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Horizon buys Raptor

Posted on 9 months ago by Gerry Kennedy

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Ireland’s Horizon Pharma ($HZNP) will pay a 21% premium for California-based Raptor Pharmaceutical as it looks to bolster its rare disease portfolio while also expanding its geographical footprint. But it will also gain a tough pipeline that has been hit by failures over the past year.

The deal, which is worth $9 a share--or around $800 million--will see Horizon gain access to Procysbi (cysteamine bitartrate) for the orphan condition nephropathic (kidney) cystinosis, as well as Quinsair, which is licensed in Europe and Canada to help manage chronic pulmonary infections due to Pseudomonas aeruginosa in patients with cystic fibrosis.

The merger will also diversify Horizon’s revenue with 11 medicines across three business units, namely in orphan, rheumatology and primary care--as well as bolstering its rare disease revenue, which in the first 6 months of 2016 was nearly half of Horizon’s total revenue.

The deal should be done by the end of the year. This will be good news to Novato, CA-based Raptor ($RPTP), which last year pulled the plug on its drug for NASH and then said it would be pushing ahead with a pivotal study for a new drug to treat Huntington's even though it failed the primary endpoint in a Phase II/III trial.

“The proposed acquisition of Raptor furthers our commitment to helping people with rare diseases and is a significant step in advancing our strategy to expand our rare disease business,” said Timothy Walbert, chairman, president and CEO of Horizon.

“Along with the potential for accelerated revenue growth, the addition of Raptor strengthens our U.S. orphan business and provides a platform to expand our orphan business in Europe and other key international markets. We look forward to working with new patient communities and building on the success of the Raptor team.”

“This transaction will deliver significant and immediate value to our shareholders through a compelling all-cash premium and provide ongoing value to our patients, their families and the physicians who treat them,” added Julie Anne Smith, president and CEO of Raptor.

Horizon said it will pay for most of the transaction, namely $675 million, through external debt, along with cash on hand for the rest. As of June 30, 2016, the company had $424.5 million of cash and cash equivalents on its balance sheet, it said in a statement, with a market cap of around $2.8 billion.

Horizon was down 1.5% premarket on the news this morning, while Raptor was up 20% premarket to $7.45 a share.