Shire acquires ViroPharma for $4.2bn

January 2014 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

Irish drug manufacturer Shire plc has entered into a definitive agreement to purchase ViroPharma Incorporated in a deal worth approximately $4.2bn.

Under the terms of the deal announced on 11 November, Shire will acquire all of the outstanding shares of ViroPharma for $50 per share. The agreed sale price represents a 27 percent premium on ViroPharma’s closing price on Friday 8 November, the last day of trading before the deal was announced. The agreed price also represents a 64 percent premium over ViroPharma’s share price before rumours of the deal first surfaced in September 2013. At the time of writing the deal is still subject to the customary closing conditions, including shareholder and antitrust authority approval, but both companies expect the deal to close in the first quarter of 2014, if not before.

Shire, which is registered in Jersey but headquartered in the Republic of Ireland, was particularly drawn to ViroPharma’s leading product, Cinryze, which is a preventive drug targeted at the hereditary genetic disease angiodema. This rare condition causes attacks of swelling in the limbs and larynx. The disease can be disfiguring, painful and in extreme cases, potentially life-threatening. Shire also produces a complementary drug, Firazyr, designed to help treat acute attacks of the condition, which affects approximately 18,000 people in the US and Europe.

Shire believes that Cinryze will help to lift revenues in its rare disease business to $2bn in 2014. In 2012, Cinryze alone generated sales of $327m, a figure which is expected to rise to $700m by 2018, making it Shire’s third highest selling therapeutic. Shire, best known for drugs that treat attention deficit hyperactivity disorder (ADHD), expects the deal to generate synergies in the region of $150m per year by 2015. In total it is estimated that ViroPharma’s business will add revenues of $831m to Shire by 2018 as a result of the deal. Shire expects to see growth of $2.6bn and total revenues of $7.3bn in 2018. Growth of that magnitude would see the company ranked second overall in the global pharmaceutical rankings; only US drug manufacturer Allergan would lead ViroPharma by market share.

Although Shire has great expectations for the acquisition of ViroPharma, the company is paying a sizeable value for its target – approximately 58 times earnings before interest, tax, depreciation and amortisation (EBITDA). Over the past five years buyers in the biotechnology sector have paid a median of 23 times EBITDA for rival companies in transactions valued at more than $100m.

In a statement announcing the sale Shire’s chief executive Flemming Ornskov noted that the acquisition of the US company will “immediately benefit Shire and is entirely consistent with our clear strategic objective of strengthening our rare disease portfolio. It brings us a new growth driving product which augments our already strong growth prospects. Shire is uniquely positioned to drive the continued success of Cinryze for the benefit of patients through our knowledge of the rare disease space, our international infrastructure and our biologics manufacturing expertise.”

Once completed, the acquisition of ViroPharma will be the third purchase the company has made since Mr Ornskov became Shire’s chief executive in April 2012. The deal is also Shire’s biggest acquisition to date, beating out the group’s $3.6bn takeover of Canada’s BioChem Pharma Inc in 2001.

In recent months Shire has been undertaking a change in direction, moving away from organic research and development and embracing growth via acquisitions. Most notably, in November Shire announced its intention to eliminate a number of its R&D positions and discontinue some of its projects to better focus on its rare disease medicines. Early in November Shire announced that some of its UK research positions would be discontinued, while a portion of the company’s Swiss operations would be moved from Eysins to Zug.

Richard Summerfield