* Sells loss-making skin treatment for no initial fee
* Could receive up to $300 million in milestone payments
* Shares touch record high
By Paul Sandle
LONDON, Jan 17 Pharmaceuticals company Shire
has agreed to sell its Dermagraft treatment to U.S.
group Organogenesis, taking a $650 million hit on the
loss-making bio-engineered skin substitute it bought less than
three years ago.
Shire had hoped that Dermagraft would be the foundation of a
regenerative medicine franchise when its acquired owner Advanced
BioHealing for $750 million, but it received a setback when the
treatment for diabetic foot ulcers failed to be approved for leg
ulcers months after the deal in June 2011.
The company said on Friday that Dermagraft's prospects had
also reduced significantly after changes in U.S. federal
reimbursement payments for wound-care products.
Shire said it will receive no upfront payment from
Organogenesis but it would be entitled to up to $300 million
cash in milestone payments if it meet sales targets up to 2018.
It said the loss on the disposal - about $650 million - will
be treated as an exceptional item in its 2013 fourth-quarter
The market welcomed the sale, with London-listed Shire's
shares reaching a record high of 30.25 pounds in early trade on
Friday. By 0930 GMT they were up 0.7 percent at 30.07 pounds.
Analysts at Societe Generale said that Dermagraft would have
become even more of a drag on Shire's earnings after the the
"Any price for the divestment is better than Shire retaining
a non-core, loss-making product," they said. "As such, we view
the divestment as a positive move that should allow Shire to
focus on its higher-growth profitable products elsewhere in its
Shire Chief Executive Flemming Ornskov is focusing the group
on core therapy areas including rare diseases and neuroscience,
where it is a leading provider of drugs to treat hyperactivity.