Shire gambles on one-man biotech startup to gain ultra-orphan drug

With pricey rare-disease drugs all the rage, Shire ($SHPG) has made a gamble to buy the baby biotech Lotus Tissue Repair and its preclinical therapy for a genetic skin disorder. The deal bolsters the pipeline of Shire's fast-growing Human Genetic Therapies, while providing Lotus investor Third Rock Ventures with its second exit in rare diseases.

Lotus took the fast track to reach a buyout deal. It began just 18 months ago with a $26 million Series A round and operates with one full-time employee, founding CEO Mark de Souza, in a rented office in Harvard Square, Third Rock Partner Neil Exter told FierceBiotech this morning. Yet in its short history the biotech drew interest in its pioneering protein treatment for a chronic condition known as dystrophic epidermolysis bullosa (DEB), which causes severe blistering and can lead to early deaths from skin cancer.

"This was just the right opportunity, the right financials and I think Shire was the right partner," Exter said. He later added: "Ultimately, this is not a company where we were going to develop sales and marketing ourselves. Although we could have, we weren't building the company to do that."

Discovered at the University of Southern California, Lotus' recombinant protein-replacement therapy could replace a missing or defective type of collagen in DEB patients that results in the severe blisters. Exter estimated that there are roughly 1,000 patients in the U.S. with DEB. Such ultraorphan diseases have made fortunes for Genzyme, Shire and Alexion ($ALXN) with therapies that cost $200,000 or more for each patient annually.

The drug has only been proven in animal models thus far, but Shire is making a bet that the benefits of Lotus' therapy will carry over in human studies and provide the first drug that addresses the root cause of the disease.

"DEB is one the most devastating orphan diseases, severely impacting the lives of patients and their families, many of whom have few or no treatment options other than palliative care," said Dr. Philip Vickers, the global head of R&D for Shire HGT, in a statement.

Shire wasn't willing to part with how much it paid for Lotus, other than saying that the transaction includes upfront and milestone payments.

The Irish drugmaker's HGT unit, based in Lexington, MA, is one of the largest rare disease drug businesses in the world with $1.23 billion in 2011 revenue, mostly from sales of the enzyme-replacement therapies Replagal for Fabry disease and Elaprase for Hunter syndrome. It's seen a swarm of larger rivals such as Sanofi ($SNY) and Pfizer ($PFE) barge in on the rare-disease business in search of profitable products to feed future growth.

Shire has some experience with epidermolysis bullosa, and its regenerative medicines unit is developing a skin-replacement product for patients with the disease.

For Third Rock, Lotus is the second exit after Eli Lilly ($LLY) bought its portfolio company Alnara. Lilly failed to gain FDA approval of Alnara's enzyme supplement for patients including those with cystic fibrosis, but the sale of Alnara was a financial win for Third Rock and its other VC backers.

- here's the release

Special Report: Shire: Branching out - The Biggest R&D Spenders in Biotech

Suggested Articles

Preclinical-stage biotech Abpro Therapeutics wants to trial its two lead candidates for HER2-positive cancers and diabetic macular edema in 2019.

After a rough patch in 2017, the stars seem to be realigning for French CAR-T expert Cellectis, which just closed a $164 million U.S. public offering.

Investment firm Frazier Healthcare Partners has closed its 11th fund—worth $780 million—that will help established companies accelerate their growth.