NPS Pharma — a suitable fit for Shire? | FT Alphaville

NPS Pharma — a suitable fit for Shire?

Seeking to secure its own independence as M&A activity — whether real or rumoured — continues to convulse the pharma sector, Britain’s Shire is believed to be considering a bid for New Jersey-based NPS Pharmaceuticals, a rare disease specialist.

According to usually well informed sources, Shire has been working quietly with advisers and held internal discussions about a potential cash offer for NPS, valuing the US business at just over $4bn. That would imply a bid pitched at around $40 a share,compared with NPS’s $27.50 market quote on Nasdaq on Friday.

However, the sources cautioned that any deal was at an early stage and might be shelved, given events elsewhere in the sector. Furthermore, other sector specialists claimed no knowledge of any pending transaction.

Shire’s own independence was once again called into question in April when Valeant first unveiled its $45bn bid for Botox specialist Allergan. That had sparked speculation that Allergan might move on Shire in an attempt to block Valeant’s hostile intentions.

NPS, which recently celebrated its 20th anniversary, specialises in developing drugs and treatments for rare diseases. Its lead product is Gattex, an injected drug that helps digestion for patients suffering short bowel syndrome.

Shire is also growing in rare diseases – a push that was accelerated by the $4.2bn acquistion of Viropharma, another US drugmaker last November and more recently the bolt-on purchase of Lumena Pharmaceuticals for around $260m.

Shire’s chief executive Flemming Ornskov has promised further deals as he looks to reduce the company’s dependence on Vyvanse, the drug that has made Shire a leader in the treatment of attention deficit hyperactivity disorder, or ADHD.

A spokesperson for Shire said “the company does not comment on rumor or speculation.”

Shire’s reputed interest in NPS comes against a backdrop of widespread deal-making across the healthcare industry. Some $163bn worth of healthcare deals have been proposed so far this year, according to Dealogic, up almost 50 per cent from last year and more than three times the level of 2012.

Shire, which earlier this year appointed Credit Suisse investment banker Susan Kilsby as chairman, is often cited as attractive takeover target for larger peers because of its growing presence in neuroscience and rare diseases.

Its Irish tax domicile would be attractive to American drugmakers looking to shelter offshore earnings from the US taxman – a factor behind several deals in recent months.

However, since Shire completed the tender offer for Viropharma January its share price has risen by around 20 per cent and the company is now valued at more than £20bn.

Mr Ornskov has steadfastly refused comment on what he has described as the “merger frenzy” in the pharmaceuticals sector.

“My perspective is to focus on growth and profitability,” he told Reuters earlier this month. “That’s what I can control and will continue to focus on.”

The Shire boss said he saw growth coming from two sources: the company’s product pipeline and mergers and acquisitions. But he said size was not the main factor in assessing potential deals.

“It’s really, do we think the compounds in the pipeline or on the market would bring significant innovation and value?,” he said after the company reported first quarter results, “And would we be the best owner of these assets from a patient perspective, from an innovation perspective and an efficiency perspective?”