LONDON â€" The Irish biopharmaceutical company Shire has sold its skin substitute Dermagraft to Organogenesis and will record a $650 million loss on the sale.
The company said on Friday that it was shedding Dermagraft because the business prospects for the treatment were reduced following a recent decision related to reimbursement for the treatment by Medicare.
The Dermagraft business reported an operating loss of $324 million through the first none months of 2013.
Dermagraft is a skin substitute used in the treatment of diabetic foot ulcers and is approved for use in the United States and Canada.
“Following the new strategy we outlined during the first half of last year, Shire has had a renewed focus on operational discipline. As such, we have been prioritizing investments that are of the greatest strategic, clinical and commercial value to our company,†said Flemming Ornskov, Shire’s chief executive. “Dermagraft no longer meets these criteria and this divestment will allow us to focus our resources on other projects.â€
As part of the transaction, Organogenesis will acquire assets related to the development, manufacture and sale of the product, including patents and trademarks.
Those assets were valued at $683 million as of Sept. 30.
Shire will receive no upfront payment from Organogenesis, but is entitled to receive up to $300 million cash in total if Organogenesis meets certain annual net sales targets between now and 2018.
It will record a loss on disposal and associated impairment charges of about $650 million related to the discontinued business in the fourth quarter of 2013.
Shire will retain certain legacy liabilities relating to the business, including a previously announced U.S. Department of Justice investigation relating to the sales and marketing practices of Advanced Biohealing.
Lazard and the law firm Davis Polk & Wardwell served as advisers to Shire.
