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SARcode Investors Reap 120% ROI in Sale to Shire

By Cormac Sheridan
Staff Writer

Underlining its ambitions in ophthalmology, Shire plc is acquiring SARcode Bioscience Inc. for $160 million up front, plus additional, undisclosed milestones based on the clinical, regulatory and commercial progress of its main asset, lifitegrast, which is undergoing a second pivotal Phase III trial in dry eye disease.

The acquisition, which is expected to close in the second quarter, comes hot on the heels of its recent purchase of Premacure AB, of Uppsala, Sweden. The latter firm is developing Premiplex (insulin-growth factor 1; IGF-1) for preventing retinopathy of prematurity (ROP), a rare eye disease that affects preterm infants. (See BioWorld Today, March 13, 2013.)

For SARcode shareholders, which include Sofinnova Ventures, Rho Ventures, Alta Partners and Clarus Venture Partners, the deal represents an overall return on their aggregate investment of almost 120 percent, with the potential for more – presumably much more – to come. Privately held SARcode, of Brisbane, Calif., raised about $73 million in its lifetime, including a $44 million B round less than two years ago. (See BioWorld Today, July 18, 2011.)

The exit represents quick work – and smart work – on the part of SARcode. It paid just $2 million in cash to acquire lifitegrast (formerly SAR 1118), from South San Francisco-based Sunesis Pharmaceuticals, Inc., in 2009.

The first-in-class drug disrupts the interaction between lymphocyte function-associated antigen-1 (LFA-1) and its ligand, intercellular adhesion molecule-1 (ICAM-1), a key step in the inflammatory cascade that contributes to dry eye disease. The condition, which has greatest prevalence in postmenopausal women, affects 25 million people in the U.S., according to Shire, of whom 9 million are eligible for drug treatment.

Only one product is approved in the indication in the U.S. Irvine, Calif.-based Allergan Inc.'s Restasis (cyclosporine ophthalmic emulsion) gained approval in 2002 for increasing tear production. It clocked up $792 million in sales last year.

"It's a nice benchmark, if you will, for a first-in-class drug for dry eye," Garheng Kong, general partner at Menlo Park, Calif.-based Sofinnova and SARcode board member, told BioWorld International.

Although the opportunity has long been identified, exploiting it has been a problem. The indication has been a graveyard for several drug development programs, because of difficulties in diagnosis and a high placebo response rate.

"The question has been: Is there a molecule that can show enough of an efficacy signal that would be convincing to the regulatory authorities and also, in this case, to an acquirer," Kong said.

Lifitegrast has already hit the primary endpoint of one Phase III trial, dubbed OPUS-1, which compared its effect on corneal staining scores – a proxy for ocular damage caused by dry eye disease – with that of placebo in 588 patients. A confirmatory trial in about 700 patients began recruitment last December, and a safety study in 300 patients, called SONATA, is ongoing. (See BioWorld Today, Oct. 23, 2012.)

The deal with Shire is a hedge against a negative outcome, while offering additional upside potential. The OPUS-1 data were enough to get it – and others – hooked. "We did have multiple bidders for the company," Kong said.

Jessica Mann, spokeswoman for Dublin, Ireland-based Shire, told BioWorld International the company was attracted to the asset because of its product differentiation potential and because it targets an area with significant unmet need. "It deals potentially with the signs and symptoms," she said.

Several other contenders are also chasing the opportunity. OphthaliX Inc., of Carson City, Nev., is in Phase III trials with a first-in-class oral A3 adenosine receptor agonist, CF101. Seattle-based Acucela Inc. is in Phase III trials with a 2 percent ophthalmic suspension of rebamipide, a generic drug used to treat ulcers and gastritis. Also in the clinic are RegenerRx Biopharmaceuticals Inc., of Rockville, Md., and Cambridge, Mass.-based Eleven Biotherapeutics Inc., with RGN-259 (thymosin beta-4 eye drops) and EBI-005, respectively. (See BioWorld Today, March 19, 2013.)

Shire said it will conduct what it called "a prioritization review" of its pipeline, to take account of the additional expenditure associated with taking on a late-stage program. That does not mean the company plans to terminate some programs, Mann said. "It means we'll be looking at where we will place our efforts."