Canaan cashing in on Shire's $750M deal for Advanced BioHealing

Shire is leaping into a new business. The UK drugmaker has agreed to buy Advanced BioHealing, the maker of a diabetic foot ulcer treatment, for $750 million. Advanced BioHealing's Dermagraft skin-substitute product will become the cornerstone of a new Shire unit focused on regenerative medicine. And Advanced BioHealing's investors, who were readying an IPO, are getting a hefty return on their investment.

Canaan Partners and some other investors bought up the rights to Dermagraft after Advanced Tissue Sciences went under in 2002. Now Canaan is slated to earn more than $200 million from its $15 million gamble, offering a healthy multiple.

ABH was preparing to go public today. For most biotechs that would represent an act of desperation, but Canaan's Stephen Block tells the New York Times that the company expected to beat out the $14 to $16 range it had provided. At that amount, the company would have been valued at up to $640 million.

Dermagraft brought in about $146 million in 2010 sales, but Shire's leadership sees the opportunity to make it a much bigger product. For one thing, it's already in trials for a new use--treatment of venous leg ulcers. But the product also has the potential to expand in its present market, Shire's specialty pharma President Mike Cola said, because most patients with diabetic ulcers receive very simple, low-tech treatment. "We're talking about changing the practice of medicine" with Dermagraft, Cola told Bloomberg.

- here's the FiercePharma story
- here's the story from the New York Times