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NPS throws ice water on $4B Shire rumor, but Wall Street keeps the faith

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NPS CEO Francois Nader

The story about Shire ($SHPG) making a $4 billion advance on NPS Pharmaceuticals ($NPSP)? Never happened, according to the latter company, which broke long-standing industry tradition by publicly commenting on a market rumor.

In an SEC filing submitted Monday evening, NPS dispelled a fast-spreading tale that Shire approached the company with a buyout offer and, after getting turned away, had amassed $5 billion in debt to make another go.

"Although it is generally NPS Pharmaceuticals, Inc.'s policy not to comment on media speculation and market rumors, in light of the erroneous press reports that Shire has had communications with NPS concerning a purported offer by Shire to acquire NPS, NPS confirmed that to date NPS has not had any communication with Shire or any representative of Shire concerning the acquisition of NPS by Shire," the company said in a statement signed by its senior vice president of legal affairs. "NPS intends to continue its policy of not commenting on media speculation and market rumors and undertakes no obligation to update the information contained in this report."

So, that's that.

However, despite the no-uncertain-terms denial, Wall Street seems convinced a buyout is still in play. NPS has given up some of its share price gains since the disclosure, but it's still up almost 20% above its value before the the back-and-forth began Friday with a Financial Times report.

Shire, unsurprisingly, has declined to comment on the rumor, and NPS' departure from standard operating procedure is a story in and of itself.

As investor and blogger Brad Loncar detailed Tuesday morning, it all stems from Monday's Jefferies Global Healthcare Conference, where NPS CEO Francois Nader gave a standard chief exec spiel to investors and anyone tuned into the webcast. However, in the not-live-streamed breakout session that followed, Nader told gathered investors that the Shire story was a non-starter, a disclosure that likely motivated NPS' legal team to make the uncommon public announcement hours later.

For the Wall Streeters still holding out hope, NPS' categorical denial doesn't mean there won't be talks in the future. The bull case for a buyout rests on Monday's Times story, which said a group of banks led by Citigroup were backing a $5 billion debt facility that would allow Shire to make a move on NPS. According to the Times' sources, former ViroPharm CSO and current NPS board member Colin Broom is working to facilitate talks between the two. Shire paid $4.2 billion for ViroPharm last year.

Such a deal would make some sense for Shire. For one, CEO Flemming Ornskov has repeatedly looked to M&A to grow the drugmaker's pipeline, and NPS' banner product, the orphan drug Gattex, would fit in alongside Shire's Firazyr franchise and the stable of rare-disease treatments it picked up in the ViroPharm deal. Furthermore, the company may be weighing multibillion-dollar deals in an effort to ward off would-be acquirers of its own. Thanks in part to the tax benefits of its Irish heritage, Shire has become a rumored target for larger drugmakers, including, reportedly, Allergan ($AGN).

- read the filing

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