Only five years ago, Shire's specialty pharma business consisted of one product, Adderall XR , one market, the U.S., and one patient type - children. Multiple generics companies had filed ANDAs, however, and the company was looking to broaden its base.

Today, its profile is hugely different. It has expanded the indications of Adderall XR (amphetamine mixed sales) to treat children and adults with attention deficit hyperactivity disorder, added products to the ADHD franchise, built a business beyond the U.S., and invested in new therapeutic areas. Adderall XR, which accounted for 50 percent of product sales only two years ago, lost its patent exclusivity in 2009 and now generates less than 10 percent of the company's total sales.

Two recent events highlighted just how much Shire has changed: the Aug. 3 announcement that it would buy Movetis, a Belgium biotech that is a spinoff of Johnson and Johnson, and its half-year earnings call on Aug. 4, in which it outlined the drivers behind its growth in the first half of the year of 15 percent in sales and 26.8 percent in income.

Shire's offer to pay €428 million ($565.5 million) in cash for Movetis, which focuses on gastrointestinal diseases, fits well into its previously stated plans to expand its small presence in that space, part of its larger focus on specialist markets that respond well to highly targeted sales and marketing approaches.

Shire, which posted sales of roughly $3 billion in 2009 and has a market cap of nearly $13 billion, has told analysts that it is targeting mid-teens growth between 2009 and 2015, with 25 percent of sales to come from GI drugs. Shire already has a small GI business consisting of two drugs, the older Pentasa (mesalamine) and its follow-on Mezavan / Lialda (mesalamine), both indicated for ulcerative colitis, and sees the field as ripe for growth. In the first half of 2010, Lialda was one of its fastest-growing products.

Movetis would give Shire a ninth commercial product - Resolor (prucalopiride), a treatment for chronic constipation, which received EU market authorization in October 2009 - as well as deep management and scientific expertise in gastrointestinal motility disorders.

Resolor, a once-daily oral drug, is indicated for women who suffer from chronic constipation and for whom laxatives fail to provide adequate relief. It already is on the market in Germany and the U.K., and Movetis is rolling it out in other European countries over the next year. So far, the company reported sales of $0.5 million in the first quarter of 2010, largely from Germany.

Shire expects Resolor's peak sales could top $400 million. In an Aug. 5 note, analyst Martin Wales of UBS projected that the acquisition of Movetis would have little impact on Shire's financial performance this year, be slightly dilutive to earnings in 2011-2012 and then become accretive in 2013-2014. Contrary to Shire's projections for Resolor sales growth, he wrote that the drug likely would peak at about $268 million (€203 million) in annual sales.

Shire Would Gain Deep GI Expertise From Movetis

Shire and Movetis executives couldn't be reached for comment, but Movetis CEO Dirk Reyn said in a statement that the combined companies would work to sell Resolor alongside Mezavant in Europe. Movetis has rights to sell Resolor in the European Union, as well as Iceland, Lichtenstein, Norway and Switzerland. It also collects royalties from sales outside Europe, where Johnson & Johnson owns commercial rights. That relationship is not expected to change as a result of a Shire acquisition, a Shire spokeswoman said.

In addition to Resolor, Movetis has two GI projects in early clinical development and several preclinical leads, as well as rights to a large library of qualified lead compounds with potential for development and commercialization in a variety of GI indications.

Movetis was founded by a group of J&J executives who in-licensed from their former employer several GI compounds including prucalopride, then in Phase III. J&J exited the GI business after the withdrawal from the market in the early 2000s of its drug Prepulsid (cisapride) because of severe cardiovascular adverse side effects.

CEO Reyn had been head of international strategic marketing for J&J's GI business and was responsible for leading the complicated global effort to remove Prepulsid from the market. Like Prepulsid, Resolor is a 5-HT4 receptor agonist, but Movetis says it avoids Prepulsid's side effects because it is far more selective. Unlike other 5-HT4 agonists, it does not interact with protein receptors that are involved with heart rhythm irregularities, which led to Prepulsid's problems. Apparently regulators agree. It is approved as a new chemical entity and has patent protection through 2020.

The drug has been studied in more than 7,000 patients across several indications, including three Phase III pivotal trials for chronic constipation and an open label, two-year safety study, Shire said.

Boosting confidence in Resolor's prospects for adoption, the U.K.'s National Institute for Health and Clinical Excellence on Aug. 3 endorsed the drug as an option for reimbursement by the National Health Service for women who have tried at least two types of laxative without success. The official cost in the U.K. is $61.18 for a pack of 28 tablets.

Movetis' financial history also indicates optimism about the drug's prospects. In January 2007, the biotech obtained $64 million in a Series A financing, the only money it raised before going public. Shortly after receiving the EU green light, in December 2009, it raised more than $100 million in an initial public offering, money it has used to bankroll its selective rollout of the product across Europe (¹ Also see "Financings Of The Fortnight: Movetis Files First European Biopharma IPO Since Early 2008" - Pink Sheet, 20 November, 2009..

Sofinnova Partners and Life Sciences Partners led the financing and now own 16.5 percent and 10.7 percent of the company, respectively. In addition, J&J contributed $14.5 million and holds a 13.5 percent share.

Movetis' board supports Shire's proposal, and will recommend that shareholders accept it. So far, institutional shareholders owning 38.9 percent of the stock are in favor of it, Movetis said in a press release. The price of €19 per share is a 74 percent premium to Movetis' stock as of the close of trading on Aug. 2, the day before the companies announced the deal. Movetis will begin the tender process as soon as Belgian regulators sign off on the prospectus, likely in early September.

Due Diligence Key After Cisapride Failure

Movetis board member Antoine Papiernik, a principal at Sofinnova Partners, said the company had been looking for partners to help commercialize Resolor when it received the Shire offer. He noted that Resolor succeeded in what had been a troubled space with a huge unmet need.

"This company met every one of its milestones," he said, adding that preparing the EU regulatory package on its own was an enormous undertaking for a small start-up, but it kept to its 18-month target date for submission. The founders did their due diligence before betting on Resolor, he said. "You can imagine how closely regulators were going to look at the filing, after the problems with cisapride."

Specialty Pharma Division Enjoying Strong Growth

The acquisition would become part of Shire's Specialty Pharma business, which currently is dominated by its attention deficit disorder franchise and headed by Michael Cola. This unit accounted for nearly 80 percent of Shire's 2009 revenues and sells strictly to specialists; one unanswered question is how Shire is going to address primary care physicians, who are an important driver of prescription volume in the GI market but are not a big target for Shire's commercial operations. Shire said it plans to keep Movetis management and staff and welcomes their world-class expertise in GI motility. Movetis currently uses a contract sales force from Quintiles to market Resolor in the UK and Germany.

During its quarterly earnings call Aug. 4, Shire reported that its specialty pharma products posted 29 percent sales growth year-over-year during the second quarter, paced by ADHD drug Vyvanse (lisdexamfetamine), whose sales rose 30 percent to $148 million.

Cola noted that total prescription volume for Vyvanse also was up 30 percent over 12 months. "[Vyvanse] is in a very dynamic market - year-over-year growth of 12 percent, year-to-date growth of 10 percent - and I would like to think that Shire gets most of the credit for that market growth," he told the call. "[We're making] good progress in an extremely fast-growing market, particularly the adult ADHD market."

Shire's current GI products are relatively small sellers, but those totals are growing nicely as well. Pentasa sales rose 12 percent to $60.6 million during the quarter, while Mezavant/Lialda sales were up 27 percent to $69.6 million.

The company also has a small but growing human genetics therapies business, which is getting a boost from its new Gaucher disease treatment Vpriv (velaglucerase alfa) and the Fabry disease treatment Replagal (agalsidase alfa), in part because of competitor Genzyme's manufacturing woes (² Also see "Human Genetic Therapies Boosts Shire, Thanks To Replagal Growth" - Pink Sheet, 4 August, 2010.).

- Joseph Haas ( ³ j.haas@elsevier.com ) and Wendy Diller ( ⁴ w.diller@elsevier.com )

Shire Emphasizes The GI Space In Its Bid For Movetis

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