A strong finish

Europe sees nearly $6B in deals as 2013 winds to a close

Kelsey Kaustinen
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While some companies might look at the last quarter as a time to quietly wind the year down and prepare for 2014, some firms are ending the year strong with big-ticket deals.
Among them is Shire PLC, which announced Nov. 11 that it would acquire all outstanding shares of ViroPharma stock for $50 per share, for an aggregate deal price of approximately $4.2 billion. The share price represents a 27-percent premium over ViroPharma’s closing share price on Nov. 8, the day before the acquisition announcement, and a 64-percent premium to its unaffected share price of $30.47 on Sept. 12.
The deal is a strong one on several fronts for Shire. The acquisition should be immediately accretive to its non-GAAP earnings per share once complete—which should happen by the end of this year or early in 2014—and Shire is expecting annual cost synergies of roughly $150 million by 2015. ViroPharma brings with it the hereditary angioedema (HAE) treatment Cinryze, which saw sales of $94.6 million in the last quarter. The drug, which is the only HAE treatment that can be taken as a preventative measure, is a strong complement to Firazyr, Shire’s own HAE treatment, which saw sales of $62.6 million last quarter. When added to its other rare disease treatments, Shire expects this transaction will cement a rare disease annual revenue base of $2 billion, which could account for 40 percent of the company’s total revenue by next year.
ViroPharma saw annual revenues of $428 million last year, and is expected to reach revenues in the range of $445 million to $465 million in 2013, with roughly $395 million to $405 million of that amount coming from sales of Cinryze in the United States.
Savvas Neophytou, an analyst at Panmure Gordon & Co., commented in a note to investors that the transaction was “the big deal the market had been waiting for,” calling the acquisition price “an eye-watering multiple but strategically very sound.” It is the largest acquisition for Shire since its $3.6 billion takeover of BioChem Pharma Inc. in 2001.
Morgan Stanley analysts noted that the transaction “cements strategy” for Shire and could increase its earnings per share by 5 percent to 10 percent in 2014 to 2016, while UBS analyst Guillaume van Renterghem temporized that “Cinryze is an attractive drug and the pipeline could provide additional revenues, but the valuation appears demanding.”
Novartis has also cut a deal with an impressive price tag, announcing the divestment of its blood transfusion unit to Grifols, a healthcare products pharmaceutical company based in Barcelona, Spain, for approximately $1.7 billion. The deal is expected to close in the first half of next year.
“The sale of the Novartis blood transfusion diagnostics unit enables us to focus more sharply on our strategic businesses while providing Grifols with a platform for global expansion,” Joseph Jimenez, CEO of Novartis, commented in a statement. “I am especially pleased that the agreement with Grifols provides our associates with an opportunity to join a company that will focus on growing this business aggressively.”
Novartis acquired the blood transfusion diagnostics unit in 2006 with its acquisition of Chiron. Since then it has been part of Novartis Vaccines and Diagnostics, seeing net sales of $565 million in fiscal year 2012—less than 1 percent of Novartis’ top line—and in recent months has been one of the units on the chopping block. The deal provides Novartis with some extra cash, while offering a boost for Grifols, which stands as the world’s third-largest producer of plasma-based therapies. Following the acquisition, diagnostics will comprise 20 percent of Grifols’ revenue, a large jump over the current 4 percent, and annual turnover is expected to grow to roughly $1 billion.
This has been a big year for deals with billion-dollar price tags in Europe. In two of the largest transactions, Irish pharmaceutical company Elan Corp. plc was acquired by Perrigo Co. in late July for $8.6 billion, and in May, Actavis Inc. acquired Warner Chilcott plc for roughly $8.5 billion.

Kelsey Kaustinen

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