Just when we thought that drug companies had given up on some of their more blatant life-cycle management tricks, snubbed by stingy payors who now know their left-handed from their right-handed isomers, out come Sanofi-Aventis and UCB with news of US approval for their new anti-histamine Xyzal. The Wall Street Journal’s Health Blog was quick to make the link—which the companies’ press release somehow omitted—and proclaim Xyzal as son-of-Zyrtec, which, incidentally, will lose patent protection in September.
Not much new drug company behavior there, then. But WSJ’s timely outing of Son-of-Zyrtec reminded IN VIVO Blog of another, somewhat more unusual Son-of-Drug story that you might just have missed.
Remember Lilly’s problematic Xigris, whose market performance has been as disappointing as the pre-launch anticipation was sizzling? In case you don’t: Xigris came to market in 2001, the first ever treatment for severe sepsis, after years of top-notch protein science and engineering inside Lilly, with many hearts and minds at stake.
Xigris is a case study of, simplistically, how too much innovation can backfire (just as too little can, also). Particularly since Lilly appears (with that wonderful thing called hindsight) to have launched the drug in too broad a population, which led to the brand image being tarnished by cases of serious bleeding. Lilly ain’t giving up on Xigris—there's too much money under the bridge for that. It's busy seeking biomarkers to find out which patients can benefit most. “We’re in invest mode” on Xigris, sum up Lilly executives.
But—and here, belatedly, is the point—Lilly was (after some persuading) quite happy to part with son-of-Xigris, theoretically a better-designed molecule, for not very much money and no claw-back to speak of. The Big Pharma last month quietly licensed the Phase I candidate to a relatively unknown Canadian biotech called Cardiome. Unknown, perhaps, except for the fact that Cardiome's CMO is Chuck Fisher, the man behind Xigris’ development and approval at Lilly.
The deal is somewhat personal, in other words. It's Fisher’s chance to make good what, to put it frankly, went bad within Lilly. He had a job persuading his own board to agree to the deal, even though Cardiome paid just $20 million up front and up to $40 million in milestones (which don’t start until 2009) for all possible indications (and there could be dozens). It’s a risky, if relatively cheap, bet for Cardiome: the drug’s father has proved an expensive failure, and although Cardiome is testing Son-of-Xigris for cardiogenic shock in the first instance, that's still a tricky indication with no pre-clinical models.
Still, if Son-of-Xigris does make it to market one day, in anything, it will be interesting to compare its development and approval path within a small, focused biotech with that of its father, who was brought up in Big Pharma: nature vs nurture. As we’ll suggest in the next issue of IN VIVO, the Xigris family of drugs may just be better suited to biotech. Certainly Fisher reckons he can do a better job marketing Xigris’ offspring than Lilly could.
Wednesday, May 30, 2007
Just when we thought that drug companies had given up on some of their more blatant life-cycle management tricks, snubbed by stingy payors who now know their left-handed from their right-handed isomers, out come Sanofi-Aventis and UCB with news of US approval for their new anti-histamine Xyzal. The Wall Street Journal’s Health Blog was quick to make the link—which the companies’ press release somehow omitted—and proclaim Xyzal as son-of-Zyrtec, which, incidentally, will lose patent protection in September.
Tuesday, May 29, 2007
In a move reminiscent of its 2004 acquisitions of ImPath and Ilex Oncology, Genzyme is taking out Bioenvision, its biotech partner on the drug clofarabine, for $345 million in cash. The buyout is the Big Biotech's first move to create a global oncology business--Bioenvision launched the drug in Europe last year, where it is sold as Evoltra--and its first acquisition since its hostile takeover of Anormed last year for $580 million. Evoltra sales over the past nine months in Europe were just over $9 million.
- Whatever you think of Congressional oversight of FDA, this news out of China suggests there are harsher ways to deal with failure to lead a food and drug regulatory body. The New York Times is reporting this morning that Zheng Xiaoyu, who headed China's Food and Drug Administration from its foundation in mid-1998 until 2005, was sentenced to death today after pleading guilty to corruption and accepting bribes.
- Via Reuters, analysts are wary that GSK's Avandia problems will hurt the regulatory chances of Sanofi-Aventis' Acomplia/Zimulti. We think rimonabant's chances were pretty slim to start with, but agree the current climate isn't helping the French drugmaker.
- Speaking of Avandia, the recent turmoil might mean serious trouble for GSK's long-term safety study Record. Patients are dropping out of the 4,450-patient trial in the wake of the NEJM study, says the NYT, and GSK is worried about whether it can complete the trail, which is scheduled to run through 2008.
- Via the recently redesigned Pharmalot, FDA has called out companies whose time-released cough and cold medicines incorporate the substance guaifenesin. Good news for Adams Respiratory Therapeutics, the only company with FDA approved drugs that contain the substance. Adams was up 10% on Friday on the Nasdaq. See the letter from FDA here, and the new sleek and sexy version of Pharmalot here. Looking good!
Friday, May 25, 2007
Now this will be interesting to watch.
The news that Advanced Medical Inc. is pondering a counteroffer to Warburg Pincus’ bid to acquire Bausch & Lomb adds a whole new wrinkle to this already intriguing deal. And it threatens to once again turn private equity investing into a public spectacle.
This isn’t how Warburg Pincus generally operates. The largest and most experienced big-money investor in health care (we mulled over including "arguably" but we don't think there is an argument), Warburg Pincus tends to move fairly quietly in the medical device sector.
The First Rule of Private Equity ...
Deals for companies like Wright Medical and Tornier happened quietly over a long span of time with Warburg Pincus’ principals spending a great deal of time coaxing the deals into existence. Or if an auction was established—as was the case with American Medical Systems—Warburg was usually the only significant bidder. (Each link will bring you to detailed In Vivo accounts of the deals, which demonstrate Warburg Pincus' doggedness to get a deal done.)
We don’t know what happened on the front end of the Bausch & Lomb deal. No doubt, Bess Weatherman, who heads the device group, moved with the same adroit skill demonstrated in the past. But Bausch & Lomb is a public company, so you're never going to get a deal done quietly.
But now Warburg Pincus may have a fight on its hands.
It’s important to note that Advanced Medical—while suggesting Warburg’s offer undervalues B&L—is only pondering a bid. There are legitimate questions as to whether the company can put together a cash-only offer to compete with Warburg’s.
But, as other reports state, they may not have to go it alone. No doubt, there are enough private equity groups out there that might be willing to team up with someone who knows the market like Advanced Medical management. As far as we see it, that’s the only way Advanced Medical will be able to put up a fight. (Read more this in our upcoming June issue of In Vivo.)
There’s no question Warburg Pincus can give the fight right back—and win. But at what cost? Warburg Pincus always has worked best out of the public spotlight, so it could opt to drop the deal and go back to finding the deals that no one else knows about. Or it might have already valued in this sort of struggle into its initial bid, which only offered a 5.7% premium over the May 15 closing price of Bausch & Lomb stock.
We'll guess that Warburg Pincus will see this one through and get the deal done. First, it can. Second, it may have to. With all the attention private equity is getting these days in newspapers, talk shows, Congress and (gasp) blogs, we wonder whether those days of the quietly closed deals are gone.
By Tom Salemi at 3:00 PM
As doctors, patients and regulators rush to make sense of the recent NEJM study showing an increased risk of heart attack among patients taking GSK's Avandia, it looks like good news for Lilly's Byetta.
Thursday, May 24, 2007
This has absolutely nothing to do with pharmaceuticals or devices.
But if you’ve never been to Sand Hill Road and you’re wondering how KKR spends its hard-earned management fees (or if you’re intensely interested in the future of media and need to know whether Roger McNamee’s right fist represents audience or content) then Kara Swisher's visit to Elevation Partners is worth watching.
Although she's a tad unkind to VCs for our taste, kudos to Swisher, of the WSJ’s All Things Digital, for the pre-interview tour. (IN VIVO Blog has to get one of them fancy cameras in the budget.) And a big giant nod to VentureBeat directing us to the video.
McNamee’s somewhat famous co-managing director was out of the office doing something.
AstraZeneca is out aggressively explaining why it committed so much of its investment capital on the $15.6 billion acquisition of MedImmune.
The Wall Street Journal’s May 22 story “AstraZeneca Thinks Bigger” highlights the strategic effort to broaden AZ’s pipeline into large molecules. Seen in the larger industry context, AZ’s MedImmune deal stands out only by its size: the land rush into large molecules by big pharma has been underway for over two years.
Beyond the goals of pipeline balance and keeping ahead of the pack in the race into biologicals, there is an important note in AZ’s public defense of the acquisition that resonates deeply about the current drug development climate. AZ Chief Executive David Brennan is quoted by the The Journal’s Jeanne Whalen as being attracted to large molecules because they “have demonstrated that they’re not just symptomatic treatments but that they actually alter the course of the disease.” (IN VIVO's own far-reaching interview with Brennan, pre-MedImmune deal, is available here.)
That marks an important change in big pharma’s development objectives and one that responds directly to signals from the Food & Drug Administration on what types of projects are likely to get favorable reviews from the agency. AZ’s willingness to reach deep into its financial resources to retool its development projects won’t bring fast results but it begins to align AZ more appropriately with FDA’s developing hierarchy of drug projects.
The dean of FDA’s drug regulatory policy, Office of Medical Policy Director Robert Temple, MD, has openly cautioned drug sponsors about a shift in attitude at the agency away from products that rely on symptomatic improvements for approval.
Temple told a meeting sponsored by The Institute of Medicine in March that there are “reasons for industry to worry” about a continuing evolution in requirements from FDA for new drug applications aimed at products for symptomatic relief. If Temple’s frank assessment is not enough, sponsors need only look at the rejection of Merck’s etoricoxib (Arcoxia) despite a vaccine-size clinical trial database of about 40,000 patients.
Focusing on disease-modifying projects also will have benefits for drug sponsors as they continue to try to win places on formularies and favorable ratings from a payer community that is increasingly focused on comparative assessments of treatments.
In the long-run, AZ and the other major pharma companies have few options other than to try to read the signs from FDA. They need to replenish their pipelines with projects that are likely to demonstrate clear disease modifying properties. That type of approach may mean lean days for some of the big players for the next few years, but it is clearly worth a big time bet to stay in the game for the long-term.
Wednesday, May 23, 2007
Our earlier post on the Cytyc/Hologic merger failed to mention this potentially salient point. IN VIVO Blog eyed Ed Hutchinson and Thomas Umbel, the business development heads for the Cytyc and Hologic, respectively, sitting next to one another on a panel at our recent In3 West Conference.
Birthplace of a Merger??
Now, we're not suggesting this is where the merger was hatched. Certainly not. (Okay, maybe we are a little bit with tongue nearly poking through cheek.) But we just wanted to point out that if you're hoping to network with some major deal makers, you might want to check out an upcoming In3 meeting.
And, as a matter of fact, the In3 Medical Device Summit is in a few weeks in San Francisco. We hope to see you there. Please take a moment to say hello, particularly if you've got some merger talks to reveal.
IN VIVO Blog knows how to keep a secret.
Tuesday, May 22, 2007
Just when Europe’s biotech sector appears to have regained some of the confidence lost after the last boom-and-bust, there are signs that history might be about to repeat itself.
At least, in the Benelux countries and on Euronext. The strong post-IPO performance of a good handful of Belgium, Dutch and French biotechs has prompted some of Europe’s investors to warn of a potential “Euronext bubble”—along the lines of that seen on Germany’s now-defunct Neuer Markt during the late 90s.
Stocks such as TiGenix, which listed in March in Belgium, or Metabolic Explorer which IPO’d in Paris in April are up more than 30%--performing a lot better than their UK counterparts on AIM. “Yet I refuse to believe they’re really worth that much more,” said William Brooks, Senior Investment Manager at Belgium-based Quest Management, at BioEquity Europe in Glasgow yesterday.
Brooks told the IN VIVO Blog that this almost-bubble is being driven by “inexperienced” Benelux banks, and a high proportion of “retail dentists and doctors”, lured by government-driven tax incentives and faced with meagre interest payments on bank savings. Companies are floating too early, and raising sub-optimal amounts—it’s the German Biotech Boom all over again.
So are sensible investors staying away this time? Apparently not. “You can’t not take part,” says one, even if it means dipping in and out in six months. Aspiring biotechs are seizing the opportunity: Amsterdam Molecular Therapeutics yesterday announced its intention to float in Holland—and it’s in gene therapy, hardly the sexiest, or safest, field to play in.
Meantime the UK market has seriously lost its flair, according to Gareth Powell, fund manager at AXA Framlington, in part because UK investors haven’t seen a real winner to get excited about. Any activity there is “is being driven by M&A activity, not by us,” chorus the buy-side investors. As for internationally-focused US investors: they still haven’t forgotten British Biotech, says MPM’s Kurt von Emster.
So with Benelux frothy, and the UK anemic, where should an aspiring young biotech list in Europe? Germany’s treading water. Like the UK, it has painful memories. Switzerland would seem a good bet—home to Europe’s biggest biotechs and plenty of healthcare-savvy investors, and with—as yet—no major disappointments. Addex happily became Switzerland’s newest public biotech earlier this week, raising CHF137 million at the upper end of its range.
If you’re not of Roche or Novartis pedigree, though, Switzerland might not prove a wise choice either. “If I were a VC-backed start-up, I wouldn’t go there, either,” warns William Blair, investment director at Scottish Widows.
Still, there’s always Australia. “We’re seeing now in Asia and Australian biotech what we saw in Europe ten years ago,” remarked MPM’s von Emster. “There’s an Australian biotech in my office almost every day; they’ve taken a huge step,” he says.
Look out, Europe.
I emailed Blog-colleague Ramsey Baghdadi last week to agree completely with his May 11 post about the security around this year's BIO event. (Even those of us who preregistered were similarly routed 3/4 around the center, by the way...) And I agree with him that some of the sessions were surprisingly more content driven than in the past: for this meeting I always wonder whether it's more presumptuous to expect to hear nothing new at the show, or to expect to hear something of merit. The 2007 edition appeared to be fine fodder for the freelance trade press, certainly, judging from the number of surprisingly pithy story pitches in my email afterward.
That said, there's no doubt that the spirit of innovation lives on in the hearts and minds of companies, investors, and other biotech stakeholders. And it's not even that BIO's voice is the wrong voice. It's just not -- no longer -- a voice of innovation. The Emerging Companies Section -- a notion integral to the merger between IBA and the smaller ABC that created BIO way back in 1993 -- appears to be fading away. In light of its policy positions, when the organization in its role of external advocate speaks of risk-taking, it rings hollow.
My dad always told me money doesn't grow on trees, and now it looks like the US government and private payors are starting to take his advice.
The issue of comparative cost-effectiveness isn't new. But the recent attention on that very issue is new, at least in the US. Under an undivided Republican administration for the last six years and change, this was an argument for university professors, think tanks, and policy wonks. Now, with Democrats in control of Congress and the very real possibility of a Democratic president in January 2009, Big Pharma and large biotechs are thinking seriously about how to ready for the coming storm.
How does an expensive new drug compare to one that has been generic for the last decade? How much money is a month of survival worth to a cancer patient? $50,000? $100,000? How can you put a price on it?
Results from the large CATIE study on antipsychotics really jumpstarted the debate. Pending results from an NIH head-to-head trial of Genentech's Lucentis vs. Avastin will take it to another level.
I have heard from a number of large biopharma manufacturers in the last week that they are starting to think about the issue of comparative cost-effectiveness during Phase I trials. Phase I trials!!!??? Boy, that's early. The drug is barely being put into humans and is a New York minute from being tested in mice.
The RPM Report has been following this issue for some time (check our archives) and a more in-depth look will appear in our June issue. There have been a number of developments in this area, newly created academic centers, and proposals on the table on how to evaluate cost vs. outcome improvement. So look out for it.
Is your company thinking about this? Or is this an inside-the-beltway kerfuffle? As always, your comments are welcome. Just leave your name, company affiliation, and email. Kidding.
Monday, May 21, 2007
Now wait a doggone minute.
This wasn’t supposed to happen. Hologic merging with Cytyc? No, no, no. Hologic and Cytyc were two of the more reliable mid-tier medical device players, acquiring the venture-backed companies that the big guys no longer had the bandwidth nor time to buy.
See, Hologic and Cytyc operated deep underwater where the storms of consolidation that occupied J&J, Boston Scientific, the former Guidant et al couldn’t reach them. They were supposed to grow steadily by buying smaller companies along the way (along with Kyphon, Inverness and the like.) For a detailed look on this strategy check out colleague Mary Stuart’s extensive piece on Hologic from earlier this year. Also keep an eye out for Hologic coverage in the upcoming issue of Medtech Insight.
But this merger certainly changes the game. Rather than build their women’s health business acquisition-by-acquisition, the two companies—which target two different areas of the market—opted to double in size with one big deal. Check out the presentation by company management (unfortunately we couldn’t access the web cast, but please try.)
This is truly a merger of equals with Hologic and Cytyc bringing roughly half the revenue to what will be a $1.4 billion company. And how do things look next year? The company is advising analysts to expect more than $1.7b in revenue and expects to grow that by 20% each year. The combined company's gross margin (100 * (Revenue - Cost of Goods Sold) / Revenue) would be 65%. Individually, Cytyc's gross margin was 75% while the capital-intensive Hologic boasted a 45%. The company anticipates saving up to $30 million by maximizing efficiences and generating $75 million in new revenues through cross-selling, a broader geographic reach and identifying new markets.
So what’s this mean for future acquisitions? We think this is a positive. Clearly, the new company—called Hologic—will be in a position to do a nice bit of acquiring. Plus, the two independent companies weren’t likely to bid on the same companies anyway. More than two-thirds of Hologic's revenue came from digital mammography, a radiology market, while Cytyc's Pap test and Novasure tissue ablation products targeted to Ob/Gyns accounted for 86% of its revenue. In fact, a few months ago when Mary asked Hologic COO and President Rob Cascella about the company’ strategy for future acquisitions he conceded that perhaps the company wasn’t likely to stray from its imaging roots. “We don’t really have skills that transfer well into a new market.”
Well, they do now. Or at least they will if and when the deal closes in the third quarter.
Here's hoping they'll still be hungry.
Well, we’re never too proud to admit mistakes.
In our post on Purdue Pharma’s $600 million settlement of its guilty plea to mishandling Oxycontin promotion, we said that “the company’s president Michael Friedman, one of the executives pleading guilty--is getting the boot and, according to the New York Times, an $18 million fine; likely to follow is chief legal officer Howard Udell, who also pleaded guilty (and, says The Times, is on the hook for $9 million).
According to Purdue’s Special Counsel Tim Bannon, Friedman in fact told Purdue’s board 18 months ago that he was going to retire and, at the board’s request, would stay on through, as Mr. Bannon says, “a then-challenging financial period.” Friedman then told the company—in April, before the consent decree—that he was going to leave before the end of the year. Purdue’s board, says Mr. Bannon, “acknowledged that Michael’s decision to leave was his own.”
As for Howard Udell: no again. He’s staying with the company, and retains, says Mr. Bannon, the board’s “complete confidence.”
So: we were wrong on both counts. Apologies.
Rest of the post we stand by.
Cleveland Clinic cardiologist and Big Pharma nemesis Steve Nissen has struck again, this time calling out GSK's Avandia in a New England Journal of Medicine analysis of the drug's cardiovascular side effects across a variety of clinical trials. Nissen's meta analysis concludes that Avandia patients are 43% more likely to have a heart attack than patients given a placebo or another drug.
GSK's share price stumbled more than 8% as the markets digested the news, wiping a whopping $13 billion off the company's market cap. The Big Pharma for its part predictably "strongly disagreed" with Nissen and co-author Kathy Wolski, pointing out the intrinsic shortcomings of the kind of meta-analysis done by Nissen and Wolski and holding up data from its ADOPT and DREAM studies, which suggested Avandia risk was comparable to that of commonly used diabetes meds metformin and sulfonylurea and placebo, respectively.
The authors acknowledged the limitations of meta-analysis but suggested GSK needed to make public more data from its Avandia program for further analysis to more accurately determine the drug's cardivascular risks.
"The manufacturer's public disclosure of summary results for rosiglitazone clinical trials is not sufficient to enable a robust assessment of cardiovascular risks," they contend. "Until better precision of the estimates of the risks of this treatment on cardiovascular events can be delineated in patients with diabetes, patients and providers should give careful consideration to the risks and benefits of their overall treatment plans."
The WSJ's Health Blog put together a nice list of Nissen's previous pharma takedowns, which includes Merck's Vioxx and Bristol/Merck's Pargluva. Nissen's prominence as a critic of industry and FDA is something our RPM Report colleagues have examined in depth several times (see their May piece for an FDA reaction to his criticism and this June 2006 look at the emergence of academics like Nissen as a shadow-FDA force to be reckoned with).
FDA's medical policy head Bob Temple told the RPM Report that meta-analyses could become standard practice for drugs on the market (and Avandia isn't the first drug knocked around this year with a retrospective analysis: witness Novartis' Zelnorm). For now the FDA is likely to convene an advisory panel ASAP and won't rule out any regulatory action. That said, the agency wasn't able to react as quickly as Rep. Henry Waxman--who announced earlier today that his Oversight committee will conduct a hearing on the matter June 6th.
Whether or not you think Nissen's brand of activism is necessary, harmful, overdue or half-baked, it's here to stay. Today it was GSK that suffered the smackdown (and diabetes competitors like Merck & Co. who will likely get a boost in the aftermath); tomorrow it'll be someone else.
Did you see that big acquisition that could change everything about the US pharma business? No, I’m not talking about AstraZeneca buying MedImmune, though it will be fun to watch AZ try to make that one pay off. (Chris Morrison and the IN VIVO crew can help you make sense of that.) I’m not even talking about the on-again, off-again talk of a Bristol-Myers Squibb/Sanofi Aventis link up. (Look for that one to be on again in about a month.)
No, I’m talking about the purchase of Chrysler by the private equity firm Cerberus Capital Management.
That deal means more to Big Pharma than you might think. Sure, it may put Chrysler back on the list for company cars at firms with Buy American policies. (Are there any companies like that left?)
But it could also go a long way toward redefining the landscape for pharmacy benefits in the US.
Assuming Cerberus (named for the three-headed hound that guards the gates of hell) lives up to its reputation, you can bet there are big cuts coming at Chrysler. And, as Steven Pearlstein points out in the Washington Post, that means a time of reckoning for the United Auto Workers union.
This looks like a watershed moment for labor relations in the US—and that has big implications for Big Pharma. Why? Because the “Big Three” union contracts go a long way towards defining the national standard for pharmacy benefits.
Some of the effect is direct. The automaker each decided to carve out their pharmacy benefits in the 1980s to help control drug costs, and in the process helped the fledgling pharmacy benefit management business take off. Chrysler, interestingly, recently moved its big PBM contract out of the hands of one of the US giants and awarded it to CVS Corp.’s Pharmacare division. But that business will end up with Caremark Rx again now that CVS has acquired the largest PBM in the US.
That contract covers about 280,000 lives (employees, retirees and dependents). That in itself is a lot of buying power. And Chrysler is the smallest of the "Big Three," so those contracts together add up to a lot of clout.
But the impact of the union deals is bigger than that. There is a direct feedback loop between the contracts—and especially the pharmacy benefit component—and federal policies in healthcare.
Unions are not the political force they once were, but they remain a vital constituency for the Democratic Party. And the “Big Three” are not the unstoppable symbol of American industry they once were, but when the CEO of an automaker has an issue to raise, you can bet he can talk to anyone he wants in Washington. What’s good for General Motors may or may not be good for America, but what General Motors gives its employees in health benefits sets a standard that it is hard for the government to ignore.
For almost two decades now, state Medicaid directors have complained that overly generous pharmacy benefits packages included in union contracts have tied their hands in trying to rein in drug costs. If the UAW negotiates an open formulary, it is hard for Medicaid to insist on a closed one. On the other hand, if the UAW agrees to a mandatory mail service provision, other benefit managers will be sure to adopt them too.
The power of union contracts to frame the health care debate is undeniable. Even President Bush’s seemingly progressive proposal to tax employer health plans that exceed $7,500 in value has to be understood in that context. On paper, the proposal looks like a tax on high wage earners with gold-standard health benefits. In reality, union workers are about the only people in America with a health plan that rich.
So when Cerberus sits down with the UAW, the pharmaceutical industry has a lot at stake. Maybe it will be business as usual, with nothing more than tinkering at the margins on the pharmacy benefit. But the time could be ripe for radical surgery. Medicare now offers a prescription drug benefit. Will Cerberus push for a new contract that dumps its retirees on the new program? Will the union agree to more aggressively managed benefits, with tighter formularies and even stronger incentives to choose generics?
One thing is certain: in the current political climate, the union can and will turn to Congress if it feels too squeezed. That could put Big Pharma in an interesting position: unions are not naturally allies of the drug industry, but if unions are fighting to protect generous drug benefits, Big Pharma may start to preach solidarity.
The IN VIVO Blog was in Michigan last week, attending a profiting-from-downsizing symposium.
Would Pfizer—we wondered at the Michigan Growth Capital Symposium--use its pull-out from the state (and the near-term freedom of some 2350 full-time Michigan-based Pfizer employees) as a way of pursuing an alternative research strategy—an experiment in externalization?
The venture world is all over Pfizer right now, looking for preclinical and clinical programs. And they’d particularly love ones that come wrapped with some of their key scientific supporters. Theoretically, we reasoned, the Michigan shut down could allow Pfizer to at least keep some of these researchers tied to the mother ship by letting them – on the VCs’ dime – take ownership of programs Pfizer will be shelving. Meanwhile, Pfizer would get equity and some kind of option on the programs, should they prove interesting to its marketers. If uninteresting to them, the program still might prove commercially worthwhile, giving Pfizer a nice equity upside.
Not that Pfizer is uninterested in venture opportunities that provide it relatively low-cost access to interesting programs. But if our Pfincubator post is to be believed, Pfizer would prefer to win cheap access to programs it didn’t create. That seems to be the intention behind its San Diego venture idea, in which Pfizer swaps infrastructure and capital for a start-up’s equity and options on its research output.
Success of that program seems just a bit more likely than an experiment at Novartis. Its pharma division’s option fund aims to co-invest with other venture funds but get, along with its equity, an option on its investee’s product. Since most VCs we know aren’t in the habit of giving co-investors in a round a better deal than they get (in this case, Novartis would get equity at the VC price plus the option), we don’t think this arrangement will get much traction. We’re likewise skeptical that VCs backing the start-ups Pfizer hopes to woo to its San Diego facilities will be particularly happy about ceding product rights for cheap space and some cash. We’ll be happy to be proven wrong.
Indeed, neither the Pfizer nor the Novartis venture adventure leverages its parent’s real differentiable assets—de-prioritized research programs. And it is only with that kind of unique asset (money and space are commodities) that a drug company can create the opportunity to get both equity appreciation and pipeline help. Novartis in particular should understand the value here: its only major recent primary care launch, Tekturna, came about because a small, privately held company, Speedel, created a product out of a de-prioritized Novartis program—on which Novartis had kept an option.
Pfizer and Novartis aren’t alone in their unwillingness to let start-ups take over assets on their shelves. Most companies won’t. Pulling together all the relevant information is expensive, invasive, and potentially competitive. It actually took the shutdown of all of its early-stage research efforts for Procter & Gamble Pharmaceuticals to try to monetize some of its unrealized value. It’s getting equity in a new Cincinnati-based spin-out, Akebia Therapeutics, which is developing two ex-P&G programs: an angiogenesis promoter (initial target: peripheral artery disease) and a Fibrogen-like EPO inducer. P&G also out-licensed two other programs—one for heart failure and one for atrial fibrillation, but these went to established companies, one large, one small.
But that doesn’t mean pharma shouldn’t do it – at least as an experiment in an alternative research strategy. Roche is the leader here—in deals, for example, with new companies, like Synosia and Amira, based around Roche IP. Lilly has certainly done plenty of out-licensing to already existing companies, like Vicuron and Cubist, but its recent deal with Versant Ventures to exploit its Chorus development division is a big step in the start-up direction.
The real question is whether more pharmas will begin to take advantage of the enormous opportunity to experiment with virtualized R&D – at very little cost to themselves. With the retirement of Pfizer's R&D chief and its most senior opponent of out-licensing, John LaMattina, it's likely that Pfizer will reassess the strategy it's so far pursued. In that reassessment, they'll soon realize that if they don’t provide some of the key research assets, they can’t hope to get low-cost options on what the start-ups do with them.
Friday, May 18, 2007
We knew the game was up for Beckman Coulter the minute Inverness Medical Innovations topped B-C's bid for Biosite. A stretch at $85 per share, we weren't even sure B-C'd come back to challenge Inverness' $90 offer, given the drain on capital and the dilution B-C faced down the road, which made investors queazy about the combination's prospects, even at the original offer price. (It matched it, then bowed out after Inverness upped the ante another $2.50.)
Should VCs be just a teensy bit worried about what’s going on at Torrey Pines?
For those who missed it, The San Diego Union-Tribune reported that Pfizer is opening up 26,600 square feet of lab, office and meeting space on its Torrey Pines campus to researchers and entrepreneurs looking to explore business ideas. Moreover, the pharma company will commit $10 million per year to roughly six to eight companies to help them grow up big and strong.
In short, Pfizer is offering entrepreneurs: capital, resources and access to its best and brightest—the folks who know how to make and sell drugs.
Sounds a little bit like the job of a VC, no?
Well, at least the job VCs used to have. Pfizer says they’re looking at projects today's VCs wouldn’t touch with a 10-foot-term sheet—early, pre-clinical ideas that just need a little TLC and nurturing to see if they amount to anything. Indeed, the two major hometown VCs in the area—Enterprise Partners and Forward Ventures—say they see this incubator as a positive thing for the area.
Who would you rather have as your landlord?
And maybe it is. But really what does this say about the pharma-VC relationship? By offering budding entrepreneurs capital, resources and the benefit of many years of experience in the pharmaceutical industry, Pfizer isn’t merely taking on the role of landlord. It’s acting like a VC.
We’re not talking about the kind of corporate VC, the liaison between corporate and outside venture capitalists who relies upon working through the latter to find young companies that might fit the former’s long-term strategy. No, Pfizer already does that and does that quite well.
Even the recent steps by Novartis outlined in our recent post "At Novartis, competing venture funds aim to avoid the high cost of biotech innovation," as unorthodox as they might be, pretty much stuck to the script of pharma finding innovation with some help of venture funds.
But Pfizer is writing itself a new role by moving to cut out the middle man. Why partner with VCs to identify promising new technologies when you can deal with the entrepreneurs themselves?
Indeed why. As laid out in the article, Pfizer would appear to have these entrepreneurs over a barrel. In exchange for the space and resources tenants will have to agree to an “up-front equity-share agreement” with Pfizer.
When research is done, Pfizer will have an option to acquire rights at a fair market price. Or the incubator could spin out the company as an independent business.
Hmmm. Either scenario sounds great for Pfizer, not so good for the entrepreneur. Who will determine what a “fair market price” is for a venture that hasn’t obtained term sheets and bids from outside investors. Pfizer, most likely. What possible leverage could these companies have in negotiations? Will they threaten to have a huge party and trash the place before moving out?
What if Pfizer declines and pursues the spin out? Sounds fair, but again, I wonder how much leverage a start-up will have in negotiating terms with outside investors when Pfizer already told you, “No thanks.” VCs generally prefer to invest in companies that pharmaceutical companies might actually want to buy. Any spin outs will be branded as “unwanted by Pfizer.”
Finally, Pfizer isn’t simply willing to let companies move in and go unwatched. According to the article:
Tenants will receive space and funding for two years, provided they meet milestones along the way. Funding won't necessarily be cut off after two years, because Pfizer realizes scientific discovery can have unexpected twists and turns.
So basically, Pfizer will have some degree of access to their tenants’ progress. It must if it’s going to ensure they’re meeting the milestones necessary to continue to use the labs. This is intriguing but curious. CEOs and VCs aren’t always comfortable with their pharma partners attending board meetings or having access to private information. Now, these partners will have keys to the filing cabinet. (Heck, they’ll own the filing cabinet.)
Look, we know we’re skeptical by nature but we’re not alone. (See comments from Pharmalot blog.) Clearly, these are smart folks. There is no doubt these issues will be addressed, and there is a strong likelihood that this program will be a success, which means Pfizer would open other centers across the country giving researchers and entrepreneurs someplace to go other than local VCs.
So what’s all this mean? For Pfizer, the idea sounds like a good one. They’ll identify extremely early stage enterprises that might bolster internal innovation. For VCs, probably won’t mean much at first but if the idea catches fire they’ll have more competition for the top-tier technology plays.
Finally, what’s this mean for the entrepreneurs? Well, Pfizer is billing this space as a “Ritz-Carlton” for start-ups. Entrepreneurs, however, need to be careful with the terms of the agreements if they don’t want to get stuck in a roach motel.
By Tom Salemi at 5:05 AM
Thursday, May 17, 2007
Something tells me that talk of a potential acquisition of Bristol-Myers Squibb by Sanofi Aventis will heat up again in exactly one month.
The on again/off again speculation about a merger of the Plavix partners is decidedly off at the moment. And yes, yes, I know that my fellow IN VIVO bloggers think that Bristol's deals with AstraZeneca and Pfizer will make a Sanofi bid economically dumb. But two events coming up in mid-June could spur some desperate action.
For Richer, For Poorer
On June 15, BMS expects to be officially released from the terms of a deferred prosecution agreement it signed two years ago. The DPA has been the sword of Damocles hanging over Bristol, making it essentially untouchable for would-be-suitors—especially once Bristol ran into further trouble with its spectacularly misguided attempt to settle patent litigation over Plavix.
Bristol has now agreed to settle charges arising from that debacle—and says it has been assured that the deferred prosecution agreement will be released on schedule as long as it stays out of trouble between now and June 15. (That seems easy enough, but given Bristol’s history, its probably best not to count the chickens just yet…)
And, since “interim” CEO Jim Cornelius pulled off a Dick Cheney style CEO search—ending with himself as the new CEO—there is no reason to assume that Bristol is committed to independence for the long run.
But the real impetus for renewed speculation will probably come two days before June 15, when Sanofi Aventis’ much touted obesity therapy rimonabant goes up before an FDA advisory committee.
Sanofi insists the meeting is a good news event for the troubled application. Maybe. But given the company’s misreadings of FDA so far, Sanofi’s optimism probably shouldn’t inspire too much confidence. I think Kate Rawson has it right in the May issue of The RPM Report: Sanofi will be lucky if the drug gets even a strong minority support from the committee.
This does not seem to be a good time to take a big drug before an FDA advisory panel. Especially one with a safety signal. Perhaps most especially one with a safety signal (in this case depression) that dovetails with a major focus of congressional scrutiny. Did you see what happened to Arcoxia?
If rimonabant suffers a similar setback before the committee, Sanofi will be under even more pressure to make another move. So expect the merger speculation to heat up just before summer arrives.
The drug industry’s littered with examples of products that have started life in one indication and got to market in a totally different one—think of Viagra et al.
But most of these reinvention stories involve a fair bit of luck—the right scientists taking a chance and managing to get it past the bosses. Since then, Big Pharma’s R&D productivity issues have prompted the birth of a handful of systematic re-positioners like Aspreva or Melior.
Or like Gene Logic. This firm—originally a genomics database group—has stuck its neck out and put a number on the value of repositioning assets: $87 million. That’s to say, repositioning a failed Phase II compound in a new indication creates an asset worth $87 million more, in net present value terms, than an equivalent in-licensed drug. That’s almost a 30% increase, according to the company.
To find out exactly how they get to these numbers—there is rhyme and reason—you’ll have to wait for June’s IN VIVO. But it’s based around the notion that a re-positioned drug has an additional two-to-three years of patent life over its non-repositioned counterpart. Since there’s no “original” indication (the drug failed, right?), then once the compound’s composition of matter patent—typically seen as the strongest IP protection—expires, the method of use patent, filed later based on a novel indication in Phase II, still has bite. (Normally, when a drug’s composition of matter patents expire, generics can compete in the original indication that the drug was approved for, and in practice also compete off-label in other, unexpired indications.)
The arguments look reasonable. At least, they do to the five Big Pharma partners that Gene Logic has attracted in the last couple of years, including, earlier this month, Abbott Labs.
But are these partners really buying into Gene Logic’s economic model—which is, by the company’s own admission, without precedent and totally unproven—or do they simply figure that they’ve got nothing to lose? Gene Logic takes on all the early risk in identifying a new indication. There’s no cost to the larger partner unless and until Gene Logic finds a viable new indication for the compound—in which case it will owe milestones (estimated at $60-$100 million per compound) and, potentially, royalties. There’s no automatic opt-in for Gene Logic—it can only take rights to repositioned compounds if the pharma partner explicitly rejects them.
Effectively, Gene Logic’s had to bend over backwards to persuade Big Pharma to hand over shelved assets---everyone knows this isn’t a favorite pastime. They’ve had to remove all the hurdles and pitfalls.
The tactic has worked, thus far. But Gene Logic won’t be able to afford this deal-structure for long. Either they won’t find new indications, in which case they’ll go bust (or change strategy again). Or they will, but that will push up development costs, so they’ll have to get more from their partners.
So if you’re a Big Pharma with stuff on the shelves, move fast.
P&G Pharmaceuticals has been the
Henny Youngman Rodney Dangerfield! of the drug industry: it couldn't get no respect. And so last year it remade itself, becoming what it calls a “search and development organization,” apparently on the model of Shire and Endo.
When it announced it was abandoning discovery, in February 2006, P&G was both admitting it couldn’t compete in research—and that it couldn’t stomach the risk. It laid off, or transferred, most of its researchers; it has spun off at least three research programs (more on that in another post); and now it’s got 45 people scouring the earth for licensable products in its chosen therapeutic areas: gastro-intestinal, musculo-skeletal and women’s health. Two key criteria: P&G only want drugs for patients that have “high involvement in their disease”; and they want products for which the development risk is “reduced.”
They’ve got some ambitious goals. To reach their growth targets, they want to launch one new product every 4-5 years – and that drug needs to become – echoing Jack Welch’s famous maxim for GE—number one or two in its category. To get to their launch target, P&G figures it will need to do 2-3 deals per year.
The question, however, is whether the kind of products that get to be #1 in their categories are also the kind of products that P&G management will be willing to pay for. It’s a challenge, admits Jeff Davis, who runs new business development. P&G has a shareholder base which demands 4-6% growth a year—that’s the kind of growth that justifies not reduced-risk research, but no-risk research, the sort that figures out how to get more or less pulp into orange juice or no-drip caps onto detergent bottles.
Moreover, while Big Pharma isn’t generally ponying up for reduced-risk development projects (in general, they still want NMEs), spec pharma is, and paying Big Pharma-sized upfronts. But P&G figures it can win these deals by emphasizing its consumer-focused marketing approach (it had an entire team of R&D, finance and marketing execs outfitted with an electronic system that, for a week, at all times of day, signaled them to react to the unpleasant gastrointestinal events of ulcerative colitis patients). And if—as this blogger believes--spec pharmas are going to be P&G’s biggest dealmaking competition, then P&G really will have an interesting advantage.
The pitch worked for Aryx Therapeutics, one of two companies with whom P&G has signed deals since its reorganization (the other is Nastech, for nasal-delivered parathyroid hormone). The Aryx drug, for GERD and gastroparesis, hit all the P&G criteria: a GI product (for GERD and gastroparesis) and risk-reduced (works like Propulsid but, apparently, avoids the drug-drug interactions which killed it). “We had three virtually identical term sheets,” says Aryx VP and COO John Varian but chose P&G because of their “focus on the consumer.”
Still, P&G is hardly burning up the dealmaking track. They’ve done two deals since their restructuring—the last in July 2006. Davis is confident that in ’07 his group will be able to get to terms sheets on 2-3 programs. There are plenty of biotechs who'll appreciate the P&G approach. But we wonder whether the Consumer King will tolerate the risk of signing them.
Wednesday, May 16, 2007
While neither of the anti-infective incentives in the Senate FDARA bill we wrote about earlier this week appears to create a niche for a blockbuster commercial product, together the incentives show that there is still room for pharma advocates to negotiate for incentives with the Democratic Congress.
That’s an important point as potential biogenerics legislation hangs around the fringes of the progressing user fee/drug safety bill (S 1082, the Food & Drug Administration Revitalization Act).
Democratic and Republican staffers involved in the follow-on biologics debate have reported good progress on the approval pathway and safety issues for follow-on biologics. They have said publicly that they expect more difficulty around the incentive discussions.
If history is any guide, the ability of the existing innovators in the biologics category (primarily Amgen, Biogen-Idec, Genentech, Genzyme and J&J) to carve out protections for their products will determine whether follow-on biologics is added as a last-minute part of the PDUFA/drug safety package this year.
That’s how Waxman-Hatch was passed in 1984 (when Pfizer and J&J cut deals to protect some of their major in-line products) and that’s what it will take to get a follow-on biologics bill this session.
On the other hand, AstraZeneca shareholders have been none too pleased with MEDI's $15.6 billion price tag, asking, essentially, where's the beef? And by beef, we mean value. And by value, we mean late-stage clinical projects.
Whether or not AZ paid too much or too little (in other words, whether the deal will eventually pay off for the Big Pharma) is impossible to know right now, and therefore isn't as interesting to us as looking at the value of MedImmune, the stand-alone biotech giant, versus the value of MedImmune, the industrial-strength pharmaceutical company fertilizer. This valuation gulf and the monster takeout premiums it creates have been evident across the board in looking at the biggest companies’ biggest biotech acquisitions of the past five years.
We looked at those deals for an upcoming IN VIVO article, and weighed in on the success or failure of the ones far enough in the rear-view mirror to judge. The twenty top pharma companies (by 2006 revenues) made 33 biotech/small pharma acquisitions valued at greater than $100 million since the beginning of 2003 (we excluded generics, diagnostics, devices, OTC, etc.). Acquisitions like AZ/MedImmune brought the mean value of those deals close to $2.9 billion (median is about $900 million). Pfizer, J&J and AZ did the most deals, while Wyeth, Sanofi-Aventis, and BMS did none that fit the criteria. Here’s another taste of the data, all from Windhover’s Strategic Transactions Database.
So which do you think were the best deals of the past five years? Let us know in the comments.
Tuesday, May 15, 2007
I just wanted to post a few more impressions I had from the BIO annual meeting in Boston. One thing that struck me in particular is how little high-level attention smaller biotech companies give to FDA and CMS affairs in general. I understand that CEOs travel the country trying to raise enough money just to keep the lights on, but in the end, it doesn't mean much if FDA won't approve the product or if CMS won't pay for it. The "We'll Cross that Bridge When We Come to It" strategy just doesn't work anymore. Biotechs need to be engaged in the approval process from the earliest stages to understand the types of studies FDA likes best, the benchmarks, the key people within the agency, and the approval standards in a particular disease area.
I rarely see the top management of smaller biotech companies attending FDA town hall sessions or speeches by senior FDA officials. There's also an assumption that if FDA approves it, CMS will cover and pay for it. Done and done. Outside of oncology, that is becoming less and less true. At The RPM Report, we have heard often from CMS officials that they want to see reps from a company with a developmental product when the Phase II study is getting underway in order to start reimbursement discussions.
One exception is Medimmune CEO David Mott, who has always appeared to me to be very engaged in FDA/CMS activities. How much did he get for selling Medimmune? Oh, I forgot, $400 million. I'm not saying there's a link, I'm just saying.
One thing I like to observe when I'm people-watching is the size of CEO entourages. At BIO, Biogen Idec CEO James Mullen was rolling with about five or six people when he sat in on a drug safety session featuring Biogen R&D neurology VP Alfred Sandrock. By comparison, I recall Merck CEO Richard Clark flying essentially solo at PhRMA's annual meeting in Washington a few years back. Clark's predecessor Ray Gilmartin was known to keep a fairly low profile as well.
Stepping into the political realm, HHS Secretary Michael Leavitt has a group of handlers that arrive well in advance of his speeches in order to keep improvisation to a minimum. Rep. Henry Waxman often comes to events alone, without handlers, and even drives himself, a rarity in Washington. Do any of you know of particularly large CEO entourages? Or CEOs happy to eat lunch alone? We would love to hear about it.
Maybe it’s time to buy Amgen. Yeah, you heard right.
Many of Amgen’s shareholders—including the CFO—have scuttled over the past few months, frightened away by the seemingly endless series of blows to hit the US biotech. That’s why the stock’s at a year-low and down 30% since the start of 2007.
Over the last week, a dozen or so further percentage points were knocked off by May 10th's FDA advisory committee meeting and by the CMS’s proposal on Monday to curb Medicare payments for Aranesp in certain cancer patients.
Can it get any worse? Apparently some of Wall Street’s analysts think so. Several cut their ratings on the stock last week, according to the Wall Street Journal’s Health Blog, including long-time bulls Lazard Capital Markets.
Now, we’re not analysts. (Nor are we shareholders, nor are we share-tipping.) But, let’s face it, analysts have been known to be wrong. Dare we suggest there are whiffs of panic? Perhaps hints of lemming behavior—the slope on this once-loved stock has reversed now for, what, six months, so game’s up?
Now granted, there may be just one or two more potential hitches—the most significant being FDA’s planned fall meeting to discuss the use of EPO drugs in kidney failure. Nephrology makes up a far larger chunk of Amgen’s $6.6 billion EPO sales than oncology, and any ruling here could hit both Epogen and Aranesp.
But Amgen’s already trading at an almost 15% discount to its biopharma peers based on estimated 2007 EPS. And, as they say, in every cloud is a silver lining.
For one thing, any bad for EPO drugs is bad for Amgen’s competitors, too—including Roche's Mircera. Look out on May 20th , the Mircera PDUFA date: a bumpy ride for Roche may help Amgen.
If investors don't start buying Amgen again soon, maybe, just maybe, the stock will hit a low that an acquisition-mad Big Pharma can't resist. The idea is around, if improbable.
Monday, May 14, 2007
We watch C-SPAN, so you don’t have to
The two most interesting incentives—which promise limited scope for faster drug reviews and longer product lives—both relate to anti-infective drug development.
The first incentive, suggested as an amendment by the odd pair of very liberal Ohio Democrat Sherrod Brown and very conservative Kansas Republican Sam Brownback, would offer a faster FDA review for any drugs of a sponsor’s choice (anything in a sponsor’s pipeline—not just anti-infectives). All a sponsor would have to do to get access to the faster review would be to develop and make commercially available a product for under-treated diseases prevalent in the developing world.
The second amendment, sponsored by Utah Republican Orrin Hatch, claims to expand research incentives for antibiotics and redress exclusivity issues created ten years ago in a previous Congressional effort to bring antibiotics under Waxman-Hatch exclusivity provisions.
The first measure, Brown said, would be built on awarding “a priority review voucher to any company that brings a neglected tropical disease treatment to market.” It derives from an early 2006 proposal from a group at the Duke Fuqua School of Business, “Developing Drugs for Developing Countries,” and proponents say it could be worth about 12 months of extra marketing time to a company: FDA is supposed to conduct priority reviews within six months compared to “the average time of 18 months” for standard FDA application reviews. What’s more, research-stage companies that earn such vouchers could sell them on to Big Pharma, creating an additional asset market that encourages investment in neglected diseases.
Skeptics argue that tying the vouchers to “priority” review—instead of patent life or market exclusivity--may not turn out to be a big incentive. A senior Merck policy executive, Ian Spatz, openly questioned the vouchers’ value shortly after the Duke proposal was published. The difference in approval times associated with standard and priority reviews is much shorter than a year, argues Spatz, and therefore much less valuable to big commercial sponsors. And major products, where a voucher might tend to be used, often qualify for priority review in their own right.
The Hatch antibiotic incentive amendment would confer five-year market exclusivity for antibiotics filed with FDA before November 1997 but not yet approved by the agency. Preliminary analysis of the provision also suggests that it would permit generic copies of some antibiotics approved before November 1997 and so-far protected from generic competition due to an obligation for the follow-on sponsor to show that all patented indications have expired.
Hatch is also calling for clearer orphan drug incentives for anti-infectives. The amendment calls for FDA to hold an open meeting to clear up what indications qualify for orphan protections, including market exclusivity. Currently, anti-infective sponsors—and even some FDA reviewers—do not know how indications are counted toward the orphan population limits. The open meeting is designed to make it clear whether a product can qualify for orphan incentives if it treats a subclass of an infection (such as pneumonia) caused by a specific pathogen.
The Hatch incentives also would offer exclusivity protections to new approvals for single enantiomer drugs with an enantiomer that was previously part of an approved racemic drug, if the enantiomer drug is in a different therapeutic class. That distinction would prevent evergreening of existing products in the same class as an existing product (we’re looking at you, Nexium) but offer an incentive for the development of enantiomer in a new therapeutic category.
Can biotechs build businesses around discovery research?
It's a subject IN VIVO tackled last November, in Roger Longman's article "The $100 Million IND." While the answer is, of course, that it depends--on a variety of factors--the $100 million benchmark has gained both credibility (among biotechs) and perhaps not a little notoriety (at their pharma counterparts).
Over the weekend the NJ's Star Ledger took a look at biotech's 9-figure ambition, and noted the upward progress of the price of discovery: essentially, you've come a long way, baby.
(We certainly did not.)
It should be noted that the $100 million figure is extrapolated from Infinity Pharmaceuticals' cost-based analysis of drug discovery, a method Infinity's Jeff Tong talked at length about at our recent Pharmaceutical Strategic Outlook meeting in New York.
The upshot is this: top tier IND-stage biotech assets are fetching the kinds of prices that should allow those biotechs that are very good at discovery research--Infinity and its ilk--to build profitable businesses without resorting to highly dilutive equity fundraising or attempting to move downstream into later-stage development and commercialization -- seen by most investors and management teams as a requirement for any successful biotech and a high costly aspect of dealmaking for the pharmas whose infrastructure the biotechs feel forced to duplicate.
Indeed, in an article in the upcoming IN VIVO, Alnylam Pharmaceuticals CEO John Maraganore argues that biotechs could be willing to give up their ambitions for development and commercial infrastructure in return for a bigger chunk of royalties -- say 20%.
Whether the reason for these increased valuations is an increased recognition of INDs' worth, desperation at Big Pharma exploited by savvy biotechs, or a simple case of supply and demand doesn't really matter. It seems the $100 million IND is here to stay.
Friday, May 11, 2007
The BIO annual meeting never ceases to amaze. This year in Boston, the conference drew over 20,000 people. The exhibit hall had the feel of a World Cup soccer event and was as creative as ever with espresso bars and great beers from all over, and Biogen Idec put together a great booklet of places to see and be seen if you decided to leave Shangri La and take a tour of the city.
I found the meeting sessions to be particularly strong in the content department, something I hadn't felt the last time I went in Philadelphia. The policy and regulatory tracks were what I stuck to, and I found myself rarely bored. By the way, Nicolas Rossignol, who heads up the European Commission's division on pharmaceutical legislation, is a rising star. I thought that when I saw him testify before the Senate HELP Committee a few months back, and that perception was reinforced during the follow-on biologics session at the conference. So, all in all, BIO and the conference team deserve a round of applause for putting on such a large and high-level event.
But what was up with the security? My decision to go to the meeting was last minute so I had to register on site. Bad choice by me. No badge, no soup. I was told to go to a side door, take an elevator down to "level zero" and then, "you'll see signs" the guard told me. As an aside, I would love to see the crime rates for the last week in Boston because all of the cops, special forces and snipers were at the convention center. I followed the guard's directions to the letter, but the "you'll see signs" part of it was a lot longer than I expected. You have to travel the entire outside perimeter of the convention center, which looks like the type of place you would get offed in the Sopranos , to get to the registration site. The badges have barcodes and you are scanned into each and every session by people guarding the doors. When did we get to this point? Where's the trust people? The head of FDA's biologics center Jesse Goodman complained that it took him 45 minutes to get into the building and they weren't going to let him in at one point.
Did anyone else have the same feelings as me on the tight security? I would love to hear some anecdotes. I know a few people missed their one-on-ones because of it.
One last note: in San Diego next year, can we please have more coffee stations separate from the exhibit hall? I went through serious withdrawal at one point and didn't have time to make it down to "level zero." Just a thought.
Dendreon’s "approvable" letter for its cutting-edge prostate cancer vaccine Provenge this week asks for—among other things like further manufacturing specs—more clinical data, a request that sliced over 60% from the biotech’s market cap. (For more on Provenge’s rollercoaster background, see here and here.)
But why were Dendreon shares priced so high to begin with? An FDA advisory committee shocker in March, where FDA’s advisors voted 13-4 in favor of approving the vaccine. Indeed Provenge’s prospects for a positive ruling from the FDA panel looked slim going into that meeting: two Phase III studies supporting the application missed the primary endpoint target of time to progression as well as failing to meet secondary endpoints of clinical and pain progression and treatment failure.
And that’s not a good thing when you’re trying to prove you’ve got an effective product.
What won over the committee? Two things: First, an analysis of data from a subset of patients in one of the Phase III trials demonstrated a statistically significant increase in time to progression. Second, and perhaps as importantly, the review of the therapeutic vaccine falls under the purview of the agency’s Center for Biologic Evaluation & Research—not the Center for Drug Evaluation & Research’s Office of Oncology.
Provenge therefore avoided CDER’s Oncology Drugs Advisory Committee, which is now considered to be a stricter committee to go through because of the tone set by oncology director Richard Pazdur, MD.
One scenario that did not bode well for Provenge is the involvement of Pazdur himself in the review. When cancer drug reviews were organized under a newly created Office of Oncology in 2004, biologics and chemo-preventative drugs fell under the CDER office, while vaccines remained under the CBER umbrella. But Pazdur still has a hand in cancer vaccine reviews; for example, he consulted on the approval of Merck’s human papillomavirus vaccine Gardasil and has helped evaluate GSK’s competing HPV vaccine Cervarix.
Whether Pazdur is personally involved or not, FDA officials often say that they pay just as much attention to minority opinions as those in the majority when it comes to advisory committees. And the minority "no" opinions for Provenge were particularly unwavering.
It’s tough to say where Dendreon goes from here. Recovery from an FDA rejection can be agonizingly slow (see, for example, Xoma). Dendreon can at the very least hang its hat on the positive panel review as evidence of advocacy by a key body in the regulatory process. And the market potential for cancer vaccines—analysts expect it could grow to $6 billon by 2010--could dull the market effect of a negative FDA decision as investors hold firm with an eye toward the long-term possibilities.
Sanofi-Aventis’ recent acquisition of OxfordBiomedica’s renal cancer vaccine Trovax for approximately $700 million is hard evidence of interest in the field. That sustained interest could be Dendreon’s saving grace.