LONDON (The Deal) -- Irish pharmaceuticals company Shire (SHPG) said on Friday it had arranged to hand its Dermagraft skin substitute to Organogenesis and take a $650 million loss on the disposal, which unwinds a major part of an acquisition it made less than three years ago.
Dermagraft is used to treat the foot ulcers that often accompany diabetes. Shire acquired the treatment when it paid $750 million up front for VC-backed Advanced BioHealing, of Westport, Conn., in May 2011, preempting the target's initial public offering. But Dermagraft didn't live up to Shire's expectations, particularly after the treatment failed to get Food and Drug Administration approval for its use on leg ulcers just weeks after the Advanced BioHealing deal. Later, the U.S. government restricted reimbursements for woundcare under its Medicaid program, further denting Dermagraft's potential.
"Following the new strategy we outlined during the first half of last year, Shire has had a renewed focus on operational discipline," said Shire CEO Flemming Ornskov, referring to a reorganization which pooled the R&D functions of three units into a central entity. "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," he added in the statement.
Shire said it is parting with assets which were valued at $683 million on its books as of Sept. 30 and will retain legacy liabilities, including those relating to a Department of Justice investigation about Advanced BioHealing's sales and marketing practices.