Tuesday, March 31, 2009

Crash Test: What Pharma Can Learn from Other Industries’ Problems

We attended last week in Miami one of our favorite meetings – the rEvolution Symposium for chief scientific officers, one of the few places we know where most of the senior R&D bosses of pharma mix more-or-less freely with their biotech counterparts. Each meeting generally features the usual binaries (who’s more innovative; who’s more endangered) and complaints about marketers (the guys who turned us into used car salesmen with DTC ads).

But this was the first rEvolution Symposium where CSOs worrying about the industry model’s long-term sustainability met face-to-face with counterparts in industries with even bigger problems: cars, newspapers and aircraft. Indeed, if there were a theme to the meeting it was nicely articulated by one Big Pharma head of R&D (we’ve constrained ourselves from using some names) who asked GM’s head of R&D, Alan Taub: “What do you wish now you hadn’t done? I want to know so that in ten years we’re not asking for a government bailout.”

So what can we learn? For one thing, IP ain’t as valuable as speed to market. Take aircraft, said Tim Gallagher, a McKinsey director who focuses on that industry. Where once a manufacturer kept key IP inside – like wing design – “now the point is to get as much technology onto a plane as quickly as possible – wherever it might come from. It was a huge cultural change.” That issue struck particularly close to home. One R&D boss noted it was time to stop holding science so close to the vest; better to cooperate there, he said, and focus IP energies on the final molecule. Steve Friend, Merck’s former head of oncology (who originally made his corporate name founding and selling Rosetta Inpharmatics for nearly $600 million) noted that he’d left Merck to create the Sage Bionetworks spinoff – a not-for-profit essentially devoted to getting pharmas to share science.

Another analogy: you’ll be blindsided by competitors, probably by competitors you don’t know. Newspapers, noted Rick Edmonds of media think-tank The Poynter Institute, competed with other newspapers -- the basis of competition being the quality and style of their coverage. Until Google and craigslist and a host of other sources for classified ads stole most of the load-bearing supports for their revenue model (the rest of the supports are now being kicked out by an advertising-sparse economy).

Meanwhile, GM had lots of hybrid technology, noted Alan Taub. Just didn’t think many customers would make what is in fact an illogical economic choice – saving less on gas than they paid for the engineering of a hybrid. Toyota, with its Prius, didn’t have the same problem. As these examples paraded in front of them, the rEvolution audience was considering the competitive disruptions of managed care (which pretty much single-handedly has turned therapeutic substitution of generics into a primary care nightmare), biotech – and the creation of biologics, and therapy-determining biomarkers sold independently of any specific therapies.

And then there’s the double-edged sword of government as your main customer (think health reform). Four of the Big Five aircraft companies are completely dependent on government contracts. Which is helpful in one sense, noted Gallagher: the government feels it needs to keep a variety of manufacturers alive. And miserable in another: when the government feels it’s padded one contract with too much profit, it takes profit out of the next one.

We know that no analogies are perfect. And the ones we’ve listed are easy enough to poke holes in. But the state of the industry doesn’t allow them to be ignored, either.

Image from flickr user chuckbiscuito used under a creative commons license.

Saxagliptin: Calendar Management

When’s the best time for FDA to hold the first review of an anti-diabetes drug under the new guidelines calling for a thorough examination of cardiovascular effects?

When all the leading cardiologists are exhausted, deconvened and headed back to their practices after four days at their annual convention of the American College of Cardiology.

FDA’s selection of April 1 as the date for the Endrocrinologic Drugs Advisory Committee review of the NDA for Bristol-Myers Squibb’s saxagliptin (Onglyza) tabs suggests an interesting tactical decision.

All signs prior to the saxagliptin meeting point toward FDA hoping to have a positive first experience with reviews of new diabetes drugs in the post-Avandia guideline era. The FDA advisory committee will review Novo Nordisk’s liraglutide injection on the next day, April 2. As we noted in this earlier post, pre-meeting briefing documents for saxagliptin indicate that the sponsor has adequate and convincing data on cardiovascular safety. It may be as good a candidate as FDA has pending to test the new standards for clinical review.

It would also be convenient for FDA and for its endocrinology advisors not to have a large contingent of querulous cardiologists in the audience to pick holes in the application. That’s where the choice of the review date just following ACC becomes important. Putting the saxagliptin review on a date directly conflicting with ACC might have assured less participation by cardiologists, but that might have been too heavy-handed.

Putting the meeting, instead, right after the convention may more subtly restrict attendance by potential critics. FDA has selected two cardiolgists to attend the saxagliptin meeting as temporary voting members of the advisory committee: University of California-San Francisco’s John Teerlink and Tufts University’s Marvin Konstam.)

FDA has been accused recently (and quite publicly) of trying to stack another advisory committee to avoid dissension. The April 1 choice for saxagliptin may be just fool’s good luck for the agency—or it may be good calendar management.

Betting on the Saxagliptin Advisory Committee

Tomorrow’s advisory committee review of Bristol-Myers Squibb/AstraZeneca’s oral DPP-4 inhibitor anti-diabetic saxagliptin will be a critical milestone for type 2 diabetes drug development.

Based on our review of the briefing documents for the committee, we think FDA is essentially asking its expert panel whether it is possible for anyone to meet the agency’s new standards for cardiovascular safety of type 2 diabetes therapies without conducting prospective studies to do so.

That question is critically important to other sponsors with drugs pending at the agency, starting with Novo Nordisk whose liraglutide goes before the same committee on Thursday.

As we discuss in greater detail here, we think the signs are good for a positive outcome at the committee.

But who cares about that. We raise a more parochial question today: which of the two sponsors will look smarter when the meeting is over?

Recall that Bristol brought in AZ as a partner soon after the muraglitizar (Pargluva) disaster, where its last effort to market a type 2 diabetes agent crashed and burned—after a successful committee review. (Thank you, Dr. Nissen.) In that case—arguably the worst possible outcome for a drug development company—Bristol could at least look at the silver lining: the $100 million Merck paid for marketing rights to the drug.

In doing the deal with AZ, Bristol was very deliberately hedging its risk in light of what it saw as a worsening regulatory climate for primary care in general and type 2 diabetes in specific. So, was AZ a sucker to pay up (at least $150 million so far), or was Bristol a scaredy-cat to give away half of huge market?

Okay, okay, we get it. Obviously both Bristol and AZ have a huge stake in a positive outcome. Each is slated to share 50% of the market for saxagliptin, so there is no question of one side wanting it more than the other.

But still—given the size of the saxagliptin deal, it is worth asking whether it was worth it and for whom.

Given the concern about FDA’s diabetes guidance and the potential for costly post-marketing studies, you could easily argue that Bristol was right. Even if saxagliptin makes it through FDA soon, it will probably be more expensive to market and less lucrative than AZ may have forecast at the time of the deal.

And there is no guarantee that a positive vote tomorrow means saxagliptan is on the market this year. Most analysts seem to think the exclusive focus on cardiovascular safety at the committee means FDA has no other questions about approvability, but we're not so sure. It may be that FDA wants to focus on the cardiovascular analysis, figuring that if saxagliptin doesn't have enough data to meet the guideline, no one will.

On the other hand, at the time of the deal, saxagliptin looked certain to be at least third in the class (behind Merck’s Januvia and Novartis’ Galvus). Now, however, it has passed Galvus and is ahead of Takeda’s alogliptin . Indeed, it has even leap-frogged drugs that are not head-to-head competitors, like liraglutide. So maybe AZ got the better deal.

We think two things are clear from the above discussion: First, from Bristol’s perspective, the deal almost certainly worked as a hedging strategy. After all, even today, we don’t think you can say with any certainty whether saxagliptin will end up closer to Januvia or Pargluva on the scale of commercial success. (Ask us tomorrow and we might know more…)

Second, on the off chance that Bristol has another type 2 diabetes agent in Phase III, we doubt they'll get $200 million for it if saxagliptin crashes and burns....

Essex Looks to Stretch Many Bucks

Daily Dow watchers who were looking for a quick read on the private equity market might have felt a happy little jolt from the news that Essex Woodlands Health Ventures closed on a $900 million fund. After all, limited partners are supposed to be down on private equity and venture capital fund-raising, right? Is this a sign that the storm clouds are clearing?

Well, we're sorry to disappoint. But, as we reported a year ago, Essex Woodlands actually closed on nearly all of this capital in the first half of last year, before the walls really started tumbling down. General Partner Immanuel Thangaraj is correct in remind us that the market wasn't exactly rosy before the September meltdown, but still, times weren't nearly as tough as they've become.

In fact, Thangaraj admits the firm fell a little short of its goal. After institutional investors began lining up behind the eighth fund early into the fund raising, the firm's partners set a $1 billion goal with a $1.25 billion cap. Essex Woodlands wrapped up roughly $800 million in the first half of last year when potential LPs were ready to stuff the fund, but when the economy took a nose dive they retreated, leaving Essex with "only" $900 million. Essex held the fund open until last week to accomodate a few smaller investors who needed time to complete the transaction.

But Thangaraj and his partners clearly aren't complaining. In fact, Thangaraj presents a convincing argument that a $900 million fund in this current market carries considerable more muscle than it would have just a year ago. With public equities down up to 50% or more and private valuations dipping as well, Essex Woodlands has the necessary muscle to negotiate good prices for shares in great companies that simply need capital. If the partners place wise bets the returns from this fund could be the firm's best.

Essex Woodlands will invest the capital to match the times. The firm could put roughly two-thirds of its capital into later-stage, growth-equity style investments in companies with products or commercialization in sight. The remainder would go into earlier-stage venture capital style investments, including start-ups. "It's hard not to reflect the times, but I don't think directionally we've changed."

Thangaraj says Essex first three investments reflect the diversity of the future portfolio: early stage biopharma Catalyst Biosciences Inc.; publicly traded device company ATS Medical Inc. and specialty pharma company Victory Pharma Inc.

The $900 million figure matches the 2002 fund raised by MPM Capital, a vehicle that caused some consternation in the venture industry as many saw it as a sign of too much capital flowing into the sector. That's not a concern today. Every dollar is welcome by VCs and companies alike. In between 2004 and today, Aisling Capital, Clarus Ventures (the spin off from MPM), Domain, Frazier Healthcare Ventures, MPM and Prospect Venture Partners have all gone to raise between $500 million and $700 million in their most recent funds.

MPM Capital previously had the distinction for raising the largest venture capital fund. Asked if Essex Woodlands' partners were tempted to raise just a bit more to top MPM's mark, Thangaraj admitted that Essex Woodlands, in fact, had raised slightly more than $900 million, but only because the capital was available. But the partners preferred to publicize the $900 million, at least partly so as not to look like they were intentionally trying to top MPM's 2002 high water mark.

But Thangaraj says in this market, the value of each dollar of the fund is almost as important as the number of dollars. Valuations are dropping and capital is scarce. "We've not seen this combination in the last 25 years of operation," he says. "We have incredible purchasing power. The billion we though we had in 2007 or 2008 would probably be less effective [at that time] than the $900 million we actually have today."

Monday, March 30, 2009

While You Were At ACC

Steel yourselves for a few days of cardiovascular news aplenty as the American College of Cardiology meeting has kicked off in Orlando. Meanwhile by unpopular demand we must make note of the Australian Grand Prix (heretofore to be referenced as the curious case of Jenson Button). And so long as we're talking about really fast driving we might as well mention some other sporting feats from the weekend: Tiger is Back, Villanova is For Real, and for the upteenth consecutive year this blogger has thrown away multiple hard-earned Alexander Hamiltons on NCAA tourney pools. Oh and Opening Day? Less than a week away.

While you were counting the days ...

image from flickr user StevenM_61 used under a creative commons license.

Saturday, March 28, 2009

DotW: On the Verge

It was the kind of week where so many important things seemed on the verge of happening. Is the economy sputtering back to life? (We are taking a wait-and-see attitude there.) The calendar says it's spring, but the bone-cold temperatures in Fargo and other parts of the country belie that old adage "March goes out like a lamb."

Meanwhile, the glacial pace of follow-on-biologics legislation seems to have quickened. Does a bipartisan bill in the Senate means we could be on the cusp of seeing major changes in that realm? Let's wait and see which of the competing bills actually gets adopted.

Things on the deal-making front have also slowed a bit. But even as the odds of sizeable deals such as Pfizer/Wyeth or Merck/Schering decrease, a number of large buy-outs seem in the offing. Nearest term, GSK appears to be buying a 25% minority stake in Aspen, the South African drugmaker that markets 450 generic medicines, including antibiotics, antidepressants and HIV drugs. That deal has been on the horizon since Aspen disclosed in January that it was holding negotiations with another party that could affect its share price. GSK, of course, signed a marketing alliance with Aspen last year to build its sales in emerging markets. It's focus on generics is a move replicated by other competitors including Sanofi (Zentiva)and Pfizer (Aurobindo).

Will GSK also fill the wrinkles in it pipeline with Allergan's Botox? What about Lundbeck's potential desire for Elan? (Makes for a nice tidy neuro company after Lundbeck's purchase of Ovation doesn't it?) Which mystery buyer will snatch up Nycomed? Could suitor X, the company that ultimately lost Wyeth to Pfizer, be involved? (According to the WSJ, Infosys is reportedly interested in acquiring pharmaceutical companies too, but of the much smaller variety--$100 million to $200 million endeavors not the tens of billions a Nycomed would cost.)

Meantime, Dyax teeters. Last week's expensive deal with Cowen Healthcare Royalty Partners was followed by news this week that FDA had declined to approve ecallantide, the biotech's drug for hereditary angioedema. The announcement sent the company's share price down double-digits initially. But cooler heads ultimately prevailed as investors saw the silver lining in the news: despite questions about the drug's efficacy in HAE, FDA will not require Dyax to conduct any new studies, but will necessitate submission of a Risk Evaluation and Mitigation Strategy (REMS) prior to approval of ecallantide.

Who else is on the edge? Not Genentech. Roche officially owns the company. Adios, NYSE: DNA. Moody's responded to the news by lowering the Swiss Pharma's rating from Aa1 to A2.

We'd be remiss if we didn't recount the troubled companies on the verge of collapse--Neurobiological and Oscient make this week's list, as does Avigen. Avigen of course, has been embroiled in a public fight with its largest shareholder, Biotechnology Value Fund LP. As part of an offer to buy the company for a $1.20-a-share, BVF sought to oust Avigen's board. But a shareholder vote on the matter went against BVF on Friday, and the company will be liquidated instead.

Are you on the verge? Step away from the ledge. It's time for...

GlaxoSmithKline/Pentraxin Therapeutics:“Small but symbolic” is how this deal earns its spot in this prestigious weekly. GSK this week signed a deal with UCL spin-out Pentraxin to develop a novel treatment for amyloidosis. So what? It means a few things: 1) GSK is serious about investing in very specialist diseases (amyloidosis affects about 80,000 people in the industrialized world, though many more are likely un-diagnosed); 2) Its smaller-is-better R&D structure appears to be helping it do so; 3) With a straight-from-academia R&D chief, expect a bunch of risky, early-stage alliances with old colleagues. GSK’s SVP Drug Discovery Patrick Vallance was Head of the Division of Medicine and Professor of Pharmacology at UCL before joining GSK in 2006, and he made the deal happen, according to Pentraxin’s head, Professor Mark Pepys. Showing GSK’s small-unit R&D structure at work, this deal involves both the pharma’s academia-focused Drug Performance Unit, plus the BioPharmaceutical CEDD. (If you have forgotten what DPUs and CEDDs are, read this.) That’s because Pentraxin’s program combines a small molecule with an antibody—a pairing that’s unprecedented in drug development, according to Pepys. The small molecule component is CPHPC, a pallindromic compound that targets serum amyloid P component (SAP), known to be associated with the deformed proteins involved in amyloidosis. (For more on the complex biology surrounging CPHPC and SAP check out "The Pink Sheet" Daily.) But although CPHPC does a great job clearing SAP from the circulation, it can’t quite eke all of it out of the abnormal protein deposits. Not good enough, then, for the majority of patients who already have major amyloid deposits and damaged organ function by the time they are diagnosed. So Pepys decided to add an anti-SAP antibody to mop up the remaining 10% or so of the SAP protein within organs and tissues. The one-two punch—first the small molecule, then the antibody—works in mice, but is nevertheless a highly risky development prospect. Safety issues multiply by far more than two. But for GSK, the money’s small—undisclosed early stage success-based milestones plus drug development milestones and royalties. What’s more, it gets a shot at what could be an important new therapy, and, possibly, an even longer shot in Alzheimer's and type 2 diabetes, where the treatment might work, too--Melanie Senior.

Human Genome Sciences/Morphotek: It's so nice when a research-oriented deal can move a company's stock price 10% isn't it? (Course it would be much more impressive if the uptick were more than 8 cents and the ticker symbol was trading above $1.) That's the bounce HGS got this week, when it announced it was pairing up with Eisai's Morphotek to identify promising cancer-fighting and immunology drug candidates. Through this deal, HGS gains access to Morphotek's antibody technology, with Morphotek validating targets discovered during the Maryland biotech's gene hunting days of yore. (Anybody remember when HGS used to do their own validation?) Morphotek will also generate the antibodies and conduct preclinical proof-of-concept studies before handing the molecules back to HGS. For its work, Morphotek retains certain opt-in rights related to the development and commercialization of each antibody developed under the collaboration. Under certain circumstances, HGS and Morphotek may also share other costs, including those related to R&D, manufacturing, and commercialization. Whether or not the deal amounts to much near term for HGS, the announcement is a welcome distraction from the negative news associated with the biotech's late stage pipeline. Earlier this month Human Genome announced disappointing results from its Phase III study of Albuferon, the biotech's hep C drug partnered with Novartis. The drug met the study's non-inferiority requirements but failed to deliver outstanding efficacy results; more troubling it also showed some signs of safety problems.

Biogen Idec/AVEO: If you're having trouble getting to work in Cambridge it might be the multi-trend pileup that is the March 24 Biogen-AVEO deal blocking the road. On Tuesday AVEO said that it entered a strategic alliance with Biogen Idec for the development and commercialization of its ErbB3 targeting antibodies (ErbB3 is an EGFR overexpressed in certain solid tumors). AVEO gets an undisclosed upfront plus milestones, and Biogen gets an option to develop and sell AVEO's (currently discovery stage) mABs for cancer and other diseases outside North America. Biogen's options are exercisable at POC and the big biotech will be responsible for leading global development on programs. The finances were not disclosed. Though the companies have said little about the deal specs we do know that the pact does manage to combine a handful of interesting trends: Optionality, Regionalization, and Corporate Venture (Biogen invested in AVEO's $53mm Series D in May 2007)--Chris Morrison.

Merck/Xencor: Is Xencor on the verge of a big deal-making break-out? The company announced its third deal in three months this week, teaming up this time with Merck in an exclusive licensing deal that gives the Big Pharma access to the biotech's antibody half-life prolongation technology for the development of antibodies around an undisclosed (always!) drug target. Like the Pfizer and CSL deals that preceded this transaction, there isn't a great deal of cash on the table. Xencor gains just $3 million upfront, but could garner an additional payment (value undisclosed) if Merck selects one of its souped-up antibodies. The biotech will also receive the usual--and highly theoretical--commercial development milestones and royalties on product sales. This time around the deal is limited to Xencor's Xtend technology not its Xmab platform, the source of interest for both Pfizer and CSL. (The recent deal with Pfizer gives that pharma access to both technologies.) One tricky problem with Mother Nature's antibodies is they often don't hang around long enough to do the work of wiping out a cancer call or blocking an overactive immune response. So inventive companies like GlycArt, GlycoFi, BioWa, and Xencor have developed patent-protected methods for messing with the mABs to make them last longer. That's the premise of Xtend anyway. "The ability to enhance the pharmaceutical properties of antibody drug molecules and customize this class of drugs for specific therapeutic settings is a central differentiating factor which Xencor will continue to pioneer," commented James Posada, Xencor's acting chief business officer, in a press release accompanying the news. You have to wonder though. Will deals like this one with Merck be enough to sustain the company until it can sign a licensing deal for its lead product, a Phase I anti-CD30 for Hodgkins lymphoma and other T-cell lymphomas? The 12-year-old company is one of the last of the first next-generation antibody engineering companies still left in the private sector. (Most of the others got bought up in the large molecule landgrab.) Just how patient are Xencor's investors? To date the company has raised a whopping $130 million in venture financing, including a $45 million Series E in 2007 with backing from MedImmune Ventures, Novo Nordisk, HealthCare Ventures, Oxford Bioscience Partners and Merlin Nexus.

Friday, March 27, 2009

The IN VIVO Blog Podcast: Sandoz's View On US Biosimilars Outcome

Yes, the IN VIVO Blog Podcast is a Wednesday thing. But sometimes there's just too much podcast for little old Wednesday, and this is one of those times. Welcome to a bonus podcast to kick off your weekend.

Did you read Melanie Senior's FOBs post on Monday? When you did, did you think 'I wonder what Melanie and Hannes Teissl sounded like when they talked about these pieces of biosimilars legislation?' Well, wonder no more, and click on the logo below to listen.

When it comes to that perma-hot topic, biosimilars, all eyes are on the US right now. There are various bills up before the House, most prominently Henry Waxman's pro-generic one, and Anna Eshoo's pro-brand one (plus, as from today, a bipartisan proposal that looks very Waxman-ish). As the debate rages on in Washington, our on-the-pulse podcaster asked Hannes Teissl, head of Biopharmaceuticals at biosimilar pioneers Sandoz, what flavor of legislation he thinks will appear.

Don't forget, you can access the podcast via iTunes also.

The IN VIVO Blog Poll Results: Bye Bye Avandia

The people have spoken, and they expect a long year ahead for GlaxoSmithKline. That’s because Avandia was the run-away winner in our poll based on our purely speculative if not insanely irresponsible notion that the US Food & Drug Administration might just pull a drug to demonstrate that it is taking Congressional concerns about drug safety seriously.

It ain’t scientific, but 42% think Avandia is most likely to be pulled. And, for its worth, that’s twice as many people as think we are crazy to think this way. (See full results below.)

Frankly, we were temped to vote “crazy” ourselves, so we consider this result a bit of surprise.

We also got lots of comments—a few of the “you are crazy” variety (keep it clean, people!), but also some suggesting candidates we didn’t include in the poll. Two votes for Avelox, one for Oxycontin, and one for midrodine. Oh, and one pointing out that we should have listed Accutane for a different side effect.

So folks clearly think there is a risk here.

One final note: the polls closed before readers could digest our two most recent posts, based on our conversation with gadfly and advisory committee member Sid Wolfe. In the first, he--quite unprompted by us--predicted that Celebrex will eventually be withdrawn. In the second, he discussed his relationship with incoming deputy commissioner Joshua Sharfstein.

Celebrex only got 6% of the vote in our poll. Wonder if people feel differently today?

Thursday, March 26, 2009

Following Up With Sid Wolfe (Part 2)

Washington is full of interesting connections.

Given how much people jump from job to job in DC, it’s only a bit of an overstatement to say that everybody has worked with everybody at some point in their careers.

So it should come as no surprise, perhaps, that Joshua Sharfstein, the incoming principal deputy commissioner of the Food & Drug Administration, used to work with a prominent policy figure in Washington who happens to be a staunch critic of the pharmaceutical industry.

No, we’re not talking about Rep. Henry Waxman, for whom Sharfstein worked early in his career. This is someone perhaps even less favorable to Big Pharma (if that could be possible): Public Citizen’s Health Research Group director Sidney Wolfe.

Sharfstein worked at Public Citizen as a researcher between April-August 1992—after completing his undergraduate degree from Harvard University and starting medical school. During his five months at Public Citizen, he contributed to a report on the capacity of the U.S. correction system’s ability to care for mentally ill. (One finding: states without adequate inpatient mental health facilities jailed mentally ill patients rather than providing appropriate treatment.)

In an interview, Wolfe recalled Sharfstein's stint at Public Citizen, but was careful not to give him too much praise. When asked of his impressions of the incoming FDA official, Wolfe spoke generally of the “extreme public health experience” of both Sharfstein and FDA commissioner-designate Margaret Hamburg. “I can’t remember the last commissioner with solid public health experience,” Wolfe said. (He discounted David Kessler, who as the former head of a hospital, Wolfe says, did not rise to the same level as health commissioner of a big city.)

After Public Citizen, Sharfstein went into his first year of medical school, and promptly did something rather Wolfeish: he led a student campaign urging his classmates to return free textbooks donated by pharmaceutical companies.

According to a story in the Harvard Crimson, Sharfstein set up a drop-box for students to return two textbooks donated by Sandoz, and wrote a letter to president Timothy Rothwell protesting their distribution. The protest didn’t seem to attract much support: few books were returned, and a few that were returned were stolen from the drop-box.

Wolfe and Sharfstein kept in touch, collaborating on a 1999 petition to then-HHS secretary Donna Shalala against Pfizer’s marketing practices for the antibiotic Zithromax. Wolfe and Sharfstein, who at the time was a pediatrics fellow at Boston Medical Center, accused Pfizer of launching a campaign to convince physicians to prescribe Zithromax over the “effective and inexpensive” antibiotic amoxicillin—against CDC guidelines.

They also testified at the same FDA public hearing in 2008 over the safety of cough and cold medicines; Sharfstein petitioned FDA to relabel the products as not safe and effective for children under six years. At the public meeting, Sharfstein was the opening presenter, and Wolfe spoke during the open public hearing portion of the meeting.

We're not saying that makes them bosom buddies, but it does make for an interesting Washington connection.

DNA's Tombstone

Much has been made today--and oh, for about nine months--about the demise of an independent Genentech at the hands of its majority owner, Roche. The biotech pioneer's stock will cease trading after today.

Goodbye, NYSE:DNA.

Harken back to your initial reactions last July (here is ours). How did you think about the Roche-fication of Genentech then and how do you think about it now, with the Pfizer/Wyeth and Merck/SGP merger announcements in the rear-view mirror and the economy in the toilet?

We've seldom, if ever, written more about a deal than we have the various incarnations of Roche/Genentech. You can find much of our collective work here on the blog. For the big juicy pieces since July 2008, go here and here and here.

Even with our extensive coverage, we've barely touched on many of the central issues looming as Roche looks to integrate Genentech.

Among them: If the DNA of Genentech is about its individual managers and scientists, will Genentech live on if they remain? Or is the departure of many a foregone conclusion with the lure of greener start-up pastures or the axe of restructuring looming large? Or has there always been a bit of myth to the magnitude of the Genentech magic? In short, what's next?

To paraphrase the old pizza commercial, what do you want on Genentech's tombstone?

Haddad the Harbinger: Waxman-Hatch Activist Creates Company for Biogenerics

The robin is the traditional harbinger of spring. Here’s a harbinger of changes in the biologics business. The intense focus, activity and interest of one man in generics has been a reliable sign of big changes in the past and maybe again in 2009.

Bill Haddad, occasionally described as the “godfather” of the generics industry, is getting ready for follow-on biologics. He has established a self-funded company, Biogenerics Inc., in anticipation of Congressional action to create a pathway to approve follow-on biologics. His goal: once Congress acts, he will partner with FDA-approved plants overseas to expedite the entry of generic versions of off-patent biologics into the U.S.

Haddad has worked on the transnational movement of generics and biogenerics previously. He worked on biogenerics with Russian producers before starting his own company. Now, he says, companies in India are among the best candidates to produce biogenerics for the U.S. market, although he also cites developing industries in China, Australia and Korea. He currently acts as a U.S. representative for the Indian generics firm, Cipla, based in Mumbai.

Haddad says he has put together a list of products whose patents have expired as prime candidates for introduction to the U.S. biogenerics market – although he won’t discuss which ones with us -- and he has an idea of which firms he’d like to partner with. He’s also surveyed the range of products susceptible to patent challenges.

Another thing he’d like to do once the FOB regulatory pathway is created is to form a new trade association for biogeneric manufacturers – he was a founder of one of the original generic drug trade associations, so certainly knows how it’s done.

Haddad, a former journalist and Capitol Hill aide from the 1960’s, was a prominent voice pushing for expansion of the chemical generic industry in the 1970’s. His efforts led eventually to the1984 Drug Price Competition and Patent Restoration Act (Waxman-Hatch). He was one of the representatives for the generic industry in those discussions working with Waxman’s staffer Bill Corr (who is now headed to be Deputy Secretary of Health & Human Services).

Haddad’s connections to the expansion of low-priced drug competition goes way back. He represents one of the few people still active in the industry with ties back to the start of the Congressional effort to reduce intellectual property protections for the drug industry. At the beginning of his career, he was an aide to Tennessee Democratic Senator Estes Kefauver, for whom the 1962 drug efficacy amendments are named (“The Kefauver Amendments”). That major expansion of FDA approval authority actually arose out of efforts by Kefauver to cut back drug patent protections. That effort got side-tracked to enhanced safety and efficacy requirements by the thalidomide teratogenic experience in 1962.

Haddad smells another legislative milestone coming for generics in follow-ons and is giving Waxman’s current version of FOB legislation a good chance of clearing Congress. (See a summary of the provisions in Waxman’s bill by “The Pink Sheet” here). He called the bill “doable,” although he recognizes there is a lot of dealing left around data exclusivity and clinical trials. Until that approval pathway is set up, Biogenerics Inc. is “in a holding pattern,” he said.

As a business, Haddad sees a lot of potential for biogenerics, which he says any firm needs to be involved in in the next few years. If you’re just in small molecule drugs, “you’ll just be a commodity,” he said.

Why Plan B Still Matters

Politics played a role in the review of Plan B? We’re shocked—shocked I say—to hear it.

That “gambling in Casablanca” moment is courtesy of New York federal court Judge Edward Korman who deemed FDA’s decision to set an age limit and behind-the-counter marketing conditions on Barr Labs (now Teva’s) emergency contraceptive to be “arbitrary and capricious” decision-making.

The March 23 ruling cites “repeated and unreasonable delays, pressure emanating from the White House, and the obvious connection between the confirmation process of two FDA Commissioners and the timing of the FDA’s decisions.” (You can read our coverage of the ruling here; the opinion itself is available here.)

Now, most biopharma companies may be tempted to dismiss the whole Plan B controversy as just a tempest in a teapot: further evidence that anything touching on abortion rights is political dynamite, perhaps, but not relevant to their day to day commercial lives.

We disagree.

In the second issue of The RPM Report, three-and-a-half years ago, we noted the irony of Plan B: despite the fact that Barr Labs’ application for an over-the-counter switch of the emergency contraceptive was making national headlines—and even played a role in the Presidential campaign in 2004—it was at best the third most important commercial issue for Barr at the time.

And even less important commercially for the rest of the biopharma industry.

But, we argued, biopharma companies could ill afford to ignore the controversy over Plan B. The political firestorm over Plan B would have long term consequences for the agency, we argued, as well as an immediate impact on the framework for over-the-counter switches across the board. (You can read that story, “Why Plan B Matters,” here.)

We feel the same way now—this is a case with limited commercial impact but big policy implications. Here are seven ways that the Plan B ruling could affect the entire biopharma sector:

(1) A Wild-Card for the Hamburg Confirmation

On paper, the ruling dovetails nicely with some themes of the incoming Obama Administration, offering another case study for the White House to use to argue that it is committed to science-based public health policy. (See, for example, stem cell research.)

Indeed, it is perfectly possible that the new FDA team—led by Commissioner-designate Margaret Hamburg—would have reopened the Plan B decision of its own volition to make that very point.

But we are betting that the Obama Administration would rather not have this come up in the context of the confirmation process. And biopharma companies—who stressed the urgency of filling the FDA vacancy during the transition—should be wary of any wrinkle that could delay the confirmation.

Plan B was a rallying cry for Democrats nationwide in 2004, but was more specifically associated with the Hillary Clinton campaign in 2008. And if the Obama Administration wanted to make it a rallying point this year, it could have embraced calls to name Susan Wood—the former FDA official who resigned over the handling of the application—as commissioner of the agency.

Regardless of what the new FDA team actually would have done with Plan B, it now has no choice but to revisit the application—and Hamburg is certain to be asked about it in the confirmation process. As the ruling itself notes, Plan B already helped delay the confirmation of the last two commissioners (Lester Crawford and Andy von Eschenbach). It is not out of the question that Plan B will cause another delay this time around.

(2) Reopening Old Wounds Inside FDA

To critics of the agency’s handling of Plan B, Sue Wood is the hero of the story. Now on the faculty at George Washington University, Wood has been an outside advisor to the HHS transition team. So when she was quoted by the Washington Post pointing out that two of the key figures in the review—Steven Galson and Janet Woodcock—still have jobs, that sounded ominous to us.

Galson is now acting Surgeon General, and, as we have written previously, he is considering various options once a new Surgeon General is appointed. Woodcock, of course, is the head of FDA’s drug review center and one of the agency officials considered most vital to a functional review process by most folks in industry.

Woodcock is a career civil servant, and no one we’ve talked to thinks it is likely that she would be pushed out because of Plan B or for any other reason. Still, after a long career at FDA, no one would be surprised if Woodcock decided this was her last transition.

(3) Raising the Bar for Top-Side Involvement in Approval Decisions

Much of the ruling focuses on the degree of top-level involvement in the decision on Plan B, in effect defining a direct, hands-on role by the commissioner (actually, three commissioners: Mark McClellan, Lester Crawford and Andrew Von Eschenbach) as indicating some form of undue political interference in its own right.

That by itself is a potential concern for industry. In this case, the commissioner’s involvement appeared to delay an approval—but what of David Kessler’s hands-on role in shepherding some of the earliest HIV therapies through the agency, in effect inventing accelerated approval in the context of a specific application?

More importantly, the ruling also highlights the unusual level of involvement of the center director (Galson) in many aspects of the review. The ruling stops far short of saying the CDER director can’t weigh in on approval decisions—but it sure seems to suggest that FDA may want to better define when or how the director can get involved.

That could have big implications if it takes some discretion away from the center director. Sponsors upset by a decision rendered at the top (cf. Momenta and generic Lovenox) may applaud; others hoping for a chance to head off a negative outcome may find it harder to engage FDA’s top management without going through a formal appeals process.

(4) The End of “Behind the Counter”?

Plan B’s currently approved OTC application dictates availability solely “behind the counter,” a development that took FDA a big step closer to the long debated idea of a formal “third-class” of drugs, somewhere between prescription only and traditional over-the-counter.

Politically expedient or not, that made it a precedent setting approval.

That precedent, though, may be overturned. The court ruling specifically addresses a petition seeking to have Plan B made available over-the-counter without restriction. The ruling does not change Plan B’s behind the counter status, but directs FDA to re-review the question based on the science (with a strong indication that the judge views the science as supporting unrestricted access).

Coincidentally, the Government Accountability Office released a report on BTC status the same day as the ruling, and let’s just say that GAO is skeptical about the entire idea. (Read our coverage here.)

(5) Discouraging “Creative” Risk Management Ideas

While the court is leaving it to FDA’s discretion to reconsider the question of behind-the-counter status, the order does change one condition of the approval right away: Plan B is to be relabeled for use by those age 17 and up, rather than the current 18 and up restriction.

That overturns a last-minute change to the proposed label for the OTC version of the drug that the court attributes to former Commissioner von Eschenbach.

He “decided that 18, rather than age 17, is the ‘more appropriate cutoff point’ for OTC use of Plan B because of ‘well-established state and private-sector infrastructures [which] restrict certain products to consumers 18 and older,’” the judge wrote.

That, in the judge’s view, was entirely unsupported by FDA’s administrative record.

It does, however, seem logical: 18 is a well-defined milestone defining the boundary between teenager and adult. That rationale reminds us, at least, of some of the types of suppositions the agency is starting to make more routinely in negotiating risk management plans with sponsors. (Now formalized as Risk Evaluation & Mitigation Strategies authorized by statute.)

At its heart, the risk management process involves additional controls in the commercial setting intended to align better with real world practices. The logic of the Plan B ruling suggests that FDA may need more than common sense to justify a restriction on access that isn’t supported in the clinical database.

(6) Less Predictability in the Advisory Committee Process

We’ve written lots and lots about the ever evolving role of advisory committees in the review process—and the loss of any measure of predictability for sponsors facing a make-or-break event for their products. (Latest update: Sid Wolfe calling on FDA reviewers in the audience to offer an opinion.)

The Plan B ruling highlights the advisory committee process for two reasons. First, the court puts great weight on the fact that the advisory committee reviewing the switch voted overwhelmingly in favor of approval—but FDA ended up sending a “not approvable” letter. The court notes that FDA is not bound by advisory committee rulings, but cites a Government Accountability Office review of Plan B showing that the agency never previously overruled an OTC switch recommendation.

Any sponsor to get a positive committee review and then a rejection from FDA may think that’s good news, but we don’t see it that way. First, as we’ll argue below, no one we’ve talked to thinks a sponsor would win a case against FDA solely on those grounds. More importantly, if FDA is (or perceives itself to be) bound by advisory committee rulings, the agency will be much more conservative in its approach to those meetings, and is probably unlikely to even ask approvability questions if it is concerned about a “wrong” answer.

The ruling also touches on a more current issue about staffing committees, concluding that FDA’s leadership tried to stack the committee with people who would vote against the application. The court found that “the Office of the Commissioner appointed members to the advisory committee not for their expertise, but to achieve what the Office of the Commissioner called a ‘balance of opinion’ on the panel.” The ruling then notes that CDER officials say that is contrary to standard practice: “CDER is ‘not . . . looking for people who have an opinion coming in. That’s exactly what we don’t want. We want people who can look at what’s before them and render an assessment and recommendation on the basis of that.”

That sentiment now goes by the name “intellectual conflict of interest,” and if the recent advisory committee review of prasugrel is any indication, FDA still has some work to do on that policy. (Look for more coverage of that point soon in The RPM Report.)

(7) A Chilling Effect on Pre-NDA Commitments

Last but not least, the ruling could affect FDA’s communication about approvability issues in the pre-NDA setting.

The judge cites FDA’s pre-NDA discussions with Barr about its “actual use” study plans for Plan B as evidence that its subsequent concern about use in adolescent girls was a fig-leaf for political issues. As with the advisory committee vote, the ruling stops well short of declaring that the agency’s pre-NDA discussions should be treated as binding.

Still, some sponsors may read the case as a reason to rethink the conventional wisdom that suing FDA is a waste of time and money at best—and counterproductive at worst.

Food and drug lawyers we spoke with are unanimous in saying that there is no reason to change the conventional wisdom. In their view, Plan B is an outlier, a rare circumstance where suing the agency can (and did) work. And, they note, Barr didn’t file the suit—women’s health advocates did.

However, even if FDA doesn’t face a wave of lawsuits from sponsors asserting that, for example, the new diabetes endpoints are arbitrary and capricious, the ruling could cause the agency to consider new policies about pre-NDA communications.

That raises at least the potential that advice to sponsors may be less valuable because the agency will be more careful about avoiding any implication that any given data set will justify approval without further review.

For all those reasons, biopharma companies will need to keep their eye on the fallout of Plan B. The Obama Administration may be only too happy to play down the ruling and let the controversy over this application die.

But the Plan B controversy illustrates one other thing: you can’t keep politics out of the FDA. Even with a court order.

Wednesday, March 25, 2009

Following Up With Sid Wolfe (Part One)

Given the level of interest in our earlier blog post on Sidney Wolfe at the FDA advisory committee review for Johnson & Johnson’s rivaroxaban, we figured we'd call up Sid at his office at Public Citizen and ask the questions that you, dear readers, have posed to us:

What was behind Wolfe's decision to ask drug safety official John Senior his opinion of rivaroxaban’s benefit-risk profile during the advisory committee review? Doesn't that go against protocol, and what makes him so damn special?

Here’s what Wolfe had to say:

“John Senior without question, knows more about drug-induced liver toxicity than anyone at FDA.” Senior has organized agency workshops on the topic of hepatotoxicity, and has published numerous papers on the subject. Given that the committee was debating the significance of a liver safety signal, Wolfe said, “I assumed he would be knowledgeable.”

Rivaroxaban's hepatotoxicity signal is good reason by itself to engage thought leaders like Senior, Wolfe said: "FDA has been here before with ximelagatran," the AstraZeneca drug (also known as Exanta) that was rejected by FDA and later discontinued due to liver toxicity.

In the case of rivaroxaban, Wolfe acknowledged, "things are a bit more clouded," because the active comparator, enoxaparin (Sanofi-Aventis' Lovenox) has the potential to raise ALT levels, which may disguise the liver effects with rivaroxaban. In that sense, the rivaroxaban pivotal program reminded Wolfe of Pfizer's cardiovascular safety studies pitting celecoxib (Celebrex) against diclofenac, which he says has a known CV risk.

Wolfe also disputes the contention expressed by The IN VIVO Blog (and some of our readers) that he was stepping out of bounds by addressing Senior during the advisory committee review. FDA often has 15 to 20 different staff members sitting in the audience at advisory committee meetings, Wolfe pointed out, and it is not unusual for them to field questions from the panel.

Fair enough. We'd like to point out, however, that regardless of whether or not the advisory committee staff frown on that sort of exchange, it's not a step many advisory committee members would think to take. Which is precisely why he is not your typical advisory committee member.

And given that this is Sid Wolfe, he had to get one last dig for the pharma industry: Celebrex, he predicted, "will eventually come off the market."

Stay tuned for Part 2 of our chat with Wolfe tomorrow, which will discuss his past history with FDA principal deputy Joshua Sharfstein. Also, look for the tally of our readers' votes on whether Wolfe is right and Celebrex will come off the market.

The IN VIVO Blog Podcast: All M&A Edition

Tune in to this week's podcast by clicking on the logo below. What's in store for you? Last week it was all-FDA. This week, it's all-M&A.

Roger and Chris co-opt Mike and Ramsey's three-things format and courageously brush aside cough and cold symptoms to discuss the merits of Merck/Schering-Plough, comment on some of the scuttlebutt surrounding Nycomed and Allergan, and speculate about what the increase in earn-outs and options-to-acquire means for small biotechs and their VC investors.

Oh and there's a plug for the Canada Dry-flavored Halls throat lozenges in there too. Don't ever say we don't tip you off to the exciting things in life.

Don't forget, you can access the podcast via iTunes also.

Monday, March 23, 2009

Fighting Like a Wolfe Against Johnson & Johnson

There are certain codes of conduct during advisory committee meetings. Come prepared having thoroughly read the briefing documents. Speak in turn. Don’t discuss the merits of the application over lunch.

Sidney Wolfe isn’t one to stand on protocol.

During the March 19 Cardiovascular-Renal Drugs Advisory Committee review of Johnson & Johnson’s anticoagulant rivaroxaban, Wolfe, the acting consumer representative, took the unusual step of calling out to an FDA drug safety reviewer—Office of Surveillance & Epidemiology associate director for science John Senior, who was sitting in the audience—to ask him point-blank the very question the committee was being asked to deliberate: whether rivaroxaban should be approved based on the available data.

It was clear from the start that Wolfe wasn't keen on a rivaroxaban approval, and he set up Senior to issue a negative opinion. Wolfe noted the divergent conclusions drawn by J&J and FDA on rivaroxaban’s liver toxicity profile, and the expectation that the drug could be used extensively off-label. Then he asked Senior: “You’ve been involved in this for some time … Do you think it is a good idea to approve now without waiting to see the results of much more data from much longer duration trials?”

The question was significant for a couple reasons. First, it demonstrated that Wolfe isn’t afraid to step outside the typical bounds of advisory committee meetings to make his point. As we’ve blogged before, Wolfe is not your average committee member, and he’s certainly no shrinking violet. And while there is no hard and fast rule against asking an FDA reviewer his or her opinion about an application, to put Senior on the spot was a bit unusual—especially since he was not part of the FDA team at the conference table.

Calling on Senior served another purpose: it was Wolfe's way of getting another public FDA opinion against the approvability of rivaroxaban. OSE was well-represented at the meeting: director Gerald Dal Pan was at the committee table, and medical officer Kate Gelperin delivered a compelling critique of rivaroxaban’s safety profile. But Senior’s reasoned evaluation of the NDA only fueled Wolfe's arguments.

Senior said that while he was “impressed” with J&J's early look of longer-term safety trials (known as the ATLAS study), “I'd like to see more.”

Senior then evoked AstraZeneca's failed anticoagulant ximelagatran (Exanta). FDA should “learn the lessons from ximelagatran,” Senior said. Exanta's heptotoxicity signal did not surface until longer-term studies were analyzed, he reminded the advisory committee. With Exanta, FDA issued a “not approvable” letter, and AstraZeneca's eventually discontinued development. Without reading much between the lines: FDA should take its time with rivaroxaban.

Senior added that only under one circumstance should rivaroxaban be approved without longer-term data: “If it can be shown that the drug is saving more lives than it is risking, then I would think reduction in mortality would trump the risk of liver injury. But I haven’t been convinced that those data are real. I think we need to see that.”

Those statements seem to sum up how FDA—or at least the drug safety office—is thinking about the NDA. As reported in “The Pink Sheet” this week, the good news for J&J is that those longer-term data are available: the six-month ATLAS study has concluded. But time is likely to run out: it is unlikely that J&J can submit the final report and FDA can review it before the late May user fee deadline.

In the end, Wolfe cast only one of two votes against approval. Sanjay Kaul, perhaps best known as the disinvited prasugrel committee member, also actively argued against rivaroxaban. Neither managed to convince the rest of the advisory committee to see things their way. But the Wolfe-Senior exchange still illustrated Wolfe's tenacity in making his point—and his savvy in understanding FDA politics. Like we said before, Wolfe is not your typical advisory committee member.

There’ll be No Follow-On Biologics in the US at All...

...At least not if anything close to the Eshoo bill—one of two versions of biosimilar legislation currently before the House of Representatives—gets approved, according to Hannes Teissl, head of Sandoz’s Biopharmaceuticals unit.

Speaking to The IN VIVO Blog late last week, Teissl warned that if US biosimilar legislation, which he and many others expect will be enacted in some form or another this year, looks too much like the BIO-supported, innovator-friendly Eshoo bill, “biosimilars will not be a viable business” to pursue.

Not that he expects that to be the case: “I think we’ll see something much closer to the Waxman bill in the end,” he opines. Wishful thinking? The Waxman bill is, after all, by far the most generics-friendly: it doesn’t require biosimilar applicants to run clinical trials, has a broad, rather flexible definition of ‘comparability’, and mandates that comparable generics have the same name.

This last point on naming, along with Waxman’s position on interchangeability, are the two main advantages of the Waxman bill, according to Teissl. Europe took a while to resolve the issue of whether biosimilars could share the same International Non-proprietary Name (INN) but they now can, which goes a considerable way to proving generic makers’ case for scientific equivalence.

But not all the way. The main sticking point for biosimilars in Europe has been, and remains, interchangeability—whether a drug can formally be expected to produce the same clinical result as the reference product in any given patient. This is also closely linked to—but not the same as--substitutability, whether pharmacists may automatically substitute a branded drug with its cheaper generic equivalent, as in some countries they are mandated to do in the case of small molecules. The European regulator EMEA has passed the buck on both these issues, saying that individual member states should decide. Several, including France and Spain, have decided against allowing automatic substitution.

The Waxman bill doesn’t say biosimilars should be substitutable with their reference drug. But it includes in its wording “at least the potential for interchangeability,” opines Teissl. He sees it that FDA would “make a scientific statement that there is no clinically meaningful difference” between a biosimilar and its reference drug. (Eshoo’s bill would theoretically allow that too, but only after higher hurdles have been met.) Beyond that, it’s still up to individual states to decide whether to allow substitution, but Teissl reckons an FDA-stamp of biosimilarity will help.

And so, he adds, will Waxman’s decoupling the patent litigation process from the regulatory process. That will mean generics companies can launch at risk, which is critical to the viability of biosimilar businesses since patent litigation can drag on for years.

Teissl doesn’t underestimate the Eshoo-supporting innovator lobby but he thinks cost-savings will win in the end. “The US government wants these products, just as FDA wants more competition,” he says.

While You Were Watching Hoops

The West is where things got particularly ugly this weekend for anybody who took this advice about Cornell, but with zero surprises among the top 12 tournament seeds it's likely that most of you are still alive in your office pools. Unless you took our other advice about the Big East being overrated.

So what else happened this weekend, while you were developing a strong dislike for Coke Zero based solely on its NCAA ad blitz ...

  • You got your vacation in my surgery! You got your surgery in my vacation! NYT on medical tourism.
  • Clinical trials increasingly are conducted globally as companies hunt for treatment-naive patients and less expensive studies. The WSJ discusses some of the drawbacks and difficulties.
  • Is it splitsville for FDA's food and drugs arms? AP reporting in the Boston Globe and elsewhere that pharma industry advocates are pushing for such reform.
  • Will there be new life for the blockbuster in 2009? The Pink Sheet examines the 2009 user fee calendar at FDA and makes some interesting predictions and observations ($).
  • Merck-Serono is launching a strategic venture capital fund. News of which would have come in handy when a colleague asked us last Friday, "does Merck-Serono have a strategic venture capital fund?" The group will invest up to Eur 40mm over the next five years. Interested? Click here.
ugly bracket image by invivoblog

Saturday, March 21, 2009

DotW: It's A Mad Mad Mad Mad World

These days it seems like we could all use a dose of Stanley Kramer's 1963 classic movie about a madcap chase through the California desert in search of treasure. (What else is there?) Thankfully we have the NCAA tourney--that professional event masquerading as amateur ball--to distract us from the doom, gloom, and outrage swirling in the air.

Who's not feeling the love? Mad Money's Cramer, who is still reeling from the smackdown Jon Stewart gave him last week. Anyone associated with AIG, which has earned a new acronym in the eyes of many Americans: Arrogance, Ignorance, and Greed. Also, Connecticut Senator Christopher Dodd, given the responsibility he bears for the bail-out legislation that led to outsized AIG bonuses in the first place.

Our level-headed legislators are trying to tamp down the furor related to AIG bonuses by taxing the hell out of them. (The move ought to make VCs feel better; by comparsion the new 39% tax rate on carried interest is quite modest.)

There's no shortage of madness in our own industry. The war of words between BVF and Avigen, continues to escalate. (Remember when Carl Icahn was the only activist shareholder to whom we paid attention?) On Friday, BVF sent a letter to Avigen shareholders promising to pay $1.20-a-share for the company, but only if BVF earns seats on the company's board. BVF, of course, owns a significant share in Avigen. Outraged by the way the biotech has been managed, they are hoping to oust leadership to broker a sale to MediciNova.

Of course, the BVF/Avigen saga is small potatoes compared to the umbrage directed at Harvard professor Dr. Joseph Biederman, whose involvement in a conflict-of-interest scandal related to the use of antipsychotics became headline news once again. So much for the purity of the ivory tower.

Will Pfizer investors rise up in anger at the news the big drugmaker is on the prowl for a generics biz? What about Astellas' investors? Unwilling to be drawn into a bidding war for CV Therapeutics after Gilead trumped its offer, Astellas called off its hostile bid for the company this week. But with billions in cash in its war chest and top-seller FloMax due to go off patent in October, the number 2 Japanese pharma needs to do a deal and odds are investor clamoring to that effect will rise in the coming months.

Are you outraged about the incessant debate about Michelle Obama's right to bare arms? Stop the madness. It's time for...

Merck Serono/Fast Forward: Merck Serono this week showed its willingness to accelerate early stage research in MS by providing up to $19 million in a partnership with Fast Forward, a subsidiary of the National Multiple Sclerosis Society. The agreement—which has a two-year term, but may extend for an additional three—is focused on identifying the most promising drug discovery research in this field, whether in biotech or academia, and providing the funds to take those projects through development. The money might all be coming from Merck Serono, but it’s Fast Forward—set up 18 months ago to provide a bridge, both informational and financial, between academia and the private sector—that will take the lead in selecting awardees for the funds (albeit with participation from the drug firm). Priority areas for development, however, will be determined by a joint committee with representatives from both sides. And yes, there are strings attached: Merck Serono, with (of course) a strong interest in building out its MS franchise beyond Rebif, gets first right of refusal to pursue development of projects that it supports. Fast Forward is keen to point out that these rights don’t extend to the many other projects it’s funding independently of this agreement, however. And if Merck Serono isn’t interested in pursuing a program, Fast Forward is free to find another partner. For Merck Serono, this smells a bit like disease-focused corporate VC—albeit with a significant partner making portfolio decisions. And although many other disease-focused charities besides the National MS Society are supporting and financing research in academia and, increasingly, in the private sector too, few have signed up large drug firms. Not that this means other pharma aren’t interested in supporting early-stage research, of course: GlaxoSmithKline has a drug performance unit (DPU) dedicated to academic collaborations.—Melanie Senior

Merck/MMV: Merck Serono wasn’t the only pharma to announce a tie-up with a not-for-profit this week. Merck & Co. Inc. also made headlines, announcing a deal with the Medicines for Malaria Venture (MMV) around a novel, orally available, IND-ready antimalarial. Under the terms of the agreement Merck, whose researchers discovered the candidate, has granted MMV an exclusive royalty-free license to pursue development of the malaria drug in countries where the disease is endemic. In return, Merck retains the option to become MMV’s development partner upon completion of the first Phase II study of the candidate. But if it exercises that option, Merck has also promised that it will price the drug such that it is “not ultimately profiting from its use in developing countries,” according to the press release announcing the news. Merck scientists have already shown in preclinical studies that the IND-ready drug is effective against P. falciparum, the organism that causes acute malaria, including multi-drug resistant strains. MMV will take-over further testing, launching first in human safety trials later this year. The deal is a good one for Merck on a number of levels. It bolsters the pharma’s public image, showing its intent to play a role in developing treatments for diseases that have long been neglected, a move echoed by GlaxoSmithKline and Novartis. It also offloads some development costs near-term, while retaining a clawback to the product should it ultimately work as advertised. More importantly, from the biz dev perspective, it may give Merck access to a priority review voucher in the future. The PRV program, first proposed by a group of Duke economics professors as a potential approach to incentivize R&D for global public health priorities, was included in the FDA Amendments Act with only minor refinement in 2007. Merck, like Pfizer and Sanofi-Aventis, has signaled its interest in the program, by offering comments on FDA’s draft guidance for the incentive program.—Ellen Foster Licking

Centocor/U. Michigan: Even as debate rages in the public sector about the academia’s ties to industry, Big Pharmas’ efforts to get closer to thought leaders at universities is likely to muddy the discussion. In addition to GlaxoSmithKline and AstraZeneca, Johnson & Johnson has been at the forefront of embracing a new model of innovation that improves information flow between the tree-lined walks of academic institutions and the halls of pharma. In January, J&J’s Belgium affiliate Janssen Pharmaceutica NV teamed up with Vanderbilt University's Program in Drug Discovery to discover and license metabotropic glutamate receptors for the potential development of a new class of schizophrenia drugs. That collaboration, which promises to move J&J’s schizophrenia therapy in a new direction, fits in with the pharmaceutical company's new mantra of "open innovation," a term Paul Stoffels, MD, J&J's chairman of global R&D, Pharmaceuticals, first used in media interviews at the beginning of the year. On March 19, J&J announced another deal, this time between Centocor and the University of Michigan, designed to further its ability to access innovation on the cheap. In an interesting twist, the Centocor/U. Michigan tie-up doesn’t relate to the product pipeline as much as the war for talent. The new program pairs minority post-doctoral fellows recruited by the University of Michigan with Centocor researchers to work jointly on interesting research. Under the program, research proposals will be developed by U Mich and Centocor scientists and then submitted for review by a combined steering committee that will select certain grants and follow their progress. One important mission of the program will be fostering strong relationships with African Americans, Hispanic, and Native American scientists who are working in the strategic areas of focus for Centocor. “This strategic link will help us build strong relationships with these talented individuals thus creating a robust pipeline of potential hires,” said Miguel Barbosa, PhD, VP of Discovery Research at Centocor. It’s the latest attempt to do well financially by doing good, but it’s unquestionably a smart PR move on Centocor’s part. It requires very little financial input, breathes new life into the organization, and may yield interesting products down the road.—Ellen Foster Licking

Inverness/Acon Labs: Point-of-care diagnostics specialist Inverness has scooped up the remaining portion of ACON Labs’ lateral flow immunoassay test kit business for the consumer, point-of-care, and laboratory markets, including tests in infectious disease, cardiology, drugs of abuse, and women’s health. The price of the deal? A mere $200 million. ACON will retain its other worldwide in vitro diagnostics businesses including diabetes testing, clinical chemistry and other immunoassay products. Inverness expects to complete the transaction in a series of cash payments through October 2011, but holds the option to use stock for up to 34% of the purchase price. Three years ago, following a patent dispute in which Inverness alleged ACON infringed several of its immunoassay patents including IP around consumer pregnancy and ovulation tests, it acquired ACON’s rapid diagnostics businesses covering the US, Canada, most of Europe, and parts of the Pacific Rim for $175 million. At the time, Inverness agreed to buy the remainder of ACON’s ROW territories including China, India, Russia, Latin and South America, the Middle East, Africa, and Eastern Europe. That “second territory” business – the subject of this deal -- accounted for $45 million in revenues last year. The deal returns Inverness to its “bread and butter: broadening geographic reach and leveraging sales and manufacturing infrastructure,” according to Leerink Swann analyst Bruce Cranna. Inverness has been on a more expansionist buying spree in the past several years, acquiring Biosite and Cholestech in 2007 (see our coverage in IN VIVO here),then shelling out over a billion dollars to buy Matria Healthcare and establish a health management division alongside its diagnostics business.--Mark Ratner

GTC-Biotherapeutics/LEO Pharma: Our, uh, “goat” this week is a deal that has for months apparently been in slow transition, but last Friday took a nasty turn (OK, yes, so it’s a No Deal of Last Week). LEO Pharma has since 2005 held rights to develop and market GTC-Biotherapeutics’ recombinant human antithrombin Atryn in Europe, Canada and the Middle East, but it just doesn’t want those rights anymore. So last year the two companies said that LEO wanted to transition Atryn to a different marketing partner, and GTC has been seeking to do so (Atryn, which is made in the milk of transgenic goats, was approved in Europe in 2006, and was also recently approved in the US as well, where it will be sold by Ovation). Now comes word that “GTC considers LEO to be in breach of its obligations under the contract and is terminating the contract pursuant to its terms and seeking damages under International Chamber of Commerce arbitration procedures.” Terminating the LEO deal should allow GTC to speed discussions with new potential partners, broaden the drug’s label in existing markets and get it approved in other markets, like Canada. One potential partner: LFB Biotechnologies, the French plasma-drugs specialist that loaned GTC $15 million last December and with whom GTC has an existing deal in recombinant proteins and mAbs development. Meanwhile GTC, despite its recent regulatory success in the US—which the company believes is a significant validation of its transgenic technology—has other troubles. This week the biotech received a warning letter from Nasdaq related to the minimum market-value threshold.—Chris Morrison

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

Friday, March 20, 2009

The Cost of Money

Just how tight is money in biotech?

Well, you could look at the number of companies trading below cash (81, per Rodman & Renshaw). Or the number of months without a significant US biotech IPO: 14, per Strategic Transactions).

Then there are the anecdotal measures. One recent anecdote of interest: Dyax’s $15 million debt royalty financing from Cowen. Dyax has been around forever (well, OK – since 1989) and hasn’t managed to get a drug to market yet (it isn’t alone in that, of course). It’s got one drug at the FDA now (DX-88, or ecallantide, for hereditary angioedema – an orphan drug candidate which hasn’t had the smoothest of development programs) and a couple of still preclinical candidates. But that’s largely because most of Dyax’s life was spent on developing its phage display technology and finding companies who wanted to exploit it.

The relatively predictable stream of revenues from the platform business, Dyax realized, could in fact help finance the pipeline and they turned to Paul Royalty, which in return for what now Dyax figures was a 25% IRR for Paul, borrowed $30 million against, and repaid through royalties on, the platform business’ proceeds (called the Licensing and Funded Research Program, or LFRP).

Fast forward two years. Paul Royalty’s Greg Brown has joined the newly set up Cowen Healthcare Royalty Partners and he does a new deal with Dyax – one that allows the company to pay off the final $35 million it still owed Paul with a new LFRP-secured $50 million loan, again repaid through royalties. The deal looks like a comparative bargain: a 16% interest rate (given the kind of money outfits like Paul could make, competition for providing royalty financing was getting competitive and rates were going down – see for example this piece from IN VIVO).

But now Dyax has gone back to the well, in a financing environment which has become considerably bleaker. Moreover, the future of Dyax’s big bet -- ecallantide – is looking a bit dicey. An FDA advisory panel voted that the drug’s risk-benefit profile supported approval in adults, but the vote was a narrow one (6-5, with two abstentions). They nixed approval for kids. Safety, they said, wasn’t adequately assessed – very tough in an orphan disease (See our Pink Sheet analysis).

Cowen’s loaned an additional $15 million to Dyax – but the interest rate is 34% higher (21.5% annually) and assures the financier of doubling its money, since Dyax can’t prepay the loan for 3½ years. Cowen also gets more security (it gets repaid with bigger chunks of the LFRP revenues) – and some upside through warrants.

OK, you gotta do what you gotta do. But let’s face it. Just as there’s no free lunch, there’s really no dilution-free financing, either. Especially now.

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