It’s not Baxalta, but Dyax will do nicely for Shire

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With the $5.9bn takeout of Dyax, Shire becomes to the rare disease hereditary angioedema as Biogen is to multiple sclerosis. It will control one prophylactic and two acute treatments on the market, and has just acquired a pipeline project that represents the most serious threat to its second-biggest seller, Cinryze.

Shire says it remains focused on bigger deals, specifically a proposal to buy Baxalta, even as it beefs itself up with this transaction in a bid to fend off hostile buyers. In a counterintuitive way, however, acquiring Dyax only makes Shire a more attractive target as it expands its presence in orphan diseases, with all the favourable pricing and durable sales such a strategy entails.

The deal comes in at $37.30 per Dyax share, with a $4 contingent value right for each one based on approval of DX-2930 by end of December 2019, which would add another $646m in value to the transaction. The up-front price represents a 35% premium on Dyax’s Friday close, which was nearly double its year-end 2014 price based on the performance of DX-2930 in a phase I trial at the end of March (Dyax needs to deliver after surging on phase I data, April 1, 2015).

It cannot be coincidence that the acquisition was announced on the day Dyax was scheduled to host a now-cancelled research and development day; Shire might have anticipated that discussion of a pivotal trial would drive shares even higher. That trial is slated to begin by the end of 2015.

Shire shares were down less than 1% at £48.82 in mid-afternoon trading in London. Shire's point that the transaction is dilutive to earnings in 2016 and 2017, and accretive in 2018 and beyond provided DX-2930 is approved, may have left some Shire investors feeling the company overpaid to discourage predators.

HAE you guys!

Dyax already markets Kalbitor for acute attacks of hereditary angioedema (HAE), which causes swelling in hands, feet, face, airways and internal organs. The plasma kallikrein inhibitor helps bring under control the biological cascade that ends with an overproduction of the vasodilator bradykinin.

Kalbitor, which EvaluatePharma’s consensus forecasts will sell $105m in 2020, is in direct competition with Shire’s Firazyr, which loses patent protection in 2020. Firazyr sales are forecast to peak at $586m in 2018 before shrinking to $504m in 2020.

The greater prize from this transaction, however, has to be the prophylactic project DX-2930, or lanadelumab. This kallikrein-blocking antibody showed that it could reduce the frequency of HAE attacks by 91% over placebo in a 15-week analysis; it is doubtful that the results would be as good in a larger trial with longer follow-up.

Nevertheless, the project looks promising next to Cinryze, which was able to show that in a 12-week trial the mean number of attacks for patients taking it was 6.1 compared with 12.7 for patients on placebo.

Persuading patients to take a preventive agent is a cunning commercial strategy. The US government pays Shire $6,900 per Firazyr injection and Dyax $3,300 per Kalbitor injection, while Cinryze costs more than $400,000 a year per patient, according to data from EvaluatePharma’s Sales, Volume & Price module. If DX-2930 can show superiority to Cinryze in phase III, Shire will no doubt try to charge more.

As far as transformational transactions to fend off buyers go, Dyax is not it. The prized target has been Baxter International biopharma spin-off Baxalta, which so far has spurned all proposals. The offer was made at $30bn, although as shares of both have wobbled, the end price could be lower if made today.

Still, Shire shows off its skills at buying in targeted growth and building franchises. Taking out a larger company like Baxalta is likely to be a messier proposition.

To contact the writer of this story email Jonathan Gardner in London at jonathang@epvantage.com or follow @ByJonGardner on Twitter

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