While We Weren't Blogging

Our apologies for the service outage this week. Everyone needs a break now and then, and we at the IN VIVO Blog are no different. Those of you who were in the office last week, we hope you got your fix elsewhere--our blog roll on your right provided some excellent recommendations, we're sure.

Before 2007 becomes 2008 we'll be back with our own version of that end-of-year tradition, the "top-ten" list. And next week a few of us will head west to attend the annual JP Morgan Health Care conference--where we'll plan on blogging about the year to come. And going to parties.

Finally we want to thank you for dropping by our little corner of the Internet. We've been at this for eight months now, and we hope you reading the IN VIVO Blog as much as we enjoy writing it. Happy New Year.

Yule Blog: The Virtual Are Only Virtuous Thanks to the Substantial

It’s time once again to sing the great Christmas Paradox—the annual carol that venerates the Immaterial in the temples of the Material.

And as everyone knows, it’s just fine that we do. Our economy’s fortune ebbs and flows with the CPI – the Christmas Paradox Index. That’s why – as some significant fraction of us proclaim that the only present we want is you or family or world peace -- the news we evidently want to hear is about the health of retail sales.

We are not, however, going to babble on about this particular holiday cliché. Instead, we want to point out that our industry has a parallel Paradox – the Infrastructure/Anti-Infrastructure theme now playing in the drug business almost as insistently as Deck the Halls in shopping malls.

At Windhover’s Bio/Pharma Partnerships conference, for example, Randy Woods noted that his old biotech company, Corvas, needed plenty of scientists just to get to the clinical-stage deal its investors wanted. Now, given the gap in Pharma’s late-stage pipeline, VCs want to fund the development themselves, entirely without partner money -- but with only enough infrastructure to manage the CROs and consultants they hire to do the work. Investors want all their dollars to go into development – not offices and certainly not salaries.

That’s exactly what happened with Woods’s more recent employer—NovaCardia (12 people; two products; sold with just one of the products to Merck for $350 million) and what will likely happen with current company Sequel (which inherited the same people, NovaCardia’s second product, and its investors).

Or Bristol-Myers Squibb. Senior BD director Lynne Croucher spoke about its “selective integration” strategy (and discussed at greater length here, here, and here) which, along with risk reduction, effectively reduces requisite infrastructure – off-loading costs and responsibilities onto primary-care partners. That’s why Bristol can without significant business pain cut some 4800 jobs.

And now Peter Corr, the former R&D boss at Pfizer, the industry’s most fully infrastructured business, has ended up at Pfizer’s philosophical opposite, the anti-infrastructuralist private-equity player Celtic Therapeutics (here’s the savvy assessment by the WSJ’s Health Blog).

The fund (an outfit we first wrote about in late 2005) is an ambitious follow-on to private-equity pioneer Celtic Pharma, which has deployed nearly all its $250 million in capital (plus an additional $151 million in debt) in buying up nine development-stage programs, whose development it funds using a network of CROs. It then wants to sell the successful programs to the highest bidders (so far it’s sold one and lost one). The new fund apparently hopes to do the same thing but on a much larger scale--according to the Financial Times, it’s aiming to raise $1.5 billion. Corr expects the first close of the fund this January.

Big Pharma’s infrastructure “isn’t meeting its needs,” he says. In fact, despite billions spent on R&D, drug companiest don’t even “have the flexibility to fund new projects, or more from one project to another based on science” because they’re funding infrastructure instead. Celtic Therapeutics will employ maybe 65 people managing 20 projects.

You see the paradox, no doubt. It’s not that the infrastructure doesn’t exist. It’s still there—in CROs, for example. And it’s still there in the companies that ultimately fund Celtic’s returns. If it weren’t, Celtic would have neither advantage nor customers (low-infrastructure Big Pharmas could presumably license the same programs Celtic can).

In sum, most of those caroling along about the virtues of a virtual industry know that without the infrastructure someone else is paying for they wouldn’t have much to sing about at all.

While You Were Hanging Your Stockings By the Chimney with Care

"It's a major award!"

Not many creatures stirring this pre-holiday weekend, but we couldn't resist keeping up our weekly roundups of what you might have missed anyway. Basically, not much. We guess it isn't a surprise that you won't find us keeping up the not-quite-rigorous blogging pace this week and the beginning of next, though surely we'll pop up from time to time to amuse those of you hard at work. For the rest of you, bundled up on the couch watching "A Christmas Story," be careful not to shoot your eyes out this week.

• Winner: IMS Health: Maine's state law that restricts access by medical-data companies to doctors' prescription information is unconstitutional, says a Federal Judge, according to an AP report in today's WSJ. You could have seen this one coming if you a) thought a previous ruling in New Hampshire pointed toward a similar result in Maine or b) you read about this on Friday (hey we told you it was a slow weekend).
• The Boston Globe ran a Q&A with CMS boss Kerry Weems on Sunday. Weems is on the road encouraging consumers to shop around for the best medicare plans.
• The Times profiles Renovo CEO Mark Ferguson, whose career has taken him from "dentist to alligator biologist to pharmaceutical chief executive eyeing an estimated £6 billion virgin blockbuster market."
• Ben Goldacre's Bad Science reminds us that particularly around the holidays, some health studies are too good to be true.

Deals of the Week: The Christmas Edition

'Twas four days before Christmas and all through the house, not a creature was stirring except for...the biz dev teams at several major pharmaceutical companies. My, has it been a busy week for those folks.

It's almost as if the Ghost of Christmas Yet to Come paid them a visit, offering a cautionary tale of the industry's fate 20 years hence: A graveyard filled with names like Pfizer, GlaxoSmithKline, and Eli Lilly. Perhaps, not wanting to be boiled in their own puddings or buried with stakes of holly through their hearts, the good folks at Big Pharma decided to spread some Christmas cheer via deal-making. (Or maybe they just needed a little retail therapy.) Without further ado:

Pfizer/CovX: Pfizer announced Tuesday it was buying the privately held next-generation protein play CovX for an undisclosed sum. The La Jolla-based biotech has developed a platform technology that links therapeutic peptides to antibody scaffolds. Already the company has three early stage compounds, one in diabetes and two in oncology. "The deal demonstrates Pfizer's ongoing commitment to build a competitive biotherapeutics enterprise, " said Corey Goodman, PhD, president of Pfizer's Biotherapeutic and Bioinnovation Center, in a press release. The acquisition bolsters Pfizer's large molecule discovery capabilities, but probably doesn't constitute an engine ala Bristol-Myers acquisition of Adnexus. As we wrote here, Pfizer appears to be a big believer in acquiring biologics capabilities through a serial acquisition strategy. Among its recent deals: the acquisitions of PowderMed, Rinat, Biorexis, and Bioren.

Merck-Serono/Idera & Merck-Serono/Flamel: Merck-Serono inked two deals this week. The first with TLR player Idera for two TLR9 compounds in the oncology space worth $40 million up-front and an additional $381 million in milestones. Not too surprisingly, shares of Idera surged on the news. It's the only big deal the biotech has inked in 2007: the company's last deal came about a year ago, when it signed a partnership with the other Merck worth $30 million in upfront payments. Merck-Serono also announced a collaboration with Flamel Technologies, which has developed a polymer drug-delivery technology called Medusa that can extend the activity of therapeutic proteins. Deal terms were small: just $2 million for investigating a protein in Merck-Serono's portfolio, as well as Flamel's R&D costs. This is the fifth deal Flamel has signed in 2007. Three months ago, it agreed to develop a controlled-release version of a protein for Wyeth.

Lilly/Ambrx & Lilly/BioMS & Lilly/Galapagos: Clearly Lilly execs took the Ghost of Christmas Yet to Come's message to heart. This pharma wins the honor for signing the most pre-Christmas deals, inking three this week alone. (And that doesn't count the news that Sidney Taurel, the pharma's pugnacious CEO and chairman, will cede his CEO hat to the friendly giant John Lechleiter, PhD, currently the company's president and COO.) On Monday, the company signed a research collaboration with Ambrx, a protein engineering company, for an undisclosed upfront fee and milestones. The deal builds on an existing collaboration signed by the two companies at the beginning of 2007. And Lilly execs should be quite familier with Ambrx: one of the biotech's co-founders, Richard DiMarchi, now a chemistry professor at Indiana University, spent two decades at Lilly as a VP of Biotechnology. On Tuesday, Lilly signed a rich licensing deal with the Canadian drug company BioMS for its multiple sclerosis therapeutic MBP8298. As part of the deal, Lilly will pay BioMS an $87 million up-front fee plus milestone payments that could reach $410 million. The two companies will share development costs, while Lilly will take over world-wide marketing. Finally, on Wednesday Lilly announced a smaller deal with Galapagos to develop potential new medicines for the treatment of osteoporosis. Galapagos will be responsible for discovering and developing drug candidates through proof-of-concept, at which time Lilly has the option to develop and commercialize them on a world-wide basis. Lilly, of course, has a great deal of expertise in osteoporosis thanks to its experience developing Evista, Forteo, and arzoxifene.

Medtronic/Weigao: On the device side, Medtronic, which has been beset by bad news associated with its defibrillator, announced Monday it was purchasing a 15% equity stake in Shandong Weigao Group Medical Polymer Company (Weigao) for $221 million. In addition, the two companies will form a JV to market therapies in the spine and orthopedic sectors. "China is key to our global strategy as we continue to expand our geographic footprint," said Medtronic president and CEO Bill Hawkins in a press release. Hawkins' comments echo those of many pharma execs. China remains an alluring prospect for both western drugs and devices, in part because of predictions that by 2020 it will vault to second in pharmaceutical market size with a market of $120 billion according to IMS Health. (Look for more on China's fledgling biotech industry in an up-coming START-UP.)

Paying the TLR Toll

Some much needed good news for the Toll-Like Receptor (TLR) space today. Merck-Serono, a division of Merck KGaA, announced it was licensing Idera Pharmaceuticals' two lead TLR9 agonists, IMO-2055 and IMO-2125.

Under the agreement, Merck-Serono agreed to pay $40 million up-front, plus downstream milestones worth approximately $380 million for the two therapeutics. IMO-2055 is in Phase I clinical trials for non-small cell lung cancer and in Phase II trials for renal-cell carcinoma. IMO-2125, meanwhile, is in Phase I clinical trials in patients infected with the Hepatitis C virus who have not responded to standard treatments such as interferon-alpha. This indication is not included in the agreement with Merck, which is centered purely around oncology applications.

To date, scientists know of 10 different TLRs in the human immune system that enable the body to detect pathogenic threats--viruses or bacteria that cause disease. Both Idera's IMO-2055 and IMO-2125 are novel activators of the TLR9 protein, a molecule found in certain innate immune cells such as B cells and dendritic cells. Along with TLR7, TLR9 activation has been the focus of much research--and hype--in recent years.

It's also been the subject of some high-profile failures. In January, Coley Pharmaceuticals and its partner Pfizer announced they were suspending development of their TLR9 agonist, Actilon, after disappointing results in two clinical trials of the molecule to treat Hepatitis C. In July, Anadys also suspended development of its TLR, ANA975, yet another anti-HCV drug partnered with Novartis, because of disappointing toxicology data in animals.

But despite the disappointing results in HCV, many believe TLRs have an important role to play in cancer treatments. Certainly Pfizer remains a believer: in November the company agreed to pay $164 million to acquire its partner to gain complete access to the technology, including a non-small cell lung cancer drug in Phase III clinical trials.

Depending on the sucess of the Merck-Serono/ Idera partnership, other pharmas may become converts too.

A Note on Nanotech and Cancer Diagnostics

Does anyone else sense an increase in the rate at which nanotechnology is being rationally applied to cancer diagnostics? More and more, it seems, researchers are aligning new instrumentation with existing sample preparation and analysis, which should help accelerate commercialization.

In this month’s START-UP, for example, we wrote about a way to differentiate tumors cells from normal cells based on nanomechanical measurements of cell stiffness—a technique that could improve the accuracy of traditional cytology using standard tissue sample prep and may have an immediate opportunity to diagnose mesothelioma, which is not now possible using visual analysis. Now comes a report in the December 20 issue of Nature describing a nanofluidics chip-based method for identifying circulating tumor cells (CTCs).

To be able to capture and preserve the rare and fragile CTCs, the researchers, from Massachusetts General Hospital, fine-tuned the speed and force at which a blood sample passes through their CTC-chip. By so doing, they could consistently extract up to 1000 CTCs from a 10ml blood sample from a cancer patient (other methods max out at one to five CTCs, and can only do that 50% of the time).

The CTC-chip can measure whether the number of circulating tumor cells is rising or falling after therapy, to monitor drug response, and could make monitoring of blood for tumor cells a routine part of a medical exam. And because the analysis is done by placing whole blood onto the chip without the need for any labeling or processing, the chip preserves live intact cells for subsequent analysis, which could help select the best therapy based on the molecular characteristics of the tumor.

“It’s almost like a viral load measure,” says senior author Mehmet Toner of MGH’s Bioelectromechanical Systems (BioMEMS) Resource Center. “We’re always looking at ways to put cells through chips for different purposes. This application was within reach of the technology.” MGH is continuing to demonstrate the chip’s clinical utility. It has also licensed the technology to a California company, Cellpoint Diagnostics.

A bit techy yes...

but it wouldn't be the holidays without Blueprint Ventures' Gary Snoman.

For those unfamiliar with Gary, his earlier work.

An Ugly Divorce: Where Will David Kessler Land?

This was the email that went out to University of California San Francisco medical school staff on December 14 from Dean David Kessler:

Shortly after arriving at UCSF as Dean, I discovered a series of financial irregularities that predated my appointment. I reported these issues to appropriate university officials at the time, and have endeavored to work with the university ever since to solve these problems. The university characterized me as a whistleblower. During the summer, Chancellor Bishop requested my resignation. I continued to try to solve these problems. Yesterday, Chancellor Bishop terminated my appointment as Dean, effective immediately. Over the course of the past four years, it has been my pleasure and honor to work with the outstanding faculty, staff, students and donors of this remarkable school and institution. I want to thank all of you for the opportunity to foster and nurture outstanding programs on behalf of UCSF.

Sincerely,
David A. Kessler, M.D.
Professor of
Pediatrics, and Epidemiology and Biostatistics

The news came as somewhat of a shock to the academic community and Washington policy observers who followed Kessler when he was FDA commissioner under the Bush I and Clinton Administrations from 1990 to 1997. UCSF disputes Kessler’s account of the school’s finances.

It’s not the first time Kessler has stirred up controversy or been the target of an investigation into his handling of financial issues. Prior to his voluntary resignation as FDA commissioner in 1996, Rep. Joe Barton (R-Tex.) accused Kessler of overbilling the government for expenses of just under a $1,000. Kessler eventually wrote a check to FDA for the full amount.

After stepping down from FDA, Kessler subsequently took a position as Dean of Yale Medical School in 1997. After a six-year run at Yale, where it, in September 2003, Kessler was appointed Dean of the UCSF School of Medicine.

Kessler is not the first former FDA commissioner to have been involved in a dispute over the use of institutional funds. Former commissioner Donald Kennedy was forced to resign as president of Stanford University after 12 years (1980-1992) due to questions over the indirect use of university research funds.

Kessler says he will remain at UCSF as a professor but it’s hard to imagine that could last very long considering the nature of Kessler’s firing as dean. The RPM Report noted earlier this year that Kessler had reemerged from his quiet life as an academic and into the public spotlight as a very vocal observer in the wake of criticisms against FDA.

Kessler participated in a roundtable discussion of former FDA commissioners organized by the George Washington University School of Public Health in February. Kessler showed up a few months later at a May 7 House Oversight & Government Reform hearing on food safety.

At the time, we thought Kessler was angling for an appointment in a possible Democratic administration in 2008—maybe as head of NIH. But this latest spat with UCSF almost assuredly quashes any possibility of that happening. A new administration won’t be looking for a nomination fight early on in what looks to be another closely divided election.

But Kessler could still end up in Washington, nonetheless. His knowledge and skill in the area of health policy and regulation would be attractive to any number of think tanks inside the beltway. The Engelberg Center for Healthcare Reform was recently set up by former FDA commissioner and CMS administrator Mark McClellan at the Brookings Institute. Kessler also has ties to Ruth Katz, dean of the GW School of Public Health, and would be quite a catch for an institution taking an aggressive strategy in building up the school’s faculty.

However, it’s unlikely Kessler will find a position as prominent as dean of the UCSF medical school. And it’s all but certain that Kessler will be left out of the running for a coveted appointment if the Democrats take the White House.

While You Were Snowed Under

Better to be snowed under by actual snow than pretty much anything else, we suppose. Here are a few other flakes that accumulated over the weekend ...

• Not everyone is happy with Shire's managment manouevrings. The Financial Times points out that the Association of British Insurers suggests its members, which the hold roughly one fifth of the equity, might press for a more detailed explanation of Matt Emmens' move from CEO to chairman.


• Highlights from the San Antonio Breast Cancer Symposium: GSK presented Phase II results suggesting Tykerb may be beneficial as part of combination therapy in breast cancer that has spread to the brain. Amgen's osteoporosis drug denosumab increases bone strength in patients receiving hormone therapy for breast cancer, the company reported. Genomic Health said it has confirmed the efficacy of its Oncotype Dx test in predicting breast cancer recurrence. Regenerative medicine company Cytori reported positive preclinical and clinical results from studies of its adipose-derived stem cell platform, in fat graft retention and breaset reconstruction, respectively.


• Intrigue at UCSF medical school. Bloomberg News is reporting that former FDA commish David Kessler says he was fired from the school's top post on Friday for pointing out financial irregularities. One hundred million dollar financial irregularities Hat Tip: Pharmalot.


• Hello, Santa!

Deals of the Week: Beyond Biogen

Most of the chatter over the past few days has been about you-know-who and the deal that wasn't. Or the Novartis pink slips. Or the letter written to Schering-Plough and Merck by a couple of Michigan congressmen. But plenty of ink dried elsewhere this week, and we know that you know that we know that you've grown to expect Deals of the Week to talk about deals, not so much the deals that didn't happen, the layoffs, or the House Committee on Energy and Commerce. And damnit, we're not going to let you down.

• Eisai/MGI Pharma: We wrote a bit about this acquisition on Monday, and look for more in the January issue of IN VIVO. The short of it is this: the price tag, at $3.9 billion, suggests more than a little competition for the oncology/acute care specialist, and following on the heels of Celgene's $2.9 billion acquisition of Pharmion only a few weeks ago, reinforces our view that consolidation in the specialty pharma space will continue. And although the deal is by far the largest acqisition of a non-Japanese company by a Japanese pharma, perhaps it is not predictive of a wave of similar deals. Eisai boasts more of a US base, and we're told therefore, more of a dealmaking culture than its compatriots.



• Boston Scientific/Avista Capital Partners: Consider this the other shoe. Boston Scientific officials promised during their round of conference presentations last month that they’d be announcing the sale of its fluid management and venous access business sometime this month, and they did just that. The Natick, Mass. company agreed to sell the business to private equity firm Avista Capital Partners, $425 million in cash. This sale is be the last significant piece of their wholesale restructuring that would cut costs by $500 million and trim its headcount by 12% to 13%, and it’s a nicely matching bookend to last month’s sale of its cardiac and vascular divisions to the Getinge Group for $750 million. Analysts covering the company say the restructuring should help Boston Scientific go forward with its cardiovascular and cardiac rhythm management businesses. The cash also could come in handy to pay the $1.15 million Boston Scientific will pay to Advanced Bionics Corp. for its pain management program, a result of the nasty break up between the neurostim company and its one-time acquirer. Read more in the upcoming IN VIVO magazine.
  


• GSK/Oncomed: GSK's external development CEEDD and Oncomed inked a strategic alliance to discover and develop up to four antibody therapeutics against cancer stem cells, emerging oncology targets discussed in depth in this 2006 START-UP feature. The potential biobucks deal value is enormous, but the upfront payment, which is a mix of licensing fees and an equity stake, is undisclosed. Oncomed will handle development through clinical proof-of-concept, at which GSK has an option to license the MAb. The most advanced candidate, OMP-21M18, should enter the clinic next year. Bonus GSK: The pharma also teamed up with Belgian biotech Galapagos this week, paying €3.5 million in technology access fees plus milestones and 'double-digit' royalties to tap Galapagos' natural product discovery platform in the anti-infectives space.
  


• Shire/Alba: Prolific dealmaker Shire strikes again, landing ex-US, ex-Japan rights to Alba Therapeutics' AT-1001, an inhibitor of barrier dysfunction in GI disorders. The peptide is in Phase II for Celiac disease and Shire will have a look-see at Crohn's disease and other potential indications as well. Alba scored solid terms: $25 million in up-front payments plus milestones and royalties. In other Shire news, in the understated press release "Board Changes," the company said CEO Matt Emmens is stepping down, er, up, to the chairman's role, replacing retiring chairman James Cavanaugh. CFO Angus Russell will succeed Emmens next June. Somehow we doubt this is Emmens' last deal in the drivers' seat.

Biogen Idec and Carl Icant: A Report Card on Shareholder Activism in Biotech

On Wednesday, a panel at Windhover’s Bio/Pharma Partnerships meeting in San Francisco was discussing the prospects for M&A – and in particular the future of activist shareholders.

Less influential, opined Goldman Sachs banker Geoff Parker.

Funny that. More or less as the words were leaving his mouth, Goldman’s best known biotech client, Biogen Idec, was publicly reconciling itself to the equivalent of corporate chastity. No one wanted to buy it. (We point out for the record: we told you so.) At least for a price that would have satisfied the greed of its merger-obsessed shareholders.

And chief among those was Carl Icahn whose colossal and embarrassing failure to foist the company onto Big Pharma was, for many a CEO, the unspoken subtext of the Biogen press release. Kurt von Emster, the fund manager at MPM Bioequities, now dubs him Carl Icant.

Icahn– no doubt still drunk on the profits from AZ’s acquisition of MedImmune—figured that since drug companies were desperate for revenues but had bucketloads of cash, they’d of course be willing to pay $23 billion-plus for a company which could easily lose two of its top-three products to its partners Genentech (which would inherit a bigger share of Rituxan) and Elan (which had a right to buy back Tysabri on a change in control). And that’s precisely what Elan would have done (private equity firms would have clamored to finance the repurchase) unless a buyer made it worth its while to keep the drug in Biogen’s hands.

So much is evident.

But there is also a side story to Icahn’s humiliation. Biogen apparently required bidders to sign a CDA that, while it let them ogle the company’s private data, forbid them from any dealmaking with Elan or Genentech. That means the prospect of buying Biogen wasn’t merely expensive, it was a complete crapshoot. To risk the kind of money Icahn wanted, a buyer would need to be certain it could retain at least Tysabri, which meant it had to come to some pre-acquisition settlement with Elan…to whom it couldn’t talk pre-acquisition.

We assume Carl le Terrible knew about this teensy problem. And we also assume that he won’t let himself be snookered again by the clever folks at Biogen (we had figured that CEO Jim Mullen wanted to sell the company; now – given the sneaky poison pill he inserted into the CDA -- we ain’t so sure any more). Icahn will want his revenge. This is only Act I, says our not merely witty but wise friend Kurt von Emster.

But is there a further meaning to be found in Icahn's loss? We think so—another demonstration of the failure of shareholder activism in the biotech industry.

So far, Icahn is one for three in his most recent attempts to get Big Pharma to buy his shares at big premiums (he certainly made money in ImClone—but was unable to force its sale; and as we note this month in IN VIVO, he didn’t have much effect on Genzyme’s strategy either, which remains soundly diversified).

Meanwhile, the other major hedgie activist in the biotech space has certainly had his effects, but they weren’t what he and his groupies would have liked. Most spectacularly, Dan Loeb and his Third Point fund dismastered PDL by driving Captain Mark McDade from the bridge with a series of entertaining public letters alleging, among less serious business deficiencies, intraoffice kanoodling and geographic self-dealing (like moving the office so McDade could be closer to home and his boat slip) -- the sum of which added up to gross incompetence. Or at least provided the excuse for engaging in Loeb’s subraction-of-parts strategy that involved monetizing its antibody royalty stream and breaking the rest of its business into pieces.

The result: Loeb had bought in at about $18 and apparently exited his position for the tremendous price of … $18. PDL, of course, remains unsold. And it ain’t clear to us that he did anything to improve the shareholder economics of the other companies he’s afflicted—NABI and Ligand.

Now for all we know Third Point did make some money on PDL through some God-knows-what mix of option trading. But the shareholders who jumped into the stock after him didn’t.

And neither did most of the Icahnologers, most of whom rode the stock up on Icahn’s coattails and rode it right down again.

So we’re further downgrading our rating on activist shareholders. Investing in biotech isn't easy. It requires plenty of research; understanding products; contracts; the environment. The best investors in this industry know what they’re talking about because they study hard to figure it out. But by and large, we haven’t seen much evidence that the activists in biotech are doing their assigned homework.

The Hope and Challenge of Personalized HealthCare

"Industry should take on the burden of showing the value of new technologies in terms of relative costs and benefits to the Federal government."

That was one of Hoffmann-La Roche Inc. CEO George Abercrombie’s key points in his address on Personalized Healthcare during Windhover's FDA/CMS Summit for Biopharmaceutical Executives December 6. (You can read more about the Summit's various talks elsewhere on the IN VIVO Blog--here, here, here, and here--and in the upcoming issue of The RPM Report.)

"It is our fault if we allow Federal programs and other insurers to view each advance in personalized healthcare as merely adding the costs of an additional test to their program without taking into account the health and economic benefits of prevention, safer health interventions and more effective health outcomes," Abercrombie said.

He offered an example from Roche's own experience, the commercial failure of AmpliChip, the first FDA approved micro-array. "Even though the FDA cleared it, many insurers declined to cover it because its utility was considered experimental, investigational, or unproven. Others declined to cover it because its clinical value has not been established."

If industry does its part, Abercrombie said, government needs to do its part too. "Even if the new therapy results in additional costs to the Federal government in the short term, the government should still provide premium reimbursement for these products if a case can be made for coverage based on the relative benefits to patients and the product saves the government money over the long term."

An example? How about Roche's once-monthly bisphosphonate ibandronate (Boniva), marketed to treat osteoporosis.

"Biochemical markers of bone turnover in patients with osteoporosis are reliable indicators of successful treatment as early as three months after start of bisphosphonate therapy," Abercrombie says. "Adoption of inexpensive testing, combined with pharma therapy should be embraced by the Government to control costs and improve individual patient outcomes."

Unfortunately, "payers have decided to cover bone mineral density screenings after one to two years of bisphosphonate therapy."

"We believe early feedback and positive reinforcement from biochemical markers of bone turnover in patients with osteoporosis could encourage responders to continue to take their medicine regularly. Likewise, if the bone turnover markers show that a patient is a non-responder; their physician should have that information available in deciding whether to change the patient’s bisphosphonate therapy or discontinue therapy, even if it hurts Roche’s market share."

All in all, sounds like a company willing to put its money where its mouth is.

If you missed Abercrombie's keynote address at the FDA/CMS Summit December 6, you can read it here.

The Lucentis/Avastin Investigation: “The Story is Far From Over”

If you thought the battle over Lucentis and Avastin was confined to FDA, CMS and NIH, you’re wrong. Now Congress is jumping into the fray in significant fashion as is typically the case when the government feels they are overpaying for something.

On October 18, Senate Special Committee on Aging Chairman Herb Kohl (D-Wisc.) sent a letter to Acting CMS Administrator Kerry Weems asking why Medicare was paying a steep premium for Lucentis when the “chemically similar” cancer drug Avastin can be used off-label for age-related macular degeneration at a fraction of the cost.

The letter was in response to Genentech’s decision to cut off distribution of Avastin to compounding pharmacies, which are responsible for creating micro-doses of the drug that are tolerable in the eye. For more on Genentech's strategy, see this feature in the December RPM Report.

Kohl asked two questions of CMS: 1) How much has Medicare spent on the two drugs since 2005?; and 2) What measures has CMS taken to reduce expenditures on Lucentis, such as using Avastin?

Now things are starting to heat up. On November 7, 14 and 16, Kohl launched a formal investigation by sending two letters to FDA Commissioner Andrew von Eschenbach asking for all documents related to FDA field inspections and one letter to Genentech president of product development Susan Desmond-Hellmann, respectively. Kohl asked Genentech for essentially any document related to the Lucentis/Avastin dispute, from the company’s decision-making to meetings with FDA, NIH and CMS.

“We’re trying to figure out what really happened,” says one Senate staffer involved in the investigation. The committee is receiving “conflicting stories” from FDA, CMS, NIH, Genentech and the compounding pharmacies, the staffer says.

The Aging Committee has interviewed officials from Genentech and received documents from the government agencies. However, investigative staffers are still waiting for more evidence to come in.

The investigation is focused on several questions, according to the Senate staffer. First, “what happened during the FDA inspection” of Genentech’s San Francisco facility and the reason for the destruction of several lots of Avastin at the site.

Second, the staffer says, Genentech had agreed to take part in the National Eye Institute-sponsored head-to-head CATT study of Lucentis and Avastin if the design were changed to focus more specifically on safety and the trial was extended to allow for longer follow-up. “This summer, Genentech had a change of heart,” and the committee wants to know why the company changed its mind and chose not to participate in the trial and charge the government retail price for Lucentis.

Third, there was “initial concern” that Health & Human Services General Council Daniel Meron may have been unduly influenced to reject designating the CATT study a demonstration project in order for CMS to fund the trial. Then-Acting CMS Administrator Leslie Norwalk had approved the demonstration project.

The Office of the General Counsel justified its decision by saying it was obvious the demo project would improve the quality of the clinical trial and would benefit from having Medicare beneficiaries participate in it, therefore a demonstration project was not needed to prove it.

As a result of the CATT study delay, Kohl is developing legislation that gives CMS authority to waive co-pays for patients participating in government-funded clinical trials and comparative-effectiveness studies. Co-pays present a study design challenge because beneficiaries can be unblinded to what drug they are receiving because it represents a percentage of the total drug cost. In other words, the higher the co-pay, the more expensive the drug.

The Senate staffer says this type of situation occurs routinely with head-to-head studies but the CATT study is the “most egregious” example.

The Senate Special Committee on Aging will wait to receive more documents over the next several weeks, and after review, decide whether to hold an oversight hearing. “We have enough to hold a Q&A hearing right now, but we want to wait until we have all the documents,” the staffer says. “The story is far from over.”

So What's Next for Biogen?

The word is out, and Biogen Idec's review of its strategic alternatives has apparently turned up zero alternatives that are better than the status quo. And so, Biogen Idec soldiers on, alone.

The lack of a buyer here probably says more about the handful of Big Pharma players said to be interested in the company than it says about Biogen. The Big Biotech, even before the Icahn-induced scramble, was enjoying a relatively purple patch. Big Pharma, on the other hand, has had better days.

Several companies' short- or mid-term woes could have been alleviated with the addition of Biogen's revenues and biologics capabilities. But in the end, as we and others have pointed out: the price was too high. And Big Pharma turned out not to be as desperate as some people thought, or at least they chose not to exhibit that desperation at this time. Even Pfizer, in the wake of the Exubera debacle (a black eye, for sure) and looming loss of Lipitor revenues, decided to pass.

Does this signal the end of the biopharma M&A (and M&A rumor) parade? Probably not. But perhaps Biogen Idec can take a turn on the other side of the table now.

[UPDATE: BIIB shares took quite a knock, giving up about $6.5 billion in market cap/acquisition premium]

Finding Common Ground on Off-Label Promotion

There were plenty of highlights at the FDA/CMS Summit last week. Our colleague Roger Longman already shared his, singling out shrinking violet Steve Nissen and the decidedly less sexy, but critically important, discussions about reimbursement and drug development.

For anyone worried about the boundaries between scientific exchange and off-label promotion, though, the highlight had to be the discussion between First Assistant US Attorney Michael Loucks and former FDA Chief Counsel Dan Troy (now with Sidley Austin, LLP). And since virtually every pharmaceutical and biotech company with products on the market is under investigation somewhere, shouldn’t everyone be worried about that topic?

On paper, the face off promised plenty of fireworks. Troy has been a passionate advocate of First Amendment rights throughout his career, and maintains that the recent climate of prosecution of marketing practices is chilling scientific exchange. Loucks’ Boston office has spearheaded most of the biggest investigations in the area.

But a remarkable thing happened. Instead of a shouting match, there ensued a lively discussion of the policy issues underlying off-label promotion cases—and several points of agreement that could serve as a basis for moving the debate forward.

The first point of agreement was one of philosophy. Troy was the first political appointee at FDA in the Bush Administration, so you know where he is coming from . But here is something you may not have known about Michael Loucks: “I am, believe it or not, a conservative Republican,” he said.

“I think the government ought to be, consistent with the rules, out of people’s pocket books and lives,” Loucks said. “However, if you have a set of rules that requires taking certain actions when you market a product, that set of rules has to be applied equally across the board.” Dan Troy couldn’t have put it better himself.

The more important points of agreement, though, came in discussion of the topics raised by moderator John Bentivoglio (King & Spalding).

Troy has been pushing FDA to issue guidance clarifying permissible forms of scientific exchange, starting with a policy governing dissemination of peer-reviewed medical journal articles that discuss off-label uses. The topic is so controversial that House Oversight & Government Reform Committee Chairman Henry Waxman announced an investigation of the guidance before FDA finished drafting it.

Loucks agrees with Troy that FDA guidance would be useful in this area. He even offered a new idea: having FDA create some form of advisory opinion process, modeled on a program already in place for the HHS Inspector General. Such a system would allow sponsors to ask FDA for clearance before conducting some activity that they worry might expose them to liability for off-label promotion.

Loucks also agreed with Troy’s position that dissemination of truthful, non-misleading scientific information should not be criminalized, even if it is about an off-label use. There has to be “something else” in the case, Loucks said—like an illegal inducement to a doctor, or evidence that the information was false or misleading.

The two also agreed on one other thing: the issues surrounding off-label promotion encompass more than prosecutors and manufacturers. Payors, prescribers and patient groups all have a stake—and strong beliefs—as well.

Look for lots more coverage of the current state of off-label promotion policy in The RPM Report in December.

ENHANCE Interrogation Technique

So what was our colleague Ramsey Baghdadi's "little birdie" talking about when s/he said to expect "something big" to get released this week?

Maybe it was yesterday's encore public throttling of Avandia in the Journal of the American Medical Association. That study concluded that older (age 66+) patients on Avandia had "an increased risk of congestive heart failure, acute myocardial infarction, and mortality when compared with other combination oral hypoglycemic agent treatments."

But we're not so sure--the sequel is rarely as good as the original, and why would anyone be whispering to a journalist about a study that was probably available on an embargoed basis anyway.

Perhaps instead our avian friend was referring to the latest chapter in the ENHANCE saga? Yesterday Schering-Plough's Fred Hassan and Merck's Dick Clark got some mail from the House Committee on Energy and Commerce, and it wasn't a Christmas card.

The letter, from committee chairman John Dingell (right) and subcommittee on oversight and investigations chair Bart Stupak, both Michigan Democrats, questions the companies' delay in releasing data from the ENHANCE study, which concluded in April 2006. ENHANCE was designed to compare the efficacy of Vytorin (ezetimibe [Zetia] plus simvastatin) and simvastatin alone.

Merck and Schering-Plough have five billion reasons to hope Vytorin does a better job of preventing plaque buildup in the arteries than now-generic simvastatin, and a combination of the significant and multiple delays in releasing data from the 720-patient trial, a delay in registering the trial with clinicaltrials.gov, and the apparent manipulation of the trial's primary endpoint drew the Congressional attention.

As the WSJ's Health Blog reports, both companies are still reviewing the letter and have yet to repond. For now, they say the data will be released at next March's American College of Cardiology meeting. Meanwhile, Dingell and Stupak contend the pharmas have some explaining to do.

But who knows, maybe that little birdie has something else up its sleeve.

Pfizer Supply Deal Ups Pressure on UK Price Cuts

UK drug pricing reform was on the books anyway. The Office of Fair Trading in February 2007 recommended a switch from the traditional PPRS system whereby companies are free to set prices as they wish, within broad profit constraints, to a “value-based” approach whereby drug prices are cut and capped according to a product’s perceived therapeutic benefit.

Now the OFT’s just gathered some more fodder in its call for an end to one of Europe’s friendliest national pricing schemes—from their review of the direct-to-pharmacy drug supply arrangement initiated by Pfizer in March, with several other Big Pharma following suit.

Pfizer decided to cut out the wholesaler and sell its drugs directly to pharmacists. It still uses a wholesaler, UniChem, to do so, but UniChem in this case is simply a logistics provider, receiving a fee-for-service rather than buying the drugs outright and taking a margin from selling them on to pharmacists itself.

Pfizer had plenty of reasons to embrace DTP, which you can read about in more detail in this IN VIVO feature. One of them is that it gets to control individual drug discounts. In the traditional model, manufacturers sell to wholesalers at a 12.5% discount to list price, wholesalers compete to offer pharmacies the most attractive price and typically pass on about 10.5% of that discount. The National Health Service reimburses the pharmacies at list price, but then claws back some of the profits they make from the discounting.

The OFT has concluded from its investigation that there is a “significant risk” that DTP schemes will result in higher costs to the NHS (despite Pfizer’s assurances otherwise). So, it says in a release issued today, since the PPRS scheme is under review anyway (the current plans runs from 2005-2010), here’s another reason to switch to a pricing system that ensures that pharmacists’ discounts are safeguarded.

The OFT’s helpful suggestions:

1) reduce list prices in the PPRS framework by an amount equivalent to the average pharmacy discount

2) force pharma firms to offer a minimum list price discount to pharmacies

The bit of good news: Pfizer and others are free to pursue the DTP set-up (“manufacturers should be free to choose the distribution method they consider to be most efficient,” says the OFT).

A somewhat Pyrrhic victory, though. As far as drug prices are concerned, whatever freedom there was will now certainly soon come to an end.

REVA's a Keeper

Perhaps the most interesting part of Reva Medical Inc.'s announcement that it raised $42 million isn't who joined the company as an investor. Rather it's who has remained an investor--Boston Scientific.

The struggling company has been busy divesting itself of most of its portfolio--up to 100 public and private companies--as part of its restructuring. (See the upcoming issue of IN VIVO magazine for a small report on Boston Scientific's weight loss program.)

New CFO Sam Leon told investors at one conference that the company's portfolio looked more like a venture capital firm's portfolio than a business development important so it's shedding those investment that aren't in line with its core focus and "building a wall" around those that are.

It appears that REVA hasn't been kicked off the Natick, Mass. compound. No reason to wonder why, the company is working a bioresorbable stent, and Boston Scientific has the exclusive option for global distribution for both the corornary and periperal products.

Think Boston Scientific would be interested in one of those? Yeah, IN VIVO Blog thinks so too.

Venturing to Washington II: Fleecing the Drug Industry

The primary concern of Day 1 of the FDA/CMS Summit was just how bad for the industry are the unofficial tollgates of a more safety-conscious FDA and the official post-approval burdens imposed by the FDA Amendments Act.

Day 2 focused on a perhaps more inchoate fear – the chance that payors of all stripes will take the savings they need out of the hide of the drug industry.

And they will need them. Amgen VP of Global Coverage and Reimbursement Josh Ofman noted the variety of ways drugs cut overall health costs – but ultimately acknowledged, as did a variety of other speakers, that cost-containment was going to hit drugs hard – either, says Ofman, through controlling market access, restricting coverage (e.g., through formulary controls), or by imposing conditional coverage.

Most speakers did not expect the industry nightmare of a single-payor to soon take flesh. And the popularity of unfettered drug choice makes dispensing restrictions political and economic non-starters. But without them, the easiest (and most politically popular) target for cutting costs, separately noted Eli Lilly’s top politico Alex Azar and Rob Seidman, the influential former pharmacy chief at Wellpoint, is the biopharma industry—through price reductions and rebates (which fatten PBM profits as much as they cut drug expenses). Drugs covered by Part D—where consumer choice is most obvious (“what do you mean I can’t have Lipitor?” the consumer bellows at the pharmacist)—will likely face the brunt of the pricing assault.

Unfair? Absolutely. As much BS as drug companies hand out about their R&D spend, the fact is they can’t invest in new medicines if they can’t charge enough for the ones they get to market. Investors, for one, won’t allow it. Rob Seidman somewhat cynically commented that if the drug companies can’t create new products for less than $1 billion, they “need to build a better mousetrap.”

So—some mousetrap suggestions. First, there are ways of cutting that cost. Lilly’s Chorus division has shown it can get products to proof-of-concept much quicker than traditional development programs, giving their late-stage clinical colleagues a much broader choice of likely programs to push forward (and their business development colleagues a slew of out-licensing candidates that would otherwise have been dust-collectors on lab shelves).

Second, former Pfizer exec Stephen Williams, now with a new firm he founded called Decisionability, offered an interesting solution to the rising reimbursement risks – securitizing them in much the same way private equity firms and royalty buyers have learned to securitize drug-development programs. Instead of packaging development-stage products into tradeable securities (e.g., Morgan Stanley’s Pharmaceutical Royalty Monetization Assets—click here for more on just how clever the financial community can be), theoretically one could bundle approved products into packages that could cut a sponsor’s risk of reimbursement problems and permit investors to share in the upside of a positive outcome.

But drug companies also need to figure out ways of cutting reimbursement risk without turning to Wall Street. And one very practical solution is to start exploring how to create at least two formulations, one Part D and one Part B, for a molecule entering development (it’s a point we’ve mentioned before—here for example). That means exploring how a small-molecule headed for Part D might be useful in an IV infusion…and doing so at the earliest stages of planning for proof-of-concept. Take those biotechs, for example, developing small-molecule therapies for cancer or as replacements for niche drugs in orphan diseases, like lysosomal storage disorders: oral is convenient, sure. But IV can have both therapeutic and reimbursement advantages, too.

It’s reimbursement-oriented portfolio management – and it’s why R&D executives need to be au courant on the challenges their commercial colleagues face with payors (and why the marketing guys should focus on more than just market size when they kibbitz on drug development issues).

Final suggestion: there were roughly 200 attendees at the FDA/CMS Summit. More than half were the drug companies’ policy mavens. It’s clear, at least to this blogger, that what was once inside-the-beltway wonk material is now central to financial and drug-development strategy. If senior marketing, finance and R&D execs are leaving this stuff to their Washington groups, they’re leaving themselves wide open to the competitors who aren’t.

Here's Looking at You, Barry

Genentech held its mega-Christmas party this past weekend. This year's venue: AT&T Park, home of the San Francisco Giants and, until recently, home field for the star slugger Barry Bonds. The day before, Bonds pleaded not guilty to charges that he'd lied to federal investigators about taking steroids.

Nice timing for the makers of human growth hormone, don't you think?

Drug Safety Alarm: "Something Big" Coming?

If you attended our FDA/CMS Summit last week, it was great seeing you. If you missed it, shame on you. The keynote address by Cleveland Clinic cardiologist Steve Nissen on the state of the FDA stirred up a lot of controversy, not surprisingly.

However, one thing we didn't hear in his remarks could be more worrisome to the biopharmaceutical industry than what he actually said. A little birdie told us at the meeting to prepare "for something big" to be released this week.

We have no idea what the "something" could be. Do you? I will say that the last time a little birdie told us at The RPM Report that Steve Nissen was up to "something big," the "something" turned out to be Avandia.

Venturing to Washington I: The Satanic Verses

We ventured down to Washington for the FDA/CMS Summit and while our RPM Report colleagues will undoubtedly share their own thoughts over the next few days, this auslander wants to set down a few of his own.

In perhaps the most entertaining of talks, Regulator-without-Portfolio and Cleveland Clinic’s cardiovascular boss Steve Nissen blasted the FDA leadership for soulless toadying to industry. He started at the top with Andrew von Eschenbach – damned as a close Bush friend (admittedly, from our point of view, hardly a recommendation) and a “urologist” (an apparent reference to some religio-medical schema that blesses the cardiovascular as kosher and condemns the urological as treif).

He was even rougher with Scott Gottlieb, who, disguised as a regulator, apparently secretly serves the Dark Lord. The sign of his sin: pre-FDA, he wrote a newsletter on biotech stocks. That the Satanist Gottlieb no longer ran the newsletter; that as an FDA employee he couldn’t invest in those stocks; that having written about biotechs might actually have helpfully informed a more realistic policy toward the companies who actually create the products on which FDA passes judgment, Nissen did not consider – or at least did not mention.

But parallel Nissenian logic would shackle Alan Greenspan to the economic consulting hell out of which he crept to run the Fed while Robert Rubin would have been stuck arb’ing at Goldman Sachs rather than shaping and running Clintonomics – and few would have said that either man had behaved, once in government, as the corporate lackey he was clearly trained to become.

Don’t get us wrong. We’re as disgusted as most Beltway outsiders by the industry/regulator revolving door, and we nearly joined an atheist chorale when Bush allowed his Zealots (taking a break from bashing stem cell research) to reach into the FDA and, pun intended, neuter Plan B.

But Gottlieb – whose politics we ourselves continue to endeavor to change – was in our view exactly what the Agency needed, helping Mark McClellan open it up, even if just a crack, to the possibilities of adaptive trial design; making the social science of risk communication into a reality in a group which doesn’t much believe in anything but FDA-defined hard science; and—weirdly, given the Secret Industry Program he’s been charged by Nissen with promoting—trying to get some guidelines around conflicts of interest on advisory committees.

And while we can’t say that we regularly carouse with the FDA’s senior careerists, we’ve certainly never heard them bash Gottlieb for trying to impose some right-wing agenda on them. [Disclaimer alert: Scott is a friend of ours and was once very nearly a Windhover employee …which must make us second-order Satanites?]

There is also this odd fact: the Mafia which, the accusation goes, ran/runs FDA for the benefit of Republicans and Big Pharma, approved a mere trickle of new products while wrapping lots of existing ones with new warnings and restrictions. Were these Mammonites merely incompetent at serving their Master?

While You Were at ASH

We'll start our weekend-roundup jamboree with some news out of the American Society of Hematology meeting in Atlanta. So in a way this should be called, 'while you weren't' at ASH, but we're sticking with convention. Here are a few bits of late-stage clinical news out of the blood meeting:

• ASH: JNJ and Bayer said on Saturday that their Phase III Factor Xa inhibitor anticoagulant rivaroxaban was superior to enoxaparin (Lovenox) in preventing venous thromboembolism in patients following hip replacement surgery. Rivaroxaban is a once-daily oral, while Lovenox is injected. Boehringer Ingelheim's rival treatment dabigatran, a thrombin inhibitor, has begun a mid-stage trial in acute coronary syndrime says Reuters.


• ASH: Bayer, with Biogen Idec, also posted postive results in oncology, as the companies' Zevalin lymphoma therapy significantly increased progression-free survival in follicular lymphoma.
  
• ASH: Celgene's Revlimid added to dexamethasone in a Phase III study significantly boosted progression free survival in newly diagnosed multiple myeloma patients compared with dexamethasone alone.
  
• ASH: Adding Millennium's Velcade to standard of care in front-line multiple myeloma treatment "achieved a fourfold increase in complete remission rate," according to results of a Phase III study presented at ASH.


• MGI Pharma, the oncology and acute care specialist, was bought early today by Japanese pharmaco Eisai for $3.9 billion. You can read our first take here, and we'll no doubt have more to say on this later when we're, you know, awake.

We Hardly Knew Ye, MGI

MGI has been on the block for some time, finally announcing it was seeking strategic alternatives about two weeks ago, and so it should not be a surprise that it was bought today by Eisai for $3.9 billion. But somehow, it still is. Japanese pharma doesn't typically engage in overseas acquisitions of this size.

The all-cash offer of $41/share is nearly a 39% premium to MGI's share price before it disclosed it was considering 'strategic options'. Not bad-- though not quite the almost-50% premium that Celgene paid for Pharmion a couple of weeks ago (a deal that, incidentally, creates a mightier competitor to MGI's MDS drug Dacogen.)

Still, this was undoubtedly a competitive situation, and Eisai probably beat some far larger suitors to the punch. But the mid-sized Japanese firm has been showing its dealmaking aggression for some time now as it seeks to internationalize and to secure growth beyond Aricept, whose US patent expires in 2010.

We have for some time questioned whether specialty pharma players of MGI's size and scope have an independent future. They seem tailor-made for acquisition by product-hungry Big Pharma companies who are simultaneously embracing the culture of specialist medicines. Whether this deal lights a fire under the rest--the Endos of the industry, for instance--we shall see.

Cat Ladies, Your Misunderstood Appendix, and "Lap Dance Science"

We were going to throw this in with our weekend roundup, but we got to reading the "Year in Ideas" issue of The New York Times Magazine and by the time we got to the letter C in its alphabetized list of 2007's head-turning ideas, we realized it needed its own post. Dear readers, for the most part, we can't write about these kinds of things in IN VIVO. This is, in a nutshell, why we started blogging.

We confess to always enjoying this issue of the NYTM, though it would be interesting to go back to 2001, when they started doing this, to see how many of these ideas have panned out through the years.

Among the medical science related items (and up front, let us stress "related"), scientists writing in The Journal of Theoretical Biology have essentially rehabilitated the image of the good-for-nothing appendix. (Of course there's no ethical way to prove their theory that the appendix essentially repopulates the gut with beneficial bacteria following some sort of insult, but what the hell, why not. The appendix has been the afterthought of the GI tract for too long, we say.)

Researchers at UCLA are doing some rehabilitation of their own, and actually using an automated telephone system to help detect early signs of Alzheimer's. The Times notes that "the quiz also picks up behavioral warning signs including apathy, irritability and depression," though frankly we reckon if you don't exhibit those symptoms when you're using an automated telephone system, there's something amiss.

Moving on, here are a few other things we've learnt this afternoon:

Apparently roughly one-in-five Americans are infected with a parasite "that may migrate into their brains and alter their behavior in a way that — among other things — may leave them more likely to be eaten by cats." (Check out four of your friends, if they haven't smeared themselves with Tender Vittles, it's you.)

Want to know if your neighbors are on crack? Try a little Community Urinalysis.

It appears that ovulating strippers make more money than their colleagues.

Adding images of brainscans to even specious psychological claims makes the reports more believable to the layperson.

Finally: someone, please, convince us that writing about the biotech and pharmaceutical industries takes a lot of physical energy.

What's your favorite new idea of 2007? Do share, in the comments.

Deals of the Week: It's the End of the World as We Know It

Been reading the news this week? Apparently the sky is falling in pharma land. The WSJ reports that pharma's golden age is on the wane thanks to looming patent expirations and a poor track record in product approvals. (Hmm. Where have we heard that before?) BMS is the latest pharma to announce lay-offs--yesterday it announced 10% of its workforce would go. China's drug manufacturing capabilities pose a national security risk according to the Kansas City Star. Poor Carl Icahn: it looks like Henri Temeer and Genzyme will elude his clutches after all. (For more on Genzyme's strategy, make sure to watch for our upcoming IN VIVO feature.) And an FDA advisory panel nixed the use of Genentech's Avastin for breast cancer, sending the company's stock price plunging. (C'est la vie. You can't win 'em all right?)

Yep, it's the end of the world as we know it. And I feel fine. (Thanks to Deals of the Week, of course.) Without further ado:

• Novartis/Morphosys: First up: we tip our hats to Morphosys for their avoidance of pure "biobucks" figures in telling the world what they stand to gain in milestones from their latest HuCAL alliance with Novartis, announced Monday. Revolutionary! Now on to the deal, which for Morphosys is a bit revoluationary itself. Novartis will pay the antibody specialists $600 million over ten years in committed payments (roughly 50/50 technology license fees and research support), with an additional $400 million (non-biobucks) in predicted milestone payments. Morphosys basically consolidates its discovery partnership program into this one deal--as older deals come up for renewal, they'll just expire; for example the biotech's deals with Bayer-Schering and Centocor, scheduled to expire at the end of the year, will do so. Interestingly, Morphosys is maintaining more than a small amount of independence. Novartis remains the biotech's largest shareholder, but hasn't upped its stake beyond the 7% it already held, and does not get a seat on the Morphosys board. Morphosys won't be doing any more discovery deals, but will be able to do product-focused outlicensing deals at its leisure. Novartis gains a fully human antibody discovery engine without breaking the bank.
• Merck/Addex: Not a huge deal, cash wise, but the kind of deal Addex's investors were hoping for. Addex gets $3 million upfront from Merck & Co. plus milestones and undisclosed royalties. The companies are targeting the mGluR4 receptor to develop treatments for Parkinson's disease and other indications. Addex's allosteric modulation platform essentially allows modulation of GPCRs without binding to the receptor's active site, leaving that prime real estate open for the receptor's endogenous ligand.
• Pfizer/Adolor: On Wednesday, Adolor signed a deal with Pfizer worth $30 million up-front and $232.5 million more in milestones for two compounds for pain conditions, ADL5859 and ADL5747. Both compounds belong to the delta opioid receptor agonist class, a class of pain drugs related to morphine and oxycodone, but potentially without their debilitating side-effects. As part of the deal, the two companies will split revenues and expenses in the US 60/ 40 with Pfizer taking the lion's share and Adolor retaining co-promotion rights. This is the third big deal this year for Pfizer in the pain space. This summer the company added to its pipeline, signing a $195 million deal with Hydra Biosciences for its TRPV3 antagonists and a $1 billion-plus deal with Icagen for a sodium channel modulator (For more coverage of the pain space see this 2006 IN VIVO story.) This is some much needed good news for Adolor. The company's stock was decimated earlier this year when the FDA put the brakes on the company's mu-opioid receptor antagonist Entereg because of concerns about its lack of and potential CV side-effects. (For more on this product and other GI-related opioid compounds check out this November IN VIVO feature.)
• Lilly/Aveo: Precision Therapeutics wasn't the only diagnostic company making news this week. (For more on Precision's merger with Oracle Healthcare Acquisition Corp. check out this IN VIVO Blog post.) Cancer biomarker play Aveo Pharmaceuticals announced Tuesday it had struck a deal with Lilly to help the pharma identify patients who respond to one of its cancer drugs under development. Aveo's famous for its in vivo cancer models--essentially mice that have been engineered to develop tissue-specific cancers under controllable conditions. To date, the company also has biomarker discovery deals with Schering Plough, Merck, and OSI Pharmaceuticals. Terms of the deal weren't disclosed but if there anything like the $20 million agreement Aveo inked with OSI earlier this fall, it's unlikely there's big money on the table. Historically, that's been one of the problems with the business models of these molecular diagnostic companies. Although they can sign somewhat lucrative fee-for-service deals with pharmas, these partnerhips never seem to translate into upside related to the actual commericalization of a product.
• Fresenius Medical Care/Renal Solutions: On November 29, the German dialysis product maker announced it was buying Renal Solutions, a venture-backed sorbent cartridge maker for as much as $190 million. Just two years ago, Fresenius bet big, buying Renal Care Group for $3.7 billion. That transaction gave the German company an important foothold in the US market, giving it access to more than 30,000 patients at over 425 dialysis centers. The company also made waves when it agreed to a five-year sole-supplier deal with Amgen in October 2006 for that biotech's Epogen and Aranesp. The reason: many critics saw it as aiding Amgen's strategy to prevent widespread US uptake of a competing product from Roche called Mircera. (For more on Amgen and its anemia franchise click here.)

Pelikan Scoops up a Pouchful of Cash

A wonderful bird is the pelican. In his beak, he can hold food for a week.

And also great wads of cash such as that gathered up by the bird’s namesake, Pelikan Technologies.

Pelikan (that’s the German word for pelican) announced this morning that it raised $69 million in cash and another $20 million in venture debt, bringing funds raised to date to a grand total of more than $150 million.

That sounds like an enormous amount of cash for a device start-up, but it’s not really, not for a company trying to take on the Big Four (Roche, Johnson & Johnson, Abbott and Bayer) in consumer glucose testing, a $7 billion world wide market.

Besides its great big maw, the pelican has other fine attributes. CEO Dirk Boecker told us, “The sea bird is perfectly adapted to its environment and is particularly efficient at catching fish just below the surface of the water, never diving deeper than necessary, nor causing excess ripples or waves.”

That’s how Boecker wants people to see Pelikan Technologies, which is trying to improve compliance in glucose testing. Today, diabetes patients generally don't comply with the clinical recommendations for testing, understandably, since conventional blood sugar tests require them to stick their fingers with a sharp object several times a day to draw blood.

Spun out of Agilent in 2001, Pelikan Technologies is developing a single small device that, with a single push of a button, can draw out a blood sample in a pain-free manner, feed it through microfluidic channels in the device for analysis, and read out results.

The company is still developing this integrated testing platform, which will get rid of all the paraphernalia that patients with diabetes have to carry around today—separate lancing devices, lancets, test strips and a glucose meter--but it has already introduced, as a first stage, a pain-free lancing device, the Pelikan Sun, which it is selling over the Internet.

Pelikan Sun has been launched in Australia and Europe, and the company is on the eve of its US launch. The device still pokes people in the finger, but the company claims it doesn’t hurt because it lances at an exact pre-determined and adjustable depth to reach the capillary loops without perturbing nerve endings, thereby avoiding pain altogether (so they say), and it only needs a tiny blood sample to do its job—60 nanoliters, the smallest requirement in the industry, Boecker says.

Not just any diabetes start-up working to make glucose testing pain-free and convenient can command the kinds of funds that Clarus Ventures LLC, HBM BioVentures Ltd. Global Life Science Ventures, Mannheim Holdings LLC, and Bio*One Capital have put into Pelikan. Non-invasive glucose monitoring companies, for example, are pretty much anathema to VCs because so many have failed, or if they haven’t failed yet, have consumed ten years worth of cash with still nothing to show for it.

Pelikan is attractive because it’s innovating along the same lines as those other icons of success in glucose monitoring, MediSense, and TheraSense, which made incremental but meaningful improvements to conventional blood glucose testing. Both were acquired for a premium by Abbott Laboratories.

MediSense introduced a biosensor-based point-of care blood glucose meter for home use that was more accurate and less expensive than competing products. TheraSense moved testing off the sensitive finger tips to other sites of the body that were less painful to puncture. In fact, this has been the most successful strategy since the very beginning of consumer glucose monitoring back in the 1980's; pioneer LifeScan’s success was due to added convenience; its test strip didn’t need to be blotted and wiped like the tests that came before.

Pelikan still has to face the demands of manufacturing a medical-grade device on the scale of consumer electronics--the challenge of making a complex but robust product in high volumes-- but it doesn’t have to break new ground here either.

Insulin pump manufacturer Insulet Corp., which was struggling to meet an overwhelming demand for its disposable pods of insulin, recently signed an agreement with contract manufacturer Flextronics International, which will help it get up to its goal of producing 200,000 pumps per month by the end of 2008 to meet demand. Coincidentally, Flextronics is Pelikan’s manufacturer too. (Check out the next issue of START-UP for more on glucose monitoring start-ups.)