Deals Of The Week: Whose Mind Is On Deals Anyway?

To rehash The Event of this week: the Supreme Court ruled 5-to-4 to uphold the constitutionality of the Patient Protection and Affordable Care Act June 28, including the mandate requiring individuals to have health insurance.

The decision seems favorable to the pharmaceutical industry, and may have surprised a few who already were scheming of ways to get back the billions spent on that excise tax to the federal government in 2011. We look forward to sorting out the implications for the pharmaceutical and biotech industries in the weeks and months ahead. Our sister publication, “The Pink Sheet,” DAILY did an initial review here, making the point that many changes already were set in motion by the passage of the act itself. And we'll have much more to say in the days and weeks ahead.

The pharma industry stands to benefit from the expected increase in insured patients. The Centers for Medicare & Medicaid Services project about 22 million newly insured patients, and that spending on prescription drugs by public and private payers will increase 8.8% in 2014 over 2013 – the year major coverage expansions under the ACA are scheduled to begin – compared to 4.1% growth if it had not passed.

Still, there’s no guarantee of the volume trends newly insured patients will deliver when it comes to pharmaceuticals. “The actual volume upside may be lower and more modest then some expect,” noted Barclays Capital analyst Anthony Butler in a same-day note. A significant portion of the uninsured are believed to be young people who may not use health care services or pharmaceuticals. “The addition of these segments into the coverage pool through the individual mandate may be a smaller net positive from the volume perspective for the pharma sector than some have expected,” Butler said.

There will be plenty of uncertainties as we navigate through health care reform, but for now isn’t it about time to celebrate the federal government’s executive, legislative and judicial branches in action, by heading to the beach for July 4? – Jessica Merrill

Merck Serono/Compugen – The corporate venture arm of Germany’s Merck Serono is collaborating with Compugen to establish a new company, Neviah Genomics, to discover, develop and market novel biomarkers for drug toxicity, with the aim of bringing a product to market within a few years. The Neviah collaboration, announced June 25, is the first investment under Merck Serono Ventures’ Israel Bioincubator program, established by Merck Serono in 2011 with initial funding of €10 million over seven years. Compugen, a Tel Aviv-based biotech with a pipeline of preclinical protein therapeutics and monoclonal antibodies, will bring its predictive discovery technologies to the partnership. The deal is structured so both Merck Serono Ventures and Compugen will be shareholders in Neviah, which will have its own board that will determine how any product profits will be distributed. Compugen also will earn royalties from product sales. Further financial details were not disclosed, including the amount of Merck Serono’s initial investment. The companies have worked together as part of a 2008 partnership to co-develop CGEN855, a GCPR peptide investigated in inflammatory disease. – Joseph Haas

Lilly/PrimeraDx – Massachusetts-based PrimeraDx has entered into a multi-year collaboration with Eli Lilly to develop companion diagnostics for several unspecified clinical candidates, initially focusing on oncology. Neither terms nor timelines were disclosed. PrimeraDx, will develop multiplexed assays using its proprietary ICEPlex system, which is capable of simultaneous detection and quantification of numerous target types such as mRNA, miRNA, SNPs and DNA. Founded in 2004 and formerly known as Primera Biosystems, Inc., the company sells instrumentation, software, assays and consumables. Primary customers are clinical labs at large academic research centers and reference laboratories and biopharmaceutical companies. PrimeraDx is backed by venture investors including Abingworth, InterWest, CHL Medical, MPM Capital, Burrill & Co., and the Malaysian Technology Development Corporation. It last raised a $20 million series C in September 2009. – Mike Goodman

Celgene/Inhibrx – Drug-discovery firm Inhibrx has signed a notable partner, announcing June 27 that Celgene has licensed a preclinical antibody program. The target of the program was not disclosed. The potential value of the deal is $500 million, including upfront, clinical and regulatory milestones. Inhibrx, based in La Jolla, Calif., is focused on the discovery and development of novel drugs for cancer and inflammatory disease. – J.M.

Merck/AstraZeneca – Merck and AstraZeneca announced an agreement to extend their longstanding partnership June 27 after coming to terms that could benefit both parties. The original partnership dates back to 1982 when Sweden’s Astra AB tapped Merck to market its proton pump inhibitor drugs in the US. Nexium (esomeprazole), which is expected to post dwindling sales once losing patent protection in 2014, and Prilosec (omeprazole), which is now sold as an over-the-counter medication, remain the only drugs still under the agreement. AstraZeneca now will have the option to buy the remainder of Merck’s stake in the drugs in the first quarter of 2014 for $347 million plus an amount equal to 10 times Merck's average 1% annual profit allocation in the partnership, which AstraZeneca estimates to be about $80 million. The price paid by AstraZeneca also could include the net present value of up to 5% of future U.S. sales of the painkiller Vimovo (naproxen/esomeprazole). While the extension of the deal will have no immediate effect on AstraZeneca’s earnings, it will help Merck deal with the patent expiration of the blockbuster allergy drug Singulair (monteklast) by adding $200 million in revenues to the 2012 top line. – Lisa LaMotta

Biogen Idec/Isis – Antisense drug-discovery platform operator Isis Pharmaceuticals has partnered prolifically over the years. Its latest deal with Biogen Idec is the second collaboration between the two companies, an arrangement to develop and commercialize a treatment for myotonic dystrophy type 1. The disorder, also known as Steinert disease, is a form of muscular dystrophy that afflicts adults. Biogen Idec will pay $12 million up front to enter the collaboration, but could pay much more over time if it licenses the drug at the end of Phase II. The deal includes $59 million in milestone payments prior to licensing, as well as up to $200 million for a licensing fee and and further clinical milestones. The companies will attempt to develop a drug that repairs a repeating defect in the coding of the dystrophia myotonia-protein kinase gene that results in abnormally long strands of RNA, leading to buildup in cells. Isis and Biogen already have an alliance in spinal muscular atrophy, revealed in January. – Paul Bonanos

Sanofi/Oxford – The UK's Oxford BioMedica announced June 29 that it has earned a $3 million option exercise payment from Sanofi, which has decided to acquire worldwide license to a pair of Phase I/II gene-based treatments discovered by Oxford. Under terms of an agreement signed in 2009, Sanofi has acquired rights to develop, manufacture and commercialize StarGen for Stargardt disease and UshStat for Usher syndrome type 1B. Oxford discovered and developed both candidates using its proprietary LentiVector platform technology. – Joseph Haas

Photo credit: Wikimedia Commons

Supremes' Prometheus Ruling Has Dire Consequences for Personalized Medicine

by Michael Boss

It is astonishing when nine very smart people get it so wrong. I refer to the US Supreme Court decision in Mayo v. Prometheus.

The court’s decision was that Prometheus’ patents are not valid since they are attempting to cover a law of nature. The analogy to E=mc2 is made. All of biology follows the laws of nature!

Prometheus developed an assay to help identify the correct dose of thiopurine drugs in the treatment of autoimmune disease. If the drug is metabolized too fast the level will be too low and so not effective. Too slow a metabolism and the drug can be toxic.

Potentially lost in the supreme circus around arguments addressing the constitutionality of the Affordable Care Act, the court is going to announce today whether it will grant or deny the ACLU’s cert petition asking it to review its suit against Myriad and determine if genes are patentable. Lawyers anticipate the court will grant the petition, vacate the Federal Circuit’s decision in favor of Myriad and remand the case back to the Federal Circuit for reconsideration in light of its ruling in Prometheus.

While the specific circumstances of the Prometheus case revolve around analyte measurements, by simple analogy it seems to me that the argument can be extended to genes and any gene products. So the identification of genetic variants that, say, cause disease or resistance to treatment by a drug or potential toxic response to a drug would all fall under this Supreme Court ruling.

This is a devastating ruling at the dawn of the personalized medicine era. The Court has wiped out any incentive to figure out why certain individuals might do better on drug A rather than drug B and how much of drug B should be given. And what about all the technologies under development to define the optimal treatment of cancer? Again by analogy, finding out which drug kills the tumor cells to select the correct drug for the patient would seem remarkably similar to the Prometheus situation.

The patent laws were developed to foster innovation and development of commercial enterprises. This decision has set back a key field by as long as it takes to get the ruling reversed.

image of Jacob Jordaen's painting, Prometheus having his liver eaten by an eagle (in our version the eagle is apparently the Supreme Court), via wikimedia commons.

Michael Boss, a biotech executive with companies including Antisoma, Xanthus, Elan and Athena, is currently an independent consultant. He is also an inventor on a seminal biotech patent.

Supreme Court Shoots Down Wyeth Pre-Emption Argument

After more than a year of anxiety, the U.S. Supreme Court this morning voted 6-to-3 to allow product-liability lawsuits to proceed against drugmakers in state courts (here is the ruling). At issue was the notion of preemption, which says that FDA approval of a drug supercedes state law claims challenging safety, efficacy or labeling.

The decision upheld a ruling by the Vermont Supreme Court that sided with Diana Levine, 63, a musician who lost part of her arm after a hospital administered a Wyeth drug improperly. She developed gangrene, sued Wyeth and was awarded $6 million after arguing the drugmaker wasn't prevented from adding or strengthening the warning on the label, even though the FDA rejected a proposed change.

"Oh, my God. I'm so, so happy. I can't believe this phone call," she tells the Associated Press. "I've been waiting for so long, and I had no idea of what the chances were. I'm just ecstatic. I'm going to have to sit down."

The ruling is a victory for consumers and many others - including 47 state attorneys general; former FDA commissioners; AARP; editors of the New England Journal of Medicine and the Journal of the American Medical Association, as well as various unions and tort law professors - who filed briefs last summer in support of Levine. They insisted that preemption would harm patients, making it more difficult, if not impossible, to seek legal recourse when they are allegedly harmed by a prescription drug.

Once a drug is marketed to thousands of people, we learn of things that we never knew in the clinical trials for that drug - problems that arise over the year as doctors prescribe and patients take the drug day in and day out," says Brian Wolfman, the director of the Public Citizen Litigation Group, who is also one of Levine's attorneys. "For all these reasons, legal immunity for drug manufacturers - as called for by the drug companies and the Bush administration - would have been a huge mistake."

The decision is a blow to the pharmaceutical industry. Drugmakers and their supporters maintained that FDA approval of a drug supercedes state law claims challenging safety, efficacy or labeling. Drugmakers and the FDA - with the backing of the Bush administration and various business groups - had insisted that preemption existed by maintaining the agency's action are the final word on safety and effectiveness.

But the Supremes disagreed. "Wyeth's argument that requiring it to comply with a state-law duty to provide a stronger warning would interfere with Congress' purpose of entrusting an agency with drug-labeling decisions is meritless, because it relis on an untenable interpretation of congressional intent and an overbroad view of an agency's power to preempt state law," the majority ruled.

In advancing the argument that the FDA must be presumed to have established a specific labeling standard that leaves no room for different state-law judgments, Wyeth relies not on any statement by Congress but on the preamble to a 2006 FDA regulation declaring that state law failure-to-warn claims threaten the FDA’s statutorily prescribed role.

Although an agency regulation with the force of law can preempt conflicting state requirements, this case involves no such regulation but merely an agency’s assertion that state law is an obstacle to achieving its statutory objectives. Where, as here, Congress has not authorized a federal agency to pre-empt state law directly, the weight this Court accords the agency’s explanation of state law’s impact on the federal scheme depends on its thoroughness, consistency,and persuasiveness.

Under this standard, the FDA’s 2006 preamble does not merit deference: It is inherently suspect in light of the FDA’s failure to offer interested parties notice or opportunity for comment on the preemption question; it is at odds with the available evidence of Congress’ purposes; and it reverses the FDA’s own longstanding position that state law is a complementary form of drug regulation without providing a reasoned explanation."

For its part, Wyeth was unbowed. "We believed that Federal law prohibited the company from revising its product label as the Vermont court required, and we regret that the Supreme Court disagreed. The medical and scientific experts at FDA are in the best position to weigh the risks and benefits of a medicine and to assess how those risks and benefits should be described in the product's label," the drugmaker's outside attorney, Burt Rein, said in a statement.

Justice Clarence Thomas agreed with the outcome, but didn't join the majority opinion written by Justice John Paul Stevens. Justice Samuel Alito wrote a dissent that was joined by Chief Justice John Roberts and Justice Antonin Scalia. "This case illustrates that tragic facts make bad law," Alito wrote. "The court holds that a state tort jury, rather than the Food and Drug Administration, is ultimately responsible for regulating warning labels for prescription drugs."

Check our coverage in The Pink Sheet Daily for still more info.

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

Wyeth Worries Over Supreme Court Pfizer Holdings

Why should the drugmaker be anxious? And why should one of its attorneys write the US Supreme Court clerk about its deal with Pfizer?

As you know, Pfizer plans to acquire Wyeth, which has a closely watched case before the court involving preemption - the notion that FDA approval supercedes state law claims challenging safety, efficacy, or labeling. The case involves a Vermont musician, Diana Levine, who lost part of her arm after being administered a Wyeth drug, and the ruling will determine whether patients can sue a drugmaker through state law when a product has already been approved by the FDA.

Here's the rub: Chief Justice John Roberts sat out a case involving lawsuits against Pfizer because his May 2007 financial disclosure form indicated he held Pfizer stock between $10,000 and $50,000 (back story). The recusal yielded a 4-4 deadlock that upheld the rights of 27 Michigan residents to sue drugmakers for defrauding the FDA in winning product approvals.

As a result, the court left intact a lower-court ruling allowing the Michigan lawsuits to proceed. Had Roberts not recused himself, some observers believe he may have voted in favor of the pharmaceutical industry. Wyeth apparently fears a repeat in the Levine case, and so a Wyeth attorney wrote a letter on Wednesday to the clerk of the Supreme Court to argue that Roberts' Pfizer stock should not prevent him from voting.

Why? The acquisition won't close until at least July 31, after the court is expected to decide the case. "Wyeth does not believe the proposed acquisition warrants amendment of the corporate disclosure statement in its previously filed briefs," writes Seth Waxman, of Wilmer Hale, who represents Wyeth.

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

While You Were Snowed Under

Nothing like a little early April snow to get the airport tied up in knots. If you, like us, were traveling into or out of Heathrow on Sunday morning, you have our sympathies. Find us at the BIO-Europe Spring conference in Madrid (eventually the skies cleared and BA got its act together) if you want to commisserate over a glass of Rioja... and before we get to the weekend's news we would be remiss if we didn't mention that both the Flyers and the Sixers each made the playoffs. The playoffs!--who wouldda bet on that?

• Novartis has taken a huge stake in Alcon, the world's largest ophthalmology company. The Big Pharma spent about $11 billion buying 25% of the firm from majority owner Nestle, and has the option to increase that stake to 77% by buying Nestle's remaining interest in the company for $181 per share, or about $28 billion, between January 2010 and July 2011. (Nestle can also require that Novartis buy this remaining stake.) The Alcon portfolio allegedly complements Novartis' existing contact lens and ophthalmology drug businesses and it certainly adds specialty focus and some more diversity to the drugmaker's commercial offerings and pipeline. We'll have more on this deal later.


• Amicus CEO John Crowley was reportedly running for the Republican nomination in New Jersey's upcoming Senate race, and now he's reportedly not running. From the Politico story: “John was deeply impressed with the outpouring of support for his potential candidacy for the U.S.Senate," Crowley friend and advisor Bill Spadea said. "Many people both locally here in New Jersey and nationally had been encouraging him to run over the past week, but given his tremendous level of responsibility to his family, his company and to the U.S. Navy, he’s decided not to enter the U.S. Senate race this year."


• The New York Times reports that drug companies are getting nearer to securing 'pre-emption' of lawsuits against companies when patients are harmed by FDA approved products, as the Johnson & Johnson Ortho Evra patch case reaches the Supreme Court. The Supremes already granted a similar legal shield to medical device makers earlier this year.

Photo from flickr user leejordan used under a creative commons license

Whose Life is it Anyway?

No one really wants to shout it from the rooftops, but for FDA and the drug industry, Monday's Supreme Court’s decision not to consider whether terminally ill patients have a legal right to access unapproved drugs is a little more sweet than bitter.

The decision by the high court ends a long, topsy-turvy, and often emotional legal fight by the Abigail Alliance to allow patients access to investigational drugs and biologics outside the clinical trial setting. (The alliance is named for Abigail Burroughs, who passed away in 2001 while trying to gain access to the then-investigational cancer drug cetuximab, now marketed by ImClone and Bristol-Myers Squibb as Erbitux.)

Along with the Washington Legal Foundation, the Abigail Alliance sued FDA in 2003 to allow access to unapproved drugs after the completion of Phase I studies. A Washington, DC district court initially dismissed the case, but the decision was overturned by a three-member panel of the US Court of Appeals. This August, an en banc appeals court reversed the decision, prompting WLF to ask the Supreme Court to consider the case.

Appealing to the Supreme Court is always a long-shot legal strategy, but the high court’s consideration of the Abigail Alliance lawsuit could have resulted in significant changes for FDA and industry. Check out full coverage of the Abigail Alliance lawsuit in The RPM Report here and here. If you don’t yet subscribe, you can sign up for a free trial at TheRPMReport.com.

For FDA, a win by Abigail Alliance would have meant changing its regulations to make it easier for patients to access investigational medicines. FDA has had mechanisms in place for patients to access unapproved drugs outside the clinical trial setting since the 1970s, including “treatment use” and “emergency use” INDs—mechanisms that the Abigail Alliance argued are insufficient and overly bureaucratic.

But FDA argued that it has a “compelling interest” to restrict some patients from getting investigational drugs—namely protecting them from what might be an unsafe product. And given the intense congressional scrutiny over drug safety since the Vioxx withdrawal, you can bet FDA doesn’t have warm and fuzzy feelings about giving really sick patients a drug that hasn’t yet passed the approval hurdle.

For manufacturers, expanding access would have presented a tricky dilemma: balancing the goodwill gesture of granting a patient a dying wish against the threat of litigation should something go wrong. That’s not a comfortable place to be: Amgen’s outside attorney Mark Gately (Hogan & Hartson) said he “dreaded the day” that FDA changed its regulations—or a court ordered it to do so.

But it doesn’t look like that day will come anytime soon. FDA obviously isn’t budging, and it’s unclear whether a new commissioner would change its legal interpretation of the issue. Congress could pass legislation to expand patient access to unapproved drugs, but the Abigail Alliance’s big advocate on Capitol Hill, Sen. Sam Brownback (R-Kansas), doesn’t seem to be making it a top priority this session.

The Washington Legal Foundation’s press release has an air of finality to it, but it isn’t conceding defeat: “We will continue our effort to persuade FDA that terminally ill patients deserve better access to drugs that FDA has deemed suitable for large-scale clinical trials.” But we’re not going out on a limb to say that’s a long-shot proposition.