Shire, the UK’s third-largest drugmaker, has agreed to buy New River Pharmaceuticals of the USA for $2.6 billion in a deal that will give it full control to the heir to its hyperactivity disorder bestseller Adderall XR.
Under the terms of the deal, Shire will pay $64 a share in cash for New River, which represents a premium of around 10% on the latter’s share price on February 16. The deal will be financed through debt and the private placement of new shares which should raise about $800 million and should enhance Shire’s earnings growth from late 2009. The acquisition is expected to close in April.
Shire has entered into the deal allows the firm “to capture the full economic value” of its new attention deficit hyperactivity disorder drug Vyvanse (lisdexamfetamine dimesylate), formerly known as NRP104, the follow-up treatment to Adderall XR (mixed amphetamine salts), the firm's earnings driver which becomes genericised in 2009.
The firms teamed up in January 2005 for Vyvanse before Phase II data were available for the drug and development has moved at such a pace that they received a second approvable letter for Vyvanse from the US Food and Drug Administration in December. Shire plans to launch Vyvanse for the paediatric indication and file a supplemental New Drug Application for the adult indication in the second quarter of 2007 and is confident that “the expected FDA approval will provide a strong and differentiated platform for the successful launch of Vyvanse.”
Shire is also getting access to NRP290 a conditionally bioreversible derivative of hydrocodone which is in Phase II trials to treat acute pain and is intended to be a safer, more abuse-resistant and more effective alternative to currently-marketed opioids.
Shire’s chief executive, Matthew Emmens, said that “this is an important and complementary acquisition that gives us full control of Vyvanse,” and the firm is confident that the final labelling will “differentiate this compound from other ADHD products.” He added that the combined debt and equity financing “enables us to both acquire New River and retain the financial flexibility to make further acquisitions that will continue to drive Shire's growth."
Sales rise 7% driven again by Adderall XR
Shire also announced its fourth-quarter financials which show that net income was flat at $68.6 million, while sales rose 7% to $497 million. Full-year earnings reached $278.2 million compared with a loss of $578.4 million for the previous year, while revenues rose 12% to just under $1.80 billion.
Adderall XR sales in 2006 advanced 18% to $864 million, while the ADHD patch product Daytrana (methylphenidate), which was launched in the USA last June, contributed $25.1 million. As for Shire's non-ADHD products, full-year sales of Elaprase (idursulfase) for Hunter syndrome, launched in August 2006, reached $23.6 million, although turnover from Fosrenol (lanthanum carbonate) for high blood phosphate levels fell 16% to $44.8 million. Replagal (agalsidase alfa) for the treatment of Fabry disease which entered the group's portfolio through its purchase of Transkaryotic Therapies in 2005 contributed $117.7 million to the coffers.
Looking ahead, Mr Emmens noted that as well as Vyvanse, the company is hoping to launch the ulcerative colitis treatment Lialda/Mezavant (mesalazine) and Dynepo (epoetin delta) for anaemia in patients with chronic kidney disease.
The purchase of New River and Shire’s financials went down well with analysts. Navid Malik at Collins Stewart said that in the short-term, the switching strategy will begin for Adderall XR into Vyvanse, which Shire believes will be approved this week, “and will have a competitive label.”
He noted that Shire “had already flagged 2006 as being an investment year” given the large number of products rolling out in the short-term, and added that the company’s “track record for bringing new products to the market is one of the strongest in the industry.”
Mr Malik concluded by saying that the New River acquisition, which also brings in a new platform technology for drug delivery, “makes strong strategic sense” and he reiterated his ‘buy’ recommendation on the shares.