Sunday, August 30, 2009

While You Were ESCing

An escape to Barcelona sure sounds nice doesn't it? Alas for those who made the trip to ESC it was likely cardiology over crazy nightlife, stenting over sightseeing. Then again, maybe not.

The European Society of Cardiology congress kicked off in Barcelona on Saturday and runs through Wednesday. We hear it's pretty big this year? Let's just say it's not looking good for already-marketed drugs, even new-to-the-market drugs like Effient.

image by flickr user Xavier Fargas used under a creative commons license

Friday, August 28, 2009

DotW: Back to school, back to work

It's back to school week in this blogger's neck of the woods, and the smell of freshly sharpened pencils and new notebooks must have prompted some biz dev execs to ink some deals after last week's hiatus. We're glad because it would have taken real work to create a "biz dev exec's day off" post a la Ferris.

But after the Monday flurry of deal-making tapered off, the focus centered yet again on fantasy industry tie-ups. After last week's rumor that Teva is looking hard at Shire (to which we ask, why not Genzyme?) came "news" that Viropharma might be another take-out candidate favored by the Israeli giant. Natch.

And then there's talk that GSK is mulling the advantages of owning HGS, a company that looks far more attractive after the release of positive news associated with its lupus drug, Benlysta. The proposed offer price being floated--$30 a share, or around $4 billion. (That's Manny Ramirez kind of money.)

Fantasy M&A not compelling enough for you? There was plenty of political infighting regarding health care reform, even as the country took a brief breather to mourn the sad passing of the lion of the legislature, Senator Edward Kennedy.

Or you could begin stockpiling hand sanitizer as call the doctor's office to schedule flu shots for the family. Just make sure to include the H1N1 version; new data from the Southern Hemisphere indicates this will be the strain most likely to cause problems this time around.

Did you indulge in a week of wishful thinking? We're here to bring you back to reality with another edition of

Biovail/Santhera: Having struct two separate deals in the last 12 months to gain control of Huntington's chorea treatment Xenazine, Biovail increased its footprint in the central nervous system space through a licensing deal Aug. 24 with Santhera Pharmaceuticals. Under the transaction, Toronto-based Biovail gets North American rights to fipamezole, a Phase II compound for dyskinesia associated with Parkinson’s disease. The Swiss biotech gets $8 million upfront, plus another $4 million contingent on the closure of its planned acquisition of another company, Juvantia, which originally developed the drug. Of course, there's a laundry list of "bio-bucks", too, to drive the deal's price tag into an eye-catching realm. Santhera retains European and Asian rights to fipamezole, as well as an option to co-promote the drug in the U.S. (You see, those co-promotes aren’t going away.) Santhera's CEO Klaus Schollmeier said the biotech hopes to eventually market fipamezole alongside Cantera, its Friedrich’s ataxia drug currently approved in Canada. Biovail, meanwhile, continues to build its CNS franchise around Xenazine, which it markets in Canada under the name Nitoman. The Canadian specialty pharma locked up rights to the drug via a series of deals beginning with its acquisition last year of Prestwick, which had, in turn, out-licensed U.S. commercial rights to the product to Ovation Pharmaceuticals (also purchase earlier this year, by European CNS developer Lundbeck) This spring Biovail plunked down an additional $230 million to purchase tetrabenazine products and intellectual property from the Dublin-based Cambridge Laboratories.—Joseph Haas

Proctor & Gamble/Warner Chilcott: Biovail wasn’t the only biopharmaceutical company outside the U.S. to pull off a significant deal this past week. Ireland’s Warner Chilcott wins this week’s DOTW big spender award—and our gratitude for starting the week on a positive biz dev note--by buying out P&G’s entire pharmaceutical business in a deal worth $3.1 billion. The move means the Cincinnati behemoth, perhaps most famous for creating daytime television shows like “Guiding Light” and “As The World Turns” to showcase its products (haven’t you always wondered why people call them soap operas? Of course, the good clean fun), will redevote itself to the now highly desirable consumer products biz. Warner Chilcott, meanwhile, adds significantly to its sales force while also bolstering its women’s products portfolio through the additional of P&G’s Actonel and Asacol HD. Both of those products could face generic competition by 2014, however, so Warner Chilcott needs to move fast to take full advantage of them. Importantly, the transaction seems to further the Irish spec pharma’s global ambitions, providing a commercial presence in 14 new countries and a 1200-person strong sales force based in Western Europe. While dear, the deal’s price-tag wasn’t shockingly high, representing roughly four times the 2008 net income generated by P&G’s Rx products. – Carlene Olsen

Ligand/Neurogen: Our “Low Money Down, Some Money Later…Maybe” award goes to Ligand, which this week announced plans to buy Neurogen for $11 million plus earn-outs, despite a lack of fit—at least when it comes to therapeutic focus-- between the two companies. The deal comes out to about 16 cents a share, the companies said, six cents below Neurogen’s opening-bell price on Aug. 24, the day the deal was announced. Both companies’ boards have approved the sale, but the transaction still requires the approval of Neurogen’s shareholders. Neurogen shares were still trading above the offer price when the Nasdaq market closed Aug. 27, up 5% on the day to $0.21. If the deal is approved, Neurogen owners will swap each share for .06 of a Ligand share, or approximately 3% ownership in their acquirer. Neurogen shareholders, meanwhile, will also have to hope Ligand can partner the neurology assets it picks up in the sale--at least if they want to see the deal's price tag go up another $7 million. If Ligand oulicenses Neurogen’s preclinical H3 antagonist program shareholders get $4 million – likewise if that program’s intellectual property is sold, Neurogen shareholders get half the proceeds. In addition, if Neurogen’s VR1 antagonist MK2295 – already partnered with Merck – advances to Phase III, its shareholders would get $3 million, or 50% of the proceeds if the related IP is sold off. – Alex Lash

Shire/Santaris Pharma: Even as investors speculated Shire might be the next jewel in Teva's crown, the company sought to become one of the industry's RNA players, inking an R&D agreement with privately-held Santaris to gain access to the biotech's proprietary Locked Nucleic Acid technology. Given Shire's interest in rare diseases via its Human Genetic Therapies division (you know the one that's been in the news for developing a competitor to Genzyme's troubled Gaucher drug Cerezyme), the focus of the Santaris/Shire tie-up is to develop new therapies for a range of rare diseases that are currently impossible to treat with more standard enzyme replacement therapy. As part of the joint research project, Santaris will deisgn, develop, and deliver preclinical RNAs against three preselected Shire targets, with Shire having the right to develop and commercialize these compounds on a world-wide basis. Financial terms of the agreement, which have Shire paying an upfront fee of $6.5 million, some undisclosed discovery funding, and potentially another $13.5 million if initial studies pan out, are in-line with prior R&D agreements Santaris has signed. In 2007, for instance, GSK put Santaris in charge of discovering up to four RNA antagonists for viral diseases and developing them through proof-of-concept in an option-based deal that garnered the biotech an upfront fee of $3 million and a commitment from the Big Pharma to make a $5 million equity investment. In early 2009, just before it announced its acquisition by Pfizer, Wyeth signed a similar deal, paying Santaris $7 million upfront and taking $10 million in equity in exchange for the biotech's expertise developing RNA therapeutics against 10 targets of interest.--Ellen Foster Licking

Image courtesy of flickrer busymommy used with permission through a creative commons license.

Thursday, August 27, 2009

Plavix Pharmacogenomics: To Test or Not to Test?

By now you've noticed that we are fascinated by the potential for a pharmacogenomic marker--variability in the CYP2C19 genotype--to play a pivotal role in reshaping a blockbuster market: the antiplatelet class currently dominated by Sanofi and Bristol-Myers Squibb's Plavix, but where Lilly and Daichii Sankyo hope make an impact with the newly approved Effient.

We've written about this extensively in "The Pink Sheet" (start here) and debated it during a podcast (available here, or via iTunes).

Two new developments this week have us thinking about it some more. First is the publication of arguably the most compelling data yet about the importance of the biomarker, a study by University of Maryland researcher Alan Shuldiner and colleagues that is the lead article in the Journal of the American Medical Association this week.

To recap, it seems that people with one of the variants of the CYP2C19 polymorphism are poor metabolizers of Plavix; clopidogrel is inactive as ingested, and so poor metabolizers may in effect be taking a placebo rather than antiplatelet therapy. Prasugrel (the active ingredient in Effient) is not metabolized by that pathway, and so should be effective in all patients regardless of genotype.

Given that the faulty genotype is present in something like 30% of the population (though the percentage varies by race)--and especially given that Plavix will soon be generic, while Effient is a key product for Lilly's future--the commercial implications are huge.

Now, the study itself isn't new per se. Indeed, it was Shuldiner's presentation of the data during an Institute of Medicine workshop in March (coupled with the reaction of Food & Drug Administration officials and other IoM panelists to the study) that first convinced us this could be a milestone in the evolution of personalized medicine.

As we point out in "The Pink Sheet" DAILY, publication of the study in JAMA (which is making the full article available for free) certainly ensures greater attention from the medical community. But will it change medical practice? That is the question raised in an accompanying editorial.

Which brings us to the second new development: the public release of FDA's approval letter for a labeling change for Plavix made back in May. That label change (done with no fanfare) added information about the biomarker to labeling for Plavix first time.

Two things in the letter are news to us:

(1) The label change was initiated at the request of FDA, using its new authorities under the FDA Amendments Act.

(2) FDA's initial request included a statement that PKG screening is recommended for all Plavix patients, but that was dropped after discussions with Sanofi.

FDA declined to comment on what prompted the change of heart on an explicit recommendation for the screening--but since the new FDAAA authorities give FDA for the first time the ability to mandate exactly the labeling it wants, Sanofi must have made some strong arguments along the way.

We suspect they pointed out some of the things included in the JAMA editorial, like the perceived lack of ready access to the test and (probably more importantly) the lack of evidence to guide any specific treatment decision following screening. That is, while the hypothesis that prasugrel will work better in patients who don't metabolize clopidogrel is appealing, that hasn't been tested in prospective clinical trials.

And then there are the inevitable questions about whether FDA can or should use labeling to drive change in practice, or instead make sure labeling best supports practice as it evolves.

Use of pharmacogenomic testing in the real world, LabCorp SVP Marcia Eisenberg points out, is really about "the comfortableness of physicians using molecular testing to change the pattern of their behavior.”

So, while infectious disease specialists have made HIV viral typing a routine part of therapeutic diseases, and oncologists are increasingly comfortable with testing for markers like HER2 and now KRAS, those are still very much the outliers. LabCorp alone offers dozens of potentially useful pharmacogenomic screening tests, but--with those few exceptions--most are not routinely ordered.

LabCorp (and other diagnostic firms) have made 2C19 screening available since 2005, and (in their view at least) there is no barrier to routine use. Awareness of the test is low, Eisenberg acknowledges; indeed, Shuldiner himself said during the IoM meeting in March that the test was not readily available outside of academic centers.

FDA, in Eisenberg's view, is helping to bring the overall science of personalized medicine to the forefront, but its regulatory actions inevitably lag behind actual practice. That was certainly the case with KRAS, where oncologists embraced the utility of the biomarker well before FDA approved new labeling for Amgen's Vectibix outlining the data in support of the test.

Will cardiologists do the same with Plavix? It doesn't seem likely right now. After all, the one group with a proven track record of changing behavior in cardiology is the pharmaceutical industry and its marketing prowess. But, as far as we can tell, none of the sponsors involved will be pushing for routine testing. Bristol and Sanofi made clear that they do not want to recommend the testing (indeed, they successfully prevented FDA from directing it in labeling), while Lilly and Daichii would rather not limit prasugrel to the roughly one-third of the population who don't properly metabolize clopidogrel.

That leaves the payors--but even there, the cost-benefit calculation will be complex, since routine screening would limit the population who would be eligible for generic clopidogrel, and may not be sufficient to stop prescribing of prasugrel by physicians who view it as the superior therapy.

The one thing we do know: this won't be the end of the discussion. There is plenty more data to come on the utility of the 2C19 marker in the class, and the looming patent expiration of Plavix means there are billions of dollars at stake. Anyone interested in the future of personalized medicine and blockbuster markets will want to keep paying attention.

Financings of the Fortnight: Throwing in the Towel?

Amidst the general thirst out there for capital to support R&D we can think of one biotech that isn't itching to get into IVB's Financings of the Fortnight: Cardiome.

Four-and-a-bit months on from their $60 million up-front deal with Merck & Co. for a mix of rights to the oral and IV forms of their atrial fibrillation drug vernakalant, the company seems to be making good on some promises made while the ink was still damp on that alliance agreement. On Tuesday the biotech said it was planning to buy back $27.5 million worth of its own shares.

Now, there are arguments in favor and against doing share buybacks, but those typically relate to cash-rich and cash-flow-rich Big Pharmas or Big Biotechs that have spent billions upon billions to buy back their own stock. We tend to--having been convinced by a guy who has forgotten more about biotech and pharma banking than we'll ever know in the first place--fall in the 'against' camp.

But none of those arguments even apply to loss-making biotechs. How could they? Biotechs spend money to discover and develop drugs. Lots and lots of money. Bank heist kind of money. Richie Rich money. Some biotechs make money, sure, but small companies with drugs in Phase II tend to rack up losses, at least for a long while, and Cardiome is no exception (although that loss has narrowed significantly since it offloaded its development expenses onto Merck).

After Cardiome inked its Merck deal in April, CEO Doug Janzen said something that suprised us, though. Janzen talked about how Cardiome wanted to de-risk its business from a financial perspective given the awful financial times and the high cost of capital. Can't argue there. He noted that Cardiome was willing to sacrifice a bit of green on the front end to get Merck to take care of the full development expenses. OK, makes sense.

But then the needle came off the record. "We're a development company, but we don't believe in the risks of building our own pipeline at this point," he said. "Three years ago we would have been delighted about spending the returns from such a deal on the pipeline, but that's not where we are right now." Cardiome was going to consider share buy-backs and shelve R&D. Forget the back burner, Cardiome was going to hock the stove, and give investors the pawn shop cash too.

Don't get us wrong: we fully understand that there are times when a biotech should throw in the towel and return money to shareholders. We've argued for just that instead of doing reverse mergers, for example. But Cardiome isn't a failed company.

To be fair, Cardiome had $82 million in the bank as of mid-year, and it's only buying back $27.5 million in stock. Analysts liked the move too. But the message from that April conference call is coming through loud and clear: we're getting out of the biotech business, because its too risky.

Here are a few companies that kind of disagree. They've done the deals that make us dance, and collectively they are rewarded with:

Cell Therapeutics: This Seattle-based oncology company is listed as the top market cap gainer for the year among medium- and large-cap biotechs by Rodman & Renshaw in its Aug. 24 Biotech Balance Sheet report. Based on a share price of $1.69 at the time R&R made its estimate (Cell Therapeutics’ share price since has declined slightly to the low $1.60s), the firm’s market cap was estimated at $915 million, a better than 1,100 percent gain over the year. CTI, which earlier this year sold off its interest in disappointing non-Hodgkins lymphoma drug Zevalin to partner Spectrum Pharmaceuticals, has narrowed its clinical focus to another NHL drug, pixantrone. During the process of filing an NDA and readying for a European submission of the novel topoisomerase II inhibitor, CTI also has raised cash four times this year, bringing in more than $100 million, a crucial accomplishment for a company that ended the second quarter with just $12 million in cash. During its second-quarter earnings call Aug. 6, CTI noted it had reduced total operating expenses by 24%, year over year, mainly through a 54% reduction in R&D spend during the quarter. In its most recent transaction, CTI netted $28.5 million through a registered offering of shares and warrants to a single institutional investor. In July, CTI netted $41.6 million through a follow-on public offering that sold 33.7 million common shares (and warrants)at $1.30 apiece. A pair of private placements of shares and warrants in the spring brought in another $34 million. All that dilution represents a major gamble on pixantrone, which CTI says has a molecular structure that will present a better cardiac safety profile than the anthracyclines typically used in lymphoma, leukemia and breast cancer. The biotech expects to learn its PDUFA data on Sept. 4.--Joseph Haas

D-Pharm: Just the second biopharmaceutical company to go public this year, Israel’s D-Pharm, plans to begin pivotal Phase III trials of its lead program, DP-b99, in acute ischemic stroke. In a transaction that yielded nearly $23 million (85 million New Israeli Sheckels [NIS]), D-Pharm split the offering between an IPO of NIS 28 million ($7.4 million) and a rights offering of NIS 57 million ($15.0 million). The company reported Aug. 17 that the IPO was oversubscribed, with a unit price of NIS 133 ($35.03), a 13% premium over the low end of the price range. D-Pharm said in June the FDA approved an IND for the Phase III program for DP-b99. The trial is slated to enroll 770 patients with moderately severe ischemic stroke at more than 100 medical centers in Israel, North America, Europe and South Africa. DP-b99 is a small-molecule lipid analog developed through D-Pharm’s proprietary Membrane Activated Chelator technology platform. D-Pharm also is studying the compound in traumatic brain injury and brain damage resulting from coronary artery bypass graft surgery. The IPO and rights offering brings to about $75 million the total amount D-Pharm has raised since its inception – in 2006 it raised $10 million in a private financing round led by Clal Biotechnology Industries, Israel Healthcare Ventures and Pitango Venture Capital, with participation by Care Capital, Gemini and Polar Communications.--Joseph Haas

Pacific Biosciences and Complete Genomics: (Two-for-one special!) The lure of faster and less expensive genome sequencing has certainly captured investor interest. Pacific Biosciences last week got an additional $68 million in financing from new and returning shareholders—including agricultural firm Monsanto, plus Wellcome Trust and Sutter Hill Ventures—bringing its Series E round total to $188 million, the largest venture round yet in the genome sequencing space. In 2010 the company plans to launch its SMRT (Single Molecule Real Time) system, a technology originating at Cornell that is being developed to map the human genome for the cost of $1,000 under a grant from the National Human Genome Research Institute. Pacific had developed sequencing technology using chips with thousands of zero-mode waveguides, an extremely small detection volume that makes it possible for real-time observation of a single DNA polymerase as it synthesizes DNA. With all this cash in its pockets--the four-year-old company has raised $260 million to date in private equity--and backers who are likely antsy for an exit, PacBio could be prepping for an IPO in the next year, coinciding with SMRT’s launch. The start-up is looking to catch up with Helicos in the market for single-molecule sequencers. (Incidentally Helicos was the last DNA sequencing firm to go public—in 2007 it sold 5.4 millions shares at $9 each. Its stock price had tumbled below $1 despite the hype of its True Single Molecule Sequencing technology, but recent news that Stanford scientist and company founder Stephen Quake, PhD, mapped his own genome within a few weeks for $50,000 sent the stock up.)

Complete Genomics, a 2006 start-up that was in stealth mode until 2008, raised $45 million in Series D financing from first-time backers Essex Woodlands and OrbiMed Advisors, which each contributed new board members; existing investors Enterprise Partners, OVP, Prospect, and Highland Capital also participated. Instead of selling customers the actual instrument that sequences DNA, Complete Genomics is taking a service approach by analyzing samples using its third-generation technology and providing pharma and biotech researchers with the combed-over human genetic data—packaged in a report--at a $5,000 price point. The company is building what it claims is the biggest center in the world for human genome sequencing. It plans to open the facility, located in Northern California, at the start of next year and is using the current fund raise to prepare for large-scale sequencing projects. The Series D was Complete Genomics’ first publicly disclosed financing; the firm has brought in $91 million to date.--Amanda Micklus

Poniard Pharmaceuticals: On August 20, Poniard Pharmaceuticals secured an alternative financing option by taking a committed equity line of credit from investment firm Azimuth Opportunity. Over the next 18 months the public cancer company may sell up to $60 million in registered common stock to Azimuth at a pre-negotiated discount. Poniard recently finished enrolling patients in its pivotal Phase III SPEAR trial evaluating picoplatin as a second-line treatment for small cell lung cancer. The intravenous cytotoxic platinum compound has been in Poniard’s hands since 2004, when the company—then called NeoRx--licensed the candidate from AnorMed. (The deal was expanded to worldwide rights in 2006, right around the time AnorMed was in the midst of a bidding war between Millennium and Genzyme.) Putting all of its eggs into the picoplatin basket, Poniard envisions the drug will evolve into a platform itself, spawning picoplatin products in various formulations and drug combinations for multiple indications (the candidate is also in Phase II for metastatic colorectal cancer and metastatic hormone-refractory prostate cancer, and in Phase I in the oral form for solid tumors). On June 30, 2009, Poniard had $50 million in cash and investment securities, $10 million less than it did at the end of the first quarter, but still enough, says the company, to support it through the first quarter of 2010. KPMG, Poniard’s auditor, however, has been skeptical for a while that the company will have enough cash to sustain operations.--Amanda Micklus

Wednesday, August 26, 2009

MondoBIOTECH Takes the PO out of IPO

Basel-based rare disease peptide therapeutics specialist Mondobiotech said today it was listing on the Swiss Exchange, though the company isn't raising any money right now.

The listing-without-raising strategy isn't all that Bizarro; it has been pulled off before during another time of IPO difficulty, by Speedel Group (in 2006, also on the Swiss exchange). Others have probably done it as well, though we can't remember any other biotechs off the top of our heads.

Speedel managed to secure itself a much better valuation than it would have if it had proceeded with plans to go public in 2005. But Mondobiotech never filed to raise shares in the first place. Instead it plans to

"increase its share capital through the issuance of new shares out of its existing authorized share capital on a continuous basis following the listing. The company intends to issue such new shares to existing shareholders, new investors and/or individuals and entities that are directly or indirectly affected by and/or involved in the treatment of rare and neglected diseases, such as patients, their relatives and friends, patient advocacy organisations, physicians, scientists, academic organisations, research institutions, hospitals, employees, consultants and other service providers to Mondobiotech."

So, no details on how much the company plans to raise, though certain partners like Biogen Idec have committed to invest in the company's IPO as part of previous deals. Biogen Idec licensed aviptadil from Mondobiotech back in 2006. The compound, an inhaled peptide also known as vasoactive intestinal polypeptide, is in Phase II for pulmonary arterial hypertension; as part of the deal Biogen committed to a $5 million stake in a Mondobiotech IPO.

Besides Biogen the biotech has deals with Intermune (in 2002, on interferon gamma), 23andMe (2008, for genotyping of rare diseases), and a subsidiary of United Therapeutics called LungRx (2007, options on five undisclosed candidates, one of which was exercised and targets MRSA).

Here are some fun facts from Mondobiotech's listing prospectus:

1. The company has about CHF 7.7mm in cash/equivalents.
2. Mondobiotech's board of directors is more regal than your board of directors. It consists of Prinz Michael von und zu Liechtenstein, Bernadette Stadler, and Graf Francis von Seilern Aspang.
3. The company's new HQ, under renovation until 2012, is in a 14th Century monastery, licensed to the group by the Canton of Nidwalden.
4. From 2006-2008 the company raised CHF 27.7 in private placements.

Monday, August 24, 2009

While You Were Unassisted

There have only been 15 unassisted triple plays in Major League Baseball and maybe the one Eric Bruntlett turned on Sunday in the bottom of the ninth inning was the most unlikely. The Phillies' Bruntlett doesn't usually start and this season has been less than stellar at the plate and in the field; earlier in the inning he had an error. But there he was, catching a line drive, stepping on second, and tagging an overzealous Mets runner trying to advance from first. Unassisted triple play!

Who else needs no help? Closer to your world, Sen. Chuck Schumer is essentially saying: Republicans, who needs 'em? Bloomberg and others are reporting that Democrats are considering the unassisted route themselves, after Schumer's appearance on Meet the Press over the weekend where he discussed the Democrats' options for passing health care reform.

So expect the unexpected this final full week of August, you never know.

Friday, August 21, 2009

NIH as Partner: New Director Collins Will Stress Royalties, Not Price Oversight

"Partner of choice" is a cliche in the biopharma business development world, but the US National Institutes of Health is trying to breathe new life into the concept under its new director, Francis Collins.

As we report in "The Pink Sheet" DAILY, Collins is making partnerships with industry a key priority as his tenure begins--with an emphasis on shepherding more new scientific ideas far enough into development to make them more viable as licensing candidates. Collins is emphasizing the need to "de-risk" scientific ideas to draw greater interest from pharmaceutical industry partners in areas like rare diseases.

If he succeeds, NIH may find plenty of interested partners waiting on the other side, since "rare" diseases are becoming far more attractive as the blockbuster model erodes.

That all sounds great, but there is one question that is sure to follow any successful effort by NIH to "de-risk" large numbers of interesting compounds: if the US government takes more of the risk out of drug development, shouldn't companies sell any resulting products at lower prices?

Collins, at least, doesn't see it that way. When asked exactly that question during his first press conference as NIH director, Collins responded by citing his experience when NIH briefly tried to enforce "reasonable pricing" terms under its technology transfer agreements. The effort came in the early 1990s, when Bristol-Myers Squibb licensed Taxol from the National Cancer Institute, and the combination of taxpayer funding for early development of the compound coupled with the need to source the drug from the rare Pacific Yew tree prompted Congress to demand that NIH talk with Bristol about the price of the drug.

NIH and Bristol came to terms, and Bristol still had a blockbuster product (arguably the first ever in oncology). But biopharma companies balked at that model, and the "reasonable pricing" clause disappeared.

Collins has no interest in bringing it back. "The debates about reasonable pricing clauses," he said, "made it very clear to me watching it that this was a third rail for the pharmaceutical and biotech companies. The idea of their being some kind of government intervention in terms of setting pricing for products that they had brought to market through clinical trials and FDA approval would make them very uninterested in approaching such a project in the first place."

"But I do think there is a model here that could achieve some of that in a way that would be more acceptable," Collins said. The goal will be "an arrangement where the compound is licensed, the company then takes it through clinical trials and FDA approval, but the license involves a royalty that would then return to the government to support research if in fact the product makes some money."

"So there you are not regulating the cost of the compound that the company is going to set, which seems to be the deal breaker, but you are engineering a system that allows some payback to the public for the public investment."

That formula is one that biopharma sponsors love--since it means not only that companies maintain pricing flexibility, but that NIH actually has a stake in the commercial success of their compound. And that support is all the more important in areas like rare disease, where small patient numbers make eye-popping prices common.

DotW: Let Down

Hellllooo, biz dev people. Where were you this week? I thought we had an agreement. You ink the deals; we write 'em up. I can only say my disappointment is exceeded only by my desire to get out of the office in celebration of one of the last official "summer Fridays"

Okay, okay. There were a couple of deals this week: Lonza offers $460 million for Patheon in a non-binding agreement (whoopee); Avigen/MediciNova, a deal that took only slightly less time than the formation of the seven continents; Crucell's covenants with the NIH and NIAID for flu mabs and an unnamed but "large supranational organization" for Quinvaxem; and the Vasogen/IntelliPharmaceutics merger for which no financials were disclosed. (Hint: you want coverage, we need details.)

Let's all agree it was slim pickins, which explains why Smart Brief's top story on Aug. 18 was about sea-worm based glue.

Which leads us to speculate on deals of the week to come. (It's your fault. You left us the opening.) What comes to mind? GSK buying Genmab if the stock slides lower. J&J taking out Basilea just to get out of the nasty arbitration cycle. Genzyme buying out Protalix (they can't really afford Shire, especially if Teva really is in the running) to have a steady supply of drug for Gaucher disease. Or maybe some deal between BIO and Dick Armey since he's worn out his welcome lobbying for pharma companies? Oh, and Obamacare.

Until next week, we leave you with this sentiment ala Radiohead and one final thought: GET BACK TO WORK.

Wednesday, August 19, 2009

The Medicines Co: No Non-Sinister Deed Goes Unpunished

The Medicines Company’s years-long effort to alter federal patent rules to allow certain filings to be approved even if they are late is neither an example of corporate altruism nor of corporate greed. More specifically, it’s a rather logical response to an unfortunate series of events that began in 2001 when TMC’s attorneys filed a patent extension for intravenous blood thinner drug Angiomax one day late, and the application was rejected by the U.S. Patent & Trademark Office. (See this March 2007 article from IN VIVO for a fuller understanding of the events then and since.)

Enter the national media and the omnipresent front-page stories about health care reform and town hall meetings being disrupted with angry rhetoric, sometimes verging on violence.

Earlier this month, New York Times columnist Frank Rich and MSNBC talk host Rachel Maddow reached the same conclusion when connecting three undeniable facts. 1) Former House Majority Leader Richard Armey (R-TX) up until very recently worked for DC law firm DLA Piper. 2) Armey’s lobbying group Freedom Works has played a role in fomenting the angry dissent occurring at various members of Congress’ town hall meetings. 3) The Medicines Company has employed DLA Piper in the past to lobby for patent law changes that would enable Angiomax to receive an additional four and a half years of patent protection, and Armey at times played a role in those efforts.

Those facts led to the following tautology on the part of both Rich and Maddow: The Medicines Company is helping to finance opposition to federal health care reform. TMC even had the pleasure of seeing its corporate logo displayed on Maddow’s MSNBC program Aug. 6 as she described how these events might connect.

There’s just one problem. TMC, in fact, favors health care reform, at least partially because adding more people to the health insurance rolls would be good for its business. The connections Maddow and Rich alluded to may have seemed to make sense, but in the end, they didn’t add up.

Talking with IN VIVO Blog Aug. 19, TMC CEO Clive Meanwell noted that his company had never retained Armey’s services directly and never given a penny to Freedom Works. TMC continues to retain the services of DLA Piper, he added, which is a matter of public record. Armey recently left DLA Piper so that its work would not be confused with the efforts of Freedom Works.

“I wonder if the media have noticed that the Democrats are in control at the moment,” Meanwell asked, saying that Armey, once one of the two or three most powerful Republicans in the country, has played a de minimis role at most in recent efforts to win patent law changes. “We certainly intend to continue working with DLA Piper,” Meanwell added. TMC will continue to advocate “openly and enthusiastically” for patent law changes that would benefit Angiomax, he said.

Presumably, these efforts will not include dubious tactics such as shouting down Sen. Arlen Specter (D-PA) or hanging in effigy a cardboard cutout of Rep. Frank Kratovil (D-MD).

Our sister publication “The Pink Sheet” DAILY today begins a three-part interview with Meanwell that took place before the current controversy over health care reform erupted. It focuses on TMC’s efforts to protect Angiomax and to expand the drug’s label, as well as the specialty pharma’s other efforts to plan for a post-Angiomax future.

In talking with IVB, Meanwell noted that TMC really would prefer not to be part of the health care reform news cycle – to the extent that this post extends the life of this story, we offer it only in the hope of clarifying the company’s non-role in the heated rhetoric surrounding the health care reform debate.—Joseph Haas

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

Basilea Vindicated: FDA Warns J&J over Trial Conduct

In what could almost be categorized as the silver lining in an otherwise black cloud for Basilea, the FDA has issued a warning letter to J&J, the biotech's partner on Phase III anti-infective ceftobiprole. The letter--dated Aug 10--lists a range of concerns over J&J's trial conduct and site monitoring, including failure to follow study protocol.

It's a damning--and, frankly, embarrassing--indictment of the Big Pharma. Right up front, the letter declares [our bolding]:

From our review of the establishment inspection report and the documents submitted with that report, and your letter written in response to the Form FDA 483, dated June 24, 2008, and your responses dated September 2, 2008 and September 4, 2008 in response to additional information requests from the FDA, we conclude that you did not adhere to the applicable statutory requirements and FDA regulations governing the conduct of clinical investigations."

The letter strongly vindicates Basilea's February 2009 decision to enter into arbitration against its partner, however. What may have looked like a rather unwise move for the biotech back then (after all, who is going to run out of money/time first?) now seems justified.

Basilea's seeking damages--and, most critically, missed milestone payments--resulting from a string of delays to ceftobiprole's approval. It had long claimed that J&J was doing a shoddy job of developing the drug, and various FDA red flags along the way--including an approvable letter in March 2008 that was "subject to clinical site inspections" seemed to back up its view (Arbitration is still a big and risky step to take; these partners in theory will be co-promoting the drug one day).

Now granted, this warning letter relates to issues raised last year, before the partners submitted their complete response to FDA in November 2008. So there's nothing new in it, and, according to Piper Jaffray analyst Richard Parkes, it's unlikely to affect the ongoing review and audit process that J&J is having to carry out, using an independent assessor.

Whether or not that's the case, the letter is an undeniably useful piece of evidence for Basilea in its arbitration proceedings; a "significant positive", according to Parkes.

Basilea's hardly out of the woods, though. Arbitration's cheaper and faster than going to court, but it can still take years--certainly Basilea isn't expecting a decision this year. Meanwhile the patent-clock on ceftobiprole is ticking (first patents expire in the US in 2019) and the longer it ticks before the drug gets to market, the less interested J&J may be in investing in it.

Parkes still reckons ceftobiprole (known as Zevtera) will be approved for its cSSSI indication, but it won't be before next year at the very best--three years after the drug was filed. (And that probably assumes arbitration proceedings are complete.) In Europe, the EMEA has done its GCP inspections and may report back later this year.

FDA may wish to make an example of J&J on this issue by further delaying the drug's approval; warning letters to Big Pharma on quality assurance are rare, after all. But"we do not have any indication that the warning letter could change the agency's view on the approvability of ceftobiprole," argues a Basilea spokesman, pointing out that the regulator already knew about the concerns raised in the missive before it issued its complete response. (Furthermore, the FDA division that inspects how trials are done isn't the same lot that reviews drugs.)

Perhaps more likely, the letter signals that FDA has got its arms around the scope of the problem and the issue is as good as closed (granted of course that J&J doesn't mess up again).

So maybe the clouds will clear in 2010 for Basilea: maybe the FDA letter will mean it wins the arbitration and secures better-than-expected damages, and just maybe Zevtera will get past the regulators--some sources expect an FDA decision in the first half of the new year.

Or maybe J&J will decide the time is right to buy itself out of any future embarrassment or trouble and snap up the biotech--probably cheaply.

Tuesday, August 18, 2009

Onglyza and the Type 2 Diabetes Approval Path: The Map is Still Sketchy

Biopharma companies hoping to develop drugs to compete in the type 2 diabetes market can breathe a bit easier with the approval of Bristol-Myers Squibb/AstraZeneca’s Onglyza (saxagliptin): the final go ahead from the Food & Drug Administration July 31 unequivocally shows that it is indeed possible to meet FDA’s new cardiovascular safety guidelines for the class.

The outcome is not surprising, after an advisory committee overwhelmingly supported approval of the drug earlier this year—but given the delays and uncertainty, sponsors may be forgiven if they weren’t going to believe it until they saw it.

And now that FDA has posted the approval letter for the drug, sponsors can get to work on figuring out exactly what it will take in terms of post-marketing requirements in the type 2 market of the future.

The letter makes one thing clear: a mandatory Risk Evaluation & Mitigation Strategy will not be an inevitable price for entering the class. Onglyza was approved with a host of post-marketing study commitments, but no REMS.

As for those post-marketing studies themselves, the key commitment is exactly what sponsors would have expected: a prospective clinical trial to assess cardiovascular outcomes. That section is bound to be read carefully by sponsors eager for more clues about how onerous post-marketing trials will be in the class. But they probably won’t learn much that they don’t already know.

Recall that during the advisory committee, Bristol declared its intention to run a study to demonstrate a superior cardiovascular safety profile for saxagliptin. The approval letter (in keeping with the safety focus of the new post-marketing authorities) frames the trial differently, with the goal of showing a relative risk of 1.3 or less versus the control population.

The letter also does not include any details about numbers of patients, duration of therapy or other key trial design elements. However, FDA has made clear its preference for an event-driven trial design, which (assuming Bristol agrees) would make some of the those elements irrelevant.

The letter does detail a number of other specific risks to test for (most triggered by signals in the NDA for Onglyza, but some clearly of a classwide concern.)

And it does set some deadlines. Bristol must finish designing the trial in November, and then complete the study in less than five years.

But beyond that, there’s not much to learn.

Still, the Onglyza letter is certain to be a template for future approvals in the type 2 diabetes class, so here is how FDA describes the pivotal post-marketing trial:
"A randomized, double-blind, controlled trial evaluating the effect of saxagliptin on the incidence of major adverse cardiovascular events in patients with type 2 diabetes mellitus.

The primary objective of this trial is to establish that the upper bound of the 2-sided 95% confidence interval for the estimated risk ratio comparing the incidence of major adverse cardiovascular events observed with saxagliptin to that observed in the control group is less than 1.3.

Secondary objectives must include an assessment of the long-term effects of saxagliptin on lymphocyte counts, infections, hypersensitivity reactions, liver, bone fracture, pancreatitis, skin reactions, and renal safety. For hypersensitivity reactions, especially angioedema, reports should include detailed information on concomitant use of an angiotensin-converting enzyme inhibitor or an angiotensin-receptor blocker. For cases of pancreatitis, serum amylase and/or lipase concentrations with accompanying normal ranges and any imaging study reports should be included in the narratives.

Because renal impairment is an important complication of diabetes, you must ensure that there is a minimum of 1 year of exposure for at least 200 saxagliptin-treated patients with moderate renal impairment and at least 100 saxagliptin-treated patients with severe renal impairment.

The timetable you submitted on July 15, 2009, states that you will conduct this trial according to the following timetable:

Final Protocol Submission: by November 30, 2009

Study Completion: by July 31, 2015

Final Report Submission: by January 31, 2016.”

Monday, August 17, 2009

Big Pharma, Polar Bears, and the Need to Specialize

For at least a decade, biotechs have been perceived by many observers as the likely evolutionary winners in the race for survival and prosperity in the drug industry. The credit crunch has drastically altered the environment in which companies operate and the biotech business model now looks much less likely to supply the fat returns on capital, and the price/earnings ratios, that have historically been associated with companies supplying novel medicines.

So, who will the new winners be, and what strategies must they employ to thrive in these challenging times? Scisive Consulting chairman Robert Easton, partner Catharine Staughton and consultant Matt Young weigh in with a naturalist analogy.

Granted historically lousy P/Es, growth, R&D productivity – pick your measure -- Big Pharma has one thing going for it. The current financial crisis has, at least in the short term, reversed the fortunes for still cash-rich pharmaceutical companies and the biotech upstarts that have been—for oh, about 25 years—inexorably learning to beat pharma at its own game.

The financial collapse seems itself to have been a sort of bailout for Big Pharma. Now they are able to buy novel compounds cheaply from smaller companies who are dying to sell them.

The 20 largest pharmaceutical own a combined war chest of over $100 billion. If current projections hold, their cash and cash equivalents will rise to more than $500 billion by 2014. With these funds on hand, Big Pharma could buy up not only enough candidates to replenish their pipelines, but the majority of the biotechnology industry itself.

On the other hand, according to Burrill & Co, one third of publicly traded biotechs have less than six months’ worth of operating cash.

The outcome of the financial collapse will be that Big Pharma will remain pre-eminent, at least while the capital crunch lasts, albeit with more modest P/E valuations. As a consequence, biotech companies, which had attracted investors with the long-term hope of valuations based on the high P/Es of Big Pharma, are struggling to fund their pipelines and must focus on - and perfect - their business development strategies just to stay viable.

So can Big Pharma do something to make its new lease of life more than temporary?

Superficially, the recipe for evolutionary success seems obvious: the Big Pharma companies use their enormous cash reserves to acquire cash-strapped biotechnology companies. But before launching into the fray with an open checkbook companies need to consider the attractions of the approach, in the light of their own specific situation.

Scisive Consulting has defined drug companies according to six types of animal: those that have adapted to a narrow evolutionary niche, and those that are more flexible inhabitants of their environment.

Consider the polar bear. These beasts are powerful and can move quickly – challenge them at your peril. Nevertheless they must adapt to a shrinking environment, thanks to global warming, in order to survive and flourish. Not a bad analogy, we believe, for Big Pharma.

At the other end of the spectrum, biotechs are rabbits. They eat a lot of green. And their population varies widely according to the availability of food. When rabbits are stressed by predators or lack of resources, they eat their own young. (It’s true, you can look it up!)

Like polar bears, Big Pharma are the top predators in their shrinking world. To stay relevant, however, they need to either figure out how to live in their shrinking environment – or find and adapt to new territories.

In industrial terms, such an imperative translates to the need for a wholesale change in the drug industry’s business model. When this industry began, it was built on a rather simple model. Science created a pill which was manufactured cheaply and marketed by sales forces to a large group of patients. This model led to profit margins that are almost unthinkable today.

The model also allowed all of the Big Pharmas to evolve in very similar looking creatures. For example, AstraZeneca, Novartis, and Bristol-Myers, all operate in the fields of neuroscience, oncology, and cardiovascular health. While some pharmas involve themselves in nutritionals, animal health, infectious disease, and other fields, all of these companies also engage with a mixing pot of therapeutic areas.

The relative strategic uniformity isn’t generally the case with the leading companies in other industries. In the high-tech industry, for example, there is a much higher level of specialization. Google is mainly in the advertising business; Microsoft, software; Research in Motion, in wireless solutions. You aren’t likely to see Facebook manufacturing semiconductors any time soon. (Yes we are aware of Microsoft’s Bing search engine and the new Google Chrome OS, but still.)

It is likely that health care businesses will evolve in a similar fashion. The leaders of the future will be those with unique and complex models which sub-speciate into differentiated forms. Companies will focus nearly all of their efforts on a single therapeutic area, becoming “immunology companies” or “cancer companies”. These companies will also become more integrated across sectors. A cardiology company will sell diagnostics, devices, and therapeutics pertaining to cardiovascular health.

Such a transformation will involve radical changes to their structures. Fortunately, pharmas have a great deal of cash now, which gives them the resources to undergo such a transformation. The winners, ultimately, will be those who recognize this need to adapt, specialize, and develop more complex business models, and subsequently capitalize on their first-mover advantage.

A good example of this can be seen in Astellas’ determination to acquire CV Therapeutics. Although CV’s board rejected the offer numerous times, ultimately fleeing into the arms of Gilead, the attempted acquisition has marked a watershed event in how Japanese companies operate with respect to their American counterparts. Typically Japanese companies have refrained from hostile corporate activity and this fundamental change in Astellas’ strategy shows its willingness to adapt and its understanding of the new reality in the pharmaceutical market.

Secondly, Pharma’s polar bears must acquire the best candidates from their prey, the cash-strapped biotech rabbits of the world. However, there is an issue of timing at play here. Although biotech assets are cheaper than ever before, they have probably not yet hit rock bottom. It is clear that these cash-eating biotechs will get more desperate as this crisis wears on and hence the pickings for the polar bears will get better.

The astute will watch and wait, and the true art will be in knowing when to pounce: before competitors do and the opportunity passes.

For the full article, including the likely fate of the duck-billed platypuses and other animals of the pharmaceutical world, see

While You Were Wavering

So it seems the so-called public plan option so intrinsic to Obamacare may not be so important after all? Color us confused, but take a look at what various officials had to say over the weekend, as reported by the NYT. Meanwhile, while you were at the beach ...

  • NeuroSearch is has inked a drug discovery and development deal with J&J's Janssen Pharmaceutica that will bring in €32 million in guaranteed funding over three years, comprising a €5 million up-front payment, €12 million in research funding, €10 million in an up-front equity investment and a right to put €5 million more worth of shares. Janssen gets various options for each drug that comes out of the CNS alliance and NeuroSearch is eligible for milestones and royalties on compounds Janssen opts into.

  • Duke researchers have found a gene that predicts response to interferon alfa in HCV patients. The findings, reported in Nature, could help doctors decide which patients should receive the gruelling regimine of IFN therapy, says Reuters.

  • IntelliPharmaCeutics is reverse merging with Nasdaq-traded Vasogen; the company will be 86% held by IPC shareholders and focused on controlled-release drugs.

  • Bayer-Schering's Betaseron interferon beta for MS by any other name is ... Novartis' Extavia, coming soon to a pharmacy near you.

  • Crucell said this morning that it received an award for $300 million worth of its Quinvaxem multi-disease pediatric vaccine.

  • How to solve the pharmaceutical industry's problems? Start with a high-end working group to discuss the issues, apparently. The FT profiles the Athenaeum Group. (IN VIVO Blog's invitation must've been lost in the mail.)

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

Friday, August 14, 2009

DotW: Sideshow

It's that time of year when reasonable folk take vacation, so perhaps that's the explanation for the carnivale nature of this week's biopharma news. Healthcare reform continues to draw heated exchanges, particularly as Congressional reps hold town-hall style meetings more prone to ranting than reason.

And there was plenty of drama--and confusion--at the circus which was yesterday's denosumab advisory committee meeting . (Did you follow our of-the-moment tweets by Ramsey Baghdadi and Lauren Smith?) The mighty regulator Richard Pazdur may have received his comeuppance when he tried to change the wording of a question late in the day only to be chastized by the advisory committee chair about FDA's disinclination to do so. Guess it doesn't matter that Padzur is FDA.

For the record, we stand by our analysis last night--and agree with Deutsche Bank's Mark Schoenebaum--that the ad com results were a huge win for Amgen despite the REMS requirement (this ain't Tysabri) and the "no votes" in post-menopausal osteoporosis prevention and treatment induced bone loss in breast cancer.

To add to the carnival nature of the week, note the reemergence of swine flu hysteria, which has rabbis praying on airplanes to create a flu free zone over Israel and Indians rushing to purchase masks after the announcement of the first death in that country. There was also the brouhaha over one Florida health department doctor's public rant against Dunkin' Donuts. And of course, who could forget Regis Philbin's tirade about that "turkey" of a pharmaceutical stock, Pfizer, on Fast Money? CNBC's Mike Huckman suggests Pfizer CEO Jeff Kindler and Regis sort things out over a Blue Moon or a Bud Light--or maybe Pfizer can get Philbin's sassy co-host, Kelly Ripa, to explain the pharma's value proposition.

Got your fill of the sideshow that is biopharma? Afraid our antidote may not help, but in case you are wondering no two-headed writers contributed to the writing of this post.

Ikaria/Fibrex: Ikaria maintained a brisk in-licensing pace with its second deal in as many months and third in under a year, agreeing Aug. 10 to acquire the worldwide license to three investigational fibrin-based peptides from Fibrex Medical. The two privately-held biotechs opted not to disclose financial terms (hey, that's their prerogative). According to this "Pink Sheet" DAILY story, Fibrex will receive an upfront payment, potential clinical development milestones, and royalties on net sales for any product that reaches the market. The transaction expands Ikaria’s portfolio of investigational critical care drugs and centers on Phase II myocardial infarction candidate FX06, which produced mixed results in last year’s F.I.R.E. (Fibrex in Ischemia and Reperfusion Injury) trial. Fibrex’s peptides bind to vascular endothelial cells to preserve endothelial barrier function and prevent tissue injury. The drug also demonstrated a reduction of two markers of muscle damage, but Ralf Rosskamp, Ikaria’s R&D chief, said his company will go “back to the drawing board” with the peptide, including new preclinical research in animal models and formulation changes. Ikaria’s goal is to set a clinical development direction for FX06 by the beginning of next year. Based in Clinton, N.J., Ikaria got into the gaseous messenger molecule space via its 2007 merger with INO Therapeutics, resulting in INO owner Linde Group getting 17 percent equity in the new company. In addition to last September’s deal with Orphan Therapeutics for North American rights to hepatorenal syndrome drug Lucassin, Ikaria last month licensed BL-1040, a Phase I/II candidate for preventing ventricular remodeling following acute heart attack from Israel’s BioLineRx.--Joseph Haas

AstraZeneca/Forest: In years gone by, practically no Big Pharma would have signed a licensing deal that didn't include U.S. rights. These days, however, the rise of China, India and other emerging markets is providing more geographic carve-out opportunities for deal-makers. Thus, in Forest Laboratories' tie-up with AstraZeneca, announced Aug. 12, the Big Pharma gets ex-U.S., Canadian and Japanese co-development and commercialization rights to the specialty pharma's Phase III broad-spectrum antibiotic ceftaroline, in development for the treatment of complicated skin and skin structure infections (cSSSI) and community-acquired bacterial pneumonia (CABP). Financials weren't disclosed, but for a signing fee, AZ takes on responsibility for development and regulatory approval in its licensed territories and will pay sales-related royalties and milestones to Forest. For AZ, this deal signals the continued importance of emerging markets--especially China--to the company's future growth, and plugs a hole in its anti-infective pipeline, which is largely built around the antibiotic Merrem, the phase II anti-TNF antibody for sepsis, CytoFab, and a number of antivirals. For Forest, the deal--it's second of the week--provides confidence in the approvability of its late-stage candidate and will help boost worldwide sales - both welcome given the patent expiry in 2012 of the company's highest-selling drug, depression and anxiety treatment Lexapro. Although neither AZ or Forest will comment on the deal terms, Basilea's 2005 tie-up with J&J may provide some clues about ceftaroline's partnership economics: although a worldwide deal, it was also signed when ceftobiprole was in Phase III and provided Basilea with $25 million up front and up to $310 million in milestones, 75 percent of which are said to be pre-launch.--Melanie Senior

Forest/Nycomed: Forest's other deal this week was the in-licensing of Nycomed's PDE-4 inhibitor Daxas, which is pending full Phase III results and regulatory approval in chronic obstructive pulmonary disease. U.S. commercialization rights to the program didn't come cheap, costing Forest $100 million up-front plus undisclosed regulatory and commercial milestones. But Forest, which needs to bulk up its pipeline given the pending expiry of Lexapro (we know we mentioned it already but it's a critical event for Forest), likely saw potential synergies since the deal allows the specialty pharma to gain a foothold in the COPD market while developing its own products, the Phase III aclinidium and Phase II oglemilast. If approved, Daxas adds an additional growth product to Forest's drug stable, which includes Bystolic and Savella. For Nycomed, the Daxas partnering was a welcome event given the drug's long and sometimes rocky development path. Initially developed by the German pharma Altana, which Nycomed purchased in 2007, earlier Daxas clinical trials yielded mixed results, forcing the mid-sized European pharma to focus on its use in the most severely-ill patients. Moreover, Nycomed has been talking up a partnering event for the drug for months given its lack of interest in building a U.S. sales force (for more see this "Pink Sheet" DAILY story). Daxas partnering might also help bolster investor interest in the company; Nycomed's private equity backers are thought to be mulling a possible IPO and may consider the timing suitable given this week's respective debuts by Cumberland Pharmaceuticals and Emdeon on the NASDAQ and NYSE.--Emily Hayes and Ellen Foster Licking

CombinatoRx/Clinical Data: Fresh off its adjustable-stake merger with Neuromed, CombinatoRx is teaming up with Clinical Data to test the latter's preclinical adenosine A2A agonist, ATL313, in a combination treatment for multiple myeloma and other B-cell cancers. There appears to be no upfront payment but CombinatoRx is paying for preclinical and clinical development and Clinical Data retains a co-development opt-in after Phase IIa. According to a CombinatoRx 8-k, Clinical Data's subsidiary PGxHealth LLC can exercise its option up to 90 days after Phase IIa data is available by paying CombinatoRx 50% of the drug's previous development costs and evenly splitting future costs. If the option is declined CombinatoRx can maintain its exclusive license by paying $5 million to Clinical Data, which will be eligible for $50 million in clinical and regulatory milestones for an initial indications, another $50 million for clinical and regulatory milestones in a second indication, and potential sales milestones and royalties. For CombinatoRx the move is a relatively low-cost way to access pipeline opportunities while it waits on the approval of Neuromed's Exalgo painkiller, which has a PDUFA date in November 2009 and was recently licensed to Covidien's Malinckrodt.--Chris Morrison

Image courtesy of flickrer New York Observer via a creative commons license.

Thursday, August 13, 2009

Financings of the Fortnight: Follow-On Fever

This week's IPOs from Cumberland Pharmaceuticals and Emdeon may have garnered all the headlines. But for portents of a future biotech IPO market--as opposed to a market in IPOs for profitable, less risky companies like Cumberland and Emdeon--look instead to what seems to be an all-of-the-sudden-white-hot follow-on market.

But one more word about IPOs before we get to the FOPO-fever. We don't mean to suggest that this week's pioneers have zero impact on or relation to investors' appetites for riskier drug discovery and development plays. For now any connection is likely psychological, but not unimportant: investors are regaining their taste for new life-sciences companies. Soon enough they'll move down the risk continuum. One correspondent suggested to us that it was like eating dry roasted peanuts: "Once you start ...". We agree, but argue that VCs need to be building more pistachio-like companies if they really want to get the ball rolling.

These days though, investors are positively nutty (sorry) about biotech follow-ons. Since our last FOTF column two Thursdays ago--which highlighted FOPOs from HGSI (net $357mm) and Orexigen ($75mm)--the floodgates have opened. We've chosen to highlight Micromet and Mannkind (see below), but there were others as well, to the tune of about $600 million worth of follow-on shares sold. And that doesn't include PIPEs. At least a dozen deals in the past two weeks brought in a total of about $100 million.

Some of the big 'uns: This morning Seattle Genetics announced underwriters had exercised their overallotment option, bringing the biotech's gross haul to $136 million. Onyx raised at least $120 million (plus at least $200 million in convertible debt). And Inspire Pharmaceuticals grossed $115 million.

The prices on these deals were pretty good too; none of the firms that raised big money were languishing near 52-week lows. If investors' appetites for biotech follow-ons remain unsated, IPOs of R&D focused companies may not be too far behind.

That said, we're not holding our breath for a flood of S-1s. But investor interest in biotech shares has other, more immediate, ramifications beyond increased underwriting revenues for investment banks. As biotech capital markets begin to thaw, pharmaceutical acquirers may become more active, sensing a market that has hit bottom and realizing that biotech prey (and the prey's investor syndicates) may eventually have other exit options. More M&A will generate more interest from investors. And thus, the cycle begins again.

But let's not get ahead of ourselves. For now content yourselves with ...

Micromet: With $49 million on hand in cash and equivalents, Micromet enhanced its cash position by netting $75 million from a follow-on public offering Aug. 4 to fund development of its pipeline of four clinical-stage antibodies. Micromet priced its offering at $5 a share on July 30 – the stock had closed trading at $5.59 the day before -- and underwriters also sold the overallotment, taking the gross haul over $80 million. The Bethesda, Md.-based biotech plans to start a pivotal trial of its lead compound blinatumomab in acute lymphoblastic leukemia next year, and two weeks ago received orphan designation for the project in Europe. It recently regained North American rights to blinatumomab from previous partner MedImmune--surely increasing its development expenses even as MedImmune continues to pay to manufacture clinical supply. Micromet also has adecatumumab in Phase II for colorectal cancer with partner Merck Serono. Each antibody is also in Phase I in a different indication: non-Hodgkin’s lymphoma for the former and metastatic breast cancer for the latter. This is by far Micromet's biggest fundraising haul, reflecting the maturation of its BiTE technology pipeline. After going public through a reverse merger with CancerVax in 2006, Micromet raised cash three times through PIPE deals. Most recently, it sold 9.4 million shares at $4.25 a share (an 8% discount) to funds including Index Ventures Growth, Abingworth, DAFNA Capital Management and Merlin Nexus, grossing $40 million. A June 2007 PIPE brought back $25.3 million and a July 2006 deal yielded $8 million.--Joe Haas

MannKind: Not giving up on inhaled insulin any time soon, MannKind has just raised $62.2 million in a follow-on public offering of 8.4 million shares including the full exercise of the overallotment. Chairman and CEO Alfred Mann, who has previously invested over $900 million of his own money into the company’s fast-acting insulin candidate Afresa according to an interview last year with IN VIVO, bought one million shares for $8.11 (the price equal to the market value immediately before the FOPO) while the remaining stock was sold for $7.35/share. Both prices are pretty good considering that in early March shares were trading around $2 and have gradually increased since MannKind submitted the NDA for Afresa on March 16, reaching a high of $8.54 on June 25, right around the time the company completed the purchase of Pfizer’s bulk insulin inventory for $3 million. Since it went public in 2004, MannKind has raised a ton of cash—$884 million, including the present deal-- through private placements and follow-ons. Most notably it brought in $401 million from a 2006 FOPO of 23 million shares, at the much higher price of $17.42 (at the same time it raised $115 million in debt). Now that Exubera has failed, and without companies like Lilly or Novo Nordisk in the picture, MannKind is the only firm left pursuing a late-stage inhaled insulin (MAP, which coincidentally also completed a follow-on recently, and Vectura/MicroDose each have candidates in Phase I). Afresa appears to have a tough road ahead and it’s clear the drug will require a REMS in light of the Exubera fall-out, as well as mandatory post-marketing studies if approved. MannKind remains in the hunt for a partner.--Amanda Micklus

Constellation Pharmaceuticals: Epigenetics player Constellation Pharmaceuticals made news this week, pulling in the third tranche of its Series A and hiring a new CEO, Mark Goldsmith, to replace acting chief and Third Rock Ventures Partner, Mark Levin. The biotech, which formed in 2008 with great fanfare, raised $14.8 million in funding from its backers last year, and closed on the remaining $17.2 earlier this month. No new investors were announced with this final tranche: in addition to Third Rock, Venrock and Column Group co-led the Series A, and Altitude Life Science Ventures also participated. The financing, which should last the company into well into 2010, will be used to push forward Constellation’s most advanced programs--still tightly under wraps—and to hire additional scientists, while building the management team. Goldsmith’s acceptance of the top spot marks the beginning of the long-promised moves by Third Rock partners away from the day-to-day management of the company. Goldsmith most recently was an entrepreneur-in-residence with Prospect Venture Partners, after stints as SVP of Genencor and CEO of Cogentus Pharmaceuticals, which officially closed shop earlier this year. A scientist-physician trained in microbiology and immunology, he’s had to immerse himself in the field of epigenetics, an emerging field of science that aims to understand how misregulation of a second layer of genetic information—the packaging of DNA into chromosomes—can result in human disease. His near-term goals, he says, are to advance the top projects (sorry no additional details yet but the focus is still on histone methyltransferases and histone demethyltransferases), enhance the platform (which he calls a product engine), and “put in place one high quality strategic corporate alliance.” He’ll have his work cut out for him. In addition to Constellation, another well-financed start-up, Epizyme, is gunning for the top spot as “the epigenetics company.” Like Constellation, Epizyme is also built around the discoveries of leading scientific thinkers, boasts top-tier managerial talent, and has A-List backers. (For more on both companies, check out this feature from March 2009's START-UP.) Beyond these two companies a number of start-ups are attempting to develop inhibitors to histone deactylases (HDACs), an enzyme family also implicated in epigenetics. And coincidentally the start-up Acetylon landed roughly $7 million in financing this week as well.--Ellen Foster Licking

XDx: Perhaps motivated in part by Human Genome Sciences’ recent positive Phase III data for lupus candidate Benlysta, Bristol-Myers Squibb last week led a $14.4 million venture round for molecular diagnostics company XDx. Earlier this year, Bristol partnered with XDx, tasking the Brisbane, Calif., biotech to identify biomarkers for systemic lupus erythamatosus. Bristol's Orencia (abatacept) is in Phase III trials for lupus, a disease that hasn't seen a new therapy in generations; a companion diagnostic could give Orencia a market edge if it is approved for lupus (it's currently sold for RA). XDx, which markets the AlloMap HTx assay to help identify heart transplant patients with low probability of organ rejection, has been working on applying its molecular expression testing technology to lupus since licensing gene expression intellectual property from the University of Minnesota two years ago. In addition to Bristol, the early-August round was financed by XDx’s existing investors: Burrill Venture Capital, Duff, Ackerman & Goodrich, Integral Capital Partners, Intel Capital, Kleiner Perkins Caulfield & Byers, Sprout Group, and TPG Biotechnology. XDx filed an IPO in October 2007 but withdrew it last September citing poor market conditions; the current financing is its seventh venture round. Between December 2004 and May 2007, the biotech raised approximately $72 million in Series D, E and F financings. XDx said it will use the Series G proceeds to support new and ongoing R&D projects and commercial activities related to AlloMap. CEO Pierre Cassigneul said the firm hopes to expand the market for AlloMap, which it says can reduce the need for invasive biopsies and potentially lower dosing of immunosuppressant drugs in transplant patients, and predicted the firm would break even financially next year.--Joe Haas

image from flickr user Joe Seggiola used under a creative commons license