Last month’s “Science Matters” column in START-UP highlighted some newly reported cell therapy work in Parkinson’s disease, but suggested that there may be fundamental limitations to any therapy strategy based on restoring dopamine—be it through implanting dopamine neurons or via existing drugs. The good news is that cell replacement therapy at least offers a new experimental model for studying Parkinson’s. And unlike the early days of cardiac cell therapy, where early human studies led to an inappropriate rush into large Phase II trials that disappointed and soured the field, for lots of reasons, clinical progress in PD has been gradual.
So what to make of the Bayer-Titan Pharmaceuticals Spheramine program to deliver human retinal pigment epithelial cells locally into the brain? The cells, which produce dopamine (apparently at a fairly constant concentration), live on little microcapsules, stay where they are put, and don’t require use of immunosuppressants to prevent rejection. All good things. And yesterday’s presentation at the American Association of Neurological Surgeons (AANS) Meeting in Chicago of four-year data from a six-patient pilot study showed motor score improvement in patients of 48% at one year and 44% at four years. "Not much in the way of loss there," noted investigator Roy Bakay of Rush University Medical Center, who presented the data.
Because it is delivered locally, Bayer and Titan see Spheramine as an improvement over oral dopamine drugs, which have systemic long-term effects linked to movement disorders. Undoubtedly, the opportunity is part of what attracted Titan’s CEO, Marc Rubin, formerly head of global R&D for Bayer Schering Pharma, who joined Titan last fall.
But many propose that to be effective, cells have to do more than produce or process dopamine: No matter how local or efficient the delivery of dopamine may be, they may also need to integrate into the neural circuitry to be effective. Indeed, the ability to restore the natural biology of a system is one of the rationales – and challenges – of cell replacement therapy.
Because of the cell type, Spheramine can’t do this. So we wonder, from a business perspective, how the added regulatory risk of a cell therapy – and in the case of Parkinson’s trials, the long development time – can be worth the effort when it does not also maximize the benefits of the technology. It’s a lot to go through to prove a decades-old delivery system.
Bayer expects to have data from a 71-patient Phase IIb trial of Spheramine sometime in the third quarter this year. The AANS abstract discussing the Phase IIb trial design noted that 71 patients were randomized and underwent surgery with “tolerable adverse effects.” At least those data should give Bayer and its Berlex subsidiary more leverage in settlement negotiations with the family of a patient from the Phase IIb program, which sued when the patient developed immediate and serious symptoms after receiving a Spheramine implant.
Wednesday, April 30, 2008
Last month’s “Science Matters” column in START-UP highlighted some newly reported cell therapy work in Parkinson’s disease, but suggested that there may be fundamental limitations to any therapy strategy based on restoring dopamine—be it through implanting dopamine neurons or via existing drugs. The good news is that cell replacement therapy at least offers a new experimental model for studying Parkinson’s. And unlike the early days of cardiac cell therapy, where early human studies led to an inappropriate rush into large Phase II trials that disappointed and soured the field, for lots of reasons, clinical progress in PD has been gradual.
Tuesday, April 29, 2008
In an article in this month's IN VIVO, we suggested that Merck’s presenting Cordaptive to FDA might be likened to waving a red rag at a bull.
Merck is after all one of the ENHANCE sponsors (alongside Schering-Plough); that saga called into question the clinical effectiveness of yet another combo, Vytorin. It probably didn't help that Merck also recently halted enrolment in one Cordaptive trial that was designed similarly to ENHANCE.
Still, ENHANCE’s effects have rippled—and will continue to ripple—far beyond Whitehouse Station. FDA this month poured cold water over Isis’ cholesterol-lowering hopeful, mipomersen—yes, the one that Genzyme in January agreed was worth $325 million up front and up to $825 million in development and regulatory milestones. The partners need outcomes studies, the Agency says, for all indications other than the highly specialist, and life-threatening, familial hypercholesterolemia. (Luckily for Genzyme, the deal terms aren’t confirmed, so watch out for lower-value Version B of the deal--and, we'll venture to suggest, a tonne more regulatory contingencies and conditional language in tomorrow's term-sheets.)
Now Merck’s doing outcomes studies with Cordaptive, but results from their 20,000-patient THRIVE trial won’t be out until 2012 or so. Small wonder, then, that some analysts have already removed four years’ worth of revenues for the drug, and its follow-on, MK-0524b.
This is the last thing Merck needs. From 2010, $4.2 billion worth of its products start to lose patent protection—Cozaar/Hyzaar that year, and Singulair two years later. Cordaptive and its follow-on could have helped fill about a third of that hole, according to analyst Catherine Arnold at Credit Suisse; now they’ll barely have any impact at all.
Nor does FDA’s harsh stance on safety requirements and outcomes studies bode well for two further Merck late-stage candidates. Can CETP inhibitor anacetrapib survive the aftermath of Pfizer’s torcetrapib blow-out? And does taranabant (a cannabinoid receptor inverse agonist) really have a chance, given FDA’s unswerving rejection of Sanofi-Aventis’ rimonabant (Zimulti)?
What we know for sure is what my quicker-off-the-mark colleagues have already said: there’s no such thing as a low-risk drug. Certainly, combination products don’t any longer represent no-brainer life-cycle extension tools. When it comes to getting past the FDA bull, it seems they’re up there with even the newest of NCEs.
Monday, April 28, 2008
We don't know what the issue with the Schering-Plough/Merck combination is, but now we know what it isn't.
Merck called us in response to our post on the "not approvable" letter for a fixed-dose combination of the blockbusters Singulair and Claritin. The letter, Merck says, did not raise any safety or tolerability issues.
We speculated that the letter must have had something to do with a recent notice from FDA suggesting a possible connection between Singulair and suicidality. Apparently that is not the issue--though we still suspect that whatever the issue is may have seemed weightier with that concern in the background.
Merck also pointed out that--contrary to what our post implied--the Singulair/Claritin combo is being developed under its own partnership agreement, separate from the Vytorin joint venture. Our bad.
We still think our point is valid: there is no such thing as a "low-risk" drug development plan.
Just ask Merck about Cordaptive....
Talk about bad timing. You could almost feel sorry for Genzyme signing a $1.9 billion development and commercialization deal with Isis for mipomersen just days before ENHANCE data shook up the long-held belief that lower LDL equals better cardiovascular outcomes.
Mipomersen is based on the same lower-is-better lipid theory, after all. In fact, the drug targeting apolipoprotein B-100 has been shown to reduce cholesterol and other atherogenic lipids by more than 40 percent beyond reductions achieved with current standard lipid-lowering drugs.
Given the uncharted regulatory environment post-ENHANCE, we weren’t surprised to hear that Genzyme and Isis are pushing back their development timeline for mipomersen. IN VIVO speculated as much in February, and sure enough FDA is requesting more data to support an NDA filing than the firms had originally banked on.
The revised development plan calls for filing in 2010, not 2009, for an initial indication in homozygous familial hypercholesterolemia – a rare, orphan drug indication. It is the planned filing for a broader indication in patients with high cholesterol at high risk of cardiovascular events, including heterozygous FH, that could face a more significant delay, until 2012 or potentially beyond.
While FDA has guided Genzyme and Isis that reduction of LDL-cholesterol is an acceptable surrogate endpoint for accelerated approval for patients with hoFH, the agency is requesting two carcinogenicity studies to be included in the filing, rather than the one the firms had been planning to have completed in time for the submission.
For the broader indication, FDA is requesting a cardiovascular outcomes trial, three words that would send a tremor through even the most deep-pocketed big pharma. Outcomes data means long, expensive trials. Take for example Merck/Schering’s ongoing outcomes trial for Vytorin, IMPROVE IT, which is enrolling 18,000 patients with data anticipated in 2012.
Genzyme and Isis management are assuring investors that they can run a significantly smaller outcomes trial given the high-risk patients that will be enrolled, but that remains to be seen.
The one outcome that is clear is that the cost of developing mipomersen just went up.
And that leads to yet another snag: the transaction hasn’t officially closed. It’s expected to this quarter, but before the door shuts on the deal, there may still be an opening for Genzyme to re-negotiate. Both chief execs were less than forthcoming when asked about re-negotiating, which makes us think some changes are likely.
One line item Genzyme might look to gain an edge on is the development costs. Under the original agreement, Genzyme is responsible for paying all but $75 million of the development costs, meaning it would bear the brunt of the outcomes trial.
The deal also includes a pretty hefty upfront payment - $325 million – but the bulk of the regulatory and commercial milestones hedge Genzyme’s risks. Only $50 million of the $825 million in development and regulatory milestones are related to the homozygous FH indication, with the rest of the allotted payments falling to a heterozygous FH indication, a non-FH indication and approval of a follow-on product.
Read more about mipomersen and the latest regulatory setback at “The Pink Sheet” DAILY.
The Pink Sheet Daily
The way things have been going for the Merck/Schering-Plough joint venture, it really shouldn't surprise anyone that their pending application for a fixed-dose combination of Merck's blockbuster asthma/allergy pill Singulair and Schering's off-patent Claritin received a "not approvable" letter from the Food & Drug Administration.
But the outcome must still be a surprise to investors who reacted with excitement to the companies' announcement at the end of August that it was filing an NDA for the product. (Yes, it really was only 8 months ago that drug stocks could move up on unexpected news.)
The combination was all but forgotten after the companies announced in 2002 that they couldn't demonstrate significant efficacy improvements when Claritin was added to Singulair. So everyone assumed MSP was a one a trick pony, albeit one with a nice trick--Vytorin. (Merck points out that the allergy combo is part of a separate partnership from Vytorin.)
Its hard to remember, but back in August no one was worried about Vytorin. And it doesn't take a rocket scientist to imagine the potential for even modest improvements on Singulair to generate big revenues: after all, the brand is now Merck's biggest at over $4.5 billion per year. So Wall Street cheerfully assumed that the companies had found a way to prove efficacy to FDA's satsifaction and took out their calculators to figure out how to adjust EPS models for the two joint venture partners.
Well, not everyone felt that way. Not to appear immodest, but (ahem) we highlighted the reaction to the NDA filing way back in September as an example of an apparent misreading of regulatory risk.
In the "Safety First" climate dominating FDA, companies and their investors can be forgiven for looking for low-risk development strategies. Just one problem: in the current regulatory climate, there is no such thing as a low risk drug development strategy. That's why, in a presentation to Windhover's Pharmaceutical Strategic Alliances conference, we cited the Singulair/Claritin combo as an example of a drug development program that was probably higher risk than it looked. (Don't believe us? Listen to the audio and see the slides here.)
Did we have some secret source telling us details about the NDA that no one else knew? Alas, no. We tied our observation to the recent travails of some other line extensions that seemed hung up at FDA based on what can only be described as unexpected safety issues. Our example: GlaxoSmithKline/Pozen's naproxen/Imitrex combo for migraines, which had been made "approvable" twice at FDA pending more safety data.
Given the many thousands of people who use those drugs in tandem already, it seemed odd that the agency needed more safety information about the fixed-dose combination--especially since it didn't accompany the "approvable" letters with any kind of warnings about the marketed products. That struck us as a clear indication that plans to market new combinations of already marketed ingredients are probably better considered low priorities for FDA, rather than low-risk development projects. And even a hint of a safety issue is sure to stall the NDA, since the reviewers know that they aren't denying anyone access to the medicine if they ask the sponsor for more data.
Merck and Schering didn't say what issues FDA raised with this combo. The Pink Sheet DAILY, however, logically connects the "not approvable" letter to a recent "early communication" issued by FDA warning of a possible association of use of the drug with suicidality. That regulatory landmine has claimed plenty of innovative products, so it is probably safe to assume it is a big factor in the setback for this combo. (We'll have much more on that theme in the next issue of The RPM Report.)
UPDATE: Logic only gets you so far. According to Merck, safety was not the issue with the Singulair/Claritin combo.
Still, the outcome is odd at best. Take Claritin, one of the safest drugs ever marketed as a prescription-only product. Add it to Singulair, one of the most widely prescribed brands today. And you get a drug that somehow can't get to market.
We'll say it again. There is no such thing as a low-risk drug development strategy.
One other thing: regulatory risk may never be low, but it also isn't infinite. That GSK/Pozen migraine drug? It was approved by FDA on the third go-around. GSK still sounds excited about its potential.
We've passed a milestone. Although if you go back and check you can find a few dozen earlier posts stretching back to late 2006, this weekend marked the one-year anniversary of the official launch of IN VIVO Blog. On April 26, 2007 we posted twice--two takes on Bristol-Myers Squibb Co.'s blockbuster deal with Pfizer on apixaban and its hybrid biotech/pharma strategy--and decided to pull back the curtain on our fledgling blogging efforts.
The response has been encouraging. Thanks to everyone who reads us on the web, subscribes (it's free!), links over, comments (we wish there were more--you can do it anonymously!), and/or mocks our sports team allegiences. We really do appreciate you dropping by.
So even though there was plenty of news out of ARVO and EASL this weekend lets highlight some sweet bloggy goodness for your weekend roundup:
- When Patent Baristas isn't dreaming up ways to celebrate World Intellectual Property Day 2008 (that explains all the drunken patent attorneys on Saturday) it's laying down the serious analysis. Friday the blog dispelled some myths about the difficulties of biotech co/university tech transfer.
- Derek Lowe takes another look at GSK/Sirtris and the ally-vs-buy question, from the GSK employee point of view and through the historic prism of Glaxo's nuclear receptor R&D push that yielded, well, not much.
- After a year of blogging over at VentureBeat Life Sciences, David Hamilton has new digs--check out his new Pharma Industry page at Bnet. (h/t pharmagossip)
- If you're not reading Pharma Giles, you're missing out on some hilarious skewering of the pharma world. This morning the target is off-label promotion.
- And finally, stop by IN VIVO Blog later today (hey, that's us!) for our take on the latest setback for the Merck/Schering-Plough joint venture, FDA's Friday night smackdown of the Singulair/Claritin NDA.
milestone photo by flickr user robw1882 used under a creative commons license.
Friday, April 25, 2008
Tired of Sirtris-GSK talk yet? Too bad. As we now bring you, the venture angle.
As you no doubt know by now, GlaxoSmithKline will pay $725 million for Sirtris Pharmaceuticals Inc., paying $22.50 per share, an 84% premium over Sirtris' closing price.
We've already gone over the particulars of the deal, including some of our concerns. But one irrefutable fact is Sirtris' venture investors made more than a few bucks.
As should be the case, the earlier investors did the best. Polaris Venture Partners, TVM Partners, Cardinal Partners, Skyline Ventures and a few of the company's co-founders will do very well. But by our measure even investors in the company's last private round early last year will see nearly their capital nearly triple, including the cigar-smoking guy directly above.
Now let's go over a round-by-round account:
* Back in the fall of 2004, Series A investors Polaris, TVM, Cardinal and Skyline as well as a few individual—co-founder Richard Aldrich, Paul Schimmel and David Sinclair—paid 50 cents a piece for 10 million shares of convertible preferred stock. At last year's IPO, those shares converted into 1.9 million shares of common stock, so by our measure those investors ultimately paid roughly $2.63 per common share.
* Later that year, Sirtris raised another $12.6 million by selling 21 million shares of Series A-1 convertible preferred stock for 60 cents a piece. The four venture investors bought in along with Wellcome Trust Limited. At the IPO, the shares converted into 4.1 million shares of common stock, meaning investors ultimately paid roughly $3.07 for each common.
* Series B investors, who came along in the spring of 2005, bought 33.7 million shares for $27 million, paying 80 cents per share. All the earlier VCs were joined by Three Arch Partners and Novartis BioVentures. Those 33.7 million shares converted into 6.4 million of common at the IPO, making the per common share price $4.20.
* Sirtris went to the well again in spring of 2006 raising $22.1 million in a sale of Series C stock, priced at $1.12 per redeemable share. Investors this time included all of the Series B investors as well as a trust managed by Schimmel, Paul Schimmel Prototype PSP. After the IPO, the 19.7 million preferred shares converted into 3.7 million common shares so these investors paid $5.88 per share.
* Finally, Sirtris capped off its private fund raising with a $35.9 million round at the start of 2007. Earlier investors TVM, Skyline, TVM, Three Arch as well as Sinclair were joined by CEO Christoph Westphal, co-founder Sinclair and Peter Elliott, senior vice president and head of development. Investors paid $1.68 each for 21.3 million shares of Series C-1 redeemable convertible preferred stock. At the IPO, those converted into 4.07 million shares of common. Per share price: $8.81.
Who were two other big winners? A trust managed by John Henry, the principal owner of the Boston Red Sox (pictured), was the single largest investor in Sitris' C-1 Round. Not sure how he came to be involved in Sirtris, perhaps he met up with fellow Brookline, Mass. resident Westphal at their neighborhood Dunkin’ Donuts. Meanwhile,Venture lender Hercules Technology Growth Capital will crow about its big returns in an upcoming conference call. (Tip of the cap to PE Week Wire for pointing this out.) Hercules provided Sirtris $15 million in venture debt in 2006.
Sirtris wasn't public long enough to file a proxy. You can find out who owned what just after the IPO right here. But some investors and executives already unloaded some stock, so the final numbers will be different.
Early investor Polaris, for example, distributed close to one million shares to its limited partners on Nov. 30, just after the lock up expired. Shares closed at $16.09 on that day.
Co-founders Westphal and Sinclair, meanwhile, sold off 55,000 and 30,000 shares, respectively, over the past few months, with the shares selling anywhere between $11.23 and $14.95. The sales were part of a Rule 10b5-1 trading plan, a prearranged and gradual sell-off of shares by insiders. Separately, Schimmel also sold off just over 11,000 shares at $17 a piece.
In our earlier post, we wondered whether Westphal would remain with GSK to run the unit or return to his venture capital roots as he was a proficient company starter while at Polaris. Westphal has kept his fingers in the venture game serving as senior advisor to Flybridge Capital, formerly IDG Ventures.
No doubt, venture capital will continue to call to Westphal, but he will have strong incentive to stay at GSK. According to the 424B4 form filed after the IPO, the stock vesting scheduls for Westphal contain a "double trigger" requirement that "prevents an unintended windfall to management in the event of a friendly (non-hostile) change of control."
Under this structure, unvested equity awards under our 2004 Stock Plan would continue to incentivize our executives to remain with the company after a friendly change of control. If, by contrast, our 2004 Stock Plan had only a "single trigger," and if a friendly change of control occurred, management's equity awards would all vest immediately, creating a windfall and the new owner would then likely find it necessary to replace the compensation with new unvested equity awards in order to retain management. This rationale is why we believe a "double-trigger" equity vesting acceleration mechanism is more stockholder-friendly, and thus more appropriate for us, than a "single trigger" acceleration mechanism.
Westphal found Sirtris' story compelling enough to leave a general partner position at Polaris. That attraction--coupled with the "double trigger"--means he may stick around for a while.
As always, if you have any private suggestions, tips, and comments on my math email me here.
There were lots of reasons to evoke the color green this week. Lest you've forgotten, Tuesday was Earth Day. The IN VIVO Blog team hopes you celebrated appropriately--perhaps by replacing those incandescent light bulbs with compact fluorescent ones or off-setting the carbon dioxide emissions from a recent plane trip. (What? You have an alternate suggestion?)
It was also earnings week--that time in the fiscal calendar when certain big pharma are forced to admit to investors and analysts that "it's not easy being green" to quote an overly analytical Muppet. Among those posting quarterly losses were Bristol-Myers Squibb (thanks to charges associated with cost-cutting measures), GlaxoSmithKline (profits down 5% on tumbling Avandia sales), and Schering Plough (down 48% due to costs related to the integration of Organon as well as the Vytorin mess). Pfizer, the industry's favorite punching bag, opted to announce its bad news late last week in advance of a shareholder meeting in Memphis.
But if the quest for greenbacks was onerous, it certainly wasn't impossible. A number of companies posted positive news, including Amgen, Bayer, and Novartis. We confess color-blindness when it comes to Merck and Lilly. Merck's first-quarter earnings rose to 89 cents a share, beating analysts' expectations. Unfortunately, sales missed their mark, edging up only one percent. Lilly meantime posted lower than expected earnings, mostly due to disappointing Byetta sales.
The preoccupation with quarterly earnings meant deal flow was lighter than average, but still we found other green examples--of the biobucks variety.
Astellas/CoMentis: We'll give top-billing to the latest entrant this week, and it's a doozy. In another big win for Japanese pharma, Astellas Pharma said this morning that it licensed worldwide development and commercialization rights to CoMentis' beta-secretase inhibitor programs--for $100 million up-front (80/20 cash/equity split) plus up to $660 million in pre-commercial milestones on the program's lead Phase I compound, CTS-21166, and additional milestone payments on any next-gen compounds discovered as part of a joint research program. CoMentis retained a co-promote/profit share in the US and elsewhere will receive undisclosed royalties. Astellas will fund development up to Phase III and the companies will split the cost of a (probably very expensive) Phase III program. Inhibition of beta-secretase has long been an unrealized goal of industry and CoMentis' ability to get its program into the clinic made it the subject of takeover rumors, as we noted in this September 2007 feature on early-stage Alzheimer's programs. Back then, CoMentis CFO John Donovan told us that the company wasn't being managed toward a quick acquisition. But rather the goal was to partner the beta-secretase program sooner rather than later, he explained, while keeping a significant piece of the back-end value—half of US rights, for example. "Most of the top 20 companies are in this space, and the top five view it as a must-win," said Donovan.
Cubist/Dyax: Cubist Pharmaceuticals signed a licensing and collaboration agreement with Dyax to develop that company's DX-88, an intravenous product in mid-stage clinical trials for the prevention of blood loss during surgery. Deal terms were smallish: Dyax will get $15 million up-front, plus another $2.5 million later this year in milestones. The company is also eligible for an additional $214 million in clinical, regulatory, and sales-based milestones. For good measure, Cubist has generously offered to pay for costs associated with the on-going Phase II trials (known as Kalahari 1), and will thow in tiered, double-digit royalties based on DX-88 sales and an option for Dyax to co-promote the product in the US. If the up-front seems low, at least Dyax gets to keep exclusive rights to DX-88 in all other indications, including its hereditary angioedema program, currently in its second Phase 3 trial.
GSK/Sirtris: Sirtris was the big winner this week. After the markets closed Tuesday, the biotech announced a stunner of a deal: GSK had agreed to acquire the early stage company for $720 million. Yep, that's right. Nearly three-quarters of a billion in cold hard cash for a company with just one less-than-exciting Phase II product and a raft of interesting molecules that have the potential to treat a variety of diseases, including Type II diabetes. IN VIVO Blog frequently writes about pharma's acquisitive nature, especially in areas where it needs to bulk up, such as biologics. But by and large, the out-sized price tags have been associated with platform biotechs such as Adnexus or Sirna. Thing is, Sirtris isn't really a traditional platform company. Its value lies in its targets and we've never seen a target-focused deal command this kind of price tag. Until now.
Shire/Zymenex: Shire agreed to pony up $135 million for global rights to Zymenex's enzyme replacement therapy, Metazym, designed to treat a serious neurological disease called metachromatic leukodystrophy (MLD). Zymenex recently finished a Phase Ib trial of Metazyme in Europe and plans for a Phase II trial in the US are in place. Just 2000 patients suffer from MLD, and Metazyme has been granted orphan drug status in both the US and EU. Genzyme, of course, is the company that pioneered the specialist strategy focused on ultra-niche indications. But with its 2005 acquisition of TKT for $1.6 billion, Shire is now definitely playing in Genzyme's sandbox. Interestingly, Shire's most recent deal comes at a time when Genzyme is facing its own struggles. On Tuesday, federal regulators rejected Genzyme's request for permission to sell a version of its Pompe disease drug, Myozyme, that is made at its Allston manufacturing plant. The FDA decision shows just how difficult the road may be for certain follow-on biologics makers.
Medtronic/Restore Medical: On Tuesday, Medtronic agreed to acquire Restore Medical for $29 million, lured by the company's minimally invasive Pillar palatal implant and demonstrating that the market for obstructive sleep apnea devices is no snorer. (Just before the new year, Philips Medical Systems made a $5.1 billion all cash offer for Respironics, the leader in the sleep apnea market.) The deal makes perfect sense for both companies. First, it gets Medtronic into the new area of sleep disorders, by way of the Ear, Nose & Throat (ENT) market where it’s already a leader. And since many start-ups are hoping to address obstructive sleep apnea with implantable neurostimulators this could be an area where Medtronic can take advantage of its existing expertise. For Restore Medical, the acquisition gives the company access to Medtronic's deep pockets. In addition, via Medtronic, Restore is much more likely to persuade ENTs of the value of its minimally invasive device. Currently, sleep medicine pulmonologists and neurologists dominate sleep medicine; ENTs, meanwhile, have been relegated to an ancillary role, stepping in only when invasive palatal surgery (which is rarely chosen) is the treatment recommendation. Restore execs knew that mounting successul patient education and marketing campaigns would be a nightmare. Now that Medtronic has agreed to acquire them, it's sweet dreams.TopoTarget/CuraGen: This week's NDotW concerns the future development of the small molecule HDAC inhibitor belinostat. In 2004 Danish biotech TopoTarget licensed rights to the then-Phase I compound to Curagen. The latter company has invested a total of about $44 million in the project which is now in Phase II for a variety of oncology indications (including NCI-sponsored studies there are now 18 trials ongoing). And on Tuesday, TopoTarget bought it all back for $39 million u/f (two thirds cash, one third stock) and a potential $6 million in milestones. In other words: lets just pretend the past four years never happened. Those years haven't been kind to CuraGen which now has $145 million of cash and equivalents on hand to go with its $50 million post-deal market capitalization and $70 million in convertible debt. It plans to focus its energy and that cash on development of another Phase II oncology candidate CR011-vcMMAE. TopoTarget doesn't plan on hanging on to all rights to belinostat; partnering discussions, it said, are already ongoing.
Flickr image courtesy of user The Gansta the killer and the dope dealer's photostream through a creative commons license.
Thursday, April 24, 2008
The US Food & Drug Administration's investigation into adverse reactions associated with Baxter's now-recalled heparin products is a major public health priority and a growing political liability for the agency.
It may also become another strain on relations between the US and China.
FDA is now confident that the reactions were indeed caused by a contaminant introduced into the raw material used by Baxter and its suppliers to produce heparin, a contaminant that FDA suspects was introduced deliberately somewhere early in the supply chain in China. The agency convened the latest in a serious of media conference calls April 22 to outline its findings so far. (Click here to read coverage of the conference call in PharmAsia News.)
Chinese regulators disagree, and called their own press conference at the Chinese embassy in Washington to make their position clear. They believe the problem is more likely the result of impurities introduced in the final production processes in the US, and plan to inspect Baxter's facilities themselves. (Here is The Washington Post's coverage of the press conference.)
Baxter, understandably, agrees with FDA's interpretation of events thus far. Assuming FDA is correct, Baxter's own liability for the adverse events will be less obvious: the company itself is presumably a victim of whomever is responsible for introducing the contaminant. (Though, as we have noted previously, the US Food Drug & Cosmetic Act is a strict liability statute that at least in theory allows for the punishment of Baxter simple because it ultimately introduced a tainted a drug.)
But the issue is a double-edged sword for the biopharmaceutical industry. If indeed the contaminant turns out to be a case of economic fraud initiated by an unscrupulous business in China, that may help Baxter, but it will also fuel the misgivings of many US consumers and politicians about the globalization of trade--and especially concerns about the perceived dangers of outsourcing to China.
The Democratic Presidential campaign is increasingly sounding some protectionist themes, and the political anxiety about the rise of China as an economic rival to the US is palpable. Then there is the sensitivity of the Chinese government to its global reputation, including outrage at the protests surrounding the Olympic torch relay.
But we do know this: global pharmaceutical corporations--and investors seeking opportunities in emerging markets--have to factor in the political dynamics of globalization into their planning. If protectionists on either side win out, plenty of players in the biopharma sectors will be among the losers.
Wednesday, April 23, 2008
Legislation authorizing FDA to develop an abbreviated pathway for follow-on biologics seems pretty much inevitable—at least, that’s the near-unanimous opinion of the experts we talk to over here at the IN VIVO blog.
So assuming legislation passes sooner rather than later—indeed, some industry watchers think it’ll be as soon as next year—it’ll be a boon for the generic drug industry. Right? Generic drug companies will easily transfer their small molecule expertise into developing biosimilars. Right? They’ll become the big players in the follow-on biologics market and make a gazillion dollars. Right?
Well, maybe not.
According to some analysts, like Cowen & Co.’s Ken Cacciatore, the market for follow-on biologics may not unfold in the way most expect. While the generic drug industry would appear to be the natural players for follow-on biologics (and indeed, they certainly think so), Wall Street is starting to look in a different direction altogether.
As we just wrote in a story for The RPM Report, Cacciatore and his colleagues at Cowen think that (surprise!) Big Pharma and biotech companies are actually better equipped to play in the follow-on biologics market. (You can read the whole story at TheRPMReport.com; if you’re not already a subscriber, you can sign up for a free trial.)
Now, we don’t mean to suggest it is all doom and gloom for the generic drug industry. There are a few bigger generic companies—like Teva and Novartis’ Sandoz, for example—with the infrastructure and expertise necessary to compete with branded companies. But interestingly, Cacciatore points to both companies' brand-like features—not their generic capabilities—in outlining their FOB potential.
For the rest of the generic drug industry, there’s still good news. Even if Congress manages to push through legislation authorizing an abbreviated pathway, FDA’s part in all this isn’t going to happen overnight. Depending on Congress’ intent, it could take a while—perhaps even years—to develop the regulations. So for companies that aren’t ready, there’s still time to prepare.
She may have eked out a victory in the Pennsylvania Democratic primary, but Hillary Clinton probably won't be getting any more votes from vaccine manufacturers. And as far as the vaccine industry is concerned, neither will Barack Obama.
Both Democratic candidates for president have joined the presumptive Republican nominee, John McCain, in making statements about a purported link between thimerosal in vaccines and autism in children.
And here we thought McCain was the only misinformed candidate, making it safe for the pharmaceutical industry to think about voting Democratic this year. For a reminder on McCain's comments on vaccines and autism, you can check out our early blog post here.
Here's Clinton's response to recent candidate questionnaire from the group A-CHAMP:
"I am committed to make investments to find the causes of autism, including possible environmental causes like vaccines....I will ensure that the NIH has the staff and funding to fully explore all possible causes of autism....Here's what Obama said in response to a question during a rally in Pennsylvania on April 21, according to the Washingtonpost.com:
I plan to fully invest in our research agencies so they can protect our children’s health, and so they can find the causes and cures for conditions such as autism....We don’t know what, if any, kind of link there is between vaccines and autism--but we should find out."
"We've seen just a skyrocketing autism rate. Some people are suspicious that it's connected to the vaccines. This person included. The science right now is inconclusive, but we have to research it."We should point out that according to the Washingtonpost.com, there's some dispute over what Obama meant when he said "this person." The Obama campaign asserts that the candidate was pointing to an individual in the audience, and was not referring to himself. Video from the remarks appears to back that up, but Obama still refers to the "inconclusive" science, which has been repeatedly discounted by scientific studies.
We know microtargeting has been especially popular during this election cycle, but is there a vaccines-cause-autism voting faction that we've missed? Or will candidates say just about anything on Primary Day to get elected? Given all the evidence to the contrary on the absence of a link between vaccines and autism, we hope that's all it is.
Sirtris’s drug development centers on a seven-member family of proteins called sirtuins, which have long been thought to play a role in the aging process. It has focused in particular on Sirt1, mostly in type 2 diabetes and oncology. (Sirtris’s lead compound SRT501, a proprietary form of resveratrol, an activator of Sirt1 that is found in red wine, is in a Phase IIa study in combination with the first-line Type 2 diabetes drug metformin.) The other sirtuins branch out into several other diseases of aging, including neurodegeneration and muscle wasting. Sirt2, for example, has in recent years become a notable potential target for Parkinson’s disease.
There’s no doubt that in some circles, sirtuins are hot. Sirtris, which dominates the IP landscape and has by far the broadest pipeline in the area, had been in off-and-on collaboration discussions with GSK for years. It’d also been talking to a handful of other pharma companies with sirtuin programs, senior director of corporate development, Michelle Dipp, told IN VIVO Blog.
But the trigger for the M&A discussion was a November 2007 paper in Nature in which Sirtris showed the chemical structure of one of its next-generation compounds (you can find our blog post around that publication here). “It proved to the world that we can develop [sirtuin] activators and that they are up to 1000 times more potent than resveratrol,” Dipp recalls. “That was the proof that they existed.” As important, it signaled to the world that its pipeline must be pretty deep. “A lot of people in the industry were surprised to see a chemical structure, because it was not even for a clinical development candidate.” In a sense, the display was a tease. The compound “was so behind what we have in-house right now,” she adds, “that we were willing to publish the structure.” Alongside of the early data on SRT501, it apparently sold GSK on Sirtris.
And that was exactly what Sirtris needed.
The problem for Sirtris was that the first-generation SRT501 was unlikely to be the centerpiece for a large collaboration—not for a long time, if at all. For one thing, it does not have composition of matter IP on SRT501 (unlike the follow-ons). Indeed, in January, the IN VIVO blog wrote that Sirtris “has to validate its target with a molecule that won’t drive all that much licensing value so that the follow-ons will.”
In a sense, SRT501 was bound to be a loss leader and an expensive one, especially given the current regulatory mandates of diabetes drug development. The usual conceit of building value through proof of concept was all the more risky, and perhaps not as rewarding. And GSK was offering more than any acquirer of a platform biotech at an equivalent stage in its clinical life, except for Merck's acquisition of Sirna Therapeutics in 2006, which arguably had a much broader platform and scope of potential enabling (and blocking) IP, around RNAi. (Some other comparables include GSK/Domantis:$454 million (2006); TEVA/CoGenesys:$400 Million (2008); BMS/Adnexus:$505 million (2007); Pfizer/CovX: $600 million (2007); Merck/GlycoFi:$400 million (2006); and Amgen/Avidia:$290 (2006).)
With GSK, Sirtris can now broaden its activities. “Right now, 90% of the company is focused on Sirt1," notes Dipp. "Now we have the resources to look into the other sirtuins, which are equally exciting.” As with next-generation antibody specialist Domantis, Sirtris will remain as a separate discovery operation, and the current management team will continue to lead this autonomous unit.
Will CEO Chrisoph Westphal stay with Sirtris? The company's exit again shows that he knows how to build a technology-based company. (Among Westphal's other credits, he is a co-founder of two other Cambridge-based platform biotechs, Alnylam and Momenta.)
"There are five things that you try to pull together in a technology-based company," Westphal told START-UP in April 2006. "A novel, breakthrough scientific idea, and the ability to address a broad, unmet disease area," are the first two. But you'd still be nowhere without three and four: "The ability to be a beachhead in the important new development of products by pulling together the leading scientists in the field, and the ability to finance the business." Fifth? "Understand early on and be comfortable with the fact that you can dominate the IP space."
As we wrote then: So it's that easy.
Tuesday, April 22, 2008
Apparently, House Energy & Commerce chairman John Dingell is unhappy with the Food & Drug Administration.
The Michigan Democrat took issue with FDA commissioner Andrew von Eschenbach's broad plan to overhaul the agency's overseas drug inspection structure to avoid another heparin situation during an E&C Oversight and Investigations Subcommittee hearing. Von Eschenbach was trying to explain that it's not just the number and frequency of inspections by inspectors, but how the inspections are carried out that matter.
Dingell was having none of what he called the commissioner's "toe dancing." Dingell, during his allotted time for question-and-answer, asked von Eschenbach to answer "yes" or "no" to a series of questions. The commissioner started off obliging Dingell but then began getting off track with longer, more verbose answers.
Dingell: I'm going to be honest with you, I'm establishing that you don't have the resources and you can't do your job.
The Energy & Commerce chairman asked if the $11 million for 2008 and $13 million for 2009 allocated for inspections was enough for FDA to inspect the thousands of currently uninspected facilities abroad which import food and drugs into the US every year.
Dingell: Does FDA need more resources to conduct inspections.
Von Eschenbach: Yes, sir. I've asked for more resources.
Dingell then pointed out that the Government Accountability Office estimated it would cost $16 million to inspect only Chinese exporters. So clearly, the $11 million and $13 million were not adequate, right?
Von Eschenbach paused and then answered: I'm telling you that we are putting [the resources] to appropriate use and I have requested additional resources to do more but I'm trying to make the point that in addition to doing more, we have to do it differently.
That set off Dingell, and recalled the Michigan Democrat's days when he skewered witnesses without mercy.
Dingell: You know, I've been in this business a long time, and I've had food and drug commissioners constantly tell me, 'Ooooh, we're going to have a new means of doing this, and we're going to be leaner and meaner.' Turns out that they're leaner and poorer and weaker and less capable of doing their jobs. And all of these promises that I get from commissioners...turn out to be nothing more or less than hooey.
Von Eschenbach: Mr. Chairman, if you allow me to...
Dingell: I didn't fall off the cabbage wagon yesterday. I've been talking to food and drug commissioners for 40 years. And you're not the first fella I've had to skin for not doing his job and coming up here and defending an indefensible situation. I want to maintain my respect for you but I can't maintain my respect for you if you keep toe dancing around the hard facts that curse you with the inability to do your job because you don't have resources.
Then Dingell asked von Eschenbach repeatedly exactly how much money FDA needs to inspect all of the outside facilities up to a US standard.
Dingell: I'm rather tired of all this toe dancing. You cannot do your job, you are not doing your job, how much money do you need to do it?
Von Eschenbach responded that he would have to submit a business plan to appropriately address the question but added that a rough estimate would be the number of total facilities multiplied by $45,000 (the GAO estimate per inspection).
That wasn't good enough for Dingell. "You are carrying water for an administration that has not given you the resources that you need. This committee wants you to have the resources that you need to do the job you have to do to protect the American people." He then brought up the deaths and adverse events related to Baxter's contaminated heparin. And started shouting. "You presided over this because you do not have the resources to do the job that you need to do. How much money do you need to do the job that you are supposed to do?"
Von Eshenbach remained calm and answered again in a way that did not calm Dingell's tone: "Mr. Chairman, I would like to have the resources that would enable us to do a systemic overhaul of the entire process, not a figure that's related to a cost per inspection times the number of facilities."
Dingell repeated again and again, slamming his hand against the desk, the question of exactly how much money FDA needed for the overseas inspections. "You have one fine scandal going on, you have others going on with regards to fish and fish products and you simply are absolutely incapable of addressing your responsibility."
In the end, von Eschenbach gave him the round figure for drugs: 3,000 facilities times $45,000 per site, which is $135 million. However, the sites are inspected once every two years, so the number really is about $70 million. The Republican Senate staff would later say it would take about 500 FDA inspectors overseas.
Dingell ended his fire and brimstone delivery with this: "Commissioner I have no ill will towards you. I have ill will of the most gross sort towards the fact that you come up here and defend a situation that is indefensible and that you are not soliciting the resources that you need to do your job to protect the American people the way the law says you should. And that you are tolerating an administration which is allowing this kind of situation to [continue] because they are too damn tight."
Von Eschenbach, for his part, handled himself well in the face of such a storm from Dingell and remained calm-not an easy thing to do considering the circumstances. But maybe next time, he should just say: $70 million.
Monday, April 21, 2008
When Michael Gilman, PhD, left his post as EVP of research at Biogen Idec Inc. in late 2005, his goal was to start afresh. He quickly hooked up with Atlas Venture and Frazier Health Care Ventures, the latter through a friend and venture partner at Frazier, Michael Gallatin, PhD. Two years later he was in the thick of his first start-up experience with a Phase I-ready monoclonal antibody to treat fibrosis.
Today that company, Stromedix Inc., announced it has raised $25 million in a Series B led by New Leaf Venture Partners, with participation from Bessemer Venture Partners, Red Abbey Venture Partners, and A-rounders Atlas and Frazier. Stromedix has already begun Phase I studies with its monoclonal antibody, licensed from an unexpected source, Biogen Idec. The Mab targets integrin alpha-v-beta-6, a cell-surface adhesion molecule and activator of transforming growth factor beta, itself a popular target in a variety of indications including fibrosis and oncology. According to Gilman, TGFb is “necessary and sufficient” in the fibrotic process.
Gilman took a few minutes to explain to us how Stromedix got from A to B, and to talk about why fibrosis has received scant industry attention despite its prevalence and well-understood pathways and potential blockbuster markets.
Fibrosis occurs when the body’s typically well-choreographed response to injury either goes haywire or cycles at low levels for long enough that scar tissue accumulates in the affected organs. Function is generally lost, eventually organs fail. “It’s a condition that has been fundamentally missed by the industry. There are no approved antifibrotic drugs and very few in development” despite the condition’s well understood biology, says Gilman.
The reason? Nobody has figured out how to successfully design and run a clinical plan for an antifibrotic drug. “There’s a generalized anxiety about how hard that clinical path is,” says Gilman.
And that, in a nutshell, is Stromedix’s proposition. Gilman, co-founder Gallatin and their small team reckon they have figured out how to do the right clinical experiment to determine that the biology that has been laid out preclinically actually holds up in humans.
So far researchers have stumbled for three fundamental reasons. First, in most instances fibrosis develops slowly, over a long period of time, making clinical study unwieldy. Second, by the time many patients present with disease they’re too far gone for a therapeutic intervention to make much of a difference. Finally fibrosis is a tissue level phenomenon, says Gilman. “There is nothing in the blood you can measure, so you need tissue from patients, and that means biopsies,” he says.
Stromedix believes the population in which to secure proof-of-concept for STX-100 is transplant patients. “You need patients who you can get early, perhaps even in advance of fibrosis, who develop disease quickly, and patients from whom you can get tissue,” he explains. A transplanted kidney, for example, goes in clean—no fibrosis—but is quickly subject to all kinds of drug- and immune system-induced injury, and so it develops fibrosis quickly; transplanted organs are also routinely biopsied. “It’s the perfect setting to test an anti-fibrotic drug,” says Gilman.
There was just one problem: Gilman and Gallatin didn’t have an anti-fibrotic drug.
But Gilman did know of a program inside Biogen that might fit the bill. Unfortunately, it was off limits because the Big Biotech was actively developing the compound for , idiopathic pulmonary fibrosis (IPF). But Biogen doesn’t have a pulmonary business and the thought of spending big on a non-core asset likely didn’t sit well. About eight months after Stromedix was began drug-hunting, Biogen shelved the program—despite its strong preclinical data--as part of a portfolio re-organization. “I called my friends over at Biogen and said ‘why don’t you let us have it?’” said Gilman.
In March 2007, Stromedix raised $4.4 million from Atlas and Frazier and finalized the STX-100 license two months later. The Mab arrived with a complete preclinical tox package, manufactured clinical material, and an IND on file at FDA. “The program came out very nicely baked,” says Gilman. “And within 90 days we were in front of the FDA with a new clinical plan in renal transplant.” Stromedix filed a new IND in October and in early 2008 started a Phase I in healthy volunteers, which should wrap toward the end of the year.
STX-100 is a poster-drug for the out-licensing movement. Biogen Idec had to take it into a much bigger market—IPF, which some analysts predict could be worth upwards of $6.5 billion (with a B) per year—in order to see enough of a return on its investment.
The economics are completely different for a small firm like Stromedix, which can monetize its investment with a well-run proof-of-concept trial in a small indication that might not even be the final clinical destination for the product.
Of course Biogen stands to gain as well—the company owns an undisclosed stake in Stromedix. Although it has no specific rights to the project down the road, Gilman acknowledges his former employer is well-placed should it decide to license the project back after POC. Provided it stays focused, today’s B round should see Stromedix through that proof-of-concept in renal transplant, which should read out in 2010.
Gilman is positively evangelical about putting Big Biotech and Big Pharma assets into the hands of small, focused firms with incentivized management. But whether or not Stromedix pursues further in-licensing opportunities is uncertain. At the moment the company is a clean, capital-efficient play on a well-regarded program that is perfectly situated on the verge of a valuation inflection point, says Gilman. In other words, given proof-of-concept success, why complicate the prospects of a takeover?
(A full version of this article will run in the May issue of START-UP)
image of fibrotic lung via Wikimedia Commons.
Before we get to the weekend's industry news, a quick correction: Yes, yes, the Flyers-in-5 prediction went down in flames on Saturday, which no doubt gave great pleasure to our colleagues in Washington. But although Flyers-in-6 (or, if needs be, Flyers-in-7) lacks that authoritative margin-of-victory and alliterative mojo that our original prediction had in spades, that's fine by us. And hey, the Sixers' come-from-behind upset of the Detroit Pistons yesterday takes a little sting out of Saturday's loss.
- Distribution of specialty therapies is an increasingly important source of revenue for pharmacy benefit managers like Express Scrips, the New York Times reported on Saturday. But even as employers hire PBMs to get access to lower priced medicines for their benefit programs, the cost of some specialty drugs are going through the roof.
- Genentech reported that Avastin in combination with cisplatin and gemcitabine as first line therapy improved progression-free survival in non-small cell lung cancer patients, but did not extend overall survival; that Phase III AVAil study was sponsored by Roche. A separate first-line Phase III test of Avastin in combination with paclitaxel and carboplatin (E4599) showed a statistically significant improvement in overall survival in a similar group of NSCLC patients. Meanwhile, Reuters reports on the challenge that Avastin is getting from Imclone's Erbitux; according to analysts from Morgan Stanley, Erbitux is winning.
- Vernalis has monetized a majority of its European Frova royalties in a deal with Paul Capital that has net the UK biotech 18.4 million euros. Our recent take on Vernalis and its Frova-induced coma is here.
- Novartis beats the Street, as Diovan and Gleevec bring home the bacon. The Big Pharma's net was up 6.8%. WSJ reports.
- And finally ... Pharmalot. Your destination for pharmaceutical-Passover humor.
image from flickr user xhtmled used under a creative commons license.
Friday, April 18, 2008
The drug industry is breathing a sigh of relief now that Janet Woodcock has permanently assumed the role as head of FDA's drug center.
But let's say Woodcock had turned down returning to oversee the Center for Drug Evaluation and Research, who would have been Commissioner Andrew von Eschenbach's next choice? Well, you can take a look at my incredibly accurate odds-making piece I wrote a few months ago. There were a number of internal candidates who may have been the choice. To read it, click here.
However, if von Eschenbach had decided to look outside, there were a number of names being thrown around as candidates. Two that I've mentioned before are Cornell pharmacologist Marcus Reidenberg and former University of Utah cardiologist Jeffrey Anderson. You can read a little more about them in The RPM Report by clicking here (registration required for non-subscribers).
Recently, I learned that another outside candidate was being pushed heavily by former FDA officials: Indiana University pharmacologist David Flockhart.
Flockhart appears to be exactly the type of candidate the agency would have been looking for in an external contender. Flockhart, chief of the division of clinical pharmacology at Indiana, is a believer in the personalized medicine revolution and the basic tenets behind FDA's Critical Path Initiative. To read more about his points of view on medicine, science, genetic testing and drug safety, click here.
A former Georgetown University researcher, Flockhart is credited with establishing Indiana as a site for NIH/National Institute of General Medical Sciences’ Pharmacogenetics Research Network. He received his MD from the University of Miami School of Medicine and PhD from the Welsh National School of Medicine in Cardiff.
So why does this matter? Well, it's interesting, isn't it? But more importantly, these are the types of thought leaders to keep on your radar for later down the road in different administrations or as possible liaisons between FDA and the academic world for key FDA/NIH/CMS initiatives. That's why they matter.
I'll keep my ear to the ground for other candidates that were interviewed or championed for the CDER director position so we can start a whole web series on "People Who Weren't Named CDER Director."
Finally, tune in next week for my Personalized Medicine Mailbag blog post. I wanted to thank everyone for the overwhelming response to my personalized medicine post. Apparently, people care about this issue. It's not too late to email me with your take on the personalized medicine vs. cost effectiveness debate.
A year ago or so IN VIVO Blog thought we had a pretty good scoop.
While we were writing this piece on specialized health care funds, we heard from TWO independent sources that InterWest Partners—the Sand Hill road stalwart—was dropping its technology team and going with a life sciences only strategy. Feeling pretty good about the information, we called InterWest for the obligatory “No Comment” or a cryptic denial that left the door open while still trying to clear the smoke.
That’s not what we got. Instead, General Partner Arnie Oronsky told us flat-out it was not true. No way. No how. No equivocation. No matter how many different ways we asked the question, the answer was the same. Not true.
So, despite having two solid sources, we didn’t include this tidbit in the article. Quite simply, we didn’t think Oronsky was the kind of guy to mislead, misdirect or—let’s say it—lie. And we’re happy to report we were right.
Earlier this week, VentureWire reported that Interwest Partners would be launching a bid to raise its 10th fund with a $650 million target. The article, drawing on information from limited partners, suggested only one-quarter of the fund would go to information technology investments. So we were feeling pretty good about our earlier information being nearly right, but Oronsky once gain nailed us with a stream of cold water. He says the split will probably be two-thirds to life sciences one-third to IT, a fairly standard split.
“We’re still a diversified fund,” Oronsky says. “We will be more focused in the IT area. We’re not going to do certain parts of IT investing so we will just be a little more focused. We will continue the same focuses in life sciences: medical device, biotech, and biopharma. Otherwise it’s pretty much business as usual.”
We still find off-the-record comments that InterWest had indeed considered dropping IT. But Oronsky says that isn’t going to happen. He vividly recalls a decade ago when venture capital firms dropped their life sciences teams to concentrate on technology investing only to see the fortunes of the industries turn around in just a few years.
InterWest, Oronsky says, didn't make that mistake a decade ago and isn't going to make it today.
Speaking of break-ups of the late 1990s, Versant Ventures is in the market with its fourth fund, a $500 million partnership, according to this morning's PE Week Wire. Versant, of course, was founded by health care partners from Crosspoint Venture Partners, Brentwood Venture Capital and Institutional Venture Partners after the IT partners from those three firms flew off to form the IT-only Redpoint Ventures. It certainly seems that Versant handled the break up quite well.
One of the tougher jobs a reporter has is trying to determine when a new investment trend has run its course. (No, it ain’t digging ditches, but yeah, it’s tough.)
No doubt, one of those questionable trends is the consumer medicine market. We have covered this area extensively, specifically the aesthetics market. And we mean extensively. Just over the past two years we’ve written about aesthetics plays here, here, here, here, here, and here .
But we're getting the feeling we ain’t seen nothing yet. A collection of some of our favorite venture firms—Aisling Capital, InterWest, Palo Alto Investors, Technology Partners, Versant and Vivo Ventures--pieced together an invite-only conference on consumer medicine a few weeks ago at the Ritz-Carlton at Laguna Nigel. And they jammed the place with 200 VCs who are trying to get a handle on how to invest in this very different business of private pay, limited regulatory oversight and direct-to-consumer marketing.
In addition to aesthetics, VCs talked about fertility, eye care, orthodontics and other markets where a growing number of patients seem willing to pay for services and products themselves. According to one organizer, the discussions identified a few key—and not at all surprising—challenges: finding executive talent capable of bridging the gap between health care and consumer markets, determining how much regulatory involvement is required, if any, and devising the most effective marketing strategy to hit consumers.
Bottom line, the number of attendees suggests the consumer medicine trend isn’t close to peaking.
IN VIVO Blog loves a good buddy flick/TV show. Starsky & Hutch, Butch Cassidy & the Sundance Kid, Turner & Hooch. So we were happy to see our industry’s own dynamic duo got a little big-time pub in the Wall Street Journal this week. We’re talking, of course, about Polaris’ Terry McGuire and MIT’s Robert Langer. They’re cozy relationship is no secret in the start-up world. We reported about it often including here, here and here. The ultimate culmination of pair's work may not thwart the criminal plans of some over-the-top bad guy. But if McGuire has his way, there's an even bigger prizing awaiting Langer someday. Heck, what are buddies for?
Christmas came early for the faithful this week, many of whom flocked to the nation's capital to see His Holiness Pope Benedict XVI on his first official visit to the US. Among those celebrating the Pope's crossing: Comedy Central's Stephen Colbert and NBC Today show host's Kathi Lee Gifford, who was so moved by the Pope's arrival that she actually "teared up" during her Pilates session.
Pharma executives--at least those with the word STRATEGY in their titles--might do well to say a few "Hail Mary's" of their own. The list of companies who might benefit from a miracle is growing longer every week. Take Merck and Schering Plough, which continue to suffer the ramifications of the ENHANCE conflagration. (Merck actually suffered a double whammy: Vioxx reared its ugly head again with the publication of a JAMA article claiming company-paid ghostwriters authored many research articles written about the drug.) Roche appears to be in need of help too: the company reported lower than expected earnings this week thanks to weak Tamiflu sales and an even weaker dollar. But the company most in need of divine intervention? Pfizer. The company pflopped big-time, with profits down 18% for the quarter thanks to generic competition for Norvasc and Lipitor.
Can't get to DC or New York for a papal blessing? Fear not, IN VIVO Blog offers a benediction of a different sort...
Roche/ PIramed: Earlier this week Roche agreed to buy UK-based PIramed for $160 million. (The biotech will get another $15 million is payable on the achievement of a relatively easy milestone: initiation of Phase II studies on PIramed's oncology program.) PIramed is at the vanguard of PI3-kinase inhibition, a position that attracted attention from Genentech--and an oncology deal worth up to $230 million--back in 2005, and we surmise Roche decided to share the love. Only last month Genentech and PIramed announced progress in the collaboration, as lead compound GDC-0941 hit the clinic in the US and the UK. PIramed even managed to hang onto an option to commercialize compounds emerging from the collaboration ex-US. (Our 2004 profile of PIramed is here, and our 2006 analysis of the Genentech deal is here.) Roche's acquisition of PIramed is, in contrast to the miserable news of late from Blighty Biotech, a jolt of good fortune. Merlin and JPMorgan, PIramed's two backers, have made a solid return--their original ₤10 million investment (then worth about $17 million) has blossomed rather nicely.
Natus Medical/Sonamed: Natus Medical is all grown up. The child care health products company announced its plans to purchase Sonamed, a privately held maker of products that screen newborns for hearing problems. Terms of the deals weren’t disclosed, but both boards have approved the deal. In the announcement, Natus Chief Executive Jim Hawkins says Sonamed’s Clarity screening device will fit into Natus’ current line of products for hearing loss, brain injury, jaundice and other maladies afflicting newborns. Two-thirds of the Sonamed’s $3.5 million in annual revenue came from the sale of disposable products, giving it a high gross profit margin, a possible boon to Natus. Just a week ago, Natus wrapped up $15 million in a secondary sale of stock, possibly to help finance the deal. This is Natus' fourth acquisition in three years. Earlier this year, Natus announced a broad restructuring plan that would help it digest its three previous buy-outs: Excel-Tech, Olympic Medical, and Bio-Logic Systems.
CV Therapeutics/ TPG-Axon: One week after receiving regulatory approval for Lexiscan, an injection that increases arterial blood flow during heart tests, CV Therapeutics sold a 50% interest in its North American royalties to private equity player TPG-Axon Capital in a deal worth up to $185 million. In 2000, CV inked a deal with Fujisawa Healthcare (now Astellas Pharma) in which it gave up North American rights to Lexiscan in exchange for milestone payments, development funding, and double-digit royalties on the product. CV retains ex-North American rights to the product and expects to submit a marketing authorization application to the European Medicines Agency by the end of the year. TPG-Axon is a spin-out of Texas Pacific Group. Financings of this kind have become increasingly common in recent months as private equity players come to the rescue of needy companies unable to tap the stingy public markets. Two weeks ago, IN VIVO Blog noted similar cash-for-royalties tie-ups between Paul Capital and Plethora Solutions and Deerfield Management and VIVUS Inc.
Pfizer/Avant: Another week, another Pfizer deal in a specialty-focused market. (Have we mentioned this is a trend?) On Wednesday came news that Pfizer was licensing Avant Immunotherapeutics' vaccine for a rare brain cancer called glioblastoma multiforme (GBM) for an initial sum of $40 million, as well as a $10 million equity stake. If Avant's Phase II immunotherapy, called CDX-110, continues to meet its clincal and regulatory endpoints, the Needham, MA-based biotech stands to receive milestones of more than $390 million as well as royalties. CDX-110 targets a tumor-specific variant of the epidermal growth factor receptor (EGFR) called EGFRvIII that researchers believe contributes to malignant cell growth in about 40% of GBM tumors. This is the second big immunotherapy deal we've seen in as many weeks: on April 2 came news that Takeda was teaming up with Cell Genesys to develop that company's GVAX Prostate immunotherapy. (We'll have more in this month's START-UP about the deal.) It seems highly unlikely that Pfizer's bus dev team would have signed this kind of deal just five years ago: after all, there are just 10,000 new cases of this kind of brain cancer annually in the US. But Pfizer has been eager to build capability in oncology, especially in the area of so-called cancer vaccines. Recall that last November the company purchased Coley Therapeutics for $164 million.
GSK/Regulus Therapeutics: GSK announced its second deal in the young field of microRNA inhibition yesterday. The pharma plans to team up with Regulus Therapeutics to develop microRNA antagonists against four undisclosed inflammatory targets through proof-of-concept, at which point GSK can claim an option. For this privilege, GSK will pay the biotech $20 million up-front, including a $5 million note that will someday convert to Regulus common stock. Total milestones (both pre- and post-POC) are up to $144.5 million per project, and Regulus will receive up to double-digit royalties on sales. If the deal seems a bit familiar that may be because only a few months ago, in December 2007, GSK's infectious disease CEDD inked a similar deal with Danish microRNA player Santaris for up to four different virology programs, that includes an option on Santaris' SPC3649 program targeting microRNA-122 in HCV. (That program was recently the subject of a write-up in Nature). Though only a few months old, Regulus is not a typical start-up; it is a well-funded JV between antisense leader Isis and RNAi leader Alnylam. (Look for a feature about Isis and its platform strategy in the April IN VIVO.) Part of Regulus's strategy is to quickly establish a base of IP around microRNA targets, as Isis did with antisense and Alnylam with RNAi.
Wyeth/ ViroPharma: It's official. Wyeth and ViroPharma officially called an end to their hepatitis C partnership around ViroPharma's small molecule non-nucleoside inhibitor, HCV-796. In August, the companies announced potential safety concerns--including an increasd risk of liver disease--associated with the medicine and halted a mid-stage clinical trial of the drug. "Significant activities were undertaken to determine a clear path forward for HCV-796; however, the risk associated with potential hepatotoxicity ultimately posed too high of a hurdle to merit further development," said Vincent Milano, who just took over as ViroPharma's president and CEO last month from Michel de Rosen. ViroPharma's HCV-796 is by no means the only hepatitis therapy dogged by safety concerns. Both Idenix and Anadys and their pharma partner Novartis were forced to retrench after bad news about their HCV drugs surfaced last year.
Image by Flickr user davescunningplan used with permission through a creative commons license.