Shire Acquires Meritage Pharma in Deal Potentially Worth $245M

Xconomy San Diego — 

[Updated 2/24/15 6:10 pm. See below.] After acquiring ViroPharma last year in a $4.2 billion deal focused on Cinryze, the Irish pharmaceutical giant Shire says it is following through on a four-year-old option that Exton, PA-based ViroPharma held with San Diego’s Meritage Pharma.

In a statement today, Shire says it has acquired San Diego’s Meritage Pharma for $70 million upfront, with another $175 million contingent on meeting milestones in the development of a viscous oral drug for treating a rare esophageal condition that makes it difficult to swallow.

Meritage’s oral budesonide suspension (OBS) is ready for late-stage clinical trials, after the San Diego company reported in September that it reduced the inflammation and dysfunction in a mid-stage trial in adolescents and adults with eosinophilic esophagitis (EoE). The FDA already has granted orphan drug status to OBS for the treatment of patients with EoE.

The disease is comparable to the kind of intense, life-threatening inflammation of the windpipe that some people get with an allergic reaction to eating peanuts. With EoE, food can get stuck in the esophagus and needs to be removed in the emergency room. While EoE was a disease few people had heard of 20 years ago, the incidence has been rising in the general population, according to recent studies. Shire now estimates the prevalence of EoE in the U.S. at about 181,000 cases.

In today’s statement, Shire’s Head of Research and Development, Philip J. Vickers, says, “Shire’s pipeline and strategic focus on rare diseases is further strengthened with the acquisition of Meritage, which also complements our strong GI capabilities.”

Meritage has developed a proprietary viscous oral formulation of budesonide that is the consistency of molasses and designed to coat the esophagus so the drug can act locally on a specific type of immune cell called an eosinophil. Budesonide is the active pharmaceutical ingredient in other FDA-approved products, including products for the treatment of asthma, allergic rhinitis, ulcerative colitis, and Crohn’s disease.

[Updates with comments from Meritage CEO] In a phone interview, Meritage CEO Elaine Phillips said the idea for using an oral formulation of budesonide to treat patients came out of UC San Diego, and found a receptive supporter in Cam Garner, the serial biotech entrepreneur whose resume includes Dura Pharmaceuticals, Somaxon Therapeutics, and Elevation Pharmaceuticals.

Garner helped found Meritage in 2008, and served as chairman of the company that carried the idea to the threshold of Phase 3 clinical trials.

Elaine Phillips

Elaine Phillips

According to Crunchbase, Meritage raised about $36.5 million from venture investors that included Domain Associates, Latterell Venture Partners, and The Vertical Group. The company operated virtually, with a whopping six employees, Phillips said.

ViroPharma had contributed $20 million to the Phase 2 study, Phillips said, and “Shire basically just picked up where ViroPharma left off.”

Some Meritage staffers will continue work on OBS, but Phillips said she and Malcolm Hill, the chief scientific officer, “won’t be going forward” once the transition to Shire has been completed.

In the end, Phillips said, Meritage is a classic example of what San Diego’s life sciences community does best—advancing an idea through pre-clinical and early stage clinical development and to the point where it’s ready for pivotal trials, “and now we’ve put it in the capable hands of Shire.”