Shire is making a move into regenerative medicine and will acquire the USA's Advanced BioHealing for $750 million in cash.
The principal attraction of Advanced BioHealing, a privately-owned Connecticut-based business, is Dermograft, a regenerative bio-engineered skin substitute used for the treatment of diabetic foot ulcers. The product presently has a 5% patient share of the potential $3 billion slow-healing DFU market, equating to $146 million in US sales last year, and Shire says the potential for growth is considerable.
The Dublin, Ireland-headquartered group says Dermagraft has a "favourable reimbursement profile", notably with Medicare (100% coverage), and generic products "would have to overcome high regulatory, development and manufacturing hurdles" to enter the DFU market.
Also, Advanced BioHealing has fully enrolled multinational trials to investigate Dermagraft for the treatment of venous leg ulcers. If all goes well, a filing in the USA is planned for the first quarter of 2012.
Mike Cola, president of Shire's specialty pharmaceuticals business, said the acquisition is "a strong and complementary strategic fit". He claimed that "the potential to build on the success of Dermagraft is attractive" as it provides a solution for a common complication suffered by diabetics that, "if not treated effectively, can lead to lower limb amputation and high cost to patients and society".
Deal comes hours before IPO
Shire has made its bid a day before Advanced BioHealing had been expected to launch an initial public offering of 13.4 million shares priced from $14 to $16. That would have raised over $200 million and the company would have been valued at around $630 million.
The deal has gone down well with analysts. Peter Welford at Jefferies International issued a research note saying that the acquisition offers Shire entry into the new field of regenerative medicine. “We see the deal as strategically sound, helping Shire potentially achieve its aspirational mid-term growth goals", he wrote, although "given the multiple paid and uncertain peak potential, we anticipate some stock weakness".
At 9.20am (UK time), Shire's shares had indeed slipped 1.2% to £18.78.