Today: The hot market for biotech mergers continues with the $ 1.1 billion purchase of Brisbane-based Hyperion Therapeutics, which wasn’t even the biggest deal of the day. Also: Tesla Motors gains after CEO Elon Musk teases a new offering.
The Lead: Hyperion Therapeutics sells for $ 1.1B as biotech boom continues
Silicon Valley’s biotechnology companies continue to command billions — and receive them — as large pharmaceutical companies look to add potential blockbuster drugs to their lineups, with Hyperion Therapeutics the latest to take advantage.
Brisbane-based Hyperion agreed to an offer from Irish drug company Horizon Pharma for $ 46 per share, leading to an all-cash purchase price of $ 1.1 billion for the company. The acquisition price is 7.6 percent higher than Hyperion’s closing price from Friday’s trading session, but substantially higher than the stock’s all-time high coming into this month: Shares had never cracked $ 33 before a sudden rise in the past month as analysts increased price targets and merger rumors surfaced.
Founded in 2006, Hyperion is one of a recently popular class of biotech companies that focus on rare diseases, with Hyperion’s two current drugs aimed at genetic disorders that keep sufferers from ridding naturally occurring ammonia from the body, which can cause myriad problems. The related disorders occur in 1 of about every 35,000 births, Hyperion says, and affect about 2,100 Americans.
Experts say that drug companies that focus on curing rare disorders avoid the scrutiny that can come with high pricing of drugs for more common diseases.
“They’re recreating the blockbuster,” WBB Securities analyst Steve Brozak told The Associated Press about such companies last week. “There’s more money, fewer patients and it’s 10 times easier to defend high prices to payers.”
Hyperion’s purchase is just one more in a string of big-money biotech deals in Silicon Valley and beyond this year — it is not even the biggest of the day nationwide, as San Diego’s Auspex Pharmaceuticals was purchased for $ 3.2 billion in cash by Israeli firm Teva Pharmaceutical. Locally, Sunnyvale-based Pharmacyclics has agreed to the largest deal of the year so far, a $ 21 billion acquisition by AbbVie, and even young startups have sold for more than $ 1 billion as they head toward IPOs at a record rate.
TheStreet writer Adam Feuerstein noted that acquisition activity in the sector has had its hottest start since 2009, and theorizes that these deals are occurring more because big pharmaceutical companies have drifted away from the type of research and development that young biotechs are accomplishing, but still need the fresh offerings to juice sales.
“In other words, Big Pharma is buying innovation and growth from biotech,” Feuerstein wrote Monday. “It’s a seller’s market.”
The potential for huge gains from these types of acquisitions, as well as the scrutiny that can result from the introduction of a big drug, are evident in the Bay Area’s largest public biopharmaceutical company, Gilead Sciences. The Foster City company bought Pharmasset for $ 11 billion in 2011 for its hepatitis C medicines, and developed them into blockbuster drugs that doubled Gilead’s revenues last year, but the $ 1,000-a-pill price tag created an uproar and the company is now facing competition that has forced it to drop the price in deals with large buyers.
Hyperion’s drugs target less prominent diseases, but have found big revenue gains since being approved by the Food and Drug Administration. After the company went public in 2012 for $ 10 a share with no revenues, it received its first FDA clearance in 2013 and brought in $ 42.2 million that year, then more than doubled that to $ 113.6 million in 2014.
“During the last two years, we have solidified our position in the orphan disease space and made significant progress in bringing life-changing medicines to people with urea cycle disorders,” Hyperion CEO Donald Santel said in a prepared statement Monday.
Hyperion, which had 80 full-time employees at the end of last year, also has a drug that treats the neurological effects of certain types of liver failure, which it says affects about 140,000 Americans. Horizon has already received guarantees that it will be able to buy more than 20 percent of Hyperion shares at the acquisition price, and hopes to close the deal by the end of the first half of 2015.
Hyperion shares gained 7.6 percent to $ 45.98 Monday, while Horizon jumped 18.2 percent to $ 25.78.
SV150 market report: Tesla Motors gains on anticipation for new product
Wall Street kicked off the week with strong gains Monday, as Tesla Motors had a strong day after CEO Elon Musk teased an upcoming product announcement.
Musk tweeted Monday that the Palo Alto electric car company plans to show off a new offering next month. ”Major new Tesla product line — not a car — will be unveiled” on April 30, Musk wrote on Twitter, after posting two other tweets from a trip to China, which may have boosted hopes on the company’s performance in that country. Speculation about Tesla’s new product focused on home battery storage, after Musk said in a February conference call that he planned to show off such a product in a month or two and get it into production in about six months. Tesla stock gained 3 percent to $ 190.57.
Apple shares jumped 2.5 percent to $ 126.37 after CEO Tim Cook took a strong stand against laws such as a recent one passed in Indiana. Gilead fell 0.3 percent to $ 100.69 after a ProPublica investigation showed that Medicare spending on hepatitis C drugs multiplied 10 times 2014 to $ 4.7 billion, with the Foster City company raking in about $ 3.7 billion of that total. Facebook declined 0.1 percent to $ 83.19 while moving into a fancy new building, and Netflix added 1.9 percent to $ 422.57 while adding a former Disney executive to its board. Nvidia gained 0.4 percent to $ 21.47 while reportedly planning some new gaming hardware, and Hewlett-Packard advanced 0.3 percent to $ 31.57 while showing off new enterprise software offerings. After big gains Friday amid reports of a possible merger, Intel and Altera sank back Monday, with Intel dropping 1.7 percent to $ 31.46, and Altera declining 3.5 percent to $ 42.82.
Up: Tesla, Apple, EA, GoPro, Cisco, Netflix, Oracle, Workday, Intuit, VMware, Juniper
Down: Intel, AMD, SunPower, LinkedIn
The SV150 index of Silicon Valley’s largest tech companies: Up 18.91, or 1.1 percent, to 1,745.16
The tech-heavy Nasdaq composite index: Up 56.22, or 1.15 percent, to 4,947.44
The blue chip Dow Jones industrial average: Up 263.65, or 1.49 percent, to 17,976.31
And the widely watched Standard & Poor’s 500 index: Up 25.22, or 1.22 percent, to 2,086.24