21st Apr 2005 13:50
SHIRE TO BUILD ON SPECIALTY PORTFOLIO THROUGH ACQUISITION OF TRANSKARYOTIC THERAPIES INC. FOR $1.6 BILLION Basingstoke, UK and Wayne PA, US - April 21, 2005 - Shire Pharmaceuticals Groupplc (LSE: SHP.L; NASDAQ:SHPGY; TSX:SHQ) ("Shire") announced today that it hassigned a definitive agreement to acquire Transkaryotic Therapies, Inc. (NASDAQ:TKTX) ("TKT") in an all cash transaction valued at $37 per outstanding TKTshare, or approximately $1.6 billion. The acquisition is consistent withShire's strategy and highly complementary to Shire's business model to developand market products for specialty pharmaceutical markets. * Strong strategic and business fit * + Products sold by small, focused sales forces working with specialist physicians + Builds on Shire's European and US specialty sales and marketing capabilities + Leverages Shire's experience in renal and hematology + Relatively low risk development pipeline: enzyme-related drugs have a high success rate in reaching the market * Adds two approved products, REPLAGAL¢â€ž¢ and DYNEPO¢â€ž¢, and two late- stage clinical development products, Iduronate 2 sulfatase (I2S) and GA-GCB * Attractive market dynamics * Areas of high unmet medical need * Limited number of competitors * Enzyme replacement therapy (ERT) market - orphan drug status available * Expected to significantly enhance Shire's medium and long-term product sales and earnings per share (EPS) growth * + Expected to be cash EPS and US GAAP EPS neutral in the second full year of ownership post closing * TKT's capabilities and skill-sets expected to bring significant value to the combined organization Shire Chief Executive Officer, Matthew Emmens, said:"This is an important and complementary acquisition that delivers on ourstrategy and brings to us a new, sustainable area of specialty pharmaceuticalexpertise in a market where there are only a small number of players. We expectthat TKT's protein-based drugs and clinical development pipeline based on aproven technology platform will enable us to diversify and broaden our revenuebase while continuing to grow our profits and further build our pipeline andplatform for growth. We believe that this acquisition positions us well for thenear and long term. We are looking forward to the prospect of working with ournew colleagues from TKT."Shire continues to perform in line with the guidance given at its preliminaryresults announcement on March 2, 2005 and will announce Q1 results on April 29,2005."Chief Executive Officer of TKT, David D Pendergast, Ph.D., said:"We are extremely gratified that Shire has recognized the value of our businessand the dramatic progress we have made, particularly, in the last two years. Webelieve the substantial resources and capabilities of Shire can accelerate thecommercial opportunities of our products and future product candidates."IntroductionTKT is a US-based biopharmaceutical company researching, developing andcommercializing therapeutics primarily for the treatment of rare geneticdiseases caused by protein deficiencies. TKT currently has one marketedproduct, REPLAGAL; a second product approved for marketing, DYNEPO; andmultiple additional products in various stages of development. TKT is quoted onNASDAQ with the ticker, TKTX.Strategic Rationale for the AcquisitionStrong strategic and business fitBoth companies utilize small, specialized sales teams, which interact withspecialist physicians. Importantly, TKT will expand Shire's revenue generationin Europe and benefit from Shire's experience and sales teams in the renal andhematology areas.Like Shire, TKT provides specific disease area expertise, a high qualityproduct portfolio and a low-risk, well-balanced development pipeline with twoattractive late-stage products. In addition, the ERT market provides a goodplatform for further expansion through research and product in-licensing. TKT'sproduct development is driven by its search for missing enzymes to develop intomedicines for affected patients. Like Shire, it does not conduct high riskdiscovery research and medicines for ERT generally benefit from fastdevelopment timelines.Shire has successfully commercialized specialty products through an establishedinfrastructure in the major pharmaceutical markets of North America and Europeand it expects to leverage this capability to realize the full potential ofTKT's product portfolio. Furthermore, Shire has the financial capability toaccelerate the development of TKT's pipeline.The acquisition of TKT will allow Shire to diversify its revenue base andexpand its specialty expertise into ERT. Enzyme disorders are relatively lowrisk drug development areas as the mechanisms of action are well established.Consequently, enzyme-related drugs have a high success rate in reaching themarket. Most ERT drugs operate in niche areas with high unmet medical needs andqualify for orphan drug status.TKT will add two approved products and two late-stage clinical developmentcandidates with rapid development timelines to Shire's portfolioREPLAGAL: An enzyme replacement therapy product currently approved and marketedto treat patients with Fabry disease in 34 countries outside the US, of whichthe majority are in Europe. Sales of REPLAGAL reached $77 million in 2004. Itis estimated that the current market is $190 million in Western Europe.Incidence is estimated at 1 in 40,000 (orphan disease). Both ease ofadministration (one fifth the volume infusion of the competing product) and abroader label have helped to establish REPLAGAL's competitive position.DYNEPO: An erythropoietin (EPO) used for the treatment of kidneydisease-related anemia. Shire will gain the European rights and is well placedto leverage its existing FOSRENOL‚® sales force in Europe to help DYNEPO gainmarket share. DYNEPO, which is approved for marketing, is expected to belaunched in Europe in 2006 and will be the first fully human EPO therapy. TheEuropean EPO market is currently more than $2.3 billion.I2S: An enzyme replacement therapy currently in Phase 3 of development for thetreatment of Hunter Syndrome. The product has gained fast track status in theUS. Assuming the results of the Phase 3 trial are positive, I2S is expected tolaunch in 2006. Shire estimates the market is approximately $300 millionworldwide, of which US and EU are of equal size at approximately 40% each.Phase 3 data is expected to become available by the end of the second quarter2005.GA-GCB: A glucocerebrosidase currently in Phase 1/2 of development for thetreatment of Gaucher disease, which is anticipated to be introduced in 2008.Estimated number of treated patients is around 4,000 worldwide, with 200-300new patients expected to present each year. The total worldwide estimatedmarket at December 2004 was approximately $840 million.Attractive market dynamicsThe ERT market has a number of attractive features and high unmet medicalneeds. ERT products that are brought to market normally benefit from longlifecycles driven by orphan drug status (seven years in the US and 10 years inthe EU), manufacturing complexities and a limited number of competitiveplayers. ERT currently provides the optimal treatment for patients sufferingfrom the relevant enzyme deficiencies.The EPO market is large and growing, currently $2.3 billion in Europe. DYNEPOprovides Shire with a good opportunity to leverage its European sales forceexpertise in this market with nephrologists and with hematologists.Significantly enhances Shire's medium and long-term sales and EPS growthThe acquisition of TKT is expected to significantly enhance Shire's sales andEPS growth beyond 2007 and sustain Shire's consistent operating marginperformance. The acquisition will provide the opportunity for modest costsavings and is expected to be cash EPS and US GAAP EPS neutral in the secondfull year of ownership post closing. It is anticipated that there will be aone-time charge of approximately $800 million on closing relating mainly to thewrite-off, under US GAAP, of the intangible asset value associated with theacquired in-process R&D pipeline, together with some restructuring costs.TKT's capabilities and skill-sets expected to bring significant value to thecombined organizationShire's ability to commercialize DYNEPO through its specialist sales force andto accommodate TKT's R&D expenditure as well as future global marketingrequirements makes it an attractive partner for the continued development ofthe TKT business. There will be some cost savings, but Shire's overallintention is to develop and grow TKT's existing position in the ERT market andbuild on TKT's current revenue stream.Terms of the TransactionUnder the terms of the acquisition agreement, TKT shareholders will receive acash consideration of $37 per share of TKT common stock. The transaction valuesTKT's share capital as of the date of the merger agreement, at $1.57 billion ona fully diluted basis. The acquisition price represents a premium ofapproximately: * 21.6% to TKT's closing share price on April 20, 2005, of $30.44 (being the last business day prior to this announcement); * 43.6% to $25.77, the last four week average TKT closing share price The transaction has been unanimously approved by Shire's board of directors andhas been approved by a majority of TKT's directors. The transaction is subjectto approval by the shareholders of both companies, as well as regulatoryapprovals and satisfaction of other customary closing conditions including thatrepresentations and warranties in the acquisition agreement are true andcorrect as of the closing except to the extent that any failure to be true andcorrect would not have a material adverse effect on TKT or on Shire's abilityto consummate the merger. For the purposes of determining whether there hasbeen a material adverse effect on TKT, certain developments, among them theresults of TKT's current clinical trial evaluating the use of I2S for Huntersyndrome, will be disregarded. The transaction is expected to close in thesummer of 2005. The acquisition agreement also contains provisions relating tothe payment of break fees by Shire and TKT, with TKT being obliged to pay Shire$52 million in specified circumstances and reimburse Shire for up to $4 millionin expenses and Shire being obliged to pay TKT $40 million if the acquisitionagreement is terminated as a result of Shire shareholders not approving thetransaction, if Shire fails to call and hold its shareholder meeting inaccordance with the acquisition agreement, or the board of directors of Shirechanging their recommendation in respect of the transaction.In addition, Shire and TKT have entered into an irrevocable and perpetuallicense agreement under which TKT grants to Shire the exclusive right to use,distribute and sell DYNEPO outside of North America, as well as the right tomanufacture. The license only takes effect if closing of the acquisitionagreement does not occur for specified reasons, which include thosecircumstances in which Shire is obliged to pay a break fee. If the license wereto become effective, Shire would make a one-time payment to TKT of $450 millionwith no royalties payable to TKT. Shire would assume TKT's obligation to paysingle-digit royalties to Aventis, from which TKT originally licensed theseDYNEPO rights. The European EPO market, where DYNEPO is expected to launch in2006, is currently worth more than $2.3 billion; Shire will leverage itsexisting FOSRENOL sales force in Europe to commercialize DYNEPO, which will bethe first fully human EPO therapy.Further details in relation to the break fees, the license in relation toDYNEPO, the closing conditions and other provisions of the acquisitionagreement are set out in the appendix to this press release.Warburg Pincus & Co. and certain of its affiliates, which together beneficiallyown approximately 14% of the outstanding shares of the common stock of TKT,have agreed, pursuant to a voting agreement with Shire, that they will vote alltheir shares in favor of the acquisition agreement at the meeting of TKTstockholders. If the acquisition agreement is terminated, however, including byTKT in order to accept an offer from a third party that it deems to be superiorto the acquisition agreement, the voting agreement also terminates.Closing of the transaction is subject to Hart-Scott-Rodino clearance, approvalof TKT's and Shire's shareholders and other customary conditions.Financial InformationThe cash consideration for the acquisition and the working capital requirementsfor Shire after completion of the acquisition will be met out of the currentcash resources of the enlarged group, together with new debt bridgingfacilities of $500 million from Goldman Sachs.Shire Pharmaceuticals Group plcShire is a global specialty pharmaceutical company with a strategic focus onmeeting the needs of the specialist physician and currently focuses on thesearch, development and marketing of products in its chosen therapeutic areas.Shire has operations in the world's key pharmaceutical markets (US, Canada, UK,France, Italy, Spain and Germany).Financial information and current resultsIn 2004, Shire achieved total revenues of $1,363 million, EBITDA of $518million and net income of $269 million. As of December 31, 2004 Shire had$1,458 million in cash and cash equivalents and total debt of $43.3 millionincluding $0.1 million in outstanding convertible notes and $43.2 million in aloan facility. Shire continues to perform in line with the guidance given atits preliminary results announcement on March 2, 2005 and will announce Q1results on April 29, 2005.For further information on Shire, please visit the Company's website: www.shire.com.Goldman Sachs acted as financial advisor to Shire in relation to theacquisition.Transkaryotic Therapies, Inc.Transkaryotic Therapies, Inc. is a biopharmaceutical company primarily focusedon researching, developing and commercializing treatments for rare diseasescaused by protein deficiencies. Within this focus, the company marketsReplagal¢â€ž¢, an enzyme replacement therapy for Fabry disease, and is developingtreatments for Hunter syndrome and Gaucher disease. In addition to its focus onrare diseases, TKT intends to commercialize Dynepo¢â€ž¢, its Gene-Activated‚®erythropoietin product for anemia related to kidney disease, in the EuropeanUnion. TKT was founded in 1988 and is headquartered in Cambridge,Massachusetts, with additional operations in Europe, Canada and SouthAmerica. Additional information about TKT is available on the company'swebsite at http://www.tktx.com.Financial informationIn 2004, TKT achieved total revenues of $78.1 million and a net loss of $(65.9)million. As of December 31, 2004 TKT had $155 million in cash and cashequivalents and total debt of $94.0 million in the form of convertible notesand net assets of $194.3 million.For further information on TKT, please visit TKT's website: www.tktx.comSG Cowen & Co., LLC acted as financial advisor to TKT in connection with thetransaction. SG Cowen & Co., LLC and Banc of America Securities LLC eachdelivered an opinion that the consideration to be received by TKT stockholdersis fair to such holders from a financial point of view.Analysts' conference calls and presentationA conference call will be held for analysts at 15:50 BST / 10:50 EDT today,April 21, 2005. Please dial USA / Canada toll free: 1866 224 3295 or StandardInternational Dial In: +44 (0) 1452 568 060, password: Shire.Please call Souheil Salah on +44 (0) 1256 894160 or Heidi Wunder on 1 484 5958709 if further details regarding the call are required.There will also be a live audio webcast at www.shire.com. and tktx.comFor further information please contact:Shire: Investor Relations Clƒ©a Rosenfeld (Rest of the World) +44 1256 894 160 Brian Piper (North America) +1 484 595 8252 Media Jessica Mann (Rest of the World) +44 1256 894 280 Matthew Cabrey (North America) +1 484 595 8248 TKT: Investor Relations Justine Koenigsberg +1 617 349 0271 Media Barbara Yates +1 781 258 6153 "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF1995Statements included herein that are not historical facts are forward-lookingstatements. Such forward-looking statements involve a number of risks anduncertainties and are subject to change at any time. In the event such risks oruncertainties materialize, Shire's results could be materially affected. Therisks and uncertainties include, but are not limited to, risks associated withthe inherent uncertainty of pharmaceutical research, product development,manufacturing and commercialization, the impact of competitive products,including, but not limited to, the impact of those on Shire's Attention Deficit& Hyperactivity Disorder (ADHD) franchise, patents, including but not limitedto, legal challenges relating to Shire's ADHD franchise, government regulationand approval, including but not limited to Health Canada's suspension ofADDERALL XR‚® sales in Canada and the expected product approval dates ofMETHYPATCH‚® (MTS) (ADHD), SPD503 (ADHD), SPD465 (ADHD), SPD476 (ulcerativecolitis), SPD 480 (ulcerative colitis) and NRP104 (ADHD), including itsscheduling classification by the Drug Enforcement Agency in the United States,Shire's ability to secure new products for development and other risks anduncertainties detailed from time to time in Shire's filings with the Securitiesand Exchange Commission, including its Annual Report on Form 10-K for the yearended December 31, 2004.Goldman Sachs International, which is authorized and regulated in the UnitedKingdom by the Financial Services Authority, is acting exclusively for Shire inrelation to the acquisition and no one else and will not be responsible toanyone other than Shire for providing the protections afforded to its customersor for providing advice in relation to the acquisition or in relation to anytransaction, arrangement or other matter referred to in this announcement.AppendixSummary of Principal Terms of Acquisition Agreement and Related DocumentsUnder the terms of the acquisition agreement, Shire will acquire TKT throughthe merger of one of its wholly owned subsidiaries with TKT. In considerationfor the acquisition of TKT, Shire will pay $37 in cash per each TKT shareoutstanding as of closing.The acquisition agreement may be terminated by either Shire or TKT if theacquisition is not consummated by December 1, 2005.The acquisition agreement contains representations and warranties that aretypical of a transaction of this nature. These representations and warrantiesdo not survive the closing of the transaction. Between the signing of theacquisition agreement and the closing of the transaction, TKT must conduct itsbusiness in the ordinary course consistent with past practice.The acquisition agreement contains conditions to the obligations of TKT andShire to close, including but not limited to: * Approval of the transaction by TKT's and Shire's shareholders; * Expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976; and * The representations and warranties in the acquisition agreement being true and correct as of the closing except to the extent that any failure to be true and correct would not have a material adverse effect on TKT or on Shire's ability to consummate the merger. For the purposes of determining whether there has been a material adverse effect on TKT, certain developments, among them the results of TKT's current clinical trial evaluating the use of I2S for Hunter syndrome, will be disregarded. Shire must pay a break fee to TKT of $40 million if the acquisition agreementis terminated as a result of the Shire shareholders not approving thetransaction, if Shire fails to call and hold its shareholder meeting inaccordance with the acquisition agreement, or if the board of directors ofShire changes its recommendation in respect of the transaction. TKT must pay abreak fee to Shire of $52 million and an expense reimbursement of up to $4million if the acquisition agreement is terminated upon the occurrence ofcertain events, including if the board of directors of TKT changes itsrecommendation in respect of the transaction or if, in certain circumstances,TKT is acquired, or enters into an agreement to be acquired by a party otherthan Shire.Subject to its obligation to pay the break fee, TKT may terminate theacquisition agreement to accept an offer from a third party that it deems to besuperior to the acquisition agreement with Shire, but only after first givingShire the opportunity to provide a counter offer.In addition, Shire and TKT have entered into an irrevocable and perpetuallicense agreement under which TKT grants to Shire the exclusive right to use,distribute and sell DYNEPO outside of North America, as well as the right tomanufacture. The license only takes effect if closing of the acquisitionagreement does not occur as a result of * The occurrence of one or more of those circumstances in which Shire is obliged to pay a break fee; * Shire terminating the acquisition as a result of the breach of the representation and warranty related to the data provided by TKT to Shire with respect to TKT's current clinical trial evaluating the use of I2S for Hunter syndrome; or * TKT terminating the acquisition agreement because Shire fails to perform, in any material respect, any of its material covenants under the acquisition agreement or because a breach of a representation or warranty made by Shire in the acquisition agreement has occurred that would have a material adverse effect on the ability of Shire to consummate the merger and, in each case, such failure or breach cannot be cured by December 1, 2005. If the license were to become effective, Shire would make a one-time payment toTKT of $450 million with no royalties payable to TKT. Shire would assume TKT'sobligation to pay single-digit royalties to Aventis, from which TKT originallylicensed these DYNEPO rights.Warburg Pincus & Co. and certain of its affiliates, which together beneficiallyown approximately 14% of the outstanding shares of common stock of TKT, haveagreed pursuant to a voting agreement with Shire, that they will vote theirshares in favor of the acquisition agreement at the meeting of TKTstockholders. If the acquisition agreement is terminated, however, including byTKT in order to accept an offer from a third party that it deems to be superiorto the acquisition agreement, the voting agreement also terminates.DefinitionsThe following definitions apply throughout this announcement unless the contextotherwise requires:"EBITDA" means earnings before interest, taxation, depreciation and amortization; "Goldman Sachs" means Goldman Sachs International; "Shire" means Shire Pharmaceuticals Group plc, a public limited company incorporated under the laws of England and Wales; "SG Cowen" means SG Cowen & Co. LLC; "TKT" means Transkaryotic Therapies, Inc. "UK GAAP" means generally accepted accounting principles in the United kingdom; "US GAAP" means generally accepted accounting principles in the United States; References to "$" are to the lawful currency of the United States of America. Page 6 of 9Hampshire International Business Park Chineham Basingstoke Hampshire RG24 8EP United Kingdom Tel +44 (0)1256 894000 Fax +44 (0)1256 894708 www.shire.com Press Release Registered in England 2883758 Registered Office as aboveENDShire Pharmaceuticals Group PLCRelated Shares:
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