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Shire PLC acquires Advanced BioHealing for $750M
July 2011
by Lloyd Dunlap  |  Email the author


DUBLIN, Ireland—Shire PLC has signed an agreement to acquire Advanced BioHealing Inc. in a straight cash deal, subject to customary conditions, including obtaining antitrust clearances.
The new entity combines Advanced BioHealing's experience and commercial capability in regenerative medicine with Shire's strengths and expertise in human cell biological manufacturing. In announcing the transaction, Shire cites ABH's strong strategic fit with Shire, the largely unmet medical need for a symptomatic condition in a growing and underpenetrated market served by specialist physicians and global market access to the leading U.S. marketed product for diabetic foot ulcers (DFU).   In addition, the product was attractive to Shire due to its high regulatory, development and manufacturing hurdles for potential competitors. Finally, the acquisition provides a platform for acquiring additional regenerative medicine assets.  
The purchase price of $750 million in cash will be financed from Shire's existing cash resources. With the acquisition, Shire will own the global rights for DERMAGRAFT and will continue to invest in the development of new indications and new geographies, pending regulatory approvals.  
DERMAGRAFT is a regenerative bioengineered skin substitute indicated for use in the treatment of diabetic foot ulcers (DFU) greater than six weeks old. The product now commands about a 5 percent patient share of the potential $3 billion slow-healing DFU market with $146 million in U.S. sales in 2010.  
According to Shire, slow healing DFUs affect nearly 538,000 people annually in the United States. The World Health Organization estimates there will be an increase in incidence of diabetes of 43 percent in North America and 55 percent worldwide from 2007 to 2025, which could positively affect DERMAGRAFT growth prospects since diabetic patients have a 15 to 25 percent lifetime risk of developing the condition.
The product consists of living cells and a bio-absorbable mesh scaffold, and is designed to stimulate healing in two ways: its mesh material is gradually absorbed and the human cells grow into place and replace the damaged skin; then the living cells in DERMAGRAFT produce many of the same proteins and growth factors found in healthy skin, which help replace and rebuild the damaged tissue in the DFU.  
Beyond diabetic foot ulcers, the therapy has potential for an expanded indication for venous leg ulcers (VLU). Advanced BioHealing has fully enrolled multinational trials in the United States, Germany, Poland, Sweden, United Kingdom, Estonia and South Africa to investigate DERMAGRAFT for the treatment of VLU with data due in the fourth quarter of this year and anticipated U.S. regulatory filing in Q1 2012.  
In the United States, VLUs account for the loss of 2 million working days and nearly $3 billion in treatment costs each year. Duration of treatment can last over a year in many cases, and frequently involves the use of significant healthcare resources, resulting in substantial costs for the U.S. healthcare system.
Kevin Rakin, CEO of Advanced BioHealing, who will continue to lead this business within the Shire organization, notes that ABH's regenerative medicine expertise came about as the result of a 2006 acquisition from Smith & Nephew. Although his company produced 100,000 cell sets in 2010, Rakin regarded combining resources with Shire as a way to "develop the business and deliver continued growth within a new environment that is highly complementary and will provide great leverage for us."  
Mike Cola, president of Shire's Specialty Pharmaceuticals business, agrees: "This acquisition is a strong and complementary strategic fit for Shire," he says. "We will invest in the strengths of Advanced BioHealing's specialist commercial team, its manufacturing and its product development. The potential to build on the success of DERMAGRAFT is attractive; it's already a leading product providing a solution for a common complication suffered by diabetics in the U.S. that, if not treated effectively, can lead to lower limb amputation and high cost to patients and society. We believe there's an opportunity to create more value from DERMAGRAFT and Advanced BioHealing's proprietary technology, and that with Advanced BioHealing's team joining Shire, we can build Advanced BioHealing into an exciting new business providing regenerative medicine for patients' unmet needs."  
Advanced BioHealing has operations on three sites in the United States: a manufacturing facility in La Jolla, Calif., corporate offices in Westport, Conn. and research laboratories in Brentwood, Tenn. In order to meet future demand, the company, under Shire's ownership, plans to expand its existing manufacturing capability. Shire will supplement Advanced BioHealing's current manufacturing functions with its manufacturing process and quality assurance expertise.
Code: E071105



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