We in Massachusetts don’t read as much about Shire Human Genetic Therapies (HGT) as other large biotech organizations headquartered here like Genzyme (NASDAQ:GENZ) and Biogen Idec (NASDAQ:BIIB). Why? Well, for one thing, Shire HGT is a unit of Irish specialty drug company Shire. (The division was formed through Shire’s $1.6 billion acquisition of Cambridge, MA-based biotech firm Transkaryotic Therapies in 2005.) This means the double-digit sales growth of its treatments, such as idursulfase (Elaprase) for Hunter syndrome, can get lost in the companywide reports. So I thought it would be illuminating to have a chat with Sylvie Gregoire, president of Shire HGT.
In a time when many companies are cutting workers, Gregoire has good news to share on growth among her own ranks. Shire HGT revealed in February that it would add 680 workers in the Bay State over the next eight years as part of its plans to invest $394 million to expand its operations in Lexington, MA. Indeed, that growth is well underway with 150-odd workers added in the state since the announcement, giving the firm about 825 employees in the Bay State, Gregoire says. (Taxpayers in the commonwealth have helped support that growth, providing Shire HGT with a $48 million state- and local-aid package for the Lexington expansion.)
Meantime, the HGT unit has become one of the fastest-growing businesses for its parent company, as Shire recently revealed in its third quarter earnings report. Sales of idursulfase, an enzyme-replacement therapy, jumped 42 percent in the third quarter, from $55.1 million in the 2007 period to $78.2 million in the same quarter this year. And sales of agalsidase alfa (Replagal), an enzyme-replacement therapy for Fabry disease, increased by 10 percent from $40.7 million to $44.6 million in the same quarter-to-quarter period. (In September, HGT launched a third product, icatibant (Firazyr), for hereditary angioedema in the U.K. and Germany.) Overall, the genetic therapies business contributed 17 percent to Shire’s $712.5 million in total sales revenue for the most recent third quarter.
I asked Gregoire about the status of the Lexington expansion, the future of the business of treating rare diseases, and more.
X: Why should biotech investors and entrepreneurs be excited about the future of the genetic treatments business in general—not just at Shire?
Gregoire: There are 7,000 rare diseases that have been identified by the NIH—very few of them have a treatment, if you think about it. Less than 12 of those diseases have a treatment that is specific to [them]. Really only enzyme-replacement treatments have been approved, beginning with Cerezyme [Cambridge, MA-based biotech firm Genzyme’s treatment for Gauche disease] about 11 years ago. The beauty of rare diseases is there is a high unmet need, and there are very few companies focused in this area—and Shire does. Each product [given the small market size for rare-disease drugs] is potentially a $300 million to $500 million product. Therefore, you do need a few products in order to make the business sustainable. But the cost of development is somewhat less than a traditional pharmaceutical, because the number of patients you can study it in is so small.
X: Would Shire HGT be profitable as an independent company?
Gregoire: HGT has been profitable as of 2007. So we’ve passed that profitability mark. In 2007, HGT revenues were about 15 percent of overall Shire revenue. From a growth perspective, it’s anticipated that in five years to 10 years it would be 30 percent and growing. Clearly, Shire has made a huge investment in HGT and sees it very much as the R&D arm that is very strategic to the company.
X: Do you think workers at larger biotechs like HGT need to be more entrepreneurial?
Gregoire: I think workers in biotech and at big biotechs should be entrepreneurial. We intend to reinvest a lot of our money in R&D. So innovation matters a lot, and how you behave in terms of decision-making, being nimble, and developing leaders that have general management capabilities is important. We generally have [fewer types of employees] than in pharmaceuticals, so we work less in silos, and working less in silos gives management more opportunities to develop. Especially in a rare disease business, the volume of what we do is low—each patient counts. Each new patient added to the patients treated matters enormously to the business. So we tend to follow things very closely as a group, so we have no choice but to remain close in our management of things and entrepreneurial.
X: What is the status of the Lexington expansion?
Gregoire: If you came here—and I’m here now—you would see that we’ve moved the research group [from Cambridge] into Building 125, a building that already existed. At 300 Patriot Way, which is the building I’m sitting in, it is also completely full with people from R&D and program management. We’ve built in this building an additional facility for the cell-culture manufacturing of Elaprase. Construction is finished on that, and now we’re validating the plant in order to begin manufacturing the drug here early next year. We’ve moved our commercial organization [to 500 Patriot Way]. In total, we have about 380 employees here in Lexington. We also have our large-scale manufacturing facility under construction next the 300 Patriot Way. The Lexington site is expected to be fully developed by 2011.