Follow-On Biologics: Is There a Pathway?

So we knew that the generic drug industry was less than thrilled with the outcome of the follow-on biologics legislative debate, but we didn't realize it was this bad.

That is our conclusion after participating in a webinar hosted by the Washington Legal Foundation on the new biosimilars pathway enacted as part of the health care reform law. (You can watch a replay of the webinar here; and, yes, that is your humble blogger moderating...)

With so much attention focused on the exclusivity issue during the legislative debate, we were excited to have the opportunity at least to start to talk about the nuts-and-bolts of making follow-on biologics happen in the real world.

But boy does it sound like an uphill climb from here. We were struck by the case made by Bob Dormer, a founding partner of the DC law firm Hyman Phelps & McNamara, who argues that--all things considered--sponsors are better off just filing a conventional BLA than bothering with the new "pathway" for biosimilars created by the health care reform law.

Dormer offered the following points:

You can file a BLA at any time (rather than waiting at least four years to file the new, abbreviated BLA--and at least 12 years total for the innovator's data exclusivity to expire before marketing is allowed).

A BLA filing is secret, preserving possible competitive advantages. An ABLA must be disclosed to the innovator.

You can get to court on patent issues quicker, without going through the cumbersome-looking administrative process set up for ABLAs.

The data requirements probably won't be very different--and, for the time being at least, the BLA requirements are more predictable.

Last but not least, you are entitled to 12 years of exclusivity on approval.

Dormer's not the only one who feels this way. As we noted in "The Pink Sheet," Novartis' Sandoz division says it will focus on the BLA route, given the drawbacks it perceives with the new pathway; Teva has also opted to file a BLA for one of its biosimilar projects, and says it may do the same in other cases while it waits and sees what FDA comes up with.

That may be the key point: how will FDA translate the legislation into a regulatory pathway? As the WLF panelists agreed, there are far more questions than answers at this point.

We will of course be covering the details of FOBs implementation. And we will be hosting our own webinar on the theme in June; click here for details.

Image courtesy of flickrer B Tal who notes this piece of ancient wisdom: if we do not change our direction, we are likely to end up where we are headed.

Teva’s Hedge on Complex Generics

Who says you can’t have your cake and eat it too?

When it comes to the follow-on biologics space, there are plenty of companies who are likely to try. As we’ve written before, the looming new pathway for abbreviated approval of biosimilars opens up opportunities for lots of companies—brand, generic and biotech—to consider whether to play as a true “follow-on” supplier, focus on improved “biobetters,” or do both.

But no one is in quite the same position as Teva. Not only is the company doing that analysis for the longer term biosimilar opportunity (you can read more about its latest thinking in “The Pink Sheet” DAILY here), but it is on both sides of the issue for two near-term decisions on complex molecules that are regulated as drugs.

Teva is one of three companies (along with Momenta and Amphastar) with pending applications to market a generic version of Sanofi Aventis’ enoxaparin (Lovenox). In that case, Teva wants FDA to agree that, while enoxaparin is a relatively complex molecule, it is not too complex to allow for a fully substitutable generic approval.

On the other hand, Teva’s largest and most important product is the branded multiple sclerosis therapy glatimir (Copaxone). There are two would-be generics pending, Momenta’s and Mylan's.

In that case, Teva is arguing that Copaxone is far too complex a molecule to be copied closely enough to allow for substitutability—and is even suggesting that other manufacturers may have trouble even getting a non-interchangeable product approved without full clinical studies.

Teva, of course, is aware that this may sound like trying to have your cake and eat it too. But they don’t see a contradiction. Here is how Teva CEO Bill Marth put it during the Goldman Sachs CEO “unplugged” conference Jan. 6:

“When you think about Copaxone, many people try to equate it to Lovenox. It is
much, much different—vastly more complex—than Lovenox will ever be. We have not characterized it. We don't believe it can be fully characterized.

If one cannot fully characterize Copaxone, I'm not sure how you get it approved without a clinical study since the method of action is not well understood and exactly what the active sequence is. And, by the way, we think there are multiple methods of action, and potentially multiple reasons for that. We think that it is virtually impossible to prove your efficacy without a clinical study. So it really falls into more of that sweet spot of the biologics....

I think it is much different with Lovenox than it is with Copaxone because with Lovenox, the active sequence has been identified by us. It hs been identified by the
innovators. It has been identified of course by Momenta and Amphistar.

So it is defined. It is a sugar. When you look at those sugars and you look at the active sequence, then what you really have to do is understand what is the other stuff or junk that is within your protein or sugar, and there make sure that you don't have improper immunogenicity. They have asked us for immunogenicity testing. We have done that. And it seems to be acceptable so far.”

In other words, Teva thinks it can kept its Copaxone cake and take a huge slice of Sanofi-Aventis’ Lovenox cake too.

But there are other outcomes. From Teva’s perspective, an outright rejection of substitutable Lovenox wouldn’t be so bad, since it would underscore the company’s position that substitutable Copaxone is a pipe dream.

And while Teva would dearly love to tap into the $2 billion Lovenox market, at best it will only get a percentage of a big generic opportunity. With Copaxone, Teva hopes to maintain its own multi-billion dollar brand in something like perpetuity.

How important is that to the company? During its January 7 investor day, Teva’s bullish forecasts for growth for 2015 included what the company called a “conservative” forecast for Copaxone, with sales peaking at $3 billion and then eroding over time to $2 billion in 2015. But the erosion, in Teva’s view, will come only in the face of competition from other MS agents (including Teva’s own oral product)—not from any substitutable generic competition.

So call it a hedge: if generic Lovenox is rejected, Teva’s Copaxone franchise is more secure. If Copaxone can’t be protected, at least Teva will have some generic enoxaparin revenues to fill in the hole.

There’s really only one scenario where Teva loses. If one of the other applicants (Momenta being the most likely candidate) actually has superior technology, it could potentially get approval for generic Lovenox and generic Copaxone, while no one else can.

For Teva, that would be more like a pie in the face.

Survey Says More FOB Negotiation Needed

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

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

Follow-On Blackjack: Place Your Exclusivity Bets

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

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

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

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



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

Piven on Biologics Exclusivity: Ten Years!

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

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



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

Follow-On Biologics: 1984 All Over Again?

Orwellian resonances aside, the year 1984 is a turning point in the history of the biopharmaceutical industry. That is the year when the generic drug industry was born, thanks to a critical and unlikely compromise between Senate Republican Orrin Hatch and Democratic Rep. Henry Waxman.

Their landmark bill created an abbreviated approval process (championed by Waxman) in exchange for enhanced patent and data exclusivity protections for innovator companies (pushed by Hatch). So critical were those two lawmakers to the crafting of the legislation that the entire generic approval/patent restoration process in the US is now known simply as Waxman/Hatch (or Hatch/Waxman, depending on which party is in the ascendancy).

As 2009 gets under way, one key question for biopharma companies of all shapes and size is: can history repeat itself?

It sure looks like the stars are aligned for another historic compromise, this time over a regulatory system for abbreviated approval of biologic products coupled with some version of data exclusivity for innovators. And, as fate would have it, Henry Waxman and Orrin Hatch find themselves add odds over some key points.

Waxman, as chair of the Energy & Commerce Committee in the House, will be at the center of any legislative work on follow-on biologics this year. And he has already put a stake in the ground, offering legislation that gives innovators the same five year data exclusivity that pharmaceuticals get under the 1984 law.

Hatch is not in the same leadership position he held as a member of the Republican majority in 1984, but he is working closing with Senate Health Committee Chairman Edward Kennedy on FOB legislation. Hatch and Kennedy were among a group of senators that forged a compromise in 2007, one that would have granted 12 years of data exclusivity to innovators.

That compromise failed to reach enactment—in no small part because Waxman refused to sign on to push for action in the House.

As Congress gets back to work in 2009, it sure doesn’t sound like a compromise is close. As we reported in The Pink Sheet DAILY, Ann Witt—the key staffer to Waxman on FOBs—sure didn’t sound optimistic about getting a bill done this year when she spoke during a forum sponsored by the Jefferson School of Population Health yesterday.

Then today, Hatch himself addressed the Food & Drug Law Institute annual conference. Like Witt, he did not make any optimistic sounding assessments about the prospects for speedy enactment, saying only that “we are working on it.”

Instead, he highlighted his frustration with New York Democratic Sen. Chuck Schumer for, in effect, defecting back to Henry Waxman's camp in 2009.

"I have some very serious reservations about some of the bills that have been recently introduced," Hatch said. "Sen. Schumer’s bill mirrors Chairman Henry Waxman’s….I was surprised to see Sen. Schumer pushing for this new approach, especially since he was the one who really sealed the deal for 12 years of data exclusivity in the last Congress with us. He came along and realized it was an important thing to do. It is frustrating to me to see that we are so quick to wipe out the incentives for innovation."

This whole exclusivity question sure does get people fired up. Indeed, your humble blogger can testify that innovators and would-be follow-on companies seem very far apart on the question of exclusivity, having gotten an earful from both sides for suggesting during a presentation at the Jefferson School event that the whole question of how much exclusivity is less important than what the follow-on biologics marketplace will actually look like. (A webcast of the event is available here.)

Generic companies, in the words of Boston University Economics Professor Laurence Kotlikoff described industry’s “support” for follow-on biologics in exchange for 14 years of exclusivity protection as simply an effort to “kill biogenerics.” Away from the dais, representatives of innovator biotech companies suggested five years of exclusivity would kill innovation.

Still, as David Nash, Dean of the Jefferson School of Population Health, said in his closing summary of the event: Despite the “fireworks,” most observers can see that there “will be some kind of a compromise” on exclusivity.

And it sounds like Hatch at least is ready to try to make that happen. With Waxman due at the FDLI conference tomorrow, Hatch enlisted the audience to help: “When Congressman Waxman is here, you might encourage him to come on board.”

“Let me tell you something. Henry knows I’m serious. He knows I’m bipartisan. He knows I want this done. I care a great deal for him,” Hatch said. He joked about that unlikely turn of events: “We’ve been good friends for all these years, although he comes from Hollywood and you can’t be any more whacked out than that that group, but he for some reason comes through. He’s a very, very complicated but a very, very good, bright guy.”

“I want this to be the Hatch/Waxman—or let’s make it Waxman/Hatch” of the biologics era, Hatch declared.

But, he added, “Henry’s going to have to come up. He was at zero, then he was at five.” President Obama’s budget proposes seven years of data exclusivity, Hatch added, indicating that too would be too low for him.

Is a compromise likely any time soon? It sure seems like the answer is no, that the two sides are--if anything--more entrenched than ever in their respective corners. But a compromise certainly didn't seem inevitable in 1984, a point that Hatch made in his opening comments to the FDLI conference.

"I can vouch for the fact that the negotiations on Hatch Waxman were, shall we say, trying at times," Hatch said. In fact, "who knows what would have happened had I not needed a root canal right in the middle of negotiations. I threatened to kill every doggone negotiator."

"Toward the end, the two leading negotiators, one for the generic industry one for the innovator industry, they jumped up and said, 'We’re outta here,' and they ran to the door, and they both arrived at the door at the same time and they got stuck in the door. It was one of the greatest days of my life."

Right now it sounds like both sides are heading to the door. Whether they actually get out the other side, we will have to wait and see...

Haddad the Harbinger: Waxman-Hatch Activist Creates Company for Biogenerics

The robin is the traditional harbinger of spring. Here’s a harbinger of changes in the biologics business. The intense focus, activity and interest of one man in generics has been a reliable sign of big changes in the past and maybe again in 2009.

Bill Haddad, occasionally described as the “godfather” of the generics industry, is getting ready for follow-on biologics. He has established a self-funded company, Biogenerics Inc., in anticipation of Congressional action to create a pathway to approve follow-on biologics. His goal: once Congress acts, he will partner with FDA-approved plants overseas to expedite the entry of generic versions of off-patent biologics into the U.S.

Haddad has worked on the transnational movement of generics and biogenerics previously. He worked on biogenerics with Russian producers before starting his own company. Now, he says, companies in India are among the best candidates to produce biogenerics for the U.S. market, although he also cites developing industries in China, Australia and Korea. He currently acts as a U.S. representative for the Indian generics firm, Cipla, based in Mumbai.

Haddad says he has put together a list of products whose patents have expired as prime candidates for introduction to the U.S. biogenerics market – although he won’t discuss which ones with us -- and he has an idea of which firms he’d like to partner with. He’s also surveyed the range of products susceptible to patent challenges.

Another thing he’d like to do once the FOB regulatory pathway is created is to form a new trade association for biogeneric manufacturers – he was a founder of one of the original generic drug trade associations, so certainly knows how it’s done.

Haddad, a former journalist and Capitol Hill aide from the 1960’s, was a prominent voice pushing for expansion of the chemical generic industry in the 1970’s. His efforts led eventually to the1984 Drug Price Competition and Patent Restoration Act (Waxman-Hatch). He was one of the representatives for the generic industry in those discussions working with Waxman’s staffer Bill Corr (who is now headed to be Deputy Secretary of Health & Human Services).

Haddad’s connections to the expansion of low-priced drug competition goes way back. He represents one of the few people still active in the industry with ties back to the start of the Congressional effort to reduce intellectual property protections for the drug industry. At the beginning of his career, he was an aide to Tennessee Democratic Senator Estes Kefauver, for whom the 1962 drug efficacy amendments are named (“The Kefauver Amendments”). That major expansion of FDA approval authority actually arose out of efforts by Kefauver to cut back drug patent protections. That effort got side-tracked to enhanced safety and efficacy requirements by the thalidomide teratogenic experience in 1962.

Haddad smells another legislative milestone coming for generics in follow-ons and is giving Waxman’s current version of FOB legislation a good chance of clearing Congress. (See a summary of the provisions in Waxman’s bill by “The Pink Sheet” here). He called the bill “doable,” although he recognizes there is a lot of dealing left around data exclusivity and clinical trials. Until that approval pathway is set up, Biogenerics Inc. is “in a holding pattern,” he said.

As a business, Haddad sees a lot of potential for biogenerics, which he says any firm needs to be involved in in the next few years. If you’re just in small molecule drugs, “you’ll just be a commodity,” he said.

There’ll be No Follow-On Biologics in the US at All...

...At least not if anything close to the Eshoo bill—one of two versions of biosimilar legislation currently before the House of Representatives—gets approved, according to Hannes Teissl, head of Sandoz’s Biopharmaceuticals unit.

Speaking to The IN VIVO Blog late last week, Teissl warned that if US biosimilar legislation, which he and many others expect will be enacted in some form or another this year, looks too much like the BIO-supported, innovator-friendly Eshoo bill, “biosimilars will not be a viable business” to pursue.

Not that he expects that to be the case: “I think we’ll see something much closer to the Waxman bill in the end,” he opines. Wishful thinking? The Waxman bill is, after all, by far the most generics-friendly: it doesn’t require biosimilar applicants to run clinical trials, has a broad, rather flexible definition of ‘comparability’, and mandates that comparable generics have the same name.

This last point on naming, along with Waxman’s position on interchangeability, are the two main advantages of the Waxman bill, according to Teissl. Europe took a while to resolve the issue of whether biosimilars could share the same International Non-proprietary Name (INN) but they now can, which goes a considerable way to proving generic makers’ case for scientific equivalence.

But not all the way. The main sticking point for biosimilars in Europe has been, and remains, interchangeability—whether a drug can formally be expected to produce the same clinical result as the reference product in any given patient. This is also closely linked to—but not the same as--substitutability, whether pharmacists may automatically substitute a branded drug with its cheaper generic equivalent, as in some countries they are mandated to do in the case of small molecules. The European regulator EMEA has passed the buck on both these issues, saying that individual member states should decide. Several, including France and Spain, have decided against allowing automatic substitution.

The Waxman bill doesn’t say biosimilars should be substitutable with their reference drug. But it includes in its wording “at least the potential for interchangeability,” opines Teissl. He sees it that FDA would “make a scientific statement that there is no clinically meaningful difference” between a biosimilar and its reference drug. (Eshoo’s bill would theoretically allow that too, but only after higher hurdles have been met.) Beyond that, it’s still up to individual states to decide whether to allow substitution, but Teissl reckons an FDA-stamp of biosimilarity will help.

And so, he adds, will Waxman’s decoupling the patent litigation process from the regulatory process. That will mean generics companies can launch at risk, which is critical to the viability of biosimilar businesses since patent litigation can drag on for years.

Teissl doesn’t underestimate the Eshoo-supporting innovator lobby but he thinks cost-savings will win in the end. “The US government wants these products, just as FDA wants more competition,” he says.

DotW: Evolution

It's a hard week not to think about evolution. In case you missed it, scientists, educators, and philosophers of all walks of life took a moment Thursday to observe the 200th anniversary of Charles Darwin's birth.

But as the economy continues to sag, the term Darwinian selection takes on a more pointed tone. As our legislators debated the stimulus plan, the nipping and tucking that ensued resulted in an economic evolution of sorts. Whether it's morphed into something with a snowball's chance in you know where of actually working...well, we'll just have to wait and see.

Certainly the stimulus package didn't include much in the way of benefits for smaller companies in our industry. Not that BIO didn't try, but it's an uphill battle for many biotechs in the current enviroment. Among the newly troubled this week: Haemacure, Telik, Oscient, and Novogen. All four announced cost-cutting moves, restructurings, or pipeline retrenchings.

Big Pharmas aren't in much better shape (we know this is drum we beat loudly and often). As they look to adapt or die, the drugmakers' strategies fall into a number of familiar categories: diversification (Wy-Pfi); acquisition to bridge the patent cliff (Wy-Pfi); outlicensing unwanted or deprioritized assets (Wy-Pfi). [Do you see a pattern here?] Only GSK seems to be attempting to change itself from the inside out, an issue we'll discuss in greater detail in an upcoming IN VIVO feature.

In a "survival of the fittest" environment, we're proud to note that IVB is closing in on its 1000th post. And boy have we changed. Any doubts, check out our very first deals of the week post, launched Oct. 26, 2007.

AstraZeneca/Mayo Clinic/Virginia Polytechnic Institute: Attendees of the BIO CEO conference in NYC this week were likely nodding their heads wisely during the panel session where execs from BMS, GSK, and Pfizer discussed the need for new sources of innovation. We've heard this before, folks. And as pharma evolves its own biz dev practices--with corporate venture capital playing a greater role in some cases--one strategy gaining momentum is to partner with smart academics, especially if the upfront money is miniscule and the deal allows the drugmaker to hedge its exposure in a risky therapeutic area. Following on last month's tie-up between Johnson & Johnson's Janssen division and Vanderbilt University for novel schizophrenia drugs came news this week of another CNS-related industry-academia partnership--this time between AstraZeneca and researchers at the Mayo Clinic and Virginia Tech. The deal centers around a cache of early-stage so-called triple reuptake inhibitors designed to treat depression. Financial terms and milestones associated with the deal were not disclosed. Triple reuptake inhibitors, which are sometimes viewed as the likely replacements for today's popular SSRI therapies, target three key neurotransmitters thought to be involved in depression: serotonin, dopamine and norepinephrine. But adverse side-effects and a growing stable of generic medicines that provide some relief have significantly upped the clinical and regulatory risks associated with this drug class, prompting pharmas to think carefully before wading into the space with a lot of money. As "The Pink Sheet" DAILY reports, one reason AstraZeneca was so interested in the Mayo/Virginia Tech molecules was that the two groups had already spent some money--about $500,000--derisking the molecules through toxicology studies. Nor is this the first time AstraZeneca has looked to academia for novel products in this particular therapeutic space. In October of last year, AstraZeneca announced a research collaboration with Columbia University Medical Center to explore neurogenesis in creating novel treatments for depression and anxiety.

Lundbeck/Ovation: As we wrote in this post, pharmas adapted rapidly to take advantage of biotech's winter by demanding contingent value rights (CVRs)--essentially some form of earn-out--in a majority of 2009 acquisitions. This week's acquisition by H. Lundbeck of Ovation Pharmaceuticals is no exception: the $900 million dollar deal came with a $300 million contingency dependent on the regulatory approval of Ovation's anti-epileptic Sabril. Of course, Denmark-based Lundbeck has been looking for new revenue sources to offset the anticipated loss of its top seller, the anti-depressant Lexapro, whose U.S. patent expires in March 2012. The pharma also has wanted to build up its U.S. marketing and registration capacities, citing the potential of its partnership with Takeda on next-generation anti-depressant Lu AA21004, now in Phase III trials. On a conference call announcing the news, Lundbeck CEO Ulf Wiinberg said the purchase was based on a "sum of the parts evaluation". But clearly one of those parts was the risk associated with Sabril, which has been under FDA review since 2007. Even though signs for Sabril's approval are positive--it recently won the endorsement of the agency's Peripheral and Central Nervous System Drugs Advisory Committee for infantile spasms and refractory complex partial seizures in adults--it's also likely that Lundbeck execs couldn't forget the $100 million they spent last May to purchase EU commercialization rights to Myriad Genetics' Alzheimer's disease drug Flurizan. Just five weeks later, that drug had a stunning Phase III clinical trial flame-out that resulted in the drug's extinction by summer's end. According to "The Pink Sheet" DAILY, Lundbeck's purchase of Ovation won't stop it from additional deal-making. Seems likely future deals will also come tagged with CVRs that help the Danish firm hedge its risk and conserve its own precious cash resources.

Merck/Insmed: Sanofi's new CEO, Chris Viehbacher, promised a message of change earlier this week, but it's not completely clear how that particular pharma plans to access innovation. As we noted here, the pharma has a somewhat diversified portfolio so it doesn't need to pull a Pfi-eth (not that it has the cash), but it certainly isn't sounding the clarion call to follow-on-biologics. Contrast that with Merck, which is now clearly in a two-horse race with Israeli giant Teva Pharmaceuticals to become the the dominant player in the FOB space. As we wrote here, this week the company announced it was bulking up in FOBs with the $130 million acquisition of Insmed's follow-on biologics platform. The deal, announced on February 12, gives the big pharma's Merck Bioventures unit two additional clinical stage programs--a Neupogen follow-on called INS-19 currently in Phase III, and a Neulasta follow-on in Phase I known as INS-20--as well as preclinical versions of Epogen and an interferon-beta 1b molecule."Insmed's pipeline of follow-on biologic candidates presents the opportunity to expedite Merck's entry in the biologics marketplace," said Frank Clyburn, SVP and general manager of Merck Bioventures in a press release announcing the news. But this deal was also very much about adding manufacturing capacity--50,000 square-feet based in Boulder, Colorado and 70 protein experts to staff it to be exact. Even better, apparently the Boulder plant offers yeast-fermentation capabilities essential to the glycosylation process Merck is already using via its next-generation GlycoFi technology. The site’s production capacity, along with the expertise of the existing staff “gives [Merck] in my view an accelerated head start on developing these products,” Geoffrey Allan, President and CEO of Insmed, asserted in an interview with "The Pink Sheet" DAILY. Relying heavily on the proprietary glyco-engineering technology housed in GlycoFi, Merck already had one FOB in clinical development--a Phase II pegylated erythropoietin for anemia called MK2578 designed to compete with Amgen's Aranesp. But even with GlycoFi's technology in house, Merck clearly felt the need to add additional capabilities--and quickly--to reach its product launch goals of six FOBs in the 2012 to 2017 time-frame. Certainly Teva upped the ante last month with its deal with Lonza for the manufacture of an unspecified number of biologic products. The question now: will Merck's latest move spur competitors who've up until now shown only tepid interest in FOBs into making a move?

Novartis/Portola: Portola continues to gun for DotW's "Little Biotech That Could Award". (Have we told you we have many awards?) The company had planned to adopt traditional wisdom and wait for Phase IIb data before partnering its anti-thrombotic elinogrel, a competitor to BMS/Sanofi-Aventis's Plavix and Daiichi Sankyo/Lilly's prasugrel. But Novartis played God Father and offered the privately-held biotech a deal it couldn't refuse: $75 million up-front, plus another $500 million in milestone payments and royalties on worldwide sales. Even better, those milestones aren't all in the distant future. The biotech stands to receive another hefty payment of $75 million when the compound enters Phase III trials, which is widely expected to happen mid-2010. With the chances of an initial public offering slim to nil--unless you are selling baby formula and have profits to boot--some Portola backers might raise their eyebrows at the Novartis deal, as it complicates an exit by way of merger or acquisition. Portola has raised $218 million in equity through several venture rounds, including $60 million last summer as well as a $20 million debt placement. So for backers to make their money back, some pharma is going to have to want Portola badly or the investment won't amount to an exit as much as a write-off. And with the lead asset partnered, potential buyers (other than Novartis, of course) might be scared away from looking seriously at the company. Marci C. Dier, Portola's chief financial officer, doesn't exactly agree noting that the biotech has two plays in thrombosis, a very large therapeutic space of avid interest to the larger drugmakers. (The company's second drug is an oral Factor Xa inhibitor in Phase IIb trials called betrixiban.) "Partnering one compound doesn't reduce our optionality, in terms of exit," she said. Indeed, practically speaking the Novartis tie-up--or something like it--had to happen because of the development dollars needed to push elinogrel forward. Phase III trials in thrombosis can involve 20,000 to 30,000 patients. Bottom line for Dier: The still-growing anti-thrombotics space is so lucrative that a takeout is not beyond the pale. If hungry enough - or desperate enough - a big pharma player could, after all, buy Portola and pay off Novartis for elinogrel rights.

Takeda/Xoma: Collaboration updates don't generally pass muster as we're trawling through the week's news for DotW candidates. But we are making an exception for Takeda's expanded agreement with Xoma announced this week. Perhaps it also shows how our thinking has evolved in the fiscally turbulent time--the non-dilutive money Takeda is plunking down--$29 million--is nothing to sneeze at these days. The two companies first teamed up in November 2006 with the goal of using Xoma's antibody phage display libraries and optimization technologies to discover and develop therapeutic antibodies. (This was Takeda's measured step into large molecules.) By 2007, when Takeda was sufficiently interested in biologics to start its own center focused on proteins and anitbodies in San Francisco, the collaboration was far enough along to warrant an increase in the number of antibodies being investigated. In addition to the upfront fee, this latest expansion could provide Takeda with potential downstream milestones and royalties--if the products ever reach the marketplace. Xoma will likely only net $21.5 million from the deal thanks to an estimated $7.5 million it will need to pay for taxes and other costs, but that money is an important lifeline for the company. In recent months the troubled Berkeley, Calif.-based company has cut its workforce 42%, down-sized its manufacturing capabilities, and stopped development of all other pipeline products to focus on its Phase II interleukin 1b inhibitor. It also restructured its oncology collaboration with Novartis, relinquishing a 30% stake in the lymphoma/multiple myeloma candidate HCD122, in exchange for $7.5 million and up to $14 million in milestones. Like so many other biotechs, Xoma has adapted to the new market reality where cash now is far more important than future--and highly theoretical--biobucks.

Thoratec/HeartWare: In medtech sectors where it can take decades to get a device to market, companies face the real and ever-present danger that by the time they launch their latest generation product, their technology has already been leap-frogged by competitors, especially small, innovative private companies. Thoratec was facing exactly that challenge. With 2008 sales of $313 million, Thoratec dominates the market for ventricular assist devices, pumps that provide a last ditch bit of love to patients with chronic heart failure. Its latest left ventricular assist device (LVAD), a small axial flow pump called the HeartMate II, took off like gangbusters when launched in the second quarter of 2008. However, HeartMate II is a second generation pump, and smaller, third (and some might call them fourth) generation versions that don't require implantation in the abdominal cavity are already in early stages of commercialization. Thus, as companies such as MicroMed Cardiovascular and HeartWare International prepared to make a run on Thoratec, the company was forced into action. On Feb. 13, it offered to acquire HeartWare for $282 million, half in cash and half in stock. The deal gives Thoratec a broad portfolio of ventricular assist devices, including the newest and latest technology, positioning it to capture growth in a market that has always been sorely underpenetrated for lack of the right technology. Medtech Insight forecasts LVAD sales of $210 million by the end of next year, but that’s only a tiny fraction of the market’s potential. CanAccord Adams analyst Jason Mills estimates that more than 25,000 patients in the U.S. alone might be candidates for LVADs--making it a $2.5 billion market--Mary Stuart.

(Image courtesy of flickr user practicalowl through a creative commons license.)

Merck Bulks Up With Insmed FOB Acquisition

Just about one year ago, Insmed scientists went on a viral marketing campaign exhorting the virtues of follow-on biologics with a YouTube video entitled "Follow-On Biologics--Tell your Story." If you ever wondered how much that video was worth to Insmed's bottom-line, you can stop wondering. The answer is $130 million.

That's how much Merck agreed to pay for all the assets related to Insmed's follow-on biologics platform.

The deal, announced on February 12, extends Merck's biologics capacities tremendously, giving its Merck Bioventures unit two additional clinical stage programs--a Neupogen follow-on called INS-19 currently in Phase III, and a Neulasta follow-on in Phase I known as INS-20--as well as preclinical versions of Epogen and an interferon-beta 1b molecule.

"Insmed's pipeline of follow-on biologic candidates presents the opportunity to expedite Merck's entry in the biologics marketplace," said Frank Clyburn, SVP and general manager of Merck Bioventures in a press release announcing the news.

But this deal was also very much about adding manufacturing capacity--50,000 square-feet based in Boulder, Colorado to be exact. In addition to a pipeline of products, Merck gets a state-of-the -art "biologics process development analytical laboratory," manufacturing facilities, and 70 protein experts to run it. A pretty good deal when you reckon that bioprocessing plants can cost half a billion or more to build from scratch.

Even better, apparently the Boulder plant offers yeast-fermentation capabilities essential to the glycosylation process Merck is already using via its next-generation GlycoFi technology. The site’s production capacity, along with the expertise of the existing staff “gives [Merck] in my view an accelerated head start on developing these products,” Geoffrey Allan, President and CEO of Insmed, asserted in an interview with "The Pink Sheet" DAILY.

And apparently Merck wanted the assets--both the products and the capacity--enough that they were willing to purchase them outright from Insmed. None of this staggered deal-making via CVRs that we've seen so much of lately. Indeed, the agreement provides initial payments of up to $10 million for INS-19 and INS-20, with the remaining $120 million due at the close of the transaction, which is expected to occur by March 31.

When Clyburn, Clark and the rest of the Merck gang announced the creation of the Merck BioVentures unit in December, they unveiled an ambitious plan: the launch of at least six FOBs in the 2012-2017 time period based on an R&D spend of $1.5 billion over the next seven years. Relying heavily on the proprietary glyco-engineering technology housed in GlycoFi, the company already had one clinical candidate--a pegylated erythropoietin for anemia called MK2578 in Phase II development that is designed to compete with Amgen's Aranesp.

But even with GlycoFi's technology in house, Merck clearly felt the need to add additional capabilities--and quickly--to reach its product launch goals. The Neupogen and Neulasta follow-ons give the unit much greater heft even as it ponders the vastly different economic model associated with FOBs. (To date, Merck has been mum about future pricing strategies for products like MK2578 or INS-19.)

If Merck's creation of its BioVentures group got our industry talking about pharma's role in FOBs, you can expect the clamor to grow even louder now. The company's willingness to fork over $130 million for Insmed's full capabilities shows that it is playing offense when it comes to FOB capacity. Indeed, Merck and Teva have emerged as the preeminent players in pharma's race to develop FOBs.

Recall that Teva, through its acquisition of Barr last year gained a G-CSF biosimilar, TevaGrastim, which is currently marketed in Europe. Its 2008 acquisition of CoGenesys, like Merck's 2006 purchase of glycoengineering play GlycoFi, means it also has the next-generation technology necessary to be a big FOB contender. Moreover, just last month, Teva itself made sure it wasn't limited in terms of its own bioprocessing capacity by inking a deal with the Swiss contract manufacturer Lonza to develop, manufacture and market generic equivalents of selected biological products.

In early January at the Goldman Sachs Healthcare CEOs Unplugged conference, Teva's Bill Marth indicated just why his company has been so active in lining up FOB capabilities: "You don't have to own them all...but you're going to have to have all the capabilities within your sphere of influence in order to get to market," he said at the time.

Merck is clearly following that same mantra with its Insmed deal--and probably isn't finished wheeling and dealing yet. "We are looking at additional partnerships," Clyburn told IVB one month ago in an interview at the J.P. Morgan Healthcare Conference.

(Image courtesy of flickr user Mysterytune through a creative commons license.)

In Follow On Biologics We Trust

Typically, Big Pharma business briefing days aren't known for being newsy events. Another year, another ho-hum pipeline update--complete with the requisite hyperbolic biodollar citations for clinical candidates to appease investors. But in the case of yesterday's annual Merck confab, that certainly wasn't the case.

At its day long event, the Big Pharma revealed the creation of Merck BioVentures, an ambitious new business unit with a heavy emphasis on follow-on biologics that aims to launch at least six such products in the 2012 - 2017 time period. The group will rely heavily on proprietary technology obtained when Merck bought the glyco-engineering biotech GlycoFi back in 2006 for $400 million.

In an interview with "The Pink Sheet" DAILY, Frank Clyburn, the newly appointed senior VP and general manager of MBV, noted that Merck plans to spend $1.5 billion over the next seven years in the hopes of putting at least five follow-on biologic candidates in the clinic by the end of 2012. "We are going to look at developing follow-on biologics in a number of therapeutic areas, a very diverse portfolio," Clyburn said.

The company is already 20% there. The only FOB Merck was willing to discuss specifically was its pegylated erythropoietin for anemia, a molecule called MK2578 designed to compete with Amgen's Aranesp currently in clinical trials that could launch as soon as 2012.

In comments to analysts and the press, CEO Richard Clark also played up the importance of FOBs to Merck's future growth strategy. Admitting that "2009 will be an important year of transformation and execution for us," Clark noted that "follow-on biologics represents a significant market opportunity due to the extensive patent expiries of leading biologics in 2017."

It is so nice to be right.

One of our favorite themes here at IN VIVO Blog--in addition to the potential benefits to biopharma of risk mitigation strategies--is that Big Pharma has a huge opportunity to become a leader in FOBs.

Think about it: as Congress continues to mull over FOB legislation, its increasingly unlikely that they will consider an abbreviated pathway to approval for these products. Indeed, it's going to take significant expertise on a number of fronts--clinical, manufacturing, and regulatory--to meet the case-by-case standards being contemplated by legislators for follow-on approvals. And, since the products are unlikely to be therapeutically substitutable, companies will also need significant sales and marketing expertise to actually make money on such products.

Who has the requisite know-how? With the exception of Teva Pharmaceuticals, it ain't the traditional generic makers. "Other players with vastly superior capabilities and resources may be at least equally—if not better—suited to participate...such as some large-cap pharmaceutical and biotech companies as well as select mid- and small-cap biotech companies," said Ken Cacciatorre, an analyst with Cowen and Co. in this April RPM feature by Kate Rawson.

A majority of Big Pharma even have the technology platforms to make it happen. Late to the biologics party, a number of Big Pharmas were extremely busy in 2006 and 2007 gobbling up so-called next generation antibody companies in their bid to build capability, especially in areas with already established intellectual property such as the anti-TNF space. In addition to Merck's purchase of GlycoFi, other biopharmas inking deals around next-generation players include GSK (Domantis), BMS (Adnexus), Pfizer (Biorexis), and Wyeth (Haptogen).

But until 2008, when Teva announced it was buying albumin-fusion play CoGenesys, the corporate spin has been about the opportunities to develop novel biologics. Teva's willingness to commit $400 million to its own FOB program seemed to jolt the thought-processes of other biopharma execs. In a matter of months, former GSK CEO JP Garnier was publicly signaling the strategic importance of Domantis' technology because it allowed the pharma to"re-do a monoclonal for everything that is on the market, from Avastin to Rituxan...without infringing IP. With a product that might even have a twist."

At Pfizer's analyst day in March, meanwhile, CEO Jeff Kindler indicated that the New York giant was also considering how to position itself in terms of FOBs. In response to a question about whether an abbreviated approval pathway would prompt the company to start developing follow-on biologics, Kindler responded: "I do think that's an opportunity for us."

But if Pfizer and GSK suggested they were willing to dip their toes in the FOB waters, Merck's news should be taken as a full-scale immersion. And it's really not that surprising. Anyone listening to Merck's financial guidance call last week knows the dire shape the pharma company is in thanks to slumping Zetia and Vytorin sales.

The company needs to do something to jump start its R&D. And using GlycoFi's technology to gain a chunk of the follow-on biologics market, poised to take off under the auspices of a new Democratic administration, is a logical place to start.

Thanks to heavily engineered yeast, Merck can develop specific protein versions that are "best-in-class" with "a better circulatory half-life, targeted tissue distribution and/or increased potency," according to Peter Kim, President of Merck Research Laboratories.

And that is the biological equivalent of the fast follower strategy Big Pharma has perfected so successfully for small molecules. At a time of increasing regulatory risk, what better way to gain a grasp on a new therapeutic modality than to create me-better versions of already well studied and hugely successful molecules such as Rituxan or Enbrel and then market the hell out of them?

It will be interesting to see if Merck's news spurs other Big Pharma down the FOB path. Certainly biotechs, such as Amgen and Genentech need to think carefully about life-cycle management strategies for their own products. Hours after the news broke, Lazard analyst Joel Sendek issued a report urging caution when it comes to Amgen:

"We view Merck’s biosimilar program as a serious long-term threat to Amgen’s anemia franchise. Neupogen follow-on biologics currently marketed in the EU have failed to acquire a very significant share of the market or dent usage of Amgen’s dominant products; however, in our view, Merck represents a more formidable competitor due to its marquee brand name and marketing expertise."

hang-glider dollar bill by flickr user J0nB0n used under a creative commons license.

Roche-Genentech: A Defensive Play on Follow-On Biologics

If a generic competitor was waiting in the wings with an improved version of Genentech’s Avastin, how much less would the company be worth in the eyes of Roche?

Probably a lot, you’d say. Probably a lot less than $44 billion, which as everyone on the planet knows by now, is what Roche bid to acquire the remaining 44% of Genentech earlier this week.

We’re not suggesting there is anyone waiting in the wings to undercut Avastin at this very moment. And when it comes to analyzing Roche-Genentech, FOBs probably isn’t the first thing that jumps to mind. (Which is why, incidentally, we’ve already blogged on the deal here and here. And why we’re planning all kinds of great coverage in this week’s issue of “The Pink Sheet.”)

Indeed, there are lots of other questions: Does Roche’s price justify the quality of the R&D portfolio it would acquire? Is the timing of the deal more about financial strategy than innovation, as Roche claims? And does any of that matter if the acquisition results in a massive walkout in South San Francisco?

But given where follow-on biologics are headed these days—and how much money is at stake for a company like Genentech—the impact of follow-on biologics on the timing of the deal is worth considering. So here’s our take:

There’s no doubt these are hard times for pharmaceutical companies—low approval rates, a stalled R&D engine, payor pressure and the risk of health care reform. And while that’s hit across Big Pharma and Big Biotech, biotechnology companies have enjoyed one major upside: infinite product exclusivity.

That honeymoon is about to be over.

We’re just not talking about Congress authorizing a regulatory pathway for follow-on biologics. Or even competition from generic companies. The biggest threat to the biologics industry may come from within Big Pharma itself—a group that is incredibly experienced in manufacturing products, has money to invest, and is desperate for a few more dollars on the bottom line.

As we’ve written in The RPM Report, Big Pharma companies haven’t been shy about their interest in developing “me-betters” that get around IP issues with existing follow-on biologics.

Indeed, some of the biggest names in Big Pharma have acquired technology platforms that could be used create ther own versions of existing large molecules: GSK (Domantis); Bristol (Adnexus); Wyeth (Haptogen); and Teva (Cogenesys). And some executives (like JP Garnier and Jeff Kindler) have acknowledged plans to do just that.

So what does that all have to do with Roche-Genentech?

It’s clear FOBs are a major threat to biologics IP. Even if Congress doesn’t pass legislation authorizing a follow-on biologics pathway, FDA will continue to approve “me-too” large molecules on a case-by-case basis. And if the technology platforms Big Pharma has been snapping up lately is any indication, we’ll start to see the March Of The “Me-Better” Biologics—and the pricing pressure that follows.

For Roche, staying ahead of that curve means finding a way to make biologics faster and cheaper. And the best way to do that is through post-merger synergies. So contrary to the message Roche is sending to investors, the timing of the deal probably has less to do with “innovation” and more to do with squeezing out savings.

At the very least, it’s another sign that that Big Pharma companies are thinking about follow-on biologics in dealmaking—either by acquiring companies with the technology to make me-betters, or by positioning themselves in a way to compete with any competing large molecules that may come down the pike.

It's one more pressure that will make biologics less profitable in the long run—and one more reason for Roche to head it off at the pass. Genentech created Roche’s pipeline—and propelled the company to the number-one growth stock despite what is arguably the worst R&D in the industry. Now it needs to protect that investment.

The Enemies You Keep

Former Rep. Bill Thomas sure has it in for Amgen.

First, as chairman of the House Ways and Means Committee, Thomas made life difficult for Amgen by siding with sworn enemy Johnson & Johnson during the now-resolved EPO bundling dispute.

Thomas wasn’t particularly happy with allegations that Amgen gave large rebates for Aranesp (which competes with J&J’s Procrit) when purchasers committed to buying Neulasta and Neupogen.

And just before retiring from public service in 2006, Thomas teamed up with Rep. Pete Stark to criticize the Centers for Medicare & Medicaid Services’ reimbursement policy for Aranesp, in the hopes of making anti-Amgen changes in the way that the product was covered under Medicare Part B.

But while the Amgen/J&J feud has finally ended with a $200 million payout to J&J, Thomas can’t quite bury the hatchet.

This time around, he’s working against Amgen on the issue of follow-on biologics. Thomas has teamed up with Insmed Inc.—a company you might remember from a moderately infamous YouTube video—but that also just announced the results of a study demonstrating bioequivalence between its INS-19 and....wait for it...Amgen’s Neupogen.

Insmed has a long way to go on INS-19—that bioequivalence study was a Phase I trial. But the company says it is planning to petition FDA to commence Phase III studies of INS-19, and wants to move another “me-too” biologic, INS-20, which Insmed says is a “generic form” of Amgen’s Neulasta, into Phase I. (Are you sensing a pattern here yet?)

How Thomas’ vision for a follow-on biologics framework is different than the bipartisan legislation that’s already out there is unclear. It’s also unclear how the Congressional Budget Office’s scoring of the Senate’s version of the bill will affect the chances for near-term passage of any legislation.

But what is clear is that there’s no love lost between Thomas and Amgen. Conventional wisdom would suggest that it took a pretty sweet fee for Insmed to get Thomas on board as a strategic advisor. But given Thomas’ history with Insmed’s main target in the war on follow-on-biologics, maybe it didn’t take too much convincing.

Playing with $6 Billion: CBO Unveils Follow-On Biologics Savings Estimates

The analysts at the Congressional Budget Office have been busy little beavers. As we cautioned earlier, CBO has been actively scoring the possible cost savings of the introduction of follow-on biologics in the US through an abbreviated pathway.

The agency released the estimates June 25 and the numbers certainly will re-ignite the follow-on biologics debate. Using the Senate Biologics Price Competition and Innovation Act to evaluate savings, CBO found FOBs would save $6.6 billion in direct government spending over a 10-year period, beginning in 2009. That's real money. To read the full analysis, click here.

The $6.6 billion comes in higher than some of the lower-end estimates and at about half the amount of the higher-end estimates. Two points to consider:

Timing: Releasing the savings analysis on June 25 begs a few questions to be asked. Were the findings unveiled ahead of the July Congressional recess so they could not be acted upon swiftly by lawmakers looking for a rest? Or does the scoring have a relationship to the Medicare package, which includes the physician payment cut offset, that just passed through the House? After all, the $6.6 billion would serve as a nice bargaining chip for the physician payment fix? Or is it all a coincidence?

Although we don't believe in coincidences, we have not heard from any sources with a stake in the game that FOBs will be attached to the Medicare package, which already has its share of somewhat controversial provisions like e-prescribing and codifying the six "protected" drug classes under Medicare Part D. To read more, click here.

Still, you never know what's going on behind closed-door negotiations, especially considering the exclusive number of Congressional leaders who are crafting the legislation. But the odds are quite small that FOBs gets attached to a must-pass Democratic or Republican offering because it would require serious and immediate action from the Senate HELP and Judiciary Committees, specifically Ted Kennedy (D-Mass.), Orrin Hatch (R-Utah), Hillary Clinton (2nd Place, Democratic nominee for President) and Mike Enzi (R-Wyo.).

How Will House Leadership React: Because the Senate HELP Committee requested the CBO analysis, it is based on the BPCIA, which gives innovators a period of 12 years of data exclusivity. At this point, that's a biotech-friendly period of exclusivity. House Committee for Oversight and Government Reform Chairman Henry Waxman (D-Calif.) and House Energy and Commerce Chairman John Dingell are understood to be looking at eight years of exclusivity and less. So they would, no doubt, hold up any legislation that includes FOBs and 12 years of exclusivity. That's not to say 12 years ends up getting the axe; we're just saying there's no way it stays 12 years without a fight from Waxman and others.

Here's an interesting take from one knowledgeable source:

"It is worth considering that the starkly competing and now “switched” views coming out of the two “sides” of the industry – GPhA essentially saying the score means the current legislation is bad and needs to be fixed (presumably by the next Congress), and BIO essentially saying the score means the current legislation is good and needs to be passed by this Congress – could result in the perception of a “draw” in the clash of the titans, which begs the question as to whether there would be sufficient momentum to get this onto the Medicare package or any other vehicle during the 110^th based upon this score....Of course, stranger things have happened in this and past Congresses."

While we don't think, as of this moment, FOBs will get attached to a Medicare bill, the $6.6 billion in savings and the timing of the release is turning out to be a real bee in our bonnet. Why now? We'll continue to investigate. In the meantime, take a look at the CBO analysis. There's a lot to digest.

Scoring Follow-on Biologics

When it comes to follow-on biologics, time keeps on slipping. There was a lot of optimism that legislation creating an abbreviated pathway for approving FOBs could slip in by the end of 2007. Not so much. Talk turned to 2008 as the year when a bill gets passed through Congress.

Well, there’s good news and bad news on that prediction depending on where you stand on the issue. Word on the street is the staff of Sen. Ted Kennedy (D-Mass.), who serves as Chairman of the Senate Health, Education, Labor & Pensions, doesn’t expect legislation to move in 2008 because of the high number of other high-profile legislative priorities ahead in the queue and the fact that Kennedy was diagnosed with a malignant brain tumor.

The good news, again depending on where you stand, is the Congressional Budget Office appears to be moving forward in scoring the 10-year savings presented by having follow-on biologics in place. Specifically, CBO is reaching out to stakeholders to determine what impact, if any, the issue of “evergreening” could have in scoring savings over 10 years. The appropriate definition of a “new” biologic threw a monkey wrench into negotiations during the last days when the bill was being considered as part of the drug reform legislation in 2007.

In other words, where is the line drawn between a new, innovative product and one that is incrementally improved, but not “new” per se? The concern among generic hopefuls is that a product that is slightly changed would get another 10 to 12 years of data/market exclusivity (meaning FDA wouldn’t allow a FOBs maker to reference that product in an application to the agency seeking approval).

If the Hatch/Waxman experience serves as a benchmark, you can bet the farm, the car and whatever else you own that whatever lines the legislation draws between “innovative” changes to biologics that merit additional exclusivity and non-protected changes will be the source of controversy and legal actions for many, many years.

CBO officials are understood to be of the opinion that “evergreening” would not wipe out savings during the 10-year scoring period because approvals couldn’t happen that quickly during the study timeframe. Biogenerics stakeholders, however, point to the relatively quick development and approval of Roche’s “next-generation” EPO Mircera as evidence that those types of products can impact savings analyses.

It will be difficult, however, for CBO to identify significant savings over such a short period of time, primarily because follow-ons will be deemed interchangeable on a case-by-case basis and new FOBs entrants will be few and far between.

The law firm Engel & Novitt on behalf of the Pharmaceutical Care Management Association estimated cost-savings from FOBs for the top 200 Medicare Part B-reimbursed therapies would be approximately $14 billion over 10 years. Two other studies, conducted by Howrey/CapAnalysis Group and Avalere Health, estimated considerably smaller savings in the range of $2 billion to $4 billion over 10 years.

We’ve said all along that if CBO comes out with numbers closer to the Howrey and Avalere analyses, that won’t do much to motivate lawmakers to push for the legislation.

There are a number of challenges to getting a bill done in 2008 and beyond that fall outside of the trenches separating the innovators and the biosimilars proponents:

1) Kennedy’s health: Kennedy took the lead on trying to get a compromise bill into the FDA Amendments Act, signed into law in September 2007, but the Senate Biologics Price Competition and Innovation Act (BPCIA) just missed getting through. With Kennedy out of the day-to-day operations in Washington while he receives treatment, it’s unlikely there will be someone to take his place in championing new legislation. Still, most with chips in the pot agree that any law will have the BPCIA provisions at its core.

2) The Medicare bill: The Medicare compromise, which includes the physician payment fix, looks to be the major piece of health legislation that will make it through Congress in 2008. So if FOBs has a chance, then it most likely has to be attached to that legislative vehicle. Well, as of right now, FOBs isn’t in either the Democratic legislation (sponsored by Senate Finance Committee Chairman Max Baucus) or the Republican counter-bill (sponsored by Iowa Republican Charles Grassley). And that means FOBs are almost assured to be left out of any final bill the two sides hash out. No one is going to be interested in tacking on a controversial piece of legislation to a must-pass bill.

3) The Election: As summer comes to an end, the election will heat up quickly, with many key Congressional leaders out campaigning for the Presidential candidates or otherwise indisposed. That pretty much knocks out 2008. Then much of the first half of 2009 will be focused on setting up the new administration. Good luck getting FOBs through in that environment. More on this in my next post.

4) General hatred and disdain between biotech and generic drugmakers: This is a half joke. But like all half jokes, half of it’s true. Both sides appear to be coming around, but the amount of rhetoric put forth by both sides leading up to final negotiations in 2007 clearly damaged their positions. The RPM Report has heard this from numerous staffers and stakeholders. Whether it was extending data exclusivity or how easily understood the science is for developing and approving follow-ons without clinical burden, Senate and House leadership staff, as well as senior FDA officials, were put off by the rhetoric.

5) Making Dingell and Waxman happy: One of the major reasons FOBs didn’t make it into FDAAA was the Senate and House schedules and views of the compromise didn’t match up. House Committee on Oversight and Government Reform Chairman Henry Waxman (D-Ca.) was and still is a key player in the follow-on biologics game, and any compromise will most likely have to have his sign-off as well as that of House Energy & Commerce Chairman John Dingell (D-Mich.); Dingell has expressed interest in getting legislation passed. But there is a lot of ground to cover between the Waxman proposal (the Access to Life-Saving Medicines Act) and the Kennedy bill in the Senate. Most importantly, the issue of data exclusivity.

So when will FOBs happen? We recommend targeting PDUFA V as the vehicle for follow-on biologics.

We expect a compromise to be hammered out over the next year or two and attached to the user fee bill when it comes up for reauthorization in 2012. Sound far away? It really isn’t. The first negotiations to gear up for PDUFA V will start taking place in 2010, and it will be much easier to attach a ready-made piece of legislation to the next user fee iteration then than to try and rush something through Congress that doesn’t meet everyone’s threshold for satisfaction.

It’s possible the follow-on biologics debate could accelerate due to some unforeseen catalyst—anything’s possible in Washington—but the safest bet is that the legislation will move in 2010, with 2012 as the finish line. Is that too safe? I would love to hear your thoughts.

Surprise Players in Follow-On Biologics?

Legislation authorizing FDA to develop an abbreviated pathway for follow-on biologics seems pretty much inevitable—at least, that’s the near-unanimous opinion of the experts we talk to over here at the IN VIVO blog.

So assuming legislation passes sooner rather than later—indeed, some industry watchers think it’ll be as soon as next year—it’ll be a boon for the generic drug industry. Right? Generic drug companies will easily transfer their small molecule expertise into developing biosimilars. Right? They’ll become the big players in the follow-on biologics market and make a gazillion dollars. Right?

Well, maybe not.

According to some analysts, like Cowen & Co.’s Ken Cacciatore, the market for follow-on biologics may not unfold in the way most expect. While the generic drug industry would appear to be the natural players for follow-on biologics (and indeed, they certainly think so), Wall Street is starting to look in a different direction altogether.

As we just wrote in a story for The RPM Report, Cacciatore and his colleagues at Cowen think that (surprise!) Big Pharma and biotech companies are actually better equipped to play in the follow-on biologics market. (You can read the whole story at TheRPMReport.com; if you’re not already a subscriber, you can sign up for a free trial.)

The branded companies, Cacciatore argues, have the clinical, manufacturing, and regulatory expertise to meet the relatively high bar for follow-on approvals. Sales and marketing will also be important, since the products are unlikely to be therapeutically substitutable. And when you think about the branded industry’s willingness to develop authorized generics of expired small molecules, it’s not such a crazy idea.

So who’s looking to play? Well, Pfizer for starters. In case you missed it, CEO Jeff Kindler acknowledged during Pfizer's recent investor day that there may be money to be made in follow-on biologics. And Pfizer’s not alone—there are a lot of other companies considering the jump as well. (Again, you can check out our story in The RPM Report for the complete list.)

Now, we don’t mean to suggest it is all doom and gloom for the generic drug industry. There are a few bigger generic companies—like Teva and Novartis’ Sandoz, for example—with the infrastructure and expertise necessary to compete with branded companies. But interestingly, Cacciatore points to both companies' brand-like features—not their generic capabilities—in outlining their FOB potential.

For the rest of the generic drug industry, there’s still good news. Even if Congress manages to push through legislation authorizing an abbreviated pathway, FDA’s part in all this isn’t going to happen overnight. Depending on Congress’ intent, it could take a while—perhaps even years—to develop the regulations. So for companies that aren’t ready, there’s still time to prepare.

One thing is clear: the participants in follow-on biologics aren’t going to be the same as the generic small molecule market. Wall Street is already starting to think in those terms. Industry should plan accordingly.

Starring Role for Follow-On Biologics

You have to hand it to the players in the follow-on biologics debate: they are pulling out all the stops. Just when you thought you thought you had seen everything, it shows up on YouTube.

The Richmond, Va.-based biotech company Insmed Inc. posted a video (below) on YouTube starring Mike Coleman, an Insmed scientist who exhorts the values of follow-on proteins, and encourages others to post their thoughts on the issue as well. The video, "Follow-On Biologics--Tell your Story," has been viewed about 1,000 since Insmed posted it on February 8.

Insmed already markets the insulin-like growth factor mecasermin (IPLEX), and wants to position itself as the first US marketer of follow-on biologics--when and if Congress gives the Food & Drug Administration the green light to establish a regulatory pathway.

The issue died down after Congress failed to attach a measure to the FDA Amendments Act last year, but was back in media reports last week after President Bush mentioned follow-on biologics in his FY 2009 budget request.

That annoucement had its own YouTube-like quality when Jim Dyer, the agency's operations chief, had to correct statements that FDA would be forwarding legislation to Congress on a regulatory pathway this year. Instead, the agency will continue helping Congress develop a bill--and the budget request is only intended to express the Administration's eagerness to see the legislation enacted this year.

We're not sure how many congressmen watch YouTube, but their staffers are sure to be clued in. Will the Internet ad be just a fun cocktail party story? Or will it prod Congress back into action? Check back to find out.

White House Tries to Jump-Start Follow-On Biologics

The Bush Administration seems to think it’s time for FDA and Congress to get back to work on developing a follow-on biologics approval pathway.

The president’s $2.4 billion fiscal year 2009 budget request for FDA lays out an agenda for an abbreviated approval process on follow-on, or “generic,” biologics. “The budget proposes a new authority for FDA to approve follow-on protein products through a new regulatory pathway that protects patient safety, promotes innovation, and includes a financing structure to cover the costs of this activity through user fees,” the request says.

During a conference call, FDA deputy commissioner for operations Jim Dyer said the agency would work with Congress to submit legislation authorizing an abbreviated pathway for follow-on biologics. That’s not really news; the agency has been in discussions with Capitol Hill and industry stakeholders for some time, and has testified in congressional hearings that it has the scientific expertise to support an approval process.

Legislation authorizing a follow-on biologics pathway came close to being attached to the drug safety/user fee bill last year, but was pulled at the 11th hour. For more coverage on the bipartisan negotiations—and what the final deal looked like—click here and here. Subscribers to The RPM Report can read the content for free, or you can sign up for a 30-day free trial.

Practically speaking, the mention of follow-on biologics in the budget request won’t result in much. Finalizing something as controversial as an abbreviated approval process for follow-on biologics during an election year is more than a little optimistic; any real work probably won’t get underway until there is a new president in the White House in 2009.

But the budget request does set the president’s agenda for FDA for the next fiscal year, and lays out what the White House hopes to see the agency accomplish. At the very least, the mention of follow-on biologic user fees will trigger a score from the Congressional Budget Office, which, should it demonstrate savings to the health care system, would be handy during the next round of negotiations.

The request also includes a call to revive user fees for pre-reviews of direct-to-consumer advertising television commercials. A program was enacted as part of the FDA Amendments Act, but Congress killed it off by refusing to fund it in the omnibus appropriations bill. (For more analysis of that story, click here.)

So the Administration, at least, hasn’t given up on that program. Of course, we already knew FDA and industry were eager to make it work—it is Congress that has been of two minds on the DTC program—enacting it in September and killing it in December.

So don’t get too excited about follow-on biologics or DTC user fees. The President’s budget keeps hope alive for action on each this year. But it doesn’t change the basic truth that both issues depend primarily on the priorities of a Democratic Congress in an election year—not the final budget from the outgoing Administration.