The 2015 NPS Pharmaceuticals acquisition
In February 2015, Shire (SHPG) completed its acquisition of NASDAQ-listed NPS Pharmaceuticals for $5.2 billion. Through the merger, NPS Pharmaceuticals, a biopharmaceutical company, gave Shire access to its key products: Gattex/Revestive and Natpara/Natpar.
Gattex/Revestive is indicated for a rare gastrointestinal disorder called short bowel syndrome. Natpara/Natpar is indicated to treat hypoparathyroidism, a rare endocrine disease. Shire expects to experience operating synergies from the acquisition in early fiscal 2016.
The acquisition enabled Shire to expand its portfolio in rare diseases. Shire has expertise in the field of gastrointestinal, ophthalmic, and neuroscience drugs. With the addition of two more drugs in its gastrointestinal portfolio, it can further accelerate sales for these two drugs. In fiscal 2015, Gattex added $142 million and Natpara added $24 million to Shire’s total product sales.
Synergies after the acquisition
According to an NPS Pharmaceuticals news release, “Shire anticipates synergies approximating 25-35% of the Street’s consensus forecast of NPS Pharma’s standalone future operating cost base from 2017 onward.” NPS Pharmaceuticals has a presence in the United States, Canada, Latin America, Europe, and Japan.
Historically, companies that have grown inorganically include Sanofi (SNY), Valeant Pharmaceuticals (VRX), and Mallinckrodt (MNK), to name a few. Sanofi acquired Genzyme to access its rare disease portfolio. Valeant acquired Salix Pharmaceuticals to gain access to Xifaxan, its gastrointestinal product. Mallinckrodt, with an acquire-to-invest strategy, acquired Recothrom, PreveLeak, and Raplixa from the Medicines Company. The products are commercial-stage topical hemostasis drugs.
To gain exposure to equity but at the same time avoid the risk, you can invest in an ETF such as the ProShares Ultra Nasdaq Biotechnology (BIB), which holds 1.2% in Shire.
Next, let’s take a detailed look at Natpara and Gattex and their market opportunities.