The $4.2bn acquisition of US speciality pharmaceutical company Viropharma brings to an end over two months of speculation that Shire (SHP) would expand its existing range of rare disease medicines with a big strategic move. Investors certainly got the strategy on this occasion, but the question is whether Viropharma can deliver the required returns after Shire paid an eyebrow-raising nine times Viropharma's sales.
The initial reaction from analysts was broadly positive, with Deutsche Bank forecasting an immediate increase of 5 per cent for EPS. Viropharma has a stable of orphan drugs for rare diseases such as Cinryze, which treats sudden attacks of swelling, and already has a big presence in the US medicines market - Cinryze alone is forecast to generate sales of $400m this year in the US. Management is counting on the fact that Shire can use its existing sales network for rare diseases to significantly boost this number, while at the same there should be cost-savings of $150m from the merger of parallel operations.
