ViroPharma, Inc. (VPHM) , a maker of treatments for rare diseases, saw its stock leap over 25 percent on Monday after long-swirling buyout rumors were confirmed. Irish pharma company Shire (SHPG) is shelling out $4.2 billion, a 27 percent premium, to purchase ViroPharma.
A Premium on a Premium
The spike in ViroPharma’s price comes on top of gains the company already made on a buyout-rumor-fueled run that started in mid-September. Since reports on September 13 indicated interest on the part of multiple firms, the company’s stock rose almost 30 percent. Now, with today’s spike, the gains are nearly at 65 percent.
"Shire has conducted a thorough and collaborative due diligence process over the last few months and, following completion of the transaction, the integration process will be focused on delivering value to all stakeholders," said Shire CEO Flemming Ornskov. "This acquisition is expected to create a $2 billion rare disease revenue base and delivers further strong growth prospects."
The decision to buy ViroPharma for Shire involved paying 7.6 times enterprise value over revenues, but "Given the company's growth characteristics, a premium valuation is warranted in our view," said Panmure Gordon analyst Savvas Neophytou.
ViroPharma Focused on Rare Disease Treatments
ViroPharma’s leading product is Cinryze, a C1 esterase inhibitor for routine prophylaxis against angioedema attacks in adolescent and adult patients with hereditary angioedema (HAE). This is a genetic disorder that causes swelling throughout the body and is both potentially fatal and severely debilitating. The company also sells Vancocin HCI capsules, which are used to treat Clostridium difficile Associated Diseases (CDAD). There is also another CDAD drug, VP20621, is in treatment and development.
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