Thursday, January 31, 2008

"Consensus is not our goal": A Conversation with FDA's Top Drug Reviewer

Drug companies aren't the only ones worried about the sinking rate of new drug approvals. Food & Drug Administration officials are equally concerned over the innovation drought. After all, the number of new drugs making it to market is at its lowest since 1983.

FDA's Office of New Drugs Director John Jenkins, who oversees all new drug applications within the drug center, is especially preoccupied with the lack of results from the drug development process. "We agree that it’s very disheartening that despite the rather massive expenditure of research dollars, we’re not seeing a growth in the number of NMEs submitted to the agency for review," Jenkins says of new molecular entities getting aproved by the agency. "We are seeing a continued growth in the number of new commercial INDs submitted, so there still seems to be a lot of innovation. It’s a question of how to get them out the other end of the pipeline."

Jenkins also addressed other issues ranging from drug safety to how FDA plans to prioritize implementing the new drug reform regulations under the FDA Amendments Act. In particular, he addressed the public disagreement between the drug review and drug safety groups during the Avandia advisory committee meeting last July.

"Consensus is not our goal," Jenkins says. "That strikes some people as odd when they first hear me say that, but I think that if you’re in a regulatory organization and people think that consensus is the goal, that leads to a subtle pressure to conform to the prevailing viewpoint even though you may not agree with the prevailing viewpoint and you may in fact be right."

You can read the whole interview in The RPM Report by clicking here. Free registration for non-subscribers is on the left side; subscribers should just log in.

I would love to hear your comments on Jenkins' views on FDA, drug companies and drug development.

Wednesday, January 30, 2008

Neuro Companies Causing Headaches

Ever since President Bush (the First) declared the 1990s to be the Decade of the Brain, hopes have been high for device innovations to treat a variety of neurological conditions ranging from stroke to migraines to depression.

For all the promise these therapeutic areas hold, neurological device applications have proven to be among the most inscrutable for entrepreneurs and investors, replete with technological and clinical challenges, not the least of which is the difficulty of conducting neuro trials, e.g., the inherent problems in enrolling acute patients for stroke studies.

Several recent announcements have done nothing but confirm how challenging the neuro space is. In fact, this year is starting out to be one that neuro investors would just as soon forget. Highlighting the bad news cascade was Northstar Neuroscience Inc.'s announcement that its EVEREST pivotal trial failed to meet its primary efficacy endpoint. This caused Northstar's stock to immediately plummet by nearly 90%, hovering today at just above $1 per share. Coming off what many investors called the most successful device IPO of 2006 (raising more than $100mm), Northstar's stock took an unexplained hit not long after going public, but there is no doubt about the reason behind this most recent crash.

Hopes surrounding Northstar were high. The EVEREST trial was designed to determine whether cortical neurostimulation, together with rehab therapy, would improve hand and arm function in stroke survivors better than rehab alone. Not only did the initial four-week data fail to show any meaningful difference between the investigational and control groups, but a preliminary review of the longer-term (24-week data) appears to show similar results. John Bowers, Northstar's president and CEO, during a conference call discussing the trial results, noted, "To put it mildly, we are extremely surprised and disappointed" by the study's outcome, and couldn't explain why EVEREST failed to reflect the positive results demonstrated by the company's two previous feasibility trials.

Northstar remains well-financed--the company reported having more than $80mm in cash and investment on hand as of year-end 2007. While feasibility studies are still being explored for possible applications of Northstar's Renova technology to treat tinnitus, aphasia and depression, Bowers acknowledged that it is unlikely the company will make sufficient progress in any of those areas to launch a new pivotal trial this year.

Northstar is not the first high-profile failure in the hot neurostim/neuromodulation space. Cyberonics' decision to no longer focus on treatment-resistant depression with its vagus-nerve stimulation technology--concentrating instead on epilepsy--has been well documented. Northstar's fall may, however, cause investors to pause and assess what progress other players in this area are making before committing additional funds.

Other recent examples of bad neuro news come from one particular therapeutic area: PFO closure (a hole in the heart that fails to close after birth) thought to possibly cause both migraines and stroke. NMT Medical Inc. just announced that it was shutting down its MIST II PFO/migraine trial, primarily due to patient enrollment difficulties, to concentrate on its CLOSURE I pivotal PFO/stroke trial. Investors didn't take the news well, driving the company's stock price down as much as 35%, although it has regained about half of that lost value in the last couple of days.

Indeed, one whole area of PFO closure technology--so-called energy-based approaches that use sources including RF-energy to seal the PFO--has apparently proven unworkable. Cierra Inc., a company out of The Foundry incubator, is in the process of winding up its operations, and, according to executives familiar with this space, CoAptus Medical Corp., the other player in this space using an energy-based approach, may soon follow suit.

Lest we leave you with a completely negative take on the prospects for device-based neurological therapies, here's one recent positive development: earlier this month, the FDA cleared Penumbra Inc.'s system, which is a tool-set designed to treat ischemic stroke by removing occlusions from the brain's larger vessels. Penumbra's approach is designed to provide neuro-interventionalists with an approach that can be used beyond the narrow, three-hour window during which the drug tPA is indicated, as the company's system can be employed within eight hours of an ischemic event.

"Human Brain" by Flickr user Gaetan Lee used under a creative commons license.

Who's Sorry Now? Not Feeling So Good Edition

Nature reports today that a peer reviewer for the New England Journal of Medicine leaked to GlaxoSmithKline that big old Avandia meta-analysis that has been the bane of their existence since it was released in May 2006. (Our coverage of the Avandia debacle can be found here.)

University of Texas Health Science Center professor of epidemiology Steven Haffner, MD, explained to Nature: "Why I sent it is a mystery. I don't really understand it. I wasn't feeling well. It was bad judgement."

Brian Vastag writes in Nature that Haffner faxed the article 17 days ahead of publication to GSK's Alexander Cobitz, whom he had worked with on an earlier trial of Avandia. What happens from there is unclear--though it's not like GSK effectively got out in front of the news, the 17-days head start may have helped them provide a relatively prompt interim analysis of its RECORD study, which was published in the NEJM in June to try to stop the bleeding.

We will likely have more on this later, once the dust settles. For now, we bring you another edition of "Who's Sorry Now?"

A Mission at Risk

It’s déjà vu all over again.

“Either we’re going to make sure this agency has the resources necessary to do its job, or we’re going to watch it continue to deteriorate.”

That’s Rep. Henry Waxman, speaking yesterday at a hearing of the Oversight & Investigations subcommittee of the House Energy & Commerce Committee. The topic: an FDA Science Board report released late last year that found FDA to be so deficient in its scientific and technological capacities that it is unable to meet its regulatory responsibilities.

Wonder why? It comes down to one simple reason, and it shouldn’t be a surprise to anyone: the regulatory demands on FDA have increased exponentially as funding for the agency has deteriorated.

But wait—didn’t the Prescription Drug User Fee program, reauthorized as part of the drug safety overhaul, fix this problem?

Alas, no. Over the years, FDA’s new drug review activities have received relatively generous funding thanks to PDUFA. It’s everything else—information technology infrastructure, scientific research to support regulatory standards, the crisis du jour that drains resources from everything FDA does—that is the problem.

The modest increase in FDA’s budget for non user fee programs is nowhere near enough to solve that problem, much less support the new authorities the agency received in drug safety. But, hey, we could have told you that—check out our earlier story on FDA’s funding crisis in The RPM Report.

In the words of former FDA chief counsel Peter Barton Hutt, who helped put the Science Board report together, that chronic underfunding has left FDA “barely hanging on by its fingertips.” What’s needed, Hutt recommended, is a doubling of FDA’s budget over the next two years, a 50% increase in employees, and a 5.8% cost of living adjustment every year thereafter—numbers that had chairman Bart Stupak’s head spinning.

Maybe that is why Stupak seemed more interested in bashing von Eschenbach over specifics in the Science Board report. One highlight was a long exchange between the two over what von Eschenbach had requested for funding in the President’s fiscal 2009 budget. Stupak wanted specifics he could compare to President Bush’s numbers; von Eschenbach demurred until the budget is released next week.

You might have thought that after the passage of the drug safety law, Congress would have left FDA alone for a while to implement it. But it doesn’t look like that’s in the cards this year: Stupak promised Commissioner Andrew von Eschenbach at least five more appearances in front of his Oversight & Investigations Subcommittee alone this year. And that’s on the heels of a packed 2007 Hill schedule for von Eschenbach and career FDAers.

So what does this mean for drug companies? Well, it’s not good news: when FDA officials are hauled up to Capitol Hill and bashed over the head for doing a poor job, that doesn’t reflect kindly on the industries it regulates. And as Gail Cassell, Lilly’s VP-scientific affairs testified, when advances in science outstrip FDA’s ability to regulate, that means new therapies don’t get approved in a timely manner.

Perhaps the saddest thing about the FDA Science Board report is that none of the findings are new. The Institute of Medicine and, most recently, the Government Accountability Office, have issued similar reports on the chronic underfunding of the agency. You can find them here and here.

Waxman closed his remarks with this comment: “I hope the Science Board report will be the last report we have to read about the desperation at the Food & Drug Administration.” You can bet Waxman isn’t alone in feeling that way.

Tuesday, January 29, 2008

Close But No Cigar

The kind of thing that strikes you as interesting if you are reading a new book about linguistics (pictured right) while keeping tabs on Wall Street's assessment of Amgen Inc.'s prospects going forward: what exactly does "close" mean?

Amgen surprised Wall Street by announcing at the JP Morgan conference that its full year 2007 earnings per share would end up "close" to the low end of its initial forecast of $4.30-$4.50 for the year. After a dismal year of regulatory and commercial setbacks, including the company's first ever layoffs, analysts did not expect the company to come near to hitting those numbers.

They dutifully revised upward their projections for the fourth quarter--but Amgen still beat their consensus when it reported earnings of $4.29 per share for the full year. That is as close as you can get to the initial baseline forecast of $4.30, right?

That at least is how it looks to people who follow the company closely.

But not everyone sees it that way. At least one Wall Street observer--a reporter for CNBC--looked at Amgen's JP Morgan announcement and read it as if the guidance itself were still in force, and Amgen's prediction of coming close to the low end as a warning that it would be in the $4.31-$4.35 range. So $4.29 per share was a disappointment. (Check out this exchange between a CNBC reporter and Amgen.)

Guess you've got to pick your words carefully....

Survey Says?! Too Little, Too Late

Lets have another quiz. The above chart illustrates ...

a. Reaction to last night's State of the Union address
b. The results of the IN VIVO Blog poll about Schering-Plough and Merck's reaction to critics of the Enhance study
c. Both

Lets not get too carried away though. Although we all know that you IVB readers are smarter and better informed than your average bear, only a very small minority of you (compared to how many visits the site gets) decided to vote. Slackers!

(It'll take a whole mouse-click but if you can muster up the energy you can find our ongoing Vytorin coverage here.)

The Muddy Waters of IVD

Ron Zwanziger, CEO of Inverness Medical Innovations, must be one helluva juggler. The company announced its twelfth acquisition in as many months. This time the Waltham, MA-based diagnostic player is spending $1.18 billion in cash and stock to bring health management company, Matria Healthcare, into its ever-widening fold. (For a more in-depth look at the Inverness strategy, check out this piece from colleague Tom Salemi.)

Matria is a leading provider of disease management services, especially strong in women's health and oncology. Inverness's acquisition is a big bet--$900 million to acquire the company and the assumption of Matria's $280 million debt--in the importance of building a diagnostics empire that directly touches patients not just in the doctor's office, but also in their homes. The ultimate goal: a range of services from tests that assess risk and help diagnose disease to home monitoring systems that keep a particular scourge, be it congestive heart failure or cancer, under control.

At first blush, the marriage of point-of-care diagnostics with health management services seems odd. It's certainly not one the Street understands. (The market reacted negatively to the news sending the stock down $4.26--about 8%--to $47.97.)

But there is a certain logic to the idea. Importantly, both health management and the diagnostic business are driven by the same underlying principle: companies that succeed in these spaces provide products for which payers will reimburse, which in turn means offering tests or services that improve an individual's health while simultaneously lowering health care costs.

Even more broadly, Inverness’ acquisitiveness is another illustration of the blurring of the lines between previously distinct sectors including the traditional IVD space, home healthcare services, benefits plans, even DTC.

The Matria acquisition comes just months after Inverness ponied up more than half a billion dollars to buy two other leading health management outfits. In October, Zwanziger's team bought Alere, which develops home monitoring systems for patients with chronic diseases, for $302 million; in November, the company bought New Jersey-based ParadigmHealth, which offers disease management services for patients with complex health problems, for $230 million.

In a conference call, Zwanziger reported that pro forma revenues from these three companies will bring in roughly $500 million, giving Inverness a dominant position in the estimated $1.8 billion health monitoring market.

Certainly the purchase price of Matria dwarfs the previous two buy-outs and is second only to its spring acquisition of BioSite. In part, the size of the deal reflects the breadth of Matria's offerings. (Services to more than 1000 employers and managed care organizations, increasing the number of patients under active management from 100,000 to over 1,000,000 according to Inverness's Ron Garety, former Alere CEO.)

There was also, apparently, some competition. "We had to move quickly," confirmed Zwanziger on the conference call. "There were other interested parties."

But Inverness's decision, while rapid, was far from hasty. According to Zwanziger, the point-of-care diagnostic company had been interested in Matria for quite some time. Such a prolonged time, in fact, that as the company sketched out its long-term strategy, they had already penciled in the Matria name.

"It's a transformative acquisition," says Garety, who will be busy integrating Alere, ParadigmHealth, and Matria into Inverness in the coming months. That's because this isn't just about adding patients to Inverness's nascent management system. It's about connecting fragmented and disparate players in the health care delivery system to offer better care for lower cost. Or as Zwanziger told a packed house at JP Morgan a few weeks ago: "Extending diagnostic testing from disease identification to risk assessment to patient management greatly extends our business potential."

To help accomplish this, Inverness also announced its intention to form a joint venture with as yet unnamed financial backers around this bulked up health management business. This JV, seems to be primarily a strategy to reduce the capital risk associated with the move into health management.

But it could also give the company a much needed capital infusion at a time when the public equity and debt markets are--to say it politely--a little uncertain. In addition, noted Zwanziger, "The [JV would provide] strong liquidity to allow us to take advantage of all the opportunities out there."

(Translation: despite the spate of acquisitions, Inverness ain't done buying yet. )

Wall Street's lack of support doesn't appear to phase Zwanziger. "As we integrate our diagnostic products into the health management side, the value of Inverness will only go up," he predicts.

It's the same sort of mantra you'll hear when you listen to execs at GE Healthcare, Siemens, or even Royal Philips Electronics, which late in December expanded into the patient monitoring business with its $4.9 billion acquisition of Respironics. (For those who haven't been following, IVD has suddenly become fashionable again in our price-pressured health care environment. Here's IN VIVO's primer from our 2007 trends story.)

Like Inverness, these companies have also been gobbling up smaller entities as they create end-to-end solutions in the health care testing market. One can hardly blame the analysts for seeming a bit confused by Inverness's move into health management (or Siemens' advance into IVD or even pharmacy benefits manager Medco's forays in personalized medicine and disease management, for that matter).

Each acquisition seems to stretch the definition of what it means to be a diagnostic company. With all these companies newly under the Inverness banner--including BioSite, Paradigm, Alere, Diamics, HemoSense, BBI Holdings, Pan Bio and Matria --there's no easy way to label the company anymore. Is it a point-of-care diagnostic company that also develops home monitoring devices? Is it a rapid IVD company that happens to have a service arm for monitoring patients?

The diagnostic waters have gotten very muddy. Perhaps clarity will come with additional acquisitions. Given Zwanziger's track record in 2007, it's likely we won't have to wait very long.

"The Mighty Mekong River" by Flickr user Cap'n Surly used under a creative commons license.

Monday, January 28, 2008

Big Biotech M&A: Waiting for the Casus belli

Carl "who-says-Icant?" Icahn is doing his level best to recoup his losses on Biogen Idec by getting the damn thing sold.

This time he’s trying, with God-knows-what leverage, to install three of his own directors onto the Biogen board. We presume that they’ll try to convince the other independent directors to try the auction process again – this time without the ill tasting, if not altogether poisonous, pill inserted by CEO Jim Mullen.

We reported on that pill here (before anyone else, we should add).

Biogen insisted that bidders for the company follow a staged process—submitting binding bids before talking with either Genentech or Elan, its partners, respectively, on Rituxan and Tysabri. That didn’t go over too well, particularly in the case of Elan, which has a right (and would immediately get the money from any number of private-equity backers) to buy back the fast-growing Tysabri.

A Biogen buyer would have to negotiate with Elan in order to get Tysabri – and it wouldn’t know the price (assume: very, very high) until after it had offered one to Biogen (which also would have to be very, very high). Sure, it could back out of a Biogen deal if it couldn’t wrap up something palatable with Elan – but why go through all the shenanigans in the first place?

So now Icahn is starting the process again. Which leads us to wonder: isn’t there a more straightforward solution for the potential Biogen buyers out there?

Not likely, given the Europe-of-1914 interlocking map of pharmaceutical contracts today.

Elan owns a buyback right to Tysabri. So theoretically, a company could buy Elan – and then buy Biogen. No good—on the change of control in Elan, Biogen would have the right to buy out Tysabri. Which could then of course trigger a bid for Biogen…

That’s a pretty expensive strategy. Particularly because much of Elan’s value is in Wyeth’s hands. Wyeth owns a big chunk of Elan’s most valuable project—indeed perhaps the most valuable project in the entire industry, bapineuzumab – potentially the first-ever disease-modifying Alzheimer’s drug, which is set to report out Phase II results in the middle of this year. Wyeth isn’t getting much benefit from its position, because it’s been in a stock-market funk since the regulatory stumbles of its three late-stage primary-care pipeline projects (bifeprunox, bazedoxifene and Pristiq).

So one could theoretically buy Wyeth on the cheap to get Elan to get Biogen.

All of which is palpably ridiculous. Of course, who’d have believed you if you’d told someone in 1913 that all of Europe would soon be torn apart because one deranged Serbian killed the Austrain heir to throne?

Good luck, Carl.

Icahn to Biogen: Take a Mulligan

And a Denner and Young, while you're at it.

From Biogen's terse release this morning:

CAMBRIDGE, Mass.--(BUSINESS WIRE)--Biogen Idec (NASDAQ: BIIB - News) today announced that it has received notice from Icahn Partners LP and certain of its affiliates for the nomination of three individuals, Alexander J. Denner, Richard C. Mulligan and Anne B. Young, to Biogen Idec’s Board of Directors at the Company’s 2008 Annual Meeting.

Analysts have suggested this morning that Icahn's endgame may be to restart the failed auction process that concluded late last year. Part of the reason that auction failed, as we've pointed out before, is the restrictive NDA that Biogen management forced potential bidders to sign, essentially preventing interested parties from negotiating in parallel with Genentech and Elan, which hold options on Biogen's two key products in the event of a sale.

Meanwhile ... in news that inexplicably didn't make it into our weekend roundup (what can we say, we bought the Guardian), the Times is reporting that Biogen may make a bid for Danish biotech Genmab. Genmab is up about 7% today on the speculation.

While You Were Almost Upsetting

We've been told by certain football (soccer) fans that there are not enough allusions to the beautiful game in our weekend roundups. So as equal opportunity sports enthusiasts we thought Saturday's FA Cup fourth round near-upset of Premier League giants Liverpool by the part-timers from the curiously named Havant and Waterlooville away at Anfield warranted a mention. (And hey it's the NFL's ridiculous weekend off anyway.)

Even though they lost 5-2, this team of teachers, builders and trash collectors (not sure if there are any pharma bloggers on the team, but who knows maybe the mysterious Insider from Pharmagossip plays for them) led twice and gave one of the top teams in Europe quite a scare, at least in the first half.

What else was going on this weekend?

Friday, January 25, 2008

FDA Gets Out in Front on Vytorin, Defends LDL Endpoint

The Food & Drug Administration is weighing in on the Vytorin controversy via an "early communication" on the study results.

Given the hue and cry over the drug since Merck and Schering-Plough finally disclosed disappointing data from the ENHANCE trial January 14, many may wonder how FDA can say it is "early" with its response. After all, didn't Steve Nissen, the United States Congress, and seemingly every media outlet in the country already tell us what to think?

As far as Vytorin goes, the FDA announcement indeed is decidedly anti-climactic. The agency summarized the results already made public by the company, and said it would review the data fully once it is submitted by the sponsor. On a media call, Office of New Drugs Director John Jenkins said it may be another couple of months before the data is submitted, and up to six months before the agency completes its review.

And, Jenkins added, it is not like there is much to expect from the regulatory review itself. Vytorin is already clearly labeled as not showing any demonstrated benefits in long term outcomes data. The agency will be looking carefully for any new safety information in the data, Jenkins said, but it is not aware of any red flags at this time.

So not much new there.

But there is an important way in which FDA is getting out in front of the Vytorin story. One of the primary messages of the early communication and the media call was to try to diminish speculation that the ENHANCE trial calls into question one of the basic tenents of cholesterol therapy: the focus on LDL levels as a key marker for treatment.

The agency's main message: it remains confident that LDL reduction is a fully validated surrogate endpoint as a basis of approval for cholesterol treatments--and that LDL reduction is an appropriate therapeutic goal for physicians and patients. (Recall that the Schering-ENHANCE study failed to show the expected benefit of combination therapy with Vytorin versus single-agent simvastatin, despite showing significantly better LDL reductions.)

"It would be premature to embark on any systematic change in how we approve lipid-lowering drugs," Jenkins said. "We have a long track record" of success in basing approvals on LDL, he noted.

In fact, Jenkins added, LDL reduction is a much more fully validated than the arterial plaque endpoint used in ENHANCE.

"It is tempting to think of" changes in arterial plaque "as a direct measure of what these drugs do," Office of Medical Policy Director Robert Temple added. But "that may not be the best measure." He noted that statin drugs show improved outcomes in a matter of months--before any measurable changes in arterial plaque are observed.

"The surrogate that really works is LDL cholesterol," Temple stressed. "I'm very concerned that this will lead to people becoming indifferent" to their LDL levels, rather than seeking treatment.

That message may or may not help Vytorin in the marketplace--but it is great news for all cholesterol drug development companies.

Deals of the Week: Beyond Vytoringate

The sky is falling! The sky is falling! It sure seems that way this January Friday morning. Global markets slid early in the week thanks to a certain R-word and its association with the US economy. Meanwhile, in pharma land the brouhaha over Vytorin data--or lack thereof--has officially morphed into a scandal, with the addition of the "gate" suffix. (Take our poll!)

As of Thursday, both houses of Congress had initiated investigations, pressing Merck and Schering-Plough for information on the timing of executive stock sales in the wake of the delayed release of results from the so-called ENHANCE trial. Adding to the bad news, comes this New York Times report, which draws the American Heart Association--remember, the group came to the defense of Vytorin just last week--into the scandal thanks to financial ties to both companies.

In the wake of such scrutiny, it's not surprising that Vytorin prescriptions have fallen. Any doubt that these two pharmas have a serious image problem should be erased by this spoof from YouTube, where the omniscient narrator voices, "Nobody knows if Vytorin is safe or effective, but with enough scientific fraud, we can sure make it look like it is."

2008 is off to a great start. Thank goodness for Deals of the Week, where we promise not to mention Vytorin, Merck, or Schering Plough again--at least in this edition.

Teva/Cogenesys: On Tuesday, the Israeli generic drugs company announced it's acquisition of Cogenesys, the albumin fusion technology play spun out of Human Genome Sciences in 2006, for $400 million. Yet again, proof of a trend we've detailed several times: pharmaceutical firms continue to bulk up their large molecule capabilities. But for generics giant Teva, this deal is as much about deepening its stake in the ill-defined, yet surely valuable, follow-on biologics arena as is it about biologics capabilities per se. And that got us thinking. How much different is this deal, really, than Glaxo's take-out of Domantis, BMS's buy-out of Adnexus, or Wyeth's acquisition of Haptogen? Pharma's made a tremendous amount of money on next-generation (or me-too) small molecules. Stands to reason that as these firms jump into biologics, this might be just the space to play in--after all, new technologies allow the pharmas the opportunity to create IP-protected versions of existing large molecules that have largely been derisked. (Note: It's probably a good thing for Cogenesys that Teva inked the deal Tuesday not Wednesday. On Wednesday came news that HGS's own albumin-fusion protein, Albuferon for the treatment of Hepatitis C, may have adverse lung-related side-effects when dosed at the 1200 microgram level. HGS says it will shift patients in the Phase III trial to a 900 microgram dose biweekly and still expects to have late-stage data on the drug by spring 2009, with a marketing application to follow later that year.)

Roche/Ventana: Requited love--isn't it romantic? On Tuesday,came the news that after attempting to pledge its troth five times--and upping its share price to $89.50--Roche finally won Ventana's hand. We advised Ventana to take the outsized $75-a-share price late last summer, as $3 billion for a company with no near-term products seemed an outrageous return. Looks like we were wrong. That extra few months of wrangling won Ventana shareholders an extra $400 million in value, with the purchase price coming very close to the $90-per-share target Ventana CEO Gleeson had been gunning for all along. But even this happy news hasn't quelled the on-going rumor-mill. Forbes is reporting that although Ventana’s board has approved the deal it was over the objections of Chairman Jack Schuler and Vice Chairman John Patience. Neither have agreed to sell their shares to Roche. That’s 12% against the deal. Larry Feinberg, manager of the $1 billion Oracle Partners hedge fund owns another 8% of Ventana’s stock. He started buying in 1999 and tells Forbes: “My strategy has been to go along with those guys.”

Estee Lauder/Allergan: Last week the self-help guide "How Not to Look Old” made its debut on the New York Times best-seller list at No. 8 in the advice and how-to category, proof that the quest for eternal youth remains a constant in our society. This week comes news that Estee Lauder Cos' Clinique Laboratories is teaming up with Allergan to develop and market a new up-scale skin care line that will only be available from physicians. The new line will be priced at a premium compared to both Clinique's retail products and Allergan's physican dispensed offerings, which include Prevage MD and Forte. "The big idea here was: How do we become a leader in skin care?" says Allergan's CEO David Pyott. Allergan, is of course, the company that brought the world Botox, and has been a leader in showing the world how lucrative it can be to blend cosmetics with aesthetic medicine.

Forest/Novexel: Forest Laboratories plans to shell out $109.5 million in up-front fees to license North American rights to Novexel's preclinical intravenous beta-lactamase inhibitor, NXL104, which is being developed in combination with Forest's ceftaroline. (For those who don't remember, Forest acquired that product as a result of its 2006 acquisition of Cerexa.) If development work bears fruit--the combination is scheduled to enter the clinic in 2009--Forest will owe an additional $109.5 million. In addition, Forest also won first negotiation rights on another combination antibiotic--NXL104 plus ceftazidime, another cephalosporin with a slightly different activity spectrum compared to ceftaroline. This is the seventh major in-licensing deal for Forest in the last two years. While other pharmas have looked to biologics and other novel technologies to rejuvenate their pipelines, Forest is proving it has the know-how to license and succeed with primary care products, from anti-infectives to hypertension medicines such as Daiichi Sankyo's Azor to irritable bowel syndrom drugs such as Microbia's linaclotide. In other words, this spec pharma is proving it can succeed in big pharma's sandbox. For more on Forest's efforts in the primary care space check out this article from the December issue of The RPM Report.

The Best Defense Is a Good Offense, Or Something Like That

Merck and Schering-Plough put out a release a few minutes ago responding to critics of ENHANCE and the trial results' fallout:

WHITEHOUSE STATION, N.J. & KENILWORTH, N.J.--(BUSINESS WIRE)--Merck and Schering-Plough said today that they strongly object to mischaracterizations about the ENHANCE (Effect of Combination Ezetimibe and High-Dose Simvastatin vs. Simvastatin Alone on the Atherosclerotic Process in Patients with Heterozygous Familial Hypercholesterolemia) trial. “While the ENHANCE trial was time consuming and took longer than originally anticipated to complete, our companies acted with integrity and good faith in connection with the trial. We took numerous actions to assure the quality of the reading of the ultrasound images,” said Thomas Koestler, Ph.D., president, Schering-Plough Research Institute.
And from there it gets more defiant. So, dear readers, what do you think? Read the whole release. Is this an effective defense for Merck and Schering-Plough? Please take our poll:

Thursday, January 24, 2008

Listen for the Threat of the Medicare Rebate

Here we are shamelessly tooting our horn for calling the politics and action around pharmaceuticals and Part D correctly in 2007 and blowing a clarion call warning for 2008.

Tooting The RPM Report horn: In January a year ago, price negotiating and eviscerating the Medicare Advantage section of Part D were watched widely as two of the early objectives for the health leadership in the new Democratic Congress.

In the thick of the media obsession with those stories, The RPM Report pointed out how unlikely Congress would be to deliver on those goals in 2007 and why. (See here, and here and here, for clear foresight in retrospect).

Call to alert for 2008: This year, some in the media (for example, an interesting wrap-up piece in the Wall Street Journal January 23) are expecting a high-profile dangerous year for pharma.

Elections are always tough years for pharma in the news, but this one does not look to us like a year for major legislative initiatives against the drug industry.

Even the prospect of Democratic sweep in November may not be as threatening to Big Pharma as the Journal story suggests. The Democratic front-runners certainly do support action on pharma pricing that industry opposes--but their overall message is more nuanced and makes health care reform sound much less threatening to industry than it did 15 years ago. (You can read more here.)

There is one new threat, however, in a proposal that is generally beneath the radar for most observers: rebates to the government on Medicare Part D drug purchasers (see here).

We understand that rebates to Medicare sound pretty boring, wonky and not nearly as worthy of a headline as government price negotiation, but rebates could add up to big dollars from pharma. And the technical fix is just the type of tweaking to Part D that draws a real shiver from pharma execs.

The movement on Capitol Hill is just beginning for this way to recapture some of the alleged windfall that pharma reaped by moving Medicaid rebated drugs to Medicare. Listen for the distant horn.

J&J Tests FDA's Pain Threshold with Tapentadol

One line in Johnson & Johnson’s press release yesterday announcing the submission of a New Drug Application for the pain therapy tapentadol caught our eye:

"More than 1,800 patients have been treated with tapentadol IR tablets in clinical trials to date."

Which got us thinking: what makes J&J think they can get a new-ingredient product approved as a pain killer at today's FDA with data on only 1,800 patients? Haven't they noticed how tough it is to get new drugs through FDA, especially in the pain category?

Here are some possible answers:

(1) They are self-absorbed egotists with unfounded views of their own power and infallibility. But that can't be it, can it?

(2) J&J thinks that FDA will relent on pain products in the next year or so. It never hurts to be optimistic, but we haven't seen any signs of that yet.

(3) The product is for limited indications; J&J has a risk management program that will assure that it will stay in that population and they will sell the program to FDA as well as the drug’s safety.

Well, the press release says the product is for "moderate to severe pain" supported by studies in "patients undergoing bunionectomy surgery or for patients with degenerative, end-stage joint disease of the hip or knee," supported by a third study in "outpatients with low back pain or pain from osteoarthritis of the hip or knee." So it sure sounds like J&J is going after a big market based on relatively small studies. Not exactly a recipe for success by cautiously selecting a sub-population.

(4) There is something different about the way this product works which means that it will have no safety or abuse issues.

It surely doesn’t sound that way in the press release. J&J says it has "a unique profile with two mechanisms of action, combining mu-opioid receptor agonism and norepinephrine reuptake inhibition in a single molecule." That may be a great profile, but from a safety perspective it suggests a higher burden on J&J to show that the drug is free of two different potential risk profiles.

As for efficacy? According to J&J "data from these clinical trials suggest that tapentadol has efficacy comparable to strong opioids."

Is this a winning profile at today's FDA? We'll all find out later this year.

Cardiovascular Systems Antes Up

IN VIVO Blog heard some muted, but optimistic tones about this year's device IPO market at the JP Morgan conference. But Cardiovascular Systems Inc. must have heard a ear-splitting rendition of "Happy Days Are Here Again" that convinced it to file for an $86.25 million offering.

Don't get us wrong. The filing pleased as well as surprised us. We’re pleased because we identified Cardiovascular Systems as one of our notable Series A deals of the year in 2006. Imagine the sound of us tooting our own horn here.

But we’re surprised because, well the company just started selling its Diamondback 360° Orbital Atherectomy System, a minimally invasive catheter system for the treatment of peripheral arterial disease. That's because the FDA just granted Cardiovascular Systems 510(k) clearance in September.

In fact, the company says it “commenced a limited commercial introduction of the Diamondback 360° in the United States in September 2007.” By the end of the year the company shipped more than 1,700 single-use catheters to 57 hospitals and generated revenues of approximately $4.6 million, according to the S-1.

That’s a nice start, no doubt. But is it enough to go public on?

IN VIVO Blog says yes. Here's why.

Hedge Fund Maverick Capital, with 15% of the company, is among its biggest investors. Maverick is increasingly well regarded as a patient investor in start-ups, but when a company pursues a public offering the firm--with a reported $9 billion or more under management--can bring its considerable public market-oriented resources to bear. If Maverick isn't investing in the IPO itself, it already has a pretty good idea about who will.

Easton Capital is another large investor. A few years ago, Maverick and Easton seemingly brought another cardiovascular company to the public markets way too soon.

That company, Conor Medsystem Inc., also didn't have revenue or FDA-approval for its drug-eluting stent technology, giving an opening to critics who thought the company was unwisely testing the IPO market in 2004. Conor did spectacularly well in the IPO and post-IPO performance, well enough on the public markets to be acquired by Johnson & Johnson acquired the company for $1.4 billion, admittedly with disappointing results but also some new hope.

Some may see Cardiovascular Systems filing as an unwise move or the issuance of a 25-page "For Sale" sign. IN VIVO Blog, however, will be betting on an IPO.

Photo 'A Roll of the Dice' by Flickr user Darwin Bell used under a Creative Commons license.

Wednesday, January 23, 2008

Vytorin: Two Sources of Angst for DTC

Rep. John Dingell is one source of cholesterol nightmares for Big Pharma advertisers

Schering-Plough and Merck are halting their direct-to-consumer television ads for Vytorin, surely a sound decision given what appears to be a continuing free fall in use of the combination cholesterol therapy after the disclosure of the ENHANCE study results.

Advertisers are worried about the impact on regulation of DTC in general. An excellent piece in Advertising Age spells out some of the concerns.

But just as the ads themselves highlight the "two sources of cholesterol," we think there are really two sources of concern about DTC raised by Vytorin.

The first is regulatory. Attacks on DTC are not going away, so advertisers are right to worry that any ammunition used against one ad can threaten tougher regulation for all. In this case, the Energy & Commerce Committee is already asking the sponsors and FDA to explain why the ads continued running long after the ENHANCE trial was complete.

But the second is more fundamental: the impact that the DTC advertisements themselves had in turning the failed ENHANCE trial into a commercial disaster for the sponsors. You can debate the medical significance of the ENHANCE findings all you want, but you can't debate this: the very success of the DTC campaign in establishing Vytorin as a consumer brand helped make the failed trial much bigger news than it might have been.

Congress doesn't open investigations of drugs no one has heard of. And national newscasts don't cover equivocal study results for drugs no one knows either.

DTC advertising is expensive and controversial. It also can be highly effective at building a brand and driving prescription growth. Any accurate calculation of the risks and benefits to a particular brand, however, has to consider the potential that an advertiser can be a victim of its own success. That surely is one of the lessons of Vytorin.

Tuesday, January 22, 2008

Teva Buys Cogenesys

Teva said this morning it was buying the albumin-fusion technology company Cogenesys for $400 million. Cogenesys spun out of Human Genome Sciences with $55 million in funding in 2006. (Our 2006 profile of the spinout can be found here.)

We remember when the phrase albumin fusion could only have referred to a Spanish egg-white omelet. Oh, Science, how far you've come!

Teva joins a host of pharmaceutical firms bulking up in large molecule capabilities and drug candidates, a phenomenon we've described in detail several times, perhaps most comprehensibly here. Nothing new there, then.

But for generics giant Teva, this deal is as much about deepening its stake in the ill-defined, yet surely valuable, follow-on biologics arena as is it about biologics capabilities per se. The Israeli group already joined the biogenerics (er, we mean biosimilars) bandwagon in 2003, via its $3.3 billion acquisition of Sicor. This isn't quite the same, though. Cogenesys technology isn't aimed at producing copies of marketed biologics, but at improving them.

The technology, which Human Genome Sciences developed after it acquired Principia Pharmaceutical Corp. (a spin-out of Aventis Behring) in 2000 for $135 million, fuses albumin with a therapeutic protein at the genetic level; translation of the fused genetic code results in a protein with the properties of the therapeutic protein and the long-half-life of albumin. (See diagram below.) The technology's main competition is the more-familiar PEGylation, which also creates longer-lasting protein therapies, though Cogenesys has consistently claimed its technology works better than PEGylation.

Albumin fusion proteins' partnership potential has been validated, first by Human Genome Sciences. That company's Albuferon long-acting interferon is being co-developed with Novartis in hepatitis C. Cogenesys has done some deals of its own since spinning out of HGSI--in 2006 the company struck alliances with PDL BioPharma and Vegenics.

Teva has long worked in both generics and, to a far smaller degree, in innovative R&D (remember MS drug Copaxone?) But competition's hotting up on the small molecule side, and there's continuing uncertainty around the US regulatory aspects, and hence commercial potential, of straight biosimilars. So this deal--for improved, IP-protected versions of existing large molecules--illustrates where Teva, along with plenty of others, including innovators, feel the future may lie: somewhere in between copying and innovating, combining the low-risk of the former with the patent-defense (and, one assumes, the regulatory pathway) of the latter.

'Egg whites omelet from Prana' by Flickr user Table For Three, Please used under a Creative Commons license. Albumin fusion diagram from Cogenesys.

Ventana Accepts $3.4 Billion

Roche finally nabs its man. Or in this case, its diagnostics company. All it took was an extra $14.50 per share. From the companies' press release:

This offer represents a premium of 4.9% to Ventana's closing price on January 18, 2008, a 19.3% premium to Roche's initial offer on June 27, 2007, and a 72.3% premium to Ventana's closing price on June 22, 2007 (the last trading day prior to the announcement of Roche's initial offer). The acquisition of Ventana, a leader in the fast-growing histopathology (tissue-based diagnostics) segment, will allow Roche to broaden its diagnostic offerings and complement its world leadership in both in-vitro diagnostic systems and oncology therapies.
Here's a recap: Roche spent most of 2007 getting turned down by Ventana, which played down the pharma's $3 billion offer multiple times. First they said please, then highlighted its belief in the importance of its diagnostics business by promoting its dx head Severin Schwann to CEO of the whole Roche Group. We suggested soon thereafter that Ventana should do the deal (this is why we are not CEOs, we suppose), and in late November they agreed to let Roche behind the curtain with an eye toward a more equitable arrangement (ka-ching!). Roche again extended its offer for the company earlier this month, and that brings us to this morning's $89.50 per-share-deal announcement.

We've outlined the rationale for this deal before (follow several of the links above). Roche clearly believes that personalized medicine is the future, and is sure that Ventana will help them get there. $3.4 billion sure.

Monday, January 21, 2008

Aye for an Eye

Well isn’t this just what the VC ordered?

Bausch & Lomb’s move to acquire privately held eyeonics Inc. certainly will be welcome news to medical device VCs wondering who the next acquirer will be. Last year wasn’t a good one for VCs who counted on mid-tier device companies to make up for the lazy pace of traditional acquirers.

Instead of emptying VC portfolios, these folks bought each other. Hologic merged with Cytyc. EV3 bought Fox Hollow. St. Francis bought Kyphon before being acquired by Medtronic. “If I come out of a meeting and find out that someone bought Arthrocare I’m going to shoot myself,” one VC told IN VIVO Blog at the JPMorgan conference.

A bit of hyberbole, perhaps.

Nevertheless, with public investors being somewhat squeamish VCs need smaller companies like Arthrocare to step up their acquisition pace. Now Bausch & Lomb, fresh from its acquisition by Warburg Pincus, may be prepared to help out, at least in picking up a few of the more mature or promising eye companies out there.

This is a fairly new strategy for B&L. In the past, Bausch & Lomb has shown a stronger interest in acquiring pharmaceutical companies with the acquisition of a controlling interest in Shandong Chia Tai Freda Pharmaceutical Group, the leading ophthalmic pharmaceutical company in China, as being one of the biggest. So the move toward devices is encouraging.

Bausch & Lomb does have a considerable surgical business. It offers a line of intraocular lenses (IOLs) and phacoemulsification equipment (used to remove a patient’s natural lens) as well as disposable surgical packs. Sales of cataract and vitreoretinal surgery products accounted for 17% of the company’s $2.292 billion 2006 revenues. It’s the third largest manufacturer of these products behind Alcon and AMO, according to the company’s 2007 annual report.

But sales of these products rose only 1 percent, according to the report. A pittance compared to what eyeonics is doing.

Eyeonics developed and sells its crystalens IOL, the only FDA approved accommodating IOL used to treat cataracts. The crystalens IOL replaces the eye’s natural lens and has been implanted in more than 95,000 eyes worldwide, according to the company.

In a statement, Ronald L. Zarrella, chairman and CEO of Bausch & Lomb, says the acquisition "immediately places Bausch & Lomb into the rapidly expanding premium IOL market." The release reports that market is growing more than 20% annually. "In 2007, eyeonics generated revenues of approximately $34 million, an increase of 100 percent over the prior year revenues of approximately $17 million. Its crystalens IOL is estimated to represent approximately 30 percent of the presbyopic IOL market in the United States," according to the release.

The acquisition automatically adds 10% to the surgical group's revenues. Still, the company has run into some challenges. Check out our MedTech Insight report here. For an early profile of the company click here.

The good news is another potential buyer is in the market. The less-than-good news is eyeonics is no spring chicken. Founded in 1998, the commercial stage company last summer filed to raise $86 million in an IPO. Yet it opted to be acquired. Venture investors include Versant Ventures, Brentwood Associates, Pequot Private Equity, ABS Ventures, and Entrepreneurs Fund.

Versant's Bill Link first invested in the company when he was still with Brentwood. (Link later would leave Brentwood to form Versant.) Together, the two groups owned 33% of the company.

So did eyeonics sell because its IPO chances were iffy? Or did Bausch & Lomb make them an offer literally too good to refuse? (So-called twin-tracking certainly happens in both the device and biopharmaceutical side of the industry.) Until we find out the terms, IN VIVO Blog is leaning toward the latter.

In any case, it's good to have another buyer out there.

Vytorin: In this Case, Best to Ignore History

Are the experts right? Or is this another example of the wisdom of crowds?

Analysts are pooh-pooh’ing the Vytorin/Zetia affair. Tim Anderson of Sanford Bernstein wrote that ENHANCE will “likely only have a muted impact on Vytorin prescription trends given the limitations of the study, but some prescriber business may be lost on the margin contingent on much negative coverage ENHANCE continues to receive.” Catherine Arnold at Credit Suisse in a note on Friday talked about investors reactions as “excessive and disengaged from the fundamentals.”

So far, the market isn't listening. Merck’s stock was down last week 10%; Schering-Plough’s 23%.

Docs aren’t paying attention to the analysts either. Daily data from ImpactRx show steep declines in new scrips. Notes ImpactRx analyst Bob Caprara: if you look at 2-day averages, Vytorin has lost 75% of its new patient starts and was still trending down last Friday. If you continue to draw that line, Vytorin could easily lose 35% of its 2008 projected sales, he says.

Admittedly, Caprara notes, that’s a big if. Schering and Merck might be able to counter the negative press. Arnold argues that “there are no sound historical comparisons for a drug coming under this much fire for a disappointing efficacy study, especially when the study looked at an unvalidated surrogate endpoint, tested the drug against a strong active comparator and showed equivocal results.”

Maybe. Other drugs have faced a barrage of criticism and recovered – most notably, as Arnold points out, AstraZeneca’s Crestor. But we’d submit the Vytorin situation is no Crestor redux, and Crestor’s antagonist, FDA's internal gadfly David Graham, is no Steve Nissen (we blogged about one of Nissen’s attacks on the drug here). In the first place, Graham could point to no single trial to define his point. Vytorin’s critics now can. And that woefully-late-to-report trial looks to those with a suspicious caste of mind (including the New York Times editorial page and US legislators) like it was suppressed.

Then there’s the lower-is-better argument that the drug industry has used so effectively to boost one statin over the previous while driving sales in the category beyond the wildest dreams of its creators – first Merck, with Zocor over Bristol-Myers’ Pravachol, then Pfizer, with Lipitor over Zocor, then AZ with Crestor over Lipitor; and now Merck and Schering with Vytorin over Lipitor and Crestor. When you think about it, there ain’t all that much data comparing head-to-head outcomes data on the most powerful drugs – Vytorin’s IMPROVE-IT trial vs. Zocor won’t report out till at least 2010; the Crestor vs. Lipitor study not until 2011. And while Arnold is right that the ENHANCE study focused on a surrogate endpoint – atherosclerosis as measured by intima-media thickening – it’s an endpoint a lot closer to a real clinical endpoint than mere cholesterol reduction.

But whether Vytorin sales slump permanently or not, the real message is that primary-care risk is now off the charts, exacerbated by Big Pharma’s addiction to DTC advertising. In fact, we think the risk will bite a virtually permanent discount from the share price of firms whose earnings now or will flow largely from primary care products, particularly those – like Vytorin – which treat asymptomatic diseases.

There are several reasons why. First, with the general lack of head-to-head outcomes data – and understandably little appetite among Big Pharma for financing it pre-approval –payors will increasingly look to switch their insured populations towards generics. And this is particularly easy with asymptomatic conditions like hypercholesterolemia because patients have very little practical reason to care. Their disease doesn’t hurt; the drugs provide a merely theoretical benefit. At least diet and exercise make you look better.

Second, these drugs are the easiest ones to attack. There are no patient cholesterol or hypertension or diabetes lobbies that can compete with breast cancer or AIDS or Alzheimer’s. The makers of the big primary-care drugs are easy targets for politicians – and evidently more frequent targets, too (thanks in part to the backswing of the double-edged DTC sword Big Pharma has been wielding so aggressively). Merck and Schering will be asked to explain themselves to Congress (and no doubt FDA will be obliged to hold an advisory committee as well). That means more headlines and more questions. As we wrote here, it won’t help that the Energy & Commerce Committee, which is investigating Vytorin, is also investigating Pfizer’s Lipitor DTC campaign.

And you add those headlines to the fact that the drugs don’t actually make people feel better – and a compliance problem the drug industry has always struggled with will grow worse.

Let us return to Catherine Arnold’s point: “there are no sound historical comparisons for a drug coming under this much fire for a disappointing efficacy study.” Exactly. History -- the rear-view mirror -- isn’t where we should be looking to understand the meaning of the Vytorin story.

Photo 'Crowd listening to T.R. speak, Chicago' from Library of Congress, via Flickr

While You Were Losing Your Resolve

Allegedly this is the time of year that most of us begin to let those New Year's resolutions slip. (Already? Weak!) Trip to the gym or grab a beer to watch the conference championship games? We watched football--but then again we were smart enough not to make any resolutions this year. Pack and Charger fans, better luck next year.

Just a couple notes from a cold and quiet Sunday. If you're taking the day off in observance of Martin Luther King Jr. Day, enjoy the long weekend.

  • Start saving for a super bowl ad: Merck and Schering-Plough defend Vytorin and Zetia in some full-page ads on Sunday. Will doctors and patients respond? We'll have some data on their early reactions to the Enhance kerfuffle later today.

  • Lupus, unmasked: Scientists writing in the New England Journal of Medicine and Nature Genetics describe unearthing genetic variants in at least six distinct regions of the genome related to the autoimmune disease systemic lupus erythematosus. Reuters' roundup is here.

Friday, January 18, 2008

Deals of the Week: You Can't Always Get What You Want

It's been a busy--and, for some, disheartening--week in biopharma land. Just three days after researchers disclosed that Vytorin, the highly touted cholesterol drug that combines Schering's Zetia and Merck's Zocor, is no more effective at preventing heart disease than Zocor alone, came the first class action law-suit. David Rheingold, the attorney in the case, filed the federal suit on behalf of his momma. (What a good son.)

The Vytorin kerfluffle aside, Novo Nordisk announced it was shelving its AERx inhaled insulin drug while NitroMed announced it would no longer provide sales and marketing for BiDil, the first drug approved for use in a specific racial group. As part of its retrenching, the company laid-off 70 of its 90 employees and hung out a for sale sign, hiring Cowen and Company to "explore strategic options."

NitroMed wasn't the only company to announce it was "restructuring". So did Novartis, which took a $444 million charge to pay for a program that will cut thousands of jobs. In addition, the company announced that its twice-delayed diabetes treatment, the DPP-IV inhibitor Galvus, may never make it to the US market at all. (The drug was approved by the EU back in September.)

All of which reminded this IN VIVO blogger of that classic Rolling Stones tune "You Can't Always Get What You Want." (You know what comes next.)

Pfizer/Scil Technology: Another week, another Pfizer deal. This blogger admits she was nonplussed upon reading the news release. Pfizer and ... Scil? A German tissue regeneration player? But yes, devoted readers, Pfizer has once again demonstrated its passion for biotech products, signing a $250 million deal to in-license world-wide rights to Scil's osteoarthritis therapy, CD-RAP, to regenerate tissue in aging joints. (Hey, it wasn't an acquisition.) The companies didn't break out how the $250 million in potential rewards will be split among up-front fees and milestone payments. But Ed Harrigan, Pfizer's SVP of worldwide business development, did say this in a news release:"This partnership reflects Pfizer's on-going commitment to pursue the best science anywhere on the globe and secure novel technologies and products that will complement our existing research programs." (We're grateful to Ed Harrigan and his team--their biologics focused deal-making continues to make us look smart.)

Alfacell/ Strativa Pharmaceuticals: Alfacell licensed its Phase III cancer therapy, Onconase, to Strative Pharmaceuticals for $5 million up-front and up to $225 million in cash milestones. Under the terms of the agreement, Strativa has exclusive marketing, sales and distribution rights to Onconase for the treatment of cancer in the U.S. and its territories. Alfacell, meanwhile, retains the rights for product manufacturing, clinical development and obtaining regulatory approvals. The drug, which is a natural protein isolated from the leopard frog, was developed using Alfacell's ribonuclease (RNase) technology for the treatment of inoperable malignant mesothelioma, a rare cancer affecting the lungs and usually associated with exposure to asbestos. Though the exact mechanism of action is unclear, the drug appears to selectively target diseased cells by triggering apoptosis. Onconase has been granted orphan drug status as well as fast-track development status by the FDA for the treatment of malignant mesothelioma.

Warburg Pincus/ Lifecore Biomedical: Warburg Pincus, the global private equity player, agreed to buy Lifecore Biomedical for $17 a share, in an all-cash deal worth roughly $239 million. (That's a 30% premium to Lifecore's average share price for the past 30 trading days in case you were wondering.) "As a private company, Lifecore will have greater flexibility to focus on its long-term strategic direction. Warburg Pincus and its affiliates have confidence in Lifecore’s future and will support achieving our long-term goals,” said Dennis Allingham, Lifecore's President and CEO in this release. We admit that Lifecore's profile--it's mostly a dental and OEM supplier--makes it the kind of device company to which we don't typically devote a lot of ink. It's also true that $239 million is small potatoes in the PE world. (Just a few months back TPG Biotech ponied up $1.3 billion for the Canadian Axcan Pharma and its portfolio of treatments for gastrointestinal disorders, for instance.) But Warburg Pincus's involvement has us intrigued. And, it's in keeping with the deeper entwining of biopharma and PE as the credit crunch halts mega-deals in other industries.

Whose Life is it Anyway?

No one really wants to shout it from the rooftops, but for FDA and the drug industry, Monday's Supreme Court’s decision not to consider whether terminally ill patients have a legal right to access unapproved drugs is a little more sweet than bitter.

The decision by the high court ends a long, topsy-turvy, and often emotional legal fight by the Abigail Alliance to allow patients access to investigational drugs and biologics outside the clinical trial setting. (The alliance is named for Abigail Burroughs, who passed away in 2001 while trying to gain access to the then-investigational cancer drug cetuximab, now marketed by ImClone and Bristol-Myers Squibb as Erbitux.)

Along with the Washington Legal Foundation, the Abigail Alliance sued FDA in 2003 to allow access to unapproved drugs after the completion of Phase I studies. A Washington, DC district court initially dismissed the case, but the decision was overturned by a three-member panel of the US Court of Appeals. This August, an en banc appeals court reversed the decision, prompting WLF to ask the Supreme Court to consider the case.

Appealing to the Supreme Court is always a long-shot legal strategy, but the high court’s consideration of the Abigail Alliance lawsuit could have resulted in significant changes for FDA and industry. Check out full coverage of the Abigail Alliance lawsuit in The RPM Report here and here. If you don’t yet subscribe, you can sign up for a free trial at

For FDA, a win by Abigail Alliance would have meant changing its regulations to make it easier for patients to access investigational medicines. FDA has had mechanisms in place for patients to access unapproved drugs outside the clinical trial setting since the 1970s, including “treatment use” and “emergency use” INDs—mechanisms that the Abigail Alliance argued are insufficient and overly bureaucratic.

But FDA argued that it has a “compelling interest” to restrict some patients from getting investigational drugs—namely protecting them from what might be an unsafe product. And given the intense congressional scrutiny over drug safety since the Vioxx withdrawal, you can bet FDA doesn’t have warm and fuzzy feelings about giving really sick patients a drug that hasn’t yet passed the approval hurdle.

For manufacturers, expanding access would have presented a tricky dilemma: balancing the goodwill gesture of granting a patient a dying wish against the threat of litigation should something go wrong. That’s not a comfortable place to be: Amgen’s outside attorney Mark Gately (Hogan & Hartson) said he “dreaded the day” that FDA changed its regulations—or a court ordered it to do so.

But it doesn’t look like that day will come anytime soon. FDA obviously isn’t budging, and it’s unclear whether a new commissioner would change its legal interpretation of the issue. Congress could pass legislation to expand patient access to unapproved drugs, but the Abigail Alliance’s big advocate on Capitol Hill, Sen. Sam Brownback (R-Kansas), doesn’t seem to be making it a top priority this session.

The Washington Legal Foundation’s press release has an air of finality to it, but it isn’t conceding defeat: “We will continue our effort to persuade FDA that terminally ill patients deserve better access to drugs that FDA has deemed suitable for large-scale clinical trials.” But we’re not going out on a limb to say that’s a long-shot proposition.

Thursday, January 17, 2008

Bio-Rad Salutes You

In the unlikely event you haven't seen this over at the WSJ Health Blog today, we felt the need to post this here as well. Bio-Rad has raised the bar. How 'bout it, Applied Biosystems? Whatchoo got?

HAT TIP: WSJ Health Blog, where you can read the back story.

Private Equity Goes Public

One of the simplest metrics we have to measure interest in a company or industry is just how jammed the rooms are at the JP Morgan conference. It's there people can literally vote with their feet...and their elbows and shoulders and briefcases and pepper spray (well, not yet) to find a few square feet to take in a company presentation.

So if an SRO presentation reflects strong interest, then this year will be a big one for private equity and health care. (The entire discussion is available here, btw.)

Last week's Private Equity Panel discussion literally could not have been more crowded with every seat, storage container, alcove and appropriate patch of carpet filled by people eager to hear what four sages from the Private Equity World had to say about their own industry and health care.

The conversation was lively and informative, and since no one left early to hit the cocktail parties (the session started at 5 p.m.) we’re guessing those many in attendance found it useful.

Unfortunately, the conversation seemed more focused on the services sectors. This isn’t a knock on the collective wisdom of Madison Dearborn Partners (represented by Tim Sullivan), CCMP Capital (Steve Murray), Welsh, Carson, Anderson & Stowe (Paul Queally) and Bain Capital (John Connaughton). All are well-heeled firms led by brilliant folks. But the firm we really would have liked to hear from was Warburg Pincus.

WP’s sweet spot seems firmly in line with our own: biopharma, devices and everything in between. Of course what moved us to write this is this week’s announcement that Warburg Pincus would spend $239 million to acquire Lifecore Biomedical Inc. The announcement came just after last week’s panelists suggested the criteria for “take private” would be much higher than last year, resulting in a slow down of such deals. “I think the vast majority of the deals done in the last 18 months will have very disappointing returns,” says Queally. “Risk was mispriced throughout the system. So I think it was a great time for public equity investors but not so good for private investors.”

But the panelists drew an important distinction. Murray says transactions aimed at taking a company private “because there was the availability of cheap financing and the other parts we’ll figure out later” will be scarce. But those firms with a plan to turn around or advance companies that have a strategic fit will still happen.

Warburg Pincus generally falls in the latter category. Last year, the firm paid $4.5 billion for Bausch & Lomb and invested $75 million in publicly traded Inspire Pharmaceuticals Inc. In 2006, Warburg Pincus secured a deal with French Orthopedics company Tornier.

IN VIVO Blog expected big things from the private equity industry in 2007 following the Biomet acquisition in 2006. (See our look at the new Biomet here.)

At first, the results were disappointing. Overall private equity dollars being used to acquire device companies dropped from 2006-2007. But the drop seemed far less significant when you realized that 2006 consisted mainly of the Biomet deal while 2007 figures were made of up of several smaller deals, including the Bausch & Lomb acquisition.

What’s going to happen in 2008? The panelists predicted a slow recovery as the private equity industry tries to digest all the companies consumed during the all-you-can-eat-affair of 2007. But we’re a little more bullish on the life sciences front. Warburg Pincus will still find deals. Meanwhile, firms like Avista Capital are identifying spin out opportunities from larger firms like Bristol-Myers Squibb and Boston Scientific. In fact, 2008 is starting with more than $1 billion in private equity acquisitions since Avista’s two deals didn’t close until this month.

Life sciences companies will probably draw much attention from the folks on the panel. “We will not take drug discovery risk,” says Connaughton. “But we love to build companies that help biotech and small and large pharma develop their drugs. But we do not want to take drug discovery risk, we're not smart enough.”

But then again. “We’ve done diagnostics, device and pharma,” says Queally. “It’s almost the nature of the company as opposed to the specific sector. In other words, is a company is going through dislocation? Is it maturing? The device industry over the past few years has matured to the point where they are trying to optimize a portfolio. Pharma is trying to figure out how to focus. All those things are things we bring to the table. If we can get those companies at appropriate valuations we can bring some value and generate some good returns.

“There was a time 10 years ago where every single device or pharma company was trading at 15 times,” he continued. “It’s very difficult given that leverage is a piece of our capital structure to garner that kind of return. But now they have come down and are going through dislocation. I would see a lot of opportunities in upcoming years.”

Well, this would explain why the room was so crowded.