Generic EPO Should be a Big Deal. But Is It?

Novartis’ Sandoz division was on Friday granted European Commission approval for its biosimilar version of Johnson & Johnson’s epoietin alfa (Eprex). It’s not a huge surprise, given the positive recommendation earlier this summer, and given that Sandoz has done this before: growth hormone Omnitrope became the first biosimilar drug to gain European approval last year (and, after a long legal kerfuffle, got onto the US market, too).

But this should nevertheless be a big deal. We’re talking, after all, about a cheaper copy of EPO, the blockbuster anemia drug that made Amgen. A drug with sales that top $7 billion globally. Of all the biologics in generic firms’ sights, this has to be by far the most valuable--the "killer biologic," as one of you readers put it in a comment on a previous post. EPO is one of the most expensive drugs on many hospital formularies, and accounts for a huge chunk of payor expenditure.

At last!, we should be saying, the long-threatened generic biologics revolution has come to pass. Injectables will get cheaper, patient access will improve, originators will be forced to innovate and move on.

The reality isn’t quite so revolutionary. Sandoz is one of the few companies with the resources to persevere with biosimilars; many smaller firms dropped out as it became clear how onerous clinical trial and regulatory requirements would be.

Commercialization ain’t a slam dunk, either. Sure, a 20% discount counts given the prices of these drugs. But it’s up to individual countries to decide on whether docs may substitute the originator drug with a biosimilar. Innovators have done a good job lobbying against interchangeability. Questions and concerns over safety standards mean that biosimilar firms have an uphill struggle on the marketing and educational front, ensuring that these products are perceived as equivalent, not potentially dangerous cheapies.

Still, Sandoz will be helped considerably by the fact that its biosimilar has been granted the same international non-proprietary name (INN) as the reference drug, epoietin alfa (to the delight of the European Generic Medicines Association, since this goes some way at least to proving their case for scientific equivalence). Sandoz’s EPO will be available under three different brand names, though, likely in order to leverage locally-recognized and trusted generic brands across the various European markets.

Stada, another surviving biosimilars stalwart, had to settle for a slightly different INN for its generic EPO--epoietin zeta, filed in June 2006. That probably helped drive their decision to hand over commercialization to US-based specialist hospital marketer Hospira last November. The move was about “curbing financial risks” associated with the project, whose approval, as the press release optimistically states, “is still possible in late 2007”. Also last year, Mayne Pharma pulled out of a marketing deal with Pliva (now part of Barr Pharmaceuticals) on generic EPO. The product was approved in Croatia in 2005 but hasn’t got past the EU regulators.

In sum, Sandoz's approval in itself isn’t much of a threat to J&J, even less to Amgen, which sells epoietin alfa as Epogen in the US. But it is symbolic, at least in its timing, of an end to the monopolies that innovators have enjoyed on hard-to-make biologics like EPO, a topic we discussed in more detail in this IN VIVO feature.

Sandoz’s head of Biopharmaceuticals Ajaz Hussain knows that biosimilars’ take off will be slow; he told IN VIVO Blog about it earlier this summer. But take off they will, eventually—and when they do, this approval may well be looked upon, if only retrospectively, as one of the most important steps along the way.

Is it Getting Breezy in Here?

No, seriously. Did somebody open a window?
Don't get us wrong, we still believe that both venture capitalists and biotech management teams deep down think that M&A is their best exit opportunity. But biotech IPOs seem to be gathering steam, as evidenced by the chart above, created from data we pulled from Windhover's Strategic Transactions Database.

We discuss the phenomenon in a little more depth in the upcoming September START-UP magazine. What caught our eye is the frequency with which we're seeing S-1 filings: just in the past week or so Archemix, Precision Therapeutics, and Biolex have filed to go public. There are a few big boys in the queue too, like Reliant Pharmaceuticals and Talecris Biotherapeutics.

In fact in the past year there have been significantly more IPOs filed than in the previous 12-month period, though quite a few have yet to price their offerings. Those IPOs that have priced in the past year have cumulatively raised 50% more cash from public investors. The averages shown above illustrate where that money is coming from: IPO hauls have been getting better.

Things aren't completely rosey. The pricing environment is still difficult, even for top-tier companies (see Jazz Pharmaceuticals). But we've suggested before that IPO values will increase, thanks at least in part to competition from Big Pharma acquirers and an influx of crossover private/public investors. It seems like that shift is already happening.

Bayer-Schering Biz Dev: Reorganized and Ready to Deal

We wondered aloud last autumn, in the wake of four multi-billion euro deals, about the impact that Europe's mid-sized pharma mergers could have on Big Pharma. Could the invigorated middle class of pharma, with its specialist bent and flexible dealmaking, eat Big Pharma's lunch?

Some of them certainly think so. Less than six months after joining Bayer-Schering Pharma as the newly-merged group’s SVP global business development and licensing, Michael Yeomans already has a clear message for the rest of the industry: look out, we’re coming—and we’re coming with aggressive deal terms (read: $$$$), an reorganized, 40-strong business development team across corporate and therapeutic-area-focused units, a love of specialist products and ambitions in biologics, too.

Bayer Pharma and Schering have pretty much sat out of the deal-making pool party since Bayer bought Schering in the middle of last year, distracted by re-structuring and spring-cleaning; just as other Euro mid-caps including UCB Group and Nycomed and Merck KGAA have done, too, as they digest Schwarz Pharma and Altana Pharma and Serono, respectively.

Now the slimmed-down, not-so-mid-cap Bayer-Schering reckons it's ready to dive in. Bayer-Schering isn’t just going to be supplementing internal R&D efforts with deals, it’s going to be replacing R&D efforts with deals, at least in some business units. “There are several areas where we'll emphasize in-licensing and acquisition rather than internal R&D", Yeomans told IN VIVO blog. The R&D budget won’t decrease in absolute terms, but Schering’s historical 18-19% of sales R&D spend will look more like 15-17% in the new group, albeit of a bigger revenue pot.

Sounds like it’s turning into spec pharma, right? Right. But that acquire-and-market model’s a bit out of date, given the cost and rarity of late-stage assets, and given that most niche drugs really aren’t that niche anymore. (Interested in discussing whether the spec pharma model is broken? Wait for September's IN VIVO.)

Still, Yeomans claims the company will have a competitive edge, in part thanks to the new BD structure he has spent the summer building. Each of Bayer-Schering’s six business units will have a team of licensing guys that decide in the first instance what to pursue; a corporate group will get involved only for selected deals “to add expertise, not as a hand-off,” Yeomans clarifies.

In other words, Bayer-Schering is creating a business development answer to GlaxoSmithKline’s R&D-focused CEDDs--centers of excellence for drug acquisition (CEDAs: our label, not theirs). They’re small, nimble, TA-focused, autonomous teams, although they don’t, apparently, have budgetary independence like GSK’s CEDDs. (Need a refresher? Recap on GSK’s CEDDs here, and indeed on GSK’s own attempt to extend the concept to business development here and in a previous blog-post).

Bayer-Schering says it has a winning combo of small-company advantages encouraged by the new structure—focus, flexibility, speed—and the financial clout of Bayer’s corporate coffers. “For the right projects, we can certainly be competitive,” he asserts.

That competitiveness may include something that most Big Pharma lack: a willingness to out-license. We hear that there are a few assets in the discovery and development pipeline that Bayer-Schering may like to part with.

The One-Two Punch in Venture Capital

Domain Associates’ Eckard Weber is now the master of the one-two punch in venture capital.

He finds a drug candidate no one cares about; creates a low-infrastructure company around it; finds a second drug to exploit the infrastructure and spread the risk; sells off the lead drug through an acquisition; keeps the second drug and same management, forms a new company around it; develops it some more; then sells it off again. The first deal at a minimum pays back the investors; the second deal juices the returns. (For more on the story, see the September issue of START-UP).

So far, Weber’s done the 'one-two' three times. He started with Peninsula and follow-on Cerexa (the former to J&J for $245 million in April 2005, the latter to Forest Labs for $494 million plus a potential earn-out in December 2006); meanwhile there was Conforma Therapeutics and follow-on Cabrellis (the first sold to Biogen in May '06 for $150 million plus earn-outs, the second to Pharmion only six months later for $59 million plus earn-outs); and most recently with NovaCardia (stage one completed with the Merck $350 million acquisition last month; stage two just getting started on NovaCardia’s second product).

It’s a good model – and now it looks like others are taking up the idea, too. In June, Amgen won an auction to buy the polymer drug specialist Ilypsa, which had created a platform for drugs that soak up various chemicals, like phosphate and potassium. The most advanced drug, the Phase II ILY101, was an improved phosphate binder that sops up excess phosphates in chronic kidney disease patients on dialysis. But there were other compounds behind it, including a nearly-clinical stage potassium binder also for use in CKD.

When Ilypsa went to partner ILY101 (they’d already sold Japanese rights, to Astellas), they got plenty of interest. And as the deal price rose, a few of the potential licensees broached the possibility of acquisition. Some of them wanted the whole company; others just the lead product. Amgen – with its erythropoietin-driven renal franchise under reimbursement assault -- was among the latter. It needed another product and was willing to pay what looked like an above-the-odds price to get it. $420 million later, Amgen had ILY101 and was ready to dispense with its other research programs (it’s watching its expenses pretty closely—a fact well known to the 2500 or so Amgenites who will be getting their pink slips), the 80 or so Ilypsa employees, and its headquarters.

Instead, some of Ilypsa’s investors – including original VC backers 5am Ventures and others -- apparently broached the topic of buying back the pieces of Ilypsa Amgen was about to chuck anyway. Amgen, which has done little out-licensing and fewer spinouts, seemed to like the idea since the parties have a preliminary deal on a newco. Amgen will get an equity stake and what looks like an inside track, if not exactly an option, on the next program, the potassium binder.

If so, Amgen’s doing the smart thing. It started by getting itself a Phase III product without hurting its P&L (it capitalized the vast majority of the purchase price). Now the VCs will spend their money on the next program while Amgen watches from a ringside seat.

If the drug passes its proof-of-concept test (Phase II trials should be fairly predictive on a non-absorbing drug that doesn’t fundamentally do anything to the body’s biology), Amgen will be able to pad its renal portfolio once again (and again without much affecting the P&L). It will, in effect, have backed into doing the kind of off-P&L R&D bankers and VCs have been urging pharma to do for years. And should it all work out, the VCs will go home pleasantly punch drunk.

While You Were Redesigning Your Blog

Does our blog look big in this? You may have noticed a few changes round these parts, and we hope you like them. No, not that the pace of our posting has slowed (this will surely pick up as industry deal activity awakes from its summer slumber), but moreso the new look and feel of our corner of the web.

Today you'll even see the addition of our first blogroll (in the right-hand column). If you're not already familiar with these Web sites, go check them out. For now, it's a short list, and sure to expand. There are plenty of other high-quality blogs, and rest assured we will aim to update that list relatively frequently.

We'll be rolling out a few other new features in the days, weeks, months ahead. IN VIVO Blog started out only a few months ago as an experiment, and judging by feedback we've received from readers it seems to be working.

So thanks for dropping by, tell your friends and colleagues about us, and feel free to send suggestions, tips, rants, praise, remonstrations, or commiserations about the Phillies' inevitable collapse to blog [at] windhover.com. Or, as always, speak your minds in the comments.

Now, on to some weekend news you may have missed ...

• Back in the U.S.S.R.: Several drugs in clincal trials to treat hepatitis C have suffered setbacks this year, potentially opening the door to new mechanisms of action. On Friday night Implicit Bioscience announced that a Phase IIa study of its immune modulator oglufanide disodium had commenced in Australia. The drug originally hails from Russia, where it was developed and marketed to treat severe infections.
  
• I'm So Tired: The Guardian weekend magazine has an excerpt from The Family That Couldn't Sleep: A Venetian Medical Mystery, by D.T. Max. The book describes the mystery surrounding fatal familial insomnia, along the way illuminating the history of other prion diseases like vCJD and kuru.


• Everybody's Got Something to Hide Except Me and My Monkey: The New York Times writes about functional MRI, and how a company called Omneuron is using the brain imaging technology to treat chronic pain. But the tech's first application could be in lie detection, says the CEO of the aptly named No Lie MRI.
  
• Cry Baby Cry: Results from Neurochem's Phase III trial of its Alzheimer's disease candidate Alzhemed were "inconclusive"--i.e. didn't show statistical significance--the company reported Sunday night. This is the latest setback for the company and its drug; shares of Neurochem have been in freefall since late last year.

No Wait! Make it a Venti!

Yesterday's post on Globus' might have contained error, but we got bad info.

Seems the press release on the deal sold the company short. Private Equity Hub is reporting that the company actually raised $110,000,001.65., allowing it to top CardioNet as the largest "venture" round to date.

PE Hub gets info directly from the SEC filings, which aren't available on the Internet YET, so IN VIVO Blog has got to believe the larger figure is right. (BTW, sign us up for the Free the Form D Campaign that's going on. Read here and here.)

Also, the next START-UP will have more on Clarus' likely fund raising plans.

Ready, set....

Globus Medical Inc. is ready to run.

Earlier this week, the company settled its lawsuit with Synthes USA, reaching an agreement that absolved Globus of allegedly stealing trade secrets and key personnel from Synthes. As part of the deal, Globus agreed to pay Synthes $13.5 million in cash and to not hire any additional Synthes employees for one year.

Freed by the drag of that lawsuit, Globus today announced it raised a $110 million Series E investment in a round assembled by Clarus Ventures, which led a syndicate of private equity investors with a commitment north of $50 million. AIG SunAmerica is the only other identified investor although several private equity firms supposedly took part.

Not that the company had exactly been standing still. Started in 2003 by CEO David Paul and other executives who left Synthes, Globus Medical last year reported more than $80 million in revenue. The size of the settlement surprised some. (Healthpoint Capital's blog has some nice before and after takes here and here. But the Philadelphia Inquirer suggested at least one juror saw some holes in Globus' case.)

Hard to say for sure why the settlement happened, but it's easy to envision Globus executives opting to settle quickly with $110 million piled atop their board room table.

The massive deal signals two developments. The first involves Globus which currently resides on the second-tier of the spinal device market. Medtronic Sofamar Danek, Depuy Spine, Synthes USA, Stryker Corp and Zimmer Spine Inc./Zimmer Holdings Inc. still lead the way. But Globus is now positioned to make a move past other mid-tier players like Blackstone Medical Inc., NuVasive Inc., Alphatec Spine Inc and others. The capital infusion enables the company to plow through with sales of its fusion products while advancing its internally developed line of non-fusion implants and spinal spacers. For more on these areas go to MedTech Insight reports here and here.

The second interesting aspect of this financing of course involves Clarus Ventures, the firm founded by five former partners of MPM Capital who left in a very public split two years ago. This financing will likely be reported as a significant “venture capital” deal, probably the biggest since CardioNet secured its $110 million (which also wasn’t really a venture capital round.) But make no mistake, this is a private equity-style investment with private equity firms involved.

Private equity firms continue to survey the medical device industry, and orthopedics particularly, for opportunities. While the Globus deal clearly resides in a different neighborhood than the $10.9 billion acquisition of Biomet Inc. by Blackstone, KKR and others, it demonstrates how well-heeled venture firms--such as Clarus--can position themselves as private equity players, at least when when medical devices are involved. The $50 million-plus investment in Globus represents roughly 10% of the $500 million debut fund that Clarus closed on at the start of 2006, so it’s a big bet. It also may be the last device deal in this debut fund.

Clarus is clearly comfortable with big wagers as it demonstrated with its participation in the $80 million financing for Sientra, which is pushing for FDA approval of a silicon-based breast implant.

Check out our next issue of START-UP to hear more about the deal and Clarus.

Take The Money and Run

On Tuesday August 21, this IN VIVO reporter had the opportunity to interview Christopher Gleeson, CEO of Ventana Medical Systems. It was an interview arranged by an outside public relations firm, ostensibly to talk about the growing importance of companion diagnostics. But there was a Swiss elephant in the room: Roche, whose $3 billion hostile offer for the diagnostic company was set to expire in a couple of days.

Gleeson confirmed his company has had no conversations with Roche since the end of June. "We would prefer not to comment on this matter," says Gleeson. But he maintains, "We continue to look at every way possible to maximize value to our shareholders." Forgive my confusion, but it seems like an odd time to seek out a meeting with a reporter and then dodge the most pressing issue facing the company.

Instead, Gleeson presented the broad case for molecular diagnostic content, invoking Genomic Health's success with Oncotype Dx, and his belief that valuable tests of this ilk can command premium price tags. Frankly, we at IN VIVO have been hearing this argument for a while now--with little formal movement.

Gleeson himself acknowledged that, to date, the relationships Ventana has developed with pharmas are primarily fee-for-service contracts for assay development using the drug company's own proprietary biomarkers. In other words, those pharmas haven't been willing to part with any kind of royalty in exchange for having a diagnostic co-listed on the drug label.

So why even bother speaking to IN VIVO at all? To convince me that a company with 2006 revenues of $260 million is worth more than Roche's $75-a-share offer?

Now, I know that the market for in vitro diagnostics is hot. A quick search through Windhover's Strategic Transactions Database shows 22 IVD acquisitions this year alone, and none of these take-outs have been cheap.

Remember Biosite? Beckman Coulter tried to buy the company for $1.44 billion, only to be out-bid by Inverness Medical. (See here for Windhover's coverage.) Especially in the over-heated molecular diagnostics arena, acquisition targets are commanding stunning multiples. Qiagen bought Digene, for instance, for $1.42 billion, a 9.3x multiple on the HPV-test maker's annual revenues.

But Roche's $3 billion offer for Ventana exceeds even that--assuming the Swiss drug maker doesn't sweeten its deal, it's nearly a 12x multiple on Ventana's 2006 sales. Said one industry insider who's been following the saga, "The price is scary."

I give Gleeson a lot of credit. He's playing a tricky game of brinkmanship. It's clear Roche wants this company badly--Ventana's cell-based assays fit with the company's professed long-term strategy to entwine drug development and personalized medicine. And the company spent 6 months pursuing Ventana privately before launching its hostile bid. When Roche finally went "hostile," it opted for a rich price, seemingly designed to frighten off competitors. As the summer wanes and the hostile bid gets extended yet again, it seems less and less likely that a white knight will appear to rescue Ventana.

Roche may decide to sweeten its offer in order to get the deal done, but that seems less likely after yesterday, when an Arizona court ruling granted a motion preventing Ventana from using a state anti-takeover position. (A ruling to prevent Ventana from issuing new shares to block the proposed deal--a so-called "poison-pill"--is still pending.) That's okay. Gleeson has done his job for shareholders: $3 billion is a rich price for a diagnostic company, especially one that isn't likely to be launching significant numbers of new companion diagnostic tests until 2011.

Seems like now is the time to take the money and run.

Old Medicine in New Bottles

Two excellent posts from the Wall Street Journal’s Health Blog and Pharmalot noted speculation from Credit Suisse on a Pfizer bid for Wyeth (we detail that company's pipeline troubles here).

Catherine Arnold, who wrote the original report, is one of our favorite analysts and anything she writes we take seriously.

But let us put the acquisition in the context of some other big decisions Pfizer needs to make.

Since the simultaneous resignation announcements of Alan Levin and John LaMattina, Pfizer has to soon appoint a new CFO and a new research boss. We’re speculated before here and here about who Pfizer might turn to for R&D. The finance choice could be complicated by what we’re told is the likely retirement of David Shedlarz, Pfizer’s vice chairman as well as Levin’s boss, Pfizer’s former CFO, and Kindler’s one-time rival for the top job. A Shedlarz departure would further upset an investment community utterly uncertain about Pfizer’s direction.

But at this point, Pfizer shouldn’t be worrying about Wall Street (it ain’t as if, with $22 billion in cash and short-term investments on its balance sheet, Pfizer needs to sell stock). Instead, the choices Pfizer makes for the R&D and finance jobs will say a lot about just how much strategic change the company’s CEO and board believe they need to make.

Would, for example, they choose a finance boss who would advocate for a more radical use of Pfizer’s cash – equity investments in several dozens of biotechs, for example, or even a Roche-Genentech like transaction? Or, even more radically, with a splintering of Pfizer into a number of quasi- or indeed completely independent therapeutically focused companies, perhaps majority held by a Pfizer holding organization? Or will the new boss simply placate shareholders short term by continuing to increase the dividend (at 4.9%, already the highest in the industry, says Goldman Sachs) and repurchasing shares?

Now back to Wyeth. As we work on a story about trends in pharmaceutical dealmaking for the September issue of IN VIVO, we consistently hear about the revival of interest in major acquisitions—that the problems of Big Pharma are now so severe that CEOs are accepting meeting requests with investment bankers that, just a few months ago, they’d have ignored.

But such deals are difficult given that the product overlap among companies is more obvious to the FTC than ever. And having to sell the overlapping products is what kills value in these deals.

That’s why biotech acquisitions are so interesting. The product overlap is usually minimal and biotechs deliver biologics capabilities that Big Pharma badly wants. A metric of that desire: the highly competitive auction that ultimately delivered MedImmune to AstraZeneca for $15.6 billion.

Theoretically, Wyeth brings similar biologics capabilities to Pfizer that MedImmune brought to AZ, along with a host of non-overlapping small-molecule drugs.

And yet we remain skeptical that such a deal is either likely or in the best interests of either company’s shareholders. Sans CFO and R&D boss, Pfizer shouldn’t embark on their third gigantic integration effort in less than a decade. Wyeth’s biologics business will do at least as well under Wyeth as it will under Pfizer (let’s remember just how underwhelmingly Pfizer has performed marketing biologics like Exubera and Rebif). Meanwhile, any biologics successes will boost Wyeth’s $22 billion base of revenues far more than Pfizer’s $47 billion. Indeed, Wyeth will resist Pfizer’s blandishments, particularly if an offer comes wrapped in Pfizer’s shares.

And if Pfizer presses its case, as it did with Warner-Lambert and Pharmacia, its own investors could easily rebel: why try to cure a disease, they might reasonably ask, with the same therapy which has consistently failed to work?

CardioNet's Not So Big Surprise

Riddle us this. When is news not news at all? When it’s involving CardioNet Inc.’s Friday filing for an IPO.

See, this filing was essentially a done deal when CardioNet secured $110 million from investment banks and hedge funds in the spring. In fact, that financing isn’t entirely complete until CardioNet goes public because the participants in that round won’t receive their shares in the company until after the IPO.
It sounded strange to us at the time, but here’s how CEO James Sweeney explained it in our April START-UP article:

In exchange [for the $110 million], the providers of the capital obtained mandatorily convertible preferred stock that will convert into common stock in the company on the eve of a successful IPO. They'll get a discount on the stock; anywhere between 10% and 25% depending upon the success and timing of the IPO. Sweeney says no debt was issued. Investors only got the promise of common stock upon the completion of the IPO.

Therefore, the valuation of the company for this deal won't actually be set until it goes public. "This is a very new product," Sweeney suggests. "In fact most of the people we sold it to hadn't seen it before."

So CardioNet and its investors didn’t set a valuation for the $110 million. Why? With no value for the last private round, Sweeney suggested the company could more favorable negotiate terms for the IPO. Sounds fine, if everything goes well and the company goes public at attractive terms. But if this company can’t go public, the terms of the private round will be “punitively expensive,” according to one investor.

Putting all these financing machinations aside for a moment, CardioNet’s wireless system looks to offer a real opportunity for innovation in health care. We’ll just wait and see how all this financing sorts out.

If you want to read more on this financing, please check out the article. But here’s one more interesting point. It looks as if this road show is entering its fifth or six month. Citigroup Global Markets and Sun Trust Robinson Humphrey, which served both as co-placement agents for the $110 million round, now are serving as underwriters for the IPO. Citi is also listed as an underwriter.

While You Were Watching the Weather Channel

Dean on the move

A few notes from the weekend that was. Yet again we've dipped into this morning's news, but it was a slow weekend unless you're an armchair meteorologist.

• Made in New Jersey. The NJ Star Ledger takes a look at Wyeth's Alzheimer's disease drug discovery and development programs (The NYT put Wyeth center stage for its own Alzheimer's feature back in June, which we pointed out here). (Hat tip, Pharmalot, where Ed points out that Wyeth's recent spate of troubles may be responsible for its proactive media push.)


• Made in China. Lilly announced early this morning a deal with Hutchison China Medtech, for multiple drug candidates in the oncology and inflammation areas sourced from Chi-Med's herbal medicine discovery platform. Chi-Med will get R&D support and upfront payments on each candidate, plus milestones ranging from $20-29 million per, plus royalties. The release arrived in our in-box at 7am BST, but it looks like the Telegraph had the scoop.


• Made in Heaven. Didja hear the one about Novartis buying Bayer? Pharmagossip helpfully illustrates some real world M&A difficulties.

Image: Reuters/NOAA

Seeing Double: Ophthotech's $36mm Series A

IN VIVO Blog has several different varieties of deja vu.

SV Life Sciences, HBM BioVentures, and Novo AS have just funded an ophthlamology start-up with a $36 million Series A that will pay for the acquisition of two interesting drug candidates. Didn't that happen last year? It sure did, in May 2006. The company was Lux BioSciences.

OK, how about this: David Guyer, MD, and Samir Patel, MD, have teamed up as founders of an ophthalmology specialist based on in-licensed aptamer drugs and hope to make headway in the tricky macular degeneration space. SV (then Schroder Ventures Life Sciences) was an early investor. No, no, no, that was way back in 2000. Eyetech, right? Absolutely.

Well, talk about getting the band back together: On Monday, BioCentury broke the news that SV and co. were launching Ophthotech with a $36 million Series A, which Patel will helm as CEO and co-founder Guyer (who is a venture partner at SV and also on the board at Lux) will chair. Everything old is new again. Next you'll be telling us the Spice Girls are getting back together. What? Nooooo!

The cash will pay for the in-licensing of two aptamer projects, each of which should be in the clinic by the end of the year, SV managing partner Lutz Giebel, PhD, told IN VIVO Blog.

The first asset comes from OSI Pharmaceuticals' troubled and for-sale ophthalmology group, which just happens to be Eyetech (!), Guyer/Patel's former outfit they somehow had convinced OSI to pay the better part of $900 million for back in 2005--to the market's, and now OSI's, chagrin. That deal brings in an old Eyetech anti-platelet derived growth factor (PDGF) aptamer program with the lead compound E10030, which Giebel calls "an IND in a box," for a familiarly undisclosed mix of up-front cash, milestones, and royalties.

The second deal brings in more aptamers, this time from Archemix. (Funnily enough, Archemix got its start by licensing in the therapeutic rights to Gilead Sciences' aptamer technology back in 2001, which Gilead had acquired along with NeXstar in 1999. The only therapeutic aptamer rights Archemix didn't get turned out to be Eyetech's Macugen.)

Ophthotech and Archemix are also not releasing terms of their deal, which gives Ophthotech worldwide rights to all ophthalmic uses of Archemix's aptamers targeting the C5 component of the complement cascade, a hallmark of many inflammatory diseases.

Beyond all the coincidences, what seems a little strange to us is that these products didn't wind up in Lux BioSciences, and that basically the same investor base felt the need to reinvent the wheel by starting up another company. At this point, Guyer, HBM's Axel Bolte, and Novo's Thomas Dyrberg all sit on Lux's board of directors as well as Ophthotech's.

True, Lux is for the moment focused on uveitis and corneal transplantation and is further along the value chain than these preclinical assets--LX211, the company's lead uveitis treatment in pivotal clinical trials, just received fast-track designation from the FDA. But Lux has told us before that it intends to get into back-of-the-eye diseases like AMD in the future, particularly as it contends that AMD is at least partially an inflammatory disease, which is in Lux's sweet spot.

Perhaps the firms' management and investors weren't so keen on diluting Lux's focus; a successful LX211 pivotal trial could provoke a quick takeout by Big Pharma, and keeping managment's eyes on the prize could have been a factor. "Lux had looked at the C5 aptamer from Archemix, and stage-wise, it just didn't fit," Giebel tells us.

He should know: he led SV's investment in Ophthotech but has not taken a seat on the board, since he remains on Lux's board (besides Guyer, SV's representative on the Ophthotech board is Henry Simon, PhD, partner at SV and former chairman of [you guessed it!] Eyetech). Giebel downplays the multiple potential conflicts of interest between the two companies, saying that while there's always potential for that sort of problem, there are many ways of managing it.

We reached Lux CEO Uli Grau, PhD, to get his take. "It is a bit of an unusual situation," he agreed. "And we share large parts of our boards and even though the two companies are positioned somewhat differently, there might be times where we'll have a tough time carving out exactly what is whose territory."

Nevertheless, he says, "I'm a little relaxed because we have a tremendous relationship with our board, the members are honest and trustworthy, and there's no indication that there is a problem."

Lux's take on the Archemix project? "You have to ask yourself," says Grau, "complementing a late stage pipeline with an interesting but early-stage approach, is that giving us value recognition by the time we are looking at a strategic exit?"

Lux can also take comfort in the presence of Prospect Venture Partners--the one investor in Lux that hasn't also invested in Ophthotech. The smiling guy on the right here is David Schnell, MD, managing director at PVP and on the board at Lux. IN VIVO Blog thinks of him as the enforcer. If Lux identifies new opportunities it doesn't want the competition to know about (and however nice everyone involved seems to want to play, the companies are competitors), Prospect provides that additional muscle.

Oddly enough, only a few years ago, it would have been a sure thing to keep all these assets under one corporate roof, because the VCs would have been hoping for an IPO exit, and investors like to see multiple clinical projects at IPO hopefuls. Now that M&A is the preferred exit, the assets are siloed. For now.

Avandia and Rezulin Redux

We told you about the dangerous parallels between GlaxoSmithKline's diabetes drug Avandia and Warner-Lambert's now-dead TZD Rezulin.

The New England Journal of Medicine has published a piece on making the same connection by Jerry Avorn, a Harvard Medical School professor. I think this quote from Avorn says it all on how he feels about FDA's advisory committee vote (almost unanimous) July 30 to keep Avandia on the market:

"The decision was more suggestive of Rezulin redux (and of Redux) than it was of resolve."

You all remember Redux don't you? To read the whole Avorn piece, click here. As always, your comments are welcome.

They MIGHT Be Giants

But can they change health care?

The New York Times reports yesterday that IT titans Microsoft and Google were set upon using their individual might to “improve the nation’s health care.”

Try as we might to be impressed by caliber of these indisputable pioneers, IN VIVO Blog is having a bit of troubling mustering anything more than a “ho hum.” Perhaps, if we try real hard, we might push it to, “We’ll believe it when we see it.”

See, we’ve been hearing (and writing about) about this IT revolution in health care for close to 10 years now. Back then Internet entrepreneurs—albeit with shoddy business plans and puddle-deep knowledge of health care—promised to bring the power of IT and the Internet to bear on the $1.3 trillion dollar health care system. The end result? Now many of those same entrepreneurs are promising to bring the power of IT and the Internet to bear on a $2 trillion-plus health care system.Yep, a 50% increase. How’s the might of IT doing so far?

So what’s different today? Well, to be fair, the Internet model is in a lot better shape than it was 10 years ago. Google, which continues to impress us (have you used the Street View feature on Google Maps? Amazing), wasn’t even around, and no one had quite figured out how to make money off the Internet yet. Today, Google’s model and services serve as a foundation for many of the start-ups in this area today. As for Microsoft, IN VIVO Blog won’t pretend we know much about the company other than we use Windows and Internet Explorer. But there’s little doubt the company hasn’t focused on health care up until now because it had much lower fruit to pick in other industries. Hospitals and doctors are notoriously bad customers for IT companies.

Perhaps that’s why both companies appear to be targeting the consumer… er…the patients. Question is can these companies capture some of the juice for a health-care consumer product? (It’s hard to imagine a ready list of drug allergies garnering the excitement of finding a new sushi restaurant on your iPhone.) Here’s what’s reportedly being planned, according to the Gray Lady:

A prototype of Google Health, which the company has shown to health professionals and advisers, makes the consumer focus clear. The welcome page reads, “At Google, we feel patients should be in charge of their health information, and they should be able to grant their health care providers, family members, or whomever they choose, access to this information. Google Health was developed to meet this need.”

A presentation of screen images from the prototype — which two people who received it showed to a reporter — then has 17 other Web pages including a “health profile” for medications, conditions and allergies; a personalized “health guide” for suggested treatments, drug interactions and diet and exercise regimens; pages for receiving reminder messages to get prescription refills or visit a doctor; and directories of nearby doctors.

Google executives would not comment on the prototype, other than to say the company plans to experiment and see what people want. “We’ll make mistakes and it will be a long-range march,” said Adam Bosworth, a vice president of engineering and leader of the health team. “But it’s also true that some of what we’re doing is expensive, and for Google it’s not.”

Bosworth deserves credit for remaining humble, but the question we have is—will all this really improve health care? The profile idea and the prompts sound like window-dressing (web-dressing?). Sure, some people might benefit from an email reminding them to make a follow up appointment, but that doesn’t mean they’ll follow through. As for the personalized health guide, the information is out there and often collected by Web sites like WebMD. How does a simple aggregation of data help? (And when does the notion that Google—which bases its Gmail ads on the content of the messages—will have complete health profile on record stop feeling weird? The assurances that this data will remain completely confidential don’t do it for me.)

Note: Google Blogoscoped, which tracks the behemoth, has previews of Google Health Screen Shots here. Lots of sizzle but not seeing the steak.

Microsoft’s efforts, in contrast, sound a little more grounded—at least initially. Again, from the NYT:

… “It will take grand scale to solve these problems like the data storage, software and networking needed to handle vast amounts of personal health and medical information,” said Steve Shihadeh, general manager of Microsoft’s health solutions group. “So there are not many companies that can do this.”

This year, Microsoft bought a start-up, Medstory, whose search software is tailored for health information, and last year bought a company that makes software for retrieving and displaying patient information in hospitals. Microsoft software is already used in hospitals, clinical laboratories and doctors’ offices, and, Mr. Shihadeh noted, the three most popular health record systems in doctors’ offices are built with Microsoft software and programming tools.

But then the talk veers off into discussion about creating consumer-oriented tools such as online offerings “as well as software to find, retrieve and store personal health information on personal computers, cellphones and other kinds of digital devices — perhaps even a wristwatch with wireless Internet links some day.”

A wristwatch? Perhaps this would work for Dick Tracy. Yes, the current process of sending faxes and letters to get a simple medical record transfer done is onerous. But do we need a wrist watch? Just let me download my records onto a thumb drive and bid me good day.

Yes, IN VIVO Blog has a difficult time seeing all of this having any real impact from these consumer-oriented efforts. They sound great, but will they really make a difference?

While Microsoft and Google bring some much needed buzz to health care’s out-moded record keeping, there are at least two other multi-nationals worth keeping an eye on in the race to digitize health care: Siemens AG and General Electric. Keep in mind that Siemens and GE also have major plays in healthcare IT and they develop the imaging and diagnostic tests that make up the bulk of a patient’s record. Who better to lead healthcare’s digital revolution than the companies that generate the actual data patients—and more importantly, doctors—want tracked. (BTW, keep an eye out for an analysis of Siemens’ IVD approach in the upcoming Sept. issue of IN VIVO.)

Wyeth's Leaky Pipeline

Poor Wyeth. The bad news just keeps coming. First came the FDA's July 24 letter asking for an additional year-long study of the company's menopause drug Pristiq. Then on August 10, the company announced it's own "daily double": a non-approvable letter for bifeprunox, a Phase III schizophrenia drug it's developing with Solvay Pharmaceuticals; and the preliminary halt of a study of HCV-796, a Hepatitis C drug Wyeth is co-developing with ViroPharma.

In addition to this negative trifecta, there's an on-going legal battle with generic-drug maker Teva over Wyeth's Protonix patent. (Wyeth has asked for an injunction to prevent the launch of the generic prior to the drug's patent expiration in 2010. A decision on the matter could come any day between now and September 7.) Perhaps it's no wonder the stock has been sliding. As of yesterday, Wyeth shares had fallen nearly 24% from their May high of $59.

Coming hard on the heels of the Pristiq news, the announcements about bifeprunox and HCV-796 must have been hard for Wyeth execs to swallow. DrugResearcher reports that just a few days prior, at the Drug Discovery & Development of Therapeutics Conference in Boston, Tom Hofstaetter, Wyeth's head of business development, told attendees that the pharma industry's productivity woes were a thing of the past. "The pipelines are more diverse and better quality than ever before," claimed Hofstaetter.

Ah, sweet irony. Seems like Wyeth's "diverse pipeline" has sprung a sizeable leak. And that puts additional pressure on the success of on-going collaborations with Progenics and Elan in pain and Alzheimer's disease. You don't have to be a brain surgeon--or even a lowly Windhover reporter--to know that the company is going to have to act--and fast--to shore things up. Investors are a flighty bunch and few these days are patient enough to endure a protracted turn-around.

Barbara Ryan, an analyst with Deutsche Bank, summed it up in her investor note: "While our expectations for Wyeth's pipeline have been relatively modest, it is now clear to all that the combined commercial potential of these products won't be sufficient to replenish revenues that will be lost at the end of the decade to generics." In the immortal words of Homer Simpson:"Doh."

I'm a glass full kind of gal. Earlier this year Wyeth won approval for Torisel, it's kidney cancer drug, and Lybrel, it's birth-control pill. More importantly, Wyeth is sitting on $12.19 billion in cash--money it could use to in-license some much needed late stage compounds or acquire smaller outfits to build up it's existing neurological or large-molecule franchises.

Still it's tough to see how Wyeth can quickly plug it's leaks through M&A or alliances. The company simply doesn't have much of a history as a deal-maker. (For a review of Big Pharma's acquisitive nature see these April and May IN VIVO articles, but be warned: Wyeth only gets mentioned in discussion of Big Pharma out-licensing [Wyeth's Hofstaetter tells us that Wyeth has to outlicense because it is over-productive in internal R&D] and as a non-acquirer.)

In fact, a quick search of Windhover's Strategic Transactions Database shows that, historically, Wyeth favors research-stage alliances over acquistions. In the past six years, the company has brokered only two deals for Phase III products--a $416.5 million deal for Progenics' pain drug methylnaltrexone and a $145.5 million deal for Solvay's bifeprunox. The other big deals? A 2004 alliance with Plexxikon for rights to its Phase I drug PLX-204 for Type II Diabetes worth $22 million, and a 2006 deal with Trubion Pharmaceuticals for rights to CD-20 targeted therapies worth $41 million. (See chart below.)

And you have to go back to the mid-1990s--a time when the names Wyeth-Ayerst and American Home Products were still in use--to find a buy-out linked to the company. Compare that with AstraZeneca and Pfizer, which, in the past five years, have spent $17 billion and $4.2 billion respectively snapping up biotech companies.

It's going to be an interesting few months for Wyeth. You can bet the IN VIVO Blog will be watching--and writing. And Wyeth execs, if you want to talk strategy, we are all ears.

(click chart to enlarge)

Northwest Under the Hammer

Surprise! The lawyers are out to get Northwest Biotherapeutics—on behalf of their disgruntled shareholders—for the “materially false and misleading statements” issued in that July 9 press release.

Northwest, or their comms department, definitely messed up—we blogged the dodgy release and its subsequent clarification here, and claim no prizes for predicting that something like this would happen. This is not a case of suing McDonalds for serving hot coffee—the lawyers, for once, have a reasonable point. Northwest declared that the world’s first therapeutic cancer vaccine was available to patients. It wasn’t. The experimental substance was allowed into Switzerland—conditionally.

Acting on behalf of “defrauded investors,” law firms like Hagens Berman Sobol Shapiro can see good business in the inherently risky, volatile biotech sector. They’re slapping suits about everywhere, it seems, including recently on GPC Biotech and Dendreon, allegedly for misleading investors over their cancer candidate’s progress.

Blaming the management is not always justifiable—especially at young firms trying to get their first drug through the FDA maze. Stuff can go wrong in drug development; investors not ready for that should choose another sector.

Trouble is, the Northwest saga will mean yet more lawsuits, and probably make these actions even more part of the biotech landscape than they already are. That doesn’t seem the best way to encourage transparent communication between management and regulators, and management and their investors.

The Most Important Deal of the Last 12 Months

In preparation for our Pharmaceutical Strategic Alliances meeting in September, we decided to send the same question to 35 of our smartest friends in the business: what deal signed in the last 12 months said the most about the drug industry’s current situation?

The answer (caveat: responses are still coming in) was AstraZeneca’s acquisition of MedImmune.

We suppose the choice shouldn’t have been surprising. At $15.6 billion in cash, it was arguably the biggest biotech acquisition ever. (Amgen’s 2001 buyout of Immunex looked bigger, but what was worth $17.9 billion in a combination of cash and stock at the deal’s announcement had, thanks to the dip in Amgen’s shares, dropped below AZ/MedImmune all-cash price by the time Amgen/Immunex closed in 2002.) And you can read what IN VIVO said about AZ/MedImmune at the time by clicking here and scrolling down to the sidebar (“AZ Spends Big on MedImmune”).

At the PSA meeting, we’ll interview in front of the assembly the man who engineered this remarkable deal—MedImmune’s CEO David Mott, who is now going to run AZ’s combined biotech efforts. And we’ll ask him what appetites at Big Pharma drove that astonishing price —since the auction he ran allowed him peeks at a variety of companies and their challenges.

By and large, our polltakers (a mix of heads of Big Pharma R&D and business development organizations, a few biotech CEOs, a couple of bankers, and a handful of VCs) figure the deal’s real driver was product panic.

One typical comment came from a Big Pharma R&D chief: “The deal shows the magnitude of the desperation of the pharmaceutical industry, and how badly things are going right now.” Or from a Big Pharma’s head of business development: the deal’s price “illustrates the general paucity of pipelines in many major companies. Over time I believe this is a value destruction deal and if replicated too often will lead to trouble.”

But the price also reflected, said our respondents, the capability AZ badly wants – large molecules and specifically antibodies. Relatively representative was the comment of one biotech CEO (whose company is pursuing small molecules). The price, he said, represented the fact that “biologics are likely to represent 30% of any Big Pharma’s future product portfolio and that they have to get in the game now, not via this or that product but, rather, by acquiring a soups-to-nuts biologics capability.”

Later this week, we’ll detail some of the other deals selected by our respondents -- every single one analyzed at the PSA meeting by the executive responsible for it.

While You Were at the Beer Festival

A friend of IN VIVO Blog reads his GBBF-approved magazine

Massive beer festivals and keeping up with the weekend's news don't necessarily mix, but damnit we'll do our best.

• Glass half-full ... The Boston Globe is reporting this morning that FoldRx, a biotech specializing in molecular chaperones that can return misfolded proteins to their correct shapes, will receive a serious chunk of change from the Cystic Fibrosis Foundation. The $22 million grant will be paid out over five years, says the Globe (Our most recent feature on venture philanthropy can be found here.)
• Glass half-empty ... Cost cutting: not just for Big Pharma. Amgen isn't saying what the cuts will look like, but the big biotech said in a regulatory filing on Friday that hits to its ESA franchise will result in a fresh look at its cost structure.
• Through the Looking Glass ... we've ignored this blog-friendly story so far if only because we don't have much to add beyond "eeesh." But for a roundup of the Johnson & Johnson-sues-the-Red Cross kerfuffle, and the various guffaws and high-horsing around the web, see the never-subtle Pharma Marketing Blog.
• What's in your glass? Finally, some tasting notes from the Great British Beer Festival for any ale aficionados out there ...

As you can see from the picture above we spent some time camped out in front of the Caledonian and Sharps booths, mostly because these breweries rarely disappoint. The XPA and Deuchars IPA were outstanding as usual, and the mysterious Rebus 20 was also quite good. Sharps' Atlantic IPA was delicious and we also liked their Cornish Coaster. No surprises there.

What did surprise us a bit were the higher-than-the-pub prices for some beers at the festival (3 quid per pint was not uncommon), and the fact that we 'discovered' only a few new ales that were top-notch. (That said, we couldn't try all 450. Maybe next year.)

Can't wait to try again: Jennings Cocker Hoop from Marston's and Caledonian's XPA.

Give it a miss: A Fist Full of Hops from Falstaff and Bullmastiff South's Welsh Gold.

If you were at the festival or just have a favorite ale to tell us about, lets hear it in the comments...

Are These Large-Molecule Twins Identical? The Biosimilars Paradox

Biosimilars may offer the promise of cheaper drugs, wider access and a panacea for over-stretched health care budgets, but they’re off to a mighty slow start.

So says Sandoz, makers of growth hormone Omnitrope, the first biosimilar drug approved in Europe and the only one available on both sides of the Atlantic. Number two epoitin alfa (equivalent to Epogen or Procrit) is expected to receive a green light from the European Commission in September and may be available by year-end.

But despite Europe's pioneering regulatory pathway for biosimilars, and reluctant grunts of acceptance from originator companies, most of which have realized that it’s pointless and counterproductive to keep resisting the biosimilar movement, the going’s tough, according to Ajaz Hussain, Sandoz’s VP and Global Head of Biopharmaceutical Development.

One might expect a drug that sells at a 20-30% discount—he did confirm this much--to fly off the shelves, given all the fuss around Amgen’s monopoly over EPO supply (and questionable bundling tactics) and the noise that most European governments and US payors are making about drug costs. But education and perception are blocking widespread uptake, as we and many others predicted they might.

“It will take time for physicians to fully understand what biosimilars are and how they fit in to the treatment options,” Hussain acknowledges. Reading between the lines: we’re not selling very much, yet (the company won’t say how much) but we reckon we will.

The slight paradox here: Sandoz reckons it needs more competition to help it drive wider acceptance and trust of biosimilars among prescribers, but not too much so as to render the economics of the game impossible. “It will take several products, and several companies to promote wider uptake of biosimilars,” he says.

But already, issues like manufacturing and the trial requirements make biosimilars a very different economic prospect to small molecules. (Genzyme’s issues with Myozyme, outlined in this WSJ piece, illustrate how even the innovators can’t always get manufacturing right.)

Biosimilars will nevertheless happen, assures Hussain (and it would be patients’ loss if they didn’t). By 2010, $18 billion’s worth of today’s biologics will be off-patent, and by then half of all products on the market will be biologicals, given the proportion of the R&D pipeline they currently account for.

Even with a few lingering perception issues, a potential $18 billion is a lot to share around among what may be just a handful of players. As for innovator’s follow-on efforts: that’s a significant competitive tool for originator firms, admits Hussain. “But the cycle will continue,” he adds. “We’ll copy them, too.”

The Return of Lord Kesslermort

Where am I going with this, you ask? Well, he's been in hiding for years and all of a sudden there are ominous signs of him everywhere. While he doesn't literally carry the Dark Mark, he may as well from the drug industry's perspective (note: if you are not getting these Harry Potter references, my apologies, but I just finished the last book.)

I'm talking about former FDA Commissioner David Kessler, who served as head of the agency from 1990, under Bush I, to 1997, when he was succeded by Jane Henney in the twilight years of the Clinton I Administration. Kessler is arguably the most controversial commissioner in recent times for the way he took on drug companies, Big Tobacco and even orange juice producers. His pursuit of having FDA regulate tobacco products resulted in the FDA vs. Brown & Williamson Tobacco Co. case, which the agency lost.

In 1996, with the voices opposing him growing louder and louder, Kessler announced he was stepping down, and subsequently took a position as Dean of Yale Medical School in 1997. In September 2003, Kessler was appointed Dean of the University of California, San Francisco School of Medicine. Now 56, Kessler has reemerged from his quiet life as an academic and has been very vocal in the wake of criticisms against the FDA.

Kessler participated in a roundtable discussion of former FDA commissioners organized by the George Washington University School of Public Health on February 21st. Here's a few things he had to say:

On PDUFA:"We are willing to continue to support PDUFA...But if PDUFA is a negotiation with the regulated industry, I don't think that is going to be trusted," Kessler said at the GW panel discussion.

On FDA leadership stability: "You can’t have a commissioner every 18 months. You can’t run an agency if a commissioner is there for such a short period of time."

On personalized medicine: "The model that pharmaceutical development is based on is not a sustainable model. The notion that there are going to be drugs that we are going to be able to come up with and have millions and millions of people take safely—the blockbuster—that is the thing that has gotten us in this trouble."

After the GW panel, Kessler showed up a few months later at a May 7 House Oversight & Government Reform hearing on food safety. "Simply put, our food safety system is broken," Kessler testified at the hearing.

This quote, however, is what really grabbed my attention. In a great article by one of my favorite writers, Geeta Anand in the Wall Street Journal, Kessler says it's time to get novel, potentially life-saving therapies to market even faster than is currently being done. "We have to find creative ways of getting cancer drugs to patients even if we end up being wrong a few times,"Kessler said in the piece. Anand highlights the birth of the accelerated approval process under Kessler's watch. And despite his "anti-industry" reputation, he's the one that made the user-fee system work.

This seems to be an attempt by Kessler to remind the drug industry, "Hey, I'm for accelerating drug approvals." In my humble opinion, it appears that Kessler's recent high profile means he's angling for something, but what? When it comes to the FDA, it's a case of "been there, done that" for Kessler. CMS Administrator? I don't think so. In his stints at Yale and UCSF, he's worked jointly with their respective hospitals and health systems and he has an Advanced Professional Certificate in Management from New York University Graduate School of Business. But I don't think that's his cup of tea. It's more difficult to have a broad brush-stroke impact on healthcare at CMS compared to other agencies in the government.

That leaves two positions: director of the National Institutes of Health with its enormous budget or Secretary for Health & Human Services. I think Kessler would be a perfect fit for the former in a Democratic administration. He's an academic at heart and has led very large academic research institutions/budgets. But I think he wants the latter, where he could lead the public health agenda and finish off his crusade against tobacco which he started over a decade ago.

He's got ties to the Clintons, should Hillary Clinton win the election. However, she may want to distance herself from such a lightning rod as she seeks to stay in the political center. Kessler also has ties to Illinois, receiving his law degree from the University of Chicago in 1978. I'm not sure how much that would help him if Barack Obama were elected President. If a Republican takes the White House for a third consecutive term, I think it's back to the quiet of academia for Kessler.

Nevertheless, drug industry watchers should stay vigilant for anymore signs that He-Who-Must-Not-Be-Named will return.

Another Co-Promote Bites the Dust

When Merck and partner Neuromed yesterday pulled the plug on Phase II chronic pain treatment NMED-160/MK-6721, another co-promote bit the dust, too.

More proof, then, that most co-promote options built into today’s biotech-pharma licensing deals are just window-dressing—comfort cushions for biotech investors dreaming of drug revenues and spec pharma success. Earlier this year we laid out in IN VIVO some of the reasons why fewer than 10% of co-promotes actually turn into market-place reality.

That statistic reassures the Big Pharma partner—most of which hate the thought of sharing their commercial spoils with inexperienced biotech, even if some of them say otherwise. But the main reason co-promote promises don’t often become reality is product discontinuation, as in this case, which helps no-one.

Luckily for Neuromed, the aborted program, an N-type calcium channel blocker, wasn’t its lead. Not since April 2007 anyway, when the biotech licensed US rights to a Phase III extended-release opioid analgesic OROS Hydromorphone from Johnson & Johnson’s Alza.

This deal means Neuromed may yet fulfil its dream, shared with most other biotechs, of setting up its own specialist sales force. And Neuromed may yet get to co-promote products with Merck, since the 2006 deal granted the biotech the option to co-promote to US specialists any N-type calcium channel blockers emerging from the collaboration—and the partners say they’ll keep looking for others.

But with NMED-160/MK-6721 gone, at least in pain, Neuromed will miss out on at least $202 million in milestones, and possibly more. It also paid $30 million up front for OROS. That product had better make it onto the US market (it's approved in Europe, but still not in the US, seven years after an approvable letter ). Otherwise private Neuromed may be in danger of biting the dust, too.

FDA and Drug Safety: It Keeps Getting Worse

How bad is the drug safety climate? Just ask GlaxoSmithKline.

Sure, last Monday was a rough day—nothing like having two FDA officials tell an advisory committee that one of your biggest products ought to be pulled—but we’re not talking about Avandia today.

No, today we are talking about the product formerly known as Trexima, a fixed-dose combination of the GSK’s migraine drug sumatriptan (Imitrex) and the nonsteroidal anti-inflammatory drug naproxen. GSK is developing the combo in partnership with Pozen. On July 31, the Food & Drug Administration issued a second “approvable” letter for Trexima, saying that it is still not convinced the combination is safe enough for marketing. (FDA has already told the companies that it will not approve the Trexima brand name, but the firms are still using it until they settle on a new one.)

In particular, Pozen says, FDA is concerned about a positive genotoxicity test. The agency apparently wants the company to conduct a relatively simple human study to provide reassurance that it is a false signal. This comes after FDA previously declined to approve Trexima because of concerns about the cardiovascular safety profile of the combination.

Keep in mind that this pill combines two ingredients that have been used together countless times in the 15 years that Imitrex has been on the market. If there really is a safety problem here, FDA probably should be doing more than just sending an “approvable” letter to Pozen.

To be fair, Imitrex has well known cardiovascular risks, and naproxen’s cardiovascular safety profile became an issue in the context of the cox-2 inhibitor safety brouhaha. So you can understand why FDA asked for more data. Now, Pozen says, the agency is satisfied on that front (thanks in part to GSK’s willingness to do a post-marketing study on the blood pressure effects of the combo). But the drug is still on hold.

Welcome to the world of new drug reviews in 2007. Trexima is just the latest indication that this may be the worst time ever to try to get a new drug through FDA.

There should be good news soon. Congress is on the verge of enacting historic drug safety legislation—at least, Congress says it will after August vacation. The bill will put new burdens on manufacturers to be sure, but it will also allow Congress to declare the drug safety problem to be fixed. That may lead to increased confidence in FDA as a regulator—and maybe increased confidence within FDA itself to allow the agency to approve drugs even if they do have a safety signal.

SHAMELESS SELF-PROMOTION ALERT: The RPM Report and Ropes & Gray will host a webinar on Aug. 14 to discuss the impact of the pending FDA bill. Two experts from Ropes & Gray’s legal practice will dissect the key provisions of the legislation, and the editors of The RPM Report will tease out the business implications of the law. Registration information is available here.

Insight + Preparation + Dumb Luck = Blockbuster

This blog has spilt plenty of bytes on the nasty consequences for GlaxoSmithKline, and for the industry, of the Avandia problem – but we haven’t said much about who’s likely to benefit. That part of the story we left to The RPM Report – and you can see that analysis here.

As Kate Rawson notes in that story, the two biggest big beneficiaries are Merck’s Januvia – the only DPP4 inhibitor on the market—and Amylin/Lilly’s Byetta. But Januvia is in many ways a more interesting business case study – and one we’ll talk about in a public fireside chat with Merck CEO Dick Clark at Windhover’s annual shindig in New York for the industry’s top business development executives, Pharmaceutical Strategic Alliances.

Clark -- pictured right -- ain't exactly the pin-up CEO. He's a manufacturing guy, from the blue-collar neighborhood of the drug industry. But he's managed a turnaround at the otherwise very white-collar Merck of impressive proportions, this being the company, that not so long ago, looked like a cartoon Gulliver hogtied by thousands of litigious Lilliputions.

And as Clark and I will discuss at the PSA meeting, much of that success is due to Januvia, the product of a nearly perfect blend of scientific insight and strategy, management skill and dumb luck.

Trailing Novartis by four years, Merck’s DPP4 team not only built a molecule that avoided one of the receptor subtypes hit by Novartis’ compound, Galvus, they managed to convince the FDA – although no one is saying so, publicly – that by doing so they’d made a safer drug. Thus Januvia never got hit with the FDA scrutiny Galvus did – and ended up with a safety label so compelling (a side-effect profile comparable to placebo) that this once-a-day pill, noted one diabetologist, has become “the first truly simple-minded therapy in diabetes.”

And probably the fastest beginning-to-end development program for any first-in-class primary-care drug in recent memory (seven years from discovery initiation to approval). Indeed, Clark and research chief Peter Kim had decided – given the company’s thin late-stage pipeline -- that Januvia was one of two drugs (the other was Gardasil, the cervical-cancer vaccine) absolutely crucial to Merck’s recovery from its disaster with Vioxx.

And so Clark created a multi-disciplinary task force around the compound, with its boss reporting directly to him. Bureaucratic hurdles fell away. And the launch was as nearly perfect as a major primary-care launch can be – five months after launch, the drug had captured a greater share of attention (nearly 40%) than nearly any of the recent successful primary-care launches. And it’s now on target for what analysts think could be $775 million in first-year sales.

(We should mention that Clark did the same thing – another multi-disciplinary task force reporting directly to him -- with Gardasil – on track for $1.5 billion in worldwide full first-year sales.)

And then there’s dumb luck. Januvia has been the extraordinary beneficiary of the misfortune of others--the Galvus approval delay, in the first place, and now Avandia. Merck therefore took 100% of the profit from the excitement Novartis helped generate around the arrival of a brand-new anti-diabetic class—but none of the negatives of Galvus’ apparent side-effects. Likewise, it’s taking the lion’s share of Avandia’s lost prescriptions.

And all of this despite the fact that Januvia ain’t that great a drug. Good as an add on. But not particularly powerful in itself. Instead, Januvia is the perfect drug for our era, when safety—particularly mixed with extreme simplicity--sells far better than efficacy alone.

The PSA conference will be a good time to question Clark on just how much a CEO matters in creating a blockbuster. We forecast his answer this way: some -- but dumb luck sure helps.