Shire has acquired Meritage Pharma for up-to-$245 million, in a deal that further strengthens the biotech giant’s gastrointestinal (GI) and rare disease portfolios with a Phase III-ready treatment—namely the acquired company’s Oral Budesonide Suspension (OBS) for the treatment of adolescents and adults with eosinophilic esophagitis (EoE).

The deal is Shire’s second in the GI sphere in as many months. Shire said January 11 it will acquire NPS Pharmaceuticals for about $5.2 billion cash, in a deal set to close later in the first quarter of this year. Shire was among companies competing to buy Salix Pharmaceuticals and its portfolio of 22 GI drugs—a scramble that ended yesterday with Salix accepting Valeant Pharmaceuticals International’s $14.5 billion offer.

In the latest deal, Shire agreed to pay $70 million upfront, plus what Meritage confirmed was up to $175 million in milestone payments, for Meritage. Shire said it was exercising rights to acquire the OBS developer that it obtained as part of its $4.2 billion acquisition of ViroPharma, completed last year.

ViroPharma held an option to buy Meritage after shelling out $7.5 million in 2011 toward Phase II studies of OBS. The option gave ViroPharma rights to buy all outstanding Meritage stock for $69.9 million, with ViroPharma shareholders eligible to receive another $175 million tied to clinical and regulatory milestones for OBS, according to ViroPharma’s consolidated financial statements for 2013, which Shire released last August.

OBS is a Meritage-developed viscous oral formulation of the corticosteroid budesonide that is designed to coat the esophagus so that the drug can act locally. The FDA has granted Orphan Drug Status designation to OBS for the treatment of patients with EoE, a rare, chronic inflammatory GI disease.

In September 2014, Meritage released positive results from a Phase IIb trial showing that OBS achieved the co-primary endpoints of reduction in inflammation and symptom of dysphagia with statistical significance. The company said statistical significance was also demonstrated for other secondary endpoints including histopathologic score, endoscopic score and physician global impression of disease activity.

The Phase IIb trial was a double-blind, randomized, placebo-controlled 16-week study that enrolled 119 patients aged 11 to 40 with confirmed EoE and documented problems swallowing food. The trial was conducted at approximately 25 U.S. clinical centers.

Founded in March 2008, Meritage has focused on GI and atopic disease treatments, raising $33.5 million in Series A financing from Domain Associates, Latterell Venture Partners and The Vertical Group.

Shire said it does not expect the Meritage acquisition to change to its previously published earnings guidance for 2015.

In reporting fourth-quarter 2014 results on Februray 12, Shire said it anticipates “low-to-mid single digit” product sales growth in 2015 based on actual exchange rates, with sales being dampened by the loss of Intuniv’s exclusivity and the strengthening US dollar—though royalties and other revenues are expected to increase by 30-40% this year since Shire will include NPS Pharma’s royalty streams for the first time.

[This report has been updated from an earlier edition to include Meritage's confirmation of the up-to-$175 million in milestone payments, a figure not included in Shire's original announcement.]

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