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Shire snaps up US partner for $2.6bn

Shire has agreed to buy US partner New River Pharmaceuticals for $2.6bn (£1.33bn) in a deal that gives it a replacement for its top selling drug which goes off patent in two years.
/ Source: Financial Times

Shire has agreed to buy US partner New River Pharmaceuticals for $2.6bn (£1.33bn) in a deal that gives it a replacement for its top selling drug which goes off patent in two years.

But the deal also means the UK speciality pharmaceuticals company is set to become an increasingly attractive takeover target, according to analysts.

Shire, which is paying $64 a share for New River, will finance the deal with $2.3bn of new debt and a share placing that on Tuesday raised $900m. The deal will be earnings enhancing after 2009, the company said.

RJ Kirk, chief executive and founder of New River, is set to receive about $1.3bn as the principal shareholder of the US company with 50.2 per cent of the shares.

Paul Diggle, analyst at Nomura Code, said: "Maybe they should have taken a risk and bought New River earlier. We would have liked the price to be less but in the long run it is definitely a value-creating acquisition."

Shire paid a 10 per cent premium to New River's closing share price of $58.35 on Friday. US markets were closed on Monday.

The deal gives the UK company full control of Vyvanse, New River's drug for attention deficit hyperactivity disorder that still has 17 years of patent protection. It will replace Shire's Adderall XR, which generates more than half of the company's sales but which will fade out once its patent protection expires in 2009.

The US Food and Drug Administration is expected to approve Vyvanse by the end of this week. Shire hopes to launch the drug, which it said would generate $1bn a year in sales, in the second quarter of this year. The US ADHD market, valued at $3.3bn, is growing at 4 per cent a year.

Shire has a healthy pipeline of products and is launching a series of new drugs at a time when the pharmaceuticals industry is struggling to fill its own pipelines. The company's shares have risen almost 90 per cent in the past two years on the back of takeover speculation.

"Shire would be an expensive acquisition at the moment as the company is growing very fast. Finding anybody in Europe that they would fit with is a little bit difficult," Mr Diggle said. "But US businesses would go for them."

Shares in Shire closed 3.7 per cent higher at £11.15 on Tuesday. New River shares rose 8.3 per cent to $63.21 in afternoon Nasdaq trading.