Deal Reporter
Shire (NASDAQ:SHPG), a specialty pharmaceuticals maker, could easily finance another multi-billion dollar acquisition and still maintain its investment grade credit rating, CFO Jeff Poulton said.
Dublin, Ireland-based Shire, which in January agreed to buy NPS Pharmaceuticals for USD 4.9bn in a bid to expand its rare diseases treatment portfolio, posted net debt of about USD 2.6bn at the end of the first quarter, giving it a debt-to-Ebitda ratio of 1x, Poulton told this news service.
“To maintain an investment grade rating, which is what we’d like to do, you could go up to 3x to 4x,” said Poulton, speaking after a presentation at the Jefferies Global Healthcare conference in New York on Tuesday. “So there is capacity to do larger deals, but that’s not what we’re focused on.”
Shire, which sells medicines to treat attention deficit disorder among other medications, has a business strategy that emphasizes acquisitions more than developing its own drugs. As such, it is always viewed as a potential acquirer of assets, particularly in the so-called “orphan” drug space and assets that can expand the breadth of is product portfolio.
Poulton said that with a wave of acquisitions in the orphan drug space, including that of NPS, Synageva, and Prosensa, there are fewer larger targets left in that market. However, Poulton said there are a plethora of acquisition opportunities among smaller drugmakers.
“We’re not under pressure to do deals,” said Poulton. “If we don’t see deals that make sense we may not do deals. But if we can find the right kinds of deals given our business model, you will continue to see us do deals.”
Poulton, in a presentation to investors, said size is not a driving factor for deals but rather a strategic fit. “We are looking closely at a lot of things in the rare diseases space,” he said.
Some areas of potential interest for Shire include gastrointestinal, ADHD and opthamology medications, he said. The company has invested around USD 100m in drug research and development, which is “not enough to sustain its organizational growth rate,” he said.