Monday, October 25, 2010

No More NICE by 2013?

Any drug developer who showed up at the Royal Society of Medicine in London this morning could have been forgiven for thinking Christmas has come early. By 2013, NICE probably won't be doing cost-effectiveness analyses of individual drugs anymore, according to Lord Howe, Parliamentary Under Secretary of State in the Department of Health.

Speaking at the joint ABPI/BIA conference entitled "Our Vision for a New Decade" (where a few other worthy initiatives were announced), Howe declared that those highly visible, and controversial, opinions delivered by NICE on whether a particular new medicine should be reimbursed by the UK National Health Service "will probably be somewhat redundant" in a few years' time.

Don't get too excited: it's not that cost-effectiveness assessments are going away. It's just that, according to Howe's plan, by then the UK will have a spanking new value-based pricing system which will see a drug's value assessed and quantified during pricing discussions. That system will replace the current PPRS (Pharmaceutical Price Regulation Scheme, which caps companies' profits rather than drug prices directly) which expires at the end of 2013.

According to Howe, the new set-up will see "the price of a drug reflecting everybody's agreed perspective on the value it provides". We were unable to establish exactly who 'everybody' is, and how they might 'agree' on such a matter. But despite scant details, it appears that companies may in future discuss value with pricing authorities directly rather than have NICE--usually post hoc--impose its judgment on a drug's cost-effectiveness.

So it's not quite Christmas. But it seems the industry associations have done a good job lobbying for greater influence in pricing and value decisions, and for NICE's teeth to be blunted somewhat. (Perhaps the writing was on the wall in 2009 after Sir Ian Kennedy published his report on NICE's methodologies.) Plus a system wherein value is discussed at the same time as pricing is, arguably, simpler, and "anything that's simpler is better," says Roch Doliveux, CEO of UCB and a significant investor in the UK (largely courtesy of the 2004 Celltech acquisition).

No-one will admit outright that NICE is about to take a back-seat in cost-effectiveness decisions. Universities and Science Minister David Willetts was quick to refute that there will be a "lesser" role for NICE, saying instead it would be a "changing role". A more "advisory" role. NICE will move away from single technology assessments (drug assessments) towards setting quality standards more broadly for public health and for care within the NHS, including in social care.

Here's the Department of Health's summary of where NICE will fit in:
"We respect the expert independence of NICE, and believe that it must be allowed to continue to issue guidance free from political interference. However, we believe that there are fundamental failings within the wider system for drug pricing and access. We are determined to address this and are clear that NICE plays a vital advisory role."
Vital its advisory role in establishing a new drug pricing system may be, but a NICE focused on setting quality standards for public health will certainly be less controversial than in its existing form. And less powerful. Today, a NICE decision can--and quite often does--shatter a drug's commercial prospects in the UK. That power looks uncertain post-2013.

HbA1c Smackdown: FDA’s Woodcock, UK’s Breckenridge Go Toe-To-Toe Over Diabetes Drug Approval Standards

Just when you think everything that can be said about Avandia has been said, along comes an impromptu, verbal sparring match between high-level officials of the U.S. and UK drug regulatory agencies over the role and value of hemoglobin A1c reduction in diabetes drug approval.

In one corner: Sir Alasdair Breckenridge, chairman of the UK’s Medicines and Healthcare products Regulatory Agency, better known as the MHRA.

And in the other corner: FDA Center for Drug Evaluation and Research Director Janet Woodcock.

The setting: the Third Annual Risk Management and Drug Safety Summit in Washington, D.C. on Oct. 18.

Woodcock, who was the first presenter at the meeting, spoke about CDER’s efforts to improve risk management and drug safety since passage of the FDA Amendments Act. She was followed at the podium by Breckenridge, who presented the European perspective on risk management and a pharmacovigilance “tool kit” for assessing and mitigating drug risks.

Near the end of his presentation, Breckenridge turned to the recent regulatory decisions on Avandia, GlaxoSmithKline’s beleaguered thiazolidinedione. Even though FDA and the European Medicines Agency took different regulatory paths – with FDA restricting distribution under a Risk Evaluation and Mitigation Strategy, and EMA suspending rosiglitazone’s license – Breckenridge stressed the extensive collaboration between the two agencies that culminated in simultaneous announcements on Sept. 23.

“If you think about the difference between what Europe has done and what the U.S. has done, in fact I would suggest there was very little difference indeed, and it was an example of regulatory authorities working together in a global manner,” he said. ("The Pink Sheet" offers an analysis of why they diverged in their final judgment.)

Following these glowing remarks about alignment among regulators on both sides of the Atlantic, Breckenridge took the Avandia post-mortem a step further, and perhaps one too far for Woodcock.

“The question I’ve asked myself is if Avandia came through for licensing today, with the information we had, what should be done, what would we have done? How has regulation advanced? Well firstly, it wouldn’t have been approved for efficacy on a surrogate marker [HbA1c]. That would not be accepted,” he said. Some in industry concur that there is now a higher hurdle, at least commercially, for diabetes products.

Fortunately for the audience, Woodcock hung around after her presentation to hear Breckenridge’s speech, and during a question and answer session, while still sitting in the audience, Woodcock pounced on the British knight’s skepticism toward HbA1c. Here is an abbreviated transcript of the exchange, along with some first-hand, editorial observations noted in brackets:

Woodcock: “If you’re not going to use hemoglobin A1c or serum glucose … what are you going to use for efficacy in diabetes? No drug in type 2 diabetes has ever been shown to improve cardiovascular outcomes.”

Breckenridge: “I believe this illustrates the problem with antidiabetic drugs. I believe it’s going to be increasingly difficult to develop any drug for diabetes which has got a suggestion that Avandia did have, and I think drugs like Avandia are going to die at a much earlier stage and be killed at a much earlier stage than developed.”

Woodcock: “I would say the question with rosiglitazone is a safety issue, it’s not an efficacy issue … I think hemoglobin A1c is more than a surrogate … I date as an internist from the era when people walked around with untreated type 2 diabetes. They hit my emergency room they were in hyperosmolar coma. That’s a life-threatening disease. Or they had severe invasive soft tissue infection with gram negative organisms, or they were dehydrated and had blurry vision and CNS issues.”

Breckenridge: [apparently attempting to explain that not all type 2 diabetics are in such dire straits] “I can remember as well, and I’m not sort of swapping stories with you, but patients with type 2 diabetes are the rather large ladies who you see walking around in the United Kingdom and I’m afraid Washington as well.” [disapproving murmurs from the audience]

Woodcock: “But if you go untreated long enough with type 2 diabetes that’s what you get into. It’s a progressive disease. So the idea that you don’t need treatments for type 2 diabetes I think is an incorrect …. ”

Breckenridge: “I’m not suggesting that ….”

Woodcock: “You will get renal failure, you’ll get amputation … It’s a symptomatic disease. People have studied this and they’ve looked at central nervous system effects of hyperglycemia … There are people walking around with blood sugar 300, 400 and so on. That is not good for you, acutely. And sub-acutely, glycemic control has been shown to be correlated with progression of retinopathy, renal failure and so forth, and neuropathy to some extent. [By now standing, holding the microphone and looking as comfortable as a talk show host on a TV production set] So I would take issue with the fact that hemoglobin A1c is a bad surrogate. I think it’s a very good surrogate for efficacy. I don’t think it tells you anything about safety of a drug just like most surrogates for efficacy.”

Breckendridge: “I’m afraid I disagree with you there, Janet. I think by the definition of a surrogate, hemoglobin A1c fulfills all the criteria … and the point I was trying to make was that if you take, in the development of a drug in the latter phase of the drug, and you had a drug which was effective by affecting the surrogate, but it had some other not just potential but huge changes, big changes which were known at the time in a possible adverse event which diabetics are already prone to, the manufacturers, I would suggest, would have a very, very careful look at that before continuing with its development.”

Woodcock: “I don’t think we’re in disagreement, I’m simply saying I thought the earlier definitions [of a surrogate] were mainly done by statisticians, like Prentiss and others … that it should contain all outcomes. That’s completely naive from a biological perspective, because you may perfectly control the disease and kill people from something else. It’s unrelated to the pathway of the disease. So I think expectation that a surrogate for efficacy would take care of your safety evaluation is unrealistic, and I think we’re saying the same thing, which is for chronic diseases there’s going to have to be a much more thorough safety evaluation, it’s longer term, includes more patients, looks for more outcomes than we have traditionally had.”

Breckenridge: “And I think diabetes is an especially difficult case for the reason I described. If you’ve got a disease whose natural history is to develop vascular disease anyway, then a drug which is going to influence that in any kind of adverse way is not good news.”

Woodcock: “The sulfonylureas have long had a warning in the United States for cardiovascular disease because the only time that was studied long-term there was a signal.”

Breckenridge: “And so do the thiazide diuretics, too.”

Woodcock: [laughing] “So there’s a lot of things we don’t know.”

During a break in the meeting later in the day, Breckenridge was overheard describing Woodcock as “feisty.”

Feisty? Perhaps. But definitely defensive of the view strongly held within CDER’s Office of New Drugs that HbA1C reduction, not cardiovascular benefit, is an appropriate efficacy endpoint for new antidiabetics. Woodcok's eagerness to enter the ring on the issue is especially interesting given that outcomes data is now essentially required to demonstrate the safety of the products.

Sue SutterPhoto "Natalya" by flickr user Snerkie used under Creative Commons License.

Friday, October 22, 2010

DotW Strategies

As 2010’s days grow shorter, the pharmaceutical industry’s larger players face fundamental challenges, both in how they invest in internal research and how they ensure continued growth commercially for their medicines in the face of increasing scrutiny from regulators and payers. An analysis of Elsevier’s Strategic Transactions database in the October IN VIVO shows that, to date, most companies have adapted with a three-pronged strategy that places an emphasis on externalization, emerging markets, and unmet medical need.

This week’s edition of deals of the week doesn’t stray far from these established themes. (Poison ivy was apparently considered optional.)

Sanofi-Aventis’s alliance with Harvard University illustrates the ongoing allure of academic relationships, as drugmakers look to identify innovative new medicines ever earlier in the development cycle. Meantime, Glaxo’s tie-up with two Italian foundations in the development of a gene therapy to treat a disorder affecting only a few hundred people worldwide shows that no disease is too rare to attract Big Pharma’s interest--as long as the unmet medical need is high. Finally Pfizer’s deal with Indian biotech Biocon, illustrates drugmakers’ growing interest in both diabetes AND emerging markets.

GlaxoSmithKline/Fondazione Telethon & Fondazione San Raffaele: Big Pharma’s interest in rare diseases shows no signs of waning. This week’s rare disease pact – it seems like one a week is now pro forma for DOTW – aligns GlaxoSmithKline and two Italian foundations. On October 18, GSK announced plants to pay Fondazione Telethon and Fondazione San Raffaele €10 million upfront (about $14 million) for worldwide rights to a Phase I/II stem cell-based gene therapy for ADA-SCID, also known as "bubble boy disease." ADA-SCID, a single-gene defect which prevents the body from producing the enzyme adenosine deaminase, afflicts about 350 children worldwide, with about 14 EU patients and 12 U.S. patients born each year. (Thus, this isn’t simply GSK investing in a rare disease; ADA-SCID counts as one of those “ultra” orphan indications, a valid term even if it makes industry and advocacy groups squeamish.) Beyond the ADA-SCID program, the two foundations will partner with GSK on clinical programs in Wiskott-Aldrich Syndrome and metachromatic leukodystrophy, as well as four additional programs, all currently in preclinical development. In addition to the upfront payment, the foundations could earn specified development milestone payments for each program. In a same day business presentation, GSK’s Global Head of Rare Diseases Marc Dunoyer offered additional color about the rare disease unit’s strategic intent. The pharma intends to address 200 rare diseases with a focus in four primary areas: metabolism and inherited disorders, central nervous system and muscle disorders, immuno-inflammation, and rare malignancies and hematology. It continues to build its portfolio via dealmaking, including ongoing collaborations with Isis, Prosensa, and JCR Pharmaceuticals.—Joe Haas

Genentech/Biogen Idec: The longtime Rituxan partners have amended their co-development terms for next-generation anti-CD20 compounds. Biogen now gets slightly higher royalties on sales of the still-experimental compounds ocrelizumab and GA101, and their introduction will not trigger lower Rituxan royalties, as was previously outlined in their agreement. The firms squabbled for years over rights to what comes after Rituxan, and an arbiter ruled last year that Biogen had the right to participate in all anti-CD20 program development decisions. Historically Biogen has received 30% of the first $50 million in US and Canadian operating profits, then 40% of everything over $50 million, a threshold passed by Rituxan in the first quarter in each of the last three years, according to ISI Research analyst Mark Schoenebaum. Commercialization of ocrelizumab will no longer reduce Biogen's share of Rituxan profits, but certain regulatory and sales milestones of GA101 will. Also, Genentech will pay for all ocrelizumab development in multiple sclerosis, with Biogen receiving between 13.5% and 24% of US sales. With GA101, which in 2008 Genentech licensed from Glycart -- itself wholly owned by Roche -- Biogen will now pay 35% instead of 30% of US development costs and receive between 35% and 39% of profits based on certain sales milestones. GA101 is in advanced development for CLL and NHL. Ocrelizumab is in Phase II for multiple sclerosis but is no longer being tested in rheumatois arthritis. -- Alex Lash

Pfizer/Biocon: Pfizer and India's biotechnology flag-bearer Biocon finally -- after months of speculation -- announced a comprehensive global commercialization pact to bring to market a range of insulins including analogs of medicines marketed by Sanofi-Aventis, Novo Nordisk and Eli Lilly. Pfizer is doling out $200 million in upfront payments to Biocon, with the Indian biotech eligible for further milestone payments of up to $150 million. Biocon will also be entitled to additional payments linked to Pfizer's sales of its four insulin biosimilar products across global markets. As part of the deal, Biocon will take up clinical development, manufacture and supply of the biosimilar insulin products and regulatory activities needed for approvals in various geographies. Pfizer has told analysts that the deal will be "incremental," not "instrumental" to its strategy in emerging markets, biosimilars, and established products. Pfizer will be responsible for commercializing the products, while Biocon will develop and manufacture them. "Pfizer's participation in this market does raise the bar for the major producers of insulin over the long term," Leerink analyst Seamus Fernandez wrote in a same-day note. But it won't have a near-term impact because Pfizer brings little to the table beyond marketing muscle and the biggest opportunity lies in developed markets, where some of the products are patent protected for several more years. Sanofi's Lantus, for example, doesn’t lose exclusivity until 2015. – Vikas Dandekar

Romark/Intercell: Romark Laboratories and Intercell said they will collaborate on their hepatitis C programs by conducting trials on a combination therapy that will include Romark’s anti-viral drug nitazoxanide and Intercell’s HCV vaccine, IC41. The combination will seek to improve on the standard of care by adding IC41’s immune-boosting properties to nitazoxanide’s ability to slow cell replication without inducing mutations. The drug pairing will be studied side-by-side with the currently used combination of Pegasys (peginterferon alfa-2a) and Copegus (ribavirin), as well as a three-way combo of nitazoxanide, IC41, and Pegasys in a European Phase II trial slated for the first half of 2011. Nitazoxanide, an anti-infective agent in the drug class known as thiazolides that appears to activate protein kinase R, is already marketed to treat diarrhea caused by viral infections. It has been studied in conjunction with peginterferon and ribavirin as well. Tampa, Fla.-based Romark and Vienna-based Intercell did not announce financial terms of the deal.—Paul Bonanos

Sanofi-Aventis/Harvard University: Technically the tie-up between Sanofi and Harvard is a deal of last week, but with so much industry activity--and playoff mania--IVB somehow overlooked a deal that ought to be seen as a sign of the times. On October 14, Sanofi and Harvard announced they were joining forces in a broad translational alliance that gives the French pharma an early look at cutting edge science that could be important future pipeline substrate. Deal terms were not disclosed, but the collaboration is designed as a grants program, with a joint steering committee from both entities awarding funding based on scientific merit and “the potential to generate translational insight and value to biomedical research.” The boon for Harvard: scientists get access to flexible and rapidly available funding without spending hours – it’s really more like weeks or months – writing up government grants. Sanofi, in turn, has the opportunity to develop diagnostic, therapeutic, and prognostic applications of any discoveries made under the collaboration. Partnerships with academia have shown a marked uptick in number in 2009 and 2010 compared to years prior. According to Elsevier’s Strategic Transactions, the number of industry-academia partnerships jumped from 6 in 2007 to well over a dozen thus far in 2010. Nor are these the typical outsourcing relationships of yore; most are structured as true partnerships that aim to share both risk and reward. Notable recent examples: AstraZeneca’s alliances with University College London and Cancer Research Technology to create stem cell therapies for ophthalmic diseases and novel cancer medicines, respectively.--EFL

GE/Clarient: With cancer diagnosis and characterization in the vanguard of molecular diagnostics development and investment, it’s no surprise that GE Healthcare chose the area for its first major external investment in molecular test content. On Friday it announced an approximately $580 million tender offer for Clarient, which provides laboratory tests using important clinically validated cancer molecular markers including BRAF, EGFr, and KRAS. The deal, at $5 per share, is roughly a 25 % premium over its closing price yesterday of $3.77. Clarient hit profitability earlier this year, taking in $28.7 million for its testing services in the second quarter ending June 30. It utilizes most of the standard cancer testing technologies including immunohistochemistry, flow cytometry, FISH, and imaging. GE, working through its subsidiary in the UK (the former Amersham, which it acquired in 2003), expects to combine Clarient’s chemistry and molecular platforms with its own diagnostic imaging expertise, which would give it a full suite of triage and cancer diagnostic capabilities. In a sense, the link to imaging brings Clarient full circle. It originated as ChromaVision, a developer of digital microscopes, then morphed from an equipment maker into a service provider. Safeguard Scientifics, a 26% owner of Clarient going back to its ChromaVision days, said it will net approximately $145 million in the deal.-- Mark Ratner

St. Jude Medical/AGA Medical: St. Jude Medical’s announcement on Monday that it would pay $1.3 billion ($20.80 per share, a 43% premium) for AGA Medical, which had sales in 2009 of just $199 million, likely caused jaws around the industry to drop. Pick your chins off the floor, people. The transaction makes sound strategic sense, driving growth in key areas where St. Jude has significant resources but slower growing products. Case in point: St. Jude’s atrial fibrillation business grew by only single digits in the past year in the US, and the cardiac rhythm management sector is forecast to grow on a global basis by only 3% in the coming year. In contrast, AGA, operating in structural heart disease--a product segment that includes heart valves and various closure devices--enjoys double digit growth thanks to its leading share of the $250 million market for PFO closure. AGA also offers a number of new product areas to drive growth for St. Jude, including a next-generation vascular plug technology to replace embolic coils and a proprietary mesh-braided nitinol platform that will enhance the big device maker's product pipeline. In the company’s recent third quarter conference call, St. Jude Chairman and CEO Daniel Starks described the acquisition as a bolt-on to its cardiovascular franchise; the company is keeping on AGA president and CEO John Barr as head of the 550-person division. St. Jude’s recent deal flow indicates the company is trying to enter new markets via the business development suite. In September, the cardiovascular giant invested $60 million in remote monitoring company CardioMEMS, developing an implantable sensor for AAA and congestive heart failure monitoring. Early this year St. Jude also acquired intravascular imaging company Light Lab Imaging Inc. for $90 million.--Mary Stuart

Image courtesy of flickrer Neil Boyd used with permission via a creative commons license.

Thursday, October 21, 2010

Financings of the Fortnight Ponders Haircuts and Waves Its Freak Flag High

There was an unexpected twist last weekend in the health care reform implementation: Docs based in the Delaware Valley got hit harder than expected. It was a rather freaky turn of events, and as of this writing, the boys from our nation's medicine chest (hey, how about working on a better anti-emetic?) are clinging to faint hopes that they can repel the upstarts from the world's biggest biotech hub, also home of some of the world's leading research on cannabinoid receptor agonists.

In its younger, rasher days, Financings of the Fortnight might have begun to gloat, but there's still more baseball to play. Our foam FOTFingers are crossed. Yes. We. Cain.

Away from the diamond, Aegerion Therapeutics has its fingers crossed, too. Its IPO is scheduled for this week, but as of noon Thursday, no word. If it can't get out, it'll be the firm's third IPO swing and miss. It withdrew efforts in 2007 and 2008, and now it's gunning for a $70 million debut. Its latest terms were 4.67 million shares for sale between $14 and $16 a pop. If it gets out, don't be surprised if executives doff their caps to reveal drastic haircuts.

Seven pure-play biotechs have gone public in the US this year with debuts that have averaged 28% below their original target. Add more discounts post-IPO, as six of the seven are below their debut price. It's not that investors are generally IPO-shy. Overall IPO returns are above 15% so far this year, with average first-day "pops" of 7%, according to Renaissance Capital. Yet there's still no clear path forward for biotech issues.

One biopharma-related firm managed to squeeze through the door this week: ShangPharma, a Chinese CRO whose contracts with GlaxoSmithKline and Eli Lilly account for 37% of its revenues, raised $87 million by selling 5.8 million depository shares and is now listed on the New York Stock Exchange. It priced at $15 a share, within its target range of $14.50 to $16.50.

Our advice to Aegerion as it steps up to the plate: Don't worry about the haircut, or even eine kleine chin musik. But fear the beard. Go Giants! It's another installment of...

Celgene: Celgene's $1.25 billion debt issue closed Oct. 7, and it tells us at least two things. First, the financing, its first big debt raise, cements Celgene as a drug company that can raise a ton of cash in an uncertain economy, something bigger brethren Amgen, Pfizer, Merck and Novartis have done during the financial crisis. If there were any doubts about Celgene in the industry's inner circle, dispel them. (Celgene is also under investigation for improperly fighting generic competition. We told you they're all grown up.) Second, and more interesting to this blog, is the debt issue as a tacit stamp of approval of Celgene's run of growth by acquisition. For many years Celgene shunned dealmaking; not so anymore, as our DOTW colleagues are more than happy to discuss. Celgene's long-term R&D partnership with Agios is certainly going to get some votes for "Deal of the Year." And Celgene seems to get more creative as it goes along; no doubt some of the $1.25 billion raised will go toward transactions. (It just sealed its acquisition of Abraxis BioScience that included cash, stock and -- speaking of creative dealmaking -- a tradable contingent value right coupon.) The Celgene debt is in three tranches: $500 million at 2.45% interest will mature in October 2015 and are priced to yield 2.481% ; $500 million at 3.95% will mature in October with 3.981% yield; and $250 million at 5.7% interest will mature in October 2040 with 5.713% yield. Citigroup, JP Morgan and Morgan Stanley are the underwriters. -- Alex "UUUU-RIBE" Lash

Pearl Therapeutics: South San Francisco-based Pearl Therapeutics, which spun out of Nektar in 2006, announced a monster $69 million Series C on October 19. According to Elsevier’s Strategic Transactions, the financing is the 5th largest private placement this year, outclassed only by by Pacific Biosciences, Archimedes, AiCuris, and Immatics. The money, which comes from Pearl’s existing venture syndicate of Clarus, New Leaf, and 5AM Ventures and includes new investor Vatera Healthcare, will be used to support ongoing clinical trials of the biotech’s PT003, currently in Phase IIb trials for patients with chronic pulmonary obstruction disorder. PT003 is a combination of glycopyrrolate, a long-acting muscarinic antagonist (LAMA), and formoterol, a well-known long-acting β2-agonist (LABA), delivered via a metered dose inhaler (MDI). The drug is being positioned as superior to Boehringer Ingelheim’s Spiriva, the only once daily COPD medicine currently approved in the U.S. which generated over €1 billion in 2009 sales. PT003 will be administered twice daily, but Pearl’s interim CEO Howard Rosen doesn’t think that will curb uptake, especially if the data from ongoing head-to-head trials with Spiriva show superiority. Data will be available by year’s end. Of the backers, Vetara is a relative newbie in the staid, clubby world of venture, founded and funded in 2007 by Michael Jaharis, former co-founder of Kos Pharmaceuticals. Jaharis and his team should provide Pearl valuable commercial advice as the biotech moves PT003 along, having already successfully shephered combo products to market. -- Ellen Foster "Buster" Licking

Synosia Therapeutics:
The Swiss biotech's latest round of equity funding coincided with a licensing deal, as Belgian biopharma UCB contributed $20 million of Synosia’s new $30 million Series C round while licensing a pair of Parkinson’s Disease drugs from the startup. Existing investors Versant Ventures, 5AM Ventures, Novo A/S, Aravis Venture, Investor Growth Capital and Swiss Helvetia Fund also participated in the round, which brings Synosia’s total funding to about $90 million. The UCB arrangement also included a non-dilutive upfront payment of undisclosed size, and milestone payments built into the deal could yield up to $725 million. The partnership covers adenosine A2a antagonist SYN-115 and 4-hydroxyphenyl-pyruvate dioxygenase inhibitor SYN-118 for Parkinson’s. Synosia will complete Phase II work on the two drugs on its own before handing them over to UCB for Phase III development and commercialization. The agreement also includes provisions for collaboration on additional drugs originating from either company, at terms to be negotiated in the future. Synosia, which typically obtains compounds abandoned by other pharmas including Roche, also has drugs in its pipeline targeting Alzheimer’s, cocaine dependence and bipolar depression. Aravis and IGC led Synosia’s CHF 32 million ($29 million) Series B round in January 2009. -- Paul "Babe Ross" Bonanos and John "The Count" Davis

Regeneron Pharmaceuticals
: The antibody company tapped the public markets for $175 million in an oversubscribed public offering of 5.5 million shares plus 825,000 more for the underwriter, Citi. It's the first follow-on offering for Regeneron since 2006, when it also scooped up $175 million. Meanwhile, the firm secured a steady source of cash by partnering long-term with Sanofi-Aventis, a deal that turns Rengeneron into Sanofi's main source of antibody R&D; the big pharma has options on all molecules from the . The December 2009 extension of their relationship promises Regeneron $160 million a year through 2017, though Sanofi can dial it back to $130 million after 2013. The full skinny on the deal is here.
So why the huge injection of dilutive follow-on cash? One answer lies in Regeneron's ambitions. It has programs outside its collaboration with Sanofi, the most advanced being Arcalyst (rilonacept), on the market for the ultra-orphan cryopyrin-associated periodic syndrome (CAPS) and in Phase III for gout. Officials make no bones about their goal of becoming a FIPCO; pushing Arcalyst to market in gout would get them a lot closer. -- A.L.

Wolfe vs. Rappaport (Part 2): Embeda Warning Letter Raised During Abuse-Resistant Opioids Ad Comm

Advisory committees are always interesting, but you really have to expect the unexpected when Public Citizen Health Research Group Director Sid Wolfe is on the panel.

The last time the FDA Drug Safety & Risk Management Advisory Committee member participated in a panel discussion, he wanted to discuss a past off-label promotion settlement during a review of a pending application from Jazz Pharmaceuticals seeking an expanded label for sodium oxybate to treat fibromyalgia.

As we reported at the time, Wolfe was cut off by the committee chair and then chastised by Division of Anesthesia & Analgesia Products Bob Rappaport for bringing up a topic that was not relevant to the discussion—and for not at least bringing it to the agency’s attention in advance as something he wanted discussed. As we first reported, Rappaport then read into the record a statement essentially telling the committee to disregard the issue.

To us, it seemed like Wolfe had a point, that a discussion focused entirely on the appropriate method for marketing a drug like sodium oxybate should at least consider the question of whether the sponsor would or would not actually follow the pathway set down by the agency. Whether or not the committee agreed with Wolfe on that point, they agreed almost unanimously that Jazz needed to rethink its approach to managing this product in the post marketing setting, and voted overwhelmingly against approval. (The agency formally rejected the application this month.)

Wolfe is back on a panel today, part of a meeting to review post-marketing study requirements for opioids that are designed to be abuse resistant. The purpose of the meeting is to determine what standards FDA should set for demonstrating abuse resistance in the real world. (Read the preview in "The Pink Sheet" DAILY, here.)

That is a fascinating topic in itself; probably a glimpse of the future (or a potential future) for essentially all big drug classes.

But the meeting began with Rappaport pointing out an unusual late addition to the committee’s briefing materials: a copy of the warning letter FDA sent to King Pharmaceuticals in 2009, shortly after it launched the abuse-resistant product Embeda. The letter, Rappaport noted, is not the type of thing FDA typically gives to committees, but Wolfe emailed the agency yesterday to ask for it to be distributed. And so it was handed out at the meeting (even though, Rappaport stressed, it is a marketing issue and so not really relevant to a scientific discussion about post-marketing study designs).

The letter hasn't been mentioned since--but King doesn't present until tomorrow morning.

King’s management team told us in an interview earlier this year that the video news releases that prompted the warning were a mistake that it would not repeat. But—as we discussed here—it certainly sets a standard for getting off on the wrong foot with an important new product.

And Wolfe, at least, sees it as evidence that FDA cannot rely on sponsors to do things the right way when it comes to making sure new drugs are used appropriately. So far (the meeting is two days and things are just getting going), Wolfe is pushing for more of the research in the pre-market setting. That doesn't seem to be getting any traction with FDA.

Interestingly, Wolfe doesn’t seem to have asked for any materials to be shared on the other product directly affected by the ongoing meeting: Purdue’s Oxycontin. That company, of course, was prosecuted for misbranding, with the government claiming Purdue’s marketing helped contribute to the widespread abuse of the drug.

Since the entire FDA effort on abuse resistance essentially flows from the Oxycontin controversy, Wolfe apparently doesn't feel like he needs to do anything to draw that connection for the committee.

Wednesday, October 20, 2010

Piper Jaffray Exits Euro Stocks

Europe's biotechs have long suffered from a lack of decent analyst coverage; now there's even less. Piper Jaffray's six-strong European-based analyst team (led by Sam Fazeli) got the chop last night, victims of a 'restructuring of European operations' made public today by the Minnesota-based investment bank and securities house.

The bank says it wants to instead focus on 'two areas of strength: distributing US and Asian securities to European institutional investors' and providing M&A advice to European-based clients. In other words, its European-focused investment research operation--across health care (biotech/medtech), IT, software and consumer--wasn't driving enough lucrative deals to justify its existence; indeed it was dragging the overall Euro operation into the red. "Our goal with this change is to return our European operation to profitability," declared chairman and CEO Andrew Duff in the release.

Perhaps the news isn't so much of a surprise: whatever one thinks about the quality of European stocks (no worse, given careful selection, than anywhere else, we'd argue), PJ never really made the full commitment to the region that other banks like Jefferies International have, and as such,"it was a question of either investing, or chopping," says one insider. "We only covered three sectors; you really need five or six to make it worthwhile," the source continues. PJ's US coverage universe is far wider.

No doubt Fazeli and his colleagues will find pastures new, if they haven't already. The companies they covered, though--especially smaller fry like Germany's MediGene, or Ark, Antisoma or Vernalis in the UK--won't likely see many fresh analysts knocking at their doors. Not the traditional kind, anyway, that live within investment banks--too many questions are being posed more widely within the financial sector about their internal ROI.

Life's not much rosier for Europe's private biotechs, either: we hear that VCs including Atlas Venture and Alta Partners have also decided to throw in the towel in Europe. Roll on government grants and corporate VC.

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

Monday, October 18, 2010

PharmAsiaSummit: Emerging Markets Are Growth, Growth, Growth, But Where's The Beef?

Windhover's PharmAsiaSummit is October 25-26 in San Francisco. For a more information and a complete PharmAsiaSummit agenda, visit our website or email Josh Berlin to learn more. We hope to see you in San Francisco. What follows is an advertisement for the meeting.

A recent forecast by IMS Health demonstrates much of what we've been hearing in emerging markets over the last several years. The market research firm forecasts 15-17% growth next year in the 17 countries designated as "pharmerging" markets, which includes the usual suspects (the BRIC countries), as well as fast followers ranging from Turkey to Indonesia to Mexico.

To be sure it's off a smaller base, but the base is growing, and next year IMS predicts revenue will reach $170-$180 billion. In other words, it isn't peanuts.

In 2011, pharmerging markets will equal roughly half the size of the US market ($320-$330 billion), which will grow at a comparatively paltry 3-5%, IMS says.

China, of course, is the Big Kahuna, with a pharma market set to reach $50 billion next year, making it the third largest. With a growth rate of 25-27% - fueled by demographics (a rapidly aging population and urbanization, for instance) and a massive government push to extend basic health insurance to China's 1.3 billion population - it is no wonder that IMS recently raised China to its own tier as part of its analysis, essentially separating the C from the BRI.

Although much of the growth will come from local manufacturers selling branded generics, there is plenty of growth to go around. Pfizer, for instance, is the largest foreign pharma in China, yet it's captured only 2% of the market, Morgan Stanley notes in a recent report. In India, Abbott is the top dog following its acquisition of Piramal earlier this year, yet it commands only 6% of India's famously fragmented market.

It's no wonder that pharmas from Pfizer to Abbott to Merck to AstraZeneca have jumped into the branded generics space, looking to sell off-patent medications in emerging markets and in some cases partnering with Indian generic companies to expand their offerings.

The editors of our sister publication, PharmAsia News, which has boots on the ground in China, India and elsewhere in Asia, like to talk about the excitement they hear from sources and friends in the industry - excitement about growth opportunities, new models for R&D, commercial strategy, China healthcare reform and so forth.

But one thing we often find missing in the discussion is specifics. What, specifically, are the right commercial strategies for China, or India or Korea? What, specifically, should biopharma companies do to take advantage of China health care reform? What, specifically, are the opportunities for partnerships or outsourcing in China? What specifically, should you do to protect intellectual property in India?

Who should you talk to? What case studies are relevant? Where should you place your bets?

Specifics are hard to come by via channels we use in the West - the media for instance or trusted websites. In Asia, most important lessons are discussed offline, and things change so quickly in markets like China and India that what worked last year might not work today.

In short, you need a strong, local network to understand the rapidly changing market.

That's the idea behind our PharmAsia Summit. We've decided to bring some of our Asia network to San Francisco this month to talk about specifics - what works, what doesn't, and what you need to know to succeed. If you're based in the U.S., it's a great chance to meet face-to-face with Asia pharma leaders.

We won't have all the answers - no one does. And what works today might not work tomorrow. But what you'll have is a forum where industry leaders - from Biogen Idec's Gunther Winkler to Merck's Ramesh Subrahmanian to Onyx's Tony Coles - will discuss Asia case studies on dealmaking, commercial strategy, outsourcing, regulatory risks, IP protection, and pricing and reimbursement.

We'll have leading Asia investors like OrbiMed's Jonathan Wang, top China analysts like Piper Jaffray's Hongbo Lu, commercial gurus like MSD's Sanjiv Navangul - a key figure behind Merck's groundbreaking strategy for Januvia in India - and IMS Health Asia VP Jan Willem Eleveld, who will provide the latest Asia data and trends.

And as policies are changing so quickly in Asia, we also have a few regulators making the trip, including Shanghai FDA's Yi Chengdong, Korea FDA's Hong Soon Wook, and U.S. FDA country directors from China and India, Chris Hickey and Bruce Ross.

Friday, October 15, 2010

Deals of the Week Has Playoff Fever and Poison Ivy

Deals of the Week! doesn't usually get up on our soapbox and complain unless it's to gripe about undisclosed deal terms, vaguely worded press releases, or an unwillingness to make CVRs tradeable.

But c'mon, pharma, it's time to develop some new products against poison ivy.

This week we saw loads of deals -- alliances, options, out-licensing, deals, deals, and tweaked deals and no-deals. But were any of them around poison ivy treatments? No. A quick search of for 'poison ivy' or the dreaded 'urushiol' turn up zilch. Our own databases reveal very little poison ivy dealmaking in the past twenty years. Did Project Bioshield or any of its ilk fund research into this scourge? Nope. This makes no sense. If this blogger's back yard is anything to go by, the market will be huge.

Now please excuse us while we scratch the hell out of our legs and go invest another $50 in bandages and feeble lotion at CVS. Oh, and go Phillies!

You're gonna need an ocean of ...

Fate Therapeutics/Becton Dickinson: Fate Therapeutics of San Diego will bring its induced pluripotent stem (iPS) cells to market thanks to a commercial deal it signed with biomedical equipment provider Becton, Dickinson, the firms said Oct. 14. No financial terms were disclosed, but BD will pay Fate an upfront fee, research funding, commercial milestones and royalties on the products BD sells. Fate is one of a handful of biotechs reprogramming adult cells into iPS cells -- an alternative to stem cells derived from human embryos -- with the goal of using iPS cells as lab tools for drug discovery. BD will be responsible for commercial-scale cell production and marketing. In an interview with the IN VIVO Blog, Fate CEO Paul Grayson declined to say specifically when the cells would reach the market. The partners will only sell what Grayson called "plain vanilla" iPS cells, not yet differentiated into various cell types. Fate is working on differentiated cells but for now keeping them for internal use. With the BD deal, Fate becomes the second firm to sell iPS cells. Cellular Dynamics, spun out of the pioneering Wisconsin lab of James Thompson, has been selling iPS-derived cardiomyoctes for nearly a year. -- Soon to be Disappointed SF Giants Fan Alex Lash

Exelixis/BMS: In a turbulent year during which it changed CEOs and laid off staff, Exelixis’ low point might’ve come in June, when key partner Bristol-Myers Squibb Co. walked away from the companies’ agreement to co-develop Phase III cancer-fighting drug XL184. Yet the two are already working together on new programs in diabetes and inflammation: In a series of deals announced October 11, BMS said it would pay $60 million upfront for exclusive development and commercialization rights to a preclinical Exelixis diabetes program that includes the TGR5 agonist XL475, as well as the right to collaborate on a discovery-stage inflammatory disease program centering on RAR-related orphan receptor antagonists. Milestone payments could add $505 million to the deal, plus Exelixis would garner royalties if the programs produce marketable drugs. Simultaneously, BMS and Exelixis said they would unwind some existing oncology agreements; Exelixis opted out of a co-development arrangement on Phase Ib cancer drug XL139 in exchange for a milestone payment, while BMS waived its final option on a 2006 deal covering three targets. The deals bring much-needed cash to the notoriously spendy Exelixis, which despite some recent cost-cutting is now shouldering the high cost of moving XL184 forward by itself.--Paul Bonanos

Merck/Lundbeck: With a large number of atypical antipsychotics competing for attention, any new entrant will have an uphill battle to gain traction, and so Merck has called in the cavalry. The Big Pharma has licensed to CNS-specialist H. Lundbeck exclusive commercialization rights to its recently approved Sycrest (asenapine) for all markets outside of the US, China and Japan. The Danish company paid an undisclosed upfront fee for the rights, and will also make product supply payments to the US company. Asenapine was launched in the US as Saphris by Merck last year, for schizophrenia and for mania associated with bipolar disorder, but has so far disappointed. Making matters trickier in the EU, the schizophrenia indication was turned down in there because regulators were not convinced of the agent's clinical effectiveness. -- John Davis

Lundbeck/Genmab: When you have a product that accounts for around half of your revenue, and that product is nearing patent expiry, you know you have your work cut out for you. Lundbeck, whose antidepressant Cipralex/Lexapro (escitalopram) accounted for 56% of its revenues in the first half, announced last month that it wanted to work with more external partners, and would cull some of its own researchers, as part of a new R&D strategy. The first fruits of this new policy were seen this week, in the Merck deal noted above and in a tie-up with fellow Danish firm Genmab, which will create novel human antibodies to CNS targets identified by Lundbeck. Genmab will receive an upfront payment of €7.5 million and, if the collaboration is successful, it could receive €38 million in milestones, and single-digit royalties as well. Genmab has an option to pursue non-CNS leads that it identifies during the course of the work, and in that case would pay milestones and royalties to Lundbeck. Genmab has been through a torrid time in the past few months, and wants to use its antibody research capabilities as a “profit center, not just a cost center,” according to newly appointed CEO Prof. van de Winkel. -- JD

Pfizer/King: In its first “bolt-on” acquisition since the mega-merger with Wyeth last year, Pfizer has reached an agreement to purchase King Pharmaceuticals for $3.6 billion. The deal, announced Oct. 12, is subject to a tender offer under which Pfizer would buy up outstanding stock in King for $14.25 a share – a 40% premium over the specialty pharma’s closing price on Oct. 11 – but both companies’ boards have agreed to the sale, with closing anticipated in fourth-quarter 2010 or the first quarter of next year. In recent months, Pfizer has outlined a strategy for bolstering its finances prior to the U.S. patent expiration of Lipitor late next year under which it would look for transactions valued at between a few billion to several billion dollars that complement the company's core businesses and add incremental revenues. King will bring to Pfizer a narrow portfolio of highly specialized pain therapies and a well-trained specialty sales force, as well as Remoxy, a tamper-resistant formulation of oxycodone under review at FDA. Pfizer believes King offers commercial synergies: some of King's drugs can be dropped into the Big Pharma's primary care sales force bags, an area where Pfizer is strong and King is not. Pfizer's two key marketed pain products, Lyrica and Celebrex, in turn, can benefit from the support of King's specialized sales force; currently Pfizer's detailing emphasis for them is on primary care doctors. –Joseph Haas and Wendy Diller

UCB/Synosia: An accomplished in-licensor of pharma's unwanted assets, Synosia Therapeutics has finally found itself on the other side of a deal: On Oct. 12 the biotech said it out-licensed its two lead Parkinson's disease candidates, SYN-115 and SYN-118, to Belgian CNS specialist UCB, which will conduct Phase III clinical trials and commercialize them. The companies will also set up a broader alliance, under which compounds from either group will be evaluated by Synosia through to the end of Phase II, at which point UCB will conduct further development and commercialization. In return for rights to the two Parkinson's disease products, UCB will make an undisclosed upfront payment and pay regulatory and commercial milestones, which could give rise to an additional $725 million in funding for Synosia. UCB has also led a $30 million series C funding in Synosia with an equity investment of $20 million. The other $10 million came from existing investors, which include Versant Ventures, 5AM Ventures, Novo A/S, Aravis Venture, Investor Growth Capital and Swiss Helvetia Fund. The deal goes some way toward validating Synosia's in-licensing strategy: '115 and '118 came from Roche and Syngenta, respectively. -- JD

Novartis/Immunogen: Last week we at IVB rhetorically asked one another: where are all the deals in antibody-drug conjugation technology, an exiting area seemingly bereft of deals lately. Well well. Just like that, antibody-drug conjugate developer ImmunoGen licensed its platform technology to Novartis for $45 million upfront to create enhanced cancer-fighting antibodies against unspecified targets of Novartis's choosing. ImmunoGen would get up to $200.5 million in milestones for each target that leads to a conjugate, plus royalties on sales if the drugs reach the market. Announcing the deal Oct. 11, the companies declined to say how many targets Novartis has rights for, but ImmunoGen retains ownership of the cytotoxic small molecules and chemical linkers plus other know-how that it contributes to each therapeutic. The Novartis deal comes just as ImmunoGen and Roche released promising interim Phase II data for T-DM1 in first-line treatment of HER2-positive metastatic breast cancer. That compound, a combination of ImmunoGen's small molecule maytansinoid DM1 and Roche/Genentech antibody Herceptin (trastuzumab), is currently industry's most advanced ADC candidate. --S.t.b.D.S.F.G.F.A.L.

Mingsight/Pfizer: Big pharmas are in the throes of revamping their R&D pipelines and that means deprioritizing certain assets. But does that mean outlicensing? Maaaybe. An analysis in the soon-to-be-published October IN VIVO shows that outlicensing volume has declined dramatically since 2007, when a total of 54 programs from big pharma, big biotech, and specialty players were offloaded to new partners. This year through August 31, there have been only 10 such deals. But for the VCs and biotech execs looking to jump-start a newco with already validated molecules, this week’s alliance between Pfizer and MingSight proves that outlicensing in the biopharma wilderness, truly a rare bird, does still exist. MingSight, a still stealthy biotech with bases of operation in both China and San Diego, has acquired exclusive worldwide rights to two preclinical compounds from Pfizer that are being developed as treatments for diabetic retinopathy, and potentially uveitis and dry eye. Under the terms of the agreement (which really weren’t disclosed in any substantive way), MingSight has agreed to pay Pfizer an upfront fee, paid in the form of cash and a convertible note, as well as development and sales related milestone payments, and royalties on future sales. MingSight’s dual citizenship is noteworthy; this kind of hybrid approach, with its emphasis on keeping R&D burn low by moving the work to the still lower-cost China, is becoming an increasingly attractive model in the start-up arena, where the mantra of the day is capital efficiency. In-licensing has been the model du jour for founding ophthalmology companies for much of the past decade, as companies look to repurpose drugs that have already been vetted in preclinical or clinical studies in non-ophthalmic indications for use in the eye.—Ellen Foster Licking

Ablynx/Merck-Serono: Ablynx has proven to be the master of Merck-Serono's domain (antibodies) as the two companies are doubling down on their collaboration in the space. On Monday Ablynx announced it would receive €10 million up-front to develop its proprietary Nanobody domain antibodies against a M-S nominated inflammatory disease target. Ablynx will hand off the package to M-S at the IND stage, handling all discovery and preclinical activities (and covering costs, excluding manufacturing costs) on its own. When (if?) Merck-Serono takes over Ablynx will receive a €15 million milestone and can opt-in to a 50/50 co-development deal on the project -- if not, Merck gets worldwide rights and Ablynx will receive milestones and royalties down the road. The companies have been working together since September 2008, on two targets in oncology and immunology. -- CM

image by flickr user cygnus921 used under a creative commons license

Tuesday, October 12, 2010

Ipsen CEO Leaves...Coz of Too Many Deals?

It's always fun to read between the lines--and put in a few calls--when CEOs depart over 'strategic differences' with their boards. Such was the wording in a release issued by mid-sized Ipsen yesterday, announcing the departure of CEO and Chairman Jean-Luc Belingard.

After nine years at the helm, during which he oversaw the group's IPO in December 2005 and undertook some bold and interesting transactions including a cross-licensing and step-wise acquisition of Tercica beginning in July 2006 and a similar tie-up earlier this year with hemophilia-focused Inspiration, Belingard apparently agreed to step aside to make way for Amgen veteran Marc de Garidel.

We don't know precisely what the 'strategic differences' were, but they were almost certainly something do to with the speed and nature of Ipsen's internationalization. Garidel takes over "to lead the group's strategy in this new [deeply changing] market environment, in particular to strengthen its US and emerging markets operations," says the PR.

Belingard can't be accused of sitting still and doing nothing, though. As well as steering the group away from primary care drugs towards specialist, biotech products, he enlarged its footprint beyond France's borders: in 2002 almost half of Ipsen's sales came from France, now that figure's less than a third. Nor did he ignore the US: Tercica provided the first foothold, the 2008 acquisition of Vernalis' US operations another, and, although the US still accounted for less than 5% of Ipsen's overall sales in 2009, the Inspiration tie-up will increase that.

No, deals (or lack of) aren't the problem. Indeed, if our well-placed source is anything to go by, it's the opposite: too many deals, too little post-deal integration, not enough organic growth. (After all, Amgen's hardly the dealmaker of the century, is it?)"It was a divergence over the frequency of dealmaking," the source revealed.

Belingard, it seems, was poised for his next move, but the Board decided it was time to digest what had already been swallowed before forking out some more millions (albeit, usually these days, risk- and cost-mitigated millions). With less room to maneuver, Belingard decided it was time to go--apparently with no hard feelings. Indeed, he was involved in choosing his successor.

Garidel--another Frenchman, was this a criterion for this 68% family-owned, Paris-based group?--joins Ipsen from his position as VP International for Amgen's South region, which includes Southern Europe plus MEA and Latin America. So he ticks the emerging market box, and having spent about a third of his career in the US (first at Lilly, then at Amgen's HQ as chief accounting officer), he ticks the US box, too. (And the very fact that Garidel's Amgen background is considered so relevant must, at least, validate Ipsen's transformation biotech-wards.)

Now Garidel is hardly going to come in and tread water, either. (And anyway, imagine luring an upwardly-mobile executive into a job, even one based in Paris, where you want to slow things down.) He was apparently involved in Amgen's significant growth in Europe and beyond--though, perhaps tellingly, this has mostly been organic, rather than deal-driven. We likely won't know what he'll do--or be told to do--until the group's annual results announcement next Spring.

Our reading between the lines suggests that we may not be seeing any more Inspiration-al deals for a while (even though Ipsen's BD head Sean McKercher said last week in London that "many companies are now approaching Ipsen, wanting an Inspiration-like deal"...perhaps that's the problem? They're too sweet?). Chances are, if the source is to be trusted, that Garidel's tenure, at least initially, will be more about building on what's there than buying more.

image by flickr user oncle tom used under a creative commons license

Thursday, October 07, 2010

Financings of the Fortnight Works on Its Stand-Up Routine

Did you hear the one about two VCs, two fund managers, and a banker who walk into a bar… or maybe onto a stage. No, wait, it gets better.

The biotech community could use a little comedy after the last couple years, and the final panel def jam at this week’s Bio Investor conference in San Francisco provided plenty. All the classic elements were there as host George Milstein, a longtime West Coast biotech banker, played the straight man to his ensemble cast of characters, er, panelists.

The context of the discussion was more sobering, what with three-quarters of the year behind us and the situation becoming clear: recession or not, it’s still pretty damn hard for biotechs and their investors to find cash.

First, VCs are still struggling to raise it. DowJones VentureSource reported this week that 2010 fundraising is on track to equal 2009, which represented a six-year low. Second, pharmas are unwilling to spend it. The upcoming October issue of IN VIVO has an excellent industry overview, but here’s a taste: overall licensing activity is down 20% from 2007, and within that option-based license deals are up. M&A volume is behind 2009’s pace so far, and what there is has skewed toward companies with marketed products and generics, bad news for those trying to carry the torch of emerging science and innovation, or better yet, fund it. Do we even have to mention the IPO market? Oh, OK. This year’s IPOs, such as they are, have been a terrible investment (median performance of -20%).

Cue the mirth. Milstein summarized the ho-hum landscape but soon, thankfully, went for the cheap laughs. A typical example: panelist David Sable of Special Situations Funds admitted he’d only been an investor for a few years; before that the trained ob-gyn said he “was doing pap smears.”

Milstein waited a perfect beat then countered, “So, how is this different?”

Later, Milstein asked panelists what they thought of Sanofi-Aventis’s hostile bid for Genzyme. Biotechnology Value Fund portfolio manager Matthew Perry produced a Magic 8-Ball that he said his colleague Oleg Nodleman got as swag from a Berkshire Hathaway retreat. Perry shook it, waited, and read the result: “Sweet deal!” (This reporter found Nodelman later and verified the 8-Ball indeed sported Warren Buffett and Charlie Munger’s cartoon faces.)

Public-side investor that he is, Perry proceeded to berate Genzyme for the temerity -- shocking! -- of putting money into R&D instead of shareholder dividends. Just because it brought one or two products to market, said Perry, doesn’t mean it'll bring more. Quit while you’re ahead and give the extra cash to me, seemed to be his message. It didn’t quite jibe with Perry’s lament a few minutes earlier that biotechs weren’t being allowed to grow and aspire to be the next Biogen Idec, Amgen or Genentech.

No matter: Perry was faithfully playing the role of the large, loose cannon. And why not? Every great comedy needs one: think John Goodman as Walter Sobchak in the Big Lebowski. Perry played it to the hilt, badmouthing a few more companies, or the investors who poured money into them, along the way. (Theravance, Xoma and Maxygen were three we counted.)

Milstein chose other sidekicks perfectly. New Leaf Ventures managing director Srini Akkaraju was the over-the-top gloomer who pretended he’d rather be anywhere else than talking biotech investing on a late Wednesday afternoon (“We should all be asking ourselves what we’re doing here”). Akkaraju was also glum about Big Pharma, whose cycles of merger and job-cutting were doing little to solve unmet medical needs. “They’re dealing with their problems in a MacGyver kind of way." (We love the idea of Pfizer being held together with used bubble gum, a pair of shoelaces, and a bottle of nail polish.)

Then again, said Akkaraju, investing in biotech is “completely irrational.” At one point, he called his own business “ludicrous” three times in one sentence, provoking nervous laughter. Sometimes the best comedy has the audience squirming in their seats.

The panel had serious moments, too. Sofinnova’s Jim Healy made the excellent point that the rise of contingency-based M&A is on a collision course with the time limits of venture funds. What happens, he asked, when the contingencies in deals pay out past the expiration date of the funds who hold the rights? (This will no doubt warm the heart of one of our colleagues whose favorite soapbox is the creation of a CVR exchange.)

And for all his boisterousness, Perry said something that sent chills up the spines of any biotech hoping to tap the public markets soon. “Most of our capital is in cash,” Perry said. “I’d love to find great early stage companies, but they’re all getting acquired.” Perry will pull the trigger when he sees fit. His firm earlier this year bought a 6.6% position in Swiss firm Addex Pharmaceuticals, which had recently been crushed by a Phase IIb failure of its lead mGluR5 modulator for migraine. As we noted in our previous column, BVF followed with a $20 million investment via combined registered direct and convertible debt, the latter of which was necessary to get around strict Swiss laws limiting size of public investment. The gymnastics were all the more impressive seeing how Addex did the deal without a financial advisor, as its CEO Tim Dyer said earlier at the conference.

Which just goes to show, you can laugh all the way to the bank and you don’t even need a banker. Thanks, we’re here all week. Whenever you’re in need of good material, look no further than….

Convergence Pharmaceuticals: The CNS exodus from GlaxoSmithKline has begun. GSK said in February it would end CNS research and sold its facility in fair Verona, Italy, where Aptuit now makes its scene. Two clinical assets and six earlier programs targeting ion channels in chronic pain are now in the hands of Convergence, backed with $35.4 million from a syndicate including Apposite Capital, New Leaf Ventures and SV Life Sciences. At first it seems odd that VCs are willing to fund development of assets whose mechanism is old hat. They also address a large, potentially primary care area like chronic pain and face huge clinical trials and high regulatory safety hurdles. But the Cambridge, UK firm says its assets, unlike most of the sodium- and calcium-channels out there or in development, are state-dependent. That is, they only inhibit neurons in the rapid-firing state that's associated with chronic pain. CEO Clive Dix, who helped steer PowderMed into Pfizer’s arms in 2006 for $300 million, takes over with a dozen ex-GSK employees in tow. GSK currently holds an 18% stake in the tranche of funds that Convergence has received to date, which SV's Bingham says is roughly half the full £22 million. Its stake will dilute as further funds are provided, but the Big Pharma will receive further equity if Convergence hits certain milestones. GSK has a board observer seat but no other strings attached. -- Melanie Senior

Agennix: SAP cofounder Dietmar Hopp strikes again. Through his investment company dievini Hopp BioTech holding, Hopp has ended up with 59% of German biotech Agennix following a 76 million ($104 million) PIPE financing that will allow Agennix to complete a Phase III trial of its lead oral compound, talactoferrin, in non-small cell lung cancer. Having previously held 29% of Agennix, dievini is applying to German financial regulators for an exemption to the rule that it must make an offer for all of the company’s shares if it owns more than 30% of them, but as of Oct. 1 hadn’t heard back from the Bundesanstalt fuer Finanzdienstleistungsaufsicht, also mercifully known as the BaFin. In the financing, 20.5 million new shares were offered at 3.81 per share; 29% were taken up by existing investors, and 71% by new investors in a private placement or by dievini. Agennix also has plans to develop talactoferrin for severe sepsis, and it has a multi-targeted kinase inhibitor in Phase I. Investor Hopp has supported the German biotech sector for a number of years; in recent weeks dievini also participated in a 54 million series C funding round for immatics biotechnologies, which is developing cancer vaccines and is based in Tubingen, Germany. -- John Davis

Tobira Therapeutics: On Sept. 29 the antiviral developer announced a $31.2 million Series B round that was led by Novo AS and included earlier backers Domain Associates, Frazier Healthcare Ventures, Montreux Equity Partners, and Canaan Partners. According to the Form D filing, the company has sold $14.2 million so far. The money will fund a Phase IIb trial of lead candidate TBR652 in CCR5-tropic, treatment-naïve HIV patients, slated to start mid-2011. Tobira launched in 2007 with exclusive global rights to the CCR5/CCR2 antagonist plus a follow-on HIV compound from Takeda Pharmaceutical. New Jersey-based Tobira believes TBR652 has advantages over Viiv Healthcare’s marketed CCR5 antagonist Selzentry (maraviroc) due to its anti-inflammatory properties through CCR2 antagonism, with the potential to be dosed only once daily and administered with other antiretrovirals. Tobira, which previously raised $31mm in Series A financing, was established by Domain partner Eckard Weber who has a reputation for starting up companies around one or two molecules rescued from the shelves of Japanese drug firms. In previous efforts -- NovaCardia and Conforma Therapeutics, for example -- his firms raised capital quickly and sold off the assets through acquisition or spin-off. -- Amanda Micklus

CytomX Therapeutics: Backed by angels in its infancy, antibody developer CytomX has turned to VCs for a tranched $30 million Series B round that will support a northbound move from Santa Barbara, Calif., to the San Francisco Bay Area. Third Rock Ventures provided the lion’s share of the round alongside Roche Venture Fund’s minority stake. Third Rock itself recently established an office in San Francisco, with new CytomX board member Charles Homcy anchoring the firm on the West Coast; Boston-based partner Neil Exter also took a seat. Both have roots at Millennium Pharmaceuticals, as does CytomX CEO Nancy Stagliano. Third Rock invested from its $378 million Fund I, closed in 2007, rather than its new $426 million Fund II. CytomX is developing modified antibodies, trademarked as Probodies, that ideally will affect diseased tissues while sparing healthy ones. They are designed to avoid unwanted reactions or to respond directly to proteases present in diseased tissue. The company intends to use the funds for a pair of oncology-related INDs, and will receive a portion of the funding in a second tranche based on milestones related to staffing, platform research, ongoing product development, and the relocation. -- Paul Bonanos

Photo courtesy of flickr user Sam Pullara.

Wednesday, October 06, 2010

Novartis Gilenya Launch: The Importance of Health Care Reform

Since literally the day the Pharmaceutical Research & Manufacturers of America reached an agreement to contribute $80 billion-ish to health care reform, we have been calling the "dollars for donuts" deal a real coup for industry. We haven't let anything deter us. Not published estimates that the true cost is well north of $80 billion over 10 years, nor a series of big charges announced during quarterly earnings reports after the reform law was enacted.

We are ready to start feeling vindicated.

Exhibit A: Novartis' new oral MS therapy Gilenya, which, Bloomberg reports, is being launched with one of the most ambitious patient copay support programs yet attempted in the industry. In our view, the strategy Novartis is pursuing perfectly illustrates the advantages of the PhRMA deal.

How so? Because it shows off perfectly the two key advantages of the reform deal: pharmaceutical companies maintain control of their launch prices while simultaneously consumers are sheltered from attempts to impose price sensitivity on them.

Those twin advantages, in our view, more than make up for the deeper rebates, new Medicare discounts, and market share fee imposed on industry as part of the deal.

According to the article, Gilenya will be priced at $48,000 per year (or about $4,000 per month). That is a hefty premium to the injectable beta interferons widely used for MS, more in line with the pricing of Biogen Idec's Tysabri, which is limited to patients sick enough to risk PML associated with the therapy.

Gilenya may cost more than Avonex, but it won't feel that way to patients: Novartis will be covering copays for all Gilenya users (except in states where that is not permitted), up to $800 per month.

Suppose every commercial managed care plan decides to slap an $800 (20%) copay on the brand? That will reduce Novartis' net price to something more in line with Avonex--while avoiding any meaningful cost-sharing on behalf of the patient that might provide an incentive to chose the older therapy.

That's pretty nifty, but what does it have to do with health care reform?

Well, at the risk of stating the obvious, Novartis can set its own price for Gilenya because there are no federal price setting mechanisms in the US. That easily could have been part of the reform law; after all, a breakthrough drug pricing board was one key element of the Clinton health care reform proposal two decades ago. So Novartis doesn't need to tie its price to existing therapies, benchmark to overseas prices, negotiate on QALYs or anything else.

True, the health care reform law ratchets up the one price control that already exists in the US (Medicaid rebates). But if manufacturers control launch prices, they can build in the deeper mandatory discounts to that program. And Medicaid remains completely free of consumer price sensitivity, since there are only de minimis copays for drugs.

In addition, health care reform limits the ability of plans to respond to Novartis' attempt to protect patients from high copays. One response by payors might be to set an extremely high copay to absorb the company's $800 per month and still create price sensitivity among consumers. Not gonna happen. Thanks to health care reform, there are limits on cost-sharing that health plans can impose.

Last but not least, there is the validation of Novartis' copay support plan for the centerpiece of the PhRMA deal, a 50% discount on brands in the Medicare Part D "donut hole." Copay support programs are prohibited in Medicare and other federal programs (except via bona fide, third-party charities). So Novartis' program isn't available under Part D.

Instead, the company will be required by law to offer a 50% discount for beneficiaries exposed to the donut hole.

Low-income Medicare beneficiaries already have essentially no copay under Part D, and the discount doesn't apply to them. But those who do face the Part D cost sharing will be exposed to much less out of pocket spending, thanks to the discount program and the already generous catastrophic coverage of Part D.

At $4,000 per month, Gilenya patients will blow through the donut hole quickly, but the discount program will save them about $1,800 while they do. The net patient cost will be on the order of $5,000 for a year's therapy--not cheap, but not unbearable for a highly effective oral MS drug.

And, given that Novartis is offering commercial patients $9,600 per year in copay support, it is hard to argue that the 50% donut hole discount is a hardship to the company. In fact, we are willing to bet that Novartis' only regret about that aspect of the deal is that the company can't give a 100% discount in the donut hole.

Of course, as health care reform phases in, the taxpayers will start to kick in additional coverage in the donut hole.

We said it before and we will say it again: there is a lot for Big Pharma to love in health care reform.

Monday, October 04, 2010

Euro-NICE? Not Likely

European regulatory experts gathered in London this morning to discuss the possibility of closer collaboration on two fronts: among Europe's various health technology assessment agencies, and between regulators and HTAs across the continent.

Good news, right? After all, it's not uncommon for pharmaceutical companies to have to foot the bill for additional trials, often large trials, to satisfy the particular requirements of maybe just one or two HTAs. And thanks to the growth in regional-level decision-making, Europe now boasts over 30 different HTA agencies and processes--more than the number of member states. A single set of requirements across the board would save time and money.

Don't get too excited. Sure, there's movement towards harmonization of HTA methodologies across Europe--via the well-intentioned EUNetHTA network of European HTA organizations--but it's slow. And anyway, as Jerome Boehm, Policy officer, Health Systems at the European Commission pointed out, the idea of this network "is not to produce a Euro-NICE". (Do I hear sighs of relief?)

Harmonizing Clinical Issues, Not Cost

He clearly distinguished clinical issues--which, the thinking goes, can be harmonized--from cost issues--politically impossible for member states to relinquish control of. The focus of EUNetHTA is on "testing a core [European] HTA methodology", promoting information exchange between national HTAs, and accessing new methodologies for measuring drugs' value. In other words, it's about aggregation and exchange of ideas among national HTAs, and about allowing those states without well-established HTA agencies to tap into official European consensus data (rather than simply downloading translations of appraisal documents from the UK's NICE or Germany's IQWiG, as some currently do).

And what of closer collaboration between HTAs and regulators? Another thorny area. But there too, success depends on segregating clinical and cost issues. On the one hand, regulatory approval can't be contaminated by cost-influenced HTA methods, as Hans-Georg Eichler, EMA's Senior Medical Officer, pointed out this morning. "In our lifetime, these [two processes] will remain separate," he promised.

But on the other hand Eichler and others within the regulatory community are adamant that standards of clinical value must be brought in line. "There's an urgent need for rapprochement" between regulators and HTAs, he said. "There's currently a huge cultural divide" between them in terms of evidence standards: what level of uncertainty is acceptable, the merits of absolute versus relative efficacy, perceptions of what's clinically relevant, and methodological issues.

Thus regulators, for instance, may okay the 6-minute walk test among patients with pulmonary arterial hypertension, but at least one senior HTA official, Eichler reports, describes this test as 'useless'. Conversely, certain HTAs value the EQ-5D index as a measure of quality-of-life, yet some regulators apparently think it's drivel.

These differences translate into huge additional trial burdens for companies, and tough decisions as to which trials to fund, with which comparators, endpoints or assessment measures, for which HTAs. "We end up doing multiple studies," spells out Alan Barge, AstraZeneca's VP and Head of Oncology and Infection, "and it can take more than a year between regulatory approval and actual reimbursement," he continues.

So how close is Europe to clinical cohesion? Well, stuff's happening on the scientific advice front: EMA's Eichler claims that this month will see the first 'tripartite' scientific advice meeting gathering together EMA, the company and several members of the HTA community. There's similar action at member-state level: Sweden has been running a pilot scheme to issue joint regulator/HTA advice for some time, and the UK regulator announced a similar program with NICE in April 2010.

Even if these meetings facilitate individual product submissions, that's still a long way off agreed common standards and measures of clinical effectiveness between regulators and HTAs. Indeed, some drug company executives--for all their hoping that such a goal is possible--remain skeptical. Their point: HTAs are unlikely to agree to be restricted to using a certain set of clinical measures since this may give them less wiggle room when deciding what data to feed into their cost-effectiveness calculations. "The cost-per-QALY [quality-adjusted life year, NICE's preferred measure of cost-effectiveness] can increase up to five-fold depending on which quality-of-life measure one plugs into the equation," illustrates Clare McGrath, Senior Director HTA Policy for Europe and RoW at Pfizer.

Separating out clinical and cost issues may look possible in theory. The practice will be trickier.