Horizon sets out to acquire Raptor for $800 million

Horizon Pharma frames the move as a ‘further step in building leading rare disease business’

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DUBLIN, Ireland & NOVATO, Calif.—Back in April in an article for the Motley Fool website, Rich Smith noted that investment bankers had been secured by Raptor Pharmaceutical Corp. to look into a possible sale of the company. At the time, he pointed out that potential buyers abounded—Shire, Allergan and Horizon Pharma among the ones he focused on—but wondered whether any of them would want to buy the company.
As he noted, Raptor wasn’t profitable, though he wrote that didn’t necessarily have to be an obstacle, “as Raptor has a decent pipeline of products in development, and an established business to boot, bringing in $94 million in annual revenue.”
Well, we got an answer to the question on Sept. 12 when Horizon Pharma plc and Raptor Pharmaceutical Corp. announced that the companies had entered into a definitive agreement—expected to close in the fourth quarter of this year—under which Horizon Pharma will acquire all of the issued and outstanding shares of Raptor common stock for $9 per share in cash, which comes out to an implied fully diluted equity value of about $800 million.
As George Budwell recently wrote for the Motley Fool in analyzing this news, “By acquiring Raptor, Horizon will add to its portfolio of orphan drugs the nephropathic cystinosis (a rare metabolic disorder) treatment Procysbi and the cystic fibrosis medication Quinsair.
“Although this acquisition will reportedly add $675 million in debt to Horizon's already highly levered balance sheet, it is expected to be accretive to the company's adjusted EBITDA in 2017. But perhaps most importantly, this deal shows that Horizon is indeed serious about transforming into an orphan drug company in order to put the headwinds surrounding the specialty pharma drug pricing controversy behind it.”
Much the same is clearly on the mind of Horizon Pharma management as well, with Chairman, President and CEO Timothy P. Walbert, saying “The proposed acquisition of Raptor furthers our commitment to helping people with rare diseases and is a significant step in advancing our strategy to expand our rare disease business. Along with the potential for accelerated revenue growth, the addition of Raptor strengthens our U.S. orphan business and provides a platform to expand our orphan business in Europe and other key international markets.”
In addition to bringing in Procysbi and Quinsair, the acquisition would help diversify Horizon’s revenue with 11 medicines across three business units: orphan indications, rheumatology and primary care. It would also help boost the company’s rare disease revenue, which in the first half of 2016 on a pro-forma basis was already 45 percent of total Horizon revenue.
Procysbi is a cystine-depleting agent given every 12 hours that is approved in the United States for the treatment of nephropathic cystinosis, a rare metabolic disorder, in adults and children 2 years of age and older. The compound received European Commission approval as an orphan medicinal product in September 2013 for the treatment of proven nephropathic cystinosis. Quinsair is a proprietary inhaled formulation of levofloxacin, approved in the European Union and Canada for the management of chronic pulmonary infections due to Pseudomonas aeruginosa in adult patients with cystic fibrosis. Quinsair is not approved in the United States.
“This transaction will deliver significant and immediate value to our shareholders through a compelling all-cash premium and provide ongoing value to our patients, their families and the physicians who treat them,” said Julie Anne Smith, president and CEO of Raptor.
Raptor’s previously disclosed total net sales guidance for full-year 2016 is $125 million to $135 million, which includes both Procysbi and Quinsair.

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