Shire CEO – Almost Ideal Timing for NPS Deal

January 20, 2015
Casey McDonald

Casey McDonald is Senior Editor, Pharmaceutical Executive.

Fresh off Shire’s announcement to purchase NPS, CEO Dr. Flemming Ornskov sat down with PharmExec in San Francisco during the JP Morgan Healthcare Conference.

Fresh off Shire’s announcement to purchase NPS, CEO Dr. Flemming Ornskov sat down with PharmExec in San Francisco during the JP Morgan Healthcare Conference.

Shire’s play to acquire New Jersey-based NPS Pharma comes at nearly ideal timing for the Dublin, Ireland-headquartered firm, explained CEO Dr. Flemming Ornskov in San Francisco, during the week of the 33rd Annual J.P. Morgan Healthcare Conference.

The deal was announced on January 11, likely the travel day for many making the trip to the bay area, adding to the optimistic buzz of the conference that deals were in a flurry even before the carnival started.

NPS was a desirable asset for a long period of time, and it “ticks all our boxes,” said Ornskov.  “When we get serious, I place a call to their CEO, and then after that, we act quickly,” added Ornskov. “I think we paid a fair price,” noted the CEO. “You always have to be careful when there are bargains, because there’s probably good reasons. This is not a bargain. I like to pay even a bit more if it’s a high quality asset.”

Worse for timing would have been if both key assets had been approved and further along their launches giving Shire little opportunity to influence, the CEO explained.

NPS launched Gattex/Revestive (teduglutide) for short bowel syndrome (SBS), in the US in 1Q13 and Europe in 3Q14. Its second compound, Natpara/Natpar (recombinant parathyroid hormone) treating hypoparathyroidism (HPT) had a positive (8 to 5) advisory committee hearing.

Shire, with its considerable scale resources will have significant impact on both the launch of Gattex, a year in, and Natpara, he said. “Everything shows that the launch trajectory is decided within the first year and six to nine months,” he said. “So we’re a little bit at the tail end for the US launch of Gattex, but certainly at the beginning of its international launch.” For Natpara, they could be in the initial phases of the launch, and once we own it, hopefully soon, we’ll apply the same rigor as in the past.”

Abbvie’s Impact on Timing

The overtures from AbbVie “delayed our ability to do anything on NPS,” said Ornskov. The firm likes to have an influence over timing, but “we were distracted for a period,” he added. Though not ideal, the timing is still good, he said.

Much of 2014 was occupied by the highly controversial and politically confounded tax inversion deal, which would have seen AbbVie buy Shire for $55 billion. AbbVie announced that it had terminated the proposed transaction in an October 20 press release where it stated that the decision was based on September notice from the US Department of Treasury “which re-interpreted longstanding tax principles in a uniquely selective manner designed specifically to destroy the financial benefits of these types of transactions”.

The decision also incurred a break up fee, in which North Chicago-headquartered AbbVie agreed to pay Shire approximately USD$1.635 billion.]

PharmExec noted the tax-inspired appeal of the deal in June, highlighting the fact that tax saving on cash flows from Humira alone could add to $8 billion over 15 years, had the deal gone through.

Strategy of the deal

The NPS deal is right on strategy, noted Ornskov. First, the firm will be able make the deal accretive in 2016 and will be able to make it have synergies from 2017 onwards. Second, gaining NPS’ products and pipeline assets dramatically improves Shire’s product offerings, as it adds another later stage clinical asset, which is very close to potential approval, not to mention another asset in Phase 2. Third, NPS’s assets fit right in with Shire’s strategy to focus on rare diseases and also leverage our GI capabilities, he added.

Ornskov’s points for the deal coincide with his overarching strategy to streamline and improve profitability, improve the depth and breadth of Shire’s pipeline, and to aspire to become the leading biotech focusing on rare diseases while not losing expertise for areas like GI and neuroscience. After his hire, Ornskov described his three-year plan to PharmExec in August 2013.

NPS Employees?

As far as NPS’ employees, “The good news is that we hired 1000 people last year, so anyone that’s good is on our hit list,” the CEO said. “Shire is open,” he added, “regardless of what you did at NPS, if you want to join a fast growing, cool company, take a look.”

“I imagine, a lot of NPS workers will move on, but we will have space for quite a number of them, he said. “Whether in research or medical affairs, our arms our open,” he added.

Shire likes fact that NPS is also focused on patients, added the CEO. Our patient focus, should make it easier for NPS employees to see Shire as an attractive work culture.

What Shire will be very careful about touching, is NPS’s commercial and customer facing infrastructure, as well as their medical and regulatory staff who are working on extremely important approvals.

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