Why Shire Will Pay a Premium for NPS Pharmaceuticals

Shire is buying NPS Pharmaceuticals for $5.2 billion in the first major deal of 2015. You may recall Shire received a lot of press last year for its planned inversion with AbbVie.

U.S.-based Abbvie planned to acquire Shire primarily for tax reasons, however the deal fell apart and as a result Shire received a breakup fee of $1.6 billion from Abbvie.

After Abbvie abandoned the deal in October last year, Shire had a fair amount of cash and was still in a vulnerable situation. At the same time the company was looking for ways to expand its growth so this transaction doesn’t come as too much of a surprise.

It is interesting, however, to note the premium Shire is willing to pay for NPS, which only earned $157.4 million in the first nine months of 2014. Shire is hoping through the acquisition to get more products, in particular rare disease drugs that have a higher value add and hopefully better reimbursements.

In 2015 you’ll be seeing more healthcare deals and companies continue to consolidate. Pharmaceuticals are struggling to fill their pipeline, especially as they come off a patent. While others in the healthcare space are still figuring out the how changes in reimbursements will affect their business. This is the first of many more healthcare deals.