then bought back the international rights to that drug, as well as Natpara, from Japan’s Takeda Pharmaceuticals. (Takeda had acquired NPS’s international partner, Nycomed, and wasn’t interested in developing rare disease therapies; they didn’t make the cut in a portfolio assessment).
That’s left NPS on the verge of having full ownership of two rare disease drugs, which in biotech, often makes you a target. Lingering questions remain about the commercial potential for Natpara. An advisory panel voted in favor of the hormone, but experts admitted to being “on the fence” about it, and analysts have said the drug would likely have a warning label about the risk of bone cancer. Still, the FDA could approve the drug by Jan. 24.
“Shire shares NPS Pharma’s commitment to patients with rare diseases. We believe that joining our two companies will drive value for shareholders and ensure we continue to transform the lives of patients with short bowel syndrome, hypoparathyroidism, and autosomal dominant hypocalcemia worldwide. I am confident that this transaction will accelerate our ambition of creating a world where every person living with a rare disease has a therapy,” Nader said in a statement. “I would like to thank all of our employees for their continued outstanding contributions and steadfast commitment to the patients we serve.”