We are pleased with UK-based Shire Plc’s (SHPGY) research collaboration with Denmark’s Santaris Pharma for the development of new drugs for rare diseases. Shire will make an upfront payment of $6.5 million and an additional $13.5 million on completion of certain initial studies.

Santaris Pharma also has the potential to get another $72 million in the form of development, regulatory and sales-related milestone payments for each of its five pipeline candidates along with royalties on sales once these products are commercialized. The initial term of the collaboration is two years and Shire may extend it by another two-year term.

With this deal, Shire will be able to utilize Santaris’ proprietary locked nucleic acid (LNA) technology platform to develop treatments for several life threatening conditions that cannot be cured by enzyme replacement therapy (ERT), a platform where Shire has a strong presence. We believe the alliance will be beneficial for Shire as the company is looking to strengthen its Human Genetic Therapies (HGT) business.

Shire is a global pharmaceutical company with strategic focus in several therapeutic areas, including Central Nervous System (CNS), gastrointestinal (GI) and renal disorders. It has several products on the market, like Adderall XR for Attention Deficit Hyperactivity Disorder (ADHD) and Pentasa for ulcerative colitis. In addition to product sales, the company earns revenue from royalties, primarily through collaborative agreements with GlaxoSmithKline (GSK).

Shire reorganized its business into the areas of Specialty Pharmaceuticals and HGT with the intention of allocating significant resources for developing the HGT business in the coming years. HGT currently accounts for roughly 18% of total company sales and Shire sees this rising to 30% by 2015. Since HGT products focus on rare genetic diseases with high unmet needs, they are usually granted orphan drug status.

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