Shire has signed an agreement to acquire Advanced BioHealing for $750 million in cash. The buy, which comes a day before Westport, CT-based Advanced BioHealing was to go public, will allow the Irish biopharmaceutical company to establish a new regenerative medicine business unit.
Advanced BioHealing's main product is Dermagraft, a cryopreserved human fibroblast-derived dermal substitute used to treat diabetic foot ulcers. It acquired the product from Smith & Nephew, which had previously been involved in a joint venture with Advanced Tissue Sciences for Dermagraft and Transcyte, in 2006 and launched it the following year. The FDA had already cleared the product through the premarket approval process to treat diabetic foot ulcers.
According to a Shire statement, Dermagraft is a leading treatment in the slow healing segment of the diabetic foot ulcer market and currently has a five percent share of that potential $3 billion market. In addition, Advanced BioHealing has fully enrolled trials in a number of countries--including the U.S., South Africa and several European nations--to evaluate Dermagraft for the treatment of venous leg ulcers. Advanced BioHealing expects data in Q4, with anticipated U.S. filing in Q1 2012.
As the Wall Street Journal notes, the deal marks a rare victory for investors in the complex field of regenerative medicine. Peter Welford, an analyst with Jefferies International, says in a note that the deal is "strategically sound, helping Shire potentially achieve its aspirational mid-term growth goals." But, "given the multiple paid and uncertain peak potential, we anticipate some stock weakness," Bloomberg quotes him as saying.
However, other analysts are expressing more skepticism about the deal. "[The wound-healing field] is well outside Shire's two areas of core therapeutic expertise," writes Emmanuel Papadakis at Collins Stewart, as quoted by the Guardian. "Whilst we favour diversification that meets criteria of financial return and some level of synergy, [it's] not clear this deal meaningfully ticks either box. Notably S&N had already pulled [the product], presumably due to lack of commercial opportunity."