Shire Pays Over $260M Upfront in IPO Detour for San Diego’s Lumena
San Diego’s Lumena Pharmaceuticals, which was on the road to raising $75 million in an IPO, has instead agreed to a $260 million-plus buyout offer from Shire (NASDAQ: SHPG), the Irish pharmaceutical giant.
Since it was founded three years ago, Lumena has worked to develop new oral drugs for rare liver diseases that stem from certain metabolic disorders that result in a build-up of bile acid in the liver. Bile acids facilitate the absorption of dietary cholesterol, fat, and fat-soluble vitamins. Lumena has focused on bile acids that act as signaling molecules in regulating metabolic processes. There are no approved therapies in the U.S. for these so-called cholestatic liver diseases, with symptoms that typically include fatigue and severe itching that cannot be relieved. Over time, these diseases can lead to liver failure.
Pappas Ventures, based in Durham, NC, led the formation of Lumena in 2011 with the licensing of its lead drug candidate, LUM001, from Pfizer, which had shelved the compound after conducting extensive clinical trials as a potential cholesterol-lowering drug.
From the beginning, Lumena has worked closely with patient advocacy groups and with scientists who have been highly committed to cholestatic liver diseases, Lumena CEO Mike Grey said in a phone interview this morning. For example, Lumena co-founder and vice-president of pharmacology, Slava Gedluin, had ideas about bile acids while working at San Diego’s Amylin Pharmaceuticals, where she identified a potentially key signaling channel called the apical sodium-dependent bile acid transporter. Lumena’s chairman John McKearn, who invested in Lumena as a managing director at St. Louis, MO-based RiverVest Venture Partners, also was familiar with the field from the years he had spent as a scientist at Searle and Pharmacia.
Lumena currently has 17 employees in San Diego. Following Shire’s acquisition, Grey said, “We will be a small outpost for them for the time being.”
In addition to having the global infrastructure and resources necessary to advance new drugs to commercialization, Grey said Shire has deep expertise in both orphan diseases and in gastrointestinal disorders. “We think it’s the perfect fit,” Grey said. “They’re big enough to make a difference and small enough to care.”
After selling its San Diego-based Dermagraft business earlier this year, Shire no longer has a presence in San Diego or the West Coast. Grey said Lumena would most likely eventually move either to Boston, where Shire has operations focused on rare diseases, or to Philadelphia, which has a Shire business unit focused on gastrointestinal drugs.
Lumena’s lead drug compound is in mid-stage development for four cholestatic liver diseases, two pediatric and two adult. Regulators in the U.S. and Europe have granted orphan drug status to LUM001 for treating Alagille Syndrome and several related cholestatic liver diseases. A second compound, LUM002, is ready to begin mid-stage trials for the treatment of non-alcoholic steatohepatitius.
In a statement today, Shire CEO Flemming Ornskov says, “These attractive potential treatments may offer new hope to patients with rare cholestatic liver disease and further contribute to Shire’s future growth. We are excited by the possibilities of these new assets in liver disease. We have the resources, the infrastructure and the operating capacity to invest in these new potential growth drivers which add further value to Shire’s innovative pipeline.”
Shire says the Lumena deal adds a new drug pipeline for its gastrointestinal business, which generated revenues of over $800 million in 2013. Shire said the deal also would be a good fit with its Fibrotech acquisition, which addresses unmet patient need in fibrotic conditions including renal impairment.
Lumena’s specialized focus in a particular group of orphan diseases, combined with a lead drug compound that already had undergone extensive testing by Pfizer, attracted buyout interest from a number of big pharma suitors, as well as strong venture support, Grey said. Before filing for an IPO in April, Lumena raised $45 million in a Series B round led by New Enterprise Associates. Adage Capital Management and RA Capital Management also participated, joining existing investors Pappas Ventures, RiverVest Venture Partners, and Alta Partners.
While the company was getting buyout feelers before filing for an IPO, the filing intensified the interest, and Grey said Lumena had multiple opportunities. Shire agreed to acquire Lumena for an upfront payment of $260 million in cash, plus a payment for net cash at closing, and near-term contingent milestone payments related to ongoing clinical trials.
Shire said it does not expect the acquisition of Lumena to result in a change to its previously stated earnings guidance for 2014.