November 2, 2015 / 11:16 AM / 2 years ago

Shire to buy Dyax for $5.9 billion, still wants Baxalta

A sign sits in front of Shire's manufacturing facility in Lexington, Massachusetts July 18, 2014. REUTERS/Brian Snyder

LONDON (Reuters) - Shire Plc (SHP.L) has agreed to buy U.S. rare disease specialist Dyax Corp DYAX.O for about $5.9 billion - and potentially up to $6.5 billion - while still pursuing a five times larger unsolicited bid for Baxalta Inc BXLT.N.

The Dyax deal, the latest in a series of purchases by the acquisitive Dublin-headquartered company, will give it access to the drug developer’s late-stage experimental treatment for a dangerous inflammatory disease that can block breathing.

It comes amid a record wave of deal-making in the broader healthcare sector so far this year, which amounted to $477 billion as of last week, according to Thomson Reuters data.

The offer price of $37.30 per share represents a 35.5 percent premium to Dyax’s closing stock price on Friday.

Dyax shareholders will also get a non-tradable contingent value right potentially worth $4.00 a share, or an additional $646 million, if Dyax’s DX-2930 drug, which could reach the market in 2018, is approved for hereditary angioedema (HAE).

Shares of the U.S. biotech firm jumped about 29 percent to $35.45 at mid-afternoon on Monday, while Shire’s stock in London fell 0.8 percent.

Shire has been locked in a three-month battle to acquire Baxalta, although a drop in its shares has led some investors to suspect that takeover bid - worth $30 billion when it was announced in August - may flounder.

But Shire Chief Executive Flemming Ornskov insisted his group had capacity to do both deals.

”Even with this transaction, we will continue to have the financial firepower to pursue other value-added strategic acquisitions, including Baxalta,” he said.

Ornskov declined to give further details on his strategy for winning Baxalta, which has spurned Shire’s approach.

However, Jefferies analysts said that since Dyax was a debt-funded cash deal there was no direct impact on Shire’s ability to do an all-equity Baxalta acquisition.

EARNINGS BOOST FROM 2018

Dyax already has one HAE drug on the market, called Kalbitor, but its sales totaled only $68 million last year and consensus analyst forecasts do not predict it will exceed annual sales of $100 million, according to Thomson Reuters Cortellis.

By contrast, Shire believes DX-2930 has potential to expand the number of HAE patients treated and achieve annual worldwide sales of up to $2 billion, while enjoying exclusivity beyond 2030.

The new drug will complement Shire’s own existing HAE treatments Firazyr and Cinryze, which are two of its fast-growing products, with combined sales approaching $1 billion.

Given its existing HAE presence, Ornskov acknowledged the deal would be scrutinized by antitrust authorities and he said Shire was already preparing for this.

Shire expects “small” operating synergies in 2016, rising to $50 million in 2017 and growing to at least $100 million in 2019. Adding Dyax is expected to hit earnings slightly in 2016 and 2017 but boost them from 2018.

Shire has secured a $5.6 billion bank loan, which, in addition to the amount undrawn under a $2.1 billion revolving credit facility, will be available to finance the transaction, which is expected to close in the first half of 2016.

Deutsche Bank, Evercore and Morgan Stanley advised Shire, while Centerview Partners acted for Dyax.

Deutsche Bank and Morgan Stanley are also providing Shire with financing for the deal.

Additional reporting by Vidya L Nathan in Bengaluru; Editing by Mark Potter and Greg Mahlich

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