UCB to Double Down in Rare Disease With $2.5 Billion Ra Deal
UCB Agrees to Buy Ra Pharmaceuticals for About $2.5 Billion
(Bloomberg) -- UCB SA agreed to buy Ra Pharmaceuticals Inc. for about $2.5 billion to join forces with one of its largest competitors in developing a rare-disease medicine, the field behind many recent industry tie-ups.
The Belgian drugmaker will pay $48 a share in cash for Cambridge, Massachusetts-based Ra Pharmaceuticals, UCB said Thursday. That’s more than double the U.S. company’s closing price Wednesday. The shares traded at $45.63 as of 10:29 a.m. in New York.
The acquisition -- the largest in the past decade for UCB -- comes as many drugmakers faced with soaring research costs and pressure on prices turn to rare diseases because treatments for them command a premium. Companies from Novartis AG to Takeda Pharmaceutical Co. have bought others developing treatments for uncommon ailments. In UCB’s case, the move complements an existing effort, but it comes at a cost after Ra’s stock gained 25% this year.
“The near-term dilution looks painful but our view is that investors should not be overly focused on this,” Wimal Kapadia, an analyst at Sanford C. Bernstein, wrote in a note to clients. “The asset fits nicely into the UCB portfolio.” UCB’s stock rose less than 1% in Brussels trading.
Ra’s most advanced treatment is for an ailment called myasthenia gravis, a so-called orphan disease caused when antibodies disrupt communication between nerves and muscles. UCB is developing its own medicine for the condition, which is in advanced clinical tests, like Ra’s.
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The Ra product, called zilucoplan, complements UCB’s own rozanolixizumab and could generate peak annual sales of more than $1 billion, according to Peter Welford, an analyst at Jefferies.
UCB said it aims to become a market leader in treating the ailment, which affects about 200,000 people in the U.S., the European Union and Japan and causes muscle weakness and fatigue. Alexion Pharmaceuticals Inc. makes a medicine for the disease, and other drugmakers working on one include Switzerland’s Novartis.
On a conference call with analysts, UCB faced questions about potential scrutiny from the U.S. Federal Trade Commission of the deal, which would give the company two drugs targeted at the same patient group. The FTC is reviewing Roche Holding AG’s deal to buy Spark Therapeutics Inc., which would combine two companies working in hemophilia. Abbvie Inc.’s proposed $63 billion purchase of Allergan Plc is facing an in-depth investigation from the agency.
UCB is confident that the deal will gain antitrust approval, Chief Executive Officer Jean-Christophe Tellier said on the call. He declined to comment further.
The Belgian company’s willingness to offer a large premium isn’t uncommon lately in the pharmaceutical industry, where buyers are battling it out in niche markets where the number of targets is limited -- even outside the rare-disease realm.
Last month, Swedish Orphan Biovitrum AB agreed to buy Dova Pharmaceuticals Inc. for more than three times the price the U.S. drugmaker’s shares had traded at in June to expand into hematology. H. Lundbeck also A/S agreed to buy migraine drug developer Alder Biopharmaceuticals Inc. at a premium of almost 80%.
Ra’s shares surged in June after the company said the U.S. Food and Drug Administration approved an application to test zilucoplan for another rare disease called immune-mediated necrotizing myopathy. The same platform that allowed Ra to discover the medicine may serve to find other drugs, according to UCB.
The companies expect to complete the transaction by the end of the first quarter. UCB will finance it through existing funds and bank loans arranged by BNP Paribas SA’s Fortis and Bank of America Merrill Lynch.
UCB said the deal will delay one of its profit-margin targets by one year to 2022, though it should add to earnings per share from 2024.
Bank of America Merrill Lynch and Lazard Ltd. are UCB’s financial advisers, while Centerview Partners is advising Ra. For legal advice, UCB hired Covington & Burling LLP while Ra Pharmaceuticals is using Latham & Watkins LLP.
To contact the reporter on this story: Thomas Mulier in Geneva at tmulier@bloomberg.net
To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, Marthe Fourcade, John Lauerman
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