Zacks_Analysts' Blog : Setback for Shire - Analyst Blog

Recently, Shire (SHPGY) suffered a setback when it failed in its efforts to expand the label of Dermagraft, which is already marketed in the US for treating patients suffering from diabetic foot ulcers (DFUs).

Shire was evaluating Dermagraft for treating patients suffering from venous leg ulcers (VLU). However, Dermagraft performed disappointingly in a late-stage pivotal trial (n>500) for the indication. The study evaluated the safety and efficacy of Dermagraft for treating VLU patients.

Shire has decided against developing Dermagraft further for VLU after the preliminary analysis of the top-line data from the late-stage study which involved patients from more than eight nations. Data from the study revealed that the product failed to meet the primary end point (complete healing of VLU by 16 weeks following Dermagraft therapy) mutually agreed upon by the regulatory authorities of the US and Europe.

Shire entered the field of regenerative medicines through the acquisition of Advanced BioHealing in the second quarter of 2011. The purchase added Dermagraft  -- a bio-engineered skin substitute, for treating patients suffering from DFU for more than six weeks -- into the company’s product portfolio.

The product, which recorded sales of $146 million in 2010 in the US, holds about a 5% share of the highly lucrative market, which is characterized by a huge unmet medical need. Slow-healing DFUs affect more than 500,000 people in the US every year.

However, the failure to expand the label of Dermagraft into an additional indication is a setback for Shire. Successful label expansion into the VLU indication would have boosted the top-line of the Ireland based company even further.

Our Recommendation

We currently have a Neutral recommendation on Shire. The stock carries a Zacks #2 Rank (Buy rating) in the short-run.