Shire ($SHPG) last October said it had decided to stop construction on a $100 million plant in California, explaining it was not going to need additional capacity for the regenerative medicines business it acquired in its 2011 buyout of Advanced BioHealing. The reason for the reversal on a major plant that was already underway became clearer Friday when the company said it was unloading the key to the 2011 deal, ulcer treatment Dermagraft, taking a $650 million loss on the deal.
Shire announced Friday it was selling the diabetic foot ulcer treatment to Canton, MA-based Organogenesis, which is not paying anything up front but could pay Shire up to $300 million if it meets sales targets up to 2018. With the deal, Organogenesis, which has its own foot ulcer product, gets the company's current 115,000-square-foot manufacturing plant in La Jolla, CA, but not the new facility, Organogenesis spokeswoman Angelyn Lowe explained over the phone.
Shire, in its third-quarter earnings report in October, announced it had decided to stop construction on the new plant as one way to cut costs for a product that CEO Flemming Ornskov said had racked up more than $100 million in losses in the first 9 months of 2013. The company said it could meet supply demand for Dermagraft from the La Jolla facility. "Shire is currently assessing possible disposal opportunities in relation to this facility," it said. It is a big turnabout. In 2012, Shire was predicting it would need both facilities to meet anticipated global demand for Dermagraft and new regenerative medicine products.
Shire is now on to its next big thing, expecting later this month to complete the buyout of rare drugmaker ViroPharma for $4.2 billion.
- here's the Shire announcement
- and a release from Organogenesis
- here's the Daily Transcript story (sub. req.)