IPXL Impax Laboratories, Inc. (delisted)

Shire plc (SHPGY) and Sangamo BioSciences, Inc. (SGMO) recently entered into a collaboration and license agreement for the development of products for hemophilia and other monogenic diseases. These products will be developed using Sangamo’s zinc finger DNA-binding protein (”ZFP”) technology.

Terms of the Deal

Shire will make an upfront payment of $13 million to Sangamo. Sangamo will also be eligible to receive milestone payments of up to $213.5 million based on the achievement of research, regulatory, development and commercial targets. Shire will pay Sangamo tiered double-digit royalties on product sales.

As per the agreement, Shire will get exclusive global rights to ZFP therapeutics designed to target 4 genes for investigating curative therapies for hemophilia A and B. Shire also gets the right to designate 3 additional gene targets.

While Sangamo will undertake all responsibilities till the submission of an Investigational New Drug ("IND") application or European Clinical Trial Application ("CTA"), Shire will reimburse Sangamo’s program-related costs (both external and internal).

This deal is in line with the company’s strategy of pursuing bolt-on acquisitions and alliances to expand its pipeline. In January, the company acquired the US rights of Resolor from Janssen Pharmaceutica N.V., a Johnson & Johnson (JNJ) company.

Shire is facing generic threats for several of its key marketed products. The company is already facing generic competition for Adderall XR, one of its top revenue-generating products. Teva Pharmaceutical Industries, Ltd. (TEVA) and Impax Laboratories, Inc. (IPXL) had launched generic versions of Adderall XR in April 2009 and October 2009, respectively.

Vyvanse, currently the top revenue grosser at Shire, is also facing patent challenges. Six companies, including Sandoz, Inc., Amneal Pharmaceuticals LLC, Watson Laboratories (WPI), Roxane Laboratories, Inc., Mylan Pharmaceuticals, Inc. (MYL) and Actavis Elizabeth LLC and Actavis Inc. (both together) have filed ANDAs for their generic versions of Vyvanse. Shire has filed patent infringement lawsuits against all these companies.

Shire is currently fighting patent infringement lawsuits for several of its other products as well including Intuniv, Fosrenol and Lialda.

Our Recommendation

We currently have a Neutral recommendation on Shire. The stock carries a Zacks #3 Rank (hold rating) in the short run.

Shire’s recent collaborations and acquisitions (including Movetis and Advanced BioHealing Inc.) have added immense potential to its pipeline. With several of its products already facing or likely to face generic competition, the company’s pipeline needs to deliver.

 
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