How did Shire benefit from the NPS Pharmaceuticals acquisition?

Shire: Will acquisitions and new drugs be enough to drive growth in 2016?

(Continued from previous part)

Acquisition of NPS Pharmaceuticals in 2015

In February 2015, Shire (SHPG) completed the acquisition of NASDAQ-listed NPS Pharmaceuticals for $5.2 billion. Through the merger, NPS Pharmaceuticals, a biopharmaceutical company, provided Shire with access to its key products: Gattex/Revestive and Natpara/Natpar.

Gattex/Revestive is indicated for the treatment of a rare gastrointestinal disorder called short bowel syndrome. Natpara/Natpar is indicated for the treatment of hypoparathyroidism, a rare endocrine disease. Shire expects to achieve operational synergies from the acquisition in early fiscal 2016.

The acquisition allowed Shire to expand its rare disease portfolio. Shire has expertise in gastrointestinal, ophthalmic and neurological medicines. By adding two more drugs to its gastrointestinal portfolio, it can further accelerate sales of these two drugs. In fiscal 2015, Gattex added $142 million and Natpara added $24 million to Shire’s total product sales.

Post-acquisition synergies

According to an NPS Pharmaceuticals press release, “Shire anticipates synergies of approximately 25-35% of the Street consensus forecast for NPS Pharma’s standalone future operating cost base from 2017.” NPS Pharmaceuticals has a presence in the United States, Canada, Latin America, Europe and Japan.

Historically, companies that have grown inorganically include: Sanofi (SNY), Valeant Pharmaceuticals (VRX) and Mallinckrodt (MNK). Sanofi acquired Genzyme to gain access to its rare disease portfolio. Valeant acquired Salix Pharmaceuticals to gain access to Xifaxan, its gastrointestinal product. Mallinckrodt, with an acquisition-investment strategy, acquired Recothrom, PreveLeak and Raplixa from Medicines Company. These products are topical hemostatic drugs in the commercial phase.

To gain equity exposure but avoid the risk, you could invest in an ETF like ProShares Ultra Nasdaq Biotechnology (BIB), which holds 1.2% of Shire.

Let us now take a detailed look at Natpara and Gattex and their market opportunities.

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