Deals Of The Weeks Wonders If A Biopharma Super Bowl Is Imminent

Deals of the Week is torn as the Super Bowl approaches – you see, most of this feature’s contributors live either in 49ers country near San Francisco or in the case of this author, a short drive from the home field of the Baltimore Ravens. With our loyalties clearly divided, rest assured DOTW will take a non-partisan approach toward the big game.

But the Super Bowl’s attendant hype puts us in mind of the biopharmaceutical industry’s closest equivalent, the mega-merger, such as those that combined Pfizer and Wyeth and then Merck and Schering-Plough in 2009. A month into 2013, we wonder, what are the chances of a mega-merger in 2013?

Industry sentiment seems inclined against one. In recent earnings calls, CEOs of major companies have disavowed their interest in disruptive deals that require multi-year, complicated integration.

Raghuram Selveraju, the head of health care equity research at Aegis Capital, recently finished up a deep-dive into the mid- and late-stage pipelines of 12 big pharmas. And while he sees companies among the big 12 that badly need a course correction, he does not think a deal the size of Pfizer/Wyeth is likely near-term.

“Some pharmas have out-performed, some are in the middle of the pack and some are absolutely abysmal,” Selveraju said. “If we look at the ones that are performing abysmally, we find clues as to who might do a mega-merger. If a company is doing well on its own, it’s very unlikely that it’s going to do a mega-merger. A company only resorts to a mega-merger only if it feels it cannot go on sustainably in a standalone manner or feels that it doesn’t have sufficient critical mass to continue performing earnings-wise with its existing panoply of products and its existing pipeline.”

At present, Selveraju views Sanofi, Novartis and to a somewhat lesser extent Roche as the top performers in the sector. The middle of the pack consists of GlaxoSmithKline, Bristol-Myers Squibb and AbbVie. But he reserves the “abysmal” label for AstraZeneca and Eli Lilly.

“I think AstraZeneca should find someone to dance with, and Lilly definitely should,” he said. “But both are run by CEOs, especially Lilly, who believe they can just grow organically and discover and develop products internally to justify being a standalone entity. I don’t agree with either – I think AstraZeneca’s approach has been very patchwork.”

One obvious solution might be for AstraZeneca and Lilly to merge, which certainly would qualify as a mega-merger. But Selveraju is unsure they would complement each other in the way that Pfizer and Wyeth did. Of the two 2009 major deals, Selveraju contends that Pfizer made out far better than did Merck.

“Merck’s decision to buy Schering-Plough, on the face of it today, looks like an unmitigated disaster,” he said. “Virtually all of Schering’s once-vaunted late-stage pipeline has fallen flat. Boceprevir (Victrelis) is a commercial failure more or less and probably never will be a success … Merck hasn’t been able to put together a successor for Vytorin (ezetimibe/simvastatin) or expand its usage. It’s been a litany of failures. Now, Merck has resorted to falling back on two other drug candidates that didn’t come from Schering: odanacatib for osteoporosis and suvorexant for insomnia.”

The other possibility for a mega-merger, Selveraju said, would occur if AstraZeneca or Lilly tried to buy out AbbVie, which he thinks could bring one of those companies some of the same benefits Pfizer derived in acquiring Wyeth. “AbbVie is a lot like Wyeth was – it has Humira (adalimumab), just like Wyeth had Enbrel (etanercept), it’s got an interesting set of late-stage candidates in clinical development, none of which are super-great but any one of which potentially could prop up earnings. And we know Humira is going to be very resistant to generic erosion.”

Buying AbbVie seems more feasible for AstraZeneca, the analyst added, as AstraZeneca has a market cap of about $60 billion, compared with AbbVie in the $40 billion range. “It’s not outside the realm of possibility that AstraZeneca could find a way to swallow AbbVie,” Selveraju said. “There’s a lot of synergy there in terms of focus – AstraZeneca likes inflammation and autoimmune disease. AbbVie also has a lot of stuff, just like Wyeth did, that would be easy to divest.”

But Selveraju thinks more focus these days is on the 2011 Sanofi buyout of Genzyme, which he sees as a much better model than either of the 2009 mega-deals,

“That deal is a major reason why Sanofi’s share price has performed so well,” he noted. “And now we’re looking at Lemtrada (alemtuzumab) potentially being approved in multiple sclerosis later this year or early next year – that could be another value-driver because it’s a biologic with an advantageous dosing schedule. Things just keep getting better and better for Sanofi.”

So Selveraju thinks big pharma should look for deals that will increase their exposure to therapies for rare diseases and bring in more “biotech-like stuff.” Two companies to watch as potential targets in the year ahead, he said, are Alexion  and BioMarin. But in the meantime, smaller but nonetheless important deals are being finalized each week in the biopharma arena. Now, let’s check in on the latest survey of …

Idenix/Janssen: Looking to advance its hepatitis C program while its nucleoside polymerase inhibitors are being reviewed for cardiovascular safety concerns by FDA, Idenix Jan. 28 announced a non-exclusive collaboration with Janssen Pharmaceuticals to test two- and three-drug combinations in the virus. FDA placed “nucs” IDX184 and IDX368 on clinical hold last year after a Bristol nuc (BMS094) was shut down due to cardiovascular adverse events that included one death and eight hospitalizations. No financial terms were disclosed for the Idenix/Janssen collaboration. It will involve testing Idenix’s Phase II pan-genotypic NS5A inhibitor IDX719 with Janssen’s protease inhibitor TMC435 (simeprevir) and non-nucleoside polymerase inhibitor TMC647055. The firms will conduct a drug-drug interaction study beginning this quarter, to be followed by a Phase II study of ‘719 and simeprevir dosed with current therapeutic standard ribavirin over 12 weeks in treatment-naïve HCV patients. After that, the two firms plan to try a three-drug combo of ‘719, simeprevir and ‘055, dosed with and without ribavirin. Idenix will conduct the trials and each company will retain all rights to their respective compounds. “This [agreement] will allow us to achieve a key goal of ours for 2013, which is to advance the development of IDX719 as part of all-oral HCV combinations in two- and three-drug regiment,” Idenix CEO Ron Renaud said in a release. - Joseph Haas

Genentech/Afraxis: Genentech has bought a full license to the entire kinase-inhibitor discovery program of Afraxis for an undisclosed upfront fee and up to $187.5 million in milestones. Although not described as a sale, the Jan. 29 deal effectively is the end of the road for Afraxis, which was founded in 2007 by Avalon Ventures. Avalon remains its sole shareholder. Avalon managing partner Jay Lichter, also Afraxis’ CEO and president, tells DOTW that his preference would have been a sale, but the licensing structure still affords Avalon an exit. Lichter declined to say how much Avalon put into the company, but SEC filings show the total could be as high as $11 million. Afraxis originally derived from research in the Massachusetts Institute of Technology lab of Susumu Tonegawa that pointed toward a cure for Fragile X Syndrome, a severe form of autism, by inhibiting P21-activated kinase (PAK) through genetic manipulation of mice, work that gained some attention at the time. Afraxis received funding from the National Institutes of Health’s TRND program to push forward a small-molecule Fragile X compound, but Genentech’s parent Roche has a Fragile X drug in advanced clinical trials. Genentech is likely to use Afraxis’ library of kinase inhibitors to pursue other indications. “Our initial goal was PAK, but we have a variety of compounds selective for other kinases, and I don’t know what indications they’ll move forward in,” Lichter said. - Alex Lash

Immunomedics/Algeta: Norwegian oncology company Algeta agreed to collaborate on an antibody-drug conjugate with New Jersey-based antibody specialist Immunomedics. Under the Jan. 28 deal, Algeta would join its thorium-227 alpha emitter with Immunomedics’ epratuzumab, an anti-CD22 antibody already being studied in both hematological cancers and autoimmune disorders. Specific terms of the deal weren’t released, but Algeta will issue an upfront payment to Immunomedics, and will owe an antibody-delivery milestone and manufacturing payments. The companies said Algeta will fund preclinical and clinical work on the compound through Phase I, after which the parties will negotiate a license for Algeta based on certain pre-existing but undisclosed parameters. Immunomedics previously partnered epratuzumab with UCB, but re-negotiated that deal in late 2011 to recover full worldwide oncology rights to the drug. UCB returned its buy-in option in cancer, and continues to hold worldwide rights in autoimmune diseases; it is conducting Phase III trials of the antibody in lupus. The compound has shown promise in leukemia and non-Hodgkin’s lymphoma, both on its own and in an yttrium-90 labeled form. Immunomedics has two other antibody-drug conjugates in the clinic: the Phase I milatuzumab-doxorubicin in relapsed multiple myeloma and labetuzumab-SN-38 in colorectal cancer. - Paul Bonanos

Bristol/Lilly: In the first of two “No-Deals” of the week, Eli Lilly during its fourth-quarter call on Jan. 29 revealed to investors that its collaboration with Bristol regarding Phase III oncology asset necitumumab has been terminated in North America and Japan. Bristol pulled out of the three-year partnership for the squamous non-small cell lung cancer treatment, leaving Lilly with sole worldwide development and commercialization rights. A Phase III non-small cell lung cancer trial was dropped two years ago due to safety concerns. “The decision to provide notice of termination for necitumumab was based on a careful review and prioritization of our entire development portfolio, which the company regularly undertakes,” said a spokesperson from Bristol in an e-mail. Lilly assured investors that it intends to continue the development of necitumumab and that data from the late-stage SQUIRE trial are expected in late-2013/early-2014. The company plans to make the therapy part of a comprehensive treatment continuum for lung cancer that also includes Alimta (pemetrexed) and clinical-stage drug ramucirumab. Oncology is one of the main therapeutic areas driving Lilly’s pipeline beyond its so-called “YZ” years that are plagued by patent expirations of blockbuster drugs. - Lisa LaMotta

Teva/CureTech: As part of a pipeline review initiated by new top management, CEO Jeremy Levin and CSO Michael Hayden, Teva has terminated its collaboration with oncology biotech CureTech. CureTech’s lead compound is CT-011, a humanized monoclonal antibody that interacts with PD-1, a B7 receptor family associated protein. It has been assessed in Phase I and Phase II clinical trials for hematological malignancies and solid tumors, including large B-cell lymphoma, colon cancer, metastatic melanoma and other indications. Teva did not say much about the trial results to date, but Hayden, in a statement, noted, “As we looked closely at CT-011 and the most recent clinical and biochemical data, we have made the strategic decision to invest our resources elsewhere, where we can have the most impact for patients.” In the mid-2000s, Teva began dipping its toes into innovative oncology R&D with a few small in-licensing deals, but Levin and Hayden have made it clear that while the company will not completely jettison oncology, it is no longer a priority for Teva’s innovative R&D program, largely because the field is so crowded and also because Teva’s strengths lay elsewhere. The deal revolved around a 2006 agreement that Teva drove, under which it paid $6 million upfront and took an option to invest another $23 million if CureTech met certain development milestones, as well as to buy the rest of the company if CT-011 were approved. At the time, CT-011 had completed Phase I testing. Unlike many other in-licensed assets under review, this one originated at the Israeli drug maker, not one of the companies Teva has acquired. Indicative of the homegrown nature of the deal, CureTech also is based in Israel, where Teva is headquartered, and for a long time, one of Teva’s top executives, Aaron Schwartz, sat on CureTech’s board. Teva is taking a $109 million noncash charge as a result of the impairment cost of the termination. - Wendy Diller

Photo credit: Wikimedia Commons

2009 Big Pharma DOTY Nominee: Pfizer/Wyeth

It's time for the IN VIVO Blog's Second Annual Deal of the Year! competition. This year we're presenting awards in three categories--that's 300% more fake prizes than last year!--to highlight the most interesting and creative deal making solutions of the year. The categories are: Big Pharma Deal of the Year, M&A/Alliance Deal of the Year, and Exit/Financing Deal of the Year. We'll supply the nominations (roughly half a dozen in each category throughout December) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.
This, surely, is The One. Whether or not you agree with Jeff Kindler's strategy for Pfizer (plenty don't), the $68 billion Wyeth acquisition, announced on January 26, has to be the most obvious candidate for Big Pharma Deal of the Year.

Are we saying it's 2009's "most interesting and creative" deal making solution, in line with what these illustrious award nominations are supposedly rooting out? Creative, no. It was another, even-more-mega, mega-merger that cynics saw as a means to mitigate the impact of Lipitor's genericization. Solution? Too early to say. But what the deal perhaps lacked in creativity--at least, at first sight--it surely made up for in interest.

For this is the deal that marked the beginning of a new kind of Big Pharma. For better or for worse, it turns Pfizer from an R&D-focused, high-risk, high-reward company into a diversified, industrialized group whose investment appeal is less about growth than about dividends, efficiency and value.

In its scale, the transaction symbolized the scope of Pfizer's--and other Big Pharma's--challenges, and in its content, it captured--in one fell swoop--many of the individual strategies drug firms are pursuing in order to escape from their R&D productivity problems. The deal furnished Pfizer with biologicals--supposedly faster-to-develop, easier-to-protect than small molecules--and thus with a chance to compete in the much-vaunted biosimilars opportunity, too, which management is beginning to talk up. The deal also provided vaccines, once a dowdy corner of health care but now Big Pharmas' ticket to good government relations, emerging market access and--exemplified by the ongoing swine 'flu outbreak--pumped up revenues.

And Wyeth brought to Pfizer a significant consumer business (not as big as the one Pfizer sold to J&J only a few years ago, but still ...) thereby offering access to non-Western markets, and, as importantly, to a new, lower-cost range of products.

And that's the point: Pfizer has decided its only way to survive is by providing a far wider range of medicines, at a range of price-points, across a range of markets. What it sorely lacks in innovative R&D output it will make up in breadth-of-offering, economies of scale and lower costs. As a senior Pfizer source was quoted in this IN VIVO feature:

"The way to deliver earnings growth isn't what we did in the go-go days of the '90s, but rather, it's emulating what the consumer package goods companies, Coke, Pepsi, Procter & Gamble did. There was never great top-line growth there--3-8%. But if you grow your expense line at a much slower rate you can still achieve double-digit bottom-line growth--a predictable 10-13%."

All that makes sense, surely, in a payer-constrained world with increasing generics and where most future growth is predicted to come from generic- and OTC-dominated developing markets like China.

Maybe. But, you ask, isn't Pfizer chickening out of blue-sky R&D? If it's not the end of the story it's certainly the end of the chapter on blockbuster, primary care drugs. Pfizer isn't giving up internal R&D, but it's definitely demoting it, betting that purchases can fill the gaps. And it's betting, too, that it can create the kind of small-unit creativity within its far-larger walls that GlaxoSmithKline has so vocally advocated.

The deal's critics say Pfizer should have gotten smaller, not larger. It should have followed Bristol. Pfizer considered shrinking, and spin-offs, according to strategy SVP Bill Ringo. Too complicated and risky, he and his colleagues concluded.

But far from choosing the easy option, it's arguable that buying Wyeth was equally, if not more, risky. Even following the R&D re-org, headcount cuts and a 35% reduction in global R&D square-footage, questions remain. The Big Pharma-turned-GE hasn't yet proven that it has a new, sustainable lease of life, far from. But that it's daring to try--well, that deserves a gold-plated* DOTY award, surely? (*not really)

Wyeth Quits On Relistor; Surprise Victory in First REMS Test Market

It is no surprise that Wyeth is willing to pay $10 million to wash its hands of the opioid-induced constipation therapy methylnaltrexone (Relistor), returning all rights to partner Progenics Pharmaceuticals.

The “transition payment” to unload future obligations is clearly a case of a throwing a bit of good money after bad, when the alternative—continuing to support the product as demanded by the partnership agreement despite negligible sales—would entail throwing a lot of good money after bad.

So it is not a surprise that Wyeth gave up on Relistor per se—but it is a surprise that Wyeth gave up on its opioid-induced constipation partnership when GlaxoSmithKline did not.

This time last year, it sure looked like Wyeth and Progenics had a much better chance of making their partnership work, while GSK—big pharma partner for Adolor’s mechanistically similar therapy alvimopan (Entereg)—had no reason to push forward.

Relistor and Entereg have a lot in common. The two drugs were approved at almost the same time in mid-2008 to relieve constipation in high-risk subpopulations. They share a similar mechanism of action, targeting the mu opioid receptor. Both were small molecules developed by small companies (Progenics and Adolor, respectively); both had big pharma partners eager to commercialize them, eyeing a blockbuster market opportunity: routine use to prevent constipation associated with chronic opioid use.

And both ran aground late in development when safety issues emerged.

That’s when things got different.

Neither product had a smooth path through the "Safety First" era Food & Drug Administration, but Entereg came to market with an ultra-restrictive indication (short-term, inpatient use in post-surgical patients only) and even more restrictive post-controls designed to ensure there is absolutely no long-term or outpatient use. It marked one of the first uses by FDA of its new Risk Evaluation & Mitigation Strategies authority granted by the FDA Amendments Act of 2007—and an early example of how the new tools really can dramatically limit the potential patient population for a new drug. (See “Entering the World of REMS,” The RPM Report, July 2008.)

Relistor was also approved with a narrow initial indication (subcutaneous use for terminally ill cancer patients on opioids), but without any special restrictions upon approval, not even mandatory post-marketing safety studies, making it an increasingly rare example of a new molecular entity approved in the FDAAA era without triggering any of the agency’s new post-marketing safety tools. (See “FDAAA Impact Analysis,” The RPM Report, May 2009.)

It’s safe to say that neither GSK nor Wyeth was thrilled with what they eventually found themselves marketing. But if you had to bet which would give up first, it sure looked like a safe bet that GSK would bow out of Entereg. After all, GSK was stuck with a hospital product instead of a primary care blockbuster; Wyeth at least had access to the primary care market, even if it didn’t yet have a blockbuster indication.

Well, it didn’t work out that way.

Not only did Wyeth give up on Relistor first, it paid Progenics an additional $10 million on top of at least $160 million in milestones and product development costs already paid--just to get the brand off its hands.

GSK, on the other hand, backed out of any further development of Entereg, but the company has continued to market the drug for the approved indication—post operative ileus—despite the strict, hospital-only access program. Entereg’s no blockbuster: with sales of just $5 million in the second quarter, it is not even a rounding error in GSK’s results.

But its doing better than Relistor, which posted sales of only $3.2 million during the quarter. More importantly, Entereg’s modest sales could potentially pay off the modest cost of marketing the drug via GSK’s hospital sales organization.

Not so with Relistor, where even a 10x ramp up in sales would make it difficult for Wyeth to justify continued support for the brand—especially in the context of the now complete Pfizer merger.

So, if (as we suggested at the time of the approvals) Entereg vs. Relistor marked an early case study of competition between products saddled by a REMS and products without restrictions, score a victory for marketing under a REMS.

Okay, we’re not overstating the case here. There’s essentially no way that Entereg will pay back GSK’s investment in the product. But there is also no denying that GSK will end up much better off than Wyeth did with Relistor, even though Relistor had the “clean” approval.

Its not like GSK and Adolor wanted a REMS. But having got one, the companies may end up demonstrating that commercial success is possible despite restrictive programs—and may even be enabled by them, since constraints on marketing by definition limit the marketing investment to commercialize REMS products.

Put another way, if you need to create a new commercial model anyway, it may help to be prohibited from using the old one.

DotW: From Russia With Love

It's the end of an era--or maybe just the end of the beginning. This week saw the WYE ticker officially disappear, as behemoth (Pfizer) gobbled up the merely big (Wyeth). Two small firms--La Jolla Pharmaceuticals and VaxGen--also entered Biotech's Bermuda Triangle to the surprise of few.

It also appears to be the end of the beginning for the "FIPNet" strategy as the industry continues to pursue the "virtual is the new reality" approach to drug discovery. Thus, Big Pharma's focus these days is on externalization, especially the ability to sign partnerships that put the onus on the ally. In exchange for taking on a greater proportion of both the risk and cost of development, a smaller partner gets the chance to take a bigger chunk of the downstream economic reward if said research pans out.

Nowhere has the strategy been more evident than in Asia, where Big Pharma hopes to tap into the increasingly high quality research available in India and China--countries that also should prove to be a major source of future customers. Merck and Lilly in particular have been active, signing deals with Advinus (Merck), Glenmark (Lilly), Nicholas Piramal (both), and Hutchison MediPharma (Lilly). (Speaking of Asia, don't forget about our PharmAsia Summit in a couple weeks ... )

Now the FIPNet action--or something similar, anyway--is moving to another closely watched emerging market: Russia. This week Roche announced an interesting licensing deal with Viriom, a Russian biotech founded earlier this year. As it turns out, Viriom was formed specifically to develop and commercialize (in Russia, Ukraine, Belarus and Kazakhstan) Roche's pre-clinical non-nucleoside inhibitors of reverse transcriptase (NNRTI) for the treatment of HIV/AIDS--although it's free to develop and license other targeted medicines in HIV too.

We're not quite talking Roche's FIPNet initiation here, mind you; "we don't believe this is the same kind of deal," asserts Roche Pharma Partnering's Peter Sandbach; "the intention was not a risk-sharing one." Roche didn't intend to develop the compounds internally--so it's more about leveraging de-prioritized assets than pulling in partner to share development risk--although granted, the Swiss pharma will be allowed to use Viriom-generated clinical data for its own use and retains rights in all other territories. Viriom will pay Roche royalties on sales of any resulting treatments in its territories.

For the Russian start-up, this deal brings close involvement of an experienced HIV drug developer, given that Roche personnel will participate on Viriom's board. Indeed, Roche reckons this deal is a first for Russian biotech, given that Viriom will take the assets all the way to market.

For Roche--which isn't paying a dime--the deal provides a useful catalyst for building up a presence in a growing market. It provides the Swiss group with a nice 'in' with the Russian government, keen to create home-grown 'bioclusters' and to encourage innovation. "The compounds licensed to Viriom will help to create a Russian BioCluster/Incubator," noted Tuygan Goeker, Roche's regional head of Central & Eastern Europe, the Middle East, Africa, and the Indian sub-continent in the PR.

It wasn't all Ruskies and FIPNets all the time, of course. There was progress on the health care reform front, the DOW hit 10,000 and deal-makers shook (not stirred) things up, just in time for us to decode them with our special LEKTOR device.



Onyx/Proteolix: In an attempt to fill a mid-stage pipeline gap, Nexavar maker Onyx announced Oct. 12 plans to acquire privately-held Proteolix for $276 million in upfront payments and another $585 million in milestones. The deals give Onyx a promising Phase II multiple myeloma medicine, carflizomib, which has been billed as a next-generation version of Takeda/Millennium's first-in-class proteasome inhibitor, Velcade. The acquisition positions Onyx to expand into the global $16 billion hematological cancer market with a potential blockbuster--if carflizomib proves more effective than Velcade, which last year raked in over $1 billion. (Carflizomib is touted as being more specific, so troubling off-target effects, especially neurotoxicity, should be limited.) The deal structure is heavily weighted towards milestones, with most on Wall Street favoring the tie-up. VCs are likely happy too--it is an exit, albeit not one of the richest ones we've seen in the industry. Since its founding in 2003, Proteolix has pulled in more than $125 million in financing, including a whopping Series C of $79 million last July. That means the return on the upfront money is only a little over 2x for Proteolix's investors, which include Delphi Ventures, Nomura Phase4 Ventures, and Advanced Technology Ventures. Of course, if carflizomib is a major success and the earn-outs are realized (and you know where we stand on the odds of this happening), that return will jump to around 7x, which sounds a whole lot more venture-like.--EFL

Novartis/Heptares: Another week, another Novartis Option Fund deal. This time, the investment, a $30 million Series A in Heptares, a UK biotech that specializes in stabilizing GPCRs so they can be poked and prodded after being removed from the cell membrane, was announced months ago. NOF, Clarus Ventures and MVM Life Science Partners invested equally in the round. Why the delay on the option component of the deal (which we should note again is distinct from Novartis' venture investment)? The companies simply took their time deciding which GPCR target to work on, Heptares CEO Malcolm Weir told IN VIVO Blog. And after lots of discussions with various therapeutic area groups at Novartis, Heptares is now getting to work, "starting from scratch on a GPCR we wouldn't have otherwise been working on," he said, though details of the target are thus far kept under wraps. The deal, with undisclosed upfront payments and milestones that could reach $200 million before royalties, sees Heptares driving drug discovery programs around the target and follows Novartis' stated M.O., avoiding Heptares' key assets in favor of a less-advanced program. For more info on Heptares check out this Start-Up profile of the company from earlier this year.--Chris Morrison

GlaxoSmithKline/Prosensa: In another sure sign of Big Pharma's recent embrace of specialist diseases, GlaxoSmithKline announced a four-compound deal this week with Holland's Prosensa, which is focused on RNA-modulating therapeutics for Duchenne Muscular Dystrophy. The deal hinges on a straightforward license component--Glaxo takes an exclusive worldwide license to lead compound PRO051, in exchange for a £16 million up-front payment. And far more typical for Glaxo, the drug maker also gets exclusive options to license three further RNA-based compounds. The total development and commercial milestones across all four candidates could reach £412 million, and Prosensa may also receive double-digit royalties. It isn't completely fair to call drugs for DMD specialist. They're actually ultra-specialist. PRO051, for instance, is designed to treat just 13% of the DMD population--a small proportion of an already highly niche disease. Indeed, the small market size was just one reason Prosensa's CEO Hans Schikan told "The Pink Sheet" DAILY, he didn't "in the beginning, honestly expect GSK to be interested" in the programs. But apparently niche is the new blockbuster (especially when meeting high unmet medical need practically guarantees reimbursement from payers). Schikan confirmed that GSK wasn't the only company sniffing around Prosensa's platform.--Melanie Senior

Novartis/Vanda: Vanda Pharmaceuticals' unlikely success with its once-maligned antipsychotic iloperidone continues. This week the biotech sold back US and Canadian development/commercialization rights to its newly approved lead asset to one-time owners Novartis, for $200 million up-front, plus milestones and royalties. Our full take on the deal is here.--CM


Wyeth/Progenics: Big Pharma mergers don't just create disarray for the integrating parties; they can be very stressful for smaller biotech partners, especially if their assets aren't central to the newly merged company's strategic endeavors. Thus, one of the hallmarks of mega-mergers is the unwinding of smaller deals. Just one day before Wyeth officially became part of Pfizer, it announced it was paying $10 million for Progenics to take back all development and commercialization rights to its opioid-induced constipation medicine Relistor. The two companies originally teamed up in 2005 in a deal that gave Progenics $60 million up-front, plus the potential to earn another $356.5 million in downstream milestones and royalties. But the injectable medicine, approved by the FDA in 2008, hasn't been a big earner--it garnered just $3.2 million in global net sales in the second quarter of '09. Although revenue was increasing substantially--up 74% from the first quarter--it seems Wyeth wanted to shed a low-earning asset prior to the Pfizer merger. And Progenics wasn't complaining. "Progenics has become increasingly aware that our objective of advancing the Relistor franchise was not aligned with the near-term priority of integrating these two large pharmaceutical organizations," Progenics CEO Paul Maddon said during an Oct. 14 investor call. The revised agreement leaves Progenics free to partner the medicine outside of Japan, where Ono Pharmaceutical locked up rights in 2008 for $15 million. In addition to the $10 million, Wyeth will also continue to provide manufacturing, marketing, and sales support for Relistor during a 12-to-15 month transition period, and will fund completion of an ongoing 1,000-patient Phase III safety study for the drug in chronic pain.--EFL

DOTW: Fireworks

Perhaps in honor of our nation’s birthday, the biopharma industry’s dealmakers got an early start on the festivities, announcing a steady stream of alliances that culminated in a show-stopping finale: Johnson & Johnson’s extremely interesting but complicated pact with Elan Pharmaceuticals.

That deal certainly provides Elan with some much needed capital and may quiet dissenting shareholders who have been advocating for change at the top of the Irish drug maker. In one fell swoop, it also makes Johnson & Johnson a player in a hot therapeutic area given its $1 billion u/f for ¼ of a potential blockbuster/potential bust. (See our previous blog post and coverage in this week's "The Pink Sheet" for more.)

The dollar value of the J&J/Elan tie-up certainly dwarfs other deals announced this week, but that doesn’t make the individual agreements any less interesting. Read on for more analysis.



Wyeth/Catalyst: It’s dealmaking as usual for Wyeth, certainly as far as biotherapeutics are concerned. This week’s tie-up with Catalyst for Factor VIIa hemophilia hopeful CB813—the partners’ second collaboration—pits the Big (soon to become Very Big) Pharma up against Novo Nordisk’s market leader in the space, NovoSeven. The Catalyst compound could be more potent and longer-acting than NovoSeven, which sold $341 million in the first quarter of this year. Compelled by the promise of this still-preclinical asset, Wyeth paid $21 million up front and may fork out more than $500 million in research funding and milestones—plus double-digit royalties. It will also fund 12 Catalyst FTEs. Three things to note: 1) Not all deals, even pre-clinical deals, are option-deals. Even GlaxoSmithKline, optioners-de-rigueur, admitted as much on a panel at this week’s Euro Biotech Forum in Barcelona. For all we know, Wyeth may have wanted an option structure, but with four interested parties (according to Catalyst) it probably didn’t have much choice. In this case, Wyeth takes over the program once it reaches the clinic. 2) The new Pfizer-Wyeth, committed as it is to biologics will present serious competition, both at the dealmaking table and commercially, in this large molecule space. Sure, NovoSeven is a minor part of Novo’s otherwise insulin-focused business. And Wyeth’s existing three-drug hemophilia franchise sells less, combined, than NovoSeven. But Wyeth/Pfizer will have serious commercial muscle—and international reach. 3) Let’s hope the change-of-control clauses are solid: Novartis Venture Fund has backed the biotech since 2004, and Johnson & Johnson’s VC arm, JJDC, invested in 2008 via Centocor. As for Wyeth’s own pending change of control: no issues, says Catalyst, because Wyeth’s R&D head Mikael Dolsten is taking the biologics reins at Pfizer.--Melanie Senior and Joseph Haas

Astellas/Maxygen: After pursuing strategic discussions with various parties since October 2008, Redwood City-based Maxygen has finally inked a deal. And it’s likely the outcome—a joint venture with Astellas focused on discovery, research, and development of multiple protein-based drug programs—isn’t exactly what the biotech’s senior management had in mind. Ever since September 2008, when Astellas signed a small deal with Maxygen for its CTLA4-Ig program—called MAXY-4—the Japanese drugmaker has been on a short-list of the biotech’s potential acquirers. But even though Astellas clearly likes Maxygen’s proprietary protein shuffling technology enough to want to deepen the relationship, it wasn’t so enamored with the platform that it felt compelled to buy the company outright. As part of the latest arrangement, Maxygen will contribute $10 million in cash and substantially all of its programs and technology assets to the JV in exchange for an 83% ownership stake in the newco. Astellas will also invest $10 million in the venture in exchange for the remaining 17% ownership stake. In addition, the big drug maker has a three-year option to buy out Maxygen's share of the venture at a predefined price that starts at $53 million and could go as high as $123 million, and will contribute up to $30 million of funding during that time period. The arrangement leaves Maxygen as essentially a holding company of financial assets including: 1) roughly $200 million in cash; 2) a 22% stake in privately-held biofuel specialist Codexis rumoured to mulling an IPO; 3) MAXY-G34, being developed for chemotherapy-induced neutropenia and Maxygen's most advanced clinical compound outside MAXY-4. —Ellen Foster Licking

Mylan/Biocon: Strong growth prospects for the global generic biologics space over the next decade are bringing together the world's third-largest generic drug maker Mylan and India's Biocon. The two signed a comprehensive deal June 29 that gives Mylan exclusive commercialization rights in the world’s major markets—including US and Europe—with Biocon sharing in the upside via a profit-sharing arrangement. Further financial details of the deal were scarce, as was color on the actual therapeutic targets. But Mylan confirmed the collaboration's primary focus would be in "monoclonal antibodies and complex biologics." This deal marks Mylan’s efforts to play catch-up in the ongoing biogenerics fray. Both Teva and Novartis, via its Sandoz division, are significantly further ahead when it comes to the creation of biogeneric drugs. Early this year, Teva significantly increased its biologics manufacturing capacity through a collaboration with Switzerland's Lonza group; meanwhile Sandoz continues to hold the lead in biogenerics launches, selling generic versions of epoetin alfa and human growth hormone. In a June 29 note on the transaction, Goldman Sachs analyst Randall Stanicky, said the collaboration positions Mylan ahead of an anticipated U.S. regulatory pathway, but predicted that bio-generics would not "contribute meaningfully until 2013" to the firm's bottom line. The deal also illustrates the growing profile of Biocon, which previously inked a collaboration with Abraxis for development and commercialization of a generic version of GCSF in addition to building a pipeline of novel therapeutic targets via in-house R&D and inlicensing.—Joseph Haas and Vikas Dandekar

Biogen/Acorda: On July 1, Biogen Idec agreed to develop and market Acorda Therapeutics’ multiple sclerosis candidate Fampridine-SR outside the U.S. in a licensing deal worth $110 million upfront and additional milestones totalling up to $400 million. In addition, Biogen will pay Acorda tiered double-digit royalties on ex-US sales of the product. If approved, Fampridine-SR could be the first oral drug that improves ambulation in MS patients; its likely to receive 10 years of exclusivity in Europe based on early conversations between Acorda and the EMEA. Biogen already has a strong franchise in MS courtesy of its flagship products, Avonex and Tysabri,which together generated $2.8 billion in sales for the company in 2008. Because Fampridine can be used alongside current treatments, the oral medicine “fits nicely” with its current portfolio of MS treatments, Biogen’s head of neurology Al Sandrock told “The Pink Sheet” DAILY. The deal also takes some of the sting out of recent events at Biogen, where in June dissent shareholder Carl Icahn, who is eager to break up the company, gained two seats on the board of directors after a year-long struggle. Prompted in part by the uncertainty surrounding Biogen's future, Acorda crafted a careful 'change of control' clause in the deal to protect its rights to Fampridine. Sources close to the negotiations note two specific events will have to occur to trigger the change-of-control: first, Biogen has to be acquired; and second, there must be a clear signal that its sales efforts on Fampridine are decreasing as a result of its acquisition. For instance, if Biogen’s new owner cuts the sales force support for Fampridine, Acorda has the right to negotiate a buy back of the product at a fair value.—Carlene Olsen

CombinatoRx/Neuromed: Nasdaq-traded CombinatoRx is merging with privately held Neuromed in an all-stock deal that, for now, gives each company’s investors a 50% piece of the action. But as Neuromed’s Exalgo hydromorphone candidate winds its way through the regulatory process, that balance may change. Exalgo was licensed to Covidien’s Malinckrodt subsidiary only a couple weeks ago and has a November 2009 PDUFA date. Neuromed is therefore hoping to see an approval milestone later this year and is eligible for royalties on the drug’s sales. This isn’t just an earn-out (or CVR, whatever you’d like to call it) for Neuromed; perversely CombinatoRx shareholders may benefit from a delay in the approval process. Neuromed’s backers will get 70% of the combined entity should Exalgo receive FDA approval by the end of this year. If the drug gets approved between January and September 2010, Neuromed’s backers will hold 60%. Approval between October and December 2010 means CombinatoRx shareholders remain in the majority with 60% of the shares, and no approval or approval after December 2010 means CombinatoRx’s backers get 70%. The combination will sport management from both companies and Neuromed’s current president and CEO Chris Gallen, MD, PhD, will hold those titles at the new incarnation of CombinatoRx. CombinatoRx shed the majority of its value last October after the failure of its lead osteoarthritis candidate, and then restructured in November. Since then it has essentially traded below the value of its cash on hand, making it a prime candidate for a reverse merger.—Chris Morrison

General Electric/Geron: There's no financial information associated with this deal, but we admit to being intrigued by the notion that GE and Geron are teaming up in the area of stem cells-based diagnostics. It's a triumph for Geron, which has struggled to turn this promising source of biological material into something monetarily more concrete, partly because of the politically charged atmosphere associated with stem cells, but also because the science is just so damned difficult. In addition to this most recent tie-up, 2009 has been a good year for Geron: it recently received FDA approval to begin the first human studies of an embryonic stem cell-based therapy for the treatment of spinal cord injuries. Phase I studies are scheduled to begin this summer. The GE deal also shows the continued interest by big industry players in these most changeable of cells. Drug makers with collaborations include Pfizer(Wisconsin Alumni Research Foundation (WARF), University College London), GlaxoSmithKline (Harvard Stem Cell Institute), Novartis (Epistem), and Novo Nordisk (Cellartis). Just as one of the first uses for genomic information was the use of biomarkers to enable drug discovery, its not too surprising to see tools players looking at the cells as a potential source for developing tests that help predict a particular drug's toxicity. Indeed, GE may be playing catch up with Invitrogen, which formed a stem cells business unit last year, and has a deal with WARF to use hES to develop new research tools.-EFL

(Image courtesy of flickr user Mr Magoo ICU used with permission via a creative commons license.)

Pfi-Wy Let The Good Times Roll--Without Corey Goodman

It's been 20 days since Pfizer and Wyeth announced their much heralded reorganization, putting 8 Wyeth execs in senior management positions at the newly bulked up company.

At the time, we noted that the appointments--especially of Mikael Dolsten to head large molecule R&D and Emilio Emini as chief vaccine guru--sent a clear message to employees that having an existing Pfizer business card would not necessarily translate into an advantage at the larger pharma.

And now we begin to see the fall out from the reorg. In SEC filings released late Monday afternoon, Pfizer revealed that Corey Goodman, hired in October 2007 as senior vice president of the pharma's BioTherapeutics and BioInnovation Center, had tendered his resignation over the weekend. Goodman's last official day with Pfizer will be May 31.

But he won't have much of a hands on role in the interim. Prior to his resignation, "Dr. Goodman will be on a paid leave of absence from Pfizer, with all of his current compensation and benefits arrangements remaining in full force and effect until his Resignation Date," according to the separation and settlement agreement filed with the SEC.

Perhaps the news isn't all that surprising. When Pfizer announced the new operating structure April 7, the five page news release trumpeting the company's vision referred to the BBC only once--the group would report to Dolsten who's official title is head of the BioTherapeutics Research Group--and made absolutely no mention of Corey Goodman's role in the larger organization.

In an interview with "The Pink Sheet" DAILY and later in a podcast with the IN VIVO Blog (you can listen here), Dolsten confirmed "there is a strong commitment to the BBC" with this latest reorganization. "They are now part of a bigger family with additional expertise in protein, peptide, and vaccine technologies. We want to promote and strengthen a great concept-the BBC unit," he said.

But Dolsten declined to discuss Goodman's evolving role in the interview, noting that the April 7 announcement focused "only on the executive leadership team and the operating model." However, Dolsten did emphasize Goodman will continue to be a critical player at Pfizer and was one of the principal architects of this new structure.

Susan Anderson, in Pfizer's public reations group, confirmed Goodman's involvement. In an email dated April 7, she noted:

"The BBC will continue as it is--a federation of the distinct research units--and will have an even greater opportunity to advance its scientific programs by working in combination with PGRD and WYE scientists within the BioPharmaceuticals Research Group under Mikael Dolsten. Corey is fully supportive of this new organizational model, which he worked with Pfizer and Wyeth leaders to create."

But not so supportive that he's willing to stay on post-Wyeth integration and report to Dolsten. Up until the acquisition of Wyeth, Goodman had a plum job with a high degree of visibility. Hired in 2007 with an annual salary of $725K, Goodman had a direct line into CEO Jeff Kindler's office and a mandate to move Pfizer in a biotech-like direction reminiscent of GSK's Centres for Excellence in Drug Development experiment (the CEDDs). Goodman was important. The BBC was important; the loose federation of biotechs was going to be the spring-board for Pfizer's great leap into biologics and prove that there was a better way for big drugmakers to do R&D.

But that mandate undoubtedly shrank with Pfizer's $68 billion take-out of Wyeth and the creation of bifurcated R&D structure headed up by Dolsten and Martin Mackay (currently head of PGRD). With Dolsten running the show, Goodman, who co-founded the biotechs Exelixis and Renovis and ran successful labs at Stanford University and UC Berkeley, mightn't have relished taking a back seat at a suddenly much bigger organization. We tried to reach Goodman for a quick comment but he was unavailable.

And let's be honest, Goodman probably didn't have much incentive to stay on. Financial security wasn't likely to be much of an issue. Goodman could have cashed out after the IPOs of either Exelixis or Renovis--or Evotec's 2007 $160 million purchase of Renovis, for that matter--and gone sailing. And his compensation package at Pfizer was nothing to sneer at. In addition to his salary, Goodman received a $3.4 million signing bonus, half of which was contingent on two years of service with the pharma.

Even though Goodman's been with the pharmaceutical company just 18 months, he'll keep that second $1.7 million in lieu of a severance package. (We should all be so lucky.)

Goodman's departure shows the peril of the stand-alone biotech within pharma and how hard it can be to retain innovators even as drug makers feel the need to grow bigger to navigate the complexity that is drug development. (Indeed, Art Levinson and Susan Desmond-Hellman are already on their way out just a few blocks away at DNA's campus.)

We aren't sure if Dolsten and Mackay will succeed with their "empowered CSO model"--or if the BBC will continue to thrive in the absence of Goodman. We do know Goodman is likely to be a hot commodity--VCs on Sand Hill Road are almost certain to be calling him--if they haven't done so already.

image by flickr user saraab used under a creative commons license

Pfizer in Name, Wy-Pfi in Spirit?

Today Pfizer announced its new corporate and R&D structure scheduled to take effect on the closing of the Wyeth acquisition. And boy does Wyeth seem well represented.

Eight Wyeth executives will be joining the upper eschelons at Pfizer, including Wyeth's president of pharma research Mikael Dolsten, who will head up a newly created BioTherapeutics Research Group. That outfit will comprise the combined companies' biologics and vaccine efforts, including Pfizer's Biotherapeutics and Bioinnovation Center. Pfizer's Martin Mackay, who is currently head of Pfizer Global R&D, will lead small molecule research at the newly named PharmaTherapeutics Research Group.

Dolsten probably won't suffer the same fate as Peter Corr, Warner-Lambert's head of R&D who, following Pfizer's takeover of his company, got a prominent R&D job -- and eventually ran the whole group. But Pfizer's R&D group had a major immune reaction to Corr, who was side-stepped out of R&D and into an awkward policy/business development role before leaving the company when Jeff Kindler became CEO. Dolsten won't have to worry about the same kind of reaction: his BioTherapeutics group largely comes from Wyeth.

Taking a page from GSK's acronym-happy CEDD/DPU structure the two research outfits will house smaller (thus-far nameless) therapeutic or technology focused groups headed by "world-class Chief Scientific Officers." At least two of these CSOs come from Wyeth: Emilio Emini will head up vaccines research and Wyeth's head of research Menelas Pangalos will run neuroscience.

Is Pfizer--and Pharma in general--trying too hard to create authentic biotech conditions within their R&D groups? These strategies seem like the equivalents of the 'authentic' Irish pubs that seem to cover every square mile of the globe. In the end authenticity hardly matters, we'd argue, so long as the Guinness tastes good. And everyone knows it takes a while to pour one of those.

So setting aside for now whether the new research structure and will in fact crank out good stout drug candidates, it's worth noting that Pfizer seems to be bending over backwards to accommodate Wyeth's senior personnel. The same is true on the operations side, where Wyeth execs including Cavan Redmond and Jim Connolly will have prominent roles (see the Pfizer release for all the specs).

All of which suggests that the $4 billion in promised cost cuts are likely to be more fairly distributed than such acquisitions normally suggest -- the impact should be felt, if not quite with exact proportionality, nearly as heavily at Pfizer as at Wyeth.

image from flickrer augie schwer used under a creative commons license.

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.

The IN VIVO Blog Podcast: Thoughts on Pfizer-Wyeth

Why is Pfizer buying Wyeth? Will the Big Pharma of the future look like General Electric? Is there a good reason to relocate to Indiana? Answers to all these questions and more on this week's installment of The IN VIVO Blog Podcast.

Just click the image below to get started. Oh, and we're on iTunes now as well, so please subscribe to that (it's free).

While You Were Throwing Snowballs

At least on the East Coast, March has apparently lived up to its reputation and come in like a large cat. Here at IVB we're not so much concerned with the way it begins and ends, but instead would rather focus on the Madness in between.

Speaking of madness: while you were making snowmen ...

• That Sebelius/HHS announcement that made so much news this weekend? Ramsey Baghdadi had the scoop for the IN VIVO Blog.
  
• Art imitates life imitating comedy imitating sad state of the world: Pharma Giles at PharmaGossip.
  
• Wyeth's Prevenar approved in Russia.
• Roche scheme to enhance Pulmozyme compliance probably needed a little more thought, don'cha think? The company has now been censured in the UK for giving out Toys R Us gift certificates to children on the drug, reports the FT.
  
• Actelion's application to expand Tracleer's use into PAH patients with less severe disease greeted with a complete response letter from FDA. FDA says Actelion's REMS first needs to be finalized and approved before it can finish its review of the sNDA.
• Have higher regulatory hurdles affected investment in early-stage Type-2 diabetes companies? VCs weigh in at The Pink Sheet.
  
• Offenses across the NFC East are breathing easier. Sadly, Brian Dawkins, no longer an Eagle, signs 5-year deal with Denver Broncos.
  

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.

Bioidentical HRT: One Of Oprah’s “Favorite Things”

Wyeth has long fought pharmacies trying to convince women to buy compounded hormone replacement therapies in lieu of Premarin. The company now has a new nemesis: Oprah Winfrey.

The television celeb devoted an entire show last month to bioidentical hormone therapy, announcing that she was “opening a national conversation” about HRT. The dialogue continued two weeks later with guest and perennial pitchwoman Suzanne Somers, a long-time advocate of bioidentical hormone replacement therapy.

The February issue of Oprah Magazine also includes an article on the topic (the cover has the teaser “Hot Women! The stuff nobody’s telling you about hormones”) and a column by Oprah in which she describes her own experience with the treatment.

“After one day on bioidentical estrogen, I felt the veil lift,” she writes. “After three days, the sky was bluer, my brain was no longer fuzzy, my memory was sharper. I was literally singing and had a skip in my step.”

Oprah’s endorsement cast a spotlight on bioidentical HRT as an alternative treatment for menopause symptoms, and has garnered attention far, far outside her typical audience: the New York State Bar Association’s annual meeting. At the meeting, attorney Irving Wiesen said her endorsement would draw an avalanche of attention to compounding.

That comment prompted Geoffrey Levitt, Wyeth’s chief regulatory counsel, to acknowledge: “It’s really hard to go up against Oprah.”

Several years ago Wyeth filed a citizen petition with FDA asking the agency to take enforcement action against compounding pharmacies that were manufacturing or dispensing bioidentical hormone replacement therapy. And Wyeth won: FDA sent warning letters to seven compounding pharmacies for producing these products with unapproved ingredients and making false and misleading promotional claims (you can read all about that here).

Oprah acknowledged FDA’s concerns about the therapy. FDA said in a statement to the show that it does not recognize the term bioidentical. “Many compounding pharmacies use ‘bioidentical’ as a marketing term to imply that drugs are natural or have effects identical to those from hormones made by the body,” the agency said.

“FDA is not aware of credible scientific evidence to support these claims. There are potentially serious adverse effects associated with long term use of these products--even when consumers use FDA-approved hormone therapy drugs that have been proven safe and effective.”

Blah-de-blah-blah-blah. This is Oprah we're taking about. The woman elected a president, for goodness' sake! She's got far more power than FDA and Wyeth combined!

(Oprah photo courtsey of flickr user radiant guy)

-- Brenda Sandburg

DotW: Titanic Meets Iceberg

Titanic, Meet Iceberg. Iceberg, Meet Titanic.

Just what did these two men say to each other on Monday at the press conference announcing their $68 billion cash-and-stock tie up? Readers weighed in with some creative suggestions, including the correct pronunciation of the new merged company's name. "Let me help you...it's pronounced FI-ZER," wrote one of our loyal readers. It was tough to choose the winning-est caption for this photo--anything IS better than the corp speak that accompanied it--but at day's end this Blogger was quite taken with the reference to the storied sinking ship. (Congratulations, "Anonymous"--if that's your real name--you win!)

Will historians look back on Jan. 26 as the date titanic Pfizer started its slow slide into the debths of non-existence? We aren't sure. Debate continues to rage over the wisdom of the deal and the ability of the mega-merger to bridge the chasm of patent expiries. (You can see ongoing coverage of the deal from "The Pink Sheet" here and here and here, as well as here at IVB.)

Another frequent topic of conversation--and of no less import--what to call this new premier biopharma? Wy-Pfi remains a popular and humorous choice. Certainly Pfieth doesn't exactly trip off the tongue, and it's first syllable connotes distaste or disapproval--or at least a big ugly Giant. (Wait, MAYBE it is a fitting name after all.) Wyeth employees are rumored to prefer "Wyzer". That might be the wiser course of action, especially as Pfizer woos some top-notch execs such as vaccine guru Emilio Emini to stay on at the new firm.

But Kindler and Poussot were be no means the only newsmakers this week. Clearly disgruntled that Pfizer pushed its name off the front page of the WSJ--okay, there were other reasons like pending Avastin trial data--Roche made headlines with its openly hostile, lower bid for Genentech. Not surprisingly, Genentech responded to Roche's salvo with a resounding "No" and followed up with a "Nein" and a "Non" just to be sure the Swiss pharma got the message. (See below.)

On the clinical front, Takeda finally experienced some good regulatory news. Despite a missed PDUFA date, the company's Kapidex, a follow-on to the GERD-treatment blockbuster Prevacid, won regulatory approval on Friday. The news came in the nick of time: Prevacid loses patent protection later this year.

This week also brought good news for Lilly and Daiichi Sankyo. As "The Pink Sheet" Daily reports, the two pharmas scored big with the FDA heading into their Feb. 3 advisory committee meeting on prasugrel. In briefing documents to the Cardiovascular and Renal Drugs Advisory Committee, FDA said that prasugrel's strong cardiovascular efficacy profile outweighs its risk of bleeding--largely putting to rest concerns that multiple delays during the NDA review would prevent approval. The news defininitely off-set the pharma's somewhat lackluster earnings.

Speaking of earnings calls, Amgen's was interesting for it's all-denosumab-all-the time undertones, which will likely swell into overtones given the dearth of products in the Big Biotech's pipeline. (Putting even more pressure on denosumab, company execs signaled that disappointing data associated with the phosphate binder and Renagel competitor AMG 223 warranted a "range of options for the development of this molecule rather than pursuing it by ourselves.") AMG 223 was acquired in the $420 million purchase of Ilypsa in 2007--not money well spent, we guess.

As you take a breath and try and catch up on the week's news, we are here to help. Time for...

Roche/Genentech: Remind us never to play poker with Severin Schwann. The man cut his teeth on hostile deal-making when he launched a months long pursuit of the molecular diagnostics maker Ventana Medical Systems in 2007. That courtship had a happy ending--the deal turned friendly after Roche finally upped its price 19%. But Schwann is playing a much trickier game with this latest hostile bid for Genentech, which requires Roche to persuade at least 80% of the biotech's minority shareholders of the deal's value if the Swiss Pharma is to prevail.

Not only could shareholders reject this latest offer, forcing two marquee investment banks to assess a fair value for Genentech that Roche can either accept or walk away from, there's a serious risk that this heavy-handed move will alienate the top-flight Genentech talent Schwann and his team have worked so hard to keep.

While risky, the $86.50 offer, which is 3% lower than the price Genentech rejected last summer, was intended to send a clear message to Genentech execs to return to the negotiating table or face the potential of an even smaller future bid. “We are disappointed that the discussions over the last six months between Roche and the special committee of Genentech have not produced a negotiated agreement,” Roche chairman Franz Humer said in a statement. “We feel it is now time to give the Genentech minority shareholders the opportunity to decide on our offer.”

The pharma is in a race against time: it would prefer to bring negotiations to a conclusion ahead of the release of widely anticipated data associated with the adjuvant use of Avastin in colorectal cancer. (Indeed, Genentech may have provoked Roche's gambit when it issued news last week that it anticipated trial data as soon as mid-April.) If the data are positive, many analysts expect Genentech's share price could skyrocket into the triple digits, which would add considerable cost to the deal.

Especially given the current cost of debt. Roche hasn't said for sure that it's lined up the money to do the deal. But others have reported that the pharma intends to use $14 billion of its own cash, financing the remaining $28 billion with a combination of commercial paper, bonds, and traditional bank financing. In July, sources say the original cost of debt would have been around 4%. But it’s now “at least 6 percent and could be even higher given the terms Pfizer got for Wyeth,” says a knowledgeable financier who spoke with IVB on Friday afternoon.

Moreover, Pfizer’s recent agreement to buy Wyeth for $68 billion may add to Roche’s pressure as banks may have a limited appetite for backing additional large pharmaceutical deals.

Many expect Roche to sweeten this latest offer in the ensuing weeks. But for every dollar per share Roche increases its current offer, it needs to come up with roughly an additional $500 million. The key question is how much higher is the Swiss Pharma willing to go?

Wyeth/Pfizer: Okay, so we covered this deal in last week's edition but we would be remiss if we didn't at least mention it again. (Let all our top-notch analysis go to waste?) As we write in the issue of "The Pink Sheet" due out Monday, with Wyeth, Pfizer gains a levee to buffer the encroaching storm. The deal could set the stage for more industry consolidation to follow as other big pharmas seek to weather their own patent challenges. Certainly it provides one strategy for covering up bad news associated with off-label drug use.

But whether a mega-merger will solve Pfizer’s problems remains to be seen. Although the move helps position Pfizer as a future biologics and vaccines Prevnar powerhouse, the addition of Wyeth doesn’t position Pfizer for near-term growth, but rather will allow the company to maintain its 2008 revenues and earnings-per-share levels through 2012. The company is forecasting $70 billion in combined revenues in 2012, although Wall Street’s consensus estimates have been about $4 billion lower. With that in mind, investors will have to keep an eye on the horizon toward the long-term.

“We’re obviously very focused on here and now and 2012, but this is a very long-term business, and we believe this deal positions us extremely well for long-term shareholder value creation,” CEO Jeff Kindler said during a same-day conference call. (But Jeff, what about the dividend?)

Wyeth partners could feel the pain of the merger sooner rather than later. Kindler indicated Monday that the company would move quickly to integrate the two companies. After months spent righting its own house, that likely means Pfizer aims to slot pipeline programs into its six invest-to-win areas. For Wyeth partners pursuing programs that fall outside this world-view, especially in de-prioritized areas such as CV and obesity--it's likely to be sayonara. Already one would-be partner has felt the axe. On Monday, Crucell announced that Wyeth had broken off acquisition talks in light of the Pfizer's offer.

Astellas/CV Therapeutics: Already partnered on the myocardial perfusion imaging agent Lexiscan, the two companies had been talking behind the scenes for more than a year about partnering in some manner on CVT’s growing angina drug, Ranexa. Then, on Jan. 27, the Japanese pharma went against its country’s traditional business practice of seeking consensus and publicly revealed its $1 billion bid to buy CVT for $16 a share. Astellas’ public letter to the CVT board noted Astellas first offered to buy the Palo Alto, Calif., biotech last November, but was rejected. The letter asserts that Astellas has the U.S. presence and sales infrastructure to help Ranexa, which posted $30.3 million in U.S. sales during third-quarter 2008, reach its market potential and asked that the two firms “work together … to reach a mutually beneficial transaction.” CVT issued a statement Jan. 28 acknowledging that it had declined Astellas’ previous offer, but adding that its board would “again review developments in the context of the company’s strategic plans and the long-term interests of its stockholders.” To be sure, that “context” will mean seeking a higher price for CVT. While Astellas’ offer represented a 41% premium over CVT’s share price at close of trading on Jan. 26, and a 69% premium over the previous 60-day average, the biotech’s shares jumped to a high of $16.68 on Jan. 27 and remained in the $15 range as the week progressed. Cowen & Company analyst Eric Schmidt predicted that Astellas would land CVT eventually, but at a share price ranging between the high teens and low 20s--Joseph Haas and Melanie Senior.

GSK/NeuroSearch: GlaxoSmithKline and NeuroSearch, which have been drug-development partners since well before the merger that created the current GSK entity, extend their five-year drug-discovery collaboration led by Phase IIb depression and ADHD candidate GSK372475. Denmark-based NeuroSearch gets an undisclosed upfront payment to continue the alliance, which now includes an expanded portfolio of novel compounds. NeuroSearch says it could realize more than $1.2 billion in milestones under the deal, along with double-digit royalties on any products that reach market. While Glaxo Wellcome collaborated with NeuroSearch in the 1990s on potassium-channel central nervous system compounds and anti-depressants, the companies’ more recent work has centered on triple monoamine reuptake inhibitors that GSK in-licensed in 2002. The NeuroSearch work was moved into GSK’s Center of Excellence for External Drug Discovery after it was launched in 2005. CEEDD programs like this one enable GSK to expand its pipeline while shifting more responsibility and risk onto its partners – NeuroSearch performs discovery and research of the GSK-partnered programs through proof-of-concept, at which point GSK takes over development and commercialization of the compound. With ‘372475, GSK expects data from two Phase IIb studies on the compound and to make a Phase III go/no go decision during the first half of this year. During 2009-2010, NeuroSearch says it will earn about $90 million from the partnership between the upfront payment and milestones. While the collaboration mainly will focus on joint development of candidates advanced during the previous five years, NeuroSearch says, the expanded deal also includes five preclinical compounds along with several qualified lead compounds that will move into preclinical development by mid-year. The deal also gives NeuroSearch a share-put option to sell up to $25.6 million of its stock to GSK at market price in four equal tranches through November 2010--Joseph Haas and Melanie Senior.

Deerfield/NitroMed: After raising its offer a second time, Deerfield Management’s “black knight” bid to acquire NitroMed, and forestall what it saw as dilutive transactions with Archemix and JHP Pharmaceuticals, appears to have succeeded. On Jan. 27, NitroMed announced it had entered into a merger agreement with Deerfield – which owns 12 percent of its stock – after the investor increased its offer to $0.80 a share. However, the agreement includes a “go shop” provision enabling NitroMed to seek a better offer through Feb. 26. NitroMed said it will actively solicit offers during that period. If a better offer doesn’t materialize, the merger is expected to close in April. At this latest offer price, the question remains whether this deal amounts to an exit for Deerfield, especially with NitroMed’s poor-selling BiDil, a heart-failure drug for black patients, still in the fold. BiDil sales totaled just $7.8 million for the first half of 2008. Deerfield made its initial bid after NitroMed announced two deals last fall, one to sell BiDil to JHP for roughly $26 million, and the other to reverse-merge with private aptamer-focused biotech Archemix. The agreement with Deerfield required NitroMed to terminate the JHP and Archemix deals, resulting in termination fees totaling $2.4 million. The reverse merger would have brought about $60 million in cash – post sale of BiDil – and a NASDAQ listing to Archemix, which had abandoned plans for an IPO early in 2008. Deerfield clearly was unhappy with the merger terms, which gave NitroMed shareholders only a 30 percent stake in a highly illiquid company. Managing Partner James Flynn said a review of other biotechs with Phase III assets showed many of them were valued lower than the theoretical $100 million value the reverse-merger would create for Archemix. Archemix, meanwhile, is pursuing business as usual as a still private enterprise, focusing on advancing its lead aptamer, ARC1779, through Phase IIb clinical trials. Despite losing out on NitroMed’s cash, the company says it has sufficient money to support operations through the end of 2010, thanks in part to a large R&D deal inked with GSK late in 2008--Joseph Haas.

Ipsen/Novartis: In a deal that may reflect increasing sales and marketing clout for regional players — or just the efforts of one big pharma to reduce its overhead in one strategic market — Novartis increased its anti-hypertension drug co-promotion work with Ipsen on Jan. 28. Paris-based Ipsen has promoted Diovan (valsartan), the world’s top-selling hypertension therapy, in France since 2003. It also helps market the product in Europe, along with Nisisco, a combination drug that includes hydrochlorothiazide. The newly expanded agreement calls for Ipsen to sell Exforge, another anti-hypertensive combining valsartan with Pfizer’s amlodipine, in France. Novartis reported 2008 worldwide sales of $406 million for Exforge, which gained FDA approval in 2007. With Ipsen well entrenched in France’s primary-care market, this deal appears to position Novartis to grow its hypertension franchise further through Exforge--Joseph Haas.

Helsinn/Sapphire: Switzerland’s Helsinn apparently picked up privately-owned cancer supportive care group Sapphire Therapeutics for an (undisclosed) bargain. The deal adds three clinical candidates to Helsinn’s pipeline: Phase II anamorelin, an oral first-in-class cancer cachexia treatment, an intravenous compound for post-operative ileus, also in Phase II, plus a Phase I oral drug for opioid-induced bowel dysfunction. It also provides the group with “a direct presence in the major pharmaceutical market of the world,” CEO Riccardo Braglia said. Reflecting the sorry state of many private biotechs, there were reportedly no other interested buyers. Moreover, Sapphire’s VC investors likely were eager to exit from a group that already had re-invented itself once. Bridgewater, N.J.-based Sapphire was launched in 2000 as Rujevenon, with a focus on anti-aging therapies and $12 million in private financing. By 2004, it had changed its therapeutic focus to small-molecule cancer and metabolic drugs, and raised more than $37 million in a Series B financing led by SV Life Sciences--Joseph Haas and Melanie Senior.