Friday, July 31, 2009

The Effient Launch: Cracking the Door to Primary-Care Marketing

So will personalized medicine be the death of primary care? Maybe not. Maybe just the opposite.

In this edition of the IN VIVO Blog Podcast, Mike McCaughan, our editor-in-chief, gives a decidedly positive (albeit counterintuitive) spin to what some of us in the editorial group thought was a pretty obviously bad piece of news: Effient’s black-boxed approval last July 10.

Yes, Effient (prasugrel) had beaten the competitor, Sanofi/Bristol-Myers’ Plavix, in Lilly’s head-to-head pivotal trial (fewer heart attacks and strokes for Effient’s users, though more bleeding) but still, we wondered, would Lilly – which depends on Effient to get it past the Zyprexa cliff – be able to build much competitive momentum against Plavix while dragging along its black-box warning about bleeding? And even if it manages to gain that momentum, won’t it be stopped dead in its commercial tracks when Plavix goes generic in 2011?

Mike’s notion: that the black-box warning and mandated two-year REMS requirement create the basis for primary-care marketing success – thanks to pharmacogenetics. Not because the data suggests the right population to get Effient – but because it argues that a third of the population getting Plavix get no benefit from it (an argument the FDA evidently agreed with because it added it to Plavix’s label). Lilly reps thus get an FDA-mandated foot-in-the-door to talk to docs about Effient’s risks (and Plavix’s deficiencies)…and, within two years, face a generic with no marketing effort behind it that they will argue doesn’t work in a third of a very high-risk population.

So click below to hear Mike’s full explanation (or you can access the podcast via iTunes).

Image from Flickr user twenty questions and used under a Creative Commons license.

Thursday, July 30, 2009

Financings of the Fortnight: Sunshine Breaking Through?

No one we know would say that biotech’s financing drought is ending. Hardly seems possible.

But conversations are taking on--dare we say it-- a slightly more optimistic tone. The Nasdaq biotech index, for one thing, continues its upwards trajectory. Most of that performance, we admit, stems from good news out of big-cap players like Elan, Amgen, Gilead and maybe a few others. It’s not a sustained small-cap phenomenon – yet.

Certainly no one’s predicting the imminent opening of an IPO window (closest thing we’ve seen to a pharma IPO filing is Vitamin Shoppe).

Indeed, there are plenty of what we’d probably call financings-under-duress, the kind of deals both investors and companies have to do to keep fighting. Oxigene, for example, followed the Alexza pattern in buying back, at a discount, its financing partnership with Symphony Capital – saddling Symphony with a lot more stock in Oxigene, and thus a lot more risk. More upside, too, of course – but that wasn’t what Symphony’s model was designed for.

We’d also note that pharma continues to provide not merely the only exits for biotech, but a fairly substantial percentage of its financing, too. Corporate VC remains at center stage – with the Avila financing from the Novartis Option Fund only the most recent example.

But a few bits of unexpectedly good news are at least quickening the industry’s pulse. Human Genome Sciences surprised the market by meeting the primary endpoint in the first of two Phase III trials on Benlysta, the first lupus drug in years to actually show real clinical results. HGS acted fast and raised more than $300 million – the industry’s biggest common-stock offering since Vertex raised $320 million back in February. Orexigen, too, raised a not-too-shabby $75 million after it announced that its obesity drug Contrave had met virtually all of its clinical goals in its Phase III programs.

And deals like Amgen’s with GlaxoSmithKline on denosumab likewise indicate why biotech does have an argument or two in its long-term favor. GSK paid a ton of money for a relatively limited set of rights – indeed, most surprisingly, agreeing to split indications on the drug with Amgen (you’ll remember that Amgen virtually destroyed the split-indication deal nearly a quarter of a century ago with its EPO deal with Johnson & Johnson).

And for those cock-eyed optimists in the group, there is some talk about IPOs. Quiet talk, perhaps. But at least a few people have speculated about Portola, which thanks to big deals with Novartis and Merck, doesn’t have to worry about financing expensive later-stage trials for the next several years and can instead focus on advancing its earlier-stage programs. And should either elinogrel (with Novartis) or betrixaban (with Merck) prove particularly interesting, well, there’s a nice little tinge of acquisition in the air to entice an IPO investor.

So, on that optimistic note, let’s get to some of the more interesting deals we’ve seen over the last fourteen days.

Avila Therapeutics: In a deal that combines equity financing with an option on an early-stage research program, Novartis Option Fund led a $30 million Series B financing on July 27 for Avila Therapeutics, which uses its proprietary Avilomics platform to design and develop covalent drugs in the areas of cancer, autoimmune disease and viral infection (you can see our write-up from The Pink Sheet” DAILY, here). NOF is a $200 million fund that seeds innovative companies through initial and follow-on investments – the initial investment is coupled with a program option to provide early validation of the company’s technology. Avila says it will use the proceeds to advance its first program into clinical development – its lead programs are a protease inhibitor for hepatitis C (AVL181) and a molecule targeting the Btk kinase (AVL291), an emerging target in oncology and autoimmune disease. The Waltham, Mass.-based company did not say which of those programs would advance to clinical development first, and neither company identified the therapeutic target of the program for which NOF has option rights. Avila says its drugs work through protein-silencing – the molecules’ covalent nature enables them to bond strongly, selectively and resiliently to disease-causing proteins, theoretically producing superior therapeutic outcomes. The drug candidates’ covalent bonding also makes them effective against mutations in disease targets, according to Avila. Participating with NOF in the Series B were Avila’s original investors – Abingworth, Advent Venture Partners, Atlas Venture and Polaris Venture Partners. The four VC firms staked Avila with $21.3 million in Series A funding in 2007, and also made a convertible debt purchase this past May that initially brought Avila $5 million and eventually could yield $15 million. – Joe Haas

Limerick Biopharma: South San Francisco, Calif.-based Limerick recently raised $15 million in a Series C round with its existing investors to begin advancing its Cellular Transport Pump Activators into clinical development. Giving the company some additional credibility, Corey Goodman, co-founder of Exelixis and Renovis and more recently the head of Pfizer’s Biotherapeutics and Bioinnovation Center, took on the chairman’s job (he’s served on Limerick’s board since 2007). Limerick’s CTPAs offer promise both as chaperone therapies and in monotherapy for cholesterol disorders. Primarily, CTPAs are intended for adjunctive use with existing or experimental drugs to improve their side-effect profiles and efficacy by activating cellular transport pumps to redistribute drugs away from areas where they have adverse effects. In theory, this will minimize toxic side effects without reducing a drug’s intended activity. While testing its candidates in the areas of immunosuppression and pain, however, Limerick also discovered that CTPAs remove cholesterol from peripheral and pancreatic beta cells, lowering serum cholesterol and glucose. The company’s secondary goal, therefore, is to develop CTPAs as therapies for hypercholesterolemia and hyperglycemia. Founded by Wendye Robbins, a Stanford professor and former president of NeurogesX, Limerick has raised $35.5 million total since 2006. The July 15 Series C was led by OVP Venture Partners, which previously was known only for leading seed and Series A rounds. In addition to OVP, Limerick’s other returning investors include Altitude funds, Arch Venture Partners and Sevin Rosen Funds. The firm hopes the current round can provide funding through proof-of-concept of one of its lead programs – one is set to begin Phase I study in immunosuppression this year, while another that could enter the clinic in 2010 will be targeted at metabolic disease. – Joe Haas

Cognition Therapeutics: There are a few drugs on the market that treat symptoms of Alzheimer’s disease, but the goal is to actually stop disease progression. Along with the actual scientific challenge of figuring out how to treat the disease, there’s also the problem in testing candidates: trials for such drugs are expensive and long. Plenty of costly failures litter the way (like Myriad Genetics’s Flurizan in Phase III—closely following Lundbeck’s lost $100 million up-front payment in their deal for the candidate). But the medical need and economic opportunity for solving the Alzheimer’s problem keep producing big new deals. For proof, just see Pfizer’s deal for dimebon and J&J’s recent investment in Elan’s Alzheimer’s immunotherapy program including bapineuzumab. Financing for biotechs breaking into the disease-modifying arena is picking up too (see Satori Pharmaceuticals), and now Cognition Therapeutics has pulled down a $1.2 million Series A financing—through the sale of equity and conversion of notes--from investors led by Ogden CAP. Founded in 2007, the company is developing small-molecule inhibitors of toxic beta amyloid oligomers, which are associated with memory loss and neurodegeneration. The start-up’s drug libraries were licensed from California State University Channel Islands where they were designed by former Amgen medicinal chemist Gilbert Rishton, PhD, who is now Cognition’s chief scientific advisor. Rishton’s chemical conditioning method takes extracts from terrestrial and ocean plants and adds chemical reagents to produce the low molecular-weight candidates, which are eventually screened in cellular assays that monitor the toxic oligomer’s effects on biological functions in mature primary hippocampal neurons. Cognition was seeded in 2007 with $200,000 in funding from Pittsburgh Life Sciences Greenhouse, which also participated in the current round.—Amanda Micklus

OxiGene: On July 21 OxiGene announced two financing events that will keep it alive for another year -- through the third quarter of 2010. The company, which works on vascular disrupting agents, closed a registered direct offering that grossed $10 million. It sold 6.25 million shares at $1.60, a 20% discount based on the ten-day pre-announcement average, as well as short- and long-term warrants to purchase up to 5.6 million in common shares. It also managed to grab another $12 million by buying back Symphony Vida Holdings, an off-balance sheet entity created with private equity firm Symphony Capital Partners. In October 2008 Symphony provided Vida with $15 million in cash to support development of OxiGene’s Oxi4503 (combretastatin A1 diphosphate), which is in Phase I for solid tumors, and Zybrestat (fosbretabulin) in ophthalmology. At the time, Symphony granted OxiGene a four-year option to acquire Vida for twice the amount that Symphony invested in the entity. But Sympony would only make that money if OxiGene lasted that long. So OxiGene is issuing Symphony $12.5 million in stock to pay for Vida ($2.5 million less than Symphony actually put into the financing vehicle) to get the $12 million cash still in the vehicle -- with Symphony now into OxiGene a lot more deeply than it ever planned to be (it owns 44% of the biotech). More or less the same thing happened with Symphony’s original deal with Alexza – which likewise bought back the Symphony vehicle for a big slug of stock, giving Symphony a 23% stake.—Amanda Micklus

Image from Flickr user Magh and used under a creative commons license.

Wednesday, July 29, 2009

Viehbacher on R&D: Smaller Teams "Not Enough"

I couldn't help thinking Sanofi Aventis CEO Chris Viehbacher was having a bit of a dig at his old employer, GlaxoSmithKline, this morning. Check out this response to yours truly's question, after the 2Q results announcement, about what the French group is doing to re-invigorate its R&D: "If you think that just by creating a smaller team you make them more biotech-like....well, that's not enough, in my experience," he said.

Surely the veiled (or not-so-veiled) reference here is to the biotech-imitating drug performance unit structure at GSK, announced last year by CEO Andrew Witty (who, remember, nabbed the top-job off Viehbacher)? It's hard to imagine what other "experience" Viehbacher might be referring to--he joined GSK in 1988 after a stint at PwC.

"I don’t think [the R&D solution] is anything to do with structure. No one has found the answer yet, I don’t believe," he continued. (Ok, he's right there.) "We need to find a different way," Viehbacher continued.

What is that different way? Well, we won't know for sure until the third quarter, when the company plans to say more about how it's turning around its 13,000-strong R&D organization. From today's comments, though, expect a much more porous interface with academia and external partners (yes, big change there), less rigid (or perhaps no) budget and instead a more "grant-like" funding set up, and lots of stuff about culture, governance, and flexible processes.

For all of today's poo-pooing of structures, these are changing, though. In a June 2009 release announcing a new R&D model--and declaring the ambitious goal of becoming "the most effective R&D organization in the pharmaceutical industry by 2013" (take that, Glaxo!)--Sanofi Aventis talked about "grouping researchers in more productive structures", and strengthening “exploratory structures” that work in close collaboration with outside entities, and deploying reactive “entrepreneurial units” to encourage the emergence of innovation. The French group has already begun consolidating scientists at the same locations to foster intimacy (and, let's face it, to save costs).

Viehbacher's point, though, is that structural changes "should follow your vision," they should be the means rather than the ends. Doubtless GSK agrees with that, and, to be fair, this company's R&D experiment is just as much about cultural, process and governance change as it is about structure.

Indeed, for all Viehbacher's talk of a"'new way" (and I'd call it that, too, if I was running my own ship and wanted to stand out) there are more similarities between GSK's and Sanofi's (and indeed other Big Pharmas') R&D re-invigoration efforts than contrasts . Externalization, flexibility, entrepreneurial culture, increased accountability, more appropriate reward get the picture.

Given Viehbacher's 2013 goal, though, of course there's a race on to see who can find the best R&D model--driven perhaps as much by old rivalries as Big Pharmas' compelling need to sort out the innovation engine before everything goes OTC or generic.

Reassuringly, Viehbacher did today keep referring back to innovation as the heart of the company (although they and others, as we well know, are now officially "global diversified health care companies", not "innovation-driven R&D-based companies"). He also asserted that core pharmaceuticals would "always be more than half the company," despite--you guessed it--planned expansions in OTC and generics.

Image by Flickr user Nebbish1 and used under a creative commons license

Monday, July 27, 2009

While You Weren't in Cooperstown...

Or perhaps you were. You were certainly somewhere because we were dealt some extremely slim pickings in "While You Were" land this weekend so we're hoping everyone had a very nice time doing whatever they did whereever they were (including a few vacationing IN VIVO Bloggers).
But let's give a heartfelt congratulations to two people who WERE and will remain in Cooperstown--Jim Rice and Rickey Henderson. Jim Ed's induction into Baseball's Hall of Fame was long overdue but it's fitting that he stood alongside Henderson, a fellow left fielder who cinched a place in the hall many years ago.

Our only regret is we weren't in Cooperstown to cheer them on, and here are some people who probably also couldn't make the festivities.
  • Andrew Witty: The GlaxoSmithKline CEO's last vacation was a ski trip in Vermont, so he certainly could have found his way to Cooperstown in upstate New York. But we're guessing his daily five miles runs and new home project keep him just a little busy these days. Oh, and he's also running one of the world's largest pharmaceutical companies. Read the this interview in the Sunday Times to learn more fun facts and get his take on GSK's H1N1 (aka Swine flu) vaccine.
  • Your Doctor: Well, he might have been there, but who can pick a doctor out of a crowd if they're not wearing their white lab coats. No one, says the docs who don't like the American Medical Association's thinking that the white coat may be responsible for spreading disease from patient to patient. The concern has the AMA mulling over the idea of having doctors toss aside their number two prop (stethescope has to be number one). See this New York Times article. Sounds like a good enough reason for physicians to go casual. Plus, think how much money this might save the US health care system in clothing and laundry costs.
  • Dr. William F. Streck: Whoa, waitaminute. Dr. Streck actually might have been in Cooperstown since he's president of Bassett Healthcare, a hospital system based in the village. Bassett received a tiny piece of the spotlight for its practice of paying its physicians salaries instead of compensating them for the fees they generate. The New York Times presents Bassett's plan as a potentially more practical role model for curtailing US health care costs than the Cleveland Clinic, which has received a whole lot of love from President Obama for its approach.
  • Representative James P. Moran, Democrat of Virginia, who is sponsoring a bill in the House to ban direct-to-consumer ads for drugs treating sexual dysfunction from prime time television on decency grounds. The New York Times reported on his and other measures by legislators to curtail direct-to-consumer drug advertising.
  • Curt Schilling: He may be in the Hall of Fame someday although we're still on the fence. But he was likely too busy raising money for his computer gaming start-up to make the four-hour drive on I-90 West. Then again, he's such a fan of the game, so maybe...

Friday, July 24, 2009

We Interrupt Your Regularly Scheduled Deals of the Week!

Deals of the Week! is on vacation. See you in August.

image from flickr user cdevers used under a creative comons license

Thursday, July 23, 2009

The NICE Report: A Curate's Egg?

We promised we'd come back to it. Several industry representatives have classified Sir Ian Kennedy's report into NICE's value-assessment methodologies as 'a curate's egg', suggesting something that's part good, part bad...but pretty much spoiled as a result.

The bad bit is certainly Sir Ian's strong endorsement of the NICE's controversial cost-effectiveness measure, the QALY, or quality-adjusted life year, which he's "unequivocally convinced" is an approach that's both "right and essential." (Listen to Sir Ian's podcast here.)

Oh dear. "Sir Ian has been unduly influenced by a small group of UK-based health economists" as to the value of the QALY, said one disgruntled industry representative, in an off-record conversation.

As we reported here, pharma feels the QALY is too narrow and overly quantitative. And while welcoming Sir Ian's calls for more wider, health-related benefits to be included in the calculation--and made more explicit, at that--some are frustrated that he doesn't suggest how. "The way that the QALY (currently) calculates improvement in qualify of life (using a questionnaire) remains crude," says Pfizer's UK managing director Richard Blackburn.

He and others are also disappointed that the report more or less rules out the inclusion of wider societal benefits a drug may bring. For instance, a treatment may reduce absenteeism, thereby benefiting the economy as a whole. But cost-benefits beyond the Health Service isn't NICE's remit, stated Sir Ian--and anyway, casting the net that wide would be too complicated, and would lead to an overall bias in favor of those of working age.

But while falling short of proposing that NICE take the kind of holistic view of a drug's benefits that some companies (and payers) are starting to try to do elsewhere (read our upcoming IN VIVO for some German examples), the report does offer some bright spots for pharma. (Read our full analysis in The Pink Sheet DAILY.)

One of them, allowing higher prices for innovative drugs for a short period, we already talked about. Another is that NICE should be far more transparent across the board, and "redouble" its existing efforts to work more closely with pharma. In particular, the report suggests that NICE deliberations on a product's cost-effectiveness, carried out during the second half of its Appraisal Committee meetings, should be made available by video recording after guidance is made public. (As part of a broader project to kick-start the UK life sciences sector and boost innovation, NICE has already agreed to allow manufacturers to attend the first part of Appraisal Committee meetings.)

The caveat to all this (the reason the egg is spoiled, perhaps?): NICE is not obliged to implement any of the report's recommendations. Still, given that it commissioned this research, "it will be hard for NICE to ignore the proposals," opines Genzyme's Steve Bates, Goverment Relations Director. NICE will issue a formal response at its next public Board meeting in September 2009 and begin a three-month consultation.

Bristol’s Poker Game: Doubling-Down on Research

Back in December ’05 Amgen paid a 50% premium, $2.9 billion in cash and debt assumption, to buy Abgenix and with it the 50% of panitumumab (Vectibix) that Abgenix still owned. (For our take at the time, which we still agree with, see this IN VIVO story).

So far, the deal looks like a poor bet. Vectibix has been an economic disappointment; it certainly hasn’t paid back Amgen’s investment in the drug or the company. The anti-cancer antibody could still work out business-wise -- thanks to some smart Amgen work in KRAS testing, Vectibix could ultimately overtake its main rival, ImClone/Lilly’s Erbitux. And there’s a small benefit for Amgen in not having to pay Abgenix single-digit royalties on denosumab, the sine qua non of Amgen’s future: if that osteoporosis/bone cancer drug isn’t approved, goodby Amgen.

Now Bristol-Myers Squibb, playing the role of Amgen, is paying $2.1 billion for Abgenix’s one-time rival in the human monoclonal business, Medarex. Thanks to the sharp decline in biotech values, Bristol will get more for its money than Amgen has, at least so far.

First, the price is less than Amgen paid for Abgenix (though at a 100% premium, it's hardly cheap). Second, Bristol will get more royalties than Amgen ever will – in particular, from Simponi, the J&J/Merck/Schering follow-on to Remicade, and J&J’s Stelara, as well as a series of other molecules. Medarex licensed its technology far more broadly than Abgenix did and so has more of pipeline from which to draw royalties. It also has a richer pipeline of its own than Abgenix managed to build.

More importantly, as Amgen bought itself out of a profit sharing deal on Vectibix, so Bristol is buying itself out of an estimated 45% US-profit-split on ipilumumab, its Phase III anti-CTLA4 oncology antibody, as well as what we assume to be a double-digit royalty ex-US. If ipilumumab works, the deal will be well worth it.

But the real issue isn’t the comparative value of the deals – it’s the similarity of the strategies. Like Vectibix at the same point in development, ipilumumab is hardly a slam dunk. This is a big bet on research.

And the deal is thus one more clear example of how different Bristol is than most other pharmas (and how similar it is to Amgen). As we noted in this IN VIVO analysis from June, Bristol continues to double down on research rather than protecting itself, and its top management’s jobs, by diversifying towards slower growth, but at least predictable, businesses.

Instead, one way or another, it’s divested itself of virtually all its non-research-based pharmaceutical interests, using the $6.2 billion in proceeds to invest back into its own or in-licensed research.

As Barclay’s Tony Butler told us a few months ago: “Jim Cornelius is perfectly willing to sell Bristol. Essentially, he’s saying: ‘If we don’t execute [the R&D-based strategy], we don’t need to be a company.’ But few other CEOs and boards are willing to accept that fate.” Cornelius himself told us that “we’ve never said we were going to sell.” But he also noted that Bristol has chosen definitely is higher risk – “the employees know that we have to be on our game or we’ll fail.”

Image by Flickr user Screen Door Slams and used under a creative commons license.

Wednesday, July 22, 2009

NICE Should Keep QALY

As anticipated, Sir Ian Kennedy's report into whether NICE values innovation appropriately (read: sufficiently broadly to satisfy the industry) has been published. This matters, remember, because NICE's methodologies, priorities and direction are and will continue to be followed by other markets.

You can read it here, and we'll have more to say on it shortly (and would love to hear your views, too). Briefly, though (there are 25 recommendations): the Quality Adjusted Life Year (QALY) measure that NICE currently uses should remain, says the report, but that doesn't end the debate, far from it. NICE should commission research to determine whether--and how--social and other benefits a drug may bring could form part of its approach. (Isn't that just passing on the problem, somewhat? Ok, so we haven't had time, what with GSK's results 'n all that, to study this fully....)

Likewise, it's up to NICE to formulate a definition of 'innovation' (admittedly tough), but the report suggests incentives to promote innovation, stating (to industry's undoubted delight) that:

"....a higher price could be accepted for some patients or indications, or even across the board, taking the cost-effectiveness of the product beyond the normal threshold. There could be an agreed higher threshold, determined by NICE. The price could then be maintained for a set period of time, eg 3-5 years, after which it must be adjusted to bring the product within the normal threshold. NICE could achieve this by establishing a special protocol for innovation. Or, NICE could undertake the appraisal using one of the new schemes established through the recent revision of the Pharmaceutical Prices Regulation Scheme, the "flexible pricing" scheme, or the "patient access" scheme."

Read this to swot up on the PPRS and flexible pricing schemes, and stay tuned....

Survey Says More FOB Negotiation Needed

Brands aren't going to get exactly what they want on follow-on biologics, not if the predictive powers of In Vivo Blog readers have anything to say about it. An FOB pathway with the brand-favored 12 years of data exclusivity cleared the Senate Health Committee, and seems poised to be added to the House bill, if the Energy and Commerce Committee mark-up ever resumes (it actually might on Wednesday). Still, you – at least those of you who took our poll – thought that the exclusivity number would eventually come down. We'll spare you just how unscientific this survey was, but while 12 years got the most votes of any of the specific categories (30%), more people overall though that exclusivity would be less than 10 years (36%).

Clearly, then, there's a lot more negotiating that needs to be done.

Have a NICE Day: Look out for Report on Value-Assessment

Keep your eyes peeled for item number 6 on the agenda for NICE’s AGM, which kicks off today at 2pm BST. It’s “to receive Sir Ian Kennedy’s report: ‘Appraising the value of innovation & other benefits—a short study for NICE.’

A short study for NICE—that makes it sound rather friendly, doesn’t it, as if Sir Ian Kennedy (professor of health law, ethics and policy of University College London) was doing the agency a favor. Maybe he is. After all, it was NICE which commissioned this ‘independent study’ into the red-hot question of how it assesses value, and whether its methodologies take into account a sufficiently broad definition thereof, back in January.

But it did so mostly because it had to—in response to an industry report calling for an enquiry to assess the long-term impact of NICE on drug cost and uptake in the UK. Behind that: plenty of drug firms frustrated at the narrowness of NICE’s current parameter for measuring cost-effectiveness, the QALY (quality-adjusted life year). This represents the estimated additional cost of one year of healthy life, for one person, when comparing a new drug with current standard practice.
Industry argues that the QALY is overly quantitative and fails to take into account wider benefits to society that a product may offer, such as making life easier for caregivers and employers, and further, to the industry's contribution to the UK economy and to innovation. "Too much calculation, and not enough judgment," was how David Fisher, commercial director of UK industry association the ABPI, put it earlier this year. (See this IN VIVO feature for the full NICE treatment.)

We’ll soon find out whether Sir Kennedy agrees—the NICE press office promises that the report will go up onto its website at 2pm.

Meantime, though, NICE isn’t apparently planning to change the current £20-30k cost-effectiveness threshold that it uses to make its go/no-go decisions, according to agenda item 8. The report of an April 2009 workshop to discuss the issue (triggered as a response to concerns expressed by the Health Select Committee) concludes that “on the basis of the current information it would be inappropriate for the Institute to change its current threshold range.”

Ok then. But there are instances where that threshold is ignored or, shall we say, stretched anyway. Like under the end-of-life guidance, issued late last year, which relaxes the cost-effectiveness criteria for drugs licensed for terminal illnesses affecting fewer than 7,000 patients per year. Several drugs, including Celgene’s Revlimid, have apparently already benefited from this loophole (as critics on the NHS/ payor side would call it). And yes, an update report on the application of this guidance is agenda item number 7 at today’s AGM.

Even after just four months of implementation, this supplementary guidance has raised several significant questions. Does the size of the population a drug treats refer to that across all indications, or only that under review? What happens to existing guidance if a drug receives subsequent additional marketing approval? What if two similar drugs are reviewed using this guidance a short time apart—would the first go through and the second be rejected, based on a an ‘alternative treatment’ being available? How should we measure a treatment’s survival gain, using mean or median survival? Should we take into account quality-of-life benefits during that time?

It’ll be a busy day for NICE’s board, after what CEO Andrew Dillon calls in his report “one of the most challenging years the Institute has experienced.”

The action’s likely to continue given NICE’s growing influence on pricing, its role in implementing the new ‘Innovation Pass’ announced earlier this month, the various additional consulting and advisory services it has set up, and ongoing pledges to increase transparency and accountability.

Monday, July 20, 2009

While You Were Moonstruck

Today is the 40th anniversary of the Apollo 11 moon landing (you may have heard!). Since you're all undoubtedly moonstruck today we'll keep it brief; lucky for us it was a quiet weekend.

image by flickr user penguinbush used under a creative commons license.

Friday, July 17, 2009

DotW: Do Deals Finish the Race?

Call it the biopharma deal-making all-star break.
Boy was it quiet this week.

But the lull provided us with opportunity to explore how older deals have fared. In particular, the prompt came from Alnylam and its announcement that Novartis has chosen to continue working on RNAi technology, the second contracted annual extension permitted based on the original 2005 deal.

But how many deals don’t make it? Our hypothesis was that, given all the challenges to deals – financing, new priorities, arguments, changing management – partnerships, like marriages, would fail more often than not.

But a preliminary look through our Strategic Transactions database suggests that, in fact, partners at least stick together for the contracted period.

We took a look at deals signed between 2002 and 2004 (we wanted to give deals, most of which have a contract period of 3-5 years, time to fail), refining our view to those with total upfront fees of at least $1 million (figuring that real money would mean real deals). Of a total of 201 deals (with programs between discovery and phase III), 49 were withdrawn – or 24%. Seems to us that’s a pretty fair recommendation for doing deals.

Now a few caveats. First, we’re not sure we’re being totally comprehensive since private companies don’t have to announce their failures. But as it turns out, roughly half of the total number of deals we covered – 121 – were completed by private companies. And 28 of those deals got terminated. So, percentagewise, roughly comparable to the public side.

We’ll dig into the data a bit more over the next month or two and report what we find. But for the moment, the basic message looks to be: dealmaking looks to be more successful than we, at least, had supposed.

Enough data dredging. Time to review the present with…

Gilead/Johnson & Johnson: In a deal that should help Gilead maintain its market dominance in the HIV space, the big biotech signed up with Johnson & Johnson to create a new triple-therapy that will combine Gilead’s two-drug Truvada with J&J’s investigational non-nucleoside reverse transcriptase inhibitor TMC278 (rilpivirine). Gilead will contribute approximately $101 million to the combo drug’s development, while J&J will provide supplies of rilpivirine at a 30% discount. These kind of triple-therapy deals are becoming a profitable habit for Gilead (for our original analysis, see this IN VIVO story). The new combo drug, which could reach the market by 2011, will compete directly with Gilead’s own $1.6 billion Atripla, which combines the two Truvada components – Viread and Emtriva – with Bristol-Myers Squibb’s Sustiva. With Sustiva losing patent protection beginning in 2013 and BMS charging Gilead the full retail price for its drug, the deal gives Gilead strong incentive to switch patients over to the new drug, Credit Suisse analyst Michael Aberman wrote in a July 16 analysis of the deal. Gilead likely will enjoy higher profit margins with the new drug, added Lazard Capital’s Joel Sendek in a July 17 note.

Gilead will be responsible for manufacturing, registering and distributing the combo, while J&J will continue working toward US and EU approval of rilpivirine as a single agent. The NNRTI, a follow-on to J&J’s Intelence, launched in 2008 for treatment-experienced HIV patients, currently is in a pair of Phase III studies with data expected next summer. Gilead also gets worldwide commercialization rights to the combo, except for Japan and the developing world, where J&J will co-promote the product. Analysts believe the new product might have significant marketing advantages over Atripla, including the potential for a better side-effect profile, and a smaller, easier-to-swallow pill. – Joseph Haas

Hisamitsu/Noven: Mention Hisamitsu Pharmaceutical, a Japanese maker of pain-relieving patches, and you’re likely to meet with a blank stare—even from vets well steeped in the industry. (It’s our US/Euro centric failing, we know.) But after spending approximately $430 million to purchase Noven Pharmaceuticals, the company is adopting a formula frequently employed by other, better know Japanese drug makers to build its US presence. Think of Eisai’s acquisition of MGI Pharma; Takeda’s of Millennium; or Shionogi’s purchase of Sciele. In all cases, the acquisitions were to lay the ground work for a greater US commercial presence; the Hisamitsu/Novel deal, while of a different scale, is no different. “The acquisition will give Hisamitsu a new technology for drug delivery…that will help develop new products. It will also help Hisamitsu establish a US base for prescription drugs,” CEO Hirotaka Nakatomi acknowledged in a press briefing. The purchase could also be the prelude to another take-out: the acquisition of a Noven/Novartis JV called Novogyne, which markets hormone replacement therapy patches including Vivelle-Dot and CombiPatch. That’s because a buy-sell clause in the original Noven/Novartis deal stipulates that if one side offers to buy the partnership, the other side has the right to accept the offer or buy the JV at the same price. According to Caris & Co. analyst Jim Molloy, Hisamitsu’s “next step is to put a price on the table that makes Novartis happy” and doesn’t trigger Novartis to make a competing offer. Molloy told our sister publication PharmAsia News that Hisamitsu will likely have to overpay to get its hands on Novogyne. But that’s not necessarily the end of the world since the JV is considered a cash machine generating $50 million a year. “The cash flow alone will pay for this deal,” he says. —Daniel Poppy and Ellen Licking

Pfizer/Various research institutions in Ontario, Canada: Wherever you look, academics and pharmas are doing their best – define the activity as you’d like – either to end-run venture capitalists or find an alternative now that VCs so assiduously seem to avoid early-stage research. Those efforts range from HS LifeSciences’s QureInvest fund, which seeds innovative academic research and tries to match it early on with potential pharma partners (see Start-Up’s analysis of the model here) to direct pharma investment in university programs, like AstraZeneca's alliance with Virginia Polytechnic Institute and the Mayo Clinic to develop novel compounds for depression, or the tie-up between J&J’s Janssen Pharmaceutica and Vanderbilt's Program in Drug Discovery for a new class of schizophrenia drugs. And Pfizer’s been pretty academically active, too – a broad-based deal with three University of California campuses, and this week a collaboration with a coalition of Ontario, Canada-based research groups, going after colon-cancer biomarkers.

The biomarker goals of the Pfizer/Ontario partnership (called POP CURE -- an acronym of acronyms that’s just not worth explaining unless you’re writing the press release) might never have been commercial enough to form the basis for a venture-backed start-up. Moreover, Pfizer probably wouldn’t want to turn a biotech for biomarker development at this stage anyway given the commercial uncertainty of drug-linked biomarkers. For more on why alliances between biomarker companies and pharmas are relatively rare, read this article from The Pink Sheet). In this case, what helps keep them rare is government funding – the Ontario government’s $900,000 contribution to what will in effect be Pfizer’s commercial opportunity (granted any opportunity at all). Unlike a biotech, Ontario isn’t after financial support – it’s looking for jobs. And since VCs aren’t likely to provide them without actually starting companies (something they do only rarely these days), Ontario’s hoping some government cash will prompt Pfizer to at least maintain its Canadian employment.—RL

GSK/Abbott: All our skepticism about biomarker development deals aside, pharma is most certainly interested in using diagnostics companies to product-ize companion diagnostics based on a pharma’s own biomarker discovery work – at least in those rare instances where they seem to want companion diagnostics. Among those rare territories: oncology. This week comes news of another drug/dx partnership that moves the field beyond Her2 expression and KRAS testing and towards the use of molecular markers to select patients that have the best opportunity to respond to a particular new drug. GlaxoSmithKline broke new ground this week with the announcement of a deal to create a companion diagnostic for an immunotherapy that arose from its ongoing Antigen Specific Cancer Immunotherapy (ASCI) program. Abbott will develop a PCR-based test to screen non-small-cell lung cancer tumors for expression of MAGE-A3, an antigen expressed only on the surface of on NSCLC, melanomas, and other solid tumors but absent from normal cell types. GSK is currently enrolling patients in two global Phase III studies of its awkwardly named but potentially elegant MAGE-A3 ASCI therapeutic vaccine: one in NSCLC and a second in melanoma. Like most immunotherapy endeavors, ASCI is a long-term bet for GSK--don't look for a commercial product for at least five years--and the MAGE-A3 trials have been underway since 2002. Based on several studies, scientists at the Big Pharma discovered a set of genes that when present at the tumor site prior to MAGE-A3 ASCI administration were predictive of a clinical response to the vaccine. Further work internally and by Roche and Roche's partner Response Genetics (NOTE: an earlier version of this story incorrectly referred to Response Genetics as part of Roche) has given GSK greater confidence about the validity of this biomarker set—and presumably the immunotherapy as well. Now the Big Pharma is turning to Abbott to develop a companion diagnostic to be marketed alongside the drug. Out of 20 potential partners GSK picked Abbott based on criteria that included “the ability to have a strong distribution network in 5-10 years,” notes GSK’s Vincent Brichard, VP and head of immunotherapeutics. More about the Abbott perspective on this deal in the upcoming July/August IN VIVO.-- Mark Ratner


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

The Importance of Health to Health Care Reform

“I am healthy and ready to go after health care reform.” That is how Henry Waxman, chairman of the House Energy & Commerce Committee and the prime mover of health care legislation in the House, answered the first question posed to him by Atlantic Media’s Political Director Ron Brownstein during a book-signing event hosted by the National Journal July 8. The question—“How is your health?”—was timely, after Waxman was hospitalized in California after fainting while at work in his district office.

Waxman certainly looked, as Brownstein put it, “tan, rested and ready” back in Washington, and there is no reason to doubt that he will indeed drive the reform debate through to completion. (We’ve written a lot more about what Waxman’s said that will entail, including his declaration that PhRMA’s deal with the Finance Committee doesn’t apply to him, and look for more in The RPM Report next week.)

Still, Waxman’s fainting spell is only the latest reminder of the role that the health of several key legislators has already played in the health care reform debate.

The prime example, of course, is the absence of Sen. Edward Kennedy (D-Mass.) from the day-to-day work on health care while undergoing treatment for brain cancer. It will never be possible to say for sure how Kennedy’s absence will end up changing what does or does not happen in the final legislation, but 18 months ago it would have been inconceivable that major health care expansion would happen without Kennedy playing a central role in cutting the final deals. He will not play that role in 2009.

Another senior Democrat, California Rep. Pete Stark was hospitalized with pneumonia earlier this year, forcing him to participate via telephone in the White House’s summit on health care in March. He joked then that his first-hand experience with the health care system would help shape his legislation. Stark is back on the job, but, for someone who has been one of the loudest voices in health policy on Capitol Hill for more than two decades, he has been surprisingly quiet thus far.

There are other cases where health issues have already shaped the reform debate. Indeed, Waxman’s central role was secured only after he launched a successful campaign to unseat Michigan Democrat John Dingell as chair of the Energy & Commerce Committee; Dingell’s perceived frailty was in issue in that fight.

A similar dynamic contributed to the departure of West Virginia’s Robert Byrd as chair of the Senate Appropriations Committee at the start of the year. That change makes it more feasible for the Democratic leadership in the Senate to hold the threat of using the budget reconciliation process to ram a bill through without fear of a filibuster. (Read more here.)

While that threat may prove to be a bluff, it does underscore the importance of every single vote in the Senate, and many reform advocates are already fretting about the challenge of ensuring that both Kennedy and Byrd can be present in the Senate chamber when the key votes are cast.

With 535 members and an average age of 57, its not surprising that there are health care emergencies in the House and Senate. Getting sick, after all, is a fact of life—the hard reality that makes health care reform such a potent political issue.

Still, the health issues of prominent Democratic leaders underscores the sense that the current debate may be their last chance to deliver legislation on an issue many of them have worked on for 30 years or more.

In Waxman’s case, there are other reminders. During the National Journal event, he twice cited former House Health Subcommittee Chair Paul Rogers as one of his heroes and mentors. Waxman was one of hundreds to attend Rogers’ funeral at the Washington National Cathedral last October.

We’re betting it didn’t take a fainting spell to remind Waxman that his time to shape health reform is limited.

Thursday, July 16, 2009

The Next Phase For Regenerative Medicine: New Advocacy Group Will Focus on Regulatory, Reimbursement Policy

We are enthusiastic believers in the proposition that political capital and venture capital are both vital to successful business models in biopharmaceuticals, so we were intrigued to see the announcement of a new Washington, DC-based organization—the Alliance for Regenerative Medicine—devoted to advancing the science of tissue engineering.

ARM was put together by two former Biotechnology Industry Organization staffers—Michael Werner (formerly BIO VP-Bioethics and now a partner at Holland & Knight) and Morrie Ruffin (formerly EVP Capital Formation & Business Development at BIO, and now managing director of Adjuvant Global Advisors).

Founding members include biopharma companies big and small (Johnson & Johnson, Geron, Aldagen, iZumi, Fate Therapeutics and Maxcyte), venture capitalists (Kleiner, Perkins, Caufield & Byers and Proteus Ventures) as well as academic institutions (Wake Forest Institute for Regenerative Medicine, Stanford University, the University of Washington, and Georgia Tech University; the Genetics Policy Institute.)

The Alliance is “dedicated to promoting regulatory, research, and reimbursement policies that will foster innovation in regenerative medicine,” the press releases announcing its formation says. It will also “serve as a source of information about regenerative medicine for policy makers, the media, and the general public.”

What that really means, Werner explains, is that ARM is devoted to making sure the tremendous political capital expended on changing stem cell research policy does more than generate “research for research’s sake.”

The goal is to move to “the next phase” and create “a way to focus on commercialization issues,” he says. Goals include shaping “regulatory policies at FDA that are predictable and facilitate a pathway,” finding a “way to start talking to CMS about value” and to “talk to NIH about future funding of research.”

ARM will be a member-driven, non-profit corporation, with no full time staff. Nothing is finalized, but Werner is likely to be representing ARM in its lobbying and advocacy work, while Ruffin will be handling operations. And they hope to recruit more members (potentially including associations like BIO and the medical device organization AdvaMed). Look for a formal launch later this year.

Financings of the Fortnight: Summer Madness

Welcome to a new regular post on IN VIVO Blog where we'll do our best to analyze the biopharma fundraising scene on an every-other-week basis, paying special attention to a handful of deals that particularly float our collective boats or are indicative of financing trends as we see them. Public, private, equity, debt, vanilla, creative, Series A, IPO (heh, sure), whatever.

This isn't meant to be a collection of every financing over the past two weeks (you can look those up in our Strategic Transactions database, you know); we're happily going to ignore some. Forgive us the alliteration but yes we're going to call it Financings of the Fortnight ('financings of the every-other-week' just didn't have that IVB zip to it).

As it happens in this inaugural edition, we're ignoring quite a few! Whatever the reason, summer madness, perhaps, life sciences investors have been active these past couple weeks, doing all manner of financing deals.

Our favorites are below, but first lets talk about Vertex and its for-sale telaprevir biobucks.

Oh hey look up there, it's a European milestone; looks like one of Vertex's. What would you pay for that sort of thing anyway? Sure it's big and looks nice, but you might get tired of it sitting around in the living room. Too big to be a paperweight, too small for a Stonehenge starter kit (we'll get back to that). A risky proposition. And believe it or not, we asked around. A lot of people we spoke with think we're not going to find out in a hurry.

Why? Because a deal is far from certain. For a typical royalty stream buyer--the kind of investor who might be attracted to this kind of revenue monetization deal--it's just too binary, too risky. We talked to a couple about Vertex's announcement and they suggested that reaching back into the value chain beyond, say, a registration-stage project was much more risky than their typical deals. But they also saw the logic: the markets just aren't recognizing the kind of value that royalties and milestones add. In particular royalties of course, which are more or less predictable when a product hits a certain level of maturity. But milestones too: whatever the odds you place on telaprevir making it to market in Europe those milestones will be worth more than $0.00--but in many cases investors ignore incoming revenue from royalties and risk-adjusted potential cash from milestones when valuing companies, so those companies sell it. We went into this in-depth here.

So we get why Vertex wants to sell--everyone needs cash, and the market doesn't reward you for these future payments. And we think telaprevir has a better-than-typical-drug shot at reaching the market. But what will they get for the stone? A couple dealmakers we spoke to said, essentially, not much. Or that they'd be surprised if Vertex's minimum wasn't going to be higher than an investor's maximum. "I would guess they wouldn't get more than one third the potential value," said one executive. "Probably less than that."

If the kind of investor that might take a look at a deal like this, a hedge fund, say, is looking for a high multiple return then unless the price was quite low it wouldn't be worth the risk. But what might be intersting--and here's where we get back to Stonehenge--would be lots of different milestones, a basket of diverse but relatively realistic biobucks IOUs. Say something with a combined potential value of a billion dollars. There the upside could be huge. "That might be worth a $200 million bet for a hedge fund," said the executive. Mmmm, tasty bio-derivatives. No way that ends badly!

We also raised the question about whether the sale of milestones or royalties decouples a company's incentive from its partner's incentive, and whether the kind of milestone monetization we're looking at here, if successful, could prompt deal lawyers to toughen up contracts with language about what a biotech could and could not do with future payments. Most people we talked to thought that would not happen.

Anyway, we digress. Welcome to ...

Viamet Pharmaceuticals: In a clear example of the increased participation by Big Pharma venture groups in early-stage biotech financings, Viamet Pharmaceuticals landed $18 million in a Series B round co-led by Novartis Option Fund and Lilly Ventures, both first-time investors in the company. According to its Form D filing, Viamet has initially sold $10 million in stock to the investor syndicate, which includes another corporate VC arm Astellas Venture Management, Intersouth Partners, Hatteras Venture Partners, and Lurie Investment Fund. The company, founded in 2005, is looking at validated metalloenzyme targets in cancer, inflammation, and infectious diseases to build safer and more effective and selective inhibitors. Its Metallophile platform generates analogues of existing metalloenzyme blockers--apparently a fairly uncommon drug target, according to Viamet, which says only 10% of marketed products are metalloenzyme inhibitors--that can bind better to metals such as zinc and iron. The Series B brings Viamet’s total money raised to approximately $25 million. For the past several years, Novartis' family of venture funds have stood out in corporate venture capital, investing in around 59 transactions since 2005. Lilly Ventures hasn’t been as active, only participating in approximately 18 fundraisings during the same time period (which is actually on par with the activity of other corporate VC arms with the exception of Novartis and to a lesser extent GSK’s SR One). But in the past few months Lilly Ventures has stepped up its biotech investments--in addition to Viamet, the firm has also recently participated in the D rounds of contrast agents developer Avid Radiopharmaceuticals and Aileron Therapeutics.--Amanda Micklus

Intellikine: The PI3k space continues to attract attention and money. On July 8 Intellikine announced a structured fundraising that could bring in up to $51 million ($28.5mm up-front) from round-leader Novartis Bioventures (there they are again!) and other new backers U.S. Venture Partners, Biogen Idec and FinTech Global Capital; founding investors Abingworth, CMEA, and Sofinnova joined in the fun. We last covered PI3k on IVB when Exelixis inked a big deal around the target with Sanofi-Aventis and noted then the $30mm that Calistoga had raised to finance its efforts around that particular signaling pathway. Intellikine's lead, INK128, a selective TORC1/2 inhibitor, should be in the clinic within 12 months.

XenoPort: On July 8 XenoPort raised $44.8 million in a public offering of 2.5 million shares offered at $19/share, a price $2.50 below its Tuesday July 7 close. The below price offering spooked the market, sending the stock price down more than 11%; while shares have rebounded slightly to around the $20 mark, the price is a far cry from the company’s 52-week high of $51.42. For investors, it seems the general attitude toward XenoPort is wait and see. Unfortunately that’s the same attitude potential partners are adopting. It’s looking more likely that the Santa Clara, CA-based biotech will overcome setbacks associated with its gabapentin prodrug, XP13512, being developed for diabetic neuropathic pain and restless leg syndrome. Last fall, XenoPort and GSK withdrew their NDA for the RLS indication after regulators requested that data from one study be reformatted. In January the partners resubmitted their NDA package and news broke in March that FDA had agreed to review the extended release medicine’s application. That was welcome news for XenoPort, triggering a $23 million milestone payment from GSK, and likely helped ease the sting of negative news one month later, when Phase II trials in diabetic neuropathy failed to meet their primary endpoint. Unlike many other biotechs, XenoPort is relatively well capitalized, with $143 million in cash and equivalents at the end of 1Q09 and a net cash burn for the year estimated to be $55 -$65 million. But with the company’s Phase II GERD drug, XP19986 still unpartnered and its recent decision to co-promote XP13512 in the US, the company needs all the cash it can get. The July offering is the second time in less than a year that the company has raised money: in December the company raised nearly $40 million in a direct offering that included Maverick Capital and Venrock Healthcare Capital.--Ellen Licking

Zosano: A 2006 spin-out from Johnson & Johnson’s Alza affiliate, Zosano recently raised $30 million in a Series B from existing backers Nomura Phase4 Ventures, New Enterprise Associates, HBM Bioventures and ProQuest Investments. Initially staked with $90 million in 2006 on the promise of its ZP patch and applicator system (the system and company both were called Macroflux at the time), Zosano will use the cash to fund Phase III development of ZP-PTH, its transdermal patch version of Eli Lilly’s bone-building Forteo, currently the only anabolic therapy approved for osteoporosis. That synthetic parathyroid hormone tallied $779 million in worldwide sales last year and is priced a premium to competing bisphosphonates, which only slow the rate of bone loss. Fremont, Calif.-based Zosano sees a strong opportunity for its needle-free, rapid-delivery version of the drug and the $30 million will Phase II clinical supply and provide a financial cushion while the company looks for a partner. “What we’re looking for is someone who will be a strong partner in all elements … commercialization, manufacturing, scale-up, clinical, regulatory,” CEO Gail Schulze said.--Joe Haas

unadulterated version of image by flickr user mackius used under a creative commons license

Wednesday, July 15, 2009

Germany Gets Creative with Pharmaco-Payer Contracts

Rebate contracts between German health insurance funds (sick funds) and generic firms have become widespread since such contracts were permitted in 2007. But sick funds may also negotiate deals directly on patented drugs, with innovative drug firms. And that, increasingly, is where the action is in Europe’s largest market.

In the case of generics, payers like AOK, Germany’s largest (covering 45% of the country’s insured) go out to tender and secure time-limited contracts based purely on price and supply capacity. The losers are effectively locked out of that segment of the market for the contract’s duration (two years, for AOK deals) since pharmacists must prescribe a rebated drug to any of that insurer’s customers (they’re penalized even if they prescribe a parallel import).

It’s slightly different for patented drugs: there’s no tender process, for one, since such products are theoretically unique. And even after a deal’s signed, sick funds can’t force doctors to prescribe that drug (and thus can’t control whether a pharmacist dispenses it).

But they can—and do—incent the docs to, with financial rewards and other support structures. Indeed, Germany’s sick funds are signing deals with doctors’ associations almost as fast as they are with pharmacos; examples include AOK’s July 2008 minimum five-year tie-up (read the German update here) with two independent doc groups. The result: stronger payer influence on prescribing decisions, and heftier payer clout in negotiations with pharmacos.

Most of those drug firms are dragging their feet when it comes to rebate deals around patented drugs, however—unsurprisingly, since Germany is a reference price market for many other European countries. (Thus even if they do sign discount deals, the details are, by necessity, opaque.) But in some circumstances, such as for mature drugs at the end of their patent life, products that are struggling to gain market share and/or are poorly differentiated, several companies, including Sanofi Aventis, Novartis, Merck & Co. and Novo Nordisk, have been willing to play ball, according to consulting firm Booz & Co.

These and others are also testing out more creative deal flavors, in their quest to avoid straight price cuts but ensure their drug is prescribed. Wyeth for example has a compliance support scheme around its pricey RA drug Enbrel with several sick funds, where it funds homecare visits to patients and a telephone support scheme. According to Booz, the drug’s showing a ‘generally positive’ sales trend within these sick funds as a result.

Meanwhile, Novartis has agreed with two payers to refund the costs of its osteoporosis drug Aclasta if it doesn’t work (if the patient gets a fracture within one year of infusion, for instance), as it seeks to claw market share off competitor Actonel.

For AMD drug Lucentis, beset by bad publicity over its high price and around illegal off-label usage of cancer product Avastin, which contains a similar active ingredient, the company set an overall cost-per-year cap for the treatment at €350 million. The gamble paid off: sales trebled from a low base of just €20 million or so, and most of the bad noise stopped, according to Booz.

You can read more about such deals, and their implications, in the July/August edition of IN VIVO. They’re not unique to Germany—similar examples are arising in the UK, in the Netherlands and Italy; Australia is at the forefront of financial risk-sharing schemes.

But Germany’s fragmented insurance market means there’s a wide variety of deals under trial, as both payers and pharmacos seek a competitive edge. As such, any winner or loser structures that emerge—it’s too early to tell which is which, for now—may well influence company strategies in other markets, not least the US.

Here, the equally fragmented nature of managed care organizations may limit their influence over prescribing for now, but experts such as ZS Associates expect this to change, and for payers like Medicare and Medicaid to increasingly influence prescription decisions.

Germany’s worth watching, in other words.

image by flickrer litandmore used under a creative commons license

Tuesday, July 14, 2009

Romance, Drama, Pharma: Pharmedy Tonight

Romance can even happen in the clinical, all-business world of drug development.

Sometimes it can turn sordid, like the secretary-swapping club that cleared out one generation of rising execs at a major pharma company about a decade ago.

But, mostly we hope it is the stuff of the happy-ending variety.

At least that’s the way we hope our former colleague, Kate Fodor, sees the interplay of testing healing medicines and forming healing relationships.

Fodor, who spent about three years on the FDC Reports staff in the 1990’s, is an up-and-coming playwright. She’s been anointed as one of the “Eight to Watch” by The New York Times. Her last play, 100 Saints You Should Know (see short video clip) had a short run off-Broadway in the autumn of 2007 and continues to be performed in repertories. Fodor describes that work as an examination of a variety of “longings”: religious, sexual, artistic, emotional.

Enter pharma: Fodor has a new play, Rx, that apparently deals with the longings and healing of love in the setting of clinical trials.

Rx is headed into the trial run phase at a new play workshop this month in the arts and humanities summer community at Chautauqua, NY.

The advance blurb for the play describes it as a “big-pharma-office-dramedy” that examines the relationship between an “erstwhile poet” who enters a clinical trial to treat “workplace depression” and the doctor running the trial. The relationship leads “them both down a twisty path in pursuit of a true prescription for happiness.”

We have to believe that some of Fodor’s interest in the pharma industry as a setting for her new play comes from her experience looking at the industry while in the offices of "The Pink Sheet." We certainly hope that any untoward portraits of the workplace do not stem from those offices themselves. That’s always the risk of working with aspiring dramatists. More likely, the play will be an interesting and clever take on healing at several levels.

And, with the current vogue for office-based drama and Fodor’s clear talent as a writer, you can expect to see a prominent Rx emerging on theater marquees in the future.

Stuck at NICE? Flash your Innovation Pass

Well, you will be able to soon, anyway. The Innovation Pass was a top action item within the UK government’s new Life Sciences Blueprint, unveiled at Imperial College Business Center in London today.

The Blueprint’s lofty goals include turning the UK into a more attractive location for life sciences companies (not least through tax incentives and measures to facilitate clinical trials), improving the country’s currently dire financing situation for small companies, encouraging industry-academia collaboration and—here it is—improving access to innovative new medicines. (Read the whole thing here.)

Enter the Innovation Pass, administered by the National Institute of Clinical Excellence, which, from next year, will make “selected innovative medicines” available on the National Health Service for three years. The idea is that highly novel drugs treating very small patient populations, where a lack of clinical data would make a regular NICE assessment unfeasible, thereby reach patients, and allow real-life data to be collected to inform the standard NICE process later on. (These days, typically, any novel drug that hasn’t been through NICE is more or less ignored.)

Who chooses which drugs will be selected? NICE will, noted deputy CEO Gillian Leng during the Blueprint launch. “We will decide on the criteria for granting an innovation Pass”, she said, following consultation with stakeholders at the end of this year. With a budget of just £25 million for the 2010/2011 pilot year for the initiative, we’re not talking hundreds of drugs here. More like ten.

Which helps explain why a Genzyme executive thoughtfully thrust his proposal for the “kind of drug that we think might be included in the scheme” under this blogger’s nose during coffee. It’s ataluren (there, I’ve done the favor)—an oral compound, previously known as PTC124, which targets a nonsense genetic mutation believed to cause Duchenne and Becker muscular dystrophy in boys. The compound’s in a 165-patient Phase IIb trial in collaboration with PTC Therapeutics, its originator.

Drugs like this for rare diseases might well benefit from an Innovation Pass, but Lord Drayson, Minister for Science & Innovation, in the Q&A session following the announcement chose as his example of qualifying drugs treatment for late-stage cancers—raising at least in this blogger’s mind the question of how this new process will sit alongside another recent NICE loophole (if we may call it that): the end of life medicines guidance issued late last year. (This, if you’ve forgotten, was a relaxing of the normal NICE cost-effectiveness criteria specifically for treatments used to extend life for terminal patients; several drugs, including Celgene’s Revlimid, have had a green light from NICE as a result.)

The Innovation Pass will sit on top of all this, according to Lord Drayson (a co-founder in 1993 of PowderJect, sold to Chiron—now Novartis—ten years later for £542 million). “It’s time-limited, budget-limited, and highly complementary to the normal NICE process,” he said. Indeed, once sufficient data is collected on a drug with an Innovation Pass, that treatment will go through the regular NICE appraisal system—and may be rejected, Drayson confirmed. (Sparks will fly among patient groups and the public if so, but NICE is used to that.)

Still, it’s reforms to the normal, broader NICE process that larger companies--those like Pfizer less likely to churn out Innovation Pass winners--are more interested in. Those ongoing reforms include increased dialog between industry and NICE’s assessment teams--in particular, the opportunity for companies to attend NICE appraisal committee meetings and respond to questions “on matters of factual accuracy”--and manufacturer debriefing meetings with NICE at the end of a drug appraisal.

On the red-hot question of how NICE assesses value, and whether its methodologies take into account a sufficiently wide range of factors to keep the industry happy, we must wait a little longer for the publication, on July 22, of Sir Ian Kennedy’s report. (Read this for background, and watch this space next week.)

image by flikrer Chris Fleming used under a creative commons license

Follow-On Blackjack: Place Your Exclusivity Bets

What will be the length of the brand exclusivity provided as part of a possible follow-on biologics pathway? At the moment, it looks like the generic camp is holding the low cards, but pharmaceutical firms should always watch their chips when Henry Waxman's at the table.

This week will see a lot of cards being shown; the Senate HELP committee mark-up that seemed like it would never end actually just voted on follow-on biologics and endorsed the 12 years of brand exclusivity offered by Sen. Orrin Hatch, R-Utah. Hatch apparently had a better hand than Sen. Ted Kennedy, D-Mass., who had endorsed 12 years last year but recently offered language starting with only nine, building up to 13.5 in exchange for additional studies, and Sen. Barbara Mikulski, D-Md., who had offered slightly lower numbers. They both ended up voting for Hatch's amendment.

On the other side of the Capitol, it feels like the Commerce Committee markup might never start. Brand firms feel that Chairman Waxman, D-Calif., who offers only a total of six years of exclusivity, is dealing from the bottom of the deck. Meanwhile, Rep. Anna Eshoo, D-Calif., is offering the brand jackpot of 14.5. President Obama, for his part, prefers lucky number seven.

It's enough to challenge even a seasoned card counter, so we thought we'd open the prognosticating up to you. Tell up how long you think the reward for innovation will end up being. If a health reform bill with FOBs does pass, we'll pick one of the winning entries at random to receive a framed, signed copy of this blog post. (Note: To receive the prize, winner will need to print this post, buy a frame, and forge the IVB signature.)

Email Subscribers: if you can't see the IVB Poll, click here to visit the post on-line.
image from flickr user waffler used under a creative commons license

Monday, July 13, 2009

The End of Generics as We Know 'Em

Generics is a dying industry, according to Claudio Albrecht, ex-CEO of generics group Ratiopharm. Never mind the wave of patent expiries causing so much sweat at Big Pharma, or the cost pressures leading governments and payers everywhere to promote generic usage. The sector, as traditionally conceived, must change or be no longer.

Albrecht’s talking about oral, small molecule generics. He’s talking about pills like simvastatin, which cost just pennies and are now commodities, soon to be dominated by high-volume price-dumpers. The future, Albrecht declared at a recent London conference organized by investment bank Bryan Garnier, is in hard-to-make generics and biosimilars, as branded drugs increase in complexity—and as branded players get smarter with their lifecycle protection strategies.

“Innovative products are the future of generics,” he hailed, somewhat contradictorily. But if you think about it, the top selling patented drugs, after the forthcoming round of expiries, will be biologics. So the traditional small molecule generics companies need to learn, fast, how to develop and sell them. Otherwise, in 5-7 years, “the generic industry won’t have an answer.”

By then generics will be a device business, too—more and more drugs will be injectable, and/or require some kind of delivery system. Look at insulin—it’s all about pens, that’s really how Novo and others have protected their franchise and will continue to do so, most likely, despite no substance IP. The increase in product complexity will ultimately lead to targeted therapies—and probably no generics at all as a result.

Big Pharma, struggling to find and fund ‘new’ drugs as traditionally defined, are cottoning onto this changing universe. Hence some are making moves (in some cases back) into generics, mostly hard-to-make injectable generics (look at Sandoz’s €925 million cash acquisition of Ebewe in May) or biosimilars and follow-on-biologics (remember Merck/Insmed) further blurring the boundaries between the innovative and generic sectors as a result.

Where does that leave the traditional generics guys, though? It’s not so easy for them to jump into R&D—most spend far too little to even hope to compete in the new world of complex generics with their likely lower substitutability and higher margins. Ratiopharm and Actavis are up for sale. Most of the others that spend less than $200 million a year (compared to over $650 million for Teva or Sandoz) will have to re-invent themselves, too.

Meanwhile if the challenge of increasing product complexity’s not enough, health care reform in Europe’s largest market ,Germany, has already radically changed the game for generics firms. This was a comfy branded generics market where high prices allowed firms to fund doc-focused sales forces. No longer. Payers now rule the roost and determine, through highly competitive price-based tendering, whose generic version will be dispensed in pharmacies for the following two years, shutting out the losers entirely. (See our forthcoming IN VIVO feature for more on how such contracts are spreading to patented drugs, too.)

Small wonder that Betapharm, and others, have fired all their doc-focused sales forces. Generic prices have fallen 30% since 2005 in Germany, a slide that will continue.

So who will be the winners in the new generic world-order? Not necessarily the small molecule lot that have honed their first-to-file skills. Teva and Sandoz, having invested in biologics and manufacturing, are well-placed.

But, less obviously, so are smaller players like UK respiratory-focused Vectura, formulation experts, sitting slap bang in the middle of these converging innovator and generics spaces: the company has two deals on value-added generics with Sandoz, as well as a tie-up with Novartis around a proprietary drug formulation, and a device deal with Boehringer Ingelheim.