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Insight & Intelligence : May 1, 2012
This Month Last Year: Shire and Thermo Fisher’s Acquisitions and Geron’s hESC Plans
While Geron’s good news in May 2011 didn’t last long, Shire and Thermo hope their moves strengthen their businesses.
Major biotech headlines last May included Shire’s purchase of Advanced BioHealing, Thermo Fisher Scientific’s buy of Phadia, and Geron winning a $25 million loan to advance its human embryonic stem cell (hESC) product for spinal cord injury through clinical development.
Through the takeover of Advanced BioHealing, Shire became a regenerative medicine company, at least partially. Thermo Fisher’s deal extended and strengthened its current product line, while Geron morphed into a cancer company from a hESC therapeutic company.
Shire Turning to Regenerative Med
On May 18, 2011, Shire shelled out $750 million for Advanced BioHealing, which agreed to sell itself one day after it planned to go public. That acquisition bought Shire Dermagraft, approved to help heal diabetic foot ulcers. It is an artificial skin product consisting of foreskin-derived human fibroblasts grown on a mesh scaffold.
Advanced Tissue Sciences (ATS), Dermagraft’s developer, went out of business in 2002, filing for bankruptcy. Canaan, among other investors, obtained rights to the project and started Advanced BioHealing to commercialize it.
This April 11, Shire made a second acquisition moving it further into the regenerative medicine space. The company reported an agreement to acquire substantially all the assets of Pervasis Therapeutics for its Vascugel product. This endothelial cell-based therapy is being developed to improve the function of arteriovenous (AV) access sites, dialysis access points that connect veins and arteries with tubing. Vascugel has received orphan drug designation from the FDA and EMA.
“About 50 percent of those grafts don’t last the first year,” Xconomy quoted Kevin Raking, former CEO and chairman of Advanced BioHealing and now head of Shire’s Regenerative Medicine, as saying. “But when Pervasis’ cells are wrapped around those access points, it improves healing.”
Advanced BioHealing was a leader in the field of regenerative medicine with its living cell product Dermagraft, Jeff Jonas, M.D., Shire’s svp of R&D, specialty pharmaceuticals and regenerative medicine, pointed out to GEN. The acquisition brought in biomaterials, experience in cell-based manufacturing, and an understanding of the complications of diabetes, he added.
“Shire already had an internal familiarity with the complications of the disease, and we thought we might have some competitive advantage because of our work with Renovo, even though we decided not to move forward with Juvista, so this was a natural fit.
“Pervasis provides a natural evolution of a product line that leverages both our experience with Dermagraft and our manufacturing skill. We already know how to develop a matrix and put cells on it, and now we have another cell-based technology platform that we can leverage to develop additional regenerative medicine therapies.
“Pervasis gives us an opportunity to conduct a clear Phase II clinical trial that will give us a clear go/no-go outcome. This is in line with Shire’s desire to make decisions early on in the clinical development process regarding whether or not to move forward with a technology. These products are also in line with our focus on specialist physicians because each of them will be delivered to patients by physicians in specialty practices.
Shire, however, has experienced some bad luck in moving from pills to proteins, following its other acquisitions of biologics companies. In 2005, Shire acquired Transkaryotic Therapies (TKT), now Shire Human Genetic Therapies, in an all-cash transaction valued at $1.6 billion. At the time, Shire said the acquisition was consistent with its strategy and highly complementary to its business model to develop and market products for specialty pharmaceutical markets.
The deal brought Shire two approved recombinant protein products, an enzyme replacement therapy for Fabry disease called Replagal, and Dynepo, a treatment for anemia in patients with chronic kidney disease.
Shire decided to stop marketing Dynepo, citing “changes in the external environment,” including the launch of several biosimilars at lower prices. And while Replagal was approved in Europe in 2001 and is avalaible in 46 countries, this March Shire decided to pull its BLA in the U.S. Shire commented that “recent interactions with the FDA have led the company to believe that the agency will require additional controlled trials for approval.”
Thermo’s Acquisition Strategy
Another big acquisition deal from last May was Thermo Fisher Scientific’s takeover of Phadia. On May 19, 2011, the firm ponied up $3.5 billion in cash for the Swedish diagnostics maker, which concentrates on allergy and autoimmunity tests. Phadia is expected to add $190 million to Thermo’s 2011 revenue results.
Thermo Fisher Scientific also picked up Dionex, Sterilin, and TREK in 2011, president Marc N. Casper told GEN. “Each of these 2011 acquisitions added key capabilities to both strengthen our competitive position and create value for our customers and shareholders.
“The Dionex acquisition, finalized in May 2011, has enabled Thermo Fisher to continue its leadership in mass spectrometry, gain market share in HPLC, and strengthen its presence in the high-growth life sciences and applied markets,” Casper added. “Regarding revenue synergies, we are well ahead of our goal and believe that we’ll meet our three-year targets as early as one year ahead of plan. We feel good about the progress on Dionex, and it’s great to be tracking ahead of expectations.”
Thermo Fisher Scientific may also be hedging against potentially weakening segments and finding high-margin value in its acquisitions. “Thermo Fisher Scientific’s operational leverage, diversity, and improving business mix (toward higher-margin businesses) provide superior earnings per share insulation and strong 13–15% growth, both standouts during a challenging funding environment,” noted Morgan Stanley analyst Daniel Brennan in The Life Sciences Report.
Geron and ESCs
Last year around this time, the pioneer in human embryonic stem cell (hESC) therapeutics, Geron, seemed to be doing well. On May 5, 2011, it got a $25 million loan from the California Institute for Regenerative Medicine (CIRM) to support clinical study of its Phase I-stage spinal cord injury (SCI) treatment, GRNOPC1. A year later, though, the company is no longer developing GRNOPC1.
In November 2011, Geron halted the trial. The firm said that it hadn’t lost faith in the potential of hESC-based therapeutics but had decided, given the scarcity of funds, to focus on its cancer therapeutics pipeline. Geron returned the $6.5 million it had borrowed to date from CIRM plus interest.
“In the current environment of capital scarcity and uncertain economic conditions, we intend to focus our resources on advancing our Phase II clinical trials of imetelstat and GRN1005,” CEO John A. Scarlett, M.D., told GEN last November.
Imetelstat, an oligonucleotide, acts as a direct enzyme inhibitor of telomerase. It is currently being tested in cancers including breast cancer, advanced non-small-cell lung cancer (NSCLC), essential thrombocythemia, and multiple myeloma. GRN1005, a peptide-drug conjugate designed to transport paclitaxel across the blood-brain barrier, targets low-density lipoprotein receptor-related proteins (LRPs), specifically LRP-1. GRN1005 is being evaluated in two Phase II trials: brain metastases arising from breast cancer and brain metastases arising from NSCLC.
Geron’s departure from the hESC field leaves Advanced Cell Technology (ACT) as the only company testing hESCs. Its hESC-derived RPE product is in two ongoing clinical trials, one in Stargardt macular dystrophy and the other in advanced dry age-related macular degeneration.
Shire, Thermo Fisher, and Geron all continue to look for growth opportunities. Among various strategies, each will evaluate acquisitions that bring them either unique product lines or opportunities to leverage their existing business in challenging economic times. At the same time, they will have to work hard to move drug candidates through the development and regulatory maze, to develop tools and services that target key market segments, as well as to promote existing commercial products.
Patricia F. Dimond, Ph.D. (email@example.com), is a principal at BioInsight Consulting.
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