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According to a report from Financial Times (FT) Alphaville, NPS Pharmaceuticals (NPSP - Analyst Report) is being eyed by Shire (SHPG - Analyst Report). The FT blog citing well informed sources claimed that Shire has had internal talks and is working with its advisors on a potential all-cash offer of around $40 per share to buy NPS Pharma. NPS Pharma, with a market cap of around $3.31 billion, surged more than 13% in Friday trading on the Nasdaq following rumors of the potential sale.

If the rumors are to be believed the offer price of $40 per share represents a huge premium to NPS Pharma’s closing price of $27.50 on Thursday, May 29. The deal would then be worth in excess of $4 billion.

We note that NPS Pharma focuses on developing and commercializing therapies for treating patients suffering from rare diseases. Shire is also interested in boosting its portfolio of rare disease drugs as can be made out by the Irish company’s $4.2 billion acquisition of ViroPharma in Jan 2014.

Shire’s focus on treatments for rare diseases was further highlighted when it inked a deal last month with the privately-held Lumena Pharmaceuticals, Inc., for an upfront payment of $260 million in cash along with milestone payments to acquire the latter.

Given Shire’s interest in expanding its rare diseases portfolio, the rumors of NPS Pharma’s acquisition may well be true.

In case the deal materializes, Shire’s portfolio would be strengthened by the addition of Gattex (teduglutide), NPS Pharma’s sole marketed product. The drug is available in the U.S. (since Feb 2013) as a subcutaneous injection for treating adults with short bowel syndrome (SBS), dependent on parenteral support.

NPS Pharma expects to add another product - Natpara (rhPTH [1-84]) – to its portfolio later in the year. The company is looking to get Natpara, which has been granted orphan drug status in the U.S. and EU, approved for treating hypoparathyroidism. The candidate is currently under review in the U.S. A decision from the U.S. Food and Drug Administration (FDA) on Natpara is expected by Oct 24, 2014.

Shire had stated on its first quarter 2014 conference call that it is focused on its growth by acquisition strategy to expand its portfolio. Will it acquire NPS Pharma in its bid to expand its rare diseases portfolio? That is the question to which we look forward to an answer.

While NPS Pharma carries a Zacks Rank #5 (Strong Sell), Shire is a Zacks Rank #3 (Hold) stock. Better-ranked stocks in the healthcare sector include Gilead Sciences (GILD - Analyst Report) and Alexion Pharmaceuticals (ALXN - Analyst Report). While Gilead carries a Zacks Rank #1 (Strong Buy), Alexion is a Zacks Rank #2 (Buy) stock.

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