Shire's $5.9 Billion Acquisition of Dyax Helps Eliminate a Rival

  • Dyax investors to get $646 million more if DX-2930 is approved
  • Target company's DX-2930 may generate $2 billion in sales

Shire Plc, whose $30 billion bid to acquire Baxalta Inc. was rebuffed, is buying biotechnology company Dyax Corp. for at least $5.9 billion in cash to gain a promising treatment for a rare genetic disorder and eliminate a key competitor. Shares of Dyax soared.

Shire will pay $37.30 for each Dyax share, the companies said in a statement on Monday. That’s a 35 percent premium over the stock’s Friday closing price. Dyax investors may also get an additional $646 million if a compound known as DX-2930 receives approval for treating hereditary angioedema, or HAE, a disease that can be debilitating and sometimes fatal.

The acquisition allows Shire to take over a drug that posed a serious threat to Cinryze, its fastest growing medicine, which prevents HAE attacks. Dyax’s DX-2930 will generate annual sales of as much as $2 billion globally and have patent protection and other exclusivity pacts beyond 2030, the companies said. The treatment will start enrolling patients in a late-stage clinical trial by the end of the year.

Shares of Dyax jumped 30 percent to $35.89, the highest in about 15 years, as of 11:37 a.m. in New York trading. Shire fell 0.8 percent to 4,885 pence as of 4:47 p.m. London time. The stock has climbed 18 percent over the past year, surpassing the 14 percent gain in the Bloomberg Europe Pharmaceutical Index.

Boosts Earnings

DX-2930 has won fast track, breakthrough therapy, and orphan drug designations by the U.S. Food and Drug Administration, Shire said on Monday. Cinryze, which cost as much as $630,000 annually in June, is projected to become Shire’s second-biggest drug by 2017, with sales of $735 million that year, according to analysts’ estimates.

“We do think there will be cannibalization of Cinryze,” Shire Chief Financial Officer Jeff Poulton said on a conference call with analysts. The Dyax drug also offers an opportunity to move more patients from androgens, a hormonal treatment, he said.

Shire expects Dyax’s drug will come to market as rates of diagnosis for HAE rise, Poulton told reporters on another call. The drug also has lower costs tied to it, and so will have a “substantially higher” gross margin than Cinryze, he said.

The acquisition will curb Shire’s earnings for two years and then be accretive starting in 2018, assuming that U.S. regulators approve the use of DX-2930 that year. Dyax also sells Kalbitor for the treatment of acute attacks of HAE in patients 12 years of age and older.

Dyax, which is based in Burlington, Massachusetts, canceled a research and development meeting it was scheduled to hold in New York on Monday.

Dublin-based Shire will fund the acquisition, which the companies expect to complete in the first half of 2016, using a $5.6 billion term loan and its $2.1 billion revolving credit facility. The transaction is backed by the boards of both companies, but requires Dyax shareholders’ approval.

“Even with this transaction, we will continue to have the financial firepower to pursue other value-added strategic acquisitions, including Baxalta,” Shire Chief Executive Officer Flemming Ornskov said in the statement.

Shire on Aug. 4 publicly announced its offer to buy Baxalta for about $30 billion in stock to bolster its focus on rare diseases. Baxalta, a business spun off by Baxter International Inc. the previous month, had already rejected Shire’s offer and has continued to rebuff the company since then.

Shire was advised by Deutsche Bank AG, Evercore Partners Inc. and Morgan Stanley as well as law firms Ropes & Gray‎, Davis Polk & Wardwell and Slaughter & May. Dyax worked with Centerview Partners, and Sullivan & Cromwell provided legal advice.

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