SHP625 (LUM001) - Shire

A key midstage failure raises doubts about Shire CEO's picks as the biotech reaches a crucial crossroad.

SHP625 was positioned as one of Flemming Ornskov's big drugs for the future of Shire ($SHPG). As the CEO plotted a path to $10 billion in sales by 2020, SHP625 was a central part of the blockbuster expansion plan.

Then the drug, designed to treat a variety of liver ailments, flopped in the first of several midstage studies, failing primary as well as secondary indications and putting the entire effort under a cloud. And just days ago, Shire capped its commitment to the Lumena investors Ornskov had acquired it from, paying $90 million in a final payout.

SHP625 and SHP626 were tapped as stars capable of earning upward of $2 billion, which Ornskov had outlined during an attempt to ward off a takeover attempt by AbbVie ($ABBV). (AbbVie got the deal, then walked away from it.)

The setbacks in the pipeline this year--including the recent rejection of lifitegrast, which just turned in more positive data in its second Phase III study--tend to underscore a poor performance record for Ornskov, who took over three years ago. He made a bid for Baxalta ($BXLT) a few months ago, which was rejected, then stepped back as analysts tried to figure out what the biotech's next move would be. Shire has the cash to do big things in the M&A game; the question now is just how good Ornskov is at picking winners.

The uncertainty arrives as Shire's R&D ops are being reorganized and centralized around the Lexington, MA, hub. The drug setback also offers a fresh cautionary tale about making ambitious sales forecasts for unproven drugs.

For more:
Shire executes a $90M Lumena payoff following PhII flop
Shire's not giving up on target Baxalta, it says amid Q3 beat
Deal-hungry Shire nabs Lumena for $260M-plus as M&A frenzy intensifies

SHP625 (LUM001) - Shire