Shire May Have Another Winner in Purchase of Jerini

| About: Shire PLC (SHPG)

Shire (SHPGY) and its well known acquisition strategy are at it again, this time buying Berlin-based, Jerini for $521.2M (a 71% premium).

The rationale for the deal was the addition of Firazyr, an orphan drug treatment for hereditary angioedema [HAE], which received a not approvable letter from the FDA in April but has an EU launch scheduled for the second half of the year.

The company puts Firazyr potential sales (with a patient population of around 10,000) at $350 million to $400 million over the next decade, including sales in the US (projected to be ~1/3 of total). Shire is confident that they will have FDA approval for Firazyr by years end. The drug failed the first of two phase 3 trials but did hit the endpoint in the recently concluded second trial.

Shire CEO Angus Russell said:

‘The proposed acquisition of Jerini would bring to Shire a new drug that is highly complementary to our HGT portfolio… Consistent with our strategy, Firazyr is a product which satisfies a high unmet medical need and treats a morbidly symptomatic disorder. With orphan designation in both Europe and the U.S., and a launch in Europe in the second half of this year, the acquisition will bring near term revenues as well as contribute to Shire’s longer-term growth.’

Some analysts have grumbled that the 71% premium was too high but I’m going the other way on this and siding with Shire.

The combination of Jerini needing cash and the FDA issuing a not approvable letter drove the stock down more than 60% in April. I’d love to see the numbers on this but I have little doubt (with US approval) that the NPV is positive on this deal.

In these deals, money is often the only thing people talk about but the fact is, Shire is royalty when it comes to marketing and selling diseases to small patient populations (see Elaprase for Hunter Syndrome and Replagal for Fabry) and that experience counts.

I think Shire has another winner on it’s hands.