London-listed biopharmaceutical company Shire has struck a deal to buy Dyax, an American biotech company for $5.9bn. Post the deal, Shire will be the world's biggest manufacturer of rare disease drugs by sales.
Dyax, having achieved a breakthrough in a rare disease treatment, seemed attractive to Shire as its products would have otherwise rivalled directly with portions of the London-listed company's portfolio. The drug, codenamed 'DX-2930', has completed its early-stage trials. In July, it was fast-tracked for approval by the US FDA (Food and Drug Administration). If the drug manages to get all approvals, it could achieve annual sales of up to $2bn.
The UK company which has arranged a $5.6bn loan to finance the deal is paying $37.30 per share in cash. Dyax shareholders, however, will be entitled to receive an additional $4 in cash per share if the DX-2930 gets approvals from regulators. The deal would dilute Shire's balance sheet in 2016 and 2017 but lift its earnings in 2018, Flemming Ornskov, CEO at Shire, said.
The acquisition will allow Shire to take control of the late-stage testing of the breakthrough drug which could potentially be its most valuable drug as well. The drug is aimed at treating hereditary angioedema, a rare disease that attacks the immune system.
"I like to buy things so we can shape Phase-3 [late-stage testing] ourselves and create the best profile for the product. Dyax is a great company, but we have a bigger global reach to get the full potential from this product." Ornskov said.
Jeffries analysts had earlier opined that the DX-2930 had the potential to eat into the revenues of a Shire drug called Cinryze to such a large extent that it could wipe off as much as 8% of the UK company's earnings per share. Other acquisitions of Shire this year include a $5.2bn takeover of NPS Pharmaceuticals in January and a $300m acquisition of an eyecare treatment business in August. Shire remains acquisitive even after the Dyax deal, Ornskov said.
The deal comes at a time when the M&A activity in the pharmaceutical industry seems to be at its highest levels supported by factors such as availability of cheap debt, an eat-or-be-eaten mentality among midsized companies and emergence of experimental treatments.