Shire Settles Age-Discrimination Lawsuit by Ex-Unit Head

Shire Plc said it settled a lawsuit by Jeffrey Jonas, the former head of the U.K. drugmaker’s Regenerative Medicine unit, alleging age discrimination and wrongful discharge.

Adi Mohanty, a Shire executive, is running the unit on an acting basis, Ben Atwell, a spokesman for Shire at FTI Consulting, said by e-mail. Jonas, 60, sued the company, former Chief Executive Officer Angus Russell and Russell’s successor, Flemming Ornskov, in May, alleging he was discriminated against because of his age and was effectively forced out.

Mohanty, 46, is the third executive to lead Regenerative Medicine, which markets the Dermagraft treatment for diabetic foot ulcers, since Shire acquired the product for $750 million in 2011. Revenue plunged after the U.S. Justice Department last year investigated the unit’s sales practices, leading Shire to replace most of the sales force.

“The main priority we have right now is to return Dermagraft to sales growth,” Ornskov said on a July 25 conference call with analysts after the company, which has management offices in Basingstoke, England, reported second-quarter earnings. “We have to be more moderately optimistic, both about peak sales and about the total opportunity of regenerative medicine.”

Shire didn’t disclose terms of the settlement. A call to Jonas’s lawyers at Mayer Brown LLP in Los Angeles before regular business hours wasn’t immediately returned.

Jonas’s Appointment

Mohanty was senior vice president of technical operations at Regenerative Medicine and previously worked in the company’s Human Genetic Therapies unit and at Transkaryotic Therapies Inc., which Shire bought for $1.6 billion in 2005.

After the Justice Department investigation, Shire in November named Jonas, the head of research and development for Specialty Pharmaceuticals, to lead Regenerative Medicine. The unit was created out of Advanced BioHealing Inc., the maker of Dermagraft, which Shire bought in 2011. He replaced Kevin Rakin, who had led Advanced BioHealing since 2007.

Jonas alleged in the lawsuit, filed in U.S. District Court in San Diego, that Russell failed to tell him the details of the government investigation before he accepted Russell’s offer of the job. Jonas turned down other opportunities and moved from Philadelphia to San Diego, where Regenerative Medicine is based, to take the position, he said.

Administrative Leave

After accepting the job, he learned that Shire planned to replace Russell with Ornskov, according to the lawsuit. Ornskov’s appointment was announced Oct. 25.

Jonas was then stripped of responsibilities before being placed on administrative leave, he alleged in the lawsuit.

“Ornskov began to strip away Jonas’s rights and responsibilities,” according to the complaint. “He did so as part of an express plan to replace current senior managers over 40 with younger employees. Shire and Ornskov have published derogatory and baseless comments about the reasons for putting Jonas on leave, including that Jonas had engaged in ’disruptive behavior that is harmful to the business.’”

Dermagraft ran into problems shortly after Shire bought Advanced BioHealing. Shire in 2011 abandoned efforts to develop Dermagraft for leg ulcers after a failed clinical trial. In this year’s second quarter, Dermagraft sales plunged 57 percent to $22 million.

Top Managers

“It became clear to Jonas that he had been promoted to be president of RM to put a good face on a messy, problematic situation in the RM business, rather than to use his skills to build the division, as senior management had previously represented,” according to the complaint.

Shire, the world’s biggest maker of pills for attention deficit disorder, has lost other top managers since last year. Sylvie Gregoire, former head of the Human Genetic Therapies division, left at the end of March. Mike Cola, head of specialty pharmaceuticals, left in April 2012.

Shire took a $199 million charge in the first quarter this year to write down the value of Regenerative Medicine.

Ornskov told analysts at a private meeting that divesting Dermagraft wasn’t out of the question, a person familiar with that meeting told Bloomberg News in February.

The case is Jonas v. Shire Pharmaceuticals LLC, 13-cv-01237, U.S. District Court, Southern District of California (San Diego).

(Adds Mohanty’s work history in sixth paragraph.)
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