Recently, Shire plc (SHPGY) inked a deal with privately-held Acceleron Pharma Inc. to co-develop and commercialize the latter’s candidate ACE-031 outside North America. While both the companies will share development costs in North America and Europe, Shire will be responsible for development costs in other regions. ACE-031 is being developed for treating patients suffering from Duchenne Muscular Dystrophy (DMD).
 
DMD refers to a fatal muscular disease with no therapies in the market. The rare disorder, characterized by rapid muscle degeneration, primarily affects boys with an incidence of approximately 1 in every 3,500 live male births. Few patients survive beyond their late-20s when their heart and respiratory muscles become weaker and eventually fail.
 
The deal will see Shire making an upfront payment of $45 million. Moreover, the agreement makes Acceleron eligible to receive additional development, regulatory and milestone payments of up to $165 million pertaining to the successful commercialization of ACE-031.
 
Through this deal, Shire aims to boost its pipeline for treating orphan muscle disorders. The agreement grants Shire exclusive ex-North American rights to the other innovative class of activin receptor type IIB (ActRIIB) molecules (of Acceleron ) being developed for treating DMD. The deal makes Acceleron eligible to receive up to an additional $288 million for the successful commercialization of other indications and molecules coupled with royalties on product sales.
 
ACE-031 is currently undergoing phase IIa studies for treating DMD patients. The collaborators are looking to advance the candidate into a global phase II/III trial. The candidate enjoys orphan drug status as well as fast track designation from the US Food and Drug Administration (FDA).
 
Shire reaffirmed its 2010 adjusted earnings guidance and continues to expect to earn $4.00 per ADS.
 
We currently have a Neutral stance on Shire in the long-term, which is supported by a Zacks #3 Rank (Short-term ‘Hold’ rating).

 
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