LONDON Shire (SHP.L) is to buy privately owned U.S. biotech firm SARcode Bioscience, paying $160 million upfront to win rights to a new drug in late-stage development for dry eye diseases.
The move is Shire's second acquisition this month of a small company in the ophthalmology space - a hot area for pharmaceutical research - following the purchase of Sweden's Premacure two weeks ago.
Britain's third biggest drugmaker has a long history of snapping up smaller biotech companies to build its specialty drugs business and its new CEO said the latest deals showed that the strategy was set to continue.
Flemming Ornskov will take over from Angus Russell as chief executive on April 30.
Ornskov said ophthalmology was an area he knew well from his previous roles at Bausch and Lomb, Novartis (NOVN.VX), where he licensed eye drug Lucentis, and Bayer (BAYGn.DE), where the ophthalmic unit reported to him.
He said Shire could do further deals in ophthalmology, both in back-of-the-eye and front-of-the-eye diseases.
"With us having now made two acquisitions, I think we are sending a strong signal both to the external world and to the internal world that we certainly will be looking at further opportunities in ophthalmology, if it is in areas of ophthalmology that we perceive to have high growth opportunities, significant unmet need and where innovation is the key driver for differentiation," he said.
Shire said on Monday it aimed to launch SARcode's new eye drug Lifitegrast in the United States as early as 2016, if Phase III clinical studies pan out as hoped. It is also evaluating regulatory filing strategies in other markets.
In addition to the upfront payment of $160 million, shareholders in California-based SARcode will be eligible for additional undisclosed payments upon achievement of certain drug development and commercial milestones.
With the global ophthalmic pharmaceutical market valued at approximately $13 billion in 2012 and growing by 4.5 percent a year, Shire said the therapeutic area was a good fit within its portfolio of specialty medicines.
Because buying SARcode will add a new Phase III program, the drugmaker said it was conducting a prioritization review of its portfolio to accommodate this new expenditure in 2013.
"I don't anticipate that this will increase our overall R&D expenditure this year, but I think we will have to make some re-prioritizations," Ornskov said.
He said the two deals in ophthalmology demonstrated that he would not change Shire's acquisition strategy.
"I want to continue to send the signal to any company, particularly smaller companies, that if you are in specialty medicine, if you have a lot of innovation and if you are in an area of interest to Shire, you should look at Shire as a potential future partner," he said.
Barclays acted as financial advisor to Shire, while J.P. Morgan advised SARcode.
(Editing by David Cowell)