NPS Pharmaceuticals, Inc. (NASDAQ:NPSP) could become an acquisition target for Shire PLC (ADR) (NASDAQ:SHPG) (LON:SHP). That's according to a report from the Financial Times, which cited "usually well informed sources."
Shire talking about offering cash for NPS Pharmaceuticals
The report said that Shire PLC (ADR) (NASDAQ:SHPG) (LON:SHP) has been quietly working with a number of advisors and talking internally about possibly making an offer for NPS Pharmaceuticals, Inc. (NASDAQ:NPSP). The amount the drug maker is supposedly considering is a little over $4 billion, which would be approximately $40 per share. That's compared to NPS's current trading price of around $32 per share and the $27.50 per share price earlier today.
The Financial Times reports that the discussions were still in the early stages and could be abandoned because of current events taking place throughout the pharmaceutical industry. In addition, the newspaper said "other sector specialists" claimed that they were unaware of any pending transaction between the two companies.
Shire looks to stand on its own
Some have been questioning whether U.K.-based Shire PLC (ADR) (NASDAQ:SHPG) (LON:SHP) will be able to keep standing on its own. There have been speculations that Allergan, Inc. (NYSE:AGN) could try to buy Shire. Some say Allergan would make an offer in an attempt to block Valeant Pharmaceuticals Intl Inc (NYSE:VRX)'s advances, thus making itself larger and more difficult for Valeant to acquire.
Currently NPS Pharmaceuticals, Inc. (NASDAQ:NPSP) makes treatments and drugs for rare diseases. Its top product is the injectable drug Gattex, which is designed to treat short bowel syndrome. Shire PLC (ADR) (NASDAQ:SHPG) (LON:SHP) is also beginning to become big in the rare diseases segment. The company's $4.2 billion purchase of U.S. drug maker Viropharma last year and its $260 million bolt-on purchase of Lumena Pharmaceuticals have both helped in this respect.
Merger and acquisition frenzy
The pharmaceutical industry has rapidly been consolidating recently. Dealogic data shows a nearly 50% year over year increase in healthcare deals this year, amounting to around $163 billion. That amount is also more than triple the amount of deals that happened in 2012.
Meanwhile Shire PLC (ADR) (NASDAQ:SHPG) (LON:SHP) itself continues to be an attractive acquisition target as well mainly because of its fous on rare diseases and also neuroscience. The company also has a location in the tax haven of Ireland, which would be attractive to U.S. drug makers interested in tax benefits. This was a factor in Valeant Pharmaceuticals Intl Inc (NYSE:VRX)'s proposal to acquire Allergan, Inc. (NYSE:AGN) and other recent deals.
At this point though, Shire PLC (ADR) (NASDAQ:SHPG) (LON:SHP) has grown significantly thanks to the recent acquisitions. Shares of the U.K.-based drug maker have increased by approximately 20%, placing a value of over £20 billion on the company.
Short interest in NPS Pharmaceuticals shoots up
Interestingly enough, short interest in NPS Pharmaceuticals, Inc. (NASDAQ:NPSP) skyrocketed this month, with nearly 11.9 million shares being sold short as of May 15. That's a more than 45% increase from the approximately 8.2 million shares that were sold short as of the end of April. The days to cover ratio is also high at more than four days.