Things Mike Pearson Has Learned

It’s always interesting to hear Mike Pearson, the blunt CEO of Valeant, expound on how nimbly his company is responding to Pharma’s complicated business environment. At an analyst meeting on June 21—coincidentally the last day of BIO 2012 – he took a few minutes for reflection on Valeant’s current strategy, as well as lessons learned from his four years at the helm: Only compete in attractive markets, defined as those in which competition is manageable and overall sales are growing. 

No direct mention of health care reform in the U.S. or market access issues in Europe crossed his lips, but clearly reimbursement and pricing hurdles are behind Valeant’s decision to almost entirely exit Western Europe (a move made prior to the current melt-down), its declining presence in the U.S., which will account for roughly 50% of sales in 2012, down from 65% in 2010, and its de-emphasis of innovative drugs in favor of OTC and branded generics ( 71%, 9% and 20% in 2010 to 59%, 14%, and 27%, respectively, in 2012).  An increasing proportion of Valeant revenues comes from products and geographies that have a heavy out-of-pocket component, even on the innovative side. 

Pearson cited several critical priorities for the company, which relies on a blend of organic and business development activities for growth. If Valeant does not deliver on a 15% return on shareholder value over three years, management takes a hit. With that kind of mandate, Valeant executives can not afford to wait out long R&D cycles.

That approach stands in contrast to Forest Laboratories,which on June 20 also provided investors with an update of its strategy, and which is also somewhat contrarian. Slightly larger than Valeant, although with a significantly lower market cap ($9.2B versus Valeant’s $13B), Forest also avoids risky early stage research in favor of a strong emphasis on business development with a focus on clinical assets.

However, it has an entirely different commercial and portfolio management mindset, with deep roots in primary care: it has no problem building support gradually for drugs that demonstrate incremental improvements over standard of care, continuing to back them despite slow launch trajectories-- an approach that worked brilliantly but now makes analysts jittery, given worries that once-proven tactics won't work in today's vastly constrained markets. 

And while Pearson struck a contrite tone with investors, who have been questioning him lately about lack of visibility on organic growth and ex-U.S. exposure, Forest’s management, led by founder Howard Solomon had a 'hold the fort' message. That message: the company's overhaul of its product development portfolio has succeeded and the current mode of operating is to stay the course.

Of course, Forest has patent cliff issues (80% of revenues at risk by 2015), which Valeant, by eschewing innovative molecule research and early clinical development, strives to avoid. And it is Valeant we’re looking at in this note. In fact, in the four years since he assumed the helm, Pearson said explicitly that he's learned to avoid primary care 'tail' products, such as the anti-depressant Wellbutrin, which did not perform to expectations after it was acquired as part of Valeant's 2010 takeover of Biovail. Also critical is discipline on integration costs. 

That said, company’s returns on its acquisitions has been “phenomenal” Pearson says, and it sees business development opportunities as “quite large” – a contrast to some others in the industry who bemoan the lack of attractive late-stage deals. So the plan is to shift capital deployment from half acquisitions and half share repurchase to more emphasis on the former. And it prefers to buy assets over full companies due to favorable tax treatment, though both are in the cards. In business development, it expects a 20% return, statutory tax rates and a cash payback within six years.

In the past year, Valeant has become a leader in certain sub-segments of dermatology and ophthalmology – and moved into podiatry and dental care, all businesses with a heavy out-of-pocket pay component. Likewise, geographically, its play in Russia is particularly aggressive, as its sales have gone rapidly from less than $40 million to $200 million. Even within that market, though, it is not selling innovative medicines, so much as branded generics and OTC products. In fact, if an asset has government ownership or reimbursement, Valeant walks away.

That sort of flexibility and aggressive rush into non-patent protected franchises implies a willingness to forgo a high-value certainty in favor of operational complexity and the vagaries of economically sensitive products. Its success--Valeant's stock has more than doubled in two years, compared to Forest, which is up only 25% in the same time frame -- is indicative of the climate in which pharma currently operates as it navigates patent cliffs, healthcare reform, and European market access hurdles. It may be an attractive way forward for mid-sized pharma right now but it is a bet on execution and opportunism over innovation and long-term commitment--currently hard-to-reach goals for an industry under siege.

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DotW: Last-Minute Shopping

Nothing like year-end deadlines to get the deal-making juices flowing. This month alone, we've counted 48 announcements of biopharma deals, an average of 2.4 per global business day, and that doesn't include financings. As far as we know, no business-development executives were crushed by a midnight mob, but you can bet lawyers poring over term sheets weren't offering any complimentary gift-wrapping.

You could attribute the flurry to concern about the unknowns of health care reform, worries over some yet-to-be announced new taxes or changes in financial accounting. But it's not quite what it seems: the total is actually on par with 2008 and way down from the Decembers of 2006 and 2007 (71 and 68, respectively). Isn't the New Normal exciting?

Maybe it just seemed like a mad rush because of all the drama outside. Or maybe it's because of all the big names. According to our count, 26 of the December deals involved Big Pharma. Of those, Pfizer seemed to be in the most partner-happy mode, with six deals to its name. Since Dec. 21 -- that's two days ago as of this writing -- it's inked four deals, all small, but all signals of its new preoccupations: in-licensing biotech (the stem-cell deal with Athersys and the Compugen deal for three drug candidates) and licensing out former priorities (The Medicines Co. gets Pfizer's ApoA-I cardiovascular compound). All of these fit with Pfizer's broader strategic intentions announced earlier this year, telling tales of days gone by and yet to come.

But a neat wrap-up wouldn't befit a year filled with unexpected shocks and twists. Despite pharma's ongoing efforts to derisk risk (Sanofi's acquisition of Chattem could fit that bill), the months to come are guaranteed to bring even more uncertainty. Who would have figured 10 or even five years ago that Teva's growth profile would seem more Big Pharma-ish than Big Pharma itself? Meanwhile, the deals announced this week are relatively small (Sanofi's being the exception), and only hint of what lies ahead… -- Wendy Diller

Pfizer/Athersys: In one of several transactions announced this week by the New York-based drug maker, Pfizer provided much-needed validation for Athersys’ transformation from a gene-therapy play to a company focused on stem-cell-derived therapeutics. The Dec. 21 licensing deal brings the Cleveland biotech $6 million upfront and up to $105 million in milestones. Pfizer obtains worldwide rights to develop and commercialize MultiStem, a preclinical stem-cell therapy, for inflammatory bowel disease. On an investor call, Athersys noted IBD affects an estimated 2 million combined patients in the U.S., core EU markets and Japan. Current therapies have limited effect and some chronic IBD cases result in surgery, but even such procedures don’t always produce a cure. Unlike embryonic stem cells, MultiStem is a biologic made from cells extracted from the bone marrow of adult donors. The Athersys collaboration is one of several forays by Pfizer into the stem-cell arena in the past two years. Last December, Pfizer paid an undisclosed upfront fee and research funding to license pancreatic progenitor cells derived from human embryonic stem cells from Novocell. In 2009, Pfizer signed a pair of agreements with academic institutions, licensing its patents related to the use of human embryonic stem cells to the Wisconsin Alumni Research Foundation, and partnering with University College London to develop stem-cell therapies for ophthalmologic indications including wet and dry age-related macular degeneration. -- Joseph Haas

Pfizer/The Medicines Company: Mimicking the risk-averse structures many Big Pharma companies have pursued in 2009, The Medicines Co. will take worldwide rights to the stalled cardiac drug ApoA-I Milano from Pfizer for $10 million upfront, plus milestones up to $410 million and single-digit royalties on sales if a product reaches market. TMC needs to add critical-care products to a portfolio threatened by next year's patent expiration of top seller Angiomax. CEO Clive Meanwell said decision-makers for the product likely will be the same critical care specialists TMC deals with in marketing Angiomax and Cleviprex, and plans to target with molecules in its late-stage pipeline. CFO Glenn Sblendorio noted that development milestones due to Pfizer total only $20 million, with $90 million pegged to regulatory filing and approval and the remainder to sales targets. The relatively low price TMC is paying is in stark contrast to the $1.25 billion Pfizer paid to bring in ApoA-I Milano in its 2003 acquisition of Esperion. -- JH

Teva/OncoGenex: Teva gave $60 million upfront and up to $370 million in milestones to OncoGenex in exchange for a global license to co-develop and commercialize OGX-011, a second-generation antisense compound ready for Phase III. Despite the solid deal terms, the Bothell, Wash., biotech's stock tumbled on the news Dec. 21. After closing Dec. 18 at $29.65 per share, the biotech’s stock dropped to $21.13 the day the deal was announced, though it has since rebuilt some value. Perhaps investors didn't notice that Teva’s upfront included a $10 million equity stake in OncoGenex at $37.38 per share, a level at which the stock hasn’t traded since late September. The firms will collaborate on an ambitious Phase III program – three trials are planned in various cancer types to demonstrate '011’s efficacy as adjunctive to chemotherapy – but Teva will cover all development costs. Should '011 reach market, OncoGenex has the option to co-promote the drug in North America and is eligible to receive sales royalties ranging in percentage from the mid-teens to the mid-20s. -- JH

Eli Lilly/Kowa: Lilly will help commercialize Livalo, a synthetic statin used to treat primary hyperlipidemia and mixed dyslipidemia, which are characterized by abnormal levels of cholesterol and fatty substances in the blood. Kowa Pharmaceuticals America, a U.S. subsidiary of the privately-held Japanese firm, will get an undisclosed upfront payment. Both companies will copromote in the U.S., with both supplying sales reps and sharing marketing and development costs. Kowa, which is based in Montgomery, Ala., will record all U.S. sales and pay Lilly an escalating co-promotion fee based on net sales. Lilly has exclusive rights to commercialize Livalo in Latin America. Livalo has been tested again Pfizer’s Lipitor and Merck’s Zocor in patients with primary hyperlipidemia or mixed dyslipidemia. -- Ed Silverman

AstraZeneca/Novexel/Forest Laboratories: About a month ago, we noted that deals for clinical-stage antibiotics or their sponsors were topping off around $500 million. Bingo! AstraZeneca is buying antibiotic developer Novexel for $350 million, plus cash and contingencies that could bring the deal to $505 million. Note, however, that Astra will get a big chunk of the cash back from Forest Labs in a complicated shuffle. Paris-based Novexel’s lead compound, NXL-104, is a beta-lactamase inhibitor that fights resistant gram-negative bugs, a growing threat in hospital settings. The compound is in Phase 2 testing in fixed-dose combination with Forest’s ceftaroline, and Forest has North American rights. Once the AZ buyout closes early next year, Forest will pay AZ $210 million for global rights to the '104/ceftaroline combo, then it will license rights outside North American and Japan back to AZ. Forest will also gain partial rights to the combination of ‘104 and ceftazidime, an off-patent antibiotic that Novexel has been testing with '104. Novexel spun out of Sanofi in 2004 and took €90 million ($129 million in today’s dollars) across two rounds of venture funding. Shareholders get the $350 million cash payout, plus reimbursement for the estimated $80 million cash left on hand at the close of the deal, along with potentially $75 million more for an undisclosed milestone. -- Alex Lash

Incyte/Lilly: Less than a month after scoring a big-bucks deal with Novartis for its lead myelofibrosis candidate, Incyte received another vote of confidence for its JAK inhibitor program. Lilly bought global rights to an early-stage molecule aimed at inflammatory diseases for $90 million upfront, $665 million in potential milestones, and up to 20 percent royalties on future sales for the JAK1/JAK2 inhibitor INCB28050 and follow-on compounds. Incyte will get an option at the start of Phase IIb to co-develop on a compound-by-compound and indication-by-indication basis. The firm expects upfront and milestone payments will fully cover its share of late-stage expenses. Royalties could stretch to the high 20s if Incyte takes advantage of the co-development option. Last month, Novartis agreed to pay $150 million upfront plus a $60 million retroactive milestone payment for development and commercialization rights outside the U.S. to INCB18424, a JAK1/JAK2 inhibitor in Phase III for myelofibrosis. More than $1 billion in potential milestones are also part of that deal. -- Emily Hayes

Seattle Genetics/GlaxoSmithKline: GSK is licensing Seattle Genetics' proprietary antibody conjugate technology, a move that further confirms Big Pharma's growing interest in antibody adjuvants to enhance their immunotherapy initiatives. Glaxo will pay $12 million upfront for rights to use the biotech’s ADC technology with multiple antigens. Glaxo will be responsible for research, product development, manufacturing and commercialization of any ADC products that originate from the deal. In return, Seattle Genetics could snare up to $390 million in milestones if all ADCs in the collaboration are commercialized, plus mid-single-digit royalties on worldwide net sales. The companies didn't disclose the specific targets or therapeutic areas, but cancer immunotherapy seems a likely focus. It's the third deal for SeaGen in nearly as many weeks. In November, the biotech announced it was expanding its 2007 licensing deal with Agensys, a subsidiary of Astellas Pharma, to include more targets. On Dec. 15, the firm announced a deal involving rights beyond the U.S. in which Millennium, a subsidiary of Takeda Oncology, gained marketing rights to its lead product, SGN-35 (brentuximab vedotin). -- EH

Chattem/Sanofi-Aventis: Sanofi-Aventis will try its hand at over-the-counter sales in the U.S. with its $1.9 billion offer to buy U.S.-based Chattem. Announced Dec. 21, the deal will further diversify the Paris-based pharma before some of its major prescription brands, notably the Plavix bloodthinner, face generic competition. Since Chattem is an established player in the U.S. OTC market, the acquisition would enable Sanofi to switch its antihistamine Allegra into an OTC product without losing a significant chunk of profits to licensing deals. At the same time, the deal allows Chattem to take advantage of Sanofi’s global network and market its products outside the U.S., including the emerging markets that Sanofi is now targeting. The U.S. OTC market was worth $21 billion in 2008, or 25 percent of global OTC. The U.S. market also is a "relatively fragmented" one, making the field more open to new players, and it is growing at a rate of about 4 percent, noted Sanofi executives. -- EH

Photo courtesy of flickr user donebythehandsofabrokenartist.

GSK Slides Away From Innovation

Two news items this week reminded us of GSK's flight from innovation. First, its re-entry into dermatology, via the $3.6 billion acquisition of privately-held Stiefel Labs (see our Pink Sheet DAILY coverage here)--the largest buy on CEO Andrew Witty's watch so far. The second news item that heralds the demise of the R&D-based pharmaceutical company? GSK this week got the green light to launch Alli, an OTC version of Roche's Xenical in the EU.

Okay, so we recognize that these moves amount to GSK (among others) taking a stab at general "healthcare" or "wellness". It is an "R&D based pharmaceutical and healthcare company" after all.

It's also an attempt by GSK to get closer to customers. GSK's take-out of Stiefel proves that derm--a low-margin zone with, until now, little sex appeal (GSK sold out in 2005) is attractive again, as is any other reliable revenue source in this R&D productivity drought.

Now sure, there's innovation in derm. Most of Stiefel's business is in prescription drugs (though that doesn't necessarily equate to innovation). But a good chunk of it--about a third--is OTC and a growing aesthetic business. Think dermal fillers and anti-wrinkle creams. In fact, only about 5% of dermatologists are purely focused on medically necessary products; most deal with the cosmetic side as well.

Indeed, "dermatology is more of an art than a science," Stiefel's President Bill Humphries told The In Vivo Blog the day after the deal was announced. "There aren't many blockbusters nor many cures," he elaborated. But GSK's diving in nevertheless.

Plenty of analysts and press--including ourselves--duly report the Stiefel acquisition as an example of Witty's very sensible diversification and de-risking approach. Reducing cyclicality 'n all that. But what about innovation? Is GSK now to be all about Sensodyne toothpaste and diet pills?

Speaking of diet pills....Alli sold £29 million (about $42 million) in the US this last quarter, a tidy sum for an OTC product. This week's EU approval means Alli should be a nice little earner in (increasingly fat) Europe--especially given the medicine's cost of £50 per month in the UK.

Why would an overweight European punter pay for the drug instead of getting double the dosage on prescription, for free? Because, says a GSK spokesperson, "if someone wants to shed a few stone, the vast majority would want to manage that themselves, seek solutions on the high street, in slimming clubs for instance." (Will GSK invest in slimming clubs next? Talk about diversification. We can't wait to see that press release.)

"We've trained 7000 pharmacists" in the UK on how to dispense Alli appropriately, says the GSK spokesperson. Alli-shoppers will have to prove their BMI is 28 or more, and be over 18 to purchase the medicine.

The idea of being weighed or having your waist measured in your local pharmacy may provide enough incentive to diet. If it doesn't, Alli will. The drug's by-now renowned side-effect is oily stool. The way to avoid that, the GSK spokesperson continues, "is to follow the recommended low-fat diet."

It makes sense, economically and socially, to help prevent patients getting heart disease and diabetes in the first place, rather than only providing snazzy, often expensive, treatments. And yes, we acknowledge that GSK's doing a bunch of interesting things to get its R&D going, to be fair. But too many more diet pills and anti-wrinkle creams, GSK, and you'll have to drop the "research-based pharmaceutical company" bit.

(Photo courtesy of flickr user Scott Abelman, used with permission through a creative commons license.)

While You Were Contemplating Pfizer/Wyeth [UPDATED]

Sorry about the lazy imagery; thanks to the speed at which things evolved this weekend we didn't have time to mock up a version of "Christina's World" with Pfizer HQ in the background as planned. We still can't quite wrap our heads around this deal's logic--as we pointed out on Friday, there are plenty of arguments against the mega-merger--but we'll be all over it with coverage in IN VIVO, The Pink Sheet (and its DAILY), all the way down to your lowly IN VIVO Blog. Our first longer-form take is in today's Pink Sheet.

Any Pfizer or Wyeth employees out there? Good deal? Bad deal? Smart deal? Dumb deal? Weigh in with your thoughts in the comments.

• The Wall Street Journal, whose reporters broke the Pfizer/Wyeth story on Friday, fills in a few more details and suggests the price tag will come in between $65 and $70 billion, or about $50/share at a roughly 30% premium to the pre-rumor shareprice. Says the WSJ: "Pfizer plans to pay for about two-thirds of the total cost in cash and use its stock for the remainder, the people say. It has raised about $25 billion in bank financing and will tap its cash reserves for the rest." [[UPDATE: WSJ now saying the magic number is $68bb--$50.19/share. That story is here. The NYT's coverage is here.]] [[UPDATE II: at 6:30am it's official. Here's the Pfizer release.]]
  
• While we're talking Wy-Pfi (a genius name pointed out by a commenter at WSJ's Health Blog) we should also link over to Derek Lowe's post at The Atlantic's new business page.
• The knock-on has begun. Crucell said today that Wyeth has pulled out of talks to acquire the vaccines company.
  
• GSK's Alli hits the shelves in Europe. Will it take off or, er, hit the skids? The Times takes a long look at orlistat.
  
• Another reason to drink lotsa coffee (besides the caffeine, wonderful aroma, and the glorious, glorious taste): results of a 21-year observational study by Scandinavian researchers suggest it might be good for your mental health, according to the New York Times. The scientists "found that the subjects who had reported drinking three to five cups of coffee daily were 65 percent less likely to have developed dementia, compared with those who drank two cups or less."

DotW: Yes We Can

As the US prepares for its last chance to check out of the office early on Friday, Dems converged this week on the Mile High Stadium in Denver to listen to ordinariness and outstanding oratory. The GOP will be hard pressed to match the rhetoric as they bear down on the Twin Cities for their own back-slapping event.

There was no shortage of rhetoric in our industry either. Amylin and Lilly finally decided to publicly address Byetta's potential role in pancreatitis in a late day conference call Tuesday. Clearly the speechifying--"Yes we can get through what ought to be a non-event"-- didn't convince a majority of investors. The stock prices of both companies continue to suffer.

Also on Tuesday came news from BMS and Pfizer that their eagerly anticipated Phase III clotting drug Apixaban--pitted in a head-to-head against Sanofi-Aventis's Lovenox for the prevention of venous thromboembolism in knee replacement surgery patients--just barely failed to show non-inferiority. The market reacted--but more modestly--with the share price of each company dipping slightly as Wednesday's trading began. For Pfizer it was a "Yes we can weather another round of negative news" moment. For Bristol, it was proof that the company's risk-sharing strategy makes sense.

Then there was Cell Genensys's announcement that it was stopping a Phase III trial of its prostate cancer vaccine GVAX due to potential safety concerns. Many believe the drug's future is in question, though a different pivotal trial of the product is still on-going. At least the Cell Genesys team has this consolation: "Yes we can ink a lucrative deal with a mid-size Pharma on limited data."

And having failed to partner its lead program, faropenem, Replidyne announced it was restructuring, reducing headcount to just 5 employees and taking a charge of $3.1 million. Undoubtedly the remaining staffers will have a "yes we can moment" that involves selling everything not already nailed down, including their investigational drug to treat C. difficile infection and additional anti-infective compounds. With nearly $61 million in cash on hand, they might even say "Yes, we can pull off a reverse merger."

We aren't going to call roll and ask readers to vote for their favorite weekly run-down of news. It's official. By acclamation, we bring you...


GlaxoSmithKline/Valeant: GSK made another valiant--er, we mean Valeant--attempt to add late stage, specialty focused products to its pipeline this week. On Thursday it announced a tie-up with Valeant for the specialty pharma's late stage epilepsy drug retigabine in a co-commercialization deal worth $125 million up-front and more than $500 million in potential milestones. In addition, the deal also involves earlier stage Valeant programs, and gives GSK world-wide rights to both its VRX698 as well as downstream potassium channel opening drugs. Milestones for these candidates could eventually reach $150 million. The two companies expect to file for approval in both the EU and US for retigabine in early 2009. As The Pink Sheet Daily notes, the deal shores up a looming gap in GSK's epilepsy franchise. The pharma's Lamictal, which will go off patent in 2010, posted global sales of $2.2 billion last year. But GSK will have to master the potentially tricky side-effect profile that comes with retigabine's first-in-class mechanism. In one trial of the drug, nearly 27% of patients withdrew due to problems that included dizziness, somnolence, headache, and fatigue. For J. Michael Pearson, Valeant's CEO, the deal validates his turn-around vision for the specialty pharma. Since coming on-board in February, Pearson has made partnering the company's retigabine and Phase II HepC drug taribavirin a priority.

Genzyme/Medicines for Malaria Ventures/Advinus: There’s a certain irony to a company that’s made its fortune finding treatments for rare diseases to go after a mega-disease and eschew all profits from it. But that’s what Genzyme is doing with the not-for-profit MMV – one of a growing number of groups, operating largely through virtual organizations, focused on just one or two diseases that can be attacked via collaborations with academics and companies. It’s likely Genzyme, along with help from MIT’s Broad Institute and Harvard, will do most of the discovery work while the Indian Advinus – a unique combination CRO and biotech firm – will do most of the development. And while Genzyme is doing its work gratis, the Advinus collaboration will also advance its nascent ambitions in India, where it is one of the few major biotechs with an R&D presence--Roger Longman.

Isis/Novosom: So many targets, so little time. As Isis and others grapple with that dilemma a variety of smaller biotechs are maneuvering to gain access to sequence- or target-specific IP from platform players to move from technology purveyors to drug development companies. Germany’s Novosom—which boasts a nucleotide-agnostic, charge-reversible systemic and topical delivery platform called Smarticles—this week exercised its option (which it lined up in an April 2007 deal with the antisense specialist) to develop antisense oligos targeting CD40, a target in B-cell cancers and inflammatory diseases. That deal lands it worldwide rights to Isis’ CD40 related IP and “non-exclusive worldwide and sublicensable access to certain aspects of Isis’ core technology patents.” Isis gets upfront and milestone payments and royalties on sales. Smarticles (animation here) should not to be confused with Nestle’s Smarties, the colorfully coated chocolate candies that taste delicious but are crap at delivering RNAi and antisense molecules to the inside of cells--Chris Morrison.

QLT/Reckitt Benckiser: Canadian biopharma QLT says "yes we can" continue to sell off assets, announcing the licensing of its Atrigel drug delivery technology to Reckitt Benckiser Pharmaceuticals for $25 million plus potential milestones payments of up to $5 million. (This should give Replidyne hope.) As part of the deal, Reckitt took some of QLT's infrastructure off its hands, acquiring 18 employees and a facilty in Fort Collins Co. QLT has been selling off assets since January, when it announced its intention to focus on its macular degeneration treatment Visudyne. The company has already sold its headquarters, cut staff, and offloaded its acne gel, Aczone, to Allergan for $150 million. Next up: the company will sell QLT USA in its entirety.

Photo courtesy of Flickr user davidhanddotnet via a creative commons license.

It's Not DTC, It's HBO

GlaxoSmithKline Consumer Healthcare and its team that promotes the over-the-counter weight loss drug alli have to be rooting for HBO’s recently announced pilot “Fat Sells” to make it to the air.

The cable network will air “Fat Sells” (get it?), a “one-hour family drama set in the world of the $46 billion herbal supplement weight loss industry,” with Academy Award winner Forest Whitaker to executive produce.

"Everyone is looking for that Magic Pill to change their lives ... We're taking a world not regulated by the FDA and breaking it wide open," says co-creator Dave Broome.

According to a report from Variety, the story “will center on the head of a weight loss behemoth (and his family) and how his life starts to unravel when the FDA begins investigating the company's claims.”

We can only hope the show can even begin to capture the excitement of a real-life FDA inspection.

Depicting weight-loss supplements as being sold as “magic pills” fits right in with Glaxo’s pitch for alli, our colleagues at “The Tan Sheet” report here. But we’re predicting we won’t see any product placement.

Glaxo, which launched alli (an Rx-to-OTC switch of orlistat, Roche’s Xenical in the prescription market) in 2007 has marketed the drug as part of a program that includes lifestyle changes such as diet and exercise. Glaxo positions alli as as “the only FDA approved” OTC weight-loss product, and an alternative to products in the supplement market that do not have to go through pre-market approval and that make more aggressive weight-loss claims.

In fact, in a move back in April that would take a large number of competitors off the market if successful, Glaxo filed a citizen petition in May asking FDA to require pre-market approval for supplements making weight-loss claims. Read about that here.

Supplement firms likely won’t be happy if Fat Sells airs, considering creator Broome, also an executive producer, has already called it an unregulated industry, an impression widely repeated in the press, and one that companies and trade groups are constantly trying to correct. And from the description of the show, it sounds like the firm depicted will be exactly the kind of company that mainstream supplement industry members have been working hard to distance themselves from, via self-regulation and public relations efforts.

On the other hand, if the show is the next “Six Feet Under,” supplement firms –and hopefully FDA – could see the same kind of uptick in job applicants that the funeral industry saw from that show.

Meanwhile, we’ll be here trying to pitch HBO some follow-on hits from the exciting world of FDA-regulated products. Keep an eye out for “The Detailers,” “Hoodia Love” and “GMPs: Miami.”

--Christopher Walker

Getting Out From Behind the Counter

So close, and yet so far away.

That pretty much sums up the prospects for a behind-the-counter drug class—products that could be sold without a prescription but with more restrictions than OTC medications (such as the oversight of a pharmacist).

Despite interest from both industry and FDA on a behind-the-counter drug class for products like statins and oral contraceptives, questions about the agency’s regulatory authority have slowed any momentum on the creation of an intermediate class of drugs.

Unfortunately, the passage of the FDA Amendments Act last year didn’t make things any clearer. Indeed, although the creation of a behind-the-counter class would fit perfectly with the intent of the agency’s new risk management authorities under FDAAA, the actual legislation explicitly limits that authority to prescription-only products. And FDA has so much to do in implementing FDAAA that any further work on a formal guidance on a third class of drugs will have to wait.

So how can interested companies move forward on a behind-the-counter class?

As reported in “The Tan Sheet” this week, one former FDA deputy commissioner, Scott Gottlieb, recommends simply asking the agency. “The best alternative right now for them is to encourage sponsors to come in on an ad hoc basis with plans for using risk-management proposals as a way to carve out a third pathway for select drugs.”

“In the absence of a guidance spelling out a formal process, the best [FDA] can hope for is that enough sponsors will come in with proposals that they will essentially carve out a pathway by example,” Gottlieb said.

One obvious opportunity for a behind-the-counter product is lovastatin (Mevacor); Merck has applied for an over-the-counter switch of the statin on three separate occasions, but has not been able to convince FDA that patients can safety use the drug without the supervision of a physician.

Office of New Drugs director John Jenkins referred to Mevacor in response to a question about behind-the-counter drugs during a town hall session at the Drug Information Association’s annual meeting last week.

“So far, no one has been able to package that type of therapy into a program that can work in the traditional over-the-counter paradigm that we have in this country,” Jenkins said. “The consumer needs to be about to self-select, self-diagnose and self-treat without the involvement of a health care provider.”

“That has led people to question, ‘could you improve access and maybe have improved outcomes by making some of these treatments for chronic, asymptomatic conditions available without a prescription?’ I think it’s an area that’s clearly still in discussion and debate.”

For companies interested in marketing products behind the counter, there’s still some hope for a formal pathway. As Jenkins noted, “we’re about to change administrations. That will probably have some impact on thinking about this issue. So I think it’s still very much up for discussion.”

Launching Alli

GlaxoSmithKline is about to find out whether the phrase "oily discharge" sounds better over-the-counter than it does by prescription.

The big US Alli launch is scheduled for this week; pharmacies will be stocking up on the OTC weight-loss drug (a half dose of Roche's prescription-only Xenical) as of this Wednesday, and the drug goes on sale next Monday. For all its reportedly softly-softly approach and emphasis on only helping those people who have a strong will to drop a few pounds, GSK is sure going to spend a ton of cash to get its message across.


Reuters is reporting that the launch--which should see GSK spend $150 million on marketing this year--is chock full of superlatives.

"It will be one of the largest launches that GSK has ever undertaken and probably one of the largest OTC launches that has been made," Greg Westerbeck,
global marketing head for Alli, told reporters in
London.

Between Alli and Sanofi-Aventis' rimonabant (Zimulti/Acomplia)'s date with the FDA on Wednesday (which, depending on your view of psychiatric events, might get messy), prepare yourselves for an onslaught of diet-drug stories. For Medtech Insight's recent take on the obesity products market, including drugs and devices, click here.

Can P&G Stomach the Risk Even When It's Reduced?

P&G Pharmaceuticals has been the Henny Youngman Rodney Dangerfield! of the drug industry: it couldn't get no respect. And so last year it remade itself, becoming what it calls a “search and development organization,” apparently on the model of Shire and Endo.

When it announced it was abandoning discovery, in February 2006, P&G was both admitting it couldn’t compete in research—and that it couldn’t stomach the risk. It laid off, or transferred, most of its researchers; it has spun off at least three research programs (more on that in another post); and now it’s got 45 people scouring the earth for licensable products in its chosen therapeutic areas: gastro-intestinal, musculo-skeletal and women’s health. Two key criteria: P&G only want drugs for patients that have “high involvement in their disease”; and they want products for which the development risk is “reduced.”

They’ve got some ambitious goals. To reach their growth targets, they want to launch one new product every 4-5 years – and that drug needs to become – echoing Jack Welch’s famous maxim for GE—number one or two in its category. To get to their launch target, P&G figures it will need to do 2-3 deals per year.

The question, however, is whether the kind of products that get to be #1 in their categories are also the kind of products that P&G management will be willing to pay for. It’s a challenge, admits Jeff Davis, who runs new business development. P&G has a shareholder base which demands 4-6% growth a year—that’s the kind of growth that justifies not reduced-risk research, but no-risk research, the sort that figures out how to get more or less pulp into orange juice or no-drip caps onto detergent bottles.

Moreover, while Big Pharma isn’t generally ponying up for reduced-risk development projects (in general, they still want NMEs), spec pharma is, and paying Big Pharma-sized upfronts. But P&G figures it can win these deals by emphasizing its consumer-focused marketing approach (it had an entire team of R&D, finance and marketing execs outfitted with an electronic system that, for a week, at all times of day, signaled them to react to the unpleasant gastrointestinal events of ulcerative colitis patients). And if—as this blogger believes--spec pharmas are going to be P&G’s biggest dealmaking competition, then P&G really will have an interesting advantage.

The pitch worked for Aryx Therapeutics, one of two companies with whom P&G has signed deals since its reorganization (the other is Nastech, for nasal-delivered parathyroid hormone). The Aryx drug, for GERD and gastroparesis, hit all the P&G criteria: a GI product (for GERD and gastroparesis) and risk-reduced (works like Propulsid but, apparently, avoids the drug-drug interactions which killed it). “We had three virtually identical term sheets,” says Aryx VP and COO John Varian but chose P&G because of their “focus on the consumer.”

Still, P&G is hardly burning up the dealmaking track. They’ve done two deals since their restructuring—the last in July 2006. Davis is confident that in ’07 his group will be able to get to terms sheets on 2-3 programs. There are plenty of biotechs who'll appreciate the P&G approach. But we wonder whether the Consumer King will tolerate the risk of signing them.