Shire to Acquire Dyax for Up to $6.5B

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Shire said today it will acquire Dyax for up to $6.5 billion, in a deal that expands the buyer’s rare-disease offerings with Dyax’s portfolio of plasma kallikrein (pKal) inhibitors against hereditary angioedema (HAE), led by the Phase III-ready DX-2930.

Shire agreed to pay approximately $5.9 billion upfront—and possibly an additional $646 million more for Dyax if DX-2930 wins U.S. regulatory approval for the prevention of type 1 and type 2 HAE by the end of 2019—a year after the drug is anticipated to launch.

DX-2930 is a human monoclonal antibody that is expected to enter Phase III clinical trials by the end of this year. The compound has shown proof of concept in a Phase Ib study by reducing the HAE attack rate over 90% in the DX-2930 combined 300mg and 400mg dosing arms compared with patients taking placebo. That study showed 0 attacks in the 300mg group, and 0.045 attacks per week in the 400 mg group, compared to 0.37 attacks per week in the placebo group.

“We see a logical strategic rationale driven by Dyax's Phase III ready DX-2930 for HAE prophylaxis, widely seen as a potential competitive threat for Shire's existing HAE franchise after impressive Phase I data,” Jefferies analysts Peter Welford, CFA, David Steinberg and Tung Huynh wrote in a note to investors this morning.

DX-2930 would join a Shire franchise of HAE treatments that includes CINRYZE® (C1 esterase inhibitor [human]) and FIRAZYR®  (icatibant injection). Shire inherited CINRYZE when it acquired ViroPharma for $4.2 billion in 2013.

“This highly complementary transaction aligns with and accelerates our strategy to build a global leading biotechnology company focused on rare diseases and specialty conditions. It adds to our portfolio of best-in-class therapies addressing unmet needs in our core therapeutic areas, expanding and extending our leadership position in HAE,” Shire CEO Flemming Ornskov, M.D., said in a statement.

During the first three quarters of this year, CINRYZE generated $474.4 million in net product sales, up 32% from the first nine months of 2014, while FIRAZYE racked up $319.8 million, up 22% over the year-ago period. CINRYZE has accounted for 10% of Shire’s total revenue, and FIRAZYR, 9%.

By contrast, Shire projected DX-2930 will generate $2 billion in annual global sales—and contribute to Shire’s publicly-stated goal of achieving $10 billion in product sales by 2020.

“(The) deal makes complete sense to us given Shire's capabilities in area and threat of competition,” Bernstein analysts led by Aaron (Ronny) Gal, Ph.D., wrote in a note to investors this morning. “Given HAE competition was a threat for the stock in the intermediate run, todays deal is an important de-risking step prolonging franchise to beyond the concern horizon (10+ years).”

According to Shire, DX-2930 could expand the HAE market to patients currently untreated with prophylaxis therapy. That expansion, according to Shire, rests with the potential for more convenient dosing in an every other week or once monthly subcutaneous injectable form, as well as the ability to significantly reduce HAE attacks.

DX-2930 has received Fast Track, Breakthrough Therapy, and Orphan Drug designations by the FDA and received Orphan Drug status in the EU.

Dyax already markets an HAE drug, KALBITOR (ecallantide), which generated $51.58 million in the first nine months of this year, up 4.5% from a year earlier. Jefferies estimated that KALBITOR will generate $71 million this year, rising to a projected $129 million by 2020.

Dyax discovered DX-2930 through its phage display discovery platform, an antibody generation technology. In addition to DX-2930, Dyax’ pipeline features early-stage, preclinical, antibody pipeline programs that include DX-2930 for diabetic macular edema; DX-2507, an anti-FcRN for antibody-mediated autoimmune diseases; and DX-4012, an anti-factor Xlla antibody for thrombosis.

Dyax also delivers to Shire revenue generated through a licensing and funded research portfolio that includes the approved drug CYRAMZA® (ramucirumab), marketed by Eli Lilly; and additional product candidates by licensees in various clinical development stages, for which Shire would receive royalties or milestone payments post-approval.

Through the acquisition, Shire will also acquire an extensive LFRP, which includes the approved product CYRAMZA® (ramucirumab), marketed by Eli Lilly & Co. The LFRP includes additional product candidates by licensees in various clinical development stages for which Shire would receive royalties or milestone payments post-approval.

Shire said it anticipates $50 million of potential cost cuts or “operating synergies” starting in 2017 and growing to at least $100 million in 2019 and thereafter, with the buyer citing its development and commercial expertise in rare diseases and M&A.

Shire agreed to pay $37.30 per share cash for Dyax, a 36% premium —plus a non-tradable contingent value right (CVR) that will pay an additional $4 in cash per Dyax share upon FDA approval of DX-2930 for the prevention of type 1 and type 2 HAE, if approved prior to December 31, 2019.

To finance the deal, Shire has secured a $5.6 billion fully underwritten term loan bank facility, in addition to the amount undrawn under its $2.1 billion revolving credit facility. The transaction is not subject to any financing contingency.

The acquisition has been unanimously approved by the boards of both Shire and Dyax, and is expected to close in the first half of 2016. The deal remains subject to approval by Dyax shareholders, as well as customary closing conditions and regulatory approvals.








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