Shire takes an L on Dermagraft, unloads it to Organogenesis

Flemming Ornskov, CEO of Shire

Shire's once-promising foray into regenerative medicine has largely been a bust, and now the Irish company ($SPHG) is handing its costly Dermagraft program to Organogenesis in exchange for little but milestone payments.

Dermagraft was the driver of Shire's $750 million deal for Advanced BioHealing in 2011, but the skin-replacement technology has since endured regulatory setbacks and reimbursement woes, stunting its potential. Now, in a deal with competitor Organogenesis, Shire is trading Dermagraft for no up-front payment but up to $300 million in milestones through 2018, expecting to take a $650 million loss on the transaction.

Shire CEO Flemming Ornskov has made no secret of his desire to see the company trim down and focus on high-growth spaces, slashing payroll, retracting its R&D footprint and doubling down on areas like rare diseases and ophthalmology. Dermagraft, considering its mounting headwinds, didn't fit into that paradigm.

"Following the new strategy we outlined during the first half of last year, Shire has had a renewed focus on operational discipline," Ornskov said in a statement. "... We believe the best path forward for the patients who benefit from Dermagraft is to transfer it to new ownership in order to provide continued care and availability of their treatment."

That's where Organogenesis comes in, though the Canton, MA, biotech is facing issues of its own. Last month, the company confirmed that it plans to make some deep cuts in response to a Medicare decision to reduce reimbursement rates for its Apligraf product.

- read the announcement

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