Lighting A Fire Over FDA

FDA has sometimes been portrayed as an agency full of cautious bureaucrats who would rather dicker with sponsors about esoteric statistical issues than approve products that patients need. But events we witnessed Friday underscore that the agency is full of hard working professionals well aware of the life or death implications of their jobs. Around seven p.m., a thunderstorm rolled through the Washington area, pretty typical for a summer evening. But after the deluge, there was another ripple of noise: sirens were blaring as emergency personnel raced towards FDA's Parklawn building, the massive structure in Rockville, Md., that had served as the agency's flagship office before the birth of the White Oak campus.

Fire trucks from Wheaton, Sliver Spring, and the National Institutes of Health – who knew? – converged on Parklawn, and a stretcher was wheeled towards the entrance.

Outside, evacuees clustered in three groups – security guards, cleaning staff, and a looser amalgam of desk workers. Everybody's consensus was that lighting had struck the building. The lights had flickered out and the emergency ones had come on, along with the fire alarms and an automated voice telling everyone to leave. But even the folks who wanted to go home after that were stuck; the fire trucks had blocked the entrance to the parking lot.

It seems that nothing too serious had happened. The evacuation order was a preliminary communication about an emerging safety issue, if you will. Eventually the fire trucks drove off and the employees drifted back in. And as night fell, there were still lights burning in Parklawn.

–M. Nielsen Hobbs

VC Financing: Enter Comparative Trials and REMS Post-market Plans

In Washington, the policymakers and legislators are arguing over how to build comparative effectiveness research into the health reform bill.

Eleven miles away in the Maryland suburbs at the Food & Drug Administration’s new White Oak campus, the regulators are figuring out on a case-by-case basis how to apply their new authority to order post-approval education, distribution and testing programs for new drug approvals. under the Risk Evaluation & Mitigation Strategies authority.

But in the private capital markets removed from the political capital, these two issues are already moving from the conceptual, formative stages into real world requirements. Drug and biological entrepreneurs are learning that they better have answers to questions about both requirements when they go into venture capital firms for development funds.

VCs now expect companies seeking funding to bring in plans for comparative research during drug development and to recognize early what level of post-marketing controls FDA will require.

That’s what MPM Capital’s Gary Patou (in the picture above) told a session on successful drug development plans at the recent annual meeting of the Drug Information Association in San Diego. Clear plans for comparative effectiveness testing and post-marketing controls are becoming de rigeur parts of solicitations for funding from VCs, he says. (For a longer examination of the new de facto requirements for drug development plans from venture capital firms, see this story from The RPM Report.)

That means that the funding spigot from private capital will help enforce and establish the new government additions to drug development. Policy is made in DC, but practice is enforced by VCs.

While You Were Oh So Close

Chalk it up as a learning experience for US Soccer, but damn that was a tough loss on Sunday in the Confederations Cup final. At least the trip to the finals should bode well for next year's world cup. OK we're off to our Euro-Biotech Forum meeting early in the morning on Monday (a 6am bus to the airport! so glamorous.) so we're letting this WYW fly early (we'll try to update early Monday morning ET).

Hope to see some of you in Barcelona. While you were brushing up on your Catalan ...

• The New York Times' Forty Years War series about cancer research asks whether the NCI's grant system--which tends to award cash for projects likely to lead toward only incremental advances, according to the article--is an impediment to more fundamental advances that are typically based on riskier research.
  
• This week's rumored buyer of Elan is Novartis. The Sunday Times (via Reuters) is reporting a well placed sources confirmed the talks. Meh.
  
• Novo Nordisk tries to capitalize on Sanofi's Lantus woes, points out its Levemir insulin hasn't seen the same cancer signal that has knocked Lantus.
  
• Is fibromuscular dysplasia an underdiagnosed condition or an extremely rare disease? The WSJ reviews the evidence.
  
• The NYT's Well blog asks (and kind of answers) the question, Can you get fit in six minutes a week? Check out the post; we'd tell you ourselves but the premise got us to thinking about the 'six minute abs' scene in "There's Something About Mary" and we surfed over to youtube to find it. Yes, it's still hilarious.
• Lidge saves. No kidding!
  

DotW: Dollars To Donuts

It was a busy week but not necessarily in terms of deal-making activity. Instead, all eyes were on Washington DC, where the discussion on healthcare reform continued to dominate--from the spacious halls of Congress to the tight confines of taxi cabs. As you muse over how many dollars it will take to close the donut hole (are these the Dunkin' variety or Krispy Kremes?) and ponder emerging news about the exclusivity period for biologics, we bring you...

GlaxoSmithKline/Chroma: We confess we've had entirely too much fun writing about this deal this week. We could use this post to delve into the industry's mysterious desire to inflate a deal's price by including stratospheric but highly improbable bio-bucks figures. But where is the fun in that? So let's focus on the actual deal. Here's what we know: GSK and Chroma teamed up June 23 in an option-based drug discovery and development deal. In conjunction with the deal, Chroma announced its $24.5 million Series D financing, which GSK also took part in, although it hasn't become a major shareholder overall. According to Chroma's CEO Ian Nicholson, GSK's stake is "well below 10 percent." Further terms weren't disclosed beyond the $1 billion 'biodollars' figure Chroma cited in a press release, but the helpful folks at EP Vantage provided some additional color on the tie-up: "we found out that GSK paid £5m upfront and contributed £5m of the £15m Series D, giving GSK a 5% equity stake in Chroma. So a total upfront consideration of £10m," EPV commented on our earlier post.

Every little bit counts, as they say. In exchange for the cash and equity, Chroma will use its macrophage-targeting technology to identify four small molecules, mainly for inflammatory and auto-immune disease indications, although the deal covers other indications as well, according to Nicholson. The biotech will take these compounds through proof of concept, at which point Glaxo can exercise its option to take an exclusive worldwide license. As an option-based deal, the tie-up illustrates yet again that this kind of risk-sharing approach to partnerships is GSK's modus operandi. (When it comes to actually exercising the option--well, that's another story.) Earlier this month the Big Pharma signed a similar deal with Concert Pharmaceuticals around three preclinical candidates in which it paid $18.3 million up front in cash and took a $16.7 million equity stake.

From Chroma's standpoint the equity stake was likely just as important as the option portion of the deal. At a time when every small company is a seller, and Big Pharma is barraged with pitches screaming "Buy me!" (or at least "Buy a piece of me!"), engaging the larger company is the real sticking point for smaller biotechs. With skin in the game, GSK is far likelier to pay closer attention to the ongoing work at Chroma, which likely stands to benefit the company as its programs move through development. Indeed, the need to engage Big Pharma is one reason traditional VCs are going out of their way to include corporate venture investors in their syndicates (the fact that CVCs still have money to commit is just a minor detail).

Biovail/Cambridge: Okay, we admit it: we’re obsessed with Xenazine, a drug for Hungington’s chorea that was approved by FDA last year. But we have our reasons. We see Xenazine as exactly the type of narrow-market product that the new regulatory and reimbursement climate favors. And, as the flurry of deal-making triggered by its approval indicates, it demonstrates that these types of products can be very lucrative, albeit not at the level of the primary care blockbusters Big Pharma is built on. (You can read much more “The Billion Dollar REMS,” from The RPM Report.)

Biovail certainly agrees with us: the company paid $200 million to buy-out Xenazine developer Prestwick Pharmaceuticals. That deal was complex, since Ovation (now Lundbeck Inc.) simultaneously acquired US marketing rights for the drug for $50 million, so Biovail really acquired Canadian marketing rights and a US royalty stream. Now Biovail is upping its piece of the Xenazine pie by acquiring global commercial rights from Cambridge Labs. Biovail paid $200 million when the deal closed June 22—an indication of the value the company sees in the product. The company will pay an additional $30 million over the next two years.

In one sense, Biovail is simply buying out a large royalty obligation: Cambridge collected 50% of US revenues. With almost 2,000 patients already on therapy at an average annual cost of $30,000 to $50,000 each, that is already a significant amount. Biovail won't save all that money; the company will continue to pay a royalty to an undisclosed third-party who manufacturers the product for global markets.

Still, Biovail says the transaction will be immediately accretive to revenues and margins, and will add $23 million to $26 million to Biovail’s cash flow in 2010. (Those figures include the contribution from international sales from European marketers of the drug as well as the impact from canceling out the royalty obligation.) It is also a pipeline play, giving Biovail full rights to a controlled-release formulation of the drug and a single isomer version of the active ingredient. Those line extensions may be key to expanding the market beyond Huntington’s; the extended release form is in development for Tourette Syndrome.

But the deal has one more wrinkle, in keeping with the unique profile of Xenazine: It takes out a layer between Biovail and international marketers of the drug, and this is a case where cutting out a middleman can pay off for reasons that aren't strictly economic. Xenazine is basically a generic drug around the world, raising a high potential for diversion into the US to capitalize on the premium price. Biovail told its investors during its second quarter call in May that Cambridge was keeping appropriate track of the supply in Europe, and the company says preventing diversion is not a factor in this deal. But we’re still betting that this transaction buys Biovail some peace of mind.—Michael McCaughan

MediciNova/Avigen: It ain't over till it's over, but for Avigen--and major shareholder Biotechnology Value Fund--the future grows clearer every day. Late on Thursday came news that MediciNova and Avigen had reached an "understanding of certain key terms", paving the way for MediciNova's acquisition of the troubled biotech. Should it come to fruition, the deal would combine the two companies' development programs based on the novel glial activation inhibitor ibudlast. (Avigen's AV-411 is stalled in Phase I studies for neuropathic pain; while MediciNova's MN-166 has advanced to Phase II for multiple sclerosis.) Interestingly, the buy-out by MediciNova recalls the plan Biotechnology Value Fund proposed several months ago.

Avigen has been reeling ever since last fall when its multiple sclerosis spasticity drug, AV-650, failed to meet its primary endpoint in a Phase IIb study. Shortly afterwards, Avigen reduced headcount and suspended its other clinical programs but BVF, loudly and publicly, called upon the biotech to suspend operations and return its remaining cash to its shareholders. Meanwhile, BVF offered to buy the company's outstanding shares with a tender offer of $1.20 per share, with the intention of merging Avigen with MediciNova. But to effect this latter proposal, BVF needed to win control of the board, a change that could only happen with the support of two-thirds of Avigen's shareholders. In late March, BVF came close--its proposal swayed 58% of Avigen's investors--but that wasn't good enough. At the time Avigen's acting CEO, Andrew Sauter, promised the biotech would sell off the remaining assets and roll-up the company. In an interview with "The Pink Sheet" DAILY, Sauter made it clear that Avigen would consider a bid by MediciNova as long as it offered fair return to Avigen shareholders.

And it looks like both sides have come to an agreement on the definition of "fair". Under the terms of the merger, Avigen shareholders will receive a consideration approximating Avigen's net cash liquidation value plus $3 million. Avigen shareholders would be able to elect to receive this consideration in cash or as MediciNova stock. At the end of 18 months, any unexercised convertible securities would be paid out at their cash value. "We believe that the proposed merger presents clear advantages for the shareholders of both companies," said Yuichi Iwaki, MediciNova's President and Chief Executive Officer, in a press release.

Astellas/NeurogesX: This week's deal with Astellas to market and distribute the neuropathic pain patch Qutenza in Europe bolsters NeurogesX’s cash position, giving the company some breathing room to prepare for regulatory approval and a 2010 launch in the U.S. market. Qutenza was approved for neuropathic pain in non-diabetic patients by the European Medicines Agency in May and it is pending review at the FDA, with an Aug. 16 user fee date. A European launch is expected by the first half of 2010. NeurogesX is set to get €30 million ($42 million) upfront for Qutenza commercialization rights from Astellas' European subsidiary. In addition to 27 countries in the European Union, the deal covers Iceland, Switzerland, and some countries in the Middle East and Africa. This isn't exactly the deal Astellas watchers have been expecting ever since it tried--and failed--to bring CV Therapeutics in-house. But in a small way, rights to Qutenza help the Japanese pharma achieve another ambition: bolstering its European presence with an additional product it can market alongside its specialist-focused medicines in dermatology, urology, transplantation, and infectious disease. The dermal patch Qutenza packs a high concentration form of synthetic capsaicin (also called trans-capsaicin) that stimulates transient vanilloid 1 receptors in the skin to subdue overactive pain receptors. As part of this week's agreement, Astellas will also pay €5 million upfront ($7 million) for a co-development and commercialization option on NGX-1998, a Phase I liquid formulation of the NeurogesX product.

The deal is definitely a balm to NeurogesX's uncertain cash position: the company had about $19 million in cash and marketable securities at the close of the first quarter, enough to carry it through 2009, but insufficient to give the company much comfort in making plans for breaking into the U.S. market. During a June 22 investors’ call, Chief Financial Officer Stephen Giglieri declined to provide runway guidance, but added: “Obviously, putting $49 million into the bank is going to extend our runway fairly significantly.” (It's all about the runway, people.) NeurogesX is also eligible for roughly $100 million in sales-based milestone payments and additional option payments for the liquid formulation. (Not billion dollar bio-bucks territory, but nothing to sneeze at either.)--Emily Hayes

LabCorp/Monogram Biosciences: Molecular diagnostics specialist Monogram Biosciences will become part of LabCorp under a tender offer announced this week. The deal, for $4.55 per share of Monogram’s stock is worth $155 million including the net indebtedness LabCorp picks up. (According to the press release announcing the news that gives Monogram an implied equity value of $106.7 million.) For the cash, LabCorp gets two of the more innovative marketed commercial tests in the molecular diagnostics space: Trofile, developed in collaboration with Pfizer, identifies patients who are eligible for the CCR5 class of HIV drugs and is a companion diagnostic for Pfizer’s first-in-class drug Selzentry; HERmark, the first commercially available functional Her2 assay, is one of a new wave of Her2 tests for breast cancer patients. Monogram is also applying the technology that led to HERmark, called VeraTag, to other cancer markers in the EGFR pathway. But it’s been struggling to come up with the resources to do that--or, as we wrote earlier this year in our coverage of the new generation of Her2 tests--to validate its Her2 assay in a prospective trial. Moreover, Monogram has been building disease management capabilities in two distinct therapy areas – HIV and oncology – also a difficult challenge for a small company with limited capital. The cash reserves at LabCorp, which has been eying the esoteric testing market for some time, should solve those problems.--Mark Ratner

(image by flickr user Pink Sherbet Photography used with permission via a creative commons license.)<

Piven on Biologics Exclusivity: Ten Years!

By now you've heard that the White House thinks seven years exclusivity for biologics is the right way to go. The branded firms were shooting for 12 or 14. Here's the Pink Sheet Daily coverage and the White House letter from Nancy Ann De Parle and Peter Orszag.

Breaking news: PhRMA and BIO have hired a new agent, who responds, uh, point blank:



Hmmm. The ball's in your court, Waxman. Happy Friday.

Taxicab Confessions: Harvey's Health Reform Plan

President Obama, Peter Orszag, Doug Elmendorf, Senators Kennedy, Baucus, Dodd, and Grassley, HHS Secretary Sebelius, and Rep. Waxman, I hope you're listening.

You all should know, that at the very least, the health care reform debate is having a strong impact on the average citizen. They are following the debate closely and developing opinions on possible solutions. How much so? We at the In Vivo Blog and The RPM Report recently experienced it firsthand.

After a lovely rooftop event for health care watchers sponsored by Hill & Knowlton, we hopped in a cab at a respectable hour on our merry way home. Our cabbie, Harvey, somehow deciphered that we write a lot about health care. I believe what tipped Harvey off was us calculating exactly how PhRMA's $80 bil. deal would be scored by CBO, our love of the epic Senate HELP markup, and the lively debate over exactly what the final health reform bill will look like.

Harvey wanted to know more and more about our thoughts on where everything is headed. We explained as best we could in lay terms about the various pieces of legislation and where the different sides stood on the debate.

Here's the thing: Harvey knew a heck of a lot about health care policy. For example, we pointed out that a major issue in health care is payment reform and incentivizing doctors and hospitals to get paid for quality outcomes rather than volume of services.

"Exactly!" Harvey shouted. "The problem with the health care system today is that it has moved away from being about the patient. Health care reform must re-focus on the patient and the quality of care. It's not about volume of services."

As we reached our final destination after a long day of Congressional activities, Harvey said: "Do you mind if I pull over? I want to finish this conversation about health reform."

Um...sure...we'd love to talk more about it.

He then asked us whether there were any innovative projects out there that were focused on quality. We named a few: Geisinger, Billings, Intermountain Healthcare and the Medicare Physician Group Practice project.

"Wait, wait," Harvey interupted. "Let me get a pen." He got his pen and pad out. "How do you spell Geisinger?"

"G-E-I-S-I-N-G-E-R."

"And where is Geisinger?" Harvey asked us.

"Pennsylvania."

"And what do they do that's different from other hospital systems?"

We then explained Geisinger's system where they essentially hold to a tried-and-true quality system that has an important compliance component and if they make a mistake, they take on th extra costs.

"You know," Harvey began after our conversation about Geisinger and specifics about Intermountain and Medicare, "I think I have come up with the solution to reforming the health care system in this country."

Hmmm. I think Harvey could tell we were skeptical.

Harvey's proposal (slightly paraphrased):

"You create a number of "free" hospitals in each state. The number and location of hospitals would be dependent on the size and population distribution of a given state. The doctors who work at each hospital are paid a flat salary. Care at these hospitals would be completely free. The only pre-requisite is that patients would be completely restricted from suing. There would be no liability."

Twenty minutes after we had pulled over, he concluded: "That's the only answer I can see to the problem."

Sure, there aren't a lot of details to Harvey's plan but there's a larger lesson: Everybody appears to be engaged in the health care reform debate, so much so, that even our trusty cabdriver Harvey is coming up with innovative approaches to care.

While we don't expect to see the Harvey Provision in the Kennedy, Baucus, or Waxman bill, it's telling that the debate is trickling down to those who don't have a direct interest in health care policy and demonstrates that there is public momentum behind reform at the moment. Of course, things change quickly.

So President Obama and Chief of Staff Emanuel, Harvey is ready to brief you on his health reform plan if things stall in Congress. But you may want to leave the afternoon free for it.

Quick Takes from Obama Press Conference

Here's our quick takes from the Obama press conference earlier today on health reform:

1) Health care reform represented the anchor leg of Obama's prepared comments at his press briefing, following his comments first on the situation with the protests of the Iranian election and then the importance of an environment bill. We believe that's meaningful and that the White House is very serious about passing sweeping health care reform legislation, much more so than an environment bill.

2) Obama made it as clear as he ever has before: the bill must be deficit neutral or better over a decade. He will not sign a bill that isn't. What does that mean? The final bill will have to be scored at $1 trillion over 10 years. In other words, if a bill is scored as costing $1 trillion over 10 years and covers 75%-80% of the uninsured, we believe that's a bill that gets signed with a Rose Garden ceremony. The administration, or the next one, can work incrementally to cover the remaining 20%-25% of the uninsured.

3) If the only thing that stands between a health care reform bill and no health care reform bill is a public plan option, the President will sign a bill without a public plan. That was our read of his comments: "Ultimately, I may have a strong opinion but it's too early," to make a decision on the plan, Obama said.

4) Obama demonstrated a real and deep understanding of complex health care issues during the Q&A and we believe that is a positive for health care providers. Why? Because when it's time to make extremely tough decisions on reform, Obama will know exactly how deep the cuts that doctors, hospitals, insurers, and drug/medical product makers are sacrificing for reform and how policy decisions will be impacting the overall system.

5) Obama also showed real teeth when it came to the public plan debate. When asked a tough question about the potential for employers to drop their coverage and send people to a cheaper public plan and the inability of private insurers to compete with a government option, he put all of the onus on the private insurers. He essentially said that any private plan worth its salt should be able to compete ably with a public plan assuming 1) the rules are the same and 2) the public plan is not continually subsidized by taxpayer dollars--it has to be premiums paid by enrollees.

If you're interested in health care reform, you can follow our twitter feeds at http://twitter.com/Ramsey_Baghdadi and http://twitter.com/RPMReportMike.

When Is A Billion Dollars Not a Billion Dollars?

When you read about it in a press release. And today's award for most egregious use of a biodollar deal total goes to Chroma Therapeutics.

Don't get us wrong. Chroma no doubt signed an interesting, solid option-alliance with the King of All Option Alliances, GSK. The deal is in an exciting area of inflammatory disease research, using Chroma's esterase-sensitive motif (ESM) technology to create compounds targeting macrophages. Macrophages are central to inflammatory cascades that give rise to a variety of conditions. The undisclosed upfront and some early milestones will likely--if they're akin to payments in other GSK option-alliances--allow Chroma to fund the disco-development programs through POC.

Fantastic!

But there is zero clarity in Chroma's press release on the financial details. There's only one figure: $1 billion dollars. That's what Chroma gets "in milestone and option payments in the event that all four programs are successful." Cue "$1 billion dollar deal!" headlines. [UPDATE: here's one from Reuters!]

Is it impossible for Chroma to get $1 billion of GSK's cash-money? No. Is it highly friggin' improbable they get anywhere close? Yes.

Of course the improbable happens on occasion. For instance (if you'll allow us to go off on a tangent): on Sunday night the US men's national soccer team was up against Egypt in FIFA's Confederations Cup, in the last match of the group stage. For USA to advance to the semi-final, they needed to win BIG against a highly favored Egypt. In fact their margin of victory combined with Brasil's margin of victory over Italy (thanks to the tournament's goal differential rule to break ties in the standings) had to be six goals. And they weren't exactly playing very well going into the game.

What happened? Brazil beat Italy 3-0. Improbable, but not overwhelmingly so. And USA beat Egypt 3-0. Very improbable. USA advances to play Spain tomorrow. Taken all together? Extremely improbable!

The stars do align, sometimes. We were cheering for USA from our couch on Sunday night and we wish Chroma the best too. But lets see what has to happen for Chroma to reach that ten-digit number.

Chroma's macrophage-targeting compounds don't exist yet. The company "will undertake four discovery and development programs" to identify the small molecules. OK, so that has to work out. They need to identify lead compounds, optimize, start preclinical development programs, the whole nine yards.

Those four compounds need to make it to the clinic. Then those four compounds need to be successful up through Phase II proof of concept studies (after they've been deemed safe in Phase I). Then GSK will have to like each one of them enough to pull the trigger on its option.

Now keep in mind that success in the clinic doesn't necessarily translate into an option getting exercised (nor is that necessarily bad for Chroma). See, for example, GSK's deal with Exelixis, where GSK decided not to option Exelixis' Phase III XL184. Bad news for Exelixis? Hardly--BMS came in and paid top-dollar for the program only weeks later.

OK so say the programs are all successful through POC, and GSK options all of 'em. Well then each compound needs to be successful in large Phase III clinical studies, and eventually all four need to get approval. Probably (the release doesn't say) in multiple markets like the EU, the US, Japan, maybe even some developing countries like the BRIC markets? And then we're probably talking sales milestones as well. Do all four drugs need to become blockbusters? Do they need to avoid generic competition for a set amount of time? This is no six-goal differential. It's a sixty goal differential.

We don't think Chroma management is deluding itself. Maybe the up-front is better than some other GSK option-alliances and they'd rather not piss off current partners by having Chroma shout their windfall from the rooftops. But inflationary biodollar figures like $1 billion for a discovery alliance are just, well, silly.

image from flickr user peat bakke used under a CC license

Wacky World of Generics: REMS Edition

Here's a "Catch-22": If the Food & Drug Administration prohibits sale of a drug outside of a tightly controlled restricted distribution program, how on earth is a generic company supposed to obtain supplies of the product to use as a comparator in bioequivalence trials?

If you are Dr. Reddy's, hoping to be first to challenge the patents on the anti-cancer agent Revlimid, you ask nicely. And if you are Celgene, apparently, you answer "no way." That, at least, is how Dr. Reddy's describes the situation in a citizen petition filed with the Food & Drug Administration earlier this month. (We have the full story in "The Pink Sheet" DAILY.)

This petition has all the markings of a test case. The goal is not so much to accelerate a generic challenge to Revlimid (the earliest a generic launch could possibly come is three years from now) but rather to define a process to assure that the new Risk Evaluation & Mitigation Strategies authority given to FDA in 2007 doesn't become a perpetual exclusivity award for sponsors.

The law (known as FDAAA) states unequivocally that restricted distribution programs are not to be used to block or delay generic competition. It's just that, well, it's one thing to say that, another thing to make it so.

Certainly, George Horner--the former CEO of Prestwick Pharmaceuticals--doesn't see any realistic way for generics to compete against products covered by REMS. He told us that in a story on the fascinating development program--and flurry of business development activity--for the Huntington's chorea therapy Xenazine. (You can read all about it in The RPM Report.)

In the petition, Dr. Reddy's is proposing a process that would essentially allow generic manufactures to obtain an authorization from FDA for studies, and then compel manufacturers to provide samples (at market prices) for use in bioequivalence trials. That certainly seems reasonable enough--and we bet (after much regulatory machination) FDA ends up setting a policy along those lines to eliminate the Catch-22 facing Dr. Reddy's.

But that still doesn't address the bigger issue: While it is presumably simple enough to create a bioequivalent version of the active ingredient in Revlimid, is it really possible to create a generic equivalent to the restricted distribution program for the drug? Celgene would argue no. In fact, the company has argued no in the context of the predecessor product--the notorious thalidomide. (Read more about that case here.)

Put another way: does FDA really want to make it simple for dozens of sponsors to launch versions of drugs like thalidomide, when the agency has already determined that the risks of inappropriate use are high enough to merit costly, burdensome post-marketing restrictions? Our hunch: products covered by restricted distribution programs will end up looking more like biotech therapies facing follow-on competition than they will like conventional generic drugs.

And, for now, there isn't even a clear-cut way for generics to begin the process of proving bioequivalence.

Rangel-ing Over Drug Promotional Expenses: A Tussle That Might Not Scare Pharma Too Much

The advertising, broadcast and medical publishing sectors were thrown into a tizzy on June 16 when reports from Capitol Hill said that removing the tax deductibility of drug promotional expenses remains a live issue in the funding discussions around health care reform.

They should have been ready. There have been reverberations for over a year that pharma’s critics on Capitol Hill might try to raise some money for health care reform from the drug industry’s marketing budgets. White House Chief of Staff Rahm Emanuel has previously talked about giving manufacturers a choice between deducting R&D expenses or promotional expenses.

So it shouldn’t have come as such a shock when House Ways & Means Chairman Charles Rangel (D-NY) said on June 16 that his committee was looking seriously at removing the deductibility for drug promotional spending. But the thought of losing such a lucrative and solid stream of funding has a way of focusing the attention of the sectors that count on pharma promotional budgets: think of the nightly news programs on TV. Their ad sales staff must be in a panic.

The $37 billion price tag that Rangel casually attached to the possible change quantified the challenge and gave it a magnitude that made it more threatening.

The $37 billion figure is presumably calculated as a ten-year revenue estimate, the format that dominates government projections. It does not, however, appear to relate directly to any discreet part of promotional spending like DTC, which is generally estimated at about $4 billion per year.

Eliminating ten years of DTC expenditures would add up to a figure in the ballpark range to Rangel’s number, but that does not mean the government would collect that amount of money. The government revenues would come from the reduced taxes on the expenditures, not from the reduced expenditures. The total expenditures do not translate directly into new tax revenues.

To achieve $37 billion in new tax revenues at the current corporate tax rate would require removing the drug industry business deductions on somewhere around $106 billion in expenditures over the next ten years.

We’ll have to wait a while to find out where the calculation comes from. Removing the tax deductibility of promotional spending was not included in the June 19 draft of the House Democratic health reform proposal.

There is one quick hint in the bill about what promotional expenses being considered for losing deductibility. The June 19 draft contains a penalty provision for companies that do not live up to new sunshine disclosure provisions for gifts to doctors. If companies get caught failing to report gifts or misreporting gifts, then they would lose the ability to deduct “any expenditure relating to the advertising, promoting, or marketing (in any medium)” of a drug or device during the year of the violation.

That can’t be a penalty if elsewhere the bill would take away the deductibility of all promotional spending. Therefore, the Democrats do not appear to have in mind a full-out assault on the deductibility of promotional spending. Which means if you are a business that relies on promotional spending from pharma, now is the time to get to the Hill to draw the line between the dollars that support your efforts versus the dollars that support other forms of promotion. The definition could have a big impact.

Did Critics Force Pharma To Cut Back Spending Too Early?

Maybe Rangel and company hoped to get some of the saving from the lavish pharma entertaining budgets. But in what may now appear in hindsight as a strategic miscalculation, the industry critics have already forced pharma to stop some of that entertaining voluntarily – getting rid of what could have been a nice source of health care funds.

Pharma’s voluntary cutbacks over the past five years in the most unseemly marketing practices, in fact, gives a hint why Rangel’s comments may not scare the industry so deeply.

Forcing pharma companies to think more carefully about their marketing expenditures (as tax disadvantaged expenditures will be more painful) may provide the cover that some industry execs want to trim back marketing and sales budgets. This is similar to arguments by pharma execs for decades that they did not like having to fund expensive sampling/giveaway programs but were afraid to stop until their competitors stopped.

An across-the-board rule like taxing ad expenditures would force all the industry companies to reassess promotional budgets and force an assessment of new ways to build customer loyalty and interest in their products.

In Vivo Blog and its affiliate The RPM Report have been touting the new post-market control programs (the REMS of the 2007 FDAAA Act) that are being required more frequently by the Food & Drug Administration as an alternative to fill the gap for discredited promotional activities. There are other, less costly ways that the current detail forces and TV ads for pharma to build its ties to the medical community and patients. Rangel and his tax approach may just be hastening the era of those changes.

That may be why we are hearing that some influential strategists within pharma are not putting a fight with Rangel at the top of the 2009 health care reform fight. Privately, they say there are much more important fights and issues in health care reform to waste too much time and effort fighting the deductibility of promotional expenses. This may be a legislative argument that pharma is not afraid to lose. They won’t say that openly, but don’t expect much effort and money directly from the drug companies to be devoted to the promotion fight.

Of course, if pharma reacts in a prudent way to higher promotional costs and cuts back those expenditures effectively, then the government will not have promotional tax dollars as one of its sources of revenues for health care reform. That would mean that the government would under-estimate the sources of funding for a new health care program. Would that be the first time?

Health Care Reform: Too Big To Fail

The House health reform discussion draft (pre-cursor to the bill) is 852 pages. Senate bills will eventually be hundreds and hundreds of pages as well. Those are some big bills.

The seemingly endless pages of legislative language represent hundreds of different policy options the two chambers of Congress are considering as part of health care reform.

The number of bills kicking around in the House and Senate, their size and complexity, the high estimated costs (way over $1 trillion over 10 years) from the Congressional Budget Office, and the markup of Ted Kennedy's bill moving at a snail's pace all have contributed to one conclusion as the process hits the most sensitive phase to date: health care reform appears doomed to fail.

Here's the reality for Democrats: Health care reform is too big to fail.

The party--from the White House to elected officials in Congress--has made health reform the linchpin of its domestic policy agenda. The President and key committee chairmen on down have staked their political futures and credibility on health care reform.

That's why the troubling start--higher than expected costs, delays, controversy over key provisions--has triggered real panic among Democrats.

We're not going to minimize the problems health care reform faces in the present. But the big picture should not be lost.

First, for Democrats, it is imperative to have one bill done by the month-long August recess deadline imposed by Obama. We wrote about this in "The Pink Sheet" and The RPM Report. Here's an excerpt:

"Democratic leaders are trying to move quickly to meet a deadline imposed by the White House to have a bill passed before Congress leaves for its month-long August recess.

"We've got to kick that deadline down the road," said Alaska Republican Lisa Murkowski. Republicans repeatedly referred to the deadline as "arbitrary."

Democrats' fear is two-fold: First, lawmakers fear that the lag in itself will slow momentum for health care reform.

Significantly more important, however, is fear among party leaders that the recess would give Republicans a full month in their home states rallying support against Democratic proposals, as well as time for other opposition groups to conduct grass roots campaigns and public polling.

Moreover, if a clear-cut agreement isn't reached by the recess, Democrats themselves will be left to answer tough questions from their constituents on the fence about the legislation, or multiple pieces of pending legislation, without being able explain the reforms, benefits, cuts, or revenues contained in a final bill.

The approach recalls the 1993 health reform experience when many crucial Democratic elected officials struggled to communicate the complicated Clinton bill to voters in their districts and home states during the long delays in the legislative process, and thus, subsequently suffered politically from the fallout."

Second, the strategy by Republicans to delay progress of Democratic proposals in Senate committees should not cloud the fact that Democrats have historic advantages in both the House, Senate, and the White House.

The numbers to remember: 79, 59+1, and 60.

The first, 79, is the margin Democrats enjoy in the House. The second, 59+1, is the number of Democrats (we'll count independents who vote with Democrats) plus Al Franken, who could be seated as the junior Senator of Minnesota at anytime, in the Senate. The sum of the equation gives Democrats the filibuster-proof 60 votes they desperately need to move forward.

That's not the same "60" we mean by the last number. That 60 is Obama's approval rating; 60% of all Americans approve of the job he's doing, according to an average of polls from Real Clear Politics.

Now, there is the strong argument that Democrats themselves don't all agree on health care reform and certainly wouldn't vote in lockstep along party lines to pass sweeping legislation that impacts one-sixth of the economy. Presently, that's absolutely the case and was reinforced by comments on the Sunday morning talk shows.

However, we bet that health care reform--particularly universal coverage--is so important in defining the future of the Democratic Party that they will have no other choice than to come together. If they don't, Obama will make that case to them in the final stage of the legislative process.

And if those three numbers (79, 59+1, and 60) aren't enough, there's always a fourth number, 51. That's the simple majority it would take to pass reform as part of the budget reconciliation process in the Senate, with healthy margins assured in the House.

Democrats themselves point to 51 as a course of last resort. But the only way to get to 60 votes in the Senate may be to make sure you have 51--a threat of inevitability that would persuade conservative Democrats and moderate Republicans to sign on to a sweeping health reform bill.

We believe the 51-vote strategy is one of last resort, but one Democrats will resort to if necessary if the choice is between that and no health care reform. Put simply, Democrats have placed too much of the Party's future in the health reform basket to abandon it now.

Which one, two, or five Democratic Senator(s) wants to be known as the reason Obama's health care reform plan was torpedoed and likely delayed at least another four years if not another 15?

So while reform has hit some roadblocks, those roadblocks were predictable. For Democrats, health reform has become too big to fail.

Of course, that's what they said about Lehman Brothers.

While You Were Calling Your Father

We hope you enjoyed a restful Father's Day/Solstice weekend, without too much rain. It was blissfully quiet in industry land, the calm before the storm, maybe?

While you were playing Bethpage Wet ...

• Like health care reform news? We've got a few posts for you today and this week promises to be a busy on on the HCR front. Start off with this WSJ wrap of the weekend deal that sees Pharma agreeing to spend $80 billion over the next ten years to improve Medicare benefits.
  
• Merck's statement on the deal is here.
• Have you signed up for Euro-Biotech Forum yet?
  
• Roche is collaborating with Covagen, a Swiss biotech developing a new kind of protein-based drug it calls Fynomers. Undisclosed targets, undisclosed terms.
  
• Even for a losing streak, the Phillies' current one pretty spectacularly awful.
  
• A workout for fathers with young children. Happy belated fathers' day.
  

image from flickr user @@:@@ used under a creative commons license.

Knowing the Score: Doing Our Part to Keep Hope Alive

Okay, everyone in Washington was a bit taken aback by the first official "score" of a health care reform proposal. Keeping score, of course, is at the very essence of everything in our nation's capital, but in this case "score" refers to the budgetary impact of a piece of legislation, as analyzed by the Congressional Budget Office.

Since (for the time being at least) everyone agrees health care reform has to be budget neutral, the score is a very big deal indeed. Every dime of added cost has to be offset by some kind of payment cut or (gasp) new tax.

No one thinks it will be cheap to expand coverage to the 46 million (and growing) uninsured population in the US, but neither does anyone know for sure exactly how much it will cost. (Or, what is more important, how much CBO thinks it will cost, which is what matters when it comes to how much you have to budget to pay for it.)

So, when CBO reported back that the first bill--admittedly little more than a rough draft from the senate Health Committee--would cost $1 trillion dollars over 10 years while reducing the population of the uninsured by just 16 million, it caused a fair bit of consternation.

With all due respect to folks like Utah Republican Senator Bob Bennett--who is fond of saying that high quality health coverage is cheaper than the mismash of inadequate coverage we have today, so that there really is a "free lunch" on health care reform--well, there is in fact no free lunch. At least not in CBO's eyes. You can't just provide subsidized insurance for the masses, wave your arms and get to universal coverage. It costs money. Lots of money.

And with that, the health care reform push stalled--at least for a week--while everyone reconsiders how best to proceed.

Never fear: The IN VIVO Blog is here. Time for some outside the box thinking on alternatives that can reduce the population of the uninsured without breaking the bank. Here are our modest proposals:

1. Bus the uninsured to Canada. Figure 1 million buses of 46 people each, plus a driver and gas money. Got to be less than $1 trillion.


2. Start another war. Commit ground forces. End the war. Spend the savings on health care.


3. Harvest the organs of the uninsured. Sell them to the wealthy.


4. Relocate the 46 million uninsured to McAllen, Texas. Give Texas back to Mexico. (Or just let it secede).


5. Have President Obama go on Oprah to promote downloadable internet coupons for free health care. Blame unexpectedly high demand for program failure.


6. Steal John McCain's insurance card. Make 46 million copies. That way everyone can have coverage just like a member of Congress.


7. Replace glue on postage stamps with a cocktail of Lipitor, Prozac and Provigil. Sit back and wait for heart attacks to go down, productivity to go up.


8. Take Obama's $900 billion set aside for health care to the roulette table at the Mandalay Bay. Put it all on black.(Ed. Note: Wesley Snipes approves!) If red comes up, nationalize the casino. Repeat at other Vegas hotels until you have $3 trillion in winnings.


9. Maybe the swine flu can take case of the problem?


10. Tax snarky bloggers until you have enough money or they stop.

Deals of the Week 3G S

Welcome to the 3G S version of Deals of the Week! It's just like previous versions of DOTW except much, much faster, and much, much more powerful. Unlike 3G S versions of other technological marvels that coincidentally became available today, DOTW 3G S doesn't cost extra (still free!) and under most circumstances you won't have to queue to read it. Oh, and subscription not necessary, but oh so convenient.

Just for you, dear readers, we've put together an all-star playlist, where your favorite companies cover your favorite hits! Are we reaching just a little? Yes. Is your normal DOTW blogger busy writing something some of you will actually pay for? Absolutely. Are we in a hurry to get down to the pub Apple Store? mmmmaybe.

1. Zicam marketer Matrixx Initiatives covers Nirvana's "Smells Like Teen Spirit"
2. Sanofi-Aventis covers the Red Hot Chili Peppers' "Give It Away Now"
3. Genzyme covers Neil Young's "The Needle and the Damage Done"
4. Arena Pharma covers Bare Naked Ladies' "If I Had Million Dollars" (100 times)
5. Biogen Idec covers Oasis' "Don't Look Back in Anger" (dedicated to Genentech)

Enough already, lets get to the best app store on these here Internets, it's ...


Johnson & Johnson's Tibotec/TB Alliance: The diversified JNJ may be busy crossing the t's and dotting the i's of its pending acquisition of Cougar Biotechnology, but its not too busy to burnish its image and do some good in the developing world. This week came news that JNJ subsidiary Tibotec was teaming up with the not-for-profit TB alliance to speed the development of TMC207, a novel molecule in Phase II clinical trials that targets a specific energy-storing enzyme that looks to be especially promising in taming multi-drug resistant tuberculosis. (Interim mid-stage data for TMC207 recently published in the New England Journal of Medicine have been generating quite a stir in the ID community: in the placebo-controlled study, the addition of TMC207 to a regimen of five other TB meds cleared traces of the nasty bug in the sputum of 48% of the participants, compared to 9% in patients taking the standard-of-care regimen.) Under the terms of the agreement, Tibotec continues to develop TMC207 for the treatment of multi-drug resistant TB, but the TB Alliance will pitch in when it comes to the drug's development costs. Once the drug is approved, Tibotec promises to establish an access program to ensure the compound reaches the people most in need of the the medicine--those in developing countries. The TB Alliance also has a royalty-free license for world-wide development of TMC207 and will collaborate with Tibotec to develop additional follow-on compounds. The deal recalls last fall's collaboration between Summit and Lilly's TB Drug Discovery Initiative and shows the increasing ground swell of support by Big Pharma for what has long been a neglected disease area. No word on whether Tibotec plans to apply for the FDA's Priority Review Voucher program, a new incentive scheme for drug development in neglected diseases, on the basis of the TMC207 research--Ellen Licking.

Watson/Arrow: On June 17, Watson Pharmaceuticals announced a $1.75 billion cash and stock deal to snap up the privately held generic company Arrow Group, which markets in more than 20 countries. Beyond Arrow's 100+ drugs, Watson gets the company's international sales, legal and regulatory infrastructure. Arrow, founded in 2000, operates as Cobalt Pharmaceuticals in the US and generated $647 million in total revenues last year. Watson execs also believe they’ve gained a long-term investment in generic biologics through Arrow's 36% stake in Eden Biodesign, a biologics CMO. The price of the deal--at about 2.7x 2008 revenue--falls in line with other recent generics deals like Mylan/Merck KGaA and Barr/Pliva; since Watson hasn't had to raise debt to pull it off ($1.05bb in cash and 16.9mm shres of common stock plus $200mm in zero coupon preferred stock redeemable in three years), it can continue to shop for more deals. Our full write up is in "The Pink Sheet" DAILY.--Carlene Olsen

GSK/Dr. Reddy’s: On June 15, GlaxoSmithKline and Indian generics giant Dr. Reddy’s allied to develop and market drugs in emerging markets, including India. GSK gains access to more than 100 branded generics in Dr. Reddy’s portfolio and pipeline for cardiovascular, diabetes, oncology, GI and pain indications. GSK and Dr. Reddy’s will co-promote the drugs in some markets and under only one of the company’s brand names in others. As “The Pink Sheet” DAILY writes, GSK says it is still sorting out “which products will be sold under what brand, in which countries." Generally, though, Dr. Reddy's will manufacture generic drugs, which GSK will then market in certain African, Middle Eastern, Asia Pacific and Latin American countries, focusing on key markets such as Brazil, Mexico, India, China and Turkey and aided by its emerging markets sales force, 11,000 reps strong. The announcement comes on the heels of GSK's deals with Shenzhen and Aspen; since the beginning of the year the pharma has entered into at least four deals that expand its presence in emerging markets. You might even say it has an emerging markets strategy.--Carlene Olsen

Vitae Pharmaceuticals/Boehringer Ingelheim: Vitae says it has extended its cash runway beyond 2010 by agreeing to co-develop BACE inhibitors for Alzheimer’s disease with BI. In what we learned was a highly competitive deal, the biotech gets $42 million upfront in its second alliance with the German pharma; as we noted earlier this week, the pair have been partnered since 2007 to develop 11beta-HSD1 inhibitors for diabetes and other metabolic disorders. The cash will come in handy: Vitae CEO Jeff Hatfield told "The Pink Sheet" DAILY this week that Vitae’s lead renin inhibitor compound VTP-27999--which it recently reacquired from ex-partner GSK--should enter clinical development before the end of 2009, and a $13 million loan secured last October was only going to get the biotech so far. BACE inhibition is a very difficult but very promising avenue of disease-modifying Alzheimer's research; hence such a large upfront payment for a program still in lead optimization--Joe Haas

Adimab/Merck and Adimab/Roche: Yeast-based antibody discovery platform play Adimab announced its first two deals this week, with Merck & Co. and Roche. The companies have been light on specifics, but the deals include upfront payments, preclinical and clinical milestone payments, and commercial milestones and royalties. Adimab thinks its on to a winner with a discovery platform it claims is both faster and better than conventional phage display technologies, and unencumbered by IP cross-licensing. (Of course there are plenty of companies who still dig the phage, for whom phage is the rage: this week Morphosys said that Schering-Plough (still betrothed to Merck) extended its access to Morphosys Hucal Gold library for another year.) Adimab will make antibodies to multiple undisclosed targets for Merck, and one undisclosed oncology target for Roche. What's perhaps more interesting is the biotech's overall deal strategy, which we've discussed here and will dive into deeper in the next issue of START-UP.--Chris Morrison

Covidien/Neuromed and Covidien/Nuvo: This is your medical device company on drugs. OK, to be fair Covidien, the diversified ex-Tyco Healthcare conglomerate, is apparently the largest supplier of controlled pain meds in the US, but it's much better known as a medical device company--devices account for greater than two thirds of its sales and its recent business development activity has been dominated by device acquisitions: VNUS, which closed this week, was the latest and you can read all about it here. So now that you've forgiven us for overlooking Covidien's pain drug franchise, part of its Mallinckrodt unit, on to the news! This week Covidien licensed Nuvo Research Inc.'s two topical formulations of the NSAID diclofenac (the more advanced drug is already under review at FDA, with a PDUFA date in early August; the second is in development). The next day, Covidien bought rights to Neuromed's Exalgo extended-release hydromorphone, a compound Neuromed licensed from JNJ's Alza Corp. in 2007. The drug recently hit its primary endpoint in a Phase III trial and has a PDUFA date in November 2009, though Covidien notes in the release announcing the deal that the class-REMS may slow things up a teensy bit. Both deals include undisclosed up-front payments, milestones and royalties.--Chris Morrison

Baucus CER Deal Under Stress

With a little help from its GOP friends in the Senate, the pharma industry could still fashion a bad agreement on CER out of the positive discussions that have been underway for over a year with Senate Finance Committee Chairman Max Baucus (D-MT).

Sens. Orrin Hatch, R-Utah, and Mike Enzi, R-Wyo., are temporarily keeping the Baucus approach to comparative effectiveness -- which could be called CER soft -- out of the Senate Finance Committee’s health care reform bill.

Hatch and Enzi are two of the longtime stalwarts of policy affecting the drug industry. They have a go/no-go status on CER because of a de facto arrangement with the ranking GOP member on Senate Finance, Charles Grassley, R-IA, who ceded decision-making on CER legislation in his committee to his colleagues on the Senate Health, Education, Labor & Pensions Committee.

CER is now traveling through the legislative process under a new pseudonym: patient-centered outcomes research, part of Baucus' amusing and practical effort to move his bill under whatever name seems most acceptable and non-inflammatory on Capitol Hill. The Baucus proposal for CER remains a separate legislative bill. The plan is to attach that bill to the developing Senate package for health reform, being melded together by the Senate Health, Education, Labor and Pensions Committee, Senate Budget Committee and Senate Finance.

Representing more adamant critics of CER, Enzi and Hatch are pushing for consideration of three issues. The danger of bringing the issues up again now is that the Baucus CER approach could fail to get on track to join the main activity on health care reform and less favorable approaches to CER could slip into the gap. In the name of layering on several more specific protections against the use of CER reviews to control treatment choices, the GOP members are risking creating an open field for other CER proposals to supplant the work that Baucus has been doing on the issue since early last year.

The Baucus staff preparing the CER bill have won praise from industry stakeholders for working with affected industries on the CER scheme. There may be more willingness by those seeking more protections against CER to seek changes to the Baucus bill because a separate approach is gaining interest in the House, sponsored by Oregon freshman Kurt Schrader (HR 2502). That effectively gives the proponents of a soft CER approach a second alternative to push.

Age Discrimination Leads List of Recent Complaints

At the top of the list of CER changes being sought by the GOP is an assurance that there will not be age discrimination in treatments based on CER determinations – i.e. that no decisions whether to accept CER information for treatment selection will be made based on the age of the patient alone. This is a major concern of one of CER’s most obdurate critics in the Senate, John Kyl, R-AZ. Kyl raised the issue earlier in the spring in April and re-introduced it on June 15 as S 1259 along with six GOP co-sponsors, including minority leader Mitch McConnell (Ky).

The GOP HELP members also suggested language to prevent establishment of a quality-adjusted life years threshold by the Centers for Medicare and Medicaid Services to determine coverage for a treatment.

Finally, the GOP took up the cause of some CER critics who argue that a new CER institute might establish a different, and confusing, level of evidence for approving or rejecting medical products that would supplant and damage the substantial evidence standard used by thee Food & Drug Administration. That could be further impacted should a recently introduced bill that opens the door for comparative effectiveness research to be put on drug labeling become law (“The Pink Sheet,” May 25, 2009, p. 4).

The GOP concerns slow down a process of incorporating CER into the Senate bill that had appeared to be moving along smoothly. The push for changes just before the Finance Committee’s self-imposed deadline for beginning consideration of CER on June 17 may also be a small part of a developing GOP effort to slow down the overall effort to get Congressional health care reform bills through each chamber before the August.

The current Baucus version of the comparative effectiveness bill, the Patient-Centered Outcomes Research Act of 2009, was introduced June 9 with co-sponsorship from Senate Budget Committee Chairman Kent Conrad, D-N.D. It is an update of legislation introduced in the last Congress and maintains the creation of a public-private entity to drive research and offers a set of standards that must be met in order for comparative effectiveness research to be incorporated into coverage decisions (“The Pink Sheet” DAILY, June 9, 2009).

If Senate Finance cannot resolve the GOP complaints and get the bill moving again, the only comparative effectiveness option that would be debated in the Senate would be the HELP proposal which would undo the extensive work between Finance Committee staff, the pharma and insurance industries and other stakeholders on the proposal. The HELP proposal is much less detailed and puts HHS in the driver seat in terms of guiding comparative effectiveness research (“The Pink Sheet,” June 15, 2009, p. 13).

Starting After the 4^th Is Not a Critical Blow To Legislative Schedule

While the comparative effectiveness options are not necessarily holding up the overall health care reform bill, they could be a contributing factor to why the committee has pushed back the markup on the full package until July.

Senate Finance will not start public consideration of the full health reform effort until after the Fourth of July recess. The delay is widely being attributed in Washington to a high preliminary score from the Congressional Budget Office on the most recent version of the Finance Committee proposal.

Reports are circulating that the Congressional Budget Office has scored the bill at $1.6 trillion, a number higher than the initial score of the incomplete HELP Committee health care reform bill. The Finance Committee held off introducing the draft chairman’s mark following the negative feedback that arose in the wake of CBO’s scoring of the HELP bill. The two-week delay in the Finance Committee consideration of health care reform does not preclude finishing a bill before the August recess, advocates say. The Senate leadership still has room in August to delay recess to get a vote if Finance starts consideration immediately after the Fourth of July break.

Senator Enzi, in a press release, commended the Finance Committee’s deliberative process that included members from both sides of the aisle, while criticizing the HELP Committee's start of consideration of its bill.

image from flickr user te.esce used under a creative commons license

Turning Off The Runway Lights At HHS

If the wide variety of health care reform proposals swirling around Washington ever coalesce into legislation that is signed into law, HHS will have dozens of new responsibilities. But sponsoring fashion shows would no longer be one of them, if Sen. Coburn has his way.

The fiscally conservative Republican from Oklahoma is sponsoring a health reform amendment to prevent HHS from using funds to sponsor fashion shows; the amendment will be considered during markup of the Senate Health, Education, Labor and Pensions health care reform bill, known as the “Affordable Health Choices Act,” which begins June 17.

Coburn has long had a beef with HHS spending money on the lights and glamour of the runway, as expressed a number of times on his web site, including in a statement protesting HHS sending dozens of employees to a conference at a beach resort where the entertainment included a “sizzling fashion show.” He also has questioned why money is being spent on social events, including fashion shows, to raise awareness of the search for an HIV vaccine when that money could be used to actually conduct research on a vaccine.

As Coburn put it in a 2008 press release: “Who knows what scientific discoveries could be unlocked at a bar or fashion show! But with your tax dollars, we will find out!”

image from flickr user maddsmadds used under a creative commons license

Everyone’s Holding Hands For Health Reform; DNC is Holding Out Its Hand

Just as we were enjoying President Obama’s unflagging effort to promote health reform as a collaborative, hand-holding effort drawing from both sides of the political aisle, we received this fund-raising email from the Democratic National Committee.

In an effort to drum up the same contagious enthusiasm and grassroots networking that sustained the Obama campaign, the DNC, over the president’s signature, sounded the alarm on health care reform, blasting an email to millions of supporters today asking them to “donate whatever you can” to the “campaign for real health care reform.”

“Today, spiraling health care costs are pushing our families and businesses to the brink of ruin, while millions of Americans go without the care they desperately need,” Obama wrote to the masses. “Fixing this broken system will be enormously difficult. But we can succeed.”

Using the now familiar we will prove them wrong tone, Obama called health reform the “biggest test of our movement” since the election, stressing that opposition will be “fierce.” The public call to arms comes one day after Obama spoke at the American Medical Association in an effort to warm doctors to an overhaul to the health care system (covered here in The Pink Sheet).

“To prevail, we must once more build a coast-to-coast operation ready to knock on doors, deploy volunteers, get out the facts, and show the world how real change happens in America.”

A link to make a donation brings recipients to “Organizing for America,” a web project of the DNC that bears the web address barackobama.com.

“It doesn't matter how much you can give, as long as you give what you can.” Obama wrote. “Millions of families on the brink are counting on us to do just that. I know we can deliver.”

Will Obama’s second effort to mobilize the masses pay off?

– Lauren Smith

image from flickr user plamoe used under a creative commons license

Adimab Banks on the Value of Discovery

Adimab, the yeast-based antibody discovery play we wrote about here, and here, will announce its first two alliances today: a multi-target therapeutic deal with Merck & Co. and a single-target therapeutic/diagnostic deal with Roche.

There aren't many details in today's press release, but that's OK: these are very early stage deals anyway. What's more interesting to us is Adimab's overall partnership strategy, and its co-founder and CEO Tillman Gerngross' staunch belief that a focus on discovery--and not taking a single step down the development pathway--will allow the company to capture significant value.

(For our readers familiar with the revolting flavor of spreadable yeast extracts, apparently drug development is a lot like Marmite: either you love it or you hate it. )

First the new deals. For Merck, Adimab will use its discovery platform to identify fully human antibodies against a number of targets selected by Merck. We know that number is greater than one, but that's about it. Merck has rights to develop and commercialize those antibodies as therapeutics. Roche has tasked Adimab with discovering antibodies against a single target, and has the right to develop and commercialize those antibodies as therapeutic or diagnostic products.

Importantly there is absolutely no exclusivity around any of the targets, Gerngross tells us; Adimab can do deals with other companies on the same targets if it chooses. For its labor Adimab gets undisclosed up-front payments, pre-clinical and clinical milestone payments, and eventually commercial milestones and royalties. Though we should note that the two deals aren't necessarily structured in the same way: as Gerngross told us in May at BIO, Adimab is flexible with regards to upfronts versus royalties and terms in between. "Just pay us," he said. The biotech is also open, in some cases, to its partners taking an equity stake (though again, there is no clarity as to whether Merck or Roche has done so).

See here for an overview of Adimab's technology; essentially the company says it has created a faster and more fully human antibody discovery technology unencumbered by the various IP cross-licenses prevalent in existing platforms like phage display. Once Adimab has been given an antigen it typically takes eight weeks to deliver about a hundred antibodies that bind that target.

So Adimab will rake in cash from its discovery deals, which it plans to announce more of in the coming months (Gerngross tells us the biotech is essentially cash-flow positive, with minimal burn and no plans to raise additional capital), and build its business: keep expanding the library, do more deals. But here's where the company parts ways with about 99% of discovery-focused biotechs. It has no plans to build a pipeline of its own. At least not directly.

Adimab will not do development work. "I think that's where many other companies have made mistakes," says Gerngross. Often they're forced down the development route to validate their own technology for partners, he says. If a biotech is promoting a technology platform that isn't well-validated, "what ends up happening is that people will say 'the science sounds great, but show me that this really works,'" he says. "And before you know it you're in the business of conducting preclinical development with a company that was originally put together to solve a scientific problem. And it creates tension and requires resources that are very significant."

Gerngross contends this isn't a problem for Adimab. "Who will argue that fully human antibodies aren't a validated modality? Having strategic access to antibody discovery is a must, it's not an option" for pharmaceutical companies that are near-uniformly saying that 20 or 25% of their pipelines will come from biologics, he says.

So the challenge is to monetize the discovery capabilities within Adimab. If you're going to eschew the development pathway the problem becomes getting sufficient value for the company's investors with a series of discovery alliances. Adimab has raised cash in three venture rounds from SV Life Sciences, Polaris Venture Partners, Orbimed Advisors, and Borealis Ventures.

The simplest way would be to whet the appetites of a few pharmas and wait for one of them to pounce. Cue bidding war and a GlycoFi-esque takeout valuation. VCs invested a total of about $35 million since 2000 in that company, Gerngross' previous effort, which Merck bought in 2006 for $400 million.

But "we're not building Adimab to be acquired," insists Gerngross. "We think we can build a cash-flow positive company that can generate an enormous amount of value," he says (though there's always an offer that's too good to refuse).

And to be sure there are other ways of monetizing discovery. Gerngross points to some of the deals signed by Regeneron (like this one) as an example. "Very big upfronts, five-year commitments, royalties ... if you can do a number of those it's more attractive than a single acquisition," he points out. To which we'd add: particularly if you aren't ploughing the cash into pipeline development and can find a way to return it to your shareholders in a tax-efficient manner.

So Adimab will continue to sign the kind of funded research programs it has just announced with Roche and Merck, with an eye toward more strategic discovery deals that give large companies direct access to Adimab's platform, says Gerngross. "We can transfer the capabilities to them," he says, for them to use the discovery platform non-exclusively across a pre-determined swathe of targets or programs, unlimited targets, unlimited programs, whatever. It'll depend on the price. These sorts of non-exclusive arrangements sound like the kinds of deals Alnylam has managed to sign with the likes of Roche.

And then there's another wrinkle, a third kind of deal in the works at Adimab outside its Big Pharma discovery services ambitions. "We see opportunities for smaller, more agile players that really understand the valuable targets in, say, oncology," says Gerngross. Put that expertise together with Adimab's antibody platform, he says, "and we're looking at a story that's very compelling."

Adimab has identified oncology, inflammation, and infectious disease as three areas to embark on these sorts of ventures, and is already in active discussions in two of those therapeutic spaces. How such a deal would be structured remains to be seen but Gerngross envisions an autonomous entity in which Adimab and the other party would have equity stakes and which would be able to raise its own development capital.

These ventures will keep Adimab a step removed from drug development, where it won't have to compromise its platform business. The only question is what potential partners and investors would be willing to pay for that discovery platform: do they value discovery as much as Adimab?

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

Vitae and Boehringer Get on BACE

Vitae Pharmaceuticals and Boehringer Ingelheim will announce today that they're collaborating in the area of beta-secretase (a.k.a. beta-site APP cleaving enzyme 1, or BACE) inhibitors to treat Alzheimer's disease. [UPDATE: release is here.]

Vitae will get $42 million up-front in combined cash, equity payments and research funding, and will be eligible for $200 million in pre-commercial milestones in the Alzheimer's indication for one molecule, as well as commercial milestone payments and royalties, and payments for other molecules or other indications. But it's waaay early, which we'll get to in a minute.

Since re-embracing its discovery roots in 2005 (a phenomenon covered here through the prism of a 2005 deal with GSK in the renin area--a deal that has since been shuttered) Vitae has now entered three discovery alliances. Today's alliance, the GSK deal and a 2007 deal with Boehringer in the diabetes space that brought in $36.5 million up-front. In fact the two BI upfronts combine to equal just about all the other financing that Vitae has raised (not including milestone payments from deals) since its inception as Concurrent Pharmaceuticals in 2001.

This latest alliance is, on the face of it, a taller order than renin or the 11beta-HSD1 inhibitors Vitae is working on in the metabolic space. BACE inhibition is an extremely difficult area of Alzheimer's R&D, and the scarcity of assets around this target perhaps reflects the large-ish upfront payment for a program that Vitae's web site suggests is still in its infancy.

But for BACE-inhibition, $42 million for a program in lead optimization sounds about right. After all, CoMentis got $100 million up-front for its own BACE inhibitor program from Astellas. That compound was only in Phase I, and when it entered the clinic in 2007, CoMentis immediately became the subject of takeover rumors.

The Boehringer cash will augment a $13 million venture-debt deal Vitae closed last October. At the time of that loan announcement Vitae's runway ran 'into 2010' so the infusion should come as a welcome relief. Just maybe they'll get enough of a lead to steal second.

image from flickr user phillenium1979 used under a creative commons license

While You Were Self-Medicating

Not much going on industry-wise this weekend so we thought we'd flag up the old-school hilarity that the wacky pharmacists over at Pill Talk dug up last week. Toothache? Cocaine's just the thing. Got a bad cough? It's heroin you need. Mostly crazy by today's standarsd, but we tend to agree that morphine sounds like a fine treatment for teething, though.

Speaking of self-medication (this weekend, ours was Hooky Bitter), we attended a meeting of the European self-medication association (AESGP) in Vienna a couple weeks ago. You can read some of that coverage in The Tan Sheet (non-subscribers can sign up for a free trial--if you're interested in OTC meds also check out Tan Sheet's blog at www.overthecountertoday.com)

Nothing on that PillTalk list for what ails a Phillies fan after dropping two-out-of-three at home to the BoSox (even though Sunday's win was outstanding, there's not much for that except for maybe a terrific Mets loss). Oh and the Lakers won the NBA Finals.

More seriously we're sure that like us, many of you followed the Iranian vote and its aftermath. An unexpected but outstanding source for updates has been Derek Lowe's twitter feed.

And on to your weekend's industry news ...

• Reuters reports that Pfizer is looking to boost its presence in emerging markets, which is par for the Big Pharma course these days. And which jibes pretty well with a report from Live Mint this morning suggesting that Pfizer was nearing a deal to buy several units of cash-desperate Wockhardt, an Indian pharmaceutical company. What's Pfizer's emerging markets strategy? We're glad you asked--because as it happens, we've got something brewing on that front. You'll just have to wait until the next issue of IN VIVO to read all about it.
  
• Gout, a painful arthritic condition, is making a come-back, writes Andy Pollack in the New York Times. Reached for comment by IVB, Gout said, "Don't call it a comeback, I been here for years, rockin' my peers and puttin' suckas in fear!" OK, easy Gout, easy. Wait. You're gonna 'knock me out?' Andy said it, knock him out. But if you want to know what we've been writing about Gout, check out the fancy new web site for The Pink Sheet DAILY and other EBI publications.
• An interesting rundown today at the Wall Street Journal of why Novartis' Alcon pseudo-acquisition has put it in a bind. Under the put/call terms of Novartis' original deal with Nestle, Novartis has an option, beginning January 1, 2010 and running nearly two years, to buy Nestle's remaining 52% of Alcon for $181/share, but Alcon is currently trading at $113. Nestle can also put its shares to Novartis, at a 20% premium to market, over the same option period. A pricey proposition no matter how you slice it, and WSJ has the details on what's likely to happen and what this means for Novartis with regards to future acquisitions.
  
• Confused about health care reform? In Sunday's Week In Review the NYT recommends 'following the money', all $2.5 Trillion of it.
  
• If you're coming to our EuroBiotech Forum in a couple weeks and sign up for the Dealmakers Value Package, that includes breakfast with some of your favorite IVB contributors (lucky you!). But Roger Longman wanted to make one thing clear regarding the 'no-holds barred' nature of the over-breakfast discussion. Roger writes: "I'd like to agree upfront that we will in fact not allow the came clutch, in any of its variations (e.g., camel clutch sleeper hold, chicken wing camel clutch, or the inverted face-lock camel clutch)."
  

DotW: The Rumorville

Pssst! Did you hear that Elan is up for sale? Probably, since it's hardly a secret that the company has been up for grabs since the start of the year, when the Irish biotech hired Citigroup to conduct a review of its business.

On Wednesday, CEO Kelly Martin added fuel to the rumor fire when he spoke at a Goldman Sachs healthcare conference, suggesting a strategic transaction "in the near term" was in the offing. "A lot of people are interested in talking to us," Martin said.

But as we all know talk is cheap. And talk certainly hasn't resulted in a deal with either BMS or Pfizer to date--two pharmas that have in recent weeks been rumored buyers of the perpetually troubled company.

Has Martin's bravuro performance assuaged investors or Elan's board? It doesn't look like it. On Thursday, Reuters reported Elan decided to forgo the proxy fight and nominated two dissidents to the board. (Perhaps Elan's board learned something from the recent experiences at Amylin and Biogen Idec?)Interestingly, Jack Schuler, cofounder of Crabtree Partners and a vocal critic of Martin, is one of the candidates. The annual meeting, scheduled for July 16, promises to be very interesting doesn't it?

What other rumors surfaced this week? Sanofi board members may have nixed a big acquisition according to Les Echos, after major shareholders rejected the planned purchase as too risky. Or maybe not. A Sanofi-Aventis spokesman said the company "formally denied" that a major acquisition project in the U.S. had been presented to the board. (Denial is a river in Egypt, right?) Wasn't it just one week ago that Sanofi's stock was on an upswing as people speculated the company had its eyes on partner Merck's shares of the animal health biz Merial?

And now that the FTC has come out against the 12-14 year exclusivity period for follow-on biologics, rumors are, of course, flying about what's actually feasible. Still think it's possible to get a proposed pathway for FOBs into the healthcare reform legislation happening this summer? According to "The Pink Sheet" DAILY, FDA is likely to be a critical player in this ongoing drama's next act. Will the agency testify before Congress or write a letter supporting a FOB approval pathway? Alternatively, will the agency adopt a cautious tone, much the way the Bush FDA chief medical officer Frank Torti did last September when he warned in a letter to Congressman Pallone of serious questions associated with the approvability of follow-on biologics? (Washington types, what are you hearing through the grapevine?)

Do you have Clorox wipes, Purell, and surgical masks handy? (For you DIY types, eHow.com notes that while pre-fab surgical masks exist, "sometimes it’s more fun to make your own." Somebody has got to get out more.) After weeks of rumors, the WHO finally pulled the trigger and raised the pandemic alert level to 6 (on a six-point scale), the first time in 41 years. What does the new alert level mean? Nothing radically different in the US, where public health specialists and the CDC put pandemic preparations on the front burner some time ago. (I know. You were secretly hoping for an updated color coded warning system ala the Homeland security threat notices weren't you?)

As you mull the events of the week, here are some items that are far from rumor. Your "just the facts, ma'am" analysis, courtesy of IVB's resident Sgt. Friday and...

Merck/Xenon Pharmaceuticals: So much for being distracted by its take-out of Schering-Plough. This week, Merck announced a small deal with privately-held Xenon Pharmaceuticals in the CV space. In what is now becoming de rigueur in the industry, this pact is a low money down (but certainly better than no money down), option-style arrangement that initially provides Xenon with research funding related to the development of its small molecule compounds. Xenon will perform validation studies using its clinical genetics platform, as well as drug discovery for those targets selected by a joint steering committee. Under the terms of the agreement, Merck has the option to exclusively license targets and compounds from Xenon for development and commercialization. In return, the biotech also stands to receive option-exercise fees, and milestone payments tied to research, development, and regulatory progress. Unlike other biobucks deals, milestones aren't sky-high: totaling up to $94.5 million for the first target and up to $89.5 million for each subsequent target selected for drug discovery. In addition, Merck will pay Xenon undisclosed royalties on sales of products resulting from the collaboration. Of course, Xenon retains the right to develop and commercialize certain compounds for which Merck does not exercise its option. Simon Pimstone, CEO of Xenon, waxed poetic in an over-the-top statement announcing the news. "We are very excited to be collaborating with Merck to define new therapeutics in the area of cardiovascular diseases," he said. "With this deal, Xenon is continuing its strategy of risk mitigation by select partnering, while retaining ownership of other programs." (What else was he going to say? "We wanted more money upfront, but we couldn't get it." That would have gone over well with Xenon's existing backers, which include MX Associates, LipoteRx, and Invesco Private Capital.) In truth, the deal probably is a big step forward for Xenon, which hasn't raised money since it pulled in $31 million in private financing in 2006, and hasn't inked a deal since late December of the same year, when it signed a pact with Roche worth $7 million up-front for its anemia inhibitors. Merck, of course, could use an infusion of innovative CV medicines. The drug maker suffered a major setback last week when it announced that preliminary results from the Phase III study of its highly touted rolofylline for acute heart therapy failure did not meet primary or secondary efficacy endpoints. In a note to investors, Sanford F. Bernstein analyst Tim Bernstein noted the setback represented a "psychological negative for Merck." (You think?)

Genentech/Bayhill Therapeutics: Genentech announces a deal and the whole world sneezes. Not really, but we do sit up and take notice. Genentech is definitely not one of the most active deal-makers in the industry; it's focus is typically on access to new technologies or compounds that bolster it's on-going work in cancer. For examples, recall last November's arrangement with Thermo Fisher Scientific for RNAi design and the October 2008 pact with GlycArt. Moreover, this is the first in-licensing deal announced since Roche took the big biotech private, providing an early glimpse in what to expect from Genentech biz dev now that it is a wholly owned subsidiary. (You'll be able to glean even more if you read the upcoming June IN VIVO.) As is typical for most BD deals involving Genentech (unless it's Genentech being bought), there's not a lot of money on the table: just $25 million and that includes an equity stake in the smaller biotech. (There are, of course, the requisite bio-bucks, which could bring privately-held Bayhill another $325 million in the product hits certain sales and regulatory milestones.) Interestingly the deal, which is focused around a Phase I/II compound called BHT-3021, seems to move Genentech into a new direction: type 1 diabetes. '3021 is a DNA-based immunotherapy designed to protect against an inappropriate immune response that triggers the destruction of insulin-producing islet cells. In an interview with "The Pink Sheet" DAILY, Genentech's head of business development, Joseph McCracken explained why the Big Biotech was interested in the compound: "The mechanism of action suggests that it could actually impact the underlying cause of type 1 diabetes, truly be disease-modifying, [instead of] just treating symptoms," he said. Under the deal, Bayhill will complete ongoing clinical work with '3021, to be reimbursed by Genentech. At that point, Genentech will assume all development, manufacturing and commercialization work for the compound, advancing '3021 through Phase II before handing the program over to a joint global development organization that will be managed by execs coming from both Genentech and Roche. Apparently Genentech had been interested in Bayhill's technology for quite some time--long before Roche's bid for the company came to fruition. McCracken's team brought the deal to Roche, explained why it was excited about the science behind '3021 and made the case that Genentech was in position to close the deal. The money should help Bayhill fund the rest of pipeline, including lead program, BHT-3009, a Phase III candidate for multiple sclerosis, and may spark additional deal-making. (If Genentech thinks the immunotherapy technology is a "go" will other Big Pharmas comes to the same conclusion?) That's important--the small company tried to go public last year but ultimately pulled its IPO due to market conditions. To date, it's raised an estimated $63 million in venture funding from backers including, Morgenthaler Ventures and Lilly Ventures.

GlaxoSmithKline/Shenzhen Neptunus: How many buzz words can we include in the write-up of this deal? This week's joint-venture with China-based Shenzhen is noteworthy despite its modest deal size because it seems to bolster the Big Pharma's vaccine distribution network in an important but opaque emerging market at a time when there is renewed fear about the global spread of swine flu. (How's that?) In addition to a cash infusion totaling roughly $30 million, GSK will provide the joint-venture with leading-edge vaccine technology and equipment. Stephen Rea, a spokesman for GSK, told sister publication PharmAsia News that the J/V should be operational by next year. "It might take a couple of years to begin producing vaccines at the joint venture," he explained, noting that the initial focus will be to produce a seasonal flu vaccine, but the outpost could also be used to generate a defense against swine flu. The J/V seems likeley to become a lifesaver for Shenzhen Neptunus, which produces vaccines, and recombinant human proteins, including interferon and interleukin-2. The firm has been fighting to stay afloat, hit hard by earnings losses, and the halt in March of production of its influenza vaccine. In a report submitted to securities regulators at the Hong Kong Stock Exchange--where the firm's shares are listed--Neptunus execs stated that the biotech outfit posted a loss of RMB 5.089 million for the first quarter of this year, compared with a loss of RMB 1.498 million for the corresponding period of 2008. Neptunus also revealed in the report that the Good Manufacturing Practices certification for its interleukin-2 facility had expired, and that to meet higher regulatory standards established by China's State FDA in 2008, they would be forced to make a significant investment into upgrading production.


CSL/Talecris: Ever since the Federal Trade Commission filed a complaint in late May to halt the proposed $3.1 billion deal between CSL and Talecris, a break-up has seemed in the cards. Realizing it didn't have the requisite hand to call FTC's bluff, CSL folded this week, shelving its planned acquisition of P-E backed Talecris, saying it was not worth the money and time to battle the agency in court. In early June, CSL's CEO Brian McNamee offered strong words in protest to the FTC's complaint that the proposed tie-up, which would have created the largest maker of blood plasma products, was not anti-competitive. But despite initially signaling that it would challenge the commision in court, CSL had a change of heart in the intervening week, announcing June 8 that it would pay Talecris a $75 million break-up fee. "CSL's Board of Directors did not believe that entering into a protracted litigation process with the FTC, with its inherent risks, substantial costs and lengthy distraction of CSL management and staff from planning and running our businesses would be in the best interest of our shareholders," said McNamee. That $75 million is likely cold comfort for Talecris and its private equity backers, Cerberus Capital Management and Ampersand Ventures. Back in 2005, Cerberus and Ampsersand put up the capital necessary to buy Bayer's plasma business and found the company, which was originally known as NPS Biotherapeutics. Talecris, which has roughly $1.4 billion in revenues, markets Gamunex, an intravenous immunoglobulin. The company was in the throes of attempting to go public when it pulled its IPO because of CSL's lucrative $3.1 billion offer last August. Because of the specialty pharma's lucrative revenue stream, the company is still a viable acquisition target but the question is who might be interested in picking it up. Bayer and Baxter, the other major players in the plasma market, are out of the running since they would generate the same FTC concerns as CSL. We suppose another private equity group or a big pharma company looking to diversify might make a bid. Alternatively, the company could be one of the first to test the IPO waters.

Image by flickrer Pricklebush used with permission through a creative commons license.

Pfizer Deceives, While GSK Shines

Pfizer has apparently held back clinical trial data for its anti-depressant reboxetine (known in Germany as Edronax) from IQWiG, Germany's drug-benefit assessment agency, leading the agency to declare "no proof of benefit" in its preliminary report.

The report was commissioned by Germany's Federal Joint Committee, which uses such information to determine which drugs should be reimbursed.

In holding back data from at least 9 studies of reboxetine (Edronax), which has been tested in at least 16 trials, according to IQWiG, Pfizer's committing "deception through concealment," according to Peter Sawicki, the agency's director, which he describes as a "non-trivial offence."

A Pfizer spokesman was quoted in German daily Die Welt as saying "we made sufficient data available to IQWiG". Whatever the truth--and why else would Pfizer hold back various published and un-published data, we ask, unless it was un-flattering?--it's certainly ruffled IQWiG's feathers.

The Agency issued a separate press release about Pfizer's misdeeds, alongside its announcement of the preliminary report on anti-depressants. In it, it talks about "publication bias" being "one of the most important and dangerous sources of error in medicine." Quite right too. And why is Pfizer's behavior just asking for trouble in this particular case? Because "other researchers have already shown that the effect of several [anti-depressant] agents has always been exaggerated in the published literature--up to 70%."

IQWiG has concluded that a 2005 agreement with one of the country's pharma associations whereby manufacturers voluntarily disclose clinical trial information, published and unpublished, is no longer reliable. It' s calling on an EU-wide legal obligation to publish results--including retrospectively, as exists in the US.

Pfizer isn't the only perpetrator here. "Companies have repeatedly refused to provide the institute with study documents requirement for the benefit-assessment," the press release continues. In this latest preliminary report on anti-depressants, Essex Pharma was also pushed into the spotlight for possible trial concealment, with the result that its drug, mirtazapine, received a distinctly luke-warm assessment as well.

Only GlaxoSmithKline shone as an example of how things should be done. In the case of bupropion XL, the institute was given "access to the complete clinical study reports by the manufacturer." And, guess what, there was proof of benefit for this agent compared to placebo in acute therapy and no indications of harm. (It wasn't a good as venlaxafine XR, mind you.)

These aren't big drugs, they aren't new drugs. But Pfizer isn't doing itself or the sector's reputation any good in holding back data. It should probably at least pretend to take IQWiG a bit more seriously, given the agency's role as a health-technology assessor in Europe's largest market.

All the more so since Pfizer has been stung in Germany before--like when it refused to accept authorities' decision to group Lipitor (known there as Sortis) into a broader 'jumbo-group' pegged at a similar price to other statins. The drug's share fell to below 3%, prompting Pfizer to return with a rebate deal.

And on the subject of rebate deals: we'll have some more posts on those shortly. For now, let's just say that they've become widespread since German payors have been allowed to negotiate directly with pharmacos. And the signs are that some companies now realize they have no choice but to get even more creative in building relationships with payors. So buck up, Pfizer.

image by flikrer Aelle used under a creative commons license

The IN VIVO Blog Podcast: Corporate Venture

Your amazing IN VIVO Blog team does it again--if we do say so ourselves. (And since we are incapable of humility, we will.) Another day. Another podcast.

Yesterday McAllen, Texas. Today the world of corporate venture capital, based on a comprehensive article Ellen Licking wrote for the May issue of START-UP. (Click here to take a gander at the story.)

Sadly, no word yet on whether President Obama has mandated this particular piece as required reading in the West Wing. Somehow we'll survive...

Don't feel inclined to dig into the story right now? Click the button below and listen to the podcast summary of what Roger Longman calls a "magnificent piece." Trust us, Roger never says that--unless he's trying to get a writer to do even more work. And don't forget, you can access the podcast via iTunes also.

Don't Mess With McAllen

We are prepared to make one bold prediction about health care reform in 2009: Whatever else happens, the health care system in the city of McAllen, Texas is going to experience big changes.

These are heady days for that hitherto little talked-about Texas city, which suddenly finds itself as the unlikely poster child for why we need health care reform in the US. McAllen can thank Atul Gawande, who focused on the city in an article in the June 1 New Yorker. If you haven't read the article, you should. It sure seems like everyone else has.

And we do mean everyone, starting with (apparently) President Obama and heading on down from there through the entire list of key figures in driving health care reform 2009.

Gawande got quite a shout-out for his article during a comparative effectiveness research conference hosted by Brookings June 9. Sen. Max Baucus mentioned it during his opening keynote, saying he was pleased to learn that President Obama himself also read it. He paused to ask if Gawande was in the room so that he could compliment him in person. (He wasn't).

Then Peter Orszag, head of the Office of Management & Budget and perhaps the single most important person shaping the health care reform agenda at the outset of the Obama Administration, delivered his opening keynote—and basically presented the Gawande article in Powerpoint form (and, much as we love the New Yorker, there is nothing like the White House seal next to an excerpt to make it seem that much more authoritative.)

Why is everyone talking about this article? Well, it probably helps that Gawande is himself part of the policymaking circle, at least as an "emeritus" member. He was on the Clinton health care reform task force in 1993, so he's hardly the typical ink-stained wretch (or is it pixel-dimmed?) when it comes to how his journalistic endeavors are perceived.

We've already mentioned him in the context of teeing up the health care reform debate, where an earlier New Yorker article offered some intellectual underpinnings for the notion that US health care reform will have to build on the US system, rather than import ideas from other nations. No US politician would dare suggest that there are any valuable models for health care to import from Europe; apart from Vermont's Bernie Sanders, most legislators in the US don't like being called "socialists. So that article helps make it okay that Orszag's omnibus overview of health care reform options (prepared while he was the head of the Congressional Budget Office) includes just one reference to an international model (and that is from Canada, which doesn't really count does it?).

But even without those connections, you can appreciate why everyone is talking about the latest article. In it, Gawande does the impossible—taking the hopelessly abstract ideas of regional treatment variations and overall health spending trends, and turning them into a specific, concrete, real-world case study: McAllen, Texas.

The article starts with the notion that McAllen is an outlier, generating much higher per capita health spending than the nearby city of El Paso. And yet, there are no obvious demographic differences between the two communities. Moreover, there are also no apparent improvement in health outcomes. (Indeed, by all indications, the community of McAllen ends up getting, if anything, worse care than El Paso, despite all the spending.)

The genius of the article, though, is how Gawande demolishes—one by one—the various possible explanations for the difference. (Our favorite: where he deals with the reflexive answer—also raised during the Brookings event—that overutilization is driven by fear of liability. After all, doctors in McAllen have no reason to fear liability any more than doctors in El Paso. Its not that liability isn’t a problem, just that it can’t explain the difference--which even the doctors Gawande interviews end up admitting.)

By the end of the article, the only conclusion left is that McAllen has fallen into a culture of overutilization, one that is at the very least enabled by a payment system that rewards entrepreneurial physicians who come up with ever-more instensive (and expensive) interventions for patients.

Is that in fact the reason for soaring health care costs (without commensurate improvements in outcomes) across the US? We have no idea.

There are certainly alternate explanations, including one possibility raised in a Wall Steet Journal editorial June 8, which suggests that apparent variations in health care costs are an artifact of the data: federal Medicare spending may vary considerable from locale to locale, but—the editorial argues—high Medicare rates may be matched by lower spending from other sources, meaning net costs overall do not in fact vary as much as Orszag and others suggest. You can see where the Journal editorial board is taking this argument: Medicare spending takes over markets and drives out more efficient private competition.

A reporter at the Brookings event asked Orszag about that hypothesis, and Orszag almost lept off the podium to respond. Cost patterns vary no matter who the payor is, Orszag said, citing large employers and Medicaid databases for further evidence that it is not just a Medicare phenomenon. He promised that he would have a "longer response" to the editorial soon.

Which brings us to our final point about McAllen, Texas. Again, we have no idea what the real cause of variation in health spending is, but this we do know: the people driving the health care reform debate are much more inclined to believe Atul Gawande than they are the Wall Street Journal's editorial board. Biopharma industry executives should bear that in mind as they plan their summer reading.

Rebranding Health Care Reform

News flash: The debate over comparative effectiveness research is over!

No, nothing actually happened--its just that the sponsors of legislation to create a new comparative research agency have responded to the controversy surrounding the issue by re-branding it. As we report in "The Pink Sheet" DAILY, Sen. Max Baucus has introduced a new bill that follows closely on his comparative research proposal from 2008--but now calls it "Patient-centered outcomes research" instead of "comparative effectiveness research" or "comparative clinical effectiveness research." Or, "cost-effectiveness research"--except no one in politics EVER calls it that.

Baucus joked about the change during a keynote address at a policy conference hosted by Brookings June 9 that focused on comparative effectiveness research. (Brookings obviously didn't get the memo on the new branding.) The Finance Committee chairman quipped that he would call it "Fred" if it helped defuse the emotion around the issue.

And there is alot of emotion. As our colleagues at On The Road note, libertarians protested the Brookings event, comparing President Obama's health care reformers--and Obama himself--to Nazis.

Anyhow, CER is out, P-COR is in.

Re-branding is fun, of course. In fact, we think its well under way in the effort to create an abbreviated pathway for approval of biologics, where what was once a debate about "generic biologics" was rebranded as "follow-on biologics." That satisfied innovator companies concerned about the implication of interchangeability inherent in the word generic.

Now policy makers are concerned about evergreening, so "follow-on" isn't quite right anymore. Which is why the European term "biosimilars" is now coming to the fore.

Still, we can't help but think that Congress should get some professional help in all this. After all, no one does branding as well as pharma. So maybe comparative effectiveness could become "National Organization to Direct Research for Understanding Good Science" (NO-DRUGS).

That's CER industry could get behind....

Nature Notes: IVB Podcast Emerges From Hibernation

Please imagine the hushed and dulcet intonation of Sir David Attenborough as we describe to you the reawakening of The IN VIVO Blog Podcast ...

Done imagining? Great. Now kick back and listen to Mike McCaughan and Ramsey Baghdadi do that thing they do where they promise to only rattle on for three minutes but then lose track of time and you've missed lunch. This week's topics? Where there's smoke, there's fire: FDA and Tobacco, Health care reform, and rumor-of-the-week.

While you're at it check out this piece from The RPM Report (The Threat of Reconciliation: Remembering the Part D Vote) and this here blog post on FDA/Tobacco. Not an RPM subscriber? Click here for a 30-day trial sub.

Oh and come back tomorrow for another podcast (when it rains, it pours) from Roger Longman and Ellen Licking.

For now, just click the button below to get started. And don't forget, you can access the podcast via iTunes also.

Shameless Euro-Biotech Forum Promotion

Shameless. We think it's just shameless how some otherwise self-respecting bloggers, providing valuable, balanced, editorially-independent and intelligent industry commentary, lapse into the occasional fit of promotional madness.

Don't you? We mean, it's as if we were to use this space to plug our forthcoming Euro-Biotech Forum in Barcelona. There'd be plenty to say: the event, held June 29-July 1 in the classy Hotel Arts Barcelona, is simply the most productive partnering meeting out there.

That's why it'll be teeming with senior dealmakers, from Pfizer, GSK, Merck & Co., J&J, Sanofi-Aventis, AZ and plenty more, including the leading Big Biotechs and European mid-caps.

And as well as kicking off--or closing--their next set of deals, Euro-Biotech attendees will hear our own guru Roger Longman's view on dealmaking's new drivers, plus get to question our hand-picked panelists during discussions covering alternative biotech financing, and Big Pharma's risk-mitigating strategies in dealmaking. (If we were so inclined we could even link to the full schedule.)

That's not to mention presentations from leading European/US mid to large companies, acquirers, investors and private equity, and a couple of fantastic receptions. (Keen to come, know you'd be crazy not to? We happen to know where you can get great conference packages.)

You see? You see how easily it's done, this shameless self-promotion thing? Be warned. That it's easy is no excuse.

How Close Avastin Really Came To Adjuvant Colorectal Cancer Use

Six events. Six additional cases of recurrence out of the 2,710 patients being treated in the C-08 trial of Roche/Genentech’s Avastin in adjuvant colorectal cancer, and there would have been an entirely different outcome.

Six more cases at the interim look and everyone would be using Avastin in adjuvant colorectal cancer patients. That’s how close the study was to meeting the early-stopping rule at one year, lead investigator Carmen Allegra said at Roche/Genentech’s on-site ASCO analyst event.

To be sure we hit this home hard enough: if just an additional six events had occurred at the one-year interim look, than the trial would have been stopped early. As the full analysis of data presented at ASCO made clear, at one year (not coincidentally, the time period that patients received bevacizumab), there was a significant benefit for the drug. A 40% advantage, to be precise. Lots of zeroes in the p-value to make the statisticians happy. More than enough benefit to drive utilization even before FDA approval.

Contrast that to the actual end of the study. At the pre-specified three-year endpoint, when there were 603 events, disease-free survival had dropped out of significance. The end result for Avastin was 77.4% versus 75.5% for chemo alone. But the eventual failure is old news, previewed in April and heard round the world.

The study investigators, and Roche/Genentech executives, were very keen on the one year results in unveiling the full dataset from C-08, stressing that the drug was extremely effective while being given and it was only after bevacizumab was stopped that the benefit diminished. Their take-away was that more study was needed with a longer duration of treatment with bevacizumab.

That’s not to say there wouldn’t have been valuable and appropriate questions raised about long-term tolerability and about the level of benefit versus alternatives and about the cost-effectiveness. However, it’s awfully close to taking what was ultimately a negative trial and finding it instead to be a runaway success based on an interim peek.

What the experience does show is exactly why long-term follow-up is important (both to see whether there’s a spike in hypertension, or hey, that benefit seems to disappear pretty quickly). It also underscores the value of designing a trial for a more clear-cut look at overall survival, which wouldn’t leave us with the potential variability from the disease-free surrogate. It’s also much harder to make a cost-effectiveness argument when you have data in hand to show that lives are saved.

For more on the implications of the C-08 data release, including the potential to establish Avastin as adjuvant therapy in other cancers (and possibly still colorectal), and the potential need for caution given tolerability and cost concerns, check out this week’s “The Pink Sheet” here and here.--Mary Jo Laffler

image from flickr user Shovelling Son used under a creative commons license

Squeeze That Fruit, Just a Little Bit Tighter: Sanofi’s New Life-Cycle Research Job

We don’t know whether the title (SVP, Industrial Development and Innovation) is Orwellian buracrospeak or in fact quite precise, but we were rather taken by the press release out of Sanofi Aventis today noting that its top international development man – Jean-Philippe Santoni – would now be boss of life-cycle management.

Were this the industry of even two years ago, the new job would have been quite a come-down for Santoni, a railroad siding far from the main train track to new drugs. But this is an industry which is recognizing it’s got far more in common with Coke, P&G, and McDonalds than with Big-Bet Big Pharma 1980 – 2007. That is to say: managers these days are learning to leverage only very modest top-line growth into faster bottom-line growth through cost-savings, bolt-on acquisitions, and rapid introductions of incrementally-improved new products. The traditional, high-risk, high-growth R&D-based model is gone, in case you hadn't noticed.

So.....companies need to squeeze a lot more Euros out of each asset. That means selling branded versions of off-patent drugs in emerging markets or, like GlaxoSmithKline with Ventolin, working with Wal-Mart to make it a store-brand generic. It also means revitalizing what has traditionally been an industry backwater: drug delivery and reformulation. Plenty of companies have life-cycle-managed plenty of drugs but it has never before now been the face of R&D, which has been all about the discovery of new compounds. (Nor has it before now been called 'innovation' as far as we're aware.)

By taking a guy like Santoni and giving him a job most self-respecting development execs would once have turned down before the offer left the boss’s lips, Sanofi is saying that it is in fact an industrial company powered by industrial innovations, which are by economic necessity different than scientific ones (like the scientific success/industrial failure rimonabant).

Should the trend catch on, we might even see drug companies split R&D in two: Novel Products R&D (largely outsourced, we’d imagine, to optionalize the spending) and Innovative Industrial R&D (think combination products, drug delivery, and single-isomer formulations). The goal of the latter: say a 50% rate of Phase II products making it through approval, up from what Booz & Co. and Credit Suisse say is 10% today.

Incidentally, the Sanofi announcement is very good news for drug-delivery companies, which have been flailing about, largely unsuccessfully, for the past 15 years or so (see, for example, this analysis). Their clients haven’t been particularly interested in their wares, at least at prices exciting to drug delivery’s investors. Now with a new economics in place at Pharma, all those arguments for reformulation and delivery will begin to sound just a trifle more interesting.

Image courtesy of Flickr user Omar Eduardo and used under a Creative Commons license.

ASCO Postscript: In Oncology, Cost is in the Hot Seat

This past ASCO meeting may have held few surprises on clinical data, but it certainly brought cost pressures to the forefront of oncology. The message: cost now matters in oncology treatment, just as it does in the rest of the pharma industry.

Oncology is still one of the least managed areas of specialty pharma and still not a top priority for cutting at most commercial payers, according to a survey presented recently at a managed care conference by Debbie Stern, a VP at the consulting firm Rxperts. Those payers are more concerned about rheumatoid arthritis, human growth hormone deficiencies, psoriasis and respiratory syncytial virus.

But payers are looking at spending trends and oncology pipelines ... and they’re scared. Oncology’s growth outstrips biotech’s overall and the pharma industry’s by a wide margin – Sales to pharma customers (hospitals, doctors, pharmacies) are growing at 8.6% this year, compared to 2.8% for biotech and flat-to-slightly-down for pharma overall, according to IMS Health. Lots of expensive new oncology drugs keep patients alive longer (if only a few months longer) and offer them a better quality of life.

As a result, the knives are getting sharpened. It’s been a slow process, mostly to-date led by the federal government, which beginning in 2004 clamped down on the amount it reimburses doctors for administering drugs in their offices. Commercial plans are following hesitantly, but they’re getting tougher, both on doctors and patients.

The upshot: doctors are getting less money for providing services to patients and therefore not able to forgive bad debt or lower bills for low-income patients. As for consumers, payers are hitting them with higher cost sharing, even as drug prices rise overall.

So how are manufacturers responding? Chiefly, by making sure patients can get the high-priced drugs, even if reimbursement is unwieldy. To help the process, they’re expanding programs that help patients cover the cost of the most expensive treatments, and also providing advice and guidance for physicians beleaguered by ever-changing reimbursement policies. The latter’s important because oncologists pay up front for drugs they administer in their offices, and then get paid by insurers for the cost of the drugs and their services. Supporting doctors is also important as oncologists talk more about cost with patients, as discussed in this Pink Sheet story.

What about price cuts? Isn't that what patients and doctors really want? Not happening, at least in the US and at least so far. If companies are spending lots of money to expand their patient access programs – reliable stats don’t exist, but consultants say the trend is growing—why don’t they de-emphasize those programs and just cut prices?

Because no matter how much they cost, patient access programs are more attractive than simply lowering prices on many drugs because even if the price of a $100K drug was slashed in half, patients still couldn’t afford it, points out Richard Ford, director of reimbursement consulting at AccessMed, a division of US Oncology, which runs patient access programs for pharma manufacturers. In other words, pharma gets more revenues from charging $100K then helping patients cover their 20% out of pocket expenses, he explains.

As for payer angst—pharma is addressing payers’ concerns by expanding its managed markets groups, which call on payers and try to negotiate the tricky waters linking providers, payers, and manufacturers. Pharma’s also paying more attention to getting its drugs listed on compendia, which helps gain payer support, particularly for off-label uses.

In the US, at least, however, pharma has yet to offer the creative kinds of risk- and cost-sharing options that it is engaged in the UK, i.e. along the lines of Merck-Serono’s tough new deal with the UK’s National Institute of Clinical Excellence for its cancer treatment Erbitux (cetuximab). Granted, the Merck-Serono deal (written up here in The Pink Sheet DAILY) takes some getting used to, and the company’s back was against the wall – the reimbursement agency had already issued negative opinions twice on Erbitux.

The industry, however, doesn’t seem to be particularly proactive in taking some other, potentially less drastic, steps US payers say they want, according to the Rxperts survey: namely, higher-quality data on survival benefits and outcomes—and preferably including information on cost effectiveness.

If industry doesn’t step up with something along those lines, it should be prepared to hear more from payers.--Wendy Diller

image by flickrer josefsilver.com used under a creative commons license

While You Were Watching Your Sugar

Or maybe instead, while you were skipping sessions at ADA to get sugar-coated beignets at Cafe Du Monde. Either or. Mmmmmmmmmmm.

In any case we've got your weekend wrap-up below, a few morsels of general industry news sprinkled with the sweet taste of clinical diabetes announcements. Or you know, the other way around.

While you were should have been sweeping the Dodgers ...

• Aileron, a biotech developing a new class of molecules it calls 'stapled peptides', raised a $40 million Series D. What's particularly noteworthy is the participation by SR One (GSK's corp. VC arm), which led the round, as well as Lilly Ventures, Novartis Venture Fund and Roche Venture Fund. For the kind of analysis that predicts deals like this, see this May START-UP feature by Ellen Licking.
  
• ADA: From late on Friday, a new GSK-sponsored study, RECORD, says Avandia doesn't up heart-attack risk. Not everyone is sold. Hmmm, we wonder who might have a comment. According to a WSJ report: “The Record trial is seriously flawed,” Nissen said, adding that there weren’t enough patients who remained in the study to say conclusively that the drug doesn’t pose a high risk for heart attacks and other cardiovascular problems.
  
• ADA: GLP-1 candidate from GSK, Syncria, better than Byetta in Phase II trial. Good enough for a major Phase III program, anyway. Reuters has the wrap up here.
  
• ADA: Meanwhile, Novo's liraglutide was beating up on Sanofi's Amaryl. Details on that two-year study here.
• ADA: Hi, we're from Boehringer Ingelheim. Did we mention we're in diabetes now?
• The NYT Magazine on the challenge of passing health care reform.
• EHA: ADA wasn't the only game in town this weekend, depending of course on what town we're talking about. At the European Hematology Assn meeting in Berlin Calistoga Pharma touted new results on its PI3k inhibitor.
  

image by flickr user jasonrowland.org used under a creative commons license

DotW: Open Your Mind

To the possibilities...

The week started off on a positive note with the interesting news that AstraZeneca and Merck had come together to conduct a clinical trial combining their two promising but early stage oncology assets. Can you imagine? Two pharmaceutical companies actually pooling assets (see below).

While we are more interested about what potentially could come next--will this lead to future pipeline sharing deals, for instance?--we admit to being impressed by the news, and are almost willing to say that the tie-up counts as one of this year's most interesting deals (the other being the GSK/Pfizer joint-venture in HIV, of course).

Who else opened their minds this week? Shareholders at Biogen Idec seemed swayed by the arguments of "Team Icahn", awarding at least one board seat to the dissident shareholder group. Alex Denner, the managing director of Icahn Partners, will definitely get to participate in regular Biogen Idec confabs. No word yet on whether Richard Mulligan--the other Icahn supporter--has also won a seat at the table. (All we know is someone is taking a Mulligan here.)

Elan investors certainly see the hope of an impending sale after a week that was rife with rumors. First BMS was interested in a minority stake and then they weren't. On Thursday, the Financial Times reported that Pfizer was sniffing around the biotech. It's not the first time the New York behemoth's name has been linked with Elan. Why, pray tell, would Pfizer, still embroiled by the integration of Wyeth, want to purchase the company? Maybe it likes the data associated with Elan's Phase III mAB for Alzheimer's disease, bapineuzimab. Thanks to the Wyeth purchase, it already owns a piece of the molecule anyway. If the data are stellar, why not take the risk and own it all? And if they aren't? We assume Pfizer will be on to its next acquisition target by then anyway.

Novavax may open its mind to taking advantage of the uptick in its share price by raising additional money. Investors have swarmed into the biotech, in part because of the company's novel technology to develop a vaccine for the H1N1 flu strain. An agreement with the National Institutes of Health to evaluate a potential vaccine, announced Friday, only added to the excitement.

See? The possibilities are endless when you just open your mind and read...

AstraZeneca/Merck: Does the tie-up announced Monday June 1 between AstraZeneca and Merck to test a combination of two early-stage oncology candidates represent a more enlightened approach to deal-making? It's too soon to tell given the limited nature of this first collaboration, which pairs Merck's MK-2206, an AKT inhibitor, with AZ's mitogen-activated protein kinase 1 blocker, AZD6244 (also known as ARRY-886) in a soon-to-commence Phase I safety and tolerability trial. MK-2206 is currently in Phase I trials as a monotherapy; AZ's '6244 in a bit further along, having completed several Phase II studies. Both represent the most advanced molecules in their respective classes.

The very fact that the tie-up happened at all is proof that the industry is taking an important step forward in how it thinks about building innovative pipelines (though we would have been more impressed if the firms' business development groups had come up with the concept). In what is sure to become one of the most repeated stories on the origin of a partnership, the pact has its roots in a security line in the Dublin airport back in 2007. Somewhere between removing their shoes and coats and placing their laptops on the X-Ray machine, the two scientists got to chatting about how sensible it would be to collaborate given the increasing importance of combination therapy in oncology. Eighteen months later the deal came to fruition, with the blessing of Merck's chief strategy guru Mervyn Turner and AZ's BD ace John Goddard.

The reason so few Big Pharma-Big Pharma development deals get done is that they're very tricky. Issues related to control, valuation, and overlap with other, non-partnered projects must be hammered out before two large companies can come together in even basic ways. Indeed one reason it may have taken so long to forge this seemingly simple pact is that both Merck and AZ are developing competing MEK and AKT inhibitors. With multiple targets in each pathway and the potential to be used to treat a number of different cancers, the possible variations on a deal (it is not as well known as Brahms's famous opus) were "overwhelming", said Merck's Turner.

As a result, the companies are starting slowly, taking a step-wise approach to collaboration that need not go beyond this Phase I program. According to Turner, "We decided, let's start with the easy part, work out how we'll do these experiments together in patients in Phase I, and if that succeeds, we'll go on to the next part," he says. If the eventual goal is some sort of fixed-dose combination, the companies will eventually have to jump in with two feet, perhaps partnering on multiple compounds or even entire pathways.--Christopher Morrison

GlaxoSmithKline/Concert Pharmaceuticals: This deal was heavy, man. Just weeks after announcing it had been granted patents by the USPTO, Concert Pharmaceuticals inked a deal with GlaxoSmithKline on June 2 to gain access to the biotech's deuterated technology. The biobucks were sky-high, but the upfront GlaxoSmithKline agreed to pay was quite down-to-earth: just $35 million, which included $16.7 million for equity that was priced at a similar level to shares Concert issued when raising its $37 million 2008 Series C. In exchange, the big drugmaker gets option rights to multiple Concert projects, including CTP-518, a deuterated version of Bristol Myers-Squibb's HIV protease inhibitor atazanavir that is scheduled to enter Phase I trials later in 2009.

Like most of GSK's previous option-deals, the Big Pharma can buy into a program at clinical proof-of-concept (generally post Phase IIa but in the case of '518 post Phase I). Concert will also create deuterated versions of three additional molecules for GSK, and hand those off after lead optimization. The deal's milestones total more than $1 billion and are heavily weighted to the three option candidates, says Concert's chief business officer Steve Bernitz. What's more, the majority of the payments are for clinical and regulatory accomplishment, as opposed to sales-based payments. Concert will get a double digit royalty on compounds from its pipeline and an undisclosed royalty on deuterium-containing molecules from GSK's pipeline.

Replacing hydrogen atoms with deuterium atoms (hydrogen atoms saddled with a neutron) may be the ultimate in life cycle management since it allows for the creation of new chemical entities that get around existing composition-of-matter IP. And it's a low risk approach to drug development, since "it does not change the physical characteristics of a drug," president and CEO Roger Tung, PhD, told IN VIVO Blog. Because deuterium forms stronger bonds with other atoms in comparison with hydrogen due to its greater mass, Tung believes deuterated versions of medicines are likely to be metabolized differently, an important fact that can potentially affect safety, tolerability--and potentially efficacy. While this has yet to be proven in the clinic, it could mean that certain "problem" drugs might be salvaged by the substitution of deuteriums for hydrogen.

Interestingly, given the importance of '518 to the deal, one might have assumed that Bristol Myers-Squibb was interested. Tung confirms that Concert talked to BMS prior to inking the pact with GSK, but it's unclear whether BMS was ever in the running for the compound. BMS's version of atazanavir, Reyataz, remains on patent and will likely still be protected by the time Concert's '518 hits the market.--Christopher Morrison

OrthoBiotech (Johnson & Johnson)/National Cancer Institute: Topping off a busy day Thursday in which the diversified drug maker touted its robust late stage pipeline, Johnson & Johnson's OrthoBiotech division announced a five-year cooperative research and development pact (otherwise known as a CRADA) with the National Cancer Institute. As NCI's involvement implies, the pact is focused on developing novel cellular immunotherapies as potential treatments for a variety of cancers including melanoma. Steven Rosenberg, who is chief of NCI's surgery branch, will help lead the research effort.

The deal is interesting on a number of levels. It continues to show J&J's commitment to doing deals with a wide variety of players, from consortia to academic collaborators to industry groups. As "The Pink Sheet" DAILY notes, this external focus mirrors an industry-wide trend. (Recall GSK's efforts to biotech itself and Lilly and Merck's FIPNet strategies.) J&J's worldwide chairman for pharmaceuticals Sheila McCoy echoed this sentiment in her comments at the drug maker's R&D confab, noting such deals "allow you to diversify. The trend is to look at consortia in certain areas... [There's] a lot of discussion about how to share capabilities." In January , J&J's Janssen unit announced a deal with Vanderbilt University; in March, Centocor signed a deal with the University of Michigan.

Diversity in terms of both molecules and therapeutic approaches is important, but so is curbing risk. And what could be more risky--the apparent success of Provenge notwithstanding--than cancer immunotherapy? NCI's Rosenberg is a pioneer in the field, working in recent years to develop technologies to alter a patient's T cells to express specific immunity against cancer cells. Despite the controversy surrounding the space, OrthoBiotech has also dabbled in cancer immunotherapy, developing an approach designed to stimulate a patient's immune system to recognize and attack cancer cells via the administration of tumor antigens and other materials. Now Rosenberg's lab will conduct a clinical trial in melanoma patients using OrthoBiotech's proprietary technology.

"This public-private partnership represents an extraordinary opportunity to bring together complementary and substantial expertise and resources from two groups with the common goal of advancing a highly promising new modality of therapy for patients with cancer," said Jay Siegel, chief biotechnology officer of J&J's Pharmaceuticals and Medical Devices and Diagnostics businesses.

Microsoft/Merck: Ever since Merck announced in October 2008 the closure of Rosetta Inpharmatics, a genomic-information software company it purchased in 2001 for $576 million, execs have speculated about the ultimate fate of the bio-IT group's assets. Speculation only increased in February after Stephen Friend, Rosetta's founder and one of the prime defenders of these kinds of tools, announced he was leaving Merck to found Sage, a new, not-for-profit, open-source initiative that will develop biological networks across tissues and organs that model disease. (For more see this March START-UP story and this April IN VIVO piece. )

Now we know. On June 1, Microsoft announced it was buying "certain assets"--code for some but not all of Rosetta's powerful software. According to genomeweb's BioInform, the deal centers around Rosetta's Resolver, Elucidator, and Syllego programs, although financial details of the deal were not disclosed.

Why are we covering it? Because the deal marks an important step forward in Microsoft's quest to play in the life sciences. And Microsoft is big enough and creative enough (notwithstanding the ludicrous decision to saddle its new search engine with the unfortunate acronym But It's Not Google) that it must be taken seriously. Microsoft plans to incorporate the genetic and genomic data-management software into Microsoft Amalga Life Sciences, which helps research organizations assemble data from disparate platforms that can be located internally or externally. Merck will remain a contributor as well. According to the WSJ, Merck will provide strategic input regarding the program's use and will become an Amalga customer.

AstraZeneca/Abbott: On June 4, AstraZeneca and Abbott announced a co-promotion agreement for their investigational Crestor/TriLipix compound, as well as their submission of a new drug application with the FDA for the product in mixed dyslipidemia (basically a combination of two or more lipid abnormalities including high LDL-cholesterol, high triglycerides and low HDL-cholesterol.)

The co-promotion extends the two drug makers' existing commercial relationship--the original deal was inked in 2006--ahead of an FDA decision on the combo product, which will be marketed as Certriad if approved. TriLipix, a delayed-release fenofibrate approved in December 2008, is Abbott's play to build on the success of the older fenofibrate brand TriCor.

As "The Pink Sheet" DAILY writes, Certriad is an important product for both Big Pharmas, but especially Abbott given that TriCor will face generic competition in just two years. As part of the agreement, AstraZeneca gains non-exclusive rights to sell TriLipix alongside Abbott in the U.S., excluding Puerto Rico. Abbott agreed to co-promote AstraZeneca's Crestor under similar terms last August.

The American Heart Association estimates that about 34 million people in the U.S. are affected by mixed dyslipidemia. But despite this huge opportunity, the drug will face an increasingly competitive market for similar fixed-dose combination CV products. For example, Daiichi Sankyo is developing a triple combination product combining its antihypertensive Azor with hydrochlorothiazide, and Merck and Schering-Plough have a combination of Zetia and Pfizer's Lipitor in development.

(Image courtesy flickrer mythic_moonlight, used with permission through a creative commons license.)

Bump in the Tobacco Road: Reimportation Returns in FDA Bill

Chairman Henry Waxman (D-California) is very close to achieving one of his objectives stretching back more than a decade: granting explicit authority for the Food & Drug Administration to regulate the marketing and development of tobacco products. The Family Smoking Prevention and Tobacco Control Act (HR 1256) passed the House on April 2 by a commanding 298-112 vote and was cruising toward Senate passage this week.

But then Sen. Byron Dorgan (D-ND) hauled out one of his long-term favorite projects (drug reimportation) and created a nasty hurdle in the final stretch of Waxman’s long journey. Dorgan (D-ND) proposed the “Pharmaceutical Market Access and Drug Safety Act of 2009” on June 2 to be introduced as an amendment to the anti-smoking bill. Dorgan has five of long-time allies on the issue: Olympia Snowe (R-ME), John McCain (R-AZ), Debbie Stabenow (D-MI), Bernie Sanders (I-VT) and Amy Klobuchar (D-MN).

There is an interesting irony for Waxman as Dorgan tries to ride the success of the smoking bill. Waxman has never been a proponent of permitting drugs from lower cost markets to be imported to the U.S. as a cost control measure. That approach has been treated by Waxman and other prominent Democratic leaders in the health area as a distraction from more direct ways to address drug prices and a threat to FDA’s ability to protect quality manufacturing for pharmaceuticals.

If Dorgan can link drug reimportation onto the tobacco bill, Waxman may be faced with having to accept a provision he has fought for years if he wants to move forward with one of his top public health priorities.

Experience says that Dorgan will fail to attach reimportation in any meaningful way. Advocates for a strong FDA are watching the Dorgan amendment effort with worry and distaste. Adding tobacco authority and working to improve food control are big projects by themselves. FDA doesn't need to try to undertake the complicated system for assuring safe imports of drugs marketed in Canada or elsewhere. Congress has foiled the reimportation attempts many times in the past or added provisions that made in difficult or impossible to implement. But like Waxman’s tobacco crusade, reimportation seems to be an issue that won’t go away.

The environment around the reimportation debate is changing also. When the proposal first came up, opponents were able to raise the convincing threat of unsafe or poorly manufactured products from outside the US slipping into the domestic drug supply if reimportation were passed.

However, with many manufacturers outsourcing production of active ingredients to a wide variety of low-cost manufacturing locales, they are effectively eroding their own defense-of-quality argument. Domestic suppliers (brand and generic) have had enough well-publicized problems assuring the quality of their products with components from overseas to create a more favorable environment for reimportation. It is one of those Congressional pet projects which might linger around long enough to find the right time for enactment.

Kind of like FDA regulation of tobacco.

All In The Family: Genentech and Roche Together At ASCO

In the immortal words of one Archie Bunker those were the days, weren’t they? Back when biotechs were biotechs (small and innovative—and usually cash poor) and pharma companies were pharma companies (big and blockbuster-focused and hugely profitable), everyone knew their place in the industry. But the disappearance of the DNA ticker symbol has made things so much more confusing. Should we think of Roche as pharma or biotech? Is Genentech a stand-alone biotech within Roche or the Swiss pharma’s future?

In one of their first appearances together since Roche officially took Genentech private, the two drug makers chose to make a big splash at the American Society of Clinical Oncology. (The Roche-Genentech business development dynamic duo of Joe McCracken and Dan Zabrowski also stepped out at BIO. Look for an indepth Q&A in a coming issue of IN VIVO.)

And what a splash they made. The newly consolidated Roche-Genentech oncology portfolio is soooo big that the industrious executives at the newly blended company couldn’t fit it into one night.

Indeed, the two organizations dominated ASCO, presenting 12% of the entire scientific content in various break-out sessions, plenaries, and posters. But it was the two-night event aimed at analysts—four hours of oncology updates—that illustrated what the future might look like for Rochetech (or is it Genenroche? It doesn’t have quite the same ring as Wy-Pfi, does it?)

The IN VIVO Blog couldn’t help but see the occasion as a wedding of sorts, with the requisite awkwardness and strained politeness of a rehearsal dinner on full display. (We aren’t revealing the identity of the drunk uncle.) The “head table” on stage was loaded 8 across with managers. And by night two, Roche felt compelled to put up nameplates—a move necessitated by the fact that analysts typically follow either Roche OR Genentech but not both and so might not have a sense of the cast of characters.

Much of the first night was spent rehashing the failed adjuvant colorectal cancer trial for Avastin, C-08. (There’s a slight possibility you’ve already heard about that, but see “The Pink Sheet” DAILY coverage here.) The firms also talked about new uses for old drugs – Herceptin’s move out of breast cancer with the ToGA trial in gastric cancer – and some new offerings from the early stage pipeline, like hedgehog inhibitor GDC-0449 and the BRAF-targeted PLX4032 partnered with Plexxikon. (Check back with the DAILY and “The Pink Sheet” in coming weeks for more coverage.)

But time was also spent addressing two particularly large elephants in the room: the on-going Roche/Genentech integration; and the impact the C-08 trial failure had on both the deal offer and the newly combined organization’s bottom line. Outgoing Roche head of U.S. pharma Bill Burns gave a finely orchestrated bit of messaging as he tried to dispel certain misperceptions.

“Since we are all sitting together as a united family now, and I know that this may be something in the back of many of your minds, I want to lay to rest two or three elements I think the mischief makers in the media were playing on in the run up to the family coming together.” (Us? Make mischief? Your Honor, in our defense, Roche made it fairly easy to categorize “the family” as dysfunctional.)

Burns delved first into continued questions about the ability of Genentech to remain an independent entity with its traditional characteristics of a quirky culture, high science, and individually-driven success. Ever since Roche announced its hostile bid for Genentech last July, that fear has been one of the brightest issues burning. Noting incessant references in the press to questions such as “Will people stay?” and “What will happen?” Burns emphasized the quick steps Roche took to establish a management team.

IVB cannot tell a lie. Roche did in fact move swiftly—within weeks of the disappearance of the DNA ticker came the April 14th announcement outlining changes at Genentech. But what Burns conveniently forgot to mention is that those changes included losing some of Genentech’s most talented leaders: Arthur Levinson and Susan Desmond-Hellman stepped down from their roles as CEO and Product development president, becoming mere advisors. A few weeks later Desmond-Hellman confirmed what media had speculated: she would be leaving Genentech to take the reins as UCSF’s chancellor, a position that starts in August.

Burns also pointed out that Roche has followed up on its intention to keep some of the innovation coming out of the Genentech labs operating “as is” in South San Francisco. (We are willing to bet however, that G’s researchers would have given up their iphones and their apple computers if it would have kept Levinson and Desmond-Hellman on board.) Moreover, said Burns, operations are continuing as normal under the leadership of Richard Scheller and his more than able assistants, Marc Tessier-Lavigne and Andy Chan.

“The team is fully in place and we have given them also the elements like business development that are required to make sure that accessing some of the bright new elements, either enablers in science or early programs, can continue,” he told investors.

Along with those tortured phrasings, Burns unveiled the creation of an internal acronym that describes Genentech’s function in the Roche family: “GReD”, for Genentech Research and early Development. IVB’s reaction? The “pharmafication” of Genentech is complete—it has its own nutty alphabet descriptor that is just one letter shy of the word greed. (Defn. Greed: (noun) the excessive desire to acquire or possess more—especially more material wealth—than one needs or deserves.)

Burns also tried to “put on the table and lay to rest” allegations that the then-pending C-08 trial results played a critical role in both the timing and the price of Roche’s even more hostile move in January, when it lowered its offer price from $89 to $86.50. Acknowledging that the potential for Avastin use in the adjuvant setting had “raised the rates” and was clearly “an inflection point for the then independent Genentech stock,” he maintained it was just one more data point Roche execs used to calculate their valuation. Acknowledging that the C-08 trial results were significant, Burns asserted “you do not go into a $46 billion privatization on the basis of one clinical trial.”

--by Mary Jo Laffler and Ellen Foster Licking

Saving Money on Volume: Obama Advisor Talks Cost Control With ASCO

Sometimes less is more. At least where healthcare reform and oncology are concerned, bringing volume down is the best path to reducing healthcare costs, according to Obama administration health advisor Ezekiel Emanuel.

Emanuel--an oncologist, a senior advisor in the Office of Management & Budget, and brother of White House Chief of Staff Rahm Emanuel--addressed a rapt audience at the American Society of Clinical Oncology annual meeting in Orlando, Fla. His May 30 presentation featured a polished presentation painting a vivid picture of escalating health care costs in a slide show reminiscent of Al Gore’s “An Inconvenient Truth.”

In this case, the inconvenient truth is not climate change, but the need to contain health care costs. “We cannot – in a responsible, sustainable way – get to universal coverage unless we’re going to take cost control seriously,” Emanuel said.

Emanuel boiled it all down to a simple equation: the combined pressures of price and volume combine for a constant increase in health care costs. That means continued, unsustainable growth unless there is a direct effect on price or volume.

Driving prices down would be great, he said. But for now, at least for Emanuel and for the medical practitioner audience at ASCO, the focus is volume – specifically, reducing unnecessary services. “I go where the money is,” he explained afterwards. Most of the increase in health spending comes from volume, not price, so that’s the appropriate target. “By and large affecting price will have … a relatively small effect" on overall cost trends.

"If you really want to hit the big time and bend the curve so it doesn’t go up exponentially, you’ve got to do volume," Emanuel says. "There’s just no two ways about it."

In oncology especially, the payment system tends to reward utilization rather than encourage evidence-based practice decisons. For instance, Emanuel argues, there should be a reduction in imaging and other screening practices since evidence doesn’t support a distinction in survival with high intensity follow-up.

For biopharma companies concerned about the prospects of price controls, Emanuel's analysis suggests attention will be focused elsewhere. Drugs, though a high value target for public and media attention, just are not a big enough driver of cost to focus on when it comes to generating dramatic reductions in healthcare spending in the U.S. (Emanuel noted the widely accepted estimate that prescription drugs are only 10% of overall healthcare costs.)

That’s not to say there won’t be some push for realizing the gains that can be squeezed out of the pharmaceutical slice of the pie. The savings on price are relatively small "but they are not negligible," he says, estimating that as much as 20%-25% of growth trends are affected by price.

Emanuel stressed generic utilization can make a difference. In cholesterol medicine, he says, 95 percent of patients can get as much benefit from the off-patent simvastatin as from the much more expensive Lipitor brand. Or, he suggested, generic albuterol versus branded asthma inhalers. “There you can make a difference in price.”

Then there is also the issue of utilization of high-priced therapies. Emanuel cited a favorite example--the low level of evidence to support use of Genentech’s Avastin – an argument he makes in his book Health Care Guaranteed. (See “The Avastin Dilemma: Two Personalities and Two Points of View on Cost Effectiveness,” The RPM Report, April 2009).

However, he added, if Avastin were a home run like the benefit from HER2-targeted breast cancer treatment (Genentech’s Herceptin), then it would be worth paying “almost anything.”

It’s a hard sell to think in terms of cost to society when there’s an individual patient looking for their best hope for life, and an especially hard sell in oncology where patient advocacy organizations push hard for access to experimental therapies. But Emanuel doesn't shy away from hard truths, pointing out that all the innovation in oncology still hasn’t cured the disease.

Of the seven years that have been added to overall life expectancy since the 1960s, only two months can be attributed to new cancer treatments, Emanuel says. In contrast, he says, the impact from use of diuretics in hypertension can be measured in years.

For biopharma companies hoping to sell the next Avastin, the notion that health care reform advocates are touting the virtues of diuretics may be the most inconvenient truth of all.

-Mary Jo Laffler (m.laffler@elsevier.com)

GSK Option Deal With Concert Is Just Like Lots of Other GSK Option Deals, Only Heavier

a hydrogen isotope AND a Canadian death-metal band? you betcha.

It seemed a few weeks back when Concert Pharmaceuticals announced they'd been granted patents by the USPTO on deuterated versions of rimonabant and mosapride that one kind of validation could quickly lead to another.

As Derek Lowe has pointed out, the molecules crossed a major threshhold: if one could be patented, why not the rest? Today the other shoe dropped: GSK has entered the fray with another one of its many option-alliances, and Concert's technology has passed yet another test.

GSK paid the biotech $35 million up-front (which includes $16.7 million for equity priced consistent with the price of the shares sold in its $37 million 2008 Series C) in exchange for options on three Concert projects: CTP-518 (a deuterated version of BMS's atazanavir HIV protease inhibitor that is scheduled to enter Phase I this year), a preclinical compound in chronic kidney disease, and a third undetermined compound. Like most of GSK's option-deals, the Big Pharma can choose to opt into a program at clinical proof-of-concept (generally post Phase IIa but in the case of '518 post Phase I).

Concert will also create deuterated versions of three additional molecules for GSK, and hand those off after lead optimization. The deal's milestones total more than $1 billion and are heavily weighted to the three option candidates, says Concert's chief business officer Steve Bernitz. What's more the majority of the payments are for clinical and regulatory accomplishment, as opposed to sales-based payments. Concert will get a double digit royalty on compounds from its pipeline and an undisclosed royalty on deuterium-containing molecules from GSK's pipeline.

Replacing hydrogen atoms with deuterium atoms (hydrogen atoms saddled with a neutron) essentially creates new NCEs, getting Concert around existing composition-of-matter IP. But "it does not change the physical characteristics of a drug," president and CEO Roger Tung, PhD, told us today. After leaving Vertex where he led that company's drug discovery efforts (and co-invented the successful HIV PIs Lexiva and Agenerase) Tung co-founded Concert with Richard Aldrich and Christoph Westphal in 2006, and has largely kept things under wraps until recently (though we were sufficiently intrigued back then to include them in our inaugural A-List of that year's top Series A financings). "So we're retaining the way a drug interacts with receptors and the pharmacology of a drug, with respect to its positive effects and selectivity profile, is unchanged."

But, says Tung, deuterium forms stronger bonds with other atoms in comparison with hydrogen, because of its greater mass. And that increase in bond strength can change the rate of a drug's metabolism and the relative ratio of its metabolites, which in turn can affect the safety and tolerability and even efficacy of certain drugs, he says.

All this remains to be seen in the clinic, but if it works out, Concert's deuteration approach (also embraced by biotechs like Auspex and Protia) seems to be the ultimate in life-cycle management. In an interview both Tung and Bernitz kept returning to the low-risk nature of the company's approach. "Generally we've been able to move from concept to the clinic in about two years," says Bernitz. And Concert doesn't take on "the risk of new biology" that many pharmaceutical companies are now embracing. "That lower risk-approach to drug discovery and development is recognized in this deal," given the substantial terms Concert has garnered for its preclinical programs, he says.

It seems logical that Concert's window for patenting deuterated versions of existing molecules is finite, perhaps now even closed since industry should be wise to deuterated drugs by now, though Tung doesn't see it that way. "Industry will take this up in the coming years, but we believe we have the poll position now and are the leaders in the use of deuterium."

And beyond deuterated versions of marketed drugs there are "tens of thousands" of compounds available that showed promise but for one reason or another did not become marketed therapies, he says. "I think we're going to be very busy for quite some time."

And so for now, what about Bristol-Myers? The company's Reyataz (atazanavir) remains on-patent and according to Tung will likely still be on-patent by the time '518 should be hitting the market. Though Tung says Concert talked to BMS prior to the GSK deal it's unclear whether BMS was in the running for the compound. For Concert, finding a partner with strength in HIV was important.

A bonus? "The deal validates that [the originator] isn't the only company we can work with" when dealing deuterated compounds, says Bernitz.

Off-Label Promotion … By HHS

Like everyone else, we get more email in a day than we can possibly read, so sifting through the in-box is an exercise in triage and second-guessing. As in, “What were we thinking when we signed up for every HHS list-serve?”

Then there are days like today, when we saw the following gem glimmering in our over-crowded in-box:

Sender: US Dept. of Health & Human Services
Subject: Going Off-Label

Yeah, we opened that one. Given the billions upon billions paid (and to be paid) to settle prosecutions of manufacturers involving off-label use of medicine, we were keen to know exactly what HHS plans to do next.

Okay, so it turns out it was a link to HHS Healthbeat, a daily podcast for consumers, focusing on off-label use of medicine. (You can listen to the podcast here, or just read it—it's short—here).

“Everybody tells the patient to read and follow label directions. But sometimes the doctors themselves don’t. They prescribe a drug in ways – or for conditions – that the label doesn’t talk about,” HHS tells consumers.

Then some words of solace for those in industry who fear that off-label use is itself being criminalized in the context of recent enforcement actions: “That actually can be good for you. It’s called an off-label use, and the doctor may be acting based on the latest research.”

Now, HHS isn’t exactly encouraging off-label use. The podcast includes a quote from Agency for Healthcare Research and Quality Director Dr. Carolyn Clancy, who advises: “If it turns out that your doctor has given you an off-label drug, you should ask your doctor if the off-label drug is likely to work better than an approved treatment.”

Of course, that is also a question AHRQ can (and we assume will) help to answer, now that HHS has $1.1 billion to spend on comparative research…

While You Were at ASCO

Hey you'll never guess, but there was an oncology meeting down in Mickey-Mouse land this weekend. No, seriously. Small group of cancer docs, it flies below the radar. Yeah that's probably why you hadn't heard of it. Say it with us: Aaasssssccccoooooohhhhh. No, ASCO.

There have been announcements galore from the annual meeting, and some interesting discussions as well. Mary Jo Laffler reported last night on a compare and contrast of FDA and EMEA, where FDA's oncology chief Richard Pazdur observed “EMEA is not the FDA of Europe, and the FDA is not the EMEA of the United States.” And this morning we wrote that Merck and AstraZeneca are announcing a tie-up in the oncology space, a rather limited but still significant deal to test the industry's most advanced mek and AKT inhibitors together in an early-stage clinical trial. We'll have more on that deal in The Pink Sheet DAILY later this morning.

Did you take the weekend off (god forbid!)? Well then, get ready for an onslaught of oncology development news. While you were winning #250 ...

• Some non-cology news to cleanse the palate: WSJ reported late friday night that Elan was close to selling a minority stake to Bristol-Myers. Reuters follows that up with this update, which includes a rumor of a second suitor (no word if second suitor is positioned on the grassy knoll). [UPDATE: Or, maybe BMS isn't buying, says Bloomberg.]
  
• Herceptin boosts survival in Her-2 positive stomach cancer patients.
  
• That fluorinated version of Nexavar that Onyx isn't happy about? Seems to be working just fine, says Bayer.
  
• Calistoga's PI3k inhibitor advances through Phase I, with flying colors.
  
• Genentech has released full results of its C-08 trial of Avastin in the adjuvant colorectal cancer setting. Full coverage from The Pink Sheet DAILY, here.
• Good data in lung cancer from (separate) studies of Lilly's Alimta and OSI's Tarceva.
• Glioblastoma data on drugs from Merck KGaA and BMS/Exelixis look good.
• There are six hundred more press releases and probably six hundred more on the way. Tell you what, get the rest of the headlines here and check back in with us later today. More to come!

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

Merck/AZ Cancer Deal: Will Intra-Big Pharma Development Deals Move Beyond the Serendipitous?

Is that a mek inhibitor, sir?

Merck and AstraZeneca are expected to announce today that they're teaming up to test a combination of two early-stage oncology candidates. The companies are billing the deal as a first-of-its-kind collaboration--and fair enough: we can't think of another time two large companies have done this kind of deal with two molecules so far from the market.

The Big Pharmas will test Merck's MK-2206 and AZ's AZD6244 (a.k.a. ARRY-886, the compound was acquired from Array Biopharma in 2003) in a Phase I safety and tolerability trial. Costs will be split evenly, the program will be steered by a joint committee, and Merck is the sponsor of the trial.

The reason so few Big Pharma-Big Pharma development deals get done is that they're very tricky; control, valuation, overlap with other, non-partnered projects--these and other things present high hurdles for two large companies to come together in even basic ways. Of course there are plenty of reasons to take a stab at such deals--several of which are outlined in this February IN VIVO piece from Bain & Co. But if these alliances aren't discouraged institutionally, they're certainly not highly sought after either. In fact this deal came about not through any lets-be-friends business development outreach program at Merck or AZ, but by chance encounter.

"This was driven by two scientists meeting at an airport security checkpoint," Merck chief strategy officer and SVP worldwide licensing and external research Merv Turner told The IN VIVO Blog.

One scientist from Merck, one from AZ, they got chatting, and presumably between removing their laptops from their cases and putting their shoes back on, the special and awkward intimacy that comes from publicly surrendering all liquids and being patted down by a stranger wearing latex gloves worked its magic. WSJ's Ron Winslow has more color on the actual conversation, which apparently included that old chestnut "Are you the mek guy?"

"Of course through competitive intelligence they had some information about what each company was up to ... and they said to one another, there’s a compelling rationale for getting these molecules together," lets get the business development groups on the case, says Turner.

That airport rendezvous was in Dublin in November 2007. That it took more than 18 months to ink a deal to conduct a combination Phase I program says as much about the complexities of oncology drug development as it does the difficulties of intra-Big Pharma dealmaking.

Merck's MK-2206 is, according to Merck and AZ, the most advanced AKT inhibitor in development. AKT acts just downstream of PI3k in that important cancer cell survival pathway (the one generating all those deals lately); Phase I data on the drug were presented at this weekend's ASCO meeting. AZ's '6244 hits mitogen-activated protein kinase 1 (mek), an actor in an important parallel signaling pathway. Like the Merck compound, '6244 is further along than its competitors; the candidate has completed several Phase II monotherapy studies and its Phase II program continues apace.

A greater understanding of cancer biology, says Turner, should drive more deals like this one, where "the potential to short circuit what could otherwise be a long and combinatorial approach to finding the right pairs" of oncology therapies "becomes quite compelling."

There are over 800 molecules in development for various cancers. "We're learning more and more about the nature of tumorogenicity and the pathways involved and therefore how to select targets and populations expressing those targets ... and as we go forward into the new mechanism-driven approaches to tumor biology the rationale for combining agents which target complementary pathways becomes more clear," explains Turner.

Of course Merck is developing its own mek inhibitor and AZ its own AKT inhibitor, there are multiple targets in each pathway, and such compounds could be useful in a variety of cancers where the companies have individual ongoing programs, all which could complicate a more extensive deal.

"When we set out on this, to try to think through all the possibilities, we soon realized that the number of branches that arise if you try to construct a decision tree of all the things that might happen in development, it just becomes overwhelming," says Turner. So the companies are starting slowly, taking a step-wise approach to collaboration that need not go beyond this Phase I program.

We decided, "let's start with the easy part, work out how we'll do these experiments together in patients in Phase I, and if that succeeds, we'll go on to the next part," he says.

If the eventual goal is some sort of fixed-dose combination the companies will eventually have to jump in with two feet, perhaps partnering on multiple compounds or even entire pathways. But that need not happen at all. "The first goal could be to have each party arrive at the marketplace [independently], with a label statement that supports use of the other agent in combination," says Turner.

A small step, but a step forward, and the kind of thing that if repeated often enough could have some meaningful impact on drug development costs and speed to market, eventually advancing the standard of care in difficult diseases.

We presume this means taking another step, beyond chance encounters in airports or the DMV or even Starbucks. "If this works as advertised," sums up Turner, "we can think of it as a template for future similar deals."