Saturday, February 28, 2009

Sebelius HHS Announcement Coming Monday?

Are we there yet? Almost. 

Our understanding is that the White House could announce Kansas Governor Kathleen Sebelius as HHS Secretary on Monday. 

Given the nature of the ups and downs for the HHS Secretary search, we want to stress that things could change at any moment and we'll do our best to keep you up to date. 

It would be a remarkable turn of events for Sebelius' nomination, which appeared to be finished just one week ago. Not too long ago, the administration had settled on Sebelius for the position. To read our coverage, click here and here

Then, multiple people we trust on Capitol Hill said the nomination was in deep, deep trouble over the issue of abortion. Sebelius, a Roman Catholic, is understood to be pro-life but carried out pro-choice policies in her state and has links to a vocal pro-choice doctor in Kansas. Social conservatives in the Senate wouldn't allow the nomination to get through. To read our story on this, click here.   

However, it appears as though the White House decided to step in due to President Obama's personal relationship with Sebelius and desire that she fill the Cabinet post. To read our story, click here

The talk in town is that Nancy-Ann DeParle will be named to head up the White House Office for Health Reform. This, like everything else health, is subject to change. 

Former New York City Health Commissioner Margaret Hamburg is still in line to be tapped as FDA Commissioner and Baltimore Health Commissioner Joshua Sharfstein is expected to be named principal deputy. We stress that this arrangement could also change. 

So to summarize, assuming things remain as they are, HHS will look like this, with the possibilty of some of these candidates having dual roles in the White House: 

HHS Secretary Kathleen Sebelius
HHS Deputy Secretary Bill Corr
HHS General Counsel Bill Schultz
CMS Administrator Don Berwick
CMS Deputy Administrator David Cutler
FDA Commissioner Margaret Hamburg
FDA Deputy Commissioner Joshua Sharfstein

We would like to emphasize that, with the downfall of the Daschle nomination, the economists in the White House (Larry Summers) and at OMB (Peter Orszag) have filled the health care reform vacuum. 

We'll tell you when we hear more. 

Friday, February 27, 2009

DotW: State of the Union

Okay, we at IVB know that Tuesday night's speech wasn't really a state of the union address. Call Obama's discourse a precursor, a practice run, a preliminary to the real thing coming in 11 months. Whatever you call it, there's no denying the officially unofficial address will likely go down in history as one of the most important events--after the budget, also released this week--of 44's first 100 days. Not necessarily because, as Ezra Klein at American Prospect notes, it was a particularly inspiring--or terrorizing--speech. But because "he didn’t wrap his agenda in a lot of rhetoric about America’s mettle or hide it behind stories and icons. He just sort of said it." Imagine.

In a week where the Dow plummeted to lows not seen since 1997 and news on rising unemployment and falling home sales only added to the gloom, it's perhaps natural to take stock of the biopharma state of the union. Sadly, as investors worried over the mind-boggling $3.6 trillion federal budget Obama submitted Thursday, the stock prices of pharma companies, med-tech outfits and insurers dropped, illustrating again that there is no such thing as a recession proof industry.

As the saying goes, you can't swing a dead cat without hitting a troubled biotech these days. Elan once again made the news with an announcement that it was shedding 230 jobs--half in Ireland and half in California--as it tries to control costs and marshall resources. (No word on the corporate jets.) Meantime, Vanda is the latest company to experience the full brunt of shareholder activism, while Intercytex shows regenerative medicine is still a tough area to grow a business.

And then there's Dynogen, this week's winner of IVB's little engine that couldn't prize. The company declared chapter 7 less than a year after trying to go public via the SPAC--or is it SCRAP?--route. Even as six law firms kvetched about their unpaid legal fees, Dynogen's venture backers, which include Oxford Bioscience Partners, SV Life Sciences, and Abingworth Management, took it on the chin despite sinking $67 million into the IBS developer.

In what is surely a sign of the times, this week Pfizer announced it was discontinuing work on two Phase III primary care products, PD 332,334 for generalized anxiety and esreboxetine for fibromyalgia, to redirect resources to drug candidates with more potential. The news shows that even Big Pharma face tough decisions these days about which programs to move forward and which to table. Could the news mark the beginning of the much vaunted Pfizer transformation CEO Kindler has talked about in the days since moving to acquire Wyeth? This blogger is reserving judgement until the New York pharma actually does some thing revolutionary, such as not just killing the programs but outlicensing them. (For another opinion on Pfizer's transormation potential be sure to check out this hilarous youtube video by a former Ann Arbor, MI-based employee.)

Meantime when it comes to dealmaking in the biopharma state, the big news this week was partnerships gone awry. Astellas made the decidely un-Japanese decision to go hostile in its quest for CV Therapeutics, despite the fact that the decision means Astellas violates a longstanding standstill agreement tied to the California biotech's Lexiscan imaging agent. The Roche/Genentech saga continues apace, with Roche marshalling its economic might by issuiing over $30 billion in bonds in the past two weeks, and Genentech preparing to woo investors at its annual R&D day in NYC on Monday. (Better be some good danish at that meeting...)

Synta’s shocking news that it was halting a Phase III trial of metastatic melanoma drug elesclomol due to excess mortality likely portends an end to its rich partnership with GlaxoSmithKline. Originally inked in 2007, the agreement has added just over $100 million to Synta’s coffers. And, as we wrote on Monday, Johnson & Johnson and Basilea seem poised to begin a very public fight over milestone payments tied to regulatory approval of the antibiotic ceftobiprole. Frustrated over European and US regulatory delays associated with the drug, Basilea announced it was seeking arbitration to obtain compensation from partner J&J for outstanding milestones and the value of the opportunity lost in not having ceftobiprole on the market.

Here at IVB, we know that not all deals are created equal. We, the bloggers, in order to form a more perfect industry, provide for the common defense and promote the general welfare, bring you another edition of Deals of the Week. (Domestic tranquility is not, however, guaranteed.)

Merck Serono/Ambrx: Merck Serono and Ambrx formed a more perfect union this week as they expanded their existing relationship to include the development and commercialization of a preclinical biological multiple sclerosis candidate, ARX424. According to the deal, announced Feb. 24, Darmstadt, Germany-based Merck Serono gains exclusive global development and commercial rights for the MS compound. In exchange, Merck Serono will pay an undisclosed sum to Ambrx, plus pick up an equity stake. Ambrx also stands to receive undisclosed clinical, regulatory and commercial milestone payments for drugs that make it to market, plus royalties on global sales, as part of the package. Furthermore, it has the option down the line of converting royalty rights in the US to a profit-and-loss sharing agreement. San Diego-based Ambrx is one of those increasingly rare beasts: a biotech with plenty of cash resources that's announcing staff increases rather than layoffs. In the last 20 months, Ambrx raked in $60 million thanks to the recent equity deal and milestone payments from its alliance partners, which also include Merck and Eli Lilly. Thanks to these resources, CEO Steve Kaldor says, conservatively speaking, his firm should be able to get through late 2011 or early 2012 with no need for new financing or equity deals. "We continue to sustain a multi-year runway while growing our biologics product portfolio and innovative platform" he said. Of course, it helps that Ambrx's RECODE (reconstituted chemically orthogonal directed engineering) technology allows the company to endow native proteins with new therapeutic propertis. And readers you know what that means. Even if the company is devoting much of its efforts to creating first-in-class molecules, there is the potential to use RECODE to create follow-on biologics, be they true generics or copy cat molecules with a twist. It's an area of intense interest to Big Pharma these days, especially given the Obama Administration's willingness to include FOB legislation in the most recent Congressional budget. (Teva and Merck dominate the Big Pharma FOB horse race currently thanks to their deal making in recent months, a topic highlighted in the February issue of IN VIVO.) As for the MS compound that was central to the Merck Serono/Ambrx deal, there are few details on the exact nature of the protein in question. "It may be a pioneering target or a follow-on biologic. We are not divulging what class it is," Kaldor told our sister publication "The Pink Sheet" DAILY. Whatever class it is, it's IVB's bet that Ambrx will not long remain an independent company. Merck Serono is our pick to buy it.

CSL/Xencor: Any doubts about interest in next generation technology that provides souped-up antibodies, look no further than news that Aussie biopharma company CSL signed an R&D alliance with Xencor to gain access to the privately-held biotech's Xmab technology, which allows the optimization of antibodies to create molecules with increased potency and longer half-lives. Details of the agreement--from its apparent breadth to the size of the upfront payment and downstream milestones--were lacking. It's the second such alliance Xencor has signed this month. Earlier in February, the biotech announced it was teaming up with Human Genome Sciences to use Xmab to create better versions of the Rockville, Maryland-based company's antibodies. Details of that transaction weren't disclosed, either. For the privately-held Xencor the two transactions--even if modest in size--likely provide much needed non-dilutive funding. The company, which has raised $130 million since its 1997 founding, last raised money in Oct. 2007 when it tacked an additional $15 million onto a 2006 $45 million Series E, which was led by MedImmune Ventures with additional backing by Novo Nordisk and HealthCare Ventures. (New investors in the Series E extension included Oxford Bioscience Partners and Merlin Nexus.) It's hard to tell how long Xencor's backers are willing to subsidize the company, but despite numerous partnerships--including deals with Centocor, Genentech, and Boehringer Ingelheim, no suitors have been sufficiently impressed with the technology to want to acquire the Monrovia, CA-based company despite pharma's 2007 land-grab for next generation antibody technologies. It could be that companies are still waiting for validation that the technology works as advertised: molecules in Xencor's internal pipeline are still at a very early stage. The biotech's lead product, an anti-CD30 for Hodgkin lymphoma and other T-cell lymphomas, is only in Phase I development.

Actelion/GeneraMedix: In a continuing bid to strengthen its position in the pulmonary arterial hypertension market, Switzerland's Actelion announced Monday that it would pay an undisclosed amount for worldwide development and commercialization rights to an IV formulation of epoprostenol from the injectable generics group GeneraMedix. Approved by FDA in June last year, this improved formulation of GlaxoSmithKline's (now generic) Flolan offers more convenient storage options than epoprostenol alternatives, including another generic from Teva approved last year. While not likely to be a large deal, the tie-up makes sense. It allows Actelion to leverage its existing infrastructure and expertise in this specialist field, where it already sells the lead drug Tracleer (bosentan). But there is no way epoprostenol will come anywhere close to replacing Tracleer, which sold CHF 1,294 million in 2008, and is under increasing pressure from contenders marketed by Gilead and United Therapeutics. (A generic version will also be available come 2015 for those keeping track.) According to analysts at Piper Jaffray, who estimate total worldwide sales of IV PAH therapies are worth about $200 million to $300 million, epoprostenol may add $30 million to $50 million in sales before 2014. To make up the revenue gap from potential lost Tracleer sales, look for Actelion, which has a sizeable war chest--approximately CHF 1.1 billion in cash at the end of 2008--to sign additional deals in the coming months.

Cephalon/Arana: Arana's mystery buyer has a name: Cephalon. On Feb. 26, Aussie biotech Arana announced that it was involved in take-over discussions. Trading on the Australian Stock Exchange was halted in anticipation of a buy-out. One day later Cephalon revealed that it intends to offer A$1.40-a-share for the biotech, a 69% premium to Arana's closing stock price on Feb. 25. If the offer goes through at the current price--and it does have the support of Arana's independent directors absent a superior proposal from another party--it will be worth approximately A$318 million ($207 million USD). In support of its bid, Cephalon took steps to secure nearly 20% of Arana's issued shares from the Aussie outfit's two largest shareholders, Start-Up Australia Ventures and Rockwell Securities Ltd., before launching the formal offer. The deal represents a slight shift in Cephalon's deal-making strategy in recent months in that it is not tied to any contingent value rights. Recall that Cephalon's recent $100 million tie-up with Ception was an option-based deal that gave the Frazer, PA-based company the right to buy the smaller biotech for an additional $250 million plus milestones and earn-outs if a Phase IIb/III trial of Ception's antibody reslizumab for eosinophilic asthma panned out. But the recent deal is certainly in-line with Cephalon's stated desire to build a larger presence in both biologics and inflammatory disease. Together with the ImmuPharma compounds Cephalon recently locked up and Ception's reslizumab, Arana's portfolio of tumor necrosis factor (TNF) alpha blockers, gives Cephalon a tidy pipeline of drugs aimed at diseases such as lupus, rheumatoid arthritis, and psoriasis. Indeed, Arana's Phase II novel anti-TNF domain antibody for psoriasis, ART621, was the primary driver of the deal. Of course, it helps that in addition to a novel pipeline of products, Arana also comes with a guaranteed revenue stream: thanks to strong IP in the anti-TNF space, the biotech receives royalties from Abbott Laboratories and Johnson & Johnson on Humira and Remicade.

Medtronic/CoreValve: As we wrote earlier this week, you know Medtronic's $1.03 billion buying spree is only the beginning, not the end, of the long-anticipated land grab around the percutaneous valve replacement field and its two major sub-markets--aortic and mitral valve devices. There has been a lag of several years since Edwards Lifesciences did the first major deal in the space, acquiring aortic player Percutaneous Valve Technology (PVT) in late 2003. But the promise of the market has continued to grow as investment remained active, technology improved, and the competition increaed. Give Medtronic credit for the executing the old "shock and awe" routine with perfection, by picking up a pair of percutaneous players in quick succession: CoreValve Inc. and Ventor Technologies Ltd. For Medtronic, these deals represent not just an investment in technology building. In CoreValve, the device behemoth gets a company that is already competing aggressively in the European aortic market, where CoreValve's smaller-sized system is running neck-and-neck with long-time leader Edwards. The deal could spark a torrent of additional partnering, especially as Edwards Lifesciences and St. Jude looked to build armamentariums competitive with Medtronic's.

Interested in future deals-of-the-week candidates? Check out the the January issue of Medtech Insight for the full story on percutaneous aortic valve players, and the technical and operational challenges facing the field.

(Photo courtesy of flickr user tsevis through a creative commons license.)

Innovation Is the Pharmaceutical Industry's Only Salvation

We here at The IN VIVO Blog probably get a little bit too caught up in our own blathering. As a tonic, we'll be inviting some outsiders to contribute. As here: to get an investor's point of view on the industry, we asked T. Rowe Price biotech analyst Jay Markowitz, MD to share some of his thoughts.

If the movie Cool Hand Luke were a commentary on the pharmaceutical industry, the most memorable line would be, "what we've got here is failure to innovate." (For an IN VIVO take on Cool Hand Luke and innovation via the JP Morgan Healthcare meeting, click here)

The decline of the drug industry is all the more dramatic in the context of its past accomplishments. Many of the most important advances in health, from HIV to cancer, are attributable to new drugs. And yet in a 2008 survey by USA Today, the Kaiser Foundation, and the Harvard School of Public Health, 44% of Americans had an unfavorable view of the pharmaceutical industry. Only health insurers and oil companies did worse.

The industry's woes boil down to a single cause: inadequate innovation. It is estimated that by 2015, $200 billion worth of branded drug sales may be lost to generic competition. The 24 new drugs approved by the FDA in 2008 was the highest number since 2004; only nine came from multinational drug companies. This meager number can replenish but a fraction of pending lost sales.

The poor record of new drug approvals can’t be blamed on a lack of R&D spending. Last year the major pharmaceutical companies spent over $50 billion on drug discovery and development. If current trends are any guide, the $1 billion estimated cost per new drug now will seem like a bargain in the future.

The industry finds itself in such a predicament because it can no longer go after me-too drugs in such blockbuster categories as ulcer medicines, blood pressure pills, antidepressants, and cholesterol lowering agents. Pharmaceutical companies previously had the luxury of letting someone else take the risk of innovation; if that someone succeeded, the drug company could follow fast with a similar drug that might have some advantages. It paid more to imitate than create. With minimal clinical differentiation of their products, companies needed to spend heavily on marketing to drive sales. But it was more profitable to spend on drug promotion than drug creation.

That equation is changing. Now that cheap generics and multiple branded drugs are available in many therapeutic categories, innovation may end up being all that pays.

To reverse its current plight and not only survive but thrive in the future, industry leaders must accept the gravity of their situation and address its root cause.

First, they must recognize that innovation is more about people than process; it can neither be scaled nor industrialized. Drug companies ought to pare back internal research, foster a more entrepreneurial culture, and be more open-minded about accessing research done by others. Far more productive to divide a $1 billion research investment among ten to twenty small, scrappy, hungry companies than to concentrate in one that is big and complacent.

Second, they need to leverage their strengths in drug development and regulatory affairs. Whereas smaller companies may be more adept at discovering novel drugs, testing them in people and getting them approved put a premium on money, manpower, and experience. Because they are constrained by capital and limited know how, all too often smaller companies make mistakes by under-investing in clinical trials or pursuing needlessly risky approval strategies. Pharmaceutical companies should grasp the opportunity to partner with smaller companies in the middle phases of human testing, thereby providing the necessary money and expertise to minimize the chance that a drug fails because it was developed for the wrong indication or because of poor planning and execution. Good new drugs are too precious to delay or waste.

Third, they should embrace comparative-effectiveness testing and value-based drug pricing to support the argument for first- or best-in-class drugs. Although such a strategy would result in higher clinical attrition, clear product differentiation would reduce the need for sales and marketing. Far better for data, not advertising, to determine which drugs are prescribed.

And fourth, they should not view mega-mergers as a solution. Yes, in the short term, consolidation can increase sales and, by reducing redundant costs, profits. And it can bring new capabilities to the acquirer. But it will ultimately disappoint unless it redresses fundamental problems. For a merger between two big pharmaceutical companies to generate long term value, it must result in more novel drugs than each would have created separately.

From my point of view as an investor, the drug industry -- despite its challenges -- is ideally positioned to translate tremendous gains in chemistry, biology, and genetics into important new medicines that extend lives and reduce suffering. But it must discard its risk-averse and xenophobic culture, embrace the drug discovery work taking place in hundreds of creative, entrepreneurial companies, and recognize that constant innovation is its only hope for sustainable growth. The good news is that there are ample opportunities to succeed. Several pharmaceutical companies are already taking appropriate steps to revive their businesses. But these steps must be bigger and faster.

Jay's views do not necessarily reflect those of his employer, T. Rowe Price, Inc., an investment management company.

Thursday, February 26, 2009

Obama's "Down Payment" On Health Care Reform: How Far Down?

Advocates for an aggressive, first-100-days push for universal coverage in the Obama Administration can't have enjoyed much of what they heard in the Presidential Address to Congress February 24.

For the biopharma industry--whose trade associations are among the stakeholder groups publicly urging action on health care--it is hard to gauge how disappointing that outcome will be, though the President's budget proposal (due out Thursday) could make that picture clearer.

There are at least three reasons advocates for universal coverage may be disappointed by the Presidential address.

First, it is clear that while health care reform is a priority for the Administration, it is not the priority. To no one's surprise, Obama focused initially on the response to the economic crisis, including the recently enacted stimulus legislation and the next installment of relief for the financial system. But when he turned to the next item on the agenda, he didn't single out health care, instead listing energy, health care and education as equal priorities.

Indeed, among the three key areas for investment cited by Obama--"energy, health care, and education"--health care was always listed second, and was also the second theme discussed at length in the speech. (As graduates of the IN VIVO Blog School of Rhetoric know, being second on a list of three is worse than being last: debaters are trained to use their strongest argument first, the second best last, and leave the weakest in the middle in hopes that no one listens too carefully.)

Second, Obama stopped well short of making universal coverage the goal of health care reform in the near term, describing his upcoming budget proposal as offering "a down-payment on the principle that we must have quality, affordable health care for every American."

Leaving aside the odd metaphor in a speech shaped so fundamentally by the collapse of the mortgage market, "down-payment" sure sounds like a synonym for "incremental." Indeed, Obama himself described the expansion of the Children's Health Insurance Program already signed into law as a "down payment."

Third, the discussion of health care reform was framed clearly in the context of addressing the long-term economic health of the country rather than as a response to the short-term economic crisis. Translation: reform proposals will be judged on their ability to reduce spending and shrink deficits--there will be no stimulus-style spending to expand coverage with promises to restore balance in the future.

All in all, Pharmaceutical Research & Manufacturers of America CEO Billy Tauzin and Biotechnology Industry Organization CEO Jim Greenwood did a pretty good job of predicting how the address would go. (See our post here.)

In particular, the address lends credence to Tauzin's suggestion that the departure of Tom Daschle from his expected position as the Obama Administration's health care general means incremental change driven by the the economic team rather than comprehensive, policy-first reform.

Therein lies the danger for the biopharma industry: in the context of budgetary priorities, measures to restrain pharmaceutical prices are tempting offsets with little political downside compared to say, slashing physician payments or forcing hospitals to close. We've already noted some rhetorical parallels between Obama's first remarks to Congress on health care and President Clinton's in 1993.

That reform was supposed to be budget neutral, to avoid undoing Clinton's first legislative victory, a tough fought balanced budget (remember those days?). With that mandate, Clinton's working groups quickly moved into aggressive proposals for restraining spending, especially on drugs and biologics before the whole initiative collapsed in the face of opposition from across the spectrum of health care sectors.

In 2009, there is no doubt that the budget comes first, quite literally. Obama's next "down payment" on health care reform will be unveiled Thursday; a bipartisan summit on health care reform kicks off on Monday. Just don't call it the Health Care Reform Task Force ...

Wednesday, February 25, 2009

Von Eschenbach Maps Out Role In Health Reform

“I’m not going to go fishing and play golf.”

That is how former FDA commissioner Andrew von Eschenbach describes his post-government plans after leaving the Food & Drug Administration: a consulting gig at Greenleaf Health LLC, a return to MD Anderson and any “other opportunities,” should they present themselves. Von Eschenbach left FDA in January when President Barack Obama took office and has kept mum about his future plans.

Until now. On the policy side, von Eschenbach is teaming up with an old FDA colleague—his former chief of staff Patrick Ronan. Von Eschenbach will be a senior adviser at Greenleaf Health, a regulatory consulting firm that Ronan founded upon leaving FDA in 2006. Ronan was von Eschenbach’s chief of staff for his first year on the job, and the two have kept in touch after Ronan left the agency, von Eschenbach said.

Greenleaf’s clients include medical device companies, pharmaceutical manufacturers and public relations firms, but Ronan says Greenleaf’s sweet spot is with smaller biotechs without a Washington presence that need regulatory guidance. Ronan and von Eschenbach are the two principle advisors; Greenleaf also has a chief marketing officer.

Of course, as a former government official, von Eschenbach is restricted in the work he can do as an industry consultant. For the next year, for example, he cannot advocate directly to FDA on behalf of a third party. And he has a lifetime ban on lobbying the agency on the rules and regulations upon which he worked on or influenced while he was commissioner.

But in speaking to von Eschenbach, that doesn’t sound like the type of work he’s interested in anyway. In a phone interview, von Eschenbach talked broadly about “contributing to a more strategic discussion of the future of health care” and helping to find “integrated solutions” for diseases like cancer and Alzheimer’s—all in the context of the greater health reform debate.

As he was at FDA, von Eschenbach is interested in issues like personalized medicine, genomics and informatics, and ways in which the system can prepare for a more patient-centric health care environment. Greenleaf, he says, is a great “launching pad” by which to contribute to those kinds of macro health care issues, and participate in a “greater conversation on a global perspective.”

Von Eschenbach is also “deeply interested” in directly contributing to health reform efforts—one of President Obama's priority issues for his first term. Von Eschenbach says he is open to talking to policymakers (without directly lobbying anyone) about changes that are needed to support the types of products—like personalized medicine and drug-diagnostic combinations—that he believes will be the future of health care. (Von Eshenbach offered thoughts on that topic during a recent health policy conference sponsored by The Atlantic. You can read more in an upcoming issue of The RPM Report.)

If that weren't enough, he's also returning to academia. As we predicted in an earlier blog post, Von Eschenbach is returning to University of Texas MD Anderson Cancer Center in Houston, where he spent 25 years of his career in various leadership positions before being named director of the National Cancer Institute in 2000.

Upon his return to MD Anderson—which is still in the works—he will be an adjunct professor and will serve on the advisory board of the David Koch Center for Applied Research in Genitourinary Cancers. His first board meeting is April 3.

Back to the Future on Health Care Reform

“All of our efforts to strengthen the economy will fail unless we take bold steps to reform our health care system.”

With those words uttered during his first address to Congress last night, President Obama officially kicked off the health care reform debate in 2009. Oh wait a second—those words were from Bill Clinton in February 1993.

What Obama said was “the cost of our health care has weighed down our economy and the conscience of our nation long enough. So let there be no doubt: health care reform cannot wait, it must not wait, and it will not wait another year.” In our next post, we'll offer our key takeaways from Obama's address.

But first, we just had to note an irony. The one thing everyone in Washington says about health care reform 2009 is that the Democrats have learned lessons from 1993. And yet there sure seemed to be a lot of similarities between Clinton's first address to Congress and Obama's when it came to the arguments for health care reform.

Here are a few of the parallels, courtesy of transcripts provided by the Washington Post for Clinton’s addresses, and the official White House text of Obama’s remarks.
Clinton (1993): “America's businesses will never be strong; America's families will never be secure; and America's government will never be solvent until we tackle our health care crisis.”

Obama (2009): “The crushing cost of health causes a bankruptcy in America every thirty seconds. By the end of the year, it could cause 1.5 million Americans to lose their homes. In the last eight years, premiums have grown four times faster than wages. And in each of these years, one million more Americans have lost their health insurance. It is one of the major reasons why small businesses close their doors and corporations ship jobs overseas. And it’s one of the largest and fastest-growing parts of our budget.”

Clinton: “Later this spring, I will deliver to Congress a comprehensive plan for health care reform that will finally get costs under control.”

Obama: “In the next few days, I will submit a budget to Congress…[that] includes an historic commitment to comprehensive health care reform – a down-payment on the principle that we must have quality, affordable health care for every American.”

Clinton: “There will be no new cuts in benefits from Medicare for beneficiaries. There will be cuts in payments to providers: doctors, hospitals, and labs, as a way of controlling health care costs. These cuts are only a stop-gap until we reform the whole health care system.”

Obama: “Comprehensive health care reform is the best way to strengthen Medicare for years to come.”

Clinton: “We will root out fraud and outrageous charges, and make sure that paperwork no longer chokes you or your doctor.”

Obama: “We will root out the waste, fraud, and abuse in our Medicare program that doesn’t make our seniors any healthier.”
Of course, we all know what happened next: Clinton’s vaunted health care reform task force set to work, and the debate devolved into partisan differences and collapsed under its own weight. Obama surely won’t repeat that mistake.

Or will he? “Now, there will be many different opinions and ideas about how to achieve reform, and that is why I’m bringing together businesses and workers, doctors and health care providers, Democrats and Republicans to begin work on this issue next week” (Obama, 2009).

Milk..Check, Eggs...Check, Corevalve...Check

Let the bidding begin.

You just know Medtronic's $1.03 billion buying spree is only the beginning, not the end, of the long-anticipated land grab around the percutaneous valve replacement field with its two major sub-markets: aortic and mitral valve devices. There has been a lag of several years since Edwards Lifesciences did the first major deal in the space, acquiring aortic player Percutaneous Valve Technology (PVT) in late 2003. But the promise of the market has continued to grow as investment remained active, technology improved, and the competition increaed.

Give Medtronic credit for the executing the old "shock and awe" routine with perfection, by picking up a pair of percutaneous players in quick succession CoreValve Inc. and Ventor Technologies Ltd., but battles aren't won with the biggest strike, no matter how impressive.

Consider the opportunities in the aortic market alone. Industry data suggests the cases of aortic stenosis will hit 4.6 million in the year 2030, almost double the cases in 2000. But the real growth comes in treating the roughly one-third or one-half of patients who currently couldn't survive an open-heart procedure.

It's that potential that's pulling Edwards Lifesciences, St. Jude, and now, most vigorously, Medtronic into building armamentariums of devices to tackle both percutaneous valve replacement markets. This was fantastic news for CoreValve and Ventor investors as the folks at Dow Jones Venture Capital Dispatch can attest.

For Medtronic, these deals represent not just an investment in technology building because in CoreValve, it is getting a company that is already competing aggressively in the European aortic market, where CoreValve's smaller-sized system is running neck-and-neck with long-time leader, Edwards.

But just as we saw in the atrial fibrillation market recently, additional acquisitions are the sincerest form of flattery. (Medtronic, once again, aggressively snapped up two of the more promising business, CryoCath and Ablation Frontiers.)

So we turned to our colleagues at Medtech Insight for the goods on what percutaneous aortic valve companies might be the target of future acquisitions and topic of future headlines. For the full story on these aortic players, please check out the January issue of Medtech Insight for the technical and operational challenges facing the percutanous aortic valve replacement field. (And for those eager to understand the potential in the percutaneous MITRAL valve replacement industry, feel free to check out Medtech Insight's cover story in the current issue here.)

And here's the field of potential acquisition targets...

Direct Flow Medical Inc. Direct Flow Medical's Aortic Valve Prosthesis expects to initiate first-in-human trials by May of this year and obtain a CE Mark by the end of this year, enabling it to possibly have a device on the market by 2010. The Aortic Valve Prosthesis consists of a trileaflet bovin pericardium valve encased in a tapered, conformable polyester fabric cuff. It contains no metal, making it unique among the offerings.
CAPITAL RAISED: $35 million
EXTREMELY HAPPY INVESTORS (EHIs): Foundation Medical Partners, EDF Venturers, New Leaf Venture Partners, Spray Venture Partners, Vantage Point Partners and ePlanet Ventures. Oh, and a little company called Johnson & Johnson Development Corp.

Sadra Medical Inc. Sadra recently completed first-in-human studies in Europe on its Lotus valve system., a repositionable, retrievable, self-expanding transcatheter aortic valve. The company expects to begin a European feasibility study in the second half of this year.
RAISED: $20 million since 2003.
EHIs: Oakwood Medical, Onset Ventures, Pequot Ventures, SV Life Sciences. Boston Scientific invested in 2006.

JenaValve Technology Gmbh JenaValve hopes to have a CE Mark for its foldable porcine valve by the end of this year.
RAISED: $20 million since the start of 2006.
EHIs: Atlas Venture, Edmond de Rothschild Investment Partners and NeoMed.

That's just a sampling, but keep an eye out for AorTech International, Heart Leaflet Technologies Inc., Cormove, and Advanced Bio Prosthetic Surfaces Ltd.

Image courtesy of flickr user lonelysandwich through a creative commons license.

The IN VIVO Blog Podcast: Comparative Effectiveness, HHS Candidates, and Health Reform

Welcome to the first IN VIVO Blog podcast. We know ... it took us a while, but we finally got there. There will be many different kinds of podcasts from various reporters and editors of the IN VIVO Blog, which includes writers of The RPM Report, IN VIVO, The Pink Sheet, Start-Up and other publications.

Our first podcast comes to you from the editors of The RPM Report. It's called "3 things in 3 minutes." What is it? It's just that: 3 topics that we try and discuss in 3 minutes (we went a little over).

The topics for this discussion? Comparative effectiveness, the next HHS Secretary, and whether Medicare Part D should be a model for health care reform. If you listen closely, you may even be rewarded with a "bonus topic."

So tell us what you think. We'd love to hear your thoughts. Just be gentle.

Tuesday, February 24, 2009

Basilea to J&J: See You in Court

Johnson & Johnson might want to phone Philadelphia Phillies GM Ruben Amaro, Jr.

No, the diversified health care giant probably isn't looking for a utility infielder or a starting RHP. But it does find itself in a situation Amaro has quite a bit of recent familiarity with: dealing with players (in J&J's case, a partner) seeking arbitration.

This off-season the (World Series Champion) Philadelphia Phillies and GM Amaro have avoided arbitration proceedings with all ten players who were eligible--locking up stars like Cole Hamels and Ryan Howard to multi-year deals. Johnson & Johnson just has one arbitration hearing to worry about right now: Basilea Pharmaceutica's claim filed today related to delays in approval of the companies' ceftobiprole antibiotic in the US and EU. (Of course J&J has a little institutional experience with arbiters too ... with EPO.)

Basilea watchers woke up to a flurry of announcements today beyond its planned annual results--not least the news that the antibiotic's EU approval process has been delayed so that good clinical practice (GCP) inspections could be carried out by EMEA. The EU's committee for medicinal products for human use (CHMP) has already recommended the drug for approval, but that recommendation must now be revisited post-inspections, and the delay could put potential approval well into next year.

Meanwhile Basilea is burning through its roughly CHF293 million cash balance and the estimated CHF100 million payments related to EU approval are for now out of reach. Anticipating approval and gearing up for a commercial launch--it had planned to co-promote the drug in the US and areas of the EU--will further add to the firm's costs. Adding insult to injury on today's call management had to deal with disgruntled shareholders annoyed with the company's shares' precipitous drop.

This is just the latest delay in ceftobiprole's commercialization. In the US, where J&J is also the drug's sponsor with FDA, an NDA was submitted in May 2007. But in March 2008 the companies received an approvable letter and in late 2008 FDA's complete response letter identified further data integrity and study conduct issues, and requested a new audit plan for CRO monitoring.

Basilea has been careful to say that it is pleased with the data from the drug's pivotal studies, saying that the problems were instead related to monitoring and quality assurance, and that issues related to the data and the process of monitoring the data were distinct. "The issues that have been brought up ... indicated that [regulatory authorities] had questions about the monitoring of the trial, the quality assurance program ... these are questions about how the trials are monitored and run and this has caused a delay," said CFO Ron Scott on Basilea's earnings conference call this morning. "The mechanism we have to address that delay is the arbitration process."

Presumably the arbitration process isn't the first port of call when a dispute like this arises, indicating an unsurprisingly frazzled relationship between the partners. So what does Basilea want out of arbitration? "Certainly we have not received our milestone payments yet," and the value of the opportunity lost not having ceftobiprole on the market in Europe and the US, noted Scott. Essentially, "compensation for the impact of the delay on Basilea," he said.

That impact is far from fully measured right now--and Basilea declined to disclose when arbitration will begin, only saying that typically these types of arbitration procedures might take one to two years, regardless of what is stipulated in a contract about a timeline for the process. Barring a settlement, the ruling will be in the hands of the Netherlands Arbitration Institute.

Basilea's move to take J&J to court is rare, and should make for an interesting dynamic at joint steering committee meetings. But the ingredients for further disputes--higher regulatory hurdles, increased out-sourcing of clinical trials, and more biotechs than ever facing ostensibly life-or-death FDA or EMEA decisions--are abundant.

Hey J&J: Amaro's office is at Citizen's Bank Park, Pattison Ave., Philadelphia.

How Much Reform, How Fast? What to Listen For Tonight

Do we have to pay for health care reform?

That is probably the single, critical question all stakeholders in the health care system will be listening for when President Obama addresses a joint session of Congress Tuesday night.

No one expects Obama to back down from his campaign promises to push for universal coverage in his first term. Indeed, Office of Management & Budget Director Peter Orszag affirmed that health care reform will be “the next priority up for the Obama administration” during a closed door meeting with the National Governors’ Association, Michigan Democrat Jennifer Granholm said Feb. 22.

However, the economic crisis and the withdrawal of Tom Daschle from his expected role as health care reform general raise significant questions about the direction of and prospects for reform in the near term.

In the context of the presidential address and upcoming budget proposal, those questions essentially focus on how reform will be framed.

For the biopharma industry, the hope is that Obama will define health care reform as, in essence, a continuation of economic stimulus, pressing the urgency of change without insisting on offsetting cuts to pay for expanded coverage.

Pharmaceutical Research & Manufacturers of America CEO Billy Tauzin suggested that policymakers should learn a lesson for Japan’s economic struggles in the 1990s. That experience, he said during a webcast sponsored by Ernst & Young on Feb. 20, shows what happens when “stimulating the economy helps turn things around and then fiscal restraint comes in too soon and then blocks the good effect of the stimulus.”

“The budget is going to be facing some very ugly deficit numbers,” Tauzin noted. However, he predicted, “the trend is going to be let the stimulus work before we start to focus on these ugly deficits.”

Nevertheless, all indications are that the President instead will call for a specific sum of money to be reserved for health care reform—and pledge to find offsets to pay for it upon enactment.

That may not sound like a significant difference since, after all, health care reform will have to be paid for one way or the other. For biopharma companies, however, the difference could be quite significant: many of the most obvious targets for savings involve cuts to drug pricing or other measures to control spending on pharmaceuticals.

It is almost impossible, for example, to imagine a package of health care spending cuts that does not address the prices of drugs under the Medicare Part D prescription drug program. Or that excludes a follow-on biologics provision, which would presumably be scored as reducing federal spending by billions of dollars.

Both measures may be inevitable anyway, but enactment in the context of finding a fixed savings target to pay for broad expansion of health coverage means a much higher chance that cuts to Part D pricing will be deeper, and that exclusivity to innovators under FOB legislation may be shorter, than would otherwise emerge from the legislative process.

The framing of health care reform is just one of many topics industry will be eagerly listening for in Obama’s “unofficial” state-of the-union address. Here are some key themes:

Bragging Rights: “I think the first thing he will do is talk about what he has already done,” BIO CEO Jim Greenwood said during the Ernst & Young webinar, highlighting expansion of the Children’s Health Insurance Program and several elements of the stimulus bill, including funding for health care IT, comparative effectiveness research, and new spending for the National Institutes of Health.

“I think he starts off with bragging rights and then promises in more general terms that there is much more to be done,” Greenwood said.

Still, even a recap of the first month could contain important indications of policy directions, especially when it comes to the comparative research funding included in the stimulus. That relatively small ($1.1 billion) line item generated a lot of political attention, and it will be interesting to see whether Obama devotes time to it.

Universal Coverage: Obama “is very interested in moving aggressively to expand insurance coverage,” Tauzin noted. But how prominent and how persuasive will discussion of that issue be? Tauzin clearly doesn’t expect much, predicting on the Ernst & Young call that reform will move “piecemeal” rather than in a comprehensive fashion in the months ahead.

Fiscal Responsibility: The President hosted a “fiscal responsibility” summit Feb. 23 and plans to release a 2010 Budget outline on Feb. 26. During his weekly web address Feb. 21, Obama pledged to “release a budget that's sober in its assessments, honest in its accounting, and lays out in detail my strategy for investing in what we need, cutting what we don't, and restoring fiscal discipline.” That sounds like a recipe for pay-as-you-go health reform.

Wellness/Prevention: Many politicians now display “an emphasis on prevention and dealing with chronic diseases in the early stages instead of literally waiting to treat all the damage done,” Tauzin noted. “You see that theme expressed in the politics everywhere and I expect you will see it expressed somewhere” in the Presidential address.

FDA: A month ago, the peanut butter recall made FDA the subject of discussion during White House press briefings and a pledge to name a new commissioner shortly. Daschle’s departure delayed that plan. Obviously any reference to FDA will be important for industry to analyze—all the more so if it suggests an emphasis on the food side of the agency’s mission (and hence a tilt towards an expert in that field to run the agency) and/or a commitment to zealous enforcement by regulators.

Tobacco regulation: All indications are that the White House and Congress are committed to expanding FDA’s mission to include regulation of tobacco products (a theme that ties together both prevention and FDA regulation). A discussion of tobacco could signal a further layer of distraction for the agency from the product review issues central to industry—but perhaps also an enforcement agenda that spares biopharma firms from the toughest scrutiny.

Stem cell research: Overturning the Bush Administration policy on stem cell research is an important priority for BIO, but also one that may have been delayed by the wait for an HHS nominee. Biotech companies would welcome a public commitment to reverse that policy.

Personalized medicine: Obama sponsored legislation in the Senate to create regulatory systems and incentives for personalized medicine. Any discussion of science and medicine from the podium could be a call to move forward in that area.

Generic drugs: Former President Bush often highlighted the cost saving impact of generics. Will Obama do the same?

Medicare managed care: The private sector has a big role in Medicare, both via fully integrated Medicare Advantage plans and as the providers of the Part D prescription drug insurance. The biopharma industry would love to see Part D serve as the template for broader health reform—but it is so closely tied to the Bush Administration that it may be difficult for Obama to embrace the program. Tonight is the first chance.

Monday, February 23, 2009

While You Were Watching the Oscars

Best Picture, director, cinematography, adapted screenplay, score, song, sound mixing, film editing ... 8 Oscars for Slumdog Millionaire. Poor Benji Button and the Wrassler. A frosty academy reception for Frost/Nixon. Anne Hathaway wuz robbed! But few surprises at the Academy Awards as Slumdog romped over Button, Nixon, Batman, and the rest.

But what were some of the other nominees that lost to Slumdog over the weekend? IN VIVO Blog has secured footage of that part of the Oscars that isn't important enough to show in prime-time, and recovered an interesting list.

So, while you were Jai Ho!'d ...

  • Best Actor in a Hostile Role: Astellas "remains committed" to its proposed takeover of CV Therapeutics.
  • Excellence in Biologics Screening: The NYT reports on a new approach to tackling flu virus: antibodies.
  • Best Policy that Has Outlived its Usefulness: Does industry still need a legal shield to help spur investment in the vaccines area? WSJ reviews the National Childhood Vaccine Injury Compensation Program, its legacy, and its future.
  • Best Actor Making Less than $1.8 million Plus Bonus, Benefits and Stock Options: J&J's William Weldon.
  • Best Original Song: "Wishful Thinking," by Billy Tauzin: What does PhRMA's Tauzin think about health reform? Read about it in the Pink Sheet Daily.

Friday, February 20, 2009

DotW: (Dis)contented

Now is the winter of our discontent. Apologies to both Shakespeare and Steinbeck, but it does seem as though we've all morphed into either Richard the Third or Ethan Allen Hawley. Moreoever, if the market reaction to Obama's housing plan is any guide, he's unlikely to prove the son of York destined to bring us a glorious summer.

As the Dow slid more than 100 points again Friday--down 6% for the week--to 7365.67, the tweets, twitters, and chirps tracking our economic outlook grow more downbeat. According to BNET, pharma cos have only begun to experiment with the new medium--hey, we can't really crow; we just started cheeping--or is that cawing?--yesterday.

News this week suggests at-risk companies in our sector now include Curagen, Vanda, and--here's a surprise--La Jolla Pharmaceuticals, all of which are looking at strategic options.

Even as Genentech continues to fight off Roche's hostile offer, the biotech was forced to acknowledge additional cases of PML associated with Raptiva. The news is unlikely to dampen Roche's desire for Genentech, and Raptiva has never been the central focus for institutional investors. Avastin anyone? But the news does bolster Roche's argument that $112-a-share for the storied South San Francisco outfit might be a wee bit generous. (Meanwhile the Swiss Pharma announced the sale of $16 billion in bonds, indicating it is lining up its financing to proceed with the deal.)

And Astellas can't be feeling too good. Remember how CV Therapeutics told the company to "hit the road jack", then thought better of it, and decided to look at the Japanese pharma's nearly $1 billion acquisition offer? On Feb 20, the Palo Alto, CA-based CVT came back with an official "don't you come back no more". As Astellas mulls its next move, here's one option not on the table: appeaing to CVT's shareholders directly. A standstill agreement included in the licensing agreement Astellas's predecessor Fujisawa inked with CVT means the pharma' can't take such aggressive action.

Traditional venture capital groups continue to wring their hands over "the denominator problem", capital calls, and the need for a plan B. Meantime corporate venture continues to shine, getting in on such deals as this week's Opsana Therapeutics and Genocea Biosciences financings.

If your feeling disgruntled or simply want an excuse to bone up on random literary and pop culture allusions, IVB is here with another edition of...

Medtronic/Ventor: With economic pressures creeping into the medical device market, stalwart competitors with suitable cash reserves are looking to turn economic woes into opportunity, seeking out potential acquisitions in areas that offer the best bang for the buck. Among the handful of segments that fall into this category, transcatheter heart valve replacement and repair, although at a relatively early stage in its evolution, is one that has garnered a great deal of interest. All of the big names in cardiovascular devices—including Edwards Lifesciences, Medtronic , Boston Scientific, Cordis/Johnson & Johnson, and St. Jude Medical--are either participating in this market or have expressed an interest in doing so, either via internal development work or partnering/acquisition. For the two dozen or so privately held emerging competitors working in this arena, the hope is that this interest will eventually translate into an M&A offer with a hefty price tag. For the Israeli company, Ventor Technologies, those hopes may soon become reality. According to recent media reports, Medtronic is close to completing a deal to acquire that privately held start-up for $325 million. Ventor, which is developing a transcatheter aortic valve replacement technology, launched a first-in-human (FIH) trial of its first-generation Embracer device in 2008 and expects to begin a pivotal, multicenter study later this year. Results of the initial FIH study were presented at the 2008 Transcatheter Cardiovascular Therapeutics (TCT) meeting, held last October in Washington DC. Medtronic and Ventor are well known to one another. As one of the firm’s investors, Medtronic reportedly contributed $7.5 million to Ventor’s latest funding round, a private placement completed last May. Since its founding in 2004, Ventor has raised a total of about $20 million, so a $300+ million exit would be an extremely successful outcome by any measure. For Medtronic, the acquisition will serve to help beef up the company’s cardiovascular pipeline and focus the firm more solidly on future high-growth market opportunities. Medtronic’s cardiovascular business has lately been facing competitive pressures in several of its key product lines. The company’s Endeavor cardiac drug-eluting stent (DES) is facing an uphill battle now that it must compete with Abbott Laboratories’ well-regarded Xience V DES (also sold under a private label as Promus by Boston Scientific), which quickly catapulted to a market leading position in the US after its launch last July. Moreover, Medtronic’s implantable cardioverter defibrillator (ICD) business has lost market share in recent quarters (although the firm now says the situation has stabilized), due in large part to lingering effects from the company’s Sprint Fidelis lead recall last year, which gave a boost to ICD competitors Boston Scientific and St. Jude Medical.--Mary Thompson

GPC Biotech/Agennix: This week GPC Biotech—on its knees since prostate cancer candidate satraplatin got knocked down at FDA in late 2007--announced plans to merge with a cash-strapped US counterpart, Agennix. GPC brings money, some people, clinical development experience and a public listing; Agennix brings a Phase III cancer compound, talactoferrin. Dievini Hopp BioTech holding, the investment company of German billionnaire Dietmar Hopp (co-founder of the multinational business software company SAP AG), provides the newco with a crucial cash infusion of €15 million. Thanks to the satraplatin debacle, it's long been expected that GPC would ink some kind of deal. But as we wrote in this blog post, IVB doubts this tie-up is the kind of sale GPC Biotech's CEO Seizinger had in mind. It’s essentially a reverse merger: GPC Biotech will be tipped into a new—as yet unnamed—company, which will also hold all of Agennix’s shares, plus the €15 million cash contribution. GPC’s shareholders will own 39.3% of the new group, Agennix’s 48%, with the Hopp cash representing 12.7%. As one of GPC's largest shareholders--the protagonist of GPC’s February 2006 fundraising, among others--Hopp is calling the shots. That's one reason the newco will be listed on the Frankfurt Stock Exchange not the Nasdaq; GPC is de-listing from that exchange as part of the merger. Top priority for the newco? Development of Agennix's talactoferrin, a recombinant version of human lactoferrin that is delivered orally. Phase II studies of the drug showed compelling results in NSCLC, according to Agennix. By bolting talactoferrin onto GPC's own products, which include a Phase I kinase inhibitor and satraplatin (which still hasn't quite drawn its last breath), the aim is to create a viable pipeline that can be advanced by GPC's biz dev team. Thankfully, the newco has enough cash, courtesy of the Hopps, to last until mid-2010.

Romark/Chugai: Details were decidely lacking when it came to this week's tie-up between privately held Romark Laboratories and Chugai for the Japan-centered development and commercialization of Romark's Phase II hepatitis C compound, nitazoxanide. As part of the deal, Romarks gets an undisclosed upfront payment from Chugai, and stands to receive additional (undisclosed) monies based on certain clinical and regulatory milestones. According to a press release anouncing the news, Romark will also receive (you guessed it, undisclosed) profits from product sales in Japan through a supply agreement, as well as royalties. "Chugai is an excellent partner for us in Japan. They bring substantial expertise in the development and marketing of treatments for chronic hepatitis C exemplified by their experience with Pegasys and Copegus," said Jean-Francois Rossignol, Chairman and CSO of Romark (Whew. I'm glad he disclosed that.) Japan, is of course, a notoriously difficult market to break into. Current wisdom is that effective commercialization of drugs in that country is often best left to Japanese pharmas who better understand the unique regulatory and sales hurdles of the home market. (It's one of the reasons for Affymax's 2006 deal with Takeda for Hematide or Amgen's 2008 monster deal--also with Takeda--involving 13 products.) Moreover, such deals provide US or European based companies with important non-dilutive funding, while doing little to dimish the partnering potential deal for a product in the rest of the world. Back in 2004, Vertex licensed Mitsubishi Japan-only rights to telapravir, receiving $33 million for that particular Phase I product. Could Chugai, part of Roche's hub and spoke model, be paying as dearly for nitazoxanide? It's hard to say (I know, that's never stopped us before.) On the one hand, the drug, which belongs to a new class of broad spectrum antiviral drugs known as thiazolides, has largely been derisked in terms of its side-effects, a sticking point that's buried many a promising hepatitis C drug in the past. Romark already markets the compound as an anti-diarrheal called Alinia. But it's also true that nitazoxanide has a storied past. Romark first licensed the compound to UniMed Pharma back in 1995 in a deal worth about $1 million. Three years later, it repurchased rights to the product after UniMed abandoned development citing changed strategic interests. In addition to hepatitis C, the drug is also being studied as a possible therapy to treat rotavirus and Crohn's disease.

Lilly/NeuroSearch: We aren't sure if NeuroSearch qualifies as the little engine that could or the little engine that can't--recall that earlier this month the Danish firm stopped work on its experimental medicine ABT-894 after a Phase II trial blow-up. Either way, the Danish company keeps doing deals. Who knows? One of these days they'll score. It not clear whether the most recent deal--a collaboration with Eli Lilly on new CNS therapeutics announced Feb. 17--will be the one that scores the big payola. The company's expanded collaboration with GSK announced late January is also in the running for that honor. And like the GSK deal, the tie-up with Lilly is one where NeuroSearch's rewards are primarily all on the come. The three-year drug discovery and development deal calls for NeuroSearch to investigate a defined number of ion channel modulators as potential CNS treatments--specific details concerning the targets were, of course, undisclosed. But IVB does know that NeuroSearch is gaining $5 million up-front for its efforts, plus up to $8 million more in funding and research fees. Lilly has also agreed to take a $17 million equity stake in the company. The deal is structured so that NeuroSearch bears the brunt of the responsibility and cost for the early work, with Lilly having "various options to exercise license rights to individual compounds". Should it exercise the option to a compound, Lilly is responsible for the remaining development and commercialization costs associated with the molecule and will pay NeuroSearch milestone payments per product of up to $320 million plus royalties. covered by the agreement and related intellectual property. For Lilly, the deal is yet another example of how the company hopes to access innovation via external collaborations through its FIPNet strategy, which the company's been discussing now for a few years as a possible means to solving its pipeline gap.

Shire/UCB: Shire is to acquire worldwide rights (ex-US, Canada, and Barbados -- hey, it's a critical market; think how manic your vacation might be otherwise) from UCB to Equasym IR and Equasym XL for treating Attention Deficit Hyperactivity Disorder. The deal hasn’t exactly made a dent in the $1.2 billion cash that Shire generated last year—it will pay just €55 million in cash, which is just over three times the products’ 2008 net sales, plus undisclosed milestones if it meets certain pre-defined sales targets. So it’s a tiny deal, but also a tidy one: UCB divests drugs (and 20 sales personnel) in markets that aren’t core, furthering its focus on "bringing new innovative medicines to people living with severe neurological conditions,” according to Troy Cox, President CNS operations for UCB. (And indeed, the Equasym drugs –which are immediate release and extended release methylphenidate hydrochloride—aren’t innovative, and ADHD doesn’t really classify as a severe neurological condition. That said, UCB’s hanging on to the US market, where the drug is sold as Metadate CD and competes with Ritalin.) But for Shire, the products fit right in. The group is already a leader in the US ADHD market, with sales of almost $1.5 billion last year. Equasym not only fills out the armamentarium, but provides a bridge into Europe, where Shire doesn’t currently sell any ADHD drugs, helping prepare for the European launch, planned for 2011, of long-acting Vyvanse. (Vyvanse, recently approved in the US, is where Shire hopes to transfer most of its Adderall XR patients ahead of generics in April.) And although most of Equasym sales are currently in Europe, buying worldwide ex-US rights provides Shire with a cheap, established treatment that may be more suited to some developing markets. That helps, albeit in a small way, further another of Shire’s goals: to quadruple the share of sales it generates from RoW to 25% by 2015--Melanie Senior.

Image courtesy of flickr user HOBO through a creative commons license.

IVB Enters the Modern Blogging Era: Podcasts, Twitter, and More

Photo by Timothy K. Hamilton

Ever thought to yourself, "you know self, that IN VIVO Blog is terrific, boy it sure is. But wouldn't it be great if it was even more terrific?" Before you reproach yourself for being greedy, well, never fear, we're going to give it a shot.

And so, dear readers, you may start to notice a few little changes around these parts. For example: twitter. Yup, no longer will your urge for 140-character IVB-gems go unfulfilled. Starting yesterday, you can follow us on twitter. And for those of you who visit the blog on the web, you'll see our recent twitters (tweets? Sorry, we're new to the whole bird-lingo thing) right there on the home page--just check out the right-hand column.---->

Oh, but that's not all. Starting next week we're going to be experimenting with a regular podcast. Look for it on Wednesdays (but probably not every Wednesday, at least not right away), we'll post it right here on the blog. The IVB Podcast will cover the same range of topics we cover here on the site and we're happy to entertain your suggestions for topics as well, just leave a comment or drop us a line.

So to recap our ongoing plans for eventual world domination (or at the very least, for catching up with well-established social media and blogging trends): this week, we're starting to twitter. Next week, the podcasting begins. The week after that? Who knows. As always, we love reader feedback (special thanks to those of you who took our survey a couple weeks back, especially if you were nice or wanted more Philly sports commentary with your health care analysis and insight--shockingly not everyone was/did!) so keep sending in suggestions on how to improve IN VIVO Blog.

And thanks for reading.

UPDATE 3/17: We're now running multiple twitter feeds @invivoblogchris, @invivoblogellen, @rpmreportmike, and @rpmreportramsey

Shire: Switching Attention to Europe and RoW

“I’m very confident that this year we’ll consummate some more deals,” said Shire CEO Angus Russell at a lunch announcing the group’s full-year results yesterday. And why shouldn’t he be? The company generated $1.2 billion cash last year (while driving a 27% increase in product sales and a 36% step-up in non-GAAP earnings per share).

The deals have started, with today’s announcement that Shire is to acquire worldwide rights (ex-US, Canada and--of course--Barbados) to Equasym IR and Equasym XL for treating Attention Deficit Hyperactivity Disorder. This hasn’t exactly made a dent in the $1.2 billion—Shire will pay the seller, UCB, just €55 million in cash, which is just over three times the products’ 2008 net sales, plus undisclosed milestones if pre-defined sales targets are met.

So it’s a tiny deal (New River it ain't), but a tidy deal: UCB divests drugs (and 20 sales personnel) in markets that aren’t core to it, furthering its focus on "bringing new innovative medicines to people living with severe neurological conditions,” according to Troy Cox, President CNS operations for UCB. (And indeed, the Equasym drugs –which are immediate release and extended release methylphenidate hydrochloride—aren’t innovative, and ADHD doesn’t really classify as a severe neurological condition. That said, UCB’s hanging on to the US market, where the drug is sold as Metadate CD and competes with the likes of Ritalin and Concerta.)

But for Shire, the products fit right in. The group is already a leader in the US ADHD market, with sales of almost $1.5 billion last year. They came from lead drug Adderall XR (a mix of amphetamine salts, likely to face generics from April 1 this year), newly-launched Vyvanse, to which Shire is busily converting Adderall XR patients—pricing it at half the cost of A-XR helps!--plus capturing a growing adult ADHD market given Vyvanse’s 13-hour plus duration of action, and Daytrana, a methylphenidate patch. Equasym fills out the armamentarium.

But most importantly, it provides a bridge into Europe, where Shire doesn’t currently sell any ADHD drugs (the Adderalls were never approved in the EU, where the disorder was only much more recently recognized as a medical condition). This deal helps the company prepare for Vyvanse’s European launch, planned for 2011. And although the products are currently sold in European markets, buying worldwide ex-US rights provides Shire with a cheap, established treatment that may be more suited to some developing markets.

By 2015, Shire hopes to have reduced its dependence on the US and top five European markets—which accounted for 70% and 25% of total 2008 sales, respectively—and to have quadrupled its share-of-sales from RoW markets to 25%. It isn’t alone in understanding where future industry growth lies. The move into BRIC countries will be spearheaded by Shire’s Human Genetic Therapies franchise, the new star of Shire’s show, expected to account for 30% of net sales by 2015, up from 18% today. This makes sense, given that HGT products—such as, for instance, enzyme replacement therapy Elaprase for the rare Hunter Syndrome) are high margin and require little infrastructure.

But for all the value in reducing its dependence on ADHD and on Adderall XR (a dependence long perceived by analysts at Shire’s Achilles heel), the company’s not going to ignore its core as it diversifies geographically—especially as many of its non-HGT products, as cheaper, non-biologicals, may better suit BRIC economies. Phosphate-binder Fosrenol, whose growth is shrinking in the US given competition from Genzyme, will be a close second candidate in the international push. Its sales grew 55% ex-US last year. The company also plans international launches this year for ulcerative colitis drug Mezavant.

“How to develop in those markets [like BRIC countries] that want cheap medicines....when we sell expensive treatments for rare a [business development] challenge we’ll be addressing this year,” Russell told The IN VIVO Blog yesterday. Indeed it is.

Thursday, February 19, 2009

HHS Secretary Sebelius? It Might Spark a Fight

What we've been telling you for some time is now official: Kansas Governor Kathleen Sebelius is the front-runner to replace Tom Daschle as the nominee for Secretary of Health & Human Services under President Obama.

At least, it is as official as these things get: unnamed "advisers" confirmed to the New York Times that she is the leading candidate.

In Washington, DC and other world capitals, this is what is known as a trial balloon. Get the name out there and make sure you have a chance to weigh any vigorous objections before you make the nomination official. The Administration has to make sure it knows the landscape, especially after the collapse of the Daschle nomination threw the White House's carefully crafted plan to launch the health care reform debate into disarray.

Here's the hitch: If the goal is to pick someone who can sail through to confirmation without a fight, it may turn out that Sebelius is not the perfect choice. As we noted, Sebelius is likely to stir up passionate opposition from pro-life members of the Senate.

The Times explains the issue well:
One issue that could draw attention is her stance on abortion. A Roman Catholic who says abortion is wrong, Ms. Sebelius vetoed a bill requiring clinics to report information on why a late-term abortion was performed, drawing the condemnation of the archbishop of Kansas City, Kan.
With that in mind, it can't be a good sign for Sebelius that the Pope himself just issued a statement affirming the view that Catholic politicians are morally obliged to work to end abortion. That was a direct slap at House Speaker Nancy Pelosi, herself a Catholic, who met with Pope Benedict on February 18. (Reuters has the story here.)

But it doesn't seem like a stretch to see the statement as a call to action against Sebelius, who as HHS secretary would oversee everything from stem cell research to regulation of RU-486 to the use of public funds for family planning services.

Stay tuned....

Wednesday, February 18, 2009

Saving German Biotech

Thank heavens for billionnaires. That’s got to be what’s going through the mind of Bernd Seizinger, the long-time CEO of Germany’s GPC Biotech. Today, this troubled company—on its knees since prostate cancer candidate satraplatin got knocked down at FDA in late 2007-- announced plans to merge with a cash-strapped US counterpart, Agennix. GPC brings money, some people and some clinical development experience, Agennix brings a Phase III cancer compound, talactoferrin.

Does holding hands make two sinking ships more likely to float? Well, yes, if a billionnaire’s on stand-by to hand out the buoyancy aids. The life-saver in question: a €15 million cash investment from dievini Hopp BioTech holding, the investment company of German billionnaire Dietmar Hopp (co-founder of the multinational business software company SAP AG). He’s already one of GPC’s largest shareholders--the protagonist of GPC’s February 2006 fundraising, among others. And the Hopp investment company still isn't giving up, according to Seizinger. They're providing cash and will be involved personally, he told The IN VIVO Blog. "They have their skin in the game now, and we’re glad, because we’re facing one of the most difficult situations in the history of biotech and of the financial markets,” he continued.

You bet. It’s bad enough if you do have a pipeline, let alone without. And that has been GPC’s problem since the satraplatin snafu. It had gathered all the troops around this drug, following promising Phase II trials. When Phase III failed (ostensibly due to FDA's reluctance to accept a composite end-point, progression-free survival, and to poor trial design), GPC, hammered by a class-action lawsuit from shareholders claiming it had lied about the drug's prospects, put itself, and its cash ($90 million at the time) up for sale in late 2007.

It has been a long wait. And we doubt this deal—which dievini Hopp proposed--is the kind of sale that Seizinger had in mind. It’s more like a reverse merger: GPC Biotech will be tipped into a new—as yet unnamed—company, which will also hold all of Agennix’s shares, plus the €15 million cash contribution. GPC’s shareholders will own 39.3% of the new group, Agennix’s 48%, with the Hopp cash representing 12.7%. Since dievini Hopp is already a majority shareholder in GPC, they call the shots in the newco—which is why it will be a German company, listed on the Frankfurt Stock Exchange. GPC will de-list from Nasdaq (surely it was clear before now that a dual–listing was a waste of money and effort?) and Agennix gets the dubious honor of becoming part of a public entity.

Far more importantly, it gets a $20 million loan from GPC to tide it over until the deal closes later this year—repayable at 12% per annum. That’s how close to the wall it had gotten—despite the fact that, according to CEO Rick Barsky, there was “significant interest” in talactoferrin from potential partners.

Not heard of it? Nor had we. But that doesn't mean it's no good, of course. We just wanted to lie low prior to the Phase II data, explains Barsky--data which showed compelling results in NSCLC, according to the company. But this oral compound, a recombinant form of human lactoferrin, a protein involved in immune system modulation, also has promise in other diseases, including renal and kidney cancer, severe sepsis, and as a topical agent in diabetic foot ulcers.

The companies hope that their combined assets will add up to a pipeline (talactoferrin, plus GPC's Phase I kinase inhibitor, and satraplatin, which still hasn't quite drawn its last breath, although it will later this year unless Japanese partner Yakult steps up to the plate), global business development skills (GPC bought a few other companies in its lifetime, including Mitotix in 2000 and bankrupt Axxima in 2005) and enough cash, thanks to the Hopps, to last until mid-2010. By then, partnering talactoferrin in ex-US markets and non-oncology indications may have brought in some more non-dilutive cash. If not, there’s always the Hopps.

They’re not doing this in a grand philanthropic gesture to save German biotech. But one could be forgiven for thinking so, given that 60% of their €350 million or so that's invested in biotech has gone into Germany, making them one of the country’s largest investors in the sector, and given that, in the words of Prof. Christof Hettich, co-managing director of dievini Hopp Biotech, “these companies would not be there without us.” Still, the company expects a good payback. As Hettich points out that it’s a great time to invest, if you have the money. “Three years ago we would have paid three times as much for Agennix,” he told IN VIVO Blog.

Maybe. But GPC has hardly created value for its shareholders. Based on figures provided in the press release, the newco will be worth just over €100 million ($125 million). Agennix has raised at least $42 million (from what we can find in our records). GPC raised almost $100 million in its heady 2000 IPO, plus another €140 million ($175 million) or so since. And that doesn’t include whatever Axxima and Mitotix had raised before that.

So: $42m + $275m + acquired GPC companies’ money = $125m. That’s what markets do to maths. That may also be why Seizinger is walking away as CEO (he’ll stay on the newco supervisory board). dievini Hopp co-MD Friedrich von Bohlen will take the helm temporarily—von Bohlen founded LION bioscience, which later became Sygnis Pharma, another of Hopp's current investments--until a replacement is found. As Seizinger concluded today: "We hope that the ship is now on a new course, in better, calmer waters.”

Still, if the storm does brew up again, the new captain can always turn to the Hopps.

image from flickr user stans_pat_pix used under a creative commons license.