What's going on?

Shire, a pharmaceuticals company, is buying the American drug development company Dyax in a $6.5 billion deal. Interestingly, it shows there is still demand for deal-making in the biotech space despite the perceived increased risk of political pressure denting profits.

What does this mean?

Shire makes the hyperactivity drug Adderall, but for the past few years it has been pursuing mid-sized acquisitions as part of a strategy to offer more products. Dyax, for example, develops an experimental drug aimed at combatting a rare and potentially fatal disease that causes sudden swelling (called hereditary angioedema). Shire already has drugs that fight the disease, so by making this acquisition, it is protecting its position as a leader for treatment of the disease. If the drug gets approval, Shire will likely be able to sell it to patients at a high profit - although it is this�sort of expensive drug that could be subject to new laws limiting how much Shire could charge for it (thus limiting Shire�s potential profit).

Why should I care?

1. The bigger picture: This is very different than the possible Pfizer-Allergan tie-up. That potential deal is more about tax strategy and drugs that are already developed. In this deal, Shire is buying a competitor that is, apparently, doing a good job of developing experimental drugs � with the hopes of eventually profiting from the sale of those drugs.
2. For the stocks: It�s good news for Dyax shareholders. Shire has agreed to pay 35% more than where the stock was trading prior to the news � and will do so in cash, which de-risks the deal for Dyax shareholders. Shire shares were essentially flat after the news.