Drug Development

UPDATED: Baxalta in hand, Shire dumps drug programs in hunt for $210M in R&D cuts

Now that Shire has closed on its buyout deal for Baxalta, the company has already trimmed a slate of drug development programs as it seeks to chop out a total of $210 million in R&D costs from the combined operation over three years. And among the first to go was a mid-stage hepatitis B gene therapy that didn’t make the cut in an increasingly competitive field.

Shire CEO Flemming Ornskov

Shire CEO Flemming Ornskov

The executive team — led by CEO Flemming Ornskov — laid out a new, bigger target for cutting costs, upping the ante from the $500 million in “synergies” pegged at the time the deal was announced to $700 million now that they’ve had a chance to consider all the prospects. And 30% of that — roughly $210 million – is coming straight out of research.

That’s the kind of message that plays well on Wall Street, where Shire’s shares surged 4% by the end of the day.

Speaking to analysts on Tuesday morning, the executive team talked up the combined pipeline of 40 programs as Ornskov highlighted “the gems in the pipeline” that would continue to get close attention.

Those gems included three late-stage programs: SHP643 for HAE;  SHP620 for CMV, which starts in H2; and SHP647, an IBD drug recently in-licensed from Pfizer, which dubbed it PF-00547659.

R&D chief Phil Vickers noted that their pipeline review unveiled 8 programs for the chopping block. Most of those are in early stage development, he added, but Shire spotlighted three Phase II programs that were cut out, including one for SHP625 (the old LUM001) in adults. 625 has won breakthrough drug status at the FDA, but Shire has had to contend with discouraging data from the drug and will focus on the pediatric population.

Shire is also cutting the gene therapy program for hemophilia B inherited from the Baxalta acquisition. And that will come as welcome news to Spark ($ONCE) and its rivals as they hustle along their own hemophilia B drugs. BioMarin announced stellar results from a proof-of-concept study in hemophilia A a few days ago, highlighting the competition for best results.

Vickers explained the decision in the call with analysts.

“For the lead compound, which was Bax 335, there was excellent expression, actually. Excellent expression seen with that particular vector. It’s an AAV8 vector, so the adenoviral vector. We were very pleased to get access to. So the expression was good but it was a little inconsistent between different patients, and with time for some patients, the level of expression decreased. And we think that’s a very important thing to factor in when considering all gene therapies, is the expression going to go down over time.

“So it did go down and we think it’s very important for the community out there for us to bring forward the highest quality asset we think we possibly can in this space. So we went over some of the technical reasons why we might be seeing that inconsistency and somewhat of a decrease in expression over time. And, have some factors that we think could account for that and we’re building those into the design and the constructs that we’re using for the gene therapy. So it’s really not any decrease in our commitment to the program. It’s just that we’re going to change the molecule and move forward for the compound that’s now in preclinical. And the factor VIII gene therapy program goes forward unaffected.”

Leerink’s Michael Schmidt had this to say:

“This is incrementally positive for QURE, since competition in hemophilia B has formed a major overhang on the stock. While several other gene therapy programs are currently in clinical dev’t (e.g. ONCE, DMTX, SGMO), and ONCE’s has generated highly impressive clinical data to date we believe that it is unlikely that one single gene therapy product will be used to treat all hemophilia B due to the product-specific limitations (e.g. neutralizing antibodies).”

Asked whether the company could still expect to make a big splash in immuno-oncology, where there’s been a frenzy of deal making and development work, Ornskov was clear that Shire would take a very measured, “step-by-step” approach to building a new franchise.

(So don’t look for any dramatic actions in that field.)

“I think that this is not a commitment at this stage for Shire to be spending significant resources on research or commercially,” Ornskov noted.

Shire has undergone a painful pipeline review before, taking a hard look at its experimental assets when the company was put through his “One Shire” initiative involved in better integrating work at the company. And Shire downsized operations in Pennsylvania as Ornskov concentrated a larger share of its research in Massachusetts.

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