UPDATED: Shire CEO extends deal drive with $5.2B NPS Pharma buyout

Shire may have been dragged on a detour along the way, but it has finally reached its destination with NPS Pharmaceuticals ($NPSP). The Ireland-based drugmaker has snapped up NPS for $5.2 billion, in a deal aimed at beefing up its rare disease portfolio.

Along with NPS Pharma's gastrointestinal drug Gattex (teduglutide), the deal comes with an as-yet-unapproved candidate, Natpara, which would be the first FDA-approved treatment for hypoparathyroidism. The agency is due to decide on Natpara later this month. Apparently, Shire ($SHPG) has enough confidence in that prospect to bet its cash on it. Together, the two drugs are expected to bring in about $1.1 billion by 2019, Leerink Partners analyst Jason Gerberry said Monday.

CEO Flemming Ornskov called the deal "a significant step" toward making Shire a leading biotech. The company's stated goal is $10 billion in sales by 2020, and though Ornskov has said Shire can hit that target without deals, he's also said that growth by M&A is one of the company's strengths. Shire is particularly good at buying companies that beef up its existing specialties and then leveraging its expertise to pump up sales of those bought-in products, Ornskov has said. Since he took the helm in January 2013, the CEO has picked up half a dozen companies.

Shire CEO Flemming Ornskov

"With our global strength and expertise in both rare diseases and GI, Shire is uniquely positioned to drive the continued success of Gattex, and, if approved, commercialize NPS Pharma's pipeline compound Natpara," Ornskov said in a statement. "We look forward to accelerating the growth of the NPS Pharma portfolio based on our proven track record of maximizing value from acquired assets and commercial execution."

Gattex, sold under the brand name Revestive in some markets, treats short bowel syndrome; approved in December 2012, it's an orphan drug that brought in $67.9 million during the first 9 months of 2014. NPS has said it's expecting $350 million in annual sales from the drug. At $295,000 a year, it's certainly priced in the orphan-drug realm, and Shire obviously intends to apply its own marketing expertise in the GI field to push Gattex growth.

And then there's Natpara, which had been up for approval late last year. After an FDA advisory panel voted 8-to-5 for approval, the agency delayed its decision by three months and asked NPS to submit its plans for postmarketing safety. The agency didn't, however, ask for new clinical trials, which was a good sign. Investors have been worried that, if approved, Natpara could be stuck with label restrictions that would limit its sales prospects. If the FDA decision doesn't go NPS Pharma's way, Shire could walk away and pay a "standard breakup fee," Gerberry said in a Monday note. "Success of the deal will ultimately be predicated on Natpara's commercial success," he said.

The deal has been a long time coming. Shire was reportedly in the throes of negotiating the acquisition when AbbVie ($ABBV) came calling last year and put Ornskov's buyout ambitions on ice. Since the AbbVie-Shire engagement fell apart in October, Ornskov has been promising more deals, and NPS Pharma has been one of the buzzed-about prospects. Then, NPS officially put itself up for sale, hiring Goldman Sachs to run an auction.

Finally bagging NPS says something loud and clear about Ornskov's ambitions, Edison Investment Research analyst Mick Cooper said Monday. The deal "serves to underscore that Shire's appetite to become a leading biotech company has only increased since AbbVie walked away," Cooper said in a statement. No doubt Ornskov would agree.

- read the Shire release

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Editor's note: This story was updated with analyst comments.

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