May 19, 2024

DealBook: Shire Acquires Biotech Company for $750 Million

It was one of the most anticipated initial public stock offerings in a while – at least for the biotechnology industry.

But late Tuesday, a day before it planned to go public, Advanced BioHealing agreed to sell itself to Shire for $750 million in cash.

“This got scooped up right at the altar,’’ said Stephen Bloch, a general partner at the venture capital firm Canaan Partners and a director of Advanced BioHealing.

Mr. Bloch is in many ways the father of the bride. Canaan basically resurrected Advanced BioHealing’s product, called Dermagraft, which is an artificial skin that is placed on diabetic foot ulcers to help them heal. The product consists of living cells – initially derived from a circumcised foreskin – that are grown on a mesh scaffold.

The company that initially developed Dermagraft, Advanced Tissue Sciences, filed for bankruptcy in 2002 and went out of business. Canaan and some other investors obtained rights to the product and started Advanced BioHealing, which is profitable and had revenue of $146.7 million in 2010, up from $8.6 million in 2007.

Canaan invested $15 million in the company and owns large stake worth at least $200 million at the acquisition price.

By one calculation, the acquisition represents a premium to what might have happened in the initial public offering. Advanced BioHealing was looking to go public at $14 to $16 a share and would have had 39.8 million shares outstanding after the offering, according to its prospectus. That would have given it a market value of about $560 million to $640 million.

Mr. Bloch, however, said that there was great demand for the offering, meaning it could have gone public at a higher price, or the stock could have risen after the offering.

“This was a very tough call,’’ he said. “We felt we had great options either way.’’

What tipped the balance in favor of the acquisition, he said, were the regulatory complications of being public and the fact that Canaan could realize a quicker return.

Canaan has a “big concentrated position,’’ he said. “You have to figure out how to unwind that in the public markets.’’

Shire, which has its headquarters in Dublin, said the new business based on cell therapies would fit nicely with its existing business selling biotech drugs for rare diseases. Shire is also known for drugs for attention deficit hyperactivity disorder.

Kevin Rakin, the chief executive of Advanced BioHealing, will continue to lead that business within Shire, the companies said.

Barclays Capital is advising Shire. Bank of AmericaMerrill Lynch advised Advanced BioHealing. The bank was one of the underwriters, along with JPMorgan Chase, Wells Fargo, William Blair Company and Oppenheimer, listed for the planned I.P.O.

Article source:

Speak Your Mind