Shire CEO sees diabetes surge buoying Dermagraft

By Ransdell Pierson and Lewis Krauskopf

NEW YORK (Reuters) - Shire Plc <SHP.L> sees a strong market for its recently acquired Dermagraft skin substitute due to surging rates of diabetes that can cause foot ulcers in a significant number of patients, according to its chief executive.

Shire acquired Dermagraft through its $750 million purchase of privately held Advanced BioHealing in June. The bio-engineered product last month flunked a late stage study for treating leg ulcers.

"The whole deal was justified on diabetic foot ulcers alone," CEO Angus Russell said in an interview in New York on Thursday, without providing specific sales projections for Dermagraft. Approval for leg ulcers "would have been a quick kind of nice upside early after the acquisition. It would have been icing on the cake."

Dermagraft had U.S. sales last year of $146 million from treating slow-healing diabetic foot ulcers. Russell in July said a new possible use in treating leg ulcers was an important new global opportunity.

But that hope was dashed in late August, when effectiveness of the product in that patient group fell short in a Phase III study, prompting Shire to scrap the trial.

Russell said Shire only gave the leg-ulcer trial a 40 percent odds of success when it agreed to buy Advanced BioHealing.

"We thought there was more a chance it wouldn't work," he said, in part because many such patients are very old and have had leg ulcers for many years. "The cellular area around their ulcers is often dead and it's very hard to reactivate the cells."

But Russell said Dermagraft's approved use, among diabetics that have foot ulcers, can only grow given sobering medical statistics.

He cited estimates that 30 percent of Americans over the age of 60 have diabetes, and that will grow to more than 50 percent within a decade.

Moreover, he said an estimated 60,000 leg amputations were performed in the United States three years ago because of infections associated with foot ulcers. "And last year, there were 90,000. The point of (Dermagraft) is to try to promote healing of the ulcers so you don't have an infection."

Shire shares have risen 30 percent in the past year due to demand for a growing number of products in its medicine cabinet, including treatments for attention deficit disorder and rare genetic diseases.

Sales of Shire's treatments for the rare Fabry and Gaucher diseases have been boosted by longstanding production problems at rival Genzyme, now a unit of French drugmaker Sanofi <SASY.PA>.

Most recently, Genzyme in August failed to ship its Fabrazyme drug for Fabry disease despite telling doctors and patients the shipment would be prompt, according to letters released last week.

"Every time one of these announcements goes out ... we get a lot of phone calls and a lot of requests for more drug," Russell said.

(Reporting by Ransdell Pierson and Lewis Krauskopf, editing by Bernard Orr)