Monday, May 11, 2009

Vanda's Iloperidone: Not Something You See Every Day

The recently and some-say miraculously approved iloperidone (Fanapt) from Vanda Pharmaceuticals is certainly a rare bird. (Full coverage of the approval in today's Pink Sheet ($), here.)

Rare in that, in just nine months, it went from not-approvable to FDA-approved.

But also rare because it is one of only a handful of unapproved assets out-licensed to a small biotech by a Big Pharma and which eventually found its way to the market. (This phenomenon was pointed out to us by eagle-eyed IVB reader and COO of Versant's EuroVentures incubator Tom Woiwode. In fact, iloperidone was out-licensed by TWO pharmas, but we'll get to that in a minute.)

In any case, we agree: despite the interest among VCs in backing ex-Big Pharma assets and spin-outs, and Big Pharma's seemingly increased willingness to part with shelved assets, few have so far meandered their way to market a la iloperidone.

Of the ones that have there have been some doozies, though.

Cubist has built its anti-infectives business on the back of the success of Eli Lilly's unwanted antibiotic daptomycin (now sold as Cubicin), for example. Actelion's bosentan (Tracleer)--a blockbuster on the market to treat pulmonary arterial hypertension--began life at Roche. And Novartis' first-in-class renin inhibitor aliskiren (Tekturna) was championed by Speedel Group founder Alice Huxley. The drug's clinical successes led Novartis to pick up its option to market the drug and eventually to buy Speedel in July 2008 in a deal valued at nearly $900 million.

Surely we're missing some, so please let us know in the comments. But we think the point remains: few drug candidates, once abandoned by their original Big Pharma developers, go on to reach the market. At least so far.

There have however been other pharma-to-biotech success stories (or qualified successes, like Adolor/GSK's alvimopan (Entereg) which was originally developed by Lilly). Some deals involved geographically restrained smaller pharmas without the urge or wherewithal to compete in every market. For example Cephalon licensed modafinil in 1993 from French pharma Groupe Lafon and wound up acquiring the pharma in 2001 on the back of Provigil's success. And after all, a drug doesn't need to be approved to spark a solid return for a biotech in-licensor.

Just ask Vicuron's investors. That company's pipeline included the antibiotic dalbavancin and the anti-fungal anidulafungin, the delayed promise of which helped spur Pfizer to buy the biotech in 2005 for a whopping $1.9 billion. Anidulafungin had been licensed by Lilly (Lilly again!) to Versicor, one of Vicuron's predecessor companies, in 1999. Pfizer eventually launched anidulafungin in 2006 under the Eraxis brand -- but the acquisition was a bust for the Big Pharma. Eraxis sales in 2008 were microscopic. Dalbavancin, which originated in a unit of Hoechst Marion Roussel and was spun off into Vicuron's other predecessor company, Biosearch Italia, remains disappointingly unapproved.

Domain Associates has made a business out of in-licensing development assets from pharma (usually Japanese companies), creating companies around them, developing the assets further -- and then selling them to Big or Mid-Sized Pharma pre-approval (as it did, for example, with Peninsula, Cabrellis and NovaCardia).

But back to iloperidone, and what a long strange trip its been. In fact two separate pharmas have out-licensed the compound. In January 1997, Hoechst licensed the drug to now-tiny Titan Pharmaceuticals. (Titan, still kicking around and trading as a penny stock, was up an insane 1500% on the approval news.) Titan turned around later that year and licensed the drug to Novartis. Novartis and Titan ran into trouble in Phase III when the drug was shown to cause QT prolongation; Vanda took on development of the drug in 2004, and received the Not Approvable letter from FDA last July.

There are a few other ex-Pharma assets coming up to their days of regulatory reckoning before too long. Cadence's Acetavance (from BMS), Movetis's prucalopride (from J&J), and Basilea/J&J's (those lovebirds!) ceftobiprole (originally from Roche) are all before or about to be before FDA and/or EMEA. VCs remain eager to back in-licensing based companies--Versant, for example, is involved in Cadence, Flexion (a POC play modeled on Lilly's Chorus division), and Synosia (CNS assets from Roche and others).

The dearth of Big-Pharma-to-Biotech asset successes may be a reflection of smart moves by pharma pipeline pruners or just the difficulty of drug development no matter a drug's provenance. But with Big Pharmas like Pfizer making for the past couple years an ever-bigger deal about its spin-off and out-partnering activities, nine months on from the iloperidone Not-Approvable, perhaps we're on the brink of something different.

Fanapt may be an outlier, for several reasons. But it may also be a reason for biotechs to be hopeful.

Dodo image from flickr user kevinzim used under a creative commons license


Anonymous said...


Anonymous said...

What Vanda will be worth depends upon how well Iloperidone sells. If it sells 250 million a year, Vanda should be worth $50 a share. 500 million sales would suggest Vanda at $100 a share. Vanda seems very underpriced to me at present.