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Diabetes: DOJ investigates Shires’ DermaGraft marketing

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Shire plc logo

British biotech Shire (NSDQ:SHPGY) is under investigation by the U.S. Justice Dept. for marketing practices for its Dermagraft diabetic foot ulcer treatment, according to regulatory filings.

The company reported that the DOJ, in conjunction with U.S. Attorney’s Offices for the Middle District of Florida and Washington, D.C., launched civil and criminal investigations into the company’s sales and marketing practices.

"Shire is cooperating in these investigations," according to an SEC filing.

Dermagraft, which is cleared for treating diabetic foot ulcers, was owned by Smith & Nephew plc (NYSE:SNN), before the British health products giant abandoned it in 2005 after the FDA rejected it as a leg ulcer treatment. SNN then sold the rights to Advanced BioHealing in 2006.

Shire picked up Dermagraft in a $750 million buyout of Advanced BioHealing in June 2011.

The investigation was noted in Shire’s latest earnings report, in which the company posted profits of $238.4 million, or 41¢ per diluted share, on sales of $1.17 billion for the 3 months ended March 31.

Shire noted that it sold $48.8 million worth of the Dermagraft skin substitute during the 1st quarter. Since Q3 2011, Shire’s reeled in about $143.4 million from the regenerative medicine product ($50 million in Q3 2011, $55 million in Q4 and the $48.8 million logged in Q1 2012).

Shire did not immediately return requests for comment today.

SHPGY shares jumped 2% to $99.07 as of about 1:15 p.m. today.

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