The deal is worth $750m (€530m) and was announced just a day before ABH, which makes the skin substitute diabetic foot ulcer treatment Dermagraft, was due to launch its initial public offering.
Mike Cola, president of Shire’s specialty pharmaceutical business, said Dermagraft was the key driver and suggested the technology underpinning the product would be a cornerstone of the firm’s entry into regenerative medicines.
ABH has operations at three sites in the US: a manufacturing facility in La Jolla, California; a corporate office in Westport, Connecticut; and research laboratories in Brentwood, Tennessee.
Shire said it plans to expand ABH’s manufacturing capability and supplement the firm’s operations with its own capacity and quality assurance teams.
Dermagraft, high barrier to entry
But while Dermagraft’s position in US diabetic foot ulcer market, which Shire estimates will be worth $3bn by 2025 based on WHO forecasts, is undoubtedly attractive, ABH’s insulation from competition is also important as the firm acknowledged.
“Generic or similar products to Dermagraft would have to overcome high regulatory, development and manufacturing hurdles, including the performance of long, costly clinical trials, to enter the DFU market.”
Shire, like many in the innovative pharmaceutical industry, has started to face competition from non-branded versions of its products that have lost patent protection in the last few years.
A case in point is Shire’s ADHD treatment Adderall XR which, despite some revenue growth in recent months as a result of generic shortages, still generates less than the $300m per quarter it brought in before patent loss.
A hard-to-copy, cell-based product, like Dermagraft, is likely to be attractive to Shire.
Market response
The market’s reaction to the proposed takeover deal has been generally positive.
Jefferies analyst Peter Welford told Dow Jones that although regenerative medicine “represents a new therapeutic area for Shire, but does fit into Shire's business model targeting significantly under-penetrated specialist markets."
This was echoed by Berstein analyst Jack Scannell, who told the newswire that: “Perhaps Shire believes its expertise in growing new markets for drugs, rather than simply developing new drugs for existing markets will help."