It's not every company that can go from $7 million in revenues to more than $1.7 billion in 10 years, but that's precisely what Shire Pharmaceuticals, whose hub lies in Wayne, Pa., accomplished in the last decade. The key to its success? Seizing opportunities that Big Pharma ignored.
Shire was founded in England in 1986 with just four employees. The company has gone from 540 employees in 1997 to roughly 3,400 now in 12 countries. Shire's rapid growth was driven by a strategy of mergers and acquisitions, with eight in the last 10 years. This strategy is focused on making Shire the leading specialty pharmaceuticals company.
"We consistently focus on relatively low-risk products that fall below Big Pharma's radar and [we] target high, unmet niche therapeutic areas," explains Matt Cabrey, Shire's senior manager of corporate communications. Specifically, he says, the company aims for medicines "that can each generate $200 million to $500 million in annual sales. With a stable of at least four to six such products in that range, we feel we're doing well."
The key acquisition of Richwood Pharmaceutical in 1997 began the franchise for attention-deficit hyperactivity disorder (ADHD) therapeutics that Shire is perhaps best known for. "We were credited with establishing ADHD as a credible medical condition with specialist physicians and other key opinion leaders," Cabrey says. Shire's Adderall XR is currently the top-selling ADHD treatment in the United States. The company's acquisition of New River Pharmaceuticals in 2007 - and its next-generation ADHD therapeutic, Vyvanse - is expected to help continue Shire's lead in ADHD. "Shire has demonstrated leadership in developing drugs for ADHD," says Frank Baldino, Jr., chair and CEO of Cephalon, the region's leading independent biotechnology company. (See "Many Happy Returns".)
Furthering Shire's growth in 2003, Matthew Emmens, formerly of Merck, came on as Shire's CEO. Cabrey estimates "scores of new employees came to Shire just because of him." At its peak, Shire was hiring 12 new employees on average each week. "Shire has an outstanding CEO in Matt Emmens," says Dennis "Mickey" Flynn, president of Pennsylvania Bio. "When he came in March 2003, they were doing just under $60 million, and he has led Shire to $2.2 billion this year,". "It's admirable that they not only realized what they had, but that they also recognized what they needed to grow and got it."
Emmens grew up in Nutley, NJ, and worked in the region since the 1990s, "so he knew a lot of people here," says Cabrey. "A lot of folks in Delaware, just 10 or 15 miles away from where we are now, wanted to work at Shire because they worked with Matt in the past, even from as long ago as the late '70s. He has this ability to inspire people: He empowers them to make decisions, he supports them on their decisions as a mentor and a guide, and he's very approachable." Baldino says, "Emmens has shown great leadership and has done an outstanding job of incorporating Shire into both the business and philanthropic communities of Greater Philadelphia."
Although Shire's rapid international growth was welcome, it also led to operations scattered across the globe, leading to an administrative jumble, such as multiple investment and health insurance plans. To address this challenge, Emmens and his leadership team decided in late 2003 to consolidate the company's operations, unifying them under a single administrative umbrella and streamlining employee services and benefits. They particularly focused on the United States, from where roughly 70% of its product sales derive. As Shire considered a US headquarters, "the company looked at California, Boston, New Jersey, Maryland, Delaware, all the usual suspects, but we ultimately chose Pennsylvania for a lot of reasons," Cabrey says.
"Matt is fond of telling the story of how Pennsylvania Governor Ed Rendell called him directly and said, 'We want you to come to Pennsylvania; we'll do anything we can to make this easy'," Cabrey recalls. The state made Shire an attractive proposal, offering $5.2 million in grants, loans, and tax credits to help the company establish its US headquarters in the Philadelphia area. And, in July 2007, when Shire announced it would expand its Pennsylvania operations, the state presented $2.07 million in aid, adding that the company is also eligible to apply for Pennsylvania R&D tax credits, since its new operation will include significant research functions. Although Shire's headquarters remains in England, the senior management and administrative support services are located in Pennsylvania.
"Shire fit in very squarely with the life sciences industry we're trying to grow in Pennsylvania, a field we see as continuing to experience tremendous growth in terms of employment nationally, typically in high-paying jobs," says Michael Rossman, director of Gov. Rendell's action team of economic development specialists. "When Shire came to us, they offered an opportunity to create as many as 400 new jobs, with average salaries approaching $100,000, and they've actually brought in 600 employees so far. With their further expansion, they may bring in nearly another 400 employees in the next three years," adds Rossman.
But the company also chose the Philadelphia area for its location, says Mike Cola, Shire's president of specialty pharmaceuticals. This includes close proximity to regulators in the Washington, DC, region and to the investor community in New York, as well as transportation hubs such as an international airport and a major Amtrak rail station, which are key to a global company.
"This is also a great place to live and work and raise a family," Cabrey says, "and there's a great talent pool of existing pharmaceutical professionals to draw from in the Greater Philadelphia area, and a great educational infrastructure to also draw job candidates from."
Although Emmens and his team unified Shire's operations, they also concentrated on diversifying the company's portfolio. "We faced the challenge of having all of our eggs in one basket," Cabrey explains - that is, a reliance on its ADHD products for income. While roughly half of Shire's revenues still come from its ADHD portfolio, the company now has medicines for gastrointestinal and renal ailments such as Lialda for ulcerative colitis and Fosrenol for end-stage kidney disease. "These niche therapeutic areas play into Shire's strength in dealing with specialist physicians," Cabrey says.
To further diversify, the company has expanded into orphan diseases - rare ailments without known therapies - by acquiring Transkaryotic Therapies in Cambridge, Mass., now known as Shire Human Genetic Therapies. While the market for an orphan drug is small by Big Pharma's standards, "by their nature, orphan drugs are generally granted no competition for a certain amount of time (7 years in Europe, 10 in the United States), so the revenue generated during that time can recoup the costs of the R&D process," Cabrey says. The Massachusetts site manufactures Shire's protein therapeutics, while its Owings Mills, Md., location - another acquisition, formerly Atlantic Pharmaceutical - manufactures its small-molecule drugs.
The ability to see potential in Transkaryotic Therapies, then a small, money-losing biotech, is one example of Emmens' vision: "seeing things that others cannot yet see," Cola says. "This business is projected to add significant value to the Shire portfolio this year and for years to come." For example, Cabrey says analysts expect that Shire's recently launched Elaprase, the first and only enzyme replacement therapy for Hunter syndrome, could earn $300 million in sales annually.
As for the future, Shire has 14 products in the pipeline, including a licensing agreement for Juvista, a scar-healing treatment option currently in Phase II from Renovo that represents a new market for Shire. "Our challenge now is to continue to add products that add value to the company, and regenerative medicine is one area that looks promising," Cabrey says.
The acquisition of Transkaryotic Therapies also represents the start of a new way of doing business for Shire that stands to substantially change the company. Shire historically "had not done any research. We looked for medicines that were either approved or ready to launch, more as 'search and development,'" Cabrey says. "But now we're doing serious research."