Shire says its once-rejected eye drug is back on track with a Phase III success

Shire CEO Flemming Ornskov

Shire ($SHPG) took a major blow this month when the FDA rejected its self-described blockbuster eye treatment lifitegrast, but the company believes data from a new clinical trial will help it quickly reapply for approval next year.

The drug, acquired in Shire's $160 million buyout of SARcode Bioscience in 2013, is a small-molecule therapy designed to interrupt the immune process that leads to dry eye disease. In its rejection, disclosed Oct. 16, the FDA demanded Shire conduct a new clinical trial to demonstrate lifitegrast's efficacy, apparently unconvinced by an earlier Phase III study in which the drug cleared only one of its two primary endpoints.

Now Shire believes it has the clinical data to change regulators' minds. On Tuesday, the company reported that lifitegrast met its primary goal in a third Phase III trial on about 700 dry eye sufferers. The drug charted a statistically significant reduction in patient-reported eye dryness compared with placebo after 12 weeks, the company said, and met secondary goals of improving symptoms from baseline at weeks two and 6.

Shire's plan is to add the new data to its existing clinical package and resubmit lifitegrast for FDA scrutiny in the first quarter of 2016, hoping to get back on track with a drug management has said can bring in $1 billion a year in peak sales.

That revenue projection came from a rosier time at Shire, just as the company shook off some unwanted buyout attention from AbbVie ($ABBV) and set off on its own with a pipeline CEO Flemming Ornskov said could effectively double the drugmaker's sales to $10 billion by 2020.

But much has gone awry in the months since. In April, the liver disease drug SHP625, star of the company's $260 million acquisition of Lumena Pharmaceuticals, failed in a Phase II study. This week, Shire paid Lumena's shareholders $90 million to nix all future milestone payments as it decides what to do with SHP625 and a second related asset, taking a hard look at projects it once said could bring in $2 billion a year.

Meanwhile, Ornskov remains focused on much-scrutinized effort to acquire Baxalta ($BXLT) for $30 billion in stock, a deal Shire says would add another $20 billion to its revenue by 2020. But Baxalta, which spun out of Baxter ($BAX) in July, has steadfastly refused what it calls a "low-ball" offer, and investors have been lukewarm on the prospect.

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