With Dermagraft Sale, Shire Jettisons Business Acquired 3 Years Ago
Shire (NASDAQ: SHPG) engendered some high expectations after the Irish biopharmaceutical giant acquired San Diego’s Advanced BioHealing in 2011 for $750 million. Over the next year or so, Shire formed a new San Diego-based division—Shire Regenerative Medicine—and unveiled plans to spend $100 million on a new corporate campus that would serve as the cornerstone for a new billion-dollar business.
But Shire’s vision changed soon after Danish physician Flemming Ornskov took over as CEO last year—and the pharma’s plans for regenerative medicine came to an abrupt end when Shire said last week it would sell Advanced BioHealing’s Dermagraft business to Organogenesis of Canton, MA.
In a statement Friday, Shire said it would record a $650 million loss on the Dermagraft sale. Organogenesis paid nothing upfront to acquire the Dermagraft business (which Shire valued at $683 million as recently as Sept. 30), but agreed to pay Shire as much as $300 million over the next four years if the division can meet certain sales targets under its new owner.
The deal includes the technology, assets, and certain manufacturing plant, equipment, and materials needed to produce the Dermagraft bioengineered living skin grafts used to treat diabetic skin ulcers.
So what’s left of Shire’s once-ambitious plans for regenerative medicine?
The Irish pharma halted work on its 28-acre campus in San Diego last fall. In response to my queries, Shire’s Jessica Mann says the company will no longer have a presence in San Diego or on the West Coast, which was once touted as a key element in Shire’s global strategy. In an e-mail, the Shire spokeswoman writes, “The RM [regenerative medicine] business unit no longer exists following the sale of Dermagraft to Organogenesis.”
In the months following its 2011 buyout of Advanced BioHealing, Shire also acquired Pervasis Therapeutics of Cambridge, MA, and said it would be combined with the regenerative medicine business. Today, Mann says, “The Pervasis acquisition brought us the Vascugel program, which is still in the R&D pipe and managed out of our Massachusetts office.” Another 2012 acquisition, San Carlos, CA-based FerroKin BioSciences, is not a regenerative medicine business and remains in Shire’s drug development pipeline, Mann says.
Shire said the Dermagraft sale was part of a broader reorganization that began last May, and Ornskov cited “a renewed focus on operational discipline” that came after he officially took over … Next Page »