Shire Takes the Pain and Offloads DERMAGRAFT®

Global Pharma company Shire plc, is to sell what it calls its “Dermagraft assets” to Organogenesis Inc.  for what could add up to $300 million dependent on future milestones. It sounds like they’re not counting on that though, the mood music being more a sense of relief at being rid of what has become an ill-fitting line.

Background

Dermagraft is a living skin substitute indicated for use in the treatment of full-thickness diabetic foot ulcers and is approved for use in the US and Canada. Organogenesis will henceforth assume all financial and management responsibility for the product.

The assets in question include include intellectual property relating to Dermagraft including patents, trademarks and know-how; regulatory filings and registrations relating to Dermagraft; certain manufacturing plant, equipment and materials; product inventory and accounts receivable.

These assets had a value of $683 million in Shire’s September 30, 2013 balance sheet. Shire is generally retaining legacy liabilities relating to the Dermagraft business, including a previously announced Department of Justice investigation relating to the sales and marketing practices of Advanced Biohealing, Inc (now known as Shire Regenerative Medicine, Inc.).

The deal will see Shire receive no upfront payment from Organogenesis but could result in up to $300 million cash in total milestone payments should Organogenesis meet certain annual net sales targets between now and 2018. Shire will record a loss on disposal and associated impairment charges of approximately $650 million in the fourth quarter of 2013, which will be excluded from Non GAAP earnings.

Company comments

Flemming Ornskov MD, Chief Executive Officer of Shire commented: “Following the new strategy we outlined during the first half of last year, Shire has had a renewed focus on operational discipline. As such, we have been prioritizing investments that are of the greatest strategic, clinical and commercial value to our Company. Dermagraft no longer meets these criteria and this divestment will allow us to focus our resources on other projects. Due to the recent Medicare ruling regarding reimbursement for Dermagraft, the business environment has changed, and the prospects for the product have reduced significantly. 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.”

Source: Shire, plc.

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