Ireland's Shire plc bulked up its hematology business by scooping up small biotech FerroKin BioSciences Inc. for $100 million in up-front cash, plus potential milestone payments of up to $225 million based on achieving clinical development, regulatory and net sales targets.

The acquisition adds FerroKin's iron chelator candidate FBS0701 to a hematology franchise that includes Xagrid and a growing development pipeline.

Currently in Phase II studies, FBS0701 is a once-daily oral capsule designed to treat iron overload following chronic blood transfusions. Excess iron in vital organs such as the liver and heart increases the risk of organ failure and is the principal cause of death in transfusion-dependent patients.

The iron chelator traps the iron and induces a complex that the body excretes. The compound removes excess iron from tissues and organs efficiently and is easy for patients to use.

The deal represents the first major biotech acquisition of 2012 for Dublin-based Shire, which last year purchased regenerative medicine firm Advanced BioHealing Inc. in a $750 million all-cash deal. (See BioWorld Today, May 19, 2011.)

The acquisition is an even bigger win for San Francisco-based FerroKin and its investors, which include Burrill & Co., Clarus Ventures, HealthCap Ventures and MP Healthcare Venture Management Inc., a unit of Mitsubishi Tanabe Pharma Group.

FerroKin has operated virtually on just $27 million in Series A and B financings since the company was founded in 2007 by physician and former venture capitalist Hugh Young Rienhoff Jr., the company's CEO. (See BioWorld Today, Oct. 18, 2010.)

Because FerroKin tightly controlled costs, with some employees working from their homes, "all of the venture investors made money," Rienhoff said.

The clinical milestones are tied to the start of Phase III trials and to U.S. and European approvals of FBS0701.

In June 2010, after FerroKin had wrapped up three Phase I studies of FBS0701 and was preparing to launch an international Phase II, Rienhoff contacted the senior business development executives at the top 30 biotech and pharmaceutical companies with a hematology and/or oncology franchise. He flew to meet with companies that were the most eager and persistent, including Shire.

"Clearly, Shire is moving into hematology, and Shire also has a history of having an appetite for orphan indications," Rienhoff told BioWorld Today. "So, in many ways, Shire was a logical [company] from the get-go."

From there, "it was the usual long dance," he added.

Small biotechs must look for partners that represent a strategic match for their technology, because "that really determines their appetite and willingness to negotiate," Rienhoff observed. Often, that requires a little digging because a large pharma's ambitions might be held close to the vest – especially in the early stages of a strategic initiative.

Rienhoff and other key employees will serve as consultants to Shire during the transition period. "We're deeply involved in a bunch of clinical trials right now, as well as a scale-up of the manufacturing, so everybody carries around critical knowledge," he said. "It goes without saying that, for this project to be successful, there needs to be a very smooth and thorough transfer of that knowledge."

Rienhoff expects Shire to "hit the ground running" to move FBS0701 into Phase III. The company published the first 24 weeks of its Phase II data in Blood and plans to present the one-year experience at the European Hematology Association meeting in Amsterdam in June.

"We've had patients in the study now for more than 18 months, and we've started our pediatric study, which is going well," Rienhoff said. "We have a core of clinical experience with both the efficacy and the safety profile of the compound, and they look favorable."

In a statement, Shire indicated it plans to file globally for FBS0701, initially in myelodysplastic syndromes and hemoglobinopathies, and predicted a potential product launch as early as 2016.

FBS0701 has received orphan product designation from both the FDA and European Medicines Agency.

The acquisition not only validates FerroKin's technology but also the virtual biotech model, Rienhoff maintained. Having a small cadre of employees scattered across nine time zones, from London to San Francisco, created a constant sense of forward momentum.

"It's an extraordinary experience to carry a molecule from the benchtop deep into Phase II studies with a very small group of people," Rienhoff said. "But it's not for everybody, and it's not scalable into Phase III," which requires a longer time horizon, more money and more people than a virtual operation can manage effectively. "In a larger organization, there are lots of handoffs," he said. "It's like a bucket brigade, and the person who throws the water on the fire has no idea how that water got to him. If you're carrying that water to the fire, you understand the whole process."

Although FerroKin was built around a single asset for a specific indication, biotechs with larger pipelines also should keep a laser-sharp focus on clinical development, Rienhoff advised.

"We spent most of our daily work on product development and manufacturing the molecule," he said. "Those are the two factors that create value. Endless amounts of scientific data are published in prestigious journals, but that really doesn't butter nearly as much bread as a good, solid clinical study."