Shire takes $650m hit in regenerative skingraft divestment

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Shire takes $650m hit in regenerative skingraft divestment
Shire has divested its regenerative skingraft product Dermagraft to Organogenesis citing a loss of financial incentive due to new Medicare ruling regarding reimbursement.

In December, Shire told“an internal business review”​ led to its decision to stop construction on a new facility in Sorrento Mesa, California, earmarked in 2012 to increase manufacturing capacity of its skin biofabrication therapy, Dermagraft.

“Shire has had a renewed focus on operational discipline,”​ said CEO Flemming Ornskov in a statement today. “As such, we have been prioritizing investments that are of the greatest strategic, clinical and commercial value to our Company. Dermagraft no longer meets these criteria and this divestment will allow us to focus our resources on other projects.”

He continued, adding the major factor behind the divestment was recent Medicare rulings affecting reimbursements for the product. “The business environment has changed, and the prospects for the product have reduced significantly.”

According to a 2011 report on Dermagraft​, approval of the product under Medicare was limited to standard care for neuropathic diabetic foot ulcers, with a number of limitations on conditions considered not necessary and reasonable, including cellulitis, osteomyelitis, necrotic ulcers and draining wounds.

The firm has announced it will receive no upfront payment for Dermagraft, but potentially up to $300m (€221m) in milestone. Howevr, Shire valued the assets at $683m its September 30 2013 balance sheet, and the firm says with disposal and associated impairment charges it will record a loss of $650m in Q4 of 2013.

Operating loss for the product in the nine months ended September 30, 2013 amounted to $324m.

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