Shire offers to buy Baxter drug spinoff for $30 billion

AP News
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Posted: Aug 04, 2015 4:29 PM

NEW YORK (AP) — The Irish drugmaker Shire is offering to buy Baxalta for about $30 billion in stock as it attempts to solidify its strengthening position in rare disease treatments.

Shire first made its offer on July 10, a little more than a week after Baxalta was spun off from Baxter International Inc.

Baxalta said Tuesday that the offer is too low and that accepting it would be risky because it is in its early stages as a stand-alone company.

Earlier this year, Shire said it would pay $5.2 billion to acquire NPS Pharmaceuticals Inc., which specializes in drugs for rare conditions. Baxalta, a Deerfield, Illinois, company spun off by Baxter International Inc. in July, focuses on bleeding disorders.

Treatments for rare diseases have become one of the hottest areas of drug industry research in the past several years. The Food and Drug Administration approved a record 17 medicines for rare diseases last year, about one-third of all drugs. Several hundred more are in testing.

The surge is being driven by tax breaks and other government financial incentives, patient advocacy groups raising money to help small companies start research on treatments for their disease, and scientific advances such as the mapping of the human genome, which brought greater understanding of the mechanisms causing gene-based diseases.

Drugmakers expect the medicines to be lucrative for them. For those recently approved, they've been asking sky-high prices: $100,000 up to nearly a half-million dollars for a year or a course of treatment.

While insurance companies have had success in winning deep discounts for super-expensive new drugs, it has also been difficult for them to refuse to cover treatments because for the vast majority of drugs used to treat rare disorders, there are usually no cheaper alternatives.

In a printed statement, Shire said that it made its initial offer to Baxalta Inc. on July 10 and that it implies a value of $45.23 per share, a 36 percent premium.

Shire needs to expand its pipeline. Revenue rose 4 percent to just under $1.56 billion during the second quarter. Product sales, though, were flat.

Shire's lead product is the attention deficit hyperactivity disorder drug Vyvanse and sales rose 18 percent to $424.8 million during the most recent quarter. The company's other ADHD treatment, Intuniv, is now facing generic drug competition, causing sales to plunge.

Shire projects that the combined company could deliver product sales of $20 billion in 2020 while advancing a full pipeline of therapies for rare diseases.

Baxalta had about $6 billion in sales in 2014. Treatments for hemophilia, including Advate, helped drive a 7 percent increase in revenue. Other products include the hemophilia treatment Feiba and the immunodeficiency drug Hyqvia.

The company has several rare disease treatments in development targeting hemophilia, sickle cell anemia , cancer, and psoriasis.

Shares of Baxalta Inc. rose $3.95, or 12 percent, to close at $37.10 on Tuesday. U.S.-traded shares of Shire PLC fell 5.4 percent to $253.60.