* London-listed firm pays $50 a share for biologicsspecialist
* Price is 64 pct premium to Sept level before bidspeculation
* Shire says deal strengthens rare disease portfolio
* Shire's shares at record highs
By Paul Sandle
LONDON, Nov 11 (Reuters) - London-listed Shire isbuying ViroPharma for $4.2 billion, its biggest dealyet to strengthen its portfolio of lucrative drugs to treat rarediseases, which are attracting increasing attention from drugscompanies as patents expire on their older treatments.
Several companies including France's Sanofi,according to reports, were interested in ViroPharma, which makesCinryze for the treatment of immune disorder hereditaryangioedema.
Treatments for such rare disorders can command huge prices,running into hundreds of thousands of dollars a year perpatient.
Shire, which latched onto the rare disease drugs trend yearsbefore bigger rivals, said on Monday it had agreed to pay $50 ashare in cash for ViroPharma, a 27 percent premium on Friday'sclosing price. Shares in the U.S. biopharmaceutical spikednearly 30 percent in September on bid speculation.
Analysts at Morgan Stanley said that for Shire the deal"cements strategy", and it could bolster earnings per share by5-10 percent in 2014-2016.
Though some investors have raised concerns about thesustainability of the business model for rare disease drugs,healthcare providers have so far generally accepted the highcosts, given the transforming effects of the medicines and thevery small number of patients who need them.
The value of biological drugs to treat rare disease wascrystallised in 2011 when Sanofi paid more than $20 billion tobuy Genzyme.
Rare diseases are already a central plank of Shire'sstrategy, and acquisitions have helped it build up a portfolioof drugs including treatments for Gaucher's and Fabry diseases.
It said buying ViroPharma, based in Exton, Pennsylvania,would take its rare diseases unit to $2 billion a year inrevenues, or 40 percent of Shire's total, up from about 30percent today.
Shire Chief Executive Flemming Ornskov said the deal was"entirely consistent with our clear strategic objective ofstrengthening our rare disease portfolio".
Shire, which also makes blockbuster drug Vyvanse to treathyperactivity, has largely grown by buying up promisingcompanies and licensing drugs rather than building its portfoliofrom first-stage research.
It said more acquisitions in rare diseases could follow.Ornskov said mergers and acquisition and in-licensing was inShire's DNA: "Our focus on this does not stop as a result oftoday's transaction."
Shares in Shire, already at record highs in recent weeksafter the group raised 2013 earnings guidance, reached a newpeak of 2,939 pence. They were trading up 3.8 percent at 2,903pence by 1328 GMT.
Analyst Savvas Neophytou at Panmure Gordon, who has a "buy"rating on Shire, said the deal was "clearly at an eye-wateringmultiple" of 7.6 times enterprise value over revenues, but itwas strategically very sound.
"Given the company's growth characteristics, a premiumvaluation is warranted in our view," he said.
Ornskov declined to comment on competition to clinch thedeal, but he said he was under no pressure and the price agreedwas good for both sets of shareholders.
He said Cinryze, ViroPharma's leading product, wouldcomplement Shire's Firazyr on-demand treatment for acute attacksof hereditary angioedema, a rare genetic disease characterisedby sudden attacks of swelling of the skin or the mucousmembranes, which can be disfiguring, painful andlife-threatening in some circumstances.
"Hereditary angioedema is a devastating rare disease thataffects about 18,000 patients in the U.S. and EU," he toldreporters on Monday.
"We will be able to better serve them by long-termprophylactic prevention with Cinryze and on-demand prevention ofacute attacks with Firazyr." Firazyr is one of Shire's fastestgrowing drugs.
ViroPharma is forecast to have annual revenues this year of$445-465 million, up from $428 million in 2012. The bulk ofrevenues this year, some $395-405 million, is expected to comefrom Cinryze sales in the United States. Shire said it hoped togrow international sales of the medicine.
Ornskov said ViroPharma also had a number of otherbiological drugs, and a portfolio of development programmestargeted at other rare disease conditions.
He said the group expected to make annual synergy savings of$150 mln a year by 2015. Shire also says it will be able to cutViroPharma's tax bill from the mid-high thirties percent to thehigh-teens rate that Dublin-based Shire pays.
Lazard and Morgan Stanley advised Shire on the deal, andGoldman Sachs worked for ViroPharma.
- Mergers, Acquisitions & Takeovers
- rare disease