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Shire Falls After Scrapping Dermagraft as Leg Ulcer Therapy

Aug. 25 (Bloomberg) -- Shire Plc fell in London trading after abandoning development of the Dermagraft skin substitute for the treatment of leg ulcers, three months after it bought the product.

The drugmaker dropped 57 pence, or 2.8 percent, to 1,955 pence, after earlier declining as much as 5.4 percent in the session. Dermagraft failed to completely heal leg ulcers in a late-stage trial, the goal Shire had agreed on with regulators in the U.S. and Europe, the company said in a statement late yesterday.

Shire acquired Dermagraft in May in the $750 million purchase of Westport, Connecticut-based Advanced BioHealing Inc. Dublin-based Shire has also had disappointing sales of Resolor, a drug it gained with the purchase of Movetis NV last year, said Justin Smith, an analyst at MF Global in London.

“The poor execution on Movetis, coupled with yesterday’s news on the ABH deal, is why some investors may now question Shire’s M&A track record,” Smith wrote in a note today. Still, the successful integration of Transkaryotic Therapies Inc., which Shire bought in 2005, indicates the company’s “expertise in M&A is solid,” Smith wrote. He rates the stock “buy.”

The shares pared losses late in the trading session after Shire won U.S. marketing approval for another product, Firazyr, to treat attacks of a rare genetic swelling disease.

Dermagraft was previously marketed by Smith & Nephew Plc until 2005 when the London-based company stopped making the therapy after the U.S. Food and Drug Administration rejected it at as a treatment for leg ulcers. Smith & Nephew sold the rights to Advanced BioHealing the following year. Dermagraft is approved for treatment of diabetic foot ulcers and had revenue of $147 million last year.

To contact the reporters on this story: Simeon Bennett in Geneva at sbennett9@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net

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