Deals of the Week: Kicking Off ASCO

This weekend marks the kick-off of that other highly anticipated biotech event: the big ASCO meeting in Chicago. Appropriately, this week's deal activity in biopharmaland involved several oncology-driven pacts, which we highlight below.

Elsewhere during a short week, the US lost to England 0-2 in a football soccer 'friendly' (the corner kick captured above was among several easily cleared by the English defense) which after a spirited first thirty minutes or so seemed like a foregone conclusion. A lot like if ASCO had released all the abstracts waaaay before the meeting. Wait, they did?

Nevermind, it's time for ...


Takeda/Alnylam: Those groggy from a long Memorial Day weekend woke up to Alnylam's latest non-exclusive technology deal, a $100 million up-front alliance with Takeda Pharmaceuticals in oncology and metabolic disease. Alnylam will also get $50 million in near-term technology transfer payments. Takeda once again illustrates its willingness to spend on new technologies--we took a closer look at the deal and Takeda's recent spate of business development activity, here--and Alnylam once again manages to pull down massive upfront payments for technology it can turn around and license again tomorrow. Takeda also gets first right of negotiation on Alnylam RNAi programs in Asia (excluding ALN-RSV01) should Alnylam look for a partner there. Alnylam gets a reciprocal first right of negotiation on any project Takeda decides to shop in the US and more importantly, gets opt-in rights for 50/50 co-dev/co-commercialization deals in the US on up to four Takeda programs of its choosing (exercisable all the way through the start of Phase III), plus the usual gajillion biobucks in development and commercial milestone payments.

BMS/Kosan: Not all observers were overwhelmed by the 230% premium BMS shelled out to acquire Kosan yesterday. After all, the biotech boasted a handful of clinical-stage compounds, including the Phase III Hsp90 inhibitor tanespimycin. As we argued here, however, Bristol probably didn't attach much value to Kosan's lead project--and we should note that Kosan itself had put partnering efforts for tanespimycin on the back burner while it looked for a deal for its Phase II epothilone program, not exactly a vote of confidence. The acquisition values Kosan at $190 million, net of its cash pile, not a bad result for a company trading at a valuation on par with the value of its liquid assets. BMS is more likely interested in Kosan's epothilone programs, which also have potential in neurodegenerative disease and were the subject of an insurance policy in the event the acquisition doesn't close. If the deal falls through BMS will license Kosan's epothilone programs and IP for $25 million upfront plus milestones and royalties. BMS has pioneered this class of drug, with its Ixempra franchise, approved last October for monotherapy and combination therapy in cancer settings.

OncoGenex/Sonus: After a seven month struggle to find strategic alternatives, Bothell, WA-based Sonus Pharmaceuticals announced it had found a solution: it would merge with the Canadian drug developer OncoGenex Technologies. The combined company will be called OncoGenex Pharmaceuticals and will be run by OncoGenex CEO Scott McCormack, with bases of operations in Vancouver and Bothell. The combined entity will have have three products in clinical trials, including Sonus’ only remaining clinical candidate SN-2310. Sonus’s share price had been in a tailspin since September 2007, when it became apparent that its lead candidate, the Phase III breast cancer drug Tocosol Paclitaxel, was associated with a greater number of side-effects than the existing breast cancer regimen it was supposed to improve upon. Partner Bayer Schering promptly cut ties with Sonus, and the biotech was forced to lay-off half of its workforce in the aftermath. But the company did have two valuable bargaining chips: its Nasdaq listing and a $29 million cash reserve. Those certainly captured OncoGenex’s interest. The Canadian company had hoped to go public last year, but axed those plans due to poor market conditions. And with just $4 million in cash to support its lead product, OGX-011, currently in Phase II clinical trials for refractory prostate cancer, OncoGenex certainly needed a cash infusion.

Boston Scientific/Cryocor: Well, we’ve been down this path before haven’t we? We go on to suggest that Boston Scientific won’t be acquiring any new companies and then—just to spite us—Boston Scientific goes ahead and makes a deal. So we’re not going to point to the closing of BSX’s acquisition of CyroCor Inc. as anything more significant than it is: a $17.6 million bet on the potentially large atrial fibrillation ablation market. To be sure, Boston Scientific’s recent weight loss efforts have garnered nearly as much attention as Oprah’s. Over the past year, it’s sold off divisions, products or sizable equity stakes related to aortic aneurysm, brain monitoring, cardiac, vascular, drug pump, and hearing loss businesses. But the acquisition of CryoCor pits it against others—including St. Jude Medical—in the atrial fibrillation market. Read more on the area here. A group of CryoCor shareholders were resisting the deal and threatening a law suit, but the deal closed officially this week. Boston Scientific had entered into a collaboration with CyroCor last year to work jointly on cryoablation products. Boston Scientific already had a cryo-therapy balloon catheter while Crycor had the means to deliver the freezing agent, nitrous oxide. Together, the product would ablate or kill tissue near the pulmonary vein, which is seen as a likely initiation site of the electrical misfires that bring on atrial fibrillation. In April, St. Jude paid $92 million to acquire publicly traded EP Medsystems Inc., maker of workstations used in atrial fibrillation procedures.

blurry picture by invivoblogger chris morrison used under a creative commons license

Ixempra Is Not Enough? BMS Buys Kosan

In an era where single Phase III projects are commanding up-front payments in the hundreds of millions of dollars--and even preclinical projects can boast the occasional triple-digit upfront payment--it might seem odd that Bristol-Myers Squibb only had to put up $190 million to acquire Kosan Biosciences.

After all, Kosan not only has tanespimycin, a Phase III cancer drug in a hot therapeutic class--Hsp90 inhibition--but it also has several other programs, including two in the clinic: a Pfizer-partnered motilide project in Phase I for GI disorders and an unpartnered Phase II program based on epothilones, molecules that could potentially be used to treat the same cancers as taxanes like Taxol.

Still, the Bristol offer, at $5.50 per share, represents about a 230% premium over the company's beaten down share price before the deal ($1.65). The market--and, probably Bristol as well--attached very little value to Kosan's unpartnered projects beyond the epothilones.

Bristol, after all, has pioneered the class of drugs with its first-in-class Ixempra, which was approved as both mono- and combination-therapy after a six-month priority review in October 2007. Landing KOS-584 and two other candidates, one in the clinic and one ready for an IND filing, helps solidify its leadership position in the epothilone field.

That the deal isn't centered more around tanespimycin probably says more about the difficulties Kosan has faced with this particular molecule than it does about the value of Hsp 90 inhibitors generally. Remember Hsp90, as a target class, has been the driver of multiple buyouts and licensing deals in the past couple years. Among them: Pfizer's acquisition of Serenex and Infinity's co-dev deal with MedImmune.

Instead it probably has more to do with the fact that tanespimycin is one of several Hsp90 inhibitors in development that are derived from geldanamycin, a natural compound relatively high in molecular weight that might have trouble reaching an important hotbed of Hsp90 activity, the interior of the mitochondria (a phenomenon we wrote about here).

We concede that this is a debatable point. Kosan's Helen Kim (then a recently appointed president and CBO brought onboard in January '08 to focus the firm on a few key assets and since promoted to CEO) told us in early March of this year that it remained unclear whether there would be a clear-cut difference in efficacy between geldanamycin-derived compounds and synthetic compounds inhibiting Hsp90. (Our feature on the Hsp90 space can be found here.)

Still at that time the market was ascribing zero value to any of Kosan's programs: it was trading around the same value as its cash on hand. In the end whether you believe Kosan was fairly or unfairly valued by BMS will depend on what you think of tanespimycin's chances.

Meanwhile, Kosan's epothilones are clearly commanding more interest. These molecules target a tumor cell's skeletal infrastructure, much like taxanes, but via a different mechanism, and molecules like Ixempra have been specifically designed to overcome drug resistance. As we noted in this December 2007 piece about Bristol's oncology business, Cornelius and co. are counting on Ixempra as a key part of its strategy to regain leadership in the cancer arena.

Kosan's epothilone programs--which also have potential in neurodegenerative disease--were also the subject of an insurance policy in the event the acquisition doesn't close. If the deal falls through BMS will license Kosan's epothilone programs and IP for $25 million upfront plus milestones and royalties.

Oddly enough that $25 million was the same up-front paid by Roche when it licensed Kosan's same programs back in 2002 (that deal dissolved in October 2007 after Ixempra's approval).

We wonder what Kosan was worth then.

Wacky World of Generics: Timing Is Everything Edition

The best fighters learn from their opponents, and whatever else you may think about generic drug firms, there is no denying they are accomplished bruisers.

So it should come as little surprise that after years of being in the crosshairs of citizen petitions filed by brand firms, generic companies are starting to pull the trigger on some petitions themselves.

Some things haven’t changed, though: the targets of petitions are still generic companies and the beneficiaries are still brand firms, since delays always help them.

The most recent example of generic-on-generic petitioning resolved by FDA is Cobalt’s failed attempt to become the only generic of acarbose (Bayer’s diabetes treatment Precose). Cobalt had made regulatory arguments that it deserved 180-day exclusivity and scientific arguments that other ANDAs needed additional tests. FDA rejected them both, and Cobalt has now launched alongside a generic from Roxane.


Cobalt was the first-to-file ANDA applicant and so had the inside track to get generic exclusivity, but it forfeited the prize in part because it failed to gain approval within 30 months. First-to-file exclusivity is critical to the profit stream for generic firms and it is no small penalty for an applicant to lose it. In this case, Cobalt did not get approval in time, perhaps due to shortcomings in its application, which FDA had initially refused to accept.

Any instance where a first filer loses the all-important exclusivity is big news for the generic industry, so the Precose fight is an important precedent for other applicants. Given the negative outcome for Cobalt, the incident raises the question of how much haste firms should use in submitting their ANDAs to FDA. Usually there is an all-out race to be first-to-file to claim exclusivity. In this case, second-to-file turned out to be good enough. (Subscribers to the Pink Sheet can read the full story here.)


The episode also shows how a generic firm – in this case Roxane – can use knowledge of FDA’s regulatory clock to get to market as soon as possible.

Among the provisions of the massive FDA bill passed last year is one designed to curb abusive citizen petitions. The new law says petitions cannot delay approvals unless FDA determines there’s a public health justification, and even then, the agency only has 180 days to decide the issue in question.

Roxane correctly predicted how FDA would apply the law in this case at least. Roxane’s lawyer, Zuckerman Spaeder partner Bill Schultz, explains that, “because there was a very good chance that” six months after Cobalt filed its petition would be “exactly when FDA was going to approve the product … Roxane, anyway, was completely ready to go on the day the 180 day deadline expired.”

Schultz clearly doesn’t think much of Cobalt’s bioequivalency arguments. The case, he says, “raises issues about...how the citizen’s petition provisions can work." The question, Schultz says, is "whether FDA is implementing this public health provision" of the new law "responsibly, or whether they’re just invoking it every time.”

But that is a fight for another day.

M. Nielsen Hobbs

An Association of One's Own: "Specialty" Companies Band Together

Q: What do these seven companies have in common? Celgene, Cephalon, Cubist, Endo, Millennium, Purdue and Sepracor.

A: Enough to form their own Washington, DC lobbying coalition.

Today's issue of "The Pink Sheet" reports that the companies are all founding members of America's Specialty Medicines Companies (ASMC).

Their first order of business: enacting legislation resolving once and for all what "specialty pharma" even means.

Okay, not seriously. In fact, the association is still in the formative stages, working with the DC antitrust law firm Constantine Cannon to get organized, set up a policy agenda and ultimately begin advocacy. (In particular, ASMC is represented by former Circuit City General Counsel Stephen Cannon and by former Patton Boggs attorney Todd Anderson.)

The members stress that they are not showing dissatisfaction with other DC trade associations--like PhRMA or BIO. Though it is safe to say that the companies will have a much bigger voice in this trade group than in any other.

And it certainly is an intriguing mix of members. Sepracor and Cephalon make a lot of money in the primary care market (thanks to Lunesta and Provigil), though both also sell more specialized medicines. Cubist sells the antibiotic Cubicin. Millennium and Celgene rely on the oncology market, though Millennium will soon be acquired by Takeda. Endo is usually considered a drug delivery company (and also has a branded generic business). Purdue, of course, is still most associated with the biggest drug-delivery/branded generic opportunity of all time: Oxycontin.

So it is by no means obvious what their common issues will be, except that each is a commercial business, all have first hand experience with the challenges of the regulatory and reimbursement climate in Washington, and none of them is big enough to shape the policy agenda of the major trade associations.

Come to think of it, that's a pretty good working definition of a specialty pharma company.

Takeda's Millions Buy a Lot of Beer

In the 1902 novel Brewster's Millions (updated famously in 1985 in a film starring the great Richard Pryor), a man must spend every penny of a $1 million inheritance within a short span in order to receive a second $7 million inheritance. As you might imagine (particularly in the film version), hilarity ensues.

The Monty Brewster of the biopharmaceutical world these days is clearly Takeda Pharmaceuticals. We're not saying that Takeda is throwing its money around unwisely--in the pharma world, only time will tell. But it's certainly true that in recent months Japan's number one pharma sure hasn't been afraid to spend it, and seems prepared to provide its partners with some very generous deal terms.

In February Takeda took on Japanese rights to a substantial bit of Amgen's pipeline--$200 million up-front--plus an additional late-stage deal with Amgen on the Phase III Phase III motesanib (another $100 million u/f). Last month it was $8.8 billion to acquire Millennium Pharmaceuticals and $50 million up-front for Cell Genesys' GVAX immunotherapy program.

And today the Japanese pharma signed a deal with Alnylam Pharmaceuticals to non-exclusively license the RNA interference pioneer's technology under terms that were certainly not small beer.

In fact, on a conference call today to discuss the companies' new alliance Alnylam CEO John Maraganore remarked that if the innovation gap in the biopharmaceutical world was a thirst, that RNAi was both "the beer and the tap" to quench that thirst. Or something. Really, he had us at beer. Because if his analogy is apt, Takeda just spent enough money to throw one hell of a party.

The terms, as we noted earlier this morning, were generous and along the lines of Alnylam's similarly non-exclusive platform deal with Roche last year, if a bit scaled down to fit the number of therapeutic areas in which Takeda can operate. Alnylam gets $100 million in up-front cash and $50 million in near-term technology transfer payments for a non-exclusive license to its RNAi platform in oncology and metabolic disease, and first right of negotiation on its RNAi programs in Asia (excluding ALN-RSV01) should Alnylam look for a partner there. Alnylam also gets first right of negotiation on any project Takeda decides to shop in the US and more importantly, gets opt-in rights for 50/50 co-dev/co-commercialization deals in the US on up to four Takeda programs of its choosing (exercisable all the way through the start of Phase III), plus the usual gajillion biobucks in development and commercial milestone payments.

It bears repeating that Alnylam has once again struck a Non-Exclusive deal--and can go out and re-license those same therapeutic areas again at any point. That said, on today's call Maraganore essentially laid down some ground rules. "We wouldn't do a platform license for a double-digit upfront payment," he said. "Given the opportunity cost of enabling a partner we have to and will be very discriminate in how we value these kinds of partnership alliances."

In other words, pony up $100 million or it's not worth our time and effort. How many triple-digit deals it can do before its proposition is diluted below the $100 million low-water mark remains to be seen, though we wouldn't bet that they're done yet.

And if you're worried that Takeda is running out of dry powder, don't. The company has plenty of money left to expand the Alnylam deal into additional therapeutic areas (the deal terms allow for bolting on new therapeutic areas at $50 million per) or do the late-stage deal that its analysts are jonesing for.

Still, any deal is more likely to come with a price tag in the range of the Alnylam upfront than the Millennium acquisition. Takeda's CEO Yasuchika Hasegawa told IN VIVO last week that he doesn't "see the necessity of an acquisition of similar magnitude [to Millennium] in the near future." Hasegawa's preference: fill the yawning gaps left by the pending Prevacid and Actos patent expiries via organic growth.

For our in-depth look at Takeda's strategy you'll have to wait for Ellen Licking's IN VIVO feature in June. But it seems Takeda realizes that it was slow to catch on in large molecules--not an uncommon mistake among its pharma ilk--and making a splash in oligonucleotides was high on its list of priorities.

photo from flickr user bob the lomond used under a creative commons license

While You Were BBQing (on Mars)

In the event your Memorial Day / Bank Holiday weekend didn't involve a glance at the news, let us inform you that NASA landed another probe on Mars, to scoop up some Martian ice and cook it up to 1800 degrees Fahrenheit to sniff out trace chemicals in the vapor, in an attempt to find signs of previous life there. With luck your own barbeques were less costly, not as burnt, involved fresher food and were at least a little tastier. It's tough to beat Phoenix's view, however, and we can't be the only ones who want a grill that looks like that (so long as it's made by Weber, naturally).

The budget for Phoenix's 422 million mile trip was about $420 million, most of which came from NASA aside from a $37 million weather instrument supplied by Canada (presumably already paid for, because now that Canada's mad at FDA--see below--checks could start bouncing).

With yet another big-upfront technology licensing deal (this time with Japan's big dealmaker Takeda), Alnylam Pharmaceuticals can probably afford to foot the bill for NASA's next mission, providing the destination may provide them access to new companies eager to spend a ton of money to non-exclusively license Alnylam's RNAi platform.

This time they didn't have to go as far afield, though for the first time they've branched out into Japan. We'll have more to say on the deal later today so watch this space. For now we give you the basics: $100 million in up-front cash and $50 million in near-term technology transfer payments for non-exclusive license to Alny's platform in oncology and metabolic disease, first right of negotiation on Alny's RNAi programs in Asia (excluding ALN-RSV01). Alnylam also gets opt-in rights for 50/50 co-dev/co-commercialization deals on Takeda programs in the US market, plus the usual gajillion biobucks in development and commercial milestone payments.

UPDATE: We've written a post on the Alnylam/Takeda deal, here.

And what else went on over the long weekend?

• On Monday Novartis said the EU had greenlit Extavia, its brand of interferon beta-1b for multiple sclerosis. Extavia is the same as Bayer-Schering's Betaferon/Betaseron; Novartis gained the right to market its version in a 2007 settlement with Bayer after it bought Chiron (which manufactured the drug for Schering) in 2006. Launch of the interferon in the US and Europe in 2009 should allow the company to secure a beachhead in the MS market before introducing its novel oral therapy fingolimod (FTY720), which is currently in Phase III.
  
• HHS Sec. Michael Leavitt says red tape is slowing FDA's push to get boots on the ground in China. (AP, at WSJ.)
  
• Health care stocks are no longer a port in an economic storm, reminds the Wall Street Journal on Sunday. The paper quizzes a few fund managers on why, and looks for exceptions to the rule.
  
• The Sunday Times is reporting that Elan is mulling a spin-off of its drug delivery business (Elan Drug Technology), but that any move will likely wait until later this summer when it has a better handle on the success or otherwise of its Alzheimer's disease program. (via reuters.) Wait. Haven't we heard this before?


• And finally ... look out FDA! You've gone and pissed off Canada ...

image: NASA

Venture Round: Venture Capital To Go

That's the thing about Asian venture capital news. A week later and you find yourself still hungry for more.

Well, last week we profiled MPM Capital's first foray into India, a $20 million investment in Sai Advantium Pharma, a contract research organization. At the time, we declared it the first investment that a U.S.-based VC made in an Indian life sciences company, a designation we later had to undeclare as we failed to identify TPG Biotech (previously known as TPG Ventures, also recognizable as the venture firm affiliated with Texas Pacific Group) had invested in its own CRO, Matrix Laboratories Inc., two or three years ago.

Well, you're better off just reading what colleague Ellen Licking wrote about TPG's investment here or about other opportunities here.

But if you'd enjoy another little nibble. Dow Jones VentureSource's yesterday issued its first quarter report on venture investments in India. The report says India $99 million in venture investment with 16 deals completed, "a 27% drop from the fourth quarter that saw a record $135 million put into 17 deals."

Life sciences deals didn't account for much. The report mentions only two biopharmaceutical deals were done, totaling $11 million. Last year, life sciences and health care companies brought in $99.5 million, so in the words of Peter's Evil Boss Bill Lumberg "we need to sorta play catch up."

William Greene, general partner at MPM, says he expects other life sciences deals to follow the investment in Sai. "Given the quality of the deal flow and the interest these entrepreneurial companies have in accessing international venture capital I do think this is an area that is really going to grow," Greene says. But he's not ready to predict when the next deal might be done. "I can't say whether it's one month, two months or two years."

Well, after last week's experience, if he's not going out on a limb on this one, neither will we.

***

Meanwhile, a few remote areas within the US are getting a little more attention, according to assorted reports.

Utah
VentureWire Lifescience reported that vSpring Capital well on its way to raising $200 million for its third venture fund. The firm is based in Salt Lake City, Utah and has offices in Albuquerque, New Mexico. vSpring invests in "Intermountain West region" companies operating in life sciences and other industries, according to the firm's web site.

Canopy Ventures secured $100 million for its second fund. The fund previously invested only in information technology companies, but General Partners Ron Heinz and Brandon Tidwell will target life sciences companies as well. Obviously, there's no shortage of opportunities there as we've written about opportunities and investments in medical device and personalized medicine.

San Diego
San Diego--which as we noted back in November suffers from an disproportionately low number of local VCs for a region so rich in pharma and research--has a new seed fund, again according to VentureWire. Mesa Verde Venture Partners, a successor firm to IngleWood Ventures, wrapped up $15 million for a seed fund in March, with some of the capital coming from two venture firms, vSpring and Sanderling Ventures. General Partner Daniel Wood--the Wood of IngleWood--and a team of venture partners scattered across the SouthWest will invest the capital in new health care start-ups in their respective regions. The strategy is an interesting one for Sanderling, which also has offices in San Diego. General Partner Fred Middleton told VentureWire the relationship provides Sanderling access to early-stage deals without committing too much partner time. It's made similar investments in the past in seed-stage firms in Pittsburgh and Silicon Valley.

Midwest

Finally, we leave you hopes and dreams from the Mid-West that coastal VCs will invest more capital in flyover states.

As evidence, the article--actually a report from a local venture conference--points to the recent $22.75 million spin off of Esperion Therapeutics from Pfizer Inc. as perhaps the beginning of a trend.

But clearly Esperion is too unusual a deal to build a thesis around. VCs will travel far and wide to invest in a ready made biopharmaceutical company led by its original CEO Dr. Roger Newton. You'll find an interview with Newton in our upcoming IN VIVO the Magazine. We'll link to it here when it's available.

But states like Minnesota and Michigan are drawing more attention from VC, particularly device VCs who see an fresh resource of talent coming from the recent spate of layoffs the spate of recent layoffs from Medtronic and Boston Scientific.

This rush of thousands of experienced medical device workers who don't have the require the same compensation as their Silicon Valley counterparts already is interest from coastal venture capitalists. New incubator--or accelerator--ConceptTx Medical Inc. is just one effort that will be able to tap this new pool of talent.

As always, if you have any private suggestions, tips, or if you really jonesing to talk venture this holiday weekend email me here. I'll get back to you Tuesday.

(Image courtesy of Flickr user Hfabulous through a Creative Commons license.)

Deals of the Week: Signage

Another week, another big pharma reorganizes. This week comes news that Lilly's CEO John Lechleiter plans to reorganize several business units, including R&D, to "minimize bureacracy by reducing the layers of management." We wonder if that will impact Lilly's Chorus group, which is attempting to push drugs rapidly to proof-of-concept before investing significant dollars in development.

Shareholder activism reared it head again this week too. More than one third of Glaxo investors refused to endorse the consolation package--a stock bonus estimated between $4 and $5 million--of Chris Viehbacher, who lost out to Andrew Witty for GSK's top spot. (Perhaps they actually want the company to invest in something important, like pipeline? Nah, probably just share buy-backs.)

And Enzon shareholders are itching for that company to explore all strategic options for its remaining commercial operations, according to documents filed with the SEC. Apparently, the recently announced spin-off of the company's biotechnology businesses doesn't go far enough. The twist? DellaCamera Capital, which holds a 5.9% stake in the company, earns this week's award for stirring the pot--not Carl Icahn. (But for you Icahn watchers, fear not. Carl may be up to his old tricks. He's increased his shares in Byetta maker Amylin Pharmaceuticals and is reportedly in discussions with management about ways to maximize product sales and development.)

Meantime, the Institute for Safe Medication Practices published its list of most dangerous drugs and--surprise--Pfizer's Chantix took top billing. As we wrote here, Chantix has been steadily climbing to the top spot on ISMP’s list, based in large part on an increased incidence of psychiatric adverse events. Now comes news, published in Drug & Therapeutics Bulletin, that the Pfizer pill may cause--among other things--serious accidents and falls, potentially lethal cardiac rhythm disturbances, severe skin reactions, acute myocardial infarction, seizures, and diabetes. (Aren't you glad it's for healthy people?) The findings prompted the Federal Aviation Adminstration to ban pilots and air traffic controllers from using the drug. (That makes you feel much better, doesn't it?)

Another "top" list made headlines this week: World Pharmaceutical Frontiers published its annual top 40 most influential people in our industry. Sadly, our own Roger Longman was passed over yet again (hey, I need my job). Still the list was informative and indicative of the changes roiling the industry. In 2007, execs from Pfizer, Novartis, and Bayer all took top billing, but this year no single big pharma exec made the top ten. (Andrew Witty, at number 6, was the one exception, but he hasn't held his position long enough to really screw up.)

Interestingly, the group placed an emphasis on innovation (really!) and regulation, with Genentech's Arthur Levinson taking the number two spot, and NICE chairman Sir Michael Rawlins at Number 5. And guess who took the number 10 spot? Shlomo Yanai, CEO of TEVA, a company that's making a name for itself in follow-on biologics as well as generics. But lest you think Big Pharma has forgotten about innovation, you'll be happy to learn this nugget of truthiness: Joe Jimenez, who recently took charge of Novartis’s pharmaceutical division, told the WSJ that selling drugs is a lot like selling ketchup. It depends on "key account management," code for building better relationships with insurance companies. If that's not a sign of the times, I don't know what is.

Unless, of course, its my own personal favorite:

Myriad/Lundbeck: Myriad Genetics announced a critical tie-up for its Phase III Alzheimer's drug, Flurizan, with the Danish pharmaceutical company H. Lundbeck A/S on Thursday May 22. In exchange for merely European commercialization rights, Lundbeck has agreed to pay Myriad a generous $100 million up-front, plus an additional $250 million in regulatory milestones as well as escalating sales royalties in the 20-39% range. Undoubtedly, the deal terms for Myriad's so-called selective amyloid beta-42 lowering agent are rich, but the real upside seems likely to come later, when the Utah-based biotech looks to ink a revenue-sharing arrangement for the product in the US market. We've written extensively about the potential for alliances to bleed value, but in the case of Myriad's Flurizan, this is a deal that's likely to be validating. Lundbeck, after all, has both the largest CNS sales force in Europe and experience selling Alzheimer's meds. Moreover, Myriad can now afford to partner Flurizan in the US for a dear but not prohibitive price. That's a situation likely to interest partners who might be interested in a biggish deal but who couldn't otherwise afford world-wide rights. Potential interested parties? Forest Labs, which markets Alzheimer's medicine Namenda, comes to mind, as does Takeda, which needs to fill the hole left by the pending patent expiry of its blockbuster Actos. (For an update on the risks and rewards of investing in Alzheimer's drugs, see this recent START-UP piece.)

Medivir/Tibotec: HCV polymerase inhibition gets a boost as Medivir inked an R&D pact with J&J's Tibotec subsidiary. Medivir sees €5 million in cash now, potentially much more later if two compounds reach the market and are approved in two indications. Joining up with J&J keeps Medivir's NS5B polymerase activity in the family as it were, given the two groups' previous deal in the area of protease inhibition (TMC435350 is in Phase IIa trials). HCV polymerase inhibition has had a tough ride lately, with Wyeth/Viropharma and Novartis/Idenix each dropping mid-stage programs in the past ten months. Medivir has pretty extensive R&D experience in the polymerase area--it's developing compounds against herpes virus, shingles, HBV, CMV and HIV polymerases, and even has a five-year old deal with Roche in HCV polymerase (terms of which are/were undisclosed). As in it's 2003 deal with Roche, Medivir has hung onto Nordic commercialization rights in its deal with Tibotec.

Pfizer/FivePrime: Pfizer announced a research tie-up with next generation protein developer FivePrime this week. The collaboration will focus on the discovery of antibody targets and novel protein drugs to treat cancer and diabetes according to the press release. Specific deal terms weren't disclosed, but FivePrime will receive an up-front payment and three years of research funding for its efforts. In addition, Pfizer is taking an equity stake in the company. This deal highlights two major trends we've been watching for some time: the importance of bringing in biologics capablities and the flight to specialist markets. Pfizer has been slow to the biologics party, but has been attempting to make up ground with torrid deal-making, including the recent acquisitions of Coley Pharmaceuticals, CovX, and Biorexis. In addition, the at least partial focus of this deal on oncology represents a shifting attitude among Big Pharma away from the risky primary care markets to a focus on specialty, where there is still great unmedical need but also a less onerous regulatory path. Recently Pfizer CEO Jeff Kindler says he is putting "Pfizer's full scope and scale" behind a push into the cancer market. As part of that effort, he's hired Garry Nicholson, a 30-year veteran of Lilly, to oversee Pfizer's newly created oncology business from clinical trials through marketing.

Daiichi Sankyo/ U3: Another week, another Japanese pharma making noise. Takeda has taken top honors lately, with its big cancer deals with Cell Genesys and Amgen and its acquisition of Velcade developer Millennium. But the other Japanese pharmas aren't giving up on either oncology or their ability to become international powerhouses. Take this week's news that Daiichi Sankyo is buying German biotech U3 Pharma for $235 million in cash. Among the drugs in U3's pipeline: a fully-human anti-HER3 monoclonal antibody due to begin clinical trials this year that is partnered with Amgen. Daiichi is no stranger to the Thousand Oaks biotech. It has Japanese rights to market Amgen's denosumab, currently in Phase III trials for osteoporosis and bone metastases in patients with advanced breast cancer. In addition, Daiichi also has several other cancer products in development, including the Phase II CS-1008 to combat malignant neoplasms.

Photo courtesy of Flickr user ramson via a Creative Commons license.

Lundbeck Thanks Myriad For The Memories

Myriad Genetics announced a critical tie-up for its Phase III Alzheimer's drug, Flurizan, with the Danish pharmaceutical company H. Lundbeck A/S on Thursday May 22. In exchange for merely European commercialization rights, Lundbeck has agreed to pay Myriad a generous $100 million up-front, plus an additional $250 million in regulatory milestones as well as escalating sales royalties in the 20-39% range.

Undoubtedly, the deal terms for Myriad's so-called selective amyloid beta-42 lowering agent are rich, but the real upside seems likely to come later, when the Utah-based biotech looks to ink a revenue-sharing arrangement for the product in the US market. Such a deal may seem counter-intuitive given that Myriad has just given up product rights for a considerable portion of the globe--a fact investors won't take lightly. (For more, see our recent take on the value of alliances in the April IN VIVO.)

But in this case, the alliance may play an important and--dare we say it--validating role for Myriad. Consider that Lundbeck currently has the largest CNS sales force in Europe and experience selling Alzheimer's meds. (The company has ex-Japan marketing rights to Ebixa, known as Namenda in the US where it is marketed by Forest Labs). Given this neuro expertise, the company's willingness to pay a hefty price just for EU rights certainly gives the risky Flurizan added street cred.

Moreover, Myriad can now afford to partner Flurizan in the US for a dear but not prohibitive price. That's a situation likely to interest partners who might be interested in a biggish deal but who couldn't otherwise afford world-wide rights. "Flurizan is more affordable to a broader pool of companies and that's likely to increase the possibility of partnering" in the US, says Charles Duncan, an analyst with JMP Securities.

Which ironically means that, with the possibility of multiple bidders, the price for any future deal could go up a bit more than mid-sized companies might want to pay -- even if staying below the threshold of the industry's largest deals.

In the meantime, Myriad pockets a $100 million--about 20% of which will be paid as a sub-license royalty to Encore Pharmaceuticals--and gains access to a ready-made sales force of more than 1300 reps well versed in selling Alzheimer's drugs in the various EU nations. That's critically important, says Duncan, who believes that "Lundbeck's infrastructure in CNS maximizes the sales potential for Flurizan in Europe."

The oral Flurizan seems to work work by dialing down--but not completely inhibiting--activity of γ-secretase, the protein responsible for chopping up amyloid precursor protein into its more toxic form, Aβ42, via an anti-inflammatory cascade. Because it lowers overall levels of toxic amyloid, the thinking goes, Flurizan is able to inhibit the negative cascade of plaque formation and neurodegeneration that follow from its initial deposition.

Results from Phase II studies are certainly tantalizing. Patients with mild forms of the disease who took a once-daily 800 milligram dose of Flurizan did not decline as rapidly as those on placebo as measured by standard cognition tests and assessments of daily living. In addition, a meaningful, but not statistically significant, portion of patients experienced zero decline in cognitive ability after two years on the medication, and in some cases, actual improvement.

Currently, Myriad is conducting two Phase III clinical trials of Flurizan: a US-based study of more than 1600 patients with mild Alzheimer's disease and a second, global trial of more than 800 patients. Results of the US-based study are expected to be announced in about a month with results of the world-wide study coming before the end of 2008.

One reason Duncan is so bullish on today's announcement is that he thinks Lundbeck inked the deal solely based on publicly available clinical data. That suggests to him that Lundbeck has anecdotal information about Flurizan's efficacy in late stage trials based on its own surveys of customers. That's important because it suggests Lundbeck believes strongly in the drug's chances for approval in the EU, if not its overall efficacy. Flurizan is expected to launch in 2010.

If that happens, the consultancy Datamonitor forecasts Flurizan revenues in excess of $1.5 billion in the seven major markets and $470 million in the EU by 2016. Still there's considerable risk associated with the product. It's quite possible given the lack of statistical significance associated with the Phase II trials, that data from the pivotal studies may be subject to interpretation.

Will that be enough to limit approval? Probably not, say analysts such as Duncan. Currently available Alzheimer's treatments such as Aricept and Namenda didn't come with overwhelmingly strong data packages either. Moreover, unlike other late stage, potentially disease-modifying drugs such as Wyeth/ Elan's antibody bapineuzumab, Flurizan is without significant adverse side-effects. (Wyeth and Elan's antibody, for instance, has been linked to severe gastrointestinal bleeding making it more likely that drug will be reserved for severe cases of the disease.)

Given the overwhelming unmet medical need and significant economic burdens of Alzheimer's, Flurizan's safety profile is important -- a safe drug that offers even the potential of slowing the scourge of Alzheimer's is likely to be prescribed.

Undoubtedly that's something Myriad is betting on as it looks for a deep-pocketed partner to help establish Flurizan's US market. Any number of potential suitors might be interested in non-EU rights, including both Forest Labs and Takeda Pharmaceuticals. Meantime, Myriad can rely on the help--and yes, we'll say it again, validation--- of Lundbeck.

Image courtesy of Flickr user .nello via a creative commons license.

Active Surveillance and Chantix: Smoking Out Adverse Events

There are lots of “top” lists out there. Maxim magazine has its annual Hot 100 awards. David Letterman has his weekly Top Ten contest. But if you’re a pharmaceutical company, there’s one list you don’t want to be on: the Institute of Safe Medication Practices’ list of most dangerous drugs.

That’s not actually the name of the list, but it might as well be. Officially, the list is called “Leading Suspect Drugs”—products with the most reports of serious adverse events in a given calendar quarter. And the most recent data, released by ISMP yesterday, has a new drug at the top: Pfizer’s varenicline (Chantix).

The idea that a product for smoking cessation would be considered that risky comes as a bit of a shock, especially when the other drugs on ISMP’s list are for seriously ill patients and tend to have “black box” warnings: interferon, Enbrel, Remicade, fentanyl and oxycodone. By comparison, Chantix is approved for use in healthy people to stop smoking. Labeling includes a bolded, but not boxed, warning.

But if Chantix’ ranking comes as a surprise, it shouldn’t. Indeed, Chantix has been steadily climbing to the top spot on ISMP’s list, based in large part on an increased incidence of psychiatric adverse events. FDA has already issued two advisories on events like depression and suicide; we wrote that story in the latest issue of The RPM Report, which you can access here.

Chantix first appeared on ISMP’s radar screen in the fourth quarter of 2006 as one of a small group of drugs that accounted for 100 or more reports of serious injury in a calendar quarter. By the second quarter of 2007, Chantix ranked third among all drugs in the US, and by the fourth quarter of 2007, it “accounted for more reports of serious drug adverse events in the United States than any other drug,” ISMP says. Given those results, ISMP was compelled to publish a report on the “strong signal.”

The accuracy of that signal—and whether Chantix truly belongs on the top of ISMP’s list—deserves to be questioned a bit. Adverse event reports can be driven by publicity about the safety of a product, and there has been plenty of buzz about Chantix, especially on psychiatric adverse events. FDA’s “early communication” on Chantix in November 2007 could have led to an increased number of reports. ISMP would debate that point, arguing that it would take longer for reports to appear in the FDA system.

Regardless, the real lesson here is on the consequences of active surveillance, and what happens when an independent group like ISMP dives into adverse event data. In the case of Chantix, it has the potential to take down a blockbuster. Bernstein Research analyst Tim Anderson cut in half his worldwide sales expectations on the news out of ISMP this week. That’s not small change: “Our assessment is that consensus forecasts in 2012 may be too high by as much as $500 million-$1 billion,” Anderson says.

Indeed, ISMP’s fishing expedition is exactly why the pharmaceutical industry needs to get behind an official active surveillance program—a neutral referee in the fast-paced, increasingly public game of post-marketing safety. Luckily, FDA is about to implement one. Today, HHS and FDA released more details about the Sentinel System, an active surveillance program that will use Medicare Part D claims to monitor post-marketing safety.

For industry, that may seem scary, given the potential for false-positives. But having a strong organization that can take a leadership role in post-marketing safety is a good thing. As Center for Drug Evaluation & Research director Janet Woodcock put it, FDA will use Sentinel to develop “best practices” for active surveillance—scientifically agreed-upon analytical methods, so that
“we can all agree what the results mean.”

The alternative—random groups and researchers using disparate databases to analyze adverse event data—is much less appealing. FDA's Woodcock acknowledges that Sentinel will lead to more warnings on products, and that may well be the near-term impact. But with any luck, Sentinel will create a lot less chaos over the long term—and fewer primary care blockbusters topping ISMP's “suspect drugs” list.

Stewie image courtesy of Flickr user speakfreegirl via a creative commons license.

Entereg Approved at Last

Perspective is an amazing thing.

In June 2004, Adolor Corp. filed a new drug application for alvimopan (Entereg) for treatment of postoperative ileus. The product had "fast track" status, and Adolor and partner GlaxoSmithKline expected to launch the drug by the start of 2005.

What do you think they would have said if you had told them that the drug would not reach the market for four years, and then only with tough restrictions limiting access to the hospital setting and the course of therapy to two weeks or less? We try to keep our blog clean, so we won't speculate on the exact commentary that company executives might have offered.

In any event, here is what Adolor CEO Michael Dougherty did say during a conference call announcing the approval of the drug May 21: "This is such a big day for Adolor...Gaining approval of our lead product is a transforming event for our company. I cannot tell you how excited we are at Adolor."

And so Adolor joins the ranks of company's that are positively giddy at the prospect of becoming pioneers in the new drug safety era.

It joins a handful of other drugs approved by the agency under the new Risk Evaluation & Mitigation Strategy authorities that took effect March 25. (You can read more about the REMS pioneers in The RPM Report.)

Entereg is a precedent-setting new drug approval: the first new molecular entity approved by the agency with a formal, mandatory restriction on the setting of care in which it can be marketed. As part of the program, Adolor and GSK will have to monitor actual use of the drug and take corrective action if it is being used outside of hospitals or for longer than the 15-day therapy maxiumum.

It is surely a measure of how much the world has changed for drug development companies that the approval of Entereg, four years late and weighed down by those tough marketing restrictions, can still be greeted as a good news event. (Adolor shares jumped 10% in after market trading when the approval was announced May 20; profit takers and launch skeptics have brought it back down today.)

But it is also true that the REMS era is beginning about as well as it possibly could for the industry. Each of the first five products covered by the new authority is a drug that was stuck at FDA. The sponsors certainly didn't expect to find themselves bogged down by safety issues at the agency--but they also eagerly embraced the opportunity to become REMS pioneers as a way to get to the market at last.

Covidien Takes Small Bites

In a recently announced deal, Covidien Ltd. said it would acquire a line of diagnostics products from Pinyons Medical Technology Inc., a privately-held company based in Park City, Utah. Terms of the deals were not disclosed.

Even without knowing the price, it's fair to say that a decade ago a deal like this would hardly be worthy of a mention. In those days when Covidien--perhaps better known as Tyco Healthcare--bought something, it BOUGHT something. The company--as a division of Tyco International--built itself into a major seller of hospital supplies and products through a series of significant acquisitions, including billion dollar-plus acquisitions of Kendall International, Mallinckrodt, Sherwood-Davis & Geck,and U.S. Surgical.

All that came to an end, however, in 2002, when Tyco International got dragged into the storm of corporate scandals that rocked Enron, Worldcom and others. The health care group was never implicated.

Fast forward five years: Tyco Healthcare spun out of Tyco and took the name Covidien, "an original name, inspired by themes of collaboration and life... selected for its global meaning" according to a 2007 press release. (While we might quibble with the global reference, we do agree it isn't likely to provoke images of Dennis Kozlowski.)

Since that time, Covidien has been building itself up through a strategy of acquisitions, investment and high profile promotions. (See photo.) But these acquisitions are much more measured than in the old Tyco days and mostly fit into the company's existing businesses.

That's where Pinyons fits in. Covidien acquired a number of devices and related assets, including the Pinyons POWRSyringe Injector and the POWRSyringe Monitor. These devices facilitate manual x-ray contrast media injections during angiography procedures performed in the cardiac catheterization laboratory and interventional radiology suite.

Over the past few years most of Covidien's acquisitions have been related to its medical device business unit, the largest of Covidien's four businesses. The new acquisition likely will slide into its imaging business unit, but Covidien also has a pharmaceuticals and medical supplies business that's worth watching. Anyone interested in reading more, can check out our May IN VIVO for a feature on Covidien's new life as an independent health care company.

The Wacky World of Generics: Trade Secret Misappropriation Edition

Hollywood has been scraping the bottom of the comic-book barrel (excuse me – graphic novels) for blockbuster scripts of late. To stand apart from the crowds, all of you aspiring script writers out there, heed the advice from Jack Moseley in 1992’s The Cutting Edge: “Then you find another barrel.” May we suggest the pharmaceutical industry?

A recent FDA decision on a seemingly routine generic drug approval led far down the rabbit hole, leading us to a case with all of the twists and turns of a great film noir.

But first, background on the agency decision.

On April 11, 2008, FDA approved Spear Pharmaceuticals’ abbreviated new drug application for a generic version of Efudex Cream 5%, Valeant’s topical fluorouracil cream indicated for treatment of (1) multiple actinic or solar keratoses; and (2) superficial basal cell carcinoma when conventional methods are impractical.

The patents for the cream expired decades ago, but nary an ANDA has been filed until Spear submitted theirs in January 2005. Valeant, though, objected to the approval and filed a citizen petition urging the agency to reject the application, claiming that the generic should not be approved based on bioequivalence studies conducted solely for the actinic keratosis indication.

FDA denied the petition on the same day it approved Spear’s ANDA. Center for Drug Evaluation & Research Director Janet Woodcock explained that the single clinical trial was sufficient to demonstrate bioequivalence in both indications.

Valeant filed suit against the agency in U.S. District Court April 25, seeking to overturn the ANDA approval.

A Generic Vanishes

These days, there is no surprise in a brand company suing to block a generic. The surprising move came on May 14, when FDA issued an “Administrative Reconsideration and Stay of Action,” saying it is in fact rethinking approval of the Spear ANDA “because there are outstanding questions regarding this approval that the agency must consider.” The notice formally pushes back a decision on the ANDA until May 30.

In other words, the ANDA isn’t exactly approved after all. At least not yet. (Spear explains the situation a bit differently in a press release issued today. If you scroll down to the bottom you will see that the company has "voluntarily agreed not to ship additional product until the end of May, at which time we fully expect that the FDA will resolve its administrative issues." UPDATE: Despite what we originally noted here, Spear did begin shipping product on April 11, but voluntarily halted thereafter.)

Legal challenges to ANDA approvals are usually short-lived and vigorously fought by the agency – witness GlaxoSmithKline’s attempt to block Roxane’s generic version of GSK’s Flonase, or King’s challenge over its hypothyroid drug Levoxyl. But in this case, the agency seems to be giving more specific consideration to the concerns raised by the brand company over its ANDA approval standards.

And the stakes in this case are potentially quite high. As we explain in an article published in “The Pink Sheet,” FDA’s final decision on how to handle the issues raised by Valeant will have implications for plenty of other generic applicants—and, potentially, for the future development of approval standards for follow-on biologics.

The Jilted Suitor

Interesting and perhaps precedent-setting, yes. The next Martin Scorsese film, no. But the plot thickens.

Spear alleges that Valeant’s citizen petition was an ‘insider job’ that should never have been considered by FDA in the first place. Spear makes those claims in a federal civil suit in December 2007 against Valeant and investment firm William Blair asserting breach of contract, trade secret misappropriation and more.

In court documents, Spear describes a story of betrayal by a financial advisor. You can read all about it here.

In a nutshell, Spear claims that Willaim Blair (and in particular the banker’s VP Brian Scullion) tipped Valeant off to the generic firms’ plans regarding Efudex.

The timing is certainly suspicious. Spear began developing the Efudex generic around February 1999, working out with FDA a plan to ensure their bioequivalence trials would be sufficient for approval for both indications.

Five years later, Spear decided to explore selling one of its other generic product lines (tretinoin, Johnson & Johnson’s Retin-A) and consulted William Blair VP Brian Scullion. After signing a confidentiality agreement, Spear says it disclosed trade secrets (including the continuing development of generic Efudex) to Scullion. Spear also mentioned the plan to file an ANDA for Efudex in November 2004.

One of the potential parties interested in the tretinoin line was Valeant. After looking over the tretinoin deal, the firm declined the opportunity in October 2004. Then, on Dec. 21, 2004, Valeant filed the citizen’s petition requesting that FDA require a generic applicant seeking approval for a version of Efudex conduct trials in both indications. Eight days later, Valeant notified Blair that it was interested in the tretinoin line after all—which Spear says came too late because negotiations were under way with another partner.

On Jan. 3, 2005, Spear filed the Efudex ANDA. When the company called FDA April 19 to check on the application’s status, the agency informed them of Valeant’s citizen petition. The news, Spear said, “was a shock.”

“The timing … was not coincidental,” Spear says. “It was reflective of the confidential information that had been improperly leaked … The specificity of the requested relief reflects that Valeant learned not only of Plaintiffs’ confidential information with respect to Plaintiffs’ plan for filing an ANDA, but also the precise nature of the clinical trial they had conducted.”

The missing link? According to Spear, Brian Scullion. Although he told Spear he was not engaged to advise or represent any interested parties during the initial tretinoin exploration, William Blair had an investment banking relationship with Valeant and held over $1.7 million in Valeant stock as of Sept. 30, 2004.

Then, to really drive the last nail in the coffin, a generic manufacturer named Oceanside Pharmaceuticals launched a a generic of Efudex Cream 5% in December 2006. How did Oceanside beat Spear to market? It launched an “authorized” generic under license from Valeant. Authorized generics are also routine these days, but—as Spears points out—this was an unusual move given that Valeant theoretically had no reason to anticipate any generic competition to Efudex.

Spear is asking for $125 million in compensatory damages plus punitive damages and other relief, to be determined at a trial.

Neither John Malkovich nor Edward Norton have returned our calls for the role of Scullion – maybe if we can cast Scarlett Johansson or Natalie Portman in the part of Woodcock, they’ll call back…

Becky Jungbauer

Why Von Eschenbach Bucked Bush: The Fight Over FDA Funding

As the New York Times reported earlier this week, FDA commissioner Andrew von Eschenbach did what has never been done before in the 100-plus years of the agency: he wrote a letter to Congress asking for more appropriated dollars for FDA.

Given the number of unfunded mandates handed to FDA over the years—and the recent demands on drug safety and overseas inspections—it should come as a surprise to no one that the agency is underfunded.

But for the FDA commissioner to make such a direct request to Congress for more money is an earth-shattering move: especially this commissioner who has shown a willingness to take a lot of criticism and abuse for defending Administration positions.

FDA has historically remained in lock-step with senior Administration officials over budget requests. The agency traditionally defers to a number of higher power centers on budget issues, including the budget enforcers at the Office of Management and Budget. Never before has an FDA commissioner publicly asked for anything from Congress that is at odds with what is in the president’s congressional budget request, in this case a 3% increase for fiscal year 2009.

But in a May 5 letter responding to a request from Sen. Arlen Specter (R-Penn.), von Eschenbach broke ranks with the White House and did just that. Specter is the ranking member of the Senate appropriations subcommittee that oversees HHS’ budget.

Using carefully worded language, von Eschenbach said that in his “professional judgment” and “without regard to the competing priorities,” FDA could use an additional $275 million in funding. The letter creates a new version of the Washington ruse of “plausible deniability.” By stressing that it is his professional judgment, von Eschenbach can continue to sound like a committed (professional) manager of FDA while denying that he is second-guessing his bosses.

Much has been made of the letter, but as earth-shattering as the request was, it didn’t come out of nowhere. Rather, it was the culmination of a series of baby steps taken by von Eschenbach over the last several months.

To Steven Grossman, deputy executive director for government relations and communications at the Alliance for a Stronger FDA, the “visible transition point” came during an Energy & Commerce Oversight & Investigations Subcommittee hearing January 30. The 180-member Alliance for a Stronger FDA has been lobbying for additional dollars for FDA; we wrote about the group in a story in The RPM Report here.

The hearing was called in response to an FDA Science Board report that detailed numerous deficiencies in the agency’s ability to meet its scientific mission. As we reported in an earlier post on the IN VIVO Blog, subcommittee chairman Bart Stupak repeatedly asked von Eschenbach whether the Administration’s budget proposal for FY 2009 was sufficient to meet FDA’s needs.

The commissioner demurred, noting that at the time, President Bush had yet to release the budget request. But as Grossman points out, von Eschenbach showed some fissures in his resolve to stick to the party line: he acknowledged that the budget was less than what he had requested from the Administration for FDA.

A month later, von Eschenbach conducted an interview with Wall Street Journal, in which he sought to correct a misperception that he didn’t think FDA needed more resources. That story was followed two days later by a keynote address at the National Press Club. (We wrote about that shift in von Eschenbach’s public comments about FDA resources in an earlier blog post here.)

After that, von Eschenbach appeared to take a couple steps backwards, first telling the Senate appropriations subcommittee on April 15 that FDA couldn’t absorb the $375 million in funding included in the Senate budget resolution. A week later, it took a long and heated exchange with Rep. John Dingell during an Oversight & Investigations hearing for von Eschenbach to acknowledge that FDA needed $70 million for overseas inspections.

So what made von Eschenbach finally publicly admit what everyone else seems to have known for a long time? We don’t claim to have any specific insight into what the commissioner was thinking, but there are a few things worth pointing out.

First, von Eschenbach and Sen. Specter had an amiable relationship long before the commissioner moved to FDA. Specter served as the chairman of the appropriations subcommittee while von Eschenbach was head of the National Cancer Institute. The two are also cancer survivors: Specter was diagnosed with Hodgkin’s disease in 1995, and von Eschenbach is a survivor of melanoma and prostate cancer.

Given that relationship, Sen. Specter may have been one of the few congressmen able to give von Eschenbach a way out of FDA’s budget crunch. In his letter to the commissioner, Specter wrote by hand in the margin, “Andy, I know the situation is extreme. I want to get you financial help now,” according to the Times.

And it’s also worth mentioning that other federal agencies have recently broken ranks with the Administration over budget requests. Last year, Julie Gerberding, head of the Centers for Disease Control & Prevention, issued a strongly-worded letter to Congress about its budgetary needs—in language much less diplomatic than von Eschenbach’s.

Much has been already written about how the letter marks the waning influence of the Bush Administration. While that may be true, it’s just as likely that von Eschenbach simply grew tried of trying to defend an indefensible situation. To the growing number of groups seeking more funding for FDA, it would be nice if von Eschenbach’s letter leads to some real money.

Boehm bucking broncho at Madison Antiques and Gifts.

Deals of the Week: Not Quite Exits, But OK Given the Circumstances

It’s hardly news that most biotechs can’t buy an investor. So it’s nice to see a few signs of progress.

Take pharma-ignored cell therapy. The stem cell world got a boost as two smart guys from biotech – Paul Grayson from Sanderling and John Mendlein, most recently CEO at biological-platform play Adnexus (sold for $500 million to Bristol-Myers Squibb) -- joined a bunch of scientists at Fate Therapeutics.

Elsewhere in the cell-therapy world: we’ve been wondering (in this post, for example) why big biotech deals so often cause biotech shares to drop. But not at Cell Genesys, whose Takeda deal started the company’s stock up a satisfyingly steep incline, virtually doubling as investors absorbed the news that somebody in Pharma, finally, had seen the value of cell therapy (albeit a pretty pharmaceuticalized version). Now it’s done the smart thing – raising $30 million from shares and warrants in a one-investor PIPE. It probably still feels the financing came at a pretty dilutive rate (something like $330 million pre-money) but hardly the dismal barely-above-cash-value price it was trading at a few months ago.

Now with that ringing endorsement we bring you ...

Intercell/Iomai: And as for exits – or quasi-exits: from the outside, things looked pretty bleak for vaccine-play Iomai, which had less than a year of cash when the Austrian Intercell said on Tuesday that it was buying the patch-tastic drug and vaccine delivery company for $6.60 per share, valuing the company at $189 million. Intercell gets a few mid-to-late-stage patch-vaccine programs from Iomai, including one for travelers’ diarrhea that may enter pivotal trials as soon as the first half of next year, as well as a second deal with Merck & Co. around Iomai’s patch with an undisclosed vaccine. Deal doesn’t do much immediately for the major investors, presumably the VCs like New Enterprise Associates and Essex Woodlands who have been stuck in the stock since taking it public in 2006 at $7/share at about an $85 million pre-money. They’ve got to take Intercell shares for their stake (which are at least far more liquid than Iomai’s were). We noted the predicament of these VCs and others who have found themselves ‘marooned in the public markets’ only last month in START-UP.

Antisoma/Xanthus: Similar issue for backers of Xanthus. Antisoma, the UK cancer-focused biotech, is acquiring the Boston-based start-up for ₤26.8 million in stock. Antisoma seems to have gotten a great deal. On a total of about $90 million invested from its VCs, Xanthus has managed to create a real pipeline, largely through in-licensing. It’s put four drugs into clinicals, with two leading the way: Xanafide is starting a Phase III trial in secondary acute myeloid leukemia under an SPA; and FDA has accepted Xanthus’ filing for oral oral fludarabine, to which its got US rights (the product is marketed in Europe and elsewhere). Most of Xanthus’ pipeline was spun out of Schering AG in a series of deals as that firm was integrating into Bayer, a deal we chronicled here in 2006. (Interestingly, before that, Xanthus had managed to grab another, earlier stage asset (P2045), a peptide coupled to a radioisotope which had originally come from biotech Diatide—which had been run by Xanthus CEO Richard Dean, PhD, and VP of development John Lister-James, PhD.) Xanthus’ backers won’t get free of Xanthus immediately: they’re putting about a third of the $42 million or so in new money Antisoma is raising simultaneously with the deal.

Merck/Ranbaxy: Now for something completely different. On Monday, Merck announced a partnership with Indian drug giant Ranbaxy in the anti-infective space. For an undisclosed up-front fee and milestones potentially totaling more than $100 million, Ranbaxy will search for anti-bacterial and anti-fungal compounds, taking compounds through Phase IIa before handing them back to Merck for additional human studies and commercialization. Merck won’t release details but Mervyn Turner, PhD, SVP for world-wide licensing and external research at Merck assures IN VIVO Blog that the proper incentives to keep both sides motivated have been built in. Still, it’s anybody’s guess what happens if Ranbaxy’s compounds don’t pan out. Does Ranbaxy get them back? Is the company still eligible for monetary compensation? “It’s all covered under the agreement,” says Turner.

This most recent deal comes on the heels of two other similarly structured deals Merck has inked in India: a November 2007 agreement with NPIL Research and Development (formerly part of Nicholas Piramal) in the oncology space and a 2006 partnership with Advinus Therapeutics in the metabolic disease arena. For Merck, the deals are all about expanding pipeline and pipeline capacity. Merck doesn’t have to fund much development, so doesn’t take a big P&L hit, but still has the right to step back in if something interesting results. We’re likely to see more such deals in the future. Increasingly Big Pharma is thinking virtual: companies once proud of their FIPCO status are openly discussing their desire to transform themselves into FIPNets (fully integrated pharmaceutical networks). Lilly, in particular, is a big proponent, and we have more on their strategy in a story in the May IN VIVO along with another piece in the same issue on Pfizer’s ideas for externalizing its pipeline.

BMS/KAI: We’ve already noted here the tie-up between Bristol-Myers Squibb and Kai Pharmaceuticals on an acute-care IV-delivery heart attack drug, KAI-9803. KAI had reformulated the compound from the original intra-coronary version it had licensed and gotten back from Sankyo, following that company’s merger with Daiichi, but the deal is also the second in Bristol’s so-called string-of-pearls strategy (after its Adnexus acquisition in 2007). No longer as big a Cahuna in the drug world as it once was, Bristol has been transforming itself into a specialist player, looking to layer in externally sourced next-generation R&D programs. If they’re good, they’ll come at a Big Cahuna cost, however -- pretty much just as Plavix is losing patent protection and with it a huge chunk of Bristol’s current operating cash flow. That’s why the company is trying to raise money now to fund its strategy, selling off Convatec ($4.1 billion) to a couple of private equity groups and IPO’ing Mead Johnson, keeping 10-20% and reaping maybe $900 million - $1.7 billion (with the possibility of selling off more over time).

Venture Round: Asian Flavor

A few years ago, back when it seemed like a firm bent on world domination, MPM Capital led a $48 million first round in TaiGen Biotechnology, a small molecule drug discovery company focused on oncology and immunology.

The real news at the time was that TaiGen was based in Taiwan. MPM had teamed up with a number of local firms to back the company, becoming the first U.S.-based VC to invest in a Taiwanese biotechnology company. At the time, in 2001, MPM looked to be the tip of the sword as life sciences venture capital firms looked East (or West really) for the opportunity to make investment in Asian companies. But no one followed MPM’s lead until just recently when firms like OrbiMed Advisors LLC and others began sponsoring Asian-focused firms. Still, early-stage investment in Asian biotechnology companies are rare. (Our February feature on recent investments in Chinese firms is here and an earlier 2006 discussion of VC reluctance to drop money in China and India is here.)

Why are we bringing this up? Well, MPM Capital appears to be Lewis-and-Clarking it again, this time in India. MPM made a $20 million investment in Sai Advantium Pharma, a contract research organization in Hyderabad, India. MPM made the investment after spending the “past couple of years” developing its emerging market strategy and developing deal flow in India. “Out of that work came a handful of opportunities, one of them being pharmaceutical outsourcing,” says William Greene, the general partner who managed the deal. “We then in parallel asked our portfolio companies if they were using preclinical outsourcing services and if they were going to India or China to do it. What came back was more than a handful of companies saying that we are doing chemistry outsourcing and we use this company in India called Sai Advantium.”

MPM followed through with more traditional due diligence. Everything checked out and MPM came to terms with Sai. While MPM was examining the company, Sequoia Capital’s India fund arranged to buy the shares of a Sai executive who was leaving the company and wanted to cash out. Greene said MPM considered buying the shares itself, but it didn’t want to obtain a stake through a secondary purchase. It wanted a piece of the company. Furthermore, Sequoia is among the US VCs with most experience in India, so MPM welcomed the expertise, he said.

A cynic—okay we—might wonder whether MPM’s initial search was fruitful since the firm’s first deal came through a referral from portfolio companies. But Greene says, “There are definitely a lot of opportunities there.

“I think we have pretty good deal flow in India considering that we are largely working with partners and talking about doing our kind of investment. There is no shortage of growth equity opportunities in hospital and health care infrastructure and that is the sort of thing we could invest in.” But MPM prefers to stick with its core strategy of investing in life sciences companies. “Those types of deals are certainly [out there]. The fact is the entrepreneurial environment for biotech and medical devices is early there. But even in the two or three years we’ve been traveling there, the fact of the matter is the country is poised, I think, to be a really good target for life sciences.” MPM also benefits from having Reliance Life Sciences, an India-based life sciences group, as a limited partner in its current fund.

Greene isn’t comfortable making this statement, but we’re going to go out on very wide limb and say this is the first significant investment that a US-based life sciences VC has made in an Indian company. “I’ve had a hard time finding [comparable investments],” Greene says. Buyout firms, however, are finding deals in more established health care companies.

(Update: Well, that limb wasn't as wide as we thought. We should have directed you to TPG Biotech's investment in Matrix Laboratories Ltd. , a contract research and manufacturing outfit in Secunderabad, India. Yes, TPG is affiliated with Texas Pacific Group, the buyout megafund. But it's still venture fund. Read all about it in our April 2006 START-UP here and here.)

Still, MPM, once again, finds itself ahead (check that, at the head) of the pack. However, unlike in Taiwan with the Taigen investment, we probably won’t have to wait very long for another venture firm to step up.

***

Fund-raising Tidbits: Greene wouldn't say this, but it appears as if MPM will be out raising a new round, maybe as early as this year. It has invested more than half of its fourth fund.

***

Merlin Nexus announced a first close of $40 million Merlin Nexus III, L.P. As it's done with its previous funds, Merlin (not to be confused with the former UK-based firm now operating under the Excalibur brand) will invest in late-stage private and public companies in the biotechnology, medical device, specialty pharmaceutical and molecular diagnostic fields. Merlin Nexus III has a $125 million target.

***

Meanwhile, MVM Life Science Partners has closed on GBP130 million ($253 million) toward its third venture fund, according to this morning's VentureWire. MVM expects to hit its GBP150 million ($292 million) target in a few weeks.

As always, if you have any private suggestions, tips, or if you know if the Sunday Red Sox game is likely to be rained out email me here.

Golden Temple photo @ Wikimedia Commons