Shire Finds Big Value in Rare Diseases, and a Strong Growth Path for its Boston Unit

5/12/11Follow @arleneweintraub

On May 11, Shire (NASDAQ: SHPGY) CEO Angus Russell told a panel of journalists at the Reuters Health Summit in New York that the British drug giant is interested in pursuing gene therapy and stem cells. Those are two areas of science that have yet to prove they can produce effective, innovative new therapies. Still, over lunch later in the day in midtown Manhattan, Russell made a strong case to me that Shire is finding tremendous opportunities on the fringes of pharmaceutical development. “You can’t tar us with making the tenth me-too drug and trying to charge a bazillion dollars a year for that,” he says. “We’re not in that game. I don’t condone that.”

As proof, Russell pointed to Shire’s burgeoning Boston unit, which makes drugs to treat rare diseases. Shire plunged into the rare-disease field in 2005 when it bought Cambridge-based Transkaryotic Therapies (TKT) for $1.6 billion. The unit, which recently moved to a large campus in Lexington, specializes in drugs to treat enzyme disorders, and it is responsible for some of Shire’s biggest hits, including idursulfase (Elaprase) for Hunter syndrome, velaglucerase alfa (Vpriv) for Gaucher disease, and agalsidase alfa (Replagal) to treat Fabry disease.

Shire got a huge head start in Fabry disease and Gaucher disease back in 2009, when competitor Genzyme ran into manufacturing issues. The FDA had not yet approved Shire’s products, but the agency gave the company permission to market them anyway, to help address the shortage resulting from Genzyme’s troubles. “It accelerated the growth of that business,” Russell says. All told, products emerging from the TKT acquisition now account for 30 percent of Shire’s sales—up from 4 percent when the companies first merged.

Russell said he’s amazed by how many drug companies are now embracing rare, “orphan” diseases, which they used to shun as lacking in blockbuster potential. New York-based Pfizer (NYSE: PFE) is among the ranks of Big Pharma companies pursuing new therapies for orphan diseases. “Things have changed,” Russell says. “The classic pharmaceutical model was built around economies of scale, reach, global presence, and sheer size. Everything was focused on getting that physician to write that script.”

Russell believes the new economics of healthcare are driving the drug industry’s flight to the orphan-drug market. “The world is much more holistic now,” he says “We have to factor in payers, we have to factor in the patients being much better informed because of the Internet, and then we’ve got policymakers that are aggressively addressing issues of cost.” As a result, he says, “We’re seeing the shrinking of that mass-marketing model.”

Certainly the economics of rare diseases have been positive for Shire. On April 28, the company announced that revenues in the first quarter jumped 19 percent year-over-year to $972 million. Replagal sales skyrocketed … Next Page »

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