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Shire plans to buy Baxalta with $32 billion cash-stock offer

(This story was updated at 12:15 p.m. ET.)

Irish drugmaker Shire is making another run at buying Baxalta, with a $32 billion, cash-and-stock offer to create a combined company with a deep stake in rare disease treatments.

Treatments for rare diseases have become a hot and lucrative area of drug industry research in the past several years, with drugmakers testing hundreds in clinical trials.

The surge is being driven, in part, by tax breaks and other financial incentives, patient advocacy groups raising money to help small companies research treatments, and scientific advances such as the mapping of the human genome.

Shire and Baxalta said during a Monday morning conference call that their combined company will draw 65% of it its total revenue from rare disease treatments. The drugmakers expect about $13 billion in revenue from that category by 2020.

They also said the combination's hemophilia franchise will provide a foundation for building a broader hematology and oncology business.

Shire's lead product is the attention deficit hyperactivity disorder drug Vyvanse. Baxalta's portfolio includes the hemophilia treatment Advate, and it also is developing treatments for sickle cell anemia , cancer and psoriasis

Shire said Monday it will give Baxalta shareholders $18 in cash and a portion of a Shire share for each Baxalta share. That adds up to a per-share price of $45.57 per share based on Friday's closing price of Shire's U.S.-traded stock.

The boards of both companies have agreed to the deal, but shareholders still need to approve it. The companies expect the deal to close in the middle of the year.

Baxalta spun off last summer from Deerfield, Illinois-based drugmaker Baxter International Inc.

Shire made an initial run at Bannockburn, Illinois-based Baxalta shortly after that spin-off, with a $30 billion all-stock bid that its target rejected as too low. That offer was valued at around $45.23 at the time.

Shire said Monday that its latest offer — which includes an infusion of cash — represents a premium of nearly 38% to Baxalta's share price before Shire announced its previous bid.

Baxalta shareholders will wind up owning about 34% of the combined company under the latest proposal.

Shire and Baxalta said Monday that they will maintain the tax-free status of the company's spinoff from Baxter. They expect an adjusted tax rate for the combined company of 16 percent to 17 percent by 2017.

U.S.-traded shares of Shire fell about 5.6%, or $16.32 to $175.68 in morning trading Monday while broader trading indexes climbed slightly. Baxalta slipped 4 cents to $39.97.


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