Amgen and J&J: Falling in Love All Over Again

With most of our bloggers on vacation, we haven't yet troubled ourselves to analyze the Bristol bid for ImClone (if imitation is the sincerest form of flattery, we trust Roche is feeling good). And we didn't jump on Sanofi's buyout of Acambis either. (Thank goodness our colleagues at "The Pink Sheet" DAILY actually work in August!)

But even the dog days of summer can't stop us from taking note of this one: Amgen is giving global rights (except for Japan) to a clinical stage neuropathic pain project to...(drum roll please) Johnson & Johnson.

Considering the companies have spent the past two decades in an endless series of disputes, arbitration and litigation over their last licensing deal, involving a little product called EPO, that is news indeed.

If there ever was a case of adversity bringing people closer together, this is it.

Amgen and J&J have both said that their working relationship has been improved by the all-out effort to save the EPO franchise from regulatory and reimbursement challenges. So much so that Amgen CEO Kevin Sharer told the JP Morgan conference in January that “I never thought I would say this, but this circumstance has made us and J&J quite effective partners.” That may not be much of a silver lining from everything that has befallen EPO--but it sure is hard to imagine the two companies reaching this agreement two years ago, when the only place their executives were likely to exchange confidential information was in court.

Amgen's willingness to deal with J&J also suggests that it really means business when it talks about winnowing down its pipeline. In fact, Amgen has already shown it means business, in fact; Japanese rights to the neuropathic pain compound were already sold as part of a large partnership with Takeda in Japan.

Now the terms. Amgen receives $50 million up front--or a refund of one-quarter of the $200 million Amgen paid to settle antitrust litigation with J&J over EPO last month. Amgen will also receive development milestones of up to $385 million. There are additional commercial milestones and a sales royalty too.

And, no, there is no copromotion agreement.

REMS to the Rescue? Why FDA's Drug Safety Tools May Mean More Approvals This Year

The statistics aren't encouraging: fewer new drugs approved by FDA so far this year than last--and last year was arguably the worst year all time for the innovative industry.

But we are boldly predicting a big finish to the year, in part for an unlikely reason: FDA's new mandatory post-marketing safety tools that allow it to compel labeling changes, Phase IV studies, and--most significantly--Risk Evaluation & Mitigation Strategies.

The REMS authorities kicked in in March, and we’re learning a bit more about how FDA is using its new tools. And while there was much nervous anticipation as industry braced for FDA to start wielding its new (now mandatory!) risk management tools, the reality has been pretty positive.

There have been a lot of required post-marketing studies, and relatively few full-fledged REMS programs for new molecular entities. In fact, it looks like REMS is turning out to be a way to revive applications that once looked dead (or at least terminally “approvable”).

FDA has applied the new drug safety tools to three new molecular entities so far this year--CV Therapeutics/Astellas’ Lexiscan, UCB’s Cimzia, and GSK/Adolor's Entereg. And in every case the sponsor has been thrilled to have a product to market at all. (Read about some of the early experiences with REMS here.)

That's just the tip of the iceberg.

A REMS is definitely in the works for GSK’s platelet growth stimulator Promacta (eltrombopag), and Lilly has hinted that its antiplatelet agent Effient (prasugrel), partnered with Daiichi Sankyo, could have some form of a REMS – although Lilly is suggesting it would be on the less intensive end of the spectrum. Both NDAs received three-month review extensions, an emerging pattern for reviewing REMS proposals.

The premature press release snafu for Amgen’s Nplate also revealed that a REMS program called NEXUS is slated to accompany the approval of romiplostim, a fusion protein that, like Promacta, treats idiopathic thrombocytopenic purpura.

FDA’s new authority opens a new parlor game of guessing which applications could be REMS-worthy. According to Pharmaceutical Approvals Monthly, there are at least 30 NMEs pending with user fee deadlines coming up during the second half of the year. Which ones could have a REMS?

Pfizer/Ligand’s Fablyn (lasofoxifene) for treatment of post-menopausal osteoporosis: The post-Evista SERM class has had trouble clearing the final approval hurdle at FDA, in part because of safety issues. Prior to the Fablyn submission Jan. 15, lasofoxifene (then Oporia) was found not approvable for prevention of PMO in 2005, and then not approvable again, for treatment of vaginal atrophy, in 2006. Wyeth’s SERM Viviant (bazedoxifene) has been approvable twice for osteoporosis prevention and once for treatment. Further data was requested on stroke and venous thrombotic events.

Johnson & Johnson’s paliperidone palmitate: Can the once-monthly version of J&J’s antipsychotic Invega do better than the “not approvable” letter issued to Lilly’s fellow atypical antipsychotic Zyprexa for its once-monthly depot, Zyprexa LAI? The long-acting injection formulations may have a new risk of excessive sedation. Given J&J’s flagging public enthusiasm for the project, and its renewed interest in Alkermes’ claim that its technology can now support a once-monthly version of Risperdal Consta, does J&J really care?

Schering-Plough’s Bridion (sugammadex): The prospect of the first selective relaxant binding agent, which was just approved in the EU, has stirred up the anesthesia market. But signals from FDA could indicate caution. The agency extended the user fee goal by three months to review a hypersensitivity study. And in an unusual set of events, a March advisory committee supported approval, but could not make a formal recommendation because data had been submitted shortly before the panel met.

Moving beyond the bounds of pending NMEs opens a plethora of potential REMS. One likely candidate is Cephalon’s fentanyl product Fentora. The advisory committee review of a breakthrough cancer pain indication for the approved drug focused on the inadequacies of the existing RiskMAP. Other extended-release pain products, like Labopharm’s tramadol formulation, are also potential REMS contenders.

Review the list yourself and play along at home. What else looks REMS worthy to you?

--Bridget Silverman

Antipsychotics and Comparative Effectiveness: FDA's Temple Explains Vanda "Not Approvable"

Pay attention to Vanda Pharmaceuticals.

The company and it's rejected investigational atypical antipschotic drug iloperidone appear to be a marker in the ongoing debate over whether FDA is increasingly using a comparative efficacy standard when considering new drug approvals.

“We are disappointed by this response, but will meet with the FDA to discuss this decision further,” Vanda Pharmaceuticals CEO Mihael Polymeropoulos said in a statement after receiving a “non-approvable” letter from FDA for the schizophrenia drug iloperidone, July 29.

Based on comments by FDA's dean of the drug review process, Bob Temple, there may not be much to discuss.

The atypical antipsychotic was licensed from Novartis after the Swiss company dropped it from development. Polymeropoulos previously headed up Novartis' global pharmacogenetics group before founding Vanda in 2003.

The FDA maintained that Vanda had demonstrated the effectiveness of iloperidone at 24 mg/day with efficacy similar to the active comparator, Pfizer’s ziprasidone (Geodon), according to the company. Vanda also claims the agency confirmed a prior study’s results that iloperidone was better than placebo in patients with schizophrenia at doses of 12-16 mg/day and 20-24 mg/day.

But FDA turned the drug away due to its lackluster performance versus Johnson & Johnson’s atypical risperidone (Risperdal). The agency, in its letter, said Vanda would have to conduct an additional trial comparing iloperidone to placebo and including an active comparator such as Risperdal or Eli Lilly’s olanzapine (Zyprexa). The company will also have to generate more safety data for the higher dose.

FDA has been assailed recently for going beyond its statutory obligation of approving and rejecting drugs simply based on its mission rooted in a singular question: do the benefits outweigh the risks? Critics say FDA is adopting a comparative effectiveness standard for me-too drugs.

FDA Office of New Drugs director John Jenkins insists that assertion is absolutely incorrect and that FDA always bases approvals on the benefit/risk question. To read more, click here. However, not everyone at the agency has been nearly as insistent on that issue.

Temple, who oversees the office which regulates psychopharmacologic drugs and also serves as director of FDA's Office of Medical Policy, has warned sponsors of the higher bar for approval in the past for classes where there are already multiple therapeutic options. To read about our warning in 2007, click here.

At a July 30 Institute of Medicine meeting on evidence-based medicine and comparative effectiveness, Temple unexpectedly—and briefly—addressed the iloperidone decision—we think.

“It’s getting much harder to develop the third, fourth, fifth, and sixth member of a class of drugs because when there’s a generic, people are inclined to use the cheap one,” Temple said.

Temple tried to frame comparative effectiveness studies—specifically randomized clinical trials and not literature reviews or observational studies—as the best, and maybe only, way to get those drugs through FDA.

“So to get anyone interested in the next member, you almost have to be able to have some sort of advantage. It could be safety, of course, but I see more interest than ever before because the industry regularly didn’t look at this sort of thing in comparative studies for a fair number of drugs.”

Then he weighed in specifically on what we assume was the iloperidone decision.

“We have taken a couple of steps that I think are interesting. We’ve turned down new antipsychotic drugs because they didn’t seem as effective as the available therapy.”

He continued: “I can’t remember if that ever happened before or whether we didn’t have the [courage] but we did. We decided that it wasn’t good if you’re an acute schizophrenic in the middle of an episode to be treated poorly.”

Those sentiments make it extremely unlikely that Vanda will be able to get an approval without conducting a large, expensive, prospective, head-to-head comparative clinical trial outlined in the FDA letter. Temple made it appear that there would be little room for negotiation.

Now it’s up to Vanda whether they want to use the $65 million in cash on hand plus future rounds of raising capital to do the studies FDA wants.

The broader message to drug developers is you can go ahead and add antipsychotics to the list of drugs that will have a higher threshold for FDA approval.

New Drug Approvals at the Half: 2008 Looks A Lot Like 2007, And That Isn’t Good

So do you want the good news or the bad news?

Let's start with the bad. So far, the number of new molecular entities and novel biologics approved by the Food & Drug Administration in the first half of 2008 is actually lower than it was at this time last year. FDA approved six NMEs by the end of June 2008, one less than the seven NMEs approved by the mid-point of 2007.

And history suggests the second half will look kind of like the first. In recent years, roughly half of the yearly total of NME approvals fall between January and June. In 2007, seven of 16 NMEs were approved by June 30; in 2006, nine of 18 fell in the first six months; and in 2005, seven of 18 NMEs were approved halfway through the year. (For more analysis of FDA’s approval performance at the half, see the July issue of Pharmaceutical Approvals Monthly.)

Given that 2007 ended up being quite possibly the worst year ever for innovative pharmaceutical launches, those are not trends anyone should be excited about. Only 16 NMEs made it through the agency last year, the lowest single-year total in a quarter century--which is before the modern generic drug industry took shape and made new molecules so vital to the health of brand name companies.

So what's the good news? Well, despite the slow start andFDA's recent history of slow finishes, we would be willing to be that the agency will in fact beat last year's NME total.

Why? First off, the agency has at least 30 pending applications for NMEs with user fee deadlines that fall during the second half of the year. (Want the list? Click here to see it, courtesy of Pharmaceutical Approvals Monthly.)

Of course, FDA has officially decided that it no longer has to meet the official user fee deadlines – given the overload of work stemming from the new drug safety legislation on an already strained staff. That certainly complicates any predictions for the rest of the year--but it also means FDA has a handful of applications that are overdue for action. And, it looks to us like the trend is for missed deadlines to end in approvals, rather than requests for more data and new review cycles.

User fee goals have been missed for three NMEs under review by the Division of Cardiovascular and Renal Products alone this year: Cardiome/Astellas’ Kynapid (vernakalant) and Solvay’s Pulzium (tedisamil), both anti-arrhythmics with user fee goal dates in mid-January, and The Medicines Company’s Cleviprex (clevidipine) for acute hypertension in May.

More recently, Theravance announced that the July 21 user fee date for its antibiotic televancin was passing without FDA action. Amgen also announced that the user fee deadline for Nplate was among the cohort of drugs where FDA was consciously missing the PDUFA date (after accidentally releasing a press release that the thrombocytopenia product was being approved).

That means FDA has at least five pending applications where an answer is overdue. We're betting that most of those will end up approved at some point this year.

Then there is the impact of one of the biggest changes to FDA’s review authorities under the new law: the creation of mandatory Risk Evaluation & Mitigation Strategies. Thus far, FDA has used the REMS to breathe life into drugs that were stuck at the agency for years.

We'll talk more about those trends in some upcoming posts, but the bottom line is that we still expect the NME tally this year to come in ahead of last year.

Still, let's keep some perspective: if by some miracle FDA approves all 30 pending NMEs this year, it will end up with a total of 36 overall. More than double last year's tally--but just an average year for the 1990s.

Sadly for the innovative industry, its clear that the best to hope for this year is to recovery from abysmal to the merely dreadful.

Amgen's Denosumab: NOW How Much Would You Pay?

Monty Hall is back, because it sounds like it may be now or never to secure a partnership with Amgen for one of the most eagerly awaited Phase III projects in the industry—the post-menopausal osteoporosis treatment denosumab.

Recall that Amgen is considering partnering the project, a once-unthinkable option but now an oh-so poignant sign of the times for an industry struggling to reinvent itself. Recall also that we offered you complimentary access to the profile of denosumab from Elsevier’s Inteleos database to help you decide how much to pay for a share of this potentially huge market opportunity—and to shoulder some of the risk that denosumab will instead become another spectacular Big Pharma flameout.

The latest development: Amgen has announced positive Phase III results in a big osteoporosis trial, involving about 8,000 patients studied for three years. The company certainly isn’t underplaying the results. R&D chief Roger Perlmutter told The New York Times that the trial “exceeded my expectations”--which seems hard to do, given that denosumab is essentially a bet-the-company project for Amgen at this point.

During Amgen's quarterly call July 28, Perlmutter explained his ebulliance. “The fact that we saw statistically significant reductions across all primary and secondary endpoints was really very impressive. I will also say that when you look at the safety database, you have nearly 24,000 patient years of experience here, so it is far greater than anything else that we had to look at. The fact that the safety profile is so balanced as compared to placebo was extremely encouraging.”

Now, we might take those comments with a grain of salt, since all indications are that Amgen is still actively soliciting interest in partners for the drug. As CEO Kevin Sharer noted during the call, the positive study “certainly doesn’t preclude the necessary work we will do to see what our options are.”

Amgen, of course, wants to raise the price of any deal: “This data certainly makes us more confident in our ability to launch ourselves,” Sharer declared.

And Amgen certainly faces other pressures. The company is deep into cost-cutting mode as it adjusts to the new, sharply reduced realities of its flagship EPO franchise. The last thing it wants to do is embark on aggressive new spending to build a massive primary care sales presence to support denosumab.

Sharer, understandably, declined to provide any estimates on how much Amgen would have to spend to support a go-it-alone launch—no sense showing all your cards, is there?

"Our view is that we've got really strong data here," he said. "We're going to have to take this data, look at it carefully, see what physicians think. But I just want to assure our shareholders that we're going to make a full and complete analysis and surface the right set of options, and I'm confident we'll pick the right one.”

Sharer also suggested that an internal launch might not be as expensive as the conventional Big Pharma model would suggest. "We see this medicine with its high science component as being something that will take the kind of high science and medicine approach that we've historically taken. So we do not see this as a normal general practitioner kind of sales product that you just throw in the bag."

On the other hand, Sharer clearly has a bit of a one-track mind when it comes to thinking about the importance of denosumab to Amgen. Asked to comment on Amgen's overall approach to infrastructure-building, and whether there might be any opportunities in the current climate of consolidation, Sharer replied succintly. "I can't imagine buying a company to acquire a sales force. That' s inconceivable."

So I guess those Genentech sales reps are going to have to look elsewhere....

DOTW: Short, Sweet, and Not Just Roche

Thanks to some well-timed vacation for a few members of your hard-working blog team here at IVB things might be a little quiet for the next week or so. Not entirely so, but just enough that you'll have a dull ache somewhere in the bottom of your soul. Take an antacid, you'll be fine. Probably.

But what a week it has been, and we're not just talking about the NL East race. Roche has kept us all entertained with its bear-hug of Genentech and--as if to say, hey, its business as usual here in Basel--two further acquisitions: RNAi delivery play Mirus and the antibody screening platform company Arius.

We hope we've entertained you with our coverage here and elsewhere within the broad FDC-Windhover family of fine publications, and we've had a good response to our poll about the wisdom of Roche's $44 billion move: 54% of the nearly 200 responses we've had thus far think that the Roche/Genentech relationship wasn't broke and so Roche is stupid for trying to fix it. If you haven't voted, go ahead, the poll is still open. And don't forget to suggest other ways Roche could spend all that money: we've started a list here.

Of course this week hasn't been all hand-wringing about Roche's moves, other companies have been busy as well. GE bought Vital Signs for $860 million. Summit and Biomarin teamed up to develop Summit's Duchenne muscular dystrophy preclinical candidate. GSK pronounced its tie-up with the South African generics player Aspen a "transformative" deal. Sanofi-Aventis' Sanofi-Pasteur vaccines division today snapped up UK vaccine play Acambis. And Lilly decided to find an alternative way to finance its Alzheimer's pipeline with a deal involving Quintiles' NovaQuest division and the massive investor TPG-Axon (see their earnings release for more details).

We're tired just thinking about all that.

image from flickr user Derek Farr used under a creative commons license.

Genentech/Roche: A Big Pharma Vet Weighs In

Roche's offer to acquire Genentech in full has got everybody talking. The most frequent subject of discussion in conversations we've had with biotech and pharma leaders is culture. What impact will Roche's deal have on Genentech's biotech roots and culture? To read our initial take, click here.

One former head of R&D at one of the largest pharmaceutical companies in the world who now works at a biotech weighed in.

"Roche and Genentech have for a very long time said that one of the key to the success of Genentech is Roche’s ability to leave it alone and continue to function in a biotech model. So, I think there are two questions," he says.

"One, is that Genentech has now grown into the size of any respectable major pharma company. Is it really still functioning in a biotech model at all? Second, will Roche have a different level of control over Genentech when it owns all of it than when it had when it owned a majority stake?"

The implicit answer to the first question is a clearcut, no.

"That second piece is in Roche’s control. They can either choose to change how they govern or just leave it alone. Frankly, I think the success of Genentech has been simply outstanding and I hope that Roche allows them to function [as they always have]."

Please keep your comments on the deal's impact on culture coming as this will be a major theme as an increasing number of biotechs get snapped up by large pharmaceutical manufacturers.

There have been a number of interesting angles to come out of the most recent proposed Genentech/Roche combination.

One theme that intrigued us in the wee hours of the morning when the deal was first announced was the nationalistic/protectionist angle of a large Swiss company taking full control of an American company, which serves as the model for the biotech industry. We've written a little about this before. To read our previous stories, click here and here.

We even wondered whether this deal triggered a formal national security review (remember Dubai Ports?) by the Committee on Foreign Investments in the US (CFIUS). The committee is made up of representatives from the State Department, Homeland Security, the Office of Science & Technology Policy, the Department of Defense, the Justice Department, the Council of Economic Advisors, and the US intelligence agencies.

We asked one of the foremost experts on the issue if it does? He says it doesn't. The only way the deal would require approval from the committee were if Roche was "gaining control through acquisition." Roche already owns 56% of the company.

Nevertheless, the patriotic angle shouldn't be altogether discarded. For example, when Roche was readying to launch it's follow-on EPO Mircera (the courts eventually had something to say about that plan), Amgen quickly built a case that a Swiss company was going to be entering the US market with a higher priced product, which would gouge Medicare and American taxpayers. To read about it, click here.

Even though the deal won't trigger a national security review, Genentech could use the protectionist argument to defend itself in a public relations fight if it decided to get down and dirty.

Do you think there is a legitimate nationalistic defense in this case? Or is this just globalization at its finest?

Venture Round: An IPO To Do List

KPMG LLC released a survey this week declaring that a venture capitalist don't expect to see a "consistent flow" of IPOs until 2010.

Odd, dire predictions like that coming from an industry populated by eternal optimists. (We later learned the survey of 297 included venture capitalists, corporate buyers, bankers and entrepreneurs.)

Ah well, as we've discussed in the past, times are tough. However, our own private survey of a few investment bankers paints a slightly brighter picture for life sciences IPOs. But it's only slightly brighter.
However, as we noted in our upcoming IN VIVO magazine, predicting when the IPO window will open is not unlike trying to predict when the winter's snow will melt. Yes, it'll happen eventually, when the weather gets warmer, and if you project out far enough into the spring calendar you've got a greater chance of being correct.

But so many macro-economic factors must be taken into account when crystal balling the IPO market. Fortunately for us, investment bank Jefferies & Co. Inc. presented us with a clear road map of what must happen for medical device and biopharmaceutical IPOs to return.

(Jefferies also provided us with some fascinating data tracking IPO success with stage of company. The results will surprise. Check out the magazine.)

Bottom line, our gurus are hoping to see things coming around sometime next year. But so many balls still hang high in the air.

***

Not surprising but certainly worth noting: SR One Ltd., one of the more if not the most venerable of corporate venturing programs, has seen its last days as an independent entity. It's merging into the new GSK Ventures, according to this morning's VentureWire Lifescience.

We suggested this would happen when we broke the news on GSK Ventures back in May. True, SR One had staying power. The unit has existed since 1985 when Peter Sears started to invest on behalf of SmithKline Beckman.

But the group's West Conshohocken office must have been equipped with a revolving door to handle all the changes in management since Sears' retirement a decade ago. The units managers have swung in and out of the place leaving for opportunities in the venture world or back at Daddy corporate.

GSK Ventures new manager Russell Grieg, a direct report to Andrew Witty, the new GSK CEO, will work from the group's office in Pennsylvannia, according to the report. SR One's web says the group has moved to East, we presume, to Conshohocken.

***

Is the out of control locomotive starting beginning to slow? VentureWire reported this week that first half investments in healthcare companies dropped 30% compared to the same period last year. Overall venture capital dropped only 12.4%

The $1.97 billion Q2 total is off 22.1% from the $2.53 billion invested in the corresponding period in 2007, a year in which VCs funneled a record $10.17 billion into the sector. So far this year, firms have invested a total of $3.8 billion in health care, down from the $5.5 billion they had funneled into the sector by the end of June 2007.

[In the biopharma sectors VCs] invested $1.07 billion last quarter, down 15% from the $1.26 billion sunk into the sector in Q2 of 2007. This year's first-half biopharma total of $1.88 billion is down 41% from the $3.1 billion in the first half of 2007, and is the lowest since 2005, when firms had invested $1.73 billion into biopharmaceutical concerns through two quarters.

Medical-device funding is also down. Investors put $797.6 million into devices companies in the second quarter, down from $1.05 billion in second quarter of 2007. Device investing stands at $1.6 billion for first two quarters, down from $2.07 billion last year.

We generally agree with the VCs quoted in the artice. This seems like a healthy correction and a wise one given the current economic state. But we'll provide deeper analysis of our own fund-raising data in the September Start-Up.

***

VentureWire Lifescience also confirmed what we reported a few weeks ago. Foundation Medical Partners is raising a fund. VWLS puts the target at $150 million which sounds about right to us....VWLS also says that OrbiMed Advisors has hit the $150 million for its Pan-Asian health care fund, Caduceus Asia Partners LP. OrbiMed added to its Asia-based team with the hiring of Sunny Sharma, a private equity partner in Mumbai. Sharma joins managing directors Nancy Chang and Jonathan Wang. Sharma previously had been managing director of Easton Capital.

***

Remember the VC Comic? They brought a little bit of laughter to an otherwise dreary day of venture capital reporters who covered the stone-cold life sciences industry rather than the red hot Internet investments. Of course, we got the the most important laugh--the last one--a few years later. (Thanks to HEC Paris Private Equity and Venture Capital Club blog.)

Waxman With A Zinger!

There's clearly no love lost between House Oversight and Government Reforms Committee Chairman Henry Waxman (D-Calif) and North Carolina Republican Patrick McHenry.

But Waxman outclevered the more junior Republican this afternoon at the Medicare Part D hearing. During friendly questioning of Acting CMS Administrator Kerry Weems, McHenry was making the point that no way could you trust the government to negotiate better prices for drugs under Part D compared to the private sector.

"There are some shortcomings to the program, it's a government program, that's what government does very well, right? Inefficiency is what government does very well," McHenry said of the Part D program.

Weems answered the eventual question on negotiating savings.

Waxman waited until the end of Weems' testimony and then hit the audience with this one-liner:

"Thank you, Mr. McHenry. Mr. Weems, thank you very much for your participation, I know you're anxious to get back to the work that government bureaucracies do so poorly, according to our friends on the other side of the aisle, but I salute you for the work that you do," Waxman said with a smile.

Zinger Zam!

Chairman Waxman will be here all week, folks.

Taking Apart Part D: A Preview of 2009

That was fast.

House Oversight and Government Reform Committee Chairman Henry Waxman (D-Calif.) didn't wait long to call out specific pharmaceutical companies at a major hearing on the Medicare Part D drug program.

Early in his opening statement, Waxman cited Johnson & Johnson and Bristol-Myers Squibb for the windfall profits they have made off the Part D program due to the switch of dual-eligible Medicaid patients over to Medicare.

"Johnson and Johnson earned over $500 million in additional profits, much of it from just one drug, the anti-psychotic medication Risperdal. Bristol Myers earned a windfall of almost $400 million, thanks to higher prices for the stroke medication Plavix," Waxman alleged.

He continued: "This is an enormous giveaway. And it has absolutely no justification. The drug companies are making the same drugs. They are being used by the same beneficiaries. Yet because the drugs are being bought through Medicare Part D instead of Medicaid, the prices paid by the taxpayers have ballooned by billions of dollars."

This was after he said the government was paying 30% more for the 6 million dual eligibles under Medicare than they paid under Medicaid.

Ranking Virginia Republican Tom Davis quickly noted that there are many drugs not available under Medicaid because of more stringent pharmacy rules. Gerard Anderson, director of the Center for Hospital Finance and Management, Bloomberg School of Public Health, Johns Hopkins University, disagreed, saying the Medicaid formulary is quite open, with a wide breadth of offerings. Davis didn't let up, pointing out that you can't fill as many prescriptions at the pharmacy under Medicaid.

Stephen Schondelmeyer, head of the Department of Pharmaceutical Care and Health Systems, University of Minnesota, waded into the numbers. States spent $43 billion in Medicaid spending in 2005. That number was cut almost in half in 2006 to $21 billion after the duals were switched to Medicare, so money was switched out of the state system, according to Schondelmeyer.

He noted that 18% to 19% of that Medicaid spending came back to states in the form of rebates. But the numbers are actually quite higher, he said. Individual states can negotiate further rebates under a supplemental law and many states are successful in getting larger rebates. Schondelmeyer cited rebates of 20%-21% between 2000-2003; 24% in 2004; and 28.8% in 2005. The University of Minnesota researcher said the Centers for Medicare and Medicaid Services has not released data for 2006 and 2007, but he estimates the rebates come in at 30% to 31%. A report released by Waxman late last year showed Part D was generating rebates of about 8%. A new report by the majority staff released today shows Part D rebates for 2007 had gone up to 14%, but still well below what the states can secure. To read the report, click here. There's a lot more to delve into.

In other words, even at 14%, states are able to negotiate more than double the rebates the government is getting under Part D.

Anderson made three major recommendations: 1) Greater Part D price transparency; 2) Drug pricing data should be readily available and accessible; and 3) All government agencies should be paying the same price for drugs.

Hmmmm. The drug and insurance industries aren't faring too well in the first part of this hearing. So what's the take home message? Expect even more of these types of hearings in 2009 and get to know the names of the witnesses who are testifying today. To see the list, click here. It's almost identical to the witness list at a Senate Finance Committee and prior House Oversight hearings in early 2007. In other words, these are the experts who Democratic lawmakers will be calling upon for advice and guidance when crafting policy.

How to Spend $44 Billion: Suggestions for Roche

We've given you our thoughts on why Roche wants to spend so much money ($43.7 billion to be exact) to buy out Genentech, a company it already controls. Of course, a key part of analyzing the deal is to consider other ways Roche could spend the money. So, herewith, we start a recurring discussion:

How else could Roche spend $44 billion?

A few initial ideas to get your creative juices going...

(1) Buy Bristol-Myers Squibb instead (current market cap=$44 billion). Why not get access to oncology/specialty products you don't already own?

(2) Buy Genzyme and Celgene (combined market cap=$50 billion). Two for the price of one!

(3) Buy majority stakes in Genzyme, Celgene, Biogen Idec, and a dozen small-to-mid-cap biotechs. If, as we keep insisting, the Genentech relationship was the most successful partnership in the history of the industry, why not repeat it on a grand scale?

(4) Buy Fannie Mae and Freddie Mac. Roche is a banker, after all, and these two depressed assets are surely a good value. Best of all (believe it or not) Roche could buy them both and still have over $20 billion left to shore up their cash reserves. America is saved!

(5) But a $16 Terrace Level ticket for dollar dog night at Citizen's Bank Park. Take in the Phillies vs. Marlins in a critical September showdown. Purchase 43,699,999,983 hotdogs. Tip the guy a buck.

How PhRMA’s Marketing Code Sells Itself

When it comes to marketing, packaging counts.

That also seems to be the case with marketing guidelines--at least, with the revised Code on Interactions with Healthcare Professionals from the Pharmaceutical Research and Manufacturers of America.

We've written a lot already about what the substantive changes to the code itself means, including its compliance mechanism, and new limits on pens, meals, speakers and CME. We’ve even offered three easy steps companies can take next to achieve a utopian future.

But beyond the message PhRMA is sending though the content of the code, there’s the image the association is projecting through the formatting of document itself. The precepts in the revised code are basically a progression from the 2002 code, but the layout is stunningly different.
The most obvious change to the code’s formatting is the color palette and design motifs. The blocks of black and red had been replaced by blues and grays in spiral patterns. What do those changes mean?

Well, we asked some of our designers their opinions. Overall, the design of the 2002 code is “forceful” and intense, they tell us, while the 2008 code is relaxed, though still “peppy.”

The new document also tones down PhRMA’s self branding. In the old version, the association’s acronym was the biggest thing on the cover page, and it towered over every question in the Q&A section. In contrast, the PhRMA logo only appears three times in the new version. Those changes may reflect an industry that now feels its size and strength make it a target for criticism. Blue is also a “loyalty color,” we are told, and the new code may in fact be bathed in Patone’s “Dispense As Written Azul.” The 2008 version also boasts a table of contents – how’s that for transparency?

Another formatting change may be evidence of industry belt tightening. Even though it contains more words, the page count of the 2008 code is 36 pages, while the old one weighed in at 58. Like marketing departments everywhere, it’s doing more with less.

Despite the reduced page count, the text in the revised version is larger and more readable than the previous version, but it uses a sans-serif font. While clean and easy to look at, a sans-serif font (like Helvetica) does not fit with the eye the way a serif font (like Times) does. According to the experts, when reading large amounts of text, people are better able to absorb it if it comes with the complex features at the tops and bottoms of the character strokes.

If that’s not an endorsement of industry’s shift towards biotech products, we don’t know what is.

– M. Nielsen Hobbs

For Amgen's Nplate, No News is Good News

In case you didn’t have it circled on your calendar, July 23 was the user fee deadline for Amgen’s romiplostim (Nplate). And according to Amgen, FDA didn’t pick up the phone yesterday with a final answer on the platelet drug.

Without delving into specifics, Amgen says it was told by FDA that the agency will miss Nplate’s Prescription Drug User Fee Act deadline. The company says it is “optimistic that a final decision will be made soon,” but wouldn't speculate on exactly when the agency will be making an approval decision.

Maybe Amgen won’t speculate, but we will. We think the delay is actually good news for Nplate, and signals that—barring any last-minute surprises—an approval is just around the corner.

Simply put, if FDA weren’t pretty confident of the approvability of Nplate, it would have issued an “approvable” letter outlining its concerns with the BLA. Amgen would need to address FDA’s questions, submit a response and wait to hear back. (We should note that starting August 11, FDA will start sending "complete response" letters for all rejections.)

In this case, the review group is taking advantage of a new policy giving them the discretion to miss PDUFA deadlines. And it is fairly easy to see why the final review might take a bit longer than expected: Nplate will have a mandatory Risk Evaluation & Mitigation Strategy, or REMS, a new feature of the regulatory process created by legislation enacted last year. FDA is setting precedents with every REMS, and the agency has already extended or missed several deadlines for products covered by that authority.

There is a major caveat: when it comes to drug time lines, industry is treading in somewhat unknown territory these days. So while past history would suggest that a missed deadline would mean that approval is imminent, there is always a chance that the agency will let the application hang for a while.

That is certainly happening with FDA’s Cardio-Renal division, which has missed user fee dates for at least three NMEs this year: two anti-arrhythmics—Cardiome/Astellas’ vernakalant (Kynapid) and Solvay’s tedisamil (Pulzium)—and The Medicines Company’s clevidipine (Cleviprex) for acute hypertension.

But the oncology group has no history of letting applications linger. Quite the opposite: FDA doesn't always approve applications for cancer and related therapies, but it almost always acts quickly.

One thing is clear: as last week's slip-up by Business Wire illustrates, Amgen is ready to issue the approval press release whenever FDA is.

Roche-Genentech: A Defensive Play on Follow-On Biologics

If a generic competitor was waiting in the wings with an improved version of Genentech’s Avastin, how much less would the company be worth in the eyes of Roche?

Probably a lot, you’d say. Probably a lot less than $44 billion, which as everyone on the planet knows by now, is what Roche bid to acquire the remaining 44% of Genentech earlier this week.

We’re not suggesting there is anyone waiting in the wings to undercut Avastin at this very moment. And when it comes to analyzing Roche-Genentech, FOBs probably isn’t the first thing that jumps to mind. (Which is why, incidentally, we’ve already blogged on the deal here and here. And why we’re planning all kinds of great coverage in this week’s issue of “The Pink Sheet.”)

Indeed, there are lots of other questions: Does Roche’s price justify the quality of the R&D portfolio it would acquire? Is the timing of the deal more about financial strategy than innovation, as Roche claims? And does any of that matter if the acquisition results in a massive walkout in South San Francisco?

But given where follow-on biologics are headed these days—and how much money is at stake for a company like Genentech—the impact of follow-on biologics on the timing of the deal is worth considering. So here’s our take:

There’s no doubt these are hard times for pharmaceutical companies—low approval rates, a stalled R&D engine, payor pressure and the risk of health care reform. And while that’s hit across Big Pharma and Big Biotech, biotechnology companies have enjoyed one major upside: infinite product exclusivity.

That honeymoon is about to be over.

We’re just not talking about Congress authorizing a regulatory pathway for follow-on biologics. Or even competition from generic companies. The biggest threat to the biologics industry may come from within Big Pharma itself—a group that is incredibly experienced in manufacturing products, has money to invest, and is desperate for a few more dollars on the bottom line.

As we’ve written in The RPM Report, Big Pharma companies haven’t been shy about their interest in developing “me-betters” that get around IP issues with existing follow-on biologics.

Indeed, some of the biggest names in Big Pharma have acquired technology platforms that could be used create ther own versions of existing large molecules: GSK (Domantis); Bristol (Adnexus); Wyeth (Haptogen); and Teva (Cogenesys). And some executives (like JP Garnier and Jeff Kindler) have acknowledged plans to do just that.

So what does that all have to do with Roche-Genentech?

It’s clear FOBs are a major threat to biologics IP. Even if Congress doesn’t pass legislation authorizing a follow-on biologics pathway, FDA will continue to approve “me-too” large molecules on a case-by-case basis. And if the technology platforms Big Pharma has been snapping up lately is any indication, we’ll start to see the March Of The “Me-Better” Biologics—and the pricing pressure that follows.

For Roche, staying ahead of that curve means finding a way to make biologics faster and cheaper. And the best way to do that is through post-merger synergies. So contrary to the message Roche is sending to investors, the timing of the deal probably has less to do with “innovation” and more to do with squeezing out savings.

At the very least, it’s another sign that that Big Pharma companies are thinking about follow-on biologics in dealmaking—either by acquiring companies with the technology to make me-betters, or by positioning themselves in a way to compete with any competing large molecules that may come down the pike.

It's one more pressure that will make biologics less profitable in the long run—and one more reason for Roche to head it off at the pass. Genentech created Roche’s pipeline—and propelled the company to the number-one growth stock despite what is arguably the worst R&D in the industry. Now it needs to protect that investment.

Next Steps for PhRMA and Marketing (Part 3): Let the Sunshine In

Concluding our series of proposals for pharmaceutical marketing to reclaim the high ground. We've already suggested re-defining the mission and combining the Pharmaceutical Research & Manufacturers of America's various codes of conduct.

Today, step three: Let the Sunshine In

“Transparency” is now everybody’s favorite buzzword in Big Pharma. Merck CEO Richard Clark urged his colleagues to embrace the call to "create transparency" during his inaugural address as chairman of PhRMA.

Indeed, the immediate impetus for PhRMA’s effort to update the marketing code came when Congress got serious about pushing “sunshine” legislation. (And the Code is already a success, since that initiative did not make it into law this year.)

The problem with transparency: by definition, you can’t see it. Obstruction you can see. Transparency is invisible.

Since the calls for transparency are motivated fundamentally by mistrust of industry, how will the public (or at least its elected representatives) ever be satisfied that industry is in fact being transparent? Put another way, if industry chooses to hold anything back—for competitive reasons or otherwise—why wouldn’t the assumption continue to be that some ugly truth is being hidden away?

Our suggestion: invite the public in to those conversations. Every pharma company should appoint a transparency committee, a group of independent outsiders--preferably well-known critics. The transparency committee (though we prefer the name "sunshine band") would have carte blanche to review anything and everything related to the company's procedures on information disclosure. They would be empowered to make recommendations that the company would be obliged to respond to. (Not necessarily implement--but at least acknowledge and explain a decision not to implement.)

The transparency committee should report directly to the board—or even better, to a central transparency committee convened by PhRMA. We even have the perfect chairman: Cleveland Clinic Cardiologist Steve Nissen. (He may have bigger plans for his career that rule him out, but still.)

Nissen is a particularly articulate critic of industry on issues like publication bias and clinical trial result reporting. But he is also a clinical investigator and an experienced author of academic research, so he understands the importance of protecting information as well.

That whole idea may sound crazy, but give us a second, we're just getting warmed up.

Industry could go yet one step further than letting its critics shape disclosure policies: it could ask them to review and approve its marketing plans in the first place. Now we know this sounds crazy. Pharma companies went ballistic over a provision in an early draft of the FDA Amendments Act that would have explicitly authorized FDA to review a company’s marketing plan in the context of assessing a proposed Risk Evaluation & Mitigation Strategy.

That provision came out--but the spirit lives on. In fact, we would argue that a suitably motivated FDA can and will demand access to marketing plans for drugs under the REMS authority. And even if FDA doesn't push that way on its own, the fact that Congress thought about it once means it is likely to come up again later.

More to the point: industry says marketing is about delivering valuable scientific information to doctors and patients. It is about education. So why not ask those being educated to review and respond to the curriculum? Who knows, they might even get excited about the new medicine...

Enough opining from us. What do you think?

Next Steps for PhRMA and Marketing (Part 2): Combine the Codes

Continuing our free advice for Big Pharma marketing groups on ways to reclaim the high ground. (And yes, you do get what you pay for...)

Yesterday, we suggested a new mission statement for marketing.

Today, step two: Combine the Codes

PhRMA has statements of principle governing professional promotion, direct-to-consumer advertising and clinical trial disclosure. But industry’s critics do not see them as separate issues. Neither should industry.

Let's start with the two "marketing" codes, one for DTC and one for interactions with physicians. It is easy to see why there are two: there are very real differences in the regulatory oversight of DTC and professional promotion, reflecting the fact that DTC is a "new" phenomenon (at least in the sense of broadcast television ads), while sales reps calling on doctors is a venerable industry institution.

But when it comes to defending marketing in the political realm, it is silly to try to differentiate. Indeed, association CEO Billy Tauzin acknowedges that many of the public perception issues facing the industry require addressing both DTC and professional promotion. So PhRMA is upgrading its principles of consumer advertising too.

In an era when informed patients often know more about their medical conditions than the physicians who treat them, it is also absurd to argue that there is a fundamental need to craft different messages based on who has the MD. (Different messages based on knowledge level yes, but sometimes that means dumbing it down for the docs and engaging more scientifically with patients.)

We might also highlight the danger for industry if doctors—not the biggest fans of DTC in the first place—begin to really get upset about it now that they spend more time in front of the TV and less time at industry sponsored dinners.

Updating the DTC code is a nice first step. But PhRMA and its members should go further. In age when Big Pharma is rethinking everything (or should be), it is time to challenge the mindset that professional marketing and consumer promotion are two different activities. A sales rep visit is indeed different than a TV commercial during the Super Bowl. But both are probably equally inefficient.

If industry wants to reclaim the high ground for marketing it must take a stand on who the marketing is supposed to benefit. The updated PhRMA code does that, by the way: "Our relationships with healthcare professionals are regulated by multiple entities and are intended to benefit patients and to enhance the practice of medicine."

If the goal is to benefit patients, then it is nonsensical to consider sales force activities and DTC as in any sense separate. If either the patient or the physician lacks the necessary information to make an informed therapeutic choice, then the marketing campaign failed.

The code of conduct for clinical trials is less obviously part of the same picture, but PhRMA would do well to look at it in that light. Industry bristles at claims that its big R&D budgets are really just to support marketing. But let’s face it: the questions asked and answered by clinical trials and other industry sponsored research are indeed the primary source of information about medicines—and so the very essence of all industry marketing.

Put another way: no one objects to industry sponsored research. They object to the perception that the results are skewed or hidden based on a commercial agenda. In other words, they think marketing trumps R&D.

PhRMA’s current clinical trial code covers issues related to reporting and disclosure, but Congress has already taken that issue much further. If PhRMA wants to reclaim the high ground, the association will need to take another look at that policy—especially in the context of even bigger steps to rebuild its reputation.

Tomorrow: Step Three—Let the Sunshine In

Roche/Genentech: When Independence Costs Too Much

It's already Tuesday but that won't stop us from our penchant for Monday morning quarterbacking--especially when it comes to the biggest deal we're likely to see all year: Roche's unsolicited bid for the remaining 44% of Genentech it didn't already own. So why do it?

Certainly, Roche’s earnings are slowing and buying the remainder of Genentech will allow it to consolidate 100% of Genentech’s profits, not merely 56% of them. And there may be, as one banker noted, obscure tax reasons pushing a deal: Roche has always had a complex financial structure.

But ultimately Roche’s acquisition rationale must out-argue the one big reason not to do the deal: this has been the most successful relationship in pharmaceutical history. Neither company would likely exist as an independent entity without it. Genentech was an acquisition waiting to happen back in 1990 when it managed to keep at least managerial independence by selling Roche 60% of its shares. Without Genentech, the Swiss giant would most likely be part of another Swiss giant, Novartis (which still owns a small stake in the pharma.)

It's worth remembering that in 2007, Roche got 28% of its sales from Genentech-sourced products, which include the large molecule trifecta Herceptin, Rituxan, and Avastin. Moreover, one third of its Phase II and III pipeline is comprised of Genentech programs. Meanwhile, Roche's 56% ownership of Genentech accounts for roughly a third ($55.2 billion) of its $154 billion market cap, the second biggest in Pharma after Johnson & Johnson.

In case you aren't getting it, let's be clear: Roche’s success is largely due to Genentech.

By buying Genentech – and no one we spoke with figures this deal will end up any other way, as we noted yesterday the only question is the ultimate price tag– Roche is betting that this unique relationship has already borne its best fruit. The independence that kept Genentech productive has simply become too expensive.

Sure, the Roche press release made the obligatory soothing noises about Genentech’s independence and culture. Severin Schwan, Roche's CEO even went so far as to say “I would like to reiterate from my side how big [our] respect is for Genentech’s achievement, how big the respect [is] for Genentech’s culture” on a same-day conference call announcing the news. “We have sent very, very strong signals to Genentech [about] how much we appreciate the strength Genentech brings into our organization," he said.

I'll say. Actions, as your mother taught you, speak louder than words. And the manner of Roche's bid does much to destroy any future positive collaborations between the two companies. Apparently, Genentech CEO Art Levinson only learned of the deal on Sunday, July 20th, the day before it was announced.

If the intent was to preserve the Genentech culture, wouldn't Schwan's team have first outlined the positive rationales for the deal to Levinson and his board, and allowed them a window of time in which to suggest alternative governance structures that might have preserved Genentech's independence? Instead the announcement was sprung upong Genentech as a fait accompli.

The deal, in short, has more of the hostile flavor of the Ventana takeover. That shouldn't be too surprising: the Ventana acquisition, which took seven months from start to finish, was also spear-headed by then diagnostics-leader Schwan. Moreover, Greenhill & Co., the boutique bank that advised Roche in that high stakes gambit, is also advising on the Genentech tender offer.

Few people we talked to figure that Genentech’s best scientists will stick around. In the first place, most of those responsible for the marketed and later-stage products are already gone or wealthy enough, thanks to Genentech options, to chance a start-up. “They’ve already got their nest eggs,” says one former Genentech executive. “I suspect most would stay if Art Levinson does,” says a senior Genentech executive. “But they won’t if he doesn’t.”

And the early betting is that he won’t. “This deal humiliates him,” says one banker. “They didn’t talk to him first.” Adds a Big Biotech CEO: “Even if they let him run the pharmaceutical operations, do you think he’d want that? I certainly wouldn’t.”

Perhaps David Hamilton of bNet Industries is correct when he writes that Roche "has vastly underestimated both the difficulty of managing biotech operations and the risk that Genentech’s scientists will simply walk away at their first opportunity." They certainly aren't the first Big Pharma to take the biotech plunge that's faced significant cultural issues--MedImmune, anyone?

But Roche is populated by extremely smart folks, so our guess is Schwan's team has probably figured the likelihood of mass exodus into its deal calculus. Instead, it’s betting that the strategic and financial flexibility complete ownership permits are more valuable than the theoretical continued R&D productivity achieved by keeping Genentech at arm’s length.

Indeed, a financially strong Roche is buying Genentech at a time “when the house of Pharma is burning,” says one Big Biotech CEO. With Genentech, Roche will be be much larger by market cap than all of its pharma rivals and far out of reach of its Swiss nemesis, Novartis, ensuring freedom from takeover threats.

Which gets to what we suspect is the real point of the deal: industrial efficiencies. Roche’s last major pharmaceutical acquisition– of Syntex, in 1994, for $5.3 billion– worked out quite well, if not exactly as the pharma company imagined. Roche cut massive costs out of the operation, saw their shares rewarded for the expense reductions, and netted themselves, in the transplant drug CellCept, one of their most important products outside of the Genentech collaboration.

Today, Genentech is one of the few large companies Roche could buy without angering Wall Street, which has come to see the large cost-cutting horizontal mergers characteristic of the 1990s as value destroying. But the aura of the Genentech pipeline allows Roche to make a horizontal acquisition–with plenty of opportunities to cut significant expenses and thus increase earnings (Roche’s PR estimates savings of $750 - $850 million a year).

And while a number of analysts were angry over the deal’s terms, Roche shares were up on the announcement. “It may not create value long term,” says the Big Biotech CEO, “but it lets Roche do what these deals used to do – cut costs – and live to fight another day.”

Indeed, Schwan’s vision of the pharmaceutical future is one in which large companies will compete on the basis of industrial efficiency, not the kinds of innovations Genentech is known for. The value of such innovation is too unpredictable and perhaps growing more so as payors increasingly question the high prices charged for a cancer drug like Avastin which provides, on average, only a few extra months of life.

It's likely Roche took a look at the price of its current Genentech relationship--with its manufacturing transfer prices, up-front fees and royalties, and most importantly no ability to leverage its investment in the US marketplace where the economics of oncology marketing look more and more like primary care--and figured those costs outweighed the innovation it would lose if Genentech's world class talented departed as a result of a takeover. Just as no primary-care force can afford to sell a single product, Roche can’t afford a US oncology operation selling only Xeloda.

Moreover, Roche is clearly not convinced that Genentech’s productivity would have continued at the rates it has in the last decade. And there are plenty of people who agree. “We all know that Amgen is now a Big Pharma. We talked about it eight years ago. But I think Genentech has now sneaked over that line too,” says the CEO of one of Genentech's peer Big Biotechs.

Without having spoken with him for this story, we suspect Severin Schwan’s vision of the pharma future looks a lot more like the cost-constrained world he knew at Roche Diagnostics – where innovation was rare and rarely paid for; where extraordinary business acumen counted for more than outsized research capabilities. Roche’s first gamble on Genentech was all about R&D. Its new gamble: business synergies will drive the next wave of pharmaceutical success.

--By Roger Longman

Roche/Genentech: End of an Era

OK, readers, have at it. Roche's proposed acquisition of the 44% of Genentech that it doesn't already own is going to dominate the biopharma chatter for the foreseeable future. So give us your initial impressions, and we'll give you ours.



Why is now the right time for Roche to move, considering that it risks screwing up what is generally considered the most successful alliance in the history of the industry? Certainly Roche probably feels like the price is right--and that it mightn't ever get righter. The dominant theme elsewhere in the media will very likely be about Roche bioteching itself with Genentech's capabilities; you might also be reminded of AZ's own increasingly precarious experience doing the same with MedImmune.

But let us suggest that this deal, for all the talk about innovation, in the end has more in common with Big Pharma megamergers--cost cutting, savings, gaining access to the US market and potentially Roche better positioning itself for the twin futures of personalized medicine and follow-on biologics.

We also realize that the price is likely to change, if today's early reaction from the market is any indication. But Roche has been there before with Ventana and it can leverage that experience. This isn't a done deal, but Roche is likely to eventually prevail.

Watch this space and our sister publications "The Pink Sheet" DAILY and "The Pink Sheet" for ongoing coverage.

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Next Steps for PhRMA and Marketing (Part 1): Define the Mission

Our hats are off to the Pharmaceutical Research & Manufacturers of America task force on professional practices. It is no simple matter to get three dozen companies to agree on anything—much less something as politically and commercially sensitive as the rules governing marketing to physicians.

And to do so in a way that addresses real-world, day-to-day operations is so much tougher. PhRMA’s updated Code on Interactions With Healthcare Professionals wrestles with the nitty gritty details of how physician marketing works, and doesn’t shy away from tough, specific directives on everything from pens to meals.

So no one can say PhRMA is hiding behind bland statements of principle rather than addressing the real world.

But perhaps you can say the opposite: that in getting into the weeds of how marketing works, PhRMA has lost site of some bigger principles. Debates over pizza and pens may help in that cause, but they don’t come close to justifying marketing as a vital, necessary activity for society.

In that spirit, may we suggest three modest proposals of our own?

Step One: Define the Mission

It is time (past time, perhaps) for PhRMA and its members to redefine the role of marketing and reclaim the high ground.

Every marketing organization should have a mission statement that it can embrace and brag about. The goal cannot be simply to increase sales. The goal should be to ensure the widest appropriate use of life-improving or life-extending medicines. Marketing done right means a medicine reaches more of the right people; it maximizes the benefit society receives from medical science.

PhRMA’s updated code on interactions with physicians suggests this mission in the preamble: “Appropriate marketing of medicines ensures that patients have access to the products they need and that the products are used correctly for maximum patient benefit.”

Hopefully, every marketing organization believes that already. The hard part is convincing the rest of the world to see it that way.

To do that, you can’t just say that’s what marketing is—you have to mean it. For example, do companies compensate marketing personnel based on “maximum patient benefit”? Its hard to say yes if sales reps get bonuses for boosting prescription market share in their territory: that is compensation based on maximizing revenue.

Of course, coming up with bonuses tied to maximizing appropriate use requires some real creativity, and probably a complete rethinking of the marketing effort.

But that’s only step one.

Tomorrow: Step Two--Combine the Codes

While You Were Joking

Yes we know that the anti-hero that has taken the cinema world by storm this weekend is The Joker, but indulge us as we play The Riddler for a quick and question-filled weekend roundup:

• What's up with Roche? The Swiss pharma has moved its earnings report up from Thursday to Monday. No reason was given for the change. We suppose by the time you read this we'll know if there was any drama. (UPDATE: Roche is offering to buy the 44% of Genentech that it doesn't already own. Pricetag? For now it's $43.7 billion.)


• What happened to Pharma Giles?


• Why did Shire cross the Irish Sea? (To get to the lower taxes.)


• When is it Shark Week? Not yet, Greg Norman.

Prasugrel: My August Looks Free…and So Does My September

Eli Lilly’s prasugrel team may have some free time on its hands in August and September if FDA’s advisory committee calendar is any indicator.

After FDA extended the priority review deadline of the novel anti-platelet drug by three months on June 23—the deadline was June 26—to September 26, speculation began in earnest around whether the drug would be required to go before the agency’s Cariovascular and Renal Drugs Advisory Committee.

August 19-20 had been tentatively blocked off for a meeting of the Cardio-Renal panel and Wall Street, FDA watchers and industry stakeholders pointed to the dates as a strong possibility for a prasugrel review.

Well, a quick look at FDA’s advisory committee calendar shows the blocks have suddenly disappeared. Moreover, September is completely free of any advisory committee meetings and no new Cardio-Renal meeting has been added to the end of July. We should note that a tentative Peripheral and Central Nervous System Drugs Advisory Committee meeting blocked off for August 6-7 has been postponed.

Do with that what you want. Of course, FDA can add a meeting at any time.

But, if FDA sticks to the extended review deadline and the calendar remains as is, it appears that prasugrel will not go before an advisory committee before a final decision on the application is made. That’s probably a positive sign for Lilly because the committee would have been used to address uncertainties with the application and the postmarket surveillance REMS program.

If, however, FDA adds a meeting in late August or early September, that almost certainly means the prasugrel review will miss another deadline.

A Lilly official says the company still has not been informed by FDA that prasugrel will require an advisory committee review. FDA says there is no Cardio-Renal panel scheduled as of right now. We still think prasugrel will be approved on its first cycle.

We’re not going to rehash our reasoning but you can read it by clicking here and the follow-up is here.

Deals of the Week: All Star Break

In a week when the AL (again) defeated the NL 4-3 in a marathon 15-inning All-Star game at Yankee Stadium (thanks, Billy Wagner, for blowing the save and losing home field advantage for the World Series-bound Phightin' Phils), there were a few all-stars in the pharmaceutical world as well.

The buzz word this week was diversification, with health-care behemoths Johnson & Johnson and Abbott Labs posting better-than-expected quarterly results. J&J was buoyed by its consumer products business and Abbott had both stents and Humira to thank for its performance. On the other hand Novartis--an increasingly diversified company--grew in spite of its non-branded Rx divisions: its consumer medicines and Sandoz generics business enjoyed only moderate success thanks to tough times in the key US market, but that didn't stop the Swiss company from posting solid second quarter numbers. (We'll have more to say on Big Pharma business models and the yin and yang of focus and diversification in an upcoming IN VIVO piece.)

Keeping with the baseball theme: we're not a blog to steal signs but we couldn't help but pick up on something earlier this week. On Tuesday we gave you all free access to the denosumab record from Elsevier's Inteleos database and noted that Amgen has suggested it would be open to licensing the project, at least for the primary care indication of post-menopausal osteoporosis (PMO).

The challenge? For all of you expert dealmakers out there to add your two cents regarding the value of the project and potential deal strategies for Amgen. We can only assume that the dearth of comments suggests that all of you are in preliminary or even final-stage negotiations with Amgen and therefore recuse yourselves from the prize-less competition. Wink wink, we get it. Slackers.

You know who hasn't been slacking off? Those intrepid dealmakers responsible for ...



GSK/Actelion: The week started off with a bang when on Monday Glaxo fronted CHF 150 million ($148 million) in a worldwide (ex-Japan) co-development and co-promotion pact with Actelion for the Phase III orexin receptor antagonist almorexant. The Big Pharma pledged an additional CHF 415 million in pre-commercial milestones for the drug’s first indication of primary insomnia and an absolutely filthy figure for total milestones in two additional indications. Reactions to this deal were varied, to say the least. One analyst called it "the largest-ever partnering deal in the history of the industry," while others pronounced themselves decidedly "underwhelmed." Certainly you can't please everyone. But allow us to be the voice of reason, the voice of moderation, the voice of baby bear, when we say that GSK's figure was probably "just right." Why's that? Well forgetting the non-insomnia terms and taking into consideration the fact that GSK will help Actelion get its primary care field force off the ground by paying it to promote an undisclosed GSK drug prior to almorexant, the upfront payment may have been low for a Phase III primary care drug circa 2000-2003, but not anymore. The few primary care drugs available for licensing in Phase III, with novel mechanisms of action designed to treat non-life-threatening diseases, come saddled with higher than ever clinical development hurdles and increased regulatory scrutiny. GSK’s ante for almorexant—though large enough to put the deal in the upper echelon when it comes to guaranteed money—might seem small were it not for those circumstances. The fact that the Big Pharma is only chipping in for a minority of almorexant’s pivotal development program (which aside from the ongoing RESTORA 1 study will include at least two more Phase III trials) is further evidence that GSK is hedging its bets here.

Genzyme/PTC: We'll spare you the "London buses" reference but suffice to say it's unusual to see one $100 million+ upfront licensing deal and to see two in a week--well, that's plain crazy. But score another one for the orphan drug seekers. On Thursday, Genzyme paid $100 million to PTC Therapeutics to enter into a global collaboration to develop and commercialize PTC124, PTC's novel oral therapy in late-stage development for the treatment of genetic disorders due to nonsense mutations. The drug is in Phase IIb trials for Duchenne muscular dystrophy and is scheduled to enter a Phase IIb in cystic fibrosis later this year. PTC will cover the cost of 124's remaining Phase II program--which is slated to include four trials--and from there the parties will split development costs 50/50. PTC is eligible for $165 million in development and approval milestones and $172 in sales milestones. PTC will commercialize in the US and Canada (where it is responsible for all commercialization costs) and Genzyme takes responsibility for marketing and associated costs for the RoW. In addition to Genzyme's up-front contribution PTC pulled in up to $25 million from the non-profit Cystic Fibrosis Foundation the day before the deal was announced to support development of '124 in CF.

ViroPharma/Lev: Specialty pharma outfit ViroPharma announced it was entering the hereditary angioedema (HAE) space with its $443 million acquisition of Lev Pharmaceuticals. The linchpin of the deal is Lev's C-1 esterase inhibitor Cinryze, a biologic that has been available in Europe for 35 years to treat this rare and life-threatening condition, which causes inflammation of the larynx, abdomen, face, and extremities. Lev filed a BLA for Cinryze in July 2007, seeking approval for both prophylaxis and acute treatment of HAE. The product faces competition from CSL Behring's C1 inhibitor Berinert and Jerini's Firazyr. Our sister publication Pink Sheet Daily has more on the HAE market and Cinryze's chances of success. For ViroPharma, the deal marks a shift away from the antiviral space, which has long been its focus, into the hospital/ transplant arena. And with the addition of a soon-to-be marketed product, it continues the company's trend of playing to an investor base attracted to fully-baked and largely derisked assets. Recall this is the company that made a tidy profit on Vancocin, a decades old product it inlicensed from Eli Lilly, to treat Clostridium difficile outbreaks. ViroPharma's timing on Vancocin was exquisite. It brought in the product just when very nasty strains of the bacterium were causing large scale hospital outbreaks of the disease; given the market forces, ViroPharma was able to raise prices of the drug considerably. It is currently working on a follow-on to Vancocin, NTCD. Meantime, there's little information available about ViroPharma's hepatitis C program: ViroPharma discontinued its HCV-796 program, partnered with Wyeth, earlier in the year. According to ViroPharma's website, the two companies continue to exlore follow-on molecules to treat the disease.--Ellen Foster Licking

MacroGenics/Raven: Raven Biotechnologies finally found a buyer in MacroGenics. Last November, Raven announced a tie-up with VaxGen worth about $39 million. But VaxGen's shareholders revolted and scuppered the deal this past spring. MacroGenics, in turn, has been working to build a fully integrated biopharmaceutical company (how quaint) around its Fc antibody engineering and dual affinity re-targeting (DART) programs. It has a large deal with Lilly to develop and commercialize its anti-CD3 mAB for use in the treatment of autoimmune diseases, icluding recent onset-type 1 diabetes. On July 17, MacroGenics and Raven announced their tie-up. Financial terms weren't disclosed but it seems unlikely that Raven got more than what VaxGen originally offered. For MacroGenics, the acquisition provides additional preclinical assets, including more than 1300 monoclonal antibodies that Scott Koenig, CEO of MacroGenics, claims can rapidly be developed using their optimization platforms. In addition, the deal gives MacroGenics access to a portfolio of proprietary cancer stem cells from many types of primary tumors that could be an important addition to MacroGenics R&D capabilities. --EFL

Teva/Barr: What's $7.6 billion buy these days? Maybe a top-five starting pitcher, but those are hard to come by. No, this week it was Barr Laboratories. This late-breaking deal of the week is the latest chapter in the ongoing consolidation of the generics sector, but the bigger story here is the combination of Teva and Barr's biologics programs. Teva also noted Barr's legal prowess and at-risk launch capabilities. Under the terms of the deal, each share of Barr common stock will be converted into $39.90 in cash and 0.6272 Teva ADRs and Teva will assume Barr's $1.5 billion in debt, to boot. In other generics news, Czech generics play Zentiva is now telling investors to reject Sanofi-Aventis' attempt to up its stake in the company, saying the $2 billion play is a lowball offer.

photo by flickr user mori claudia used under a creative commons license.