Shire to acquire FerroKin BioSciences for as much as $325 million

DUBLIN—Shire plc, a global specialtybiopharmaceutical company, announced in mid-March that it had signed anagreement to acquire FerroKin BioSciences Inc., for an upfront payment of $100million, payable in cash at closing, plus potential post-closing milestonepayments of as much $225 million, depending upon the achievement of certainclinical development, regulatory and net sales targets.

What this does for Shire is provide another stepon its strategic path to build its hematology business, which already includesXagrid and what Shire calls "a growing development pipeline." It alsoadds, the company says, "a differentiated product in development (ironchelator FBS0701), with global rights, in a global market currently worth over$900 million and growing."

The assets and pipeline Shire will gain areexpected to serve chronic patient need for treatment of iron overload followingnumerous blood transfusions. Excess iron in vital organs such as the liver andheart increases the risk of organ failure and is the principal cause of deathin transfusion-dependent patients, Shire notes.

The company maintains that the acquisition isconsistent with its strategy of developing and commercializing differentiatedspecialist products prescribed by specialist physicians (such as hematologists/hematologist-oncologists) served by a small sales force, and FBS0701 will bedeveloped to demonstrate clinical efficacy and an attractive safety profilerelative to currently approved chelating agents, as follows:

Global filing planned for indications for myelodysplasticsyndrome and hemoglobinopathies initially
Phase II studies underway with additional trials planned

Potential launch as early as 2016

"There remains a significant unmet need for aonce-a-day, oral iron chelator in a convenient dosage form for the treatment oftransfusional iron overload with a better safety profile than currentlyavailable treatments," says Ross Murdoch, Shire's senior vice presidentfor specialty pharmaceuticals. "We believe FBS0701 has the potential tomeet that need. We hope to use our expertise in hematology coupled with ourproven ability to progress products through the development pipeline to bringFBS0701 to the global marketplace. This acquisition marks an important step forShire in building a business that serves the growing needs of specialtyhematologists and their patients."

Zacks Investment Research agrees with Shire thatthe acquisition would strengthen Shire's hematology portfolio and sees the moveas consistent with Shire's strategy of targeting specialist markets with strongpatent protection and global rights. Zacks also goes on to point out in itsinvestor's note about the deal that this strategy has already been in playseveral times this year. In January, for example, Shire acquired the U.S.rights of Resolor from Janssen Pharmaceutica N.V., a Johnson & Johnson company. Then, in February, the company entered into a collaboration and licenseagreement for the development of products for hemophilia and other monogenic diseaseswith Sangamo BioSciences Inc.—said products to be developed using Sangamo'szinc finger DNA-binding protein technology. More recently, in March, Shireentered into an agreement with arGEN-X to create novel treatments for raregenetic diseases.

Zacks maintains a "Neutral" recommendation onShire but notes that Shire's recent collaborations and acquisitions, includingMovetis and Advanced BioHealing Inc., "have added immense potential to itspipeline. With several of its products already facing or likely to face genericcompetition, the company's pipeline needs to deliver."

Subsequent to the acquisition, should nothing occurto hamper it, FerroKin BioSciences' key employees, including its founder andCEO, Dr. Hugh Young Rienhoff Jr., would provide consulting services to Shireduring the transition period.

"An important factor for FerroKin BioSciencesin agreeing to this transaction was Shire's drive, capability and vision tobring new products to the hematology market that promise to raise the standardof care for patients. In Shire's hands, FBS0701 has greater potential tofulfill that promise," said Rienhoff.

The closing of the acquisition is subject tocustomary conditions, including adoption of the merger agreement by a requiredproportion of FerroKin's equityholders, holders of no more than 2 percent ofFerroKin's capital stock having exercised or being entitled to exerciseappraisal rights under Delaware law and the absence of a material adverseeffect on FerroKin BioSciences.

FBS0701 is a once-daily oral capsule indevelopment for the treatment of iron overload due to chronic bloodtransfusions in adults and children. FBS0701 has received orphan productdesignation from both the U.S. Food and Drug Administration and the EuropeanMedicines Agency. FerroKin BioSciences has completed four Phase I clinicaltrials to evaluate the safety, tolerability, pharmacokinetics and iron clearingactivity of FBS0701 in healthy volunteers and patients. Phase II dose-rangingstudies in adults and children are ongoing. Initial data from the adult study,presented at the American Society of Hematology in December, reportedly supportthe potential for FBS0701 as an effective iron chelator with a favorable safetyprofile.