Shire plc SHPG, which has been looking to acquire Baxalta Incorporated BXLT, has agreed to acquire biotech company Dyax Corp. DYAX for an upfront consideration of about $5.9 billion. Dyax’s shareholders will also receive a non-tradable contingent value right (CVR) worth $4.00 in cash representing an additional $646 million.
The CVR is payable on the FDA approval of DX-2930 for the prevention of type I and type II hereditary angioedema (HAE), before Dec 31, 2019. The acquisition is expected to close in the first half of 2016.
Acquisition to Boost HAE Portfolio
With the Dyax acquisition, Shire is looking to strengthen its position in the HAE market. Shire already has a strong position in this market in the form of Firazyr and Cinryze.
In addition to adding an approved HAE treatment, Kalbitor, to its portfolio, the Dyax acquisition will boost Shire’s pipeline with the addition of DX-2930, a phase III-ready candidate being developed for HAE prophylaxis. DX-2930 has Fast Track, Breakthrough Therapy and Orphan Drug status in the U.S. and Orphan Drug status in the EU. It is expected to enter phase III studies by year end.
Shire will also gain access to some early-stage programs targeting autoimmune diseases, diabetic macular edema and thrombosis as well as Dyax’s proprietary phage display antibody generation technology. Shire will also receive royalties on Cyramza, which is marketed by Eli Lilly and Company LLY.
Other Financial Details
The acquisition is expected to be slightly dilutive to 2016 and 2017 earnings and accretive from 2018 onwards provided DX-2930 gains FDA approval in 2018. The company expects to realize operating synergies of $50 million in 2017, with the figure expected to grow to at least $100 million from 2019 onwards.
Moreover, DX-2930 has the potential to generate annual global sales of up to $2 billion for the HAE indication. Meanwhile, Kalbitor brought in sales of $51.6 million in the first nine months of 2015.
Our Take
The upcoming acquisition of Dyax is in line with Shire’s strategy of strengthening its position in the rare diseases market. We note that Shire has been pretty active on the acquisition front – while the ViroPharma acquisition added Cinryze to its portfolio, the NPS Pharma acquisition will boost Shire’s revenues and complement its gastrointestinal disease portfolio. Shire is currently looking to acquire Baxalta.
Currently both Shire and Dyax carry a Zacks Rank #3 (Hold). A better-ranked stock in the health care sector is Actelion Ltd. ALIOF, carrying a Zacks Rank #1 (Strong Buy).
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