Friday, May 25, 2012

Deals Of The Week Jump Starts The Summer Reading List

High on the New York Times List of Bestsellers (in the hardcover advice & miscellaneous category) this spring has been the book “Reverse Innovation: Create Far From Home, Win Everywhere.”

It’s by two well-known Dartmouth business school professors, Vijay Govindarajan and Chris Trimble, and tracks how innovation originating in emerging markets is finding its way into the broader global business world. Since the topic’s increasingly relevant to pharma – although the book isn’t specific to healthcare -- and since the book arrived on my desk this morning, I’m giving it priority status for my Memorial Day weekend reading. Besides, it ties in nicely with one of the themes on my mind since attending the US-India Chamber Of Commerce Healthcare Summit on May 11 in Cambridge, MA.

That meeting was focused on biopharma, and started with a talk by Elias Zerhouni, president of Sanofi's Global R&D, on innovation and India. Billed as the keynote, he had to cancel plans to attend at the last minute and instead participated from Paris, via a near-lifelike videocast.  “I was struck several years ago by the extraordinary ability of the healthcare system in India to adopt new technologies to provide high quality care at low cost…so I know there is the fundamental power and energy to create in India,” he started off.

Sanofi, of course, bought India’s Shantha Biotechnics vaccines business, where it is working to produce vaccines at low cost for the global market.  The company also has a partnership with Glenmark on developing a monoclonal antibody for inflammatory diseases. “It is possible to see that India has capability of addressing very fundamental obstacles that exist in R&D,” Zerhouni said. "…No one, no country, no organization, has all the needs to master the complexity of biology and to have access patient population and patient samples that would give us profound insights into disease. The role of India is to innovate, not just the delivery of health care, which it has been excellent at doing, not just be less costly, what makes the difference is creativity.”

Zerhouni wasn’t specific but others at the one-day conference gave examples. The Boston Consulting Group has studied India’s capacity for innovation in healthcare, which BCG partner Bart Janssens, who is based in Mumbai, called India’s “magic beans.” According to BCG, these are information technology and computational research, which could help direct pharma’s growing appetite for big datasets (biology is becoming an information science, one speaker noted). Also on the list: nanotechnology and, to no one’s surprise, process efficiencies, a hot topic, particularly in the area of translational research .
And much of the discussion centered around innovative approaches to clinical trials, where India and U.S. academic institutions and MNCs are working aggressively on projects that are sure to change the nature of the way clinical trials are done globally -- but may not be moving fast enough, as colleague Josh Berlin points out in his excellent take on the summit. 

In health care, much of the reverse innovation activity has been on the device side, which Govindarajan and Trimble, along with GE CEO Jeff Immelt, wrote about in the Harvard Business Review in October 2009. That article received a lot of attention and gave some circles in pharma food for thought, although pharma seems to be a step behind.

Nevertheless, as I grab the book and run out the door, with more say on this post-holiday, it seems worth pointing out a mainstay of pharma's efforts to capture innovation, namely through deal making. And this week's activities boil down to....
IMI/GSK/AZ/Sanofi/Basilea/Janssen Pharmaceuticals: In an effort to address concerns about the increasing resistance of bacteria to the currently available antibiotics, a European initiative launched in November announced May 24 that it is forming a public-private collaboration coined NewDrugs4BadBugs to fund the development of new antibiotics. The Innovative Medicines Initiative, part of the EuropeanCommission’s Action Plan against the Rising Threat From Antimicrobial Resistance, is providing €119 million ($149.6 million) in funding. Private companies – GlaxoSmithKline, Sanofi, AstraZeneca, Janssen, and Basilea – will contribute a combined €114.7 million ($144.1 million). Perhaps more important, however, is the companies’ commitment to share data.  The group is forming a committee, which will build a website that can facilitate the sharing of this information, including specifics on failed targets and clinical trial data. The focus of the overall program will be to develop better networks of researchers, create more fluid trial designs, and provide incentives for companies to participate. The collaboration in the EU happens to parallel proposed legislation in the U.S. that is meant to increase the exclusivity period for antibiotics developed to combat certain types of multi-drug resistant bacteria. Both the U.S. and EU are trying to increase the number of antibiotics under development as more and more people continue to die from infections that were not previously fatal. --Lisa LaMotta

Labcorp/XDx:  With Labcorp., molecular diagnostics developer XDx has found a partner to enable it to resume development of a diagnostic to predict when lupus flares may occur. Lupus has always been in XDx’s sights.  But its early discovery efforts were not sufficient to winnow down potential candidate markers to a set ripe for clinical validation. It also had tabled a clinical study in 2010, SAGE, 600 patients short of its original goal of 1000, because it had to direct resources toward its lead product, the heart transplant diagnostic, AlloMap. 

However, through SAGE, XDx obtained an exotic lupus-oriented set of samples: blood and information on clinical parameters collected monthly from patients. “We knew a certain percentage of these patients would have a significant flare event,” says COO Mitchell Nelles. By drawing blood monthly, the company would have samples before and after flare events, allowing XDx to look for biomarker signatures which could then be used to predict those flares. Now, Labcorp has shown interest in this diagnostics discovery approach. In a deal announced May 23, the companies are collaborating to develop a test to predict lupus flares, to which Labcorp will have full US commercial rights.

A flare predictor test could potentially tell a physician when to intervene with a drug.  Even more important, if it were to have a high negative predictive value, the test could tell a physician when to reduce the use of steroids and minimize side effects or generally adjust downward the level of medication.  The aim would be “not just preventing the flare, it’s not having to give more medicine than a patient needs,” Nelles says.  “We’ve seen that in the transplant field and also autoimmunity. The opportunities to reduce medication to the lowest level possible can have a profound clinical impact.” The test would likely contain a combination of gene expression and protein biomarkers. XDx retains the right to work with other potential pharma/biotech partners to develop a companion diagnostic to predict drug response and otherwise manage therapy.  It had previously worked with Bristol-Myers as part of BMS’s clinical plan to develop its arthritis drug Orencia in lupus, an effort which ultimately failed due to the drug's lack of efficacy in Phase III. – Mark Ratner

GSK/Auxilium: GlaxoSmithKline and Auxilium Pharmaceuticals announced May 21 that they have teamed up on the marketing of the Malvern, Pa-based biotech’s testosterone gel, Testim. The co-promotion agreement is set to begin early in the third quarter and is slated to last until September 2015. That's when generics start to infiltrate the $1.4 billion testosterone gel market, which is currently all branded. In the meantime, this promotion will help Auxilium maximize its product before competition arrives. The British pharma will be responsible for increasing awareness of U.S. physicians, while Auxilium will still manufacture the product. GSK will receive revenues on the drug if it exceeds an undisclosed baseline sales figure. Testim, which is meant to treat conditions related to low testosterone levels, generated sales of $208 million in 2011 and accounted for about 80% of Auxilium’s revenues. Just a day after announcing the deal, Auxilium filed suit against Watson Pharmaceuticals in the U.S. District Court of N.J. claiming the generic drug maker’s plan to launch a generic of Testim is in violation of several patents. Other testosterone gel manufacturers like Par Pharmaceuticals and Abbott have reached agreements with Watson to keep a low-cost generic off the market until at least August 2015 – it appears Auxilium is trying to get the most out of its branded product before the competition arrives. --LL

DaVita Inc./HealthCare Partners:  DaVita, which manages more than 1,800 dialysis centers across the U.S serving 145,000 patients, is buying one of California’s largest independent physician associations, HealthCare Partners, for $4.4 billion. HCP generated $2.4 billion in revenues in 2011 from services its 700 physicians provide to 667,000 people in Southern California, Central Florida and Nevada. The deal is valued at about 8.4x HCP’s 2011 EBITDA. That’s big news in the provider services and dialysis worlds, but what does it mean for pharma?

Once integrated into DaVita, HCP will operate as a separate subsidiary and its current management will continue to run daily operations. DaVita isn’t likely to get much of a bump in its presence in the dialysis market. Rather, it sees the addition of HCP as a way to build on an integrated care approach, based on HCP’s ongoing efforts to work closely with payers and consumers. While the companies were not specific about how HCP interacts with the groups it services, they noted in the analysts’ call that in certain disease categories — chronic obstructive pulmonary disease, for example — more integrated care with physicians and patients working closely together resulted in shorter hospital stays and no increase in hospital readmissions. In addition, HCP collects claims and administrative data, which, combined with clinical data, allows it to develop clinical programs geared to specific patient populations. 

This strategy, while not directly impacting pharma in the near-term, reflects a move on the part of providers and payers to seek what is increasingly known as “a continuum of care” for patients.  Pharmaceutical companies have generally taken a wait-and-see approach to such efforts, before responding with new product portfolios and commercial models that address the shifting needs of their constituents. But the trend is on their minds and some, particularly those involved in diabetes, such as Sanofi, are forging ahead with continuum of care strategies; Endo Health Solutions, which recently changed its name from Endo Pharmaceuticals to better reflect the diversity and focus of its pipeline, is taking a continuum of care approach to the urology and oncology sub-segments.—LL
Takeda/Multilab Industria: Japanese firm Takeda Pharmaceutical claims a leading position in Brazil’s pharmaceutical space with the May 25 purchase of Multilab Industria e Comercio de Produtos Farmaceuticos, which manufactures branded generics and OTCs. The transaction, worth an upfront payment of BRL 500 million ($245.5 million), plus up to BRL 40 million, makes Osaka-based Takeda one of Brazil’s top 10 pharma players and brings it the country’s top-selling OTC cold and flu remedy, Multigrip. Takeda expects to close the deal by September.

Through its 2011 acquisition of Swiss firm Nycomed, Takeda has an OTC presence in Brazil, including the analgesic brand Neosaldina, and Rio Grande do Sul-based Multilab is expected to complement that business via its established distribution network, especially in emerging parts of Brazil. Takeda recently projected sales in Latin America, including Brazil, will reach JPY 52 billion  ($651.9 million) in 2012, and the firm does not plan to revise this year’s earnings guidance following the deal. Multilab generated revenue of about $68.8 million in 2011.--Dan Schiff

Valeant/Swiss Herbal Remedies Ltd.: Aggressive pharma acquirer Valeant Pharmaceuticals purchases assets from Canadian natural health product firm Swiss Herbal Remedies, the latest consumer health pickup for Montreal-based Valeant. In a May 24 release, Valeant said Swiss Herbal is well-known in Canada and will complement the Cold-FX NHP brand Valeant acquired along with Afexa Life Sciences in 2011. Valeant paid less than 1x sales for the assets from Richmond Hill, Ontario-based Swiss Herbal; the assets generated 2011 net revenue of CA $28 million (U.S. $27.4 million).—DS

Suneva/Spear:  Fallout from Valeant's hectic deal-making pace continued May 24 as the anti-wrinkle product Refissa (tretinoin 0.5%) moved to a new home for the second time in less than a year. In December 2011, following Valeant’s buyouts of Sanofi’s Dermik Laboratories and Janssen’s Ortho Dermatologics, the Federal Trade Commission required the specialty pharma todivest three dermatology products from its portfolio – Refissa, acne medication BenzaClin and topical flurorouracil cream 5FU. Valeant sold Refissa, indicated for fine facial lines, hyperpigmentation and tactile roughness, to Spear Pharmaceuticals, and the other two products to Mylan Pharmaceuticals. For undisclosed financial terms, Spear has sold worldwide rights to Refissa and a generic version developed and launched by Spear to privately held Suneva. Suneva CEO Nick Teti said his firm is entering the prescription topical aesthetic space, which he called a potential $100 million market opportunity. The addition will enable its marketing force to offer aesthetic physicians “a comprehensive anti-aging solution,” also include Suneva’s proprietary ReGenica skincare products and its injectable filler Artefill. Suneva called the deal transformational and said Refissa will be a key driver of sales growth over the next five years.—Joseph Haas

image from flickr user mySAPL used under creative commons

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