Financings of the Fortnight Works On Its "A" Game

There have been a lot of shifts lately behind the reasons people start new biotech companies. Academic and nonprofit sources of biomedical innovation are growing more eager to take on “translational” duties to make their research more palatable to the private sector. Cuts in Big Pharma research groups have created larger pools of available talent. New government regulations now let private companies test public investor sentiment without announcing to the world their IPO intentions. (Regulations are loosening more; the Securities and Exchange Commission just voted to allow direct solicitation of the public in securities offerings.)

The reasons might be more compelling, but are they drawing more investors back to startup-land?

The folks at our sister publication Start-Up have always liked to use Series A rounds as a way to gauge the temperature surrounding biomedical company formation. They’ve been doing what they call The A-List since 2004, tallying the year’s newly disclosed A rounds and all the data around them. It’s about numbers, but also sentiments and attitudes. For example, in the most recent A-List, we asked VCs if all worthy early-stage companies were getting funded. (Click image to enlarge.)

We’re looking forward to asking that question again at the end of 2013. For now, let's take a peek at the Series A financings for the first half of the year to see if we can stir up the tea leaves.

By FOTF’s count, there have been 41 new Series A fundings for device, diagnostic and biopharmaceutical companies with the amount disclosed (and four more without). The funds disclosed total $567 million. That’s well ahead of the 2012 first-half deal flow of 33 rounds and $423 million.

If the pace quickens in the second half of 2013 as it did last year (final 2012 tally: 103 Series A rounds), we could see deal flow akin to the pre-crisis years of 2007 and 2008. That’s one big takeaway.

As usual, biopharma makes up the bulk, with 35 deals and $481 million in disclosed dollars. That’s an average of $16 million per round for the companies that disclosed dollars, a 10% jump over last year’s biopharma average, as noted in the most recent A-List:



We might also be seeing a change in syndicate composition. By this time last year, 10 Series A were solo efforts, the largest being Third Rock Ventures’ debut of Global Blood Therapeutics, and people were telling us how difficult early-stage syndicates were to arrange. This year, only three deals have been announced as solo deals, with Third Rock again taking the top spot with its $47 million commitment to Jounce Therapeutics. (For an in-depth look at Third Rock’s strategy, check out the latest Start-Up cover story.)

Among therapeutic areas, by the way, nine of the 45 companies say they’re in oncology, seven say neurology, and six say cardiovascular disease. Infectious disease, metabolic disease, and gynecology/urology have four or five.

Based on the half-year numbers,our next full-blown A-List might reflect the optimistic bent that the IPO markets have helped create this year. Might, we emphasize. Six months of deal announcements are a squirrely sample size, so take our little foray simply as a guide to things to watch for the rest of the year.

And for the rest of this hour, how about kicking back with the latest edition of...

Prosensa Holding: On June 28, Dutch biotech Prosensa netted $83.4 million in an IPO on Nasdaq through the issuance of 6.9 million shares at $13, the high end of its $11-13 range. Prior to its IPO, the firm had raised €56.4 million ($73 million) through private equity rounds. Company president Hans Schikan says Nasdaq offered a healthier financial opportunity than European exchanges. With an RNA modification technology platform licensed exclusively from neighboring Leiden University Medical Centre, the 11-year-old company aims to develop antisense therapeutics that induce skipping of exons (disrupted gene coding sections). It’s getting a good start: just prior to the IPO filing, it got word of receipt of FDA breakthrough designation status for its lead compound drisapersen (PRO051), a program it partnered with GSK in a 2009 deal that’s worth up to $667 million in pre- and post-commercialization milestones, plus double-digit sales royalties. Earlier in the year, some of the company’s other programs were granted EU orphan drug status in the muscle-wasting disease Duchenne muscular dystrophy indication. Of the European biotechs with initial public offerings (including Belgian cell therapy company Cardio3 BioSciences, see below),  Prosensa has raised the most and has continued to climb. On its June 28th opening, it closed at $19.02, a 46% premium over its offering price, and it closed July 11 at $26.26. -- Maureen Riordan

MannKind: Despite regulatory setbacks, and facing long odds following the poor reception of Pfizer/Nektar’s Exubera and eventual withdrawal of the drug from the market in 2007, MannKind is forging ahead with its own late-stage inhaled insulin candidate Afrezza, and on July 1 announced a $160 million debt financing to support further development. Deerfield Management committed to buying 9.75% senior secured notes, maturing in 2019, in four equal $40 million tranches contingent upon MannKind achieving certain milestones that include the release of Phase III data in Type I and II diabetic patients (using the newer-generation Dreamboat inhaler), paying down debt, and Afrezza’s FDA approval. After an undisclosed period following disclosure of the clinical data (expected later this summer), Deerfield has the option to convert a portion of its notes into common stock. In return for an $18.9 million up-front payment, the investment firm also receives milestone rights, entitling it to up to $90 million based on strategic and sales goals. MannKind is also working in the oncology area but last year partnered some of those programs with Tolero Pharmaceuticals and Colby Pharmaceutical in order to put resources towards Afrezza. Since the start of 2012, MannKind has raised nearly $316 million, including two FOPOs plus the current fundraising, to fund Afrezza efforts. In Q4 2013, the company hopes to submit an amendment to its existing NDA (first filed in March 2009). -- Amanda Micklus

OncoEthix: Privately held Swiss biotech OncoEthix has raised $19 million in a Series B funding to progress its early-stage cancer treatment OTX015 into Phase II proof-of-concept studies, at which point its owners hope to sell or license out the novel medicine to a pharmaceuticals group. The BET bromodomain inhibitor belongs to a new class of medicines which researchers are testing to learn whether they can trigger cancer cell death. SV Life Sciences led the round and was joined by new investor Edmond de Rothschild Investment Partners. Existing investors including Index Ventures and Endeavour Vision also participated. The proceeds will be used to progress OTX015 into Phase II proof of concept, and a potential [investor] exit at that point, CEO Bertran Damour told "The Pink Sheet" Daily. The fundraising brings OncoEthix’s total venture capital up to $30 million and will keep the biotech running for the next 24 months, Damour predicted. The company was founded in 2009 by Esteban Cvitkovic, Kay Noel, Yves Paternot, and Patrice Herait, all experienced oncology drug researchers who set out to establish a portfolio of three to five new cancer medicines through in-licensing. Between them the founders have been involved in bringing 37 drugs to market, according to CEO Damour. OTX015 was in-licensed from Mitsubishi Tanabe Pharma Corp. in 2012. After reaching proof-of-concept, the company plans to out-license drug candidates to pharma partners. – Sten Stovall

Cardio3 Biosciences: Another biotech from The Low Countries debuted this fortnight and almost immediately had to weather a storm. The Belgian firm debuted on the NYSE Euronext Brussels and Paris, selling 1.38 million shares at €16.65 ($21.76) each. Cardio3's lead product C-Cure uses a patient's own hematopoetic stem cells harvested from bone marrow and programmed outside the body to differentiate into heart muscle cells and, re-injected back into the patient, to repair damaged heart tissue. The issue raised €23 million for the regenerative medicine firm, and it raised the eyebrows of UK researchers and subsequently Forbes columnist Larry Husten, who highlighted several data discrepancies in a Cardio3 paper that helped fuel the IPO, as well as a conflict of interest with one of the paper's authors. Husten's column has been updated with a sharp response from Cardio3 and a rather sarcastic one from the UK professor leading the criticism against Cardio3. The firm says the criticism is unfounded; so far investors have mainly rolled with the punch, and the stock closed July 11 at €18.73, down from a brief high of €21.45 but by no means a sign of sauve-qui-peut, as they say in Wallonie. -- Alex Lash

All The Rest: Heliae, a start-up developing algae-based products for the therapeutic, nutraceutical, personal care, and agroscience markets, received $24.8mm in an early-stage VC funding round...regenerative medicine company ViaCyte (developing a stem cell therapy for diabetes) raised $10.6mm in Series C-1 funds from backers including J&J Development Corp., Sanderling Ventures, and Asset Management Co…in an $6mm add-on to its February 2012 Series A round, Mnemosyne Pharmaceuticals garnered a total of $11.4mm...In what appears to be its Series A round, viDA Therapeutics has raised $1.8mm in new VC funding following the second tranche of its seed funding in April…University of Bath spin-out Glythera added £700k ($1mm) to its 2008 Series A, which is expected to total £2mm over the next three years in tranches of a similar size and contingent on the achievement of certain milestones…In an early venture round, Cantargia – a Swedish developer of leukemia therapeutics – added $1mm to its coffers…ETH Zurich spin-off BioVersys (antibiotics) raised an undisclosed oversubscribed Series A round..Publicly traded AntriaBio (metabolic disorders) completed a $12mm private placement…AmpliPhi BioSciences (antibacterials) grossed $7mm through the private placement of 5mm Series B preferred shares that convert into 10 common shares…Avanex Life Sciences (Alzheimer's disease therapeutics) completed a $2.6mm PIPE, plus a $10mm funding commitment from Lincoln Park Capital with $100k received so far…Cancer drug developer Merrimack, which went public last year, proposed concurrent $50mm follow-on and $75mm notes offerings…Amarin completed a FOPO of 21.7mm ADSs priced at $5.60 netting $121.5mm…A few companies set IPO terms: OncoMed Pharmaceuticals (cancer) plans to offer 4mm shares at a $14-16 range; Conatus Pharmaceuticals (liver disease therapeutics) anticipates selling 5mm shares at a $10-12 range; and human cell manufacturer Cellular Dynamics set a range of $12-14 for a planned 3.8mm share offering…Heat Biologics (cancer and infectious disease immunotherapies) increased its proposed number of IPO shares, to 2.3mm (from 1.65mm) at the same $10-12 price range…And three companies filed for IPOs: Emcure Pharmaceuticals, an Indian manufacturer and developer of APIs across a variety of therapy areas; Can-Fite spin-off OphthaliX (has a Phase III candidate for dry-eye syndrome); and synthetic biology technologies company Intrexon…Specialty CNS pharmaco Avanir has tentative plans for a $50mm debt financing…Biodelivery Sciences brought in $20mm through a senior secured loan from an affiliate of Midcap Financial LLC…regenerative medicine firm Tengion raised $18.6mm through the sales of senior secured convertible notes concurrent with a $15mm equity investment from Celgene…In fund news, Kohl Kohlberg Kravis Roberts closed a $6bn Asia-Pacific region fund focusing on consumer products, retail, health care, education, and industrial companies.

Big thanks to Maureen Riordan and Amanda Micklus for help with Series A data. 

Photo courtesy of flickr user IMLS DCC. Click that link if you like old boats.

Insulin Pricing: Let The Battles Begin

In the same week that Novo Nordisk filed its latest-generation insulins, ultra-long-acting Degludec and the DegludecPlus combo, in Europe and the US, the drug makers says it won't be seeking the highest price it feels its new offerings could command.

"We could probably justify a higher price premium [for Degludec] than in reality we can ask for," acknowledged EVP & CSO Mads Krogsgaard Thomsen in a Sept. 28 phone call. He alluded to a host of health economic outcomes research the Danish group has carried out on its new products from Phase II onwards, but admitted that "the financial crisis and the focus on short-term financial optimization rather than long-term societal costs" means Novo won't push its luck.

You bet it won't. Even without the financial crisis, insulin pricing is becoming a hot issue as governments and payers try to cut down on the costs of a disease that's spreading fast. Never mind that insulin's value-proposition is still significantly better than that of many cancer drugs. Never mind the argument about long-term cost-savings from effectively controlling diabetes. The bottom line is that older insulins are cheaper, and not that much less effective, at least according to this BMJ Open article published Sept. 22 . That piece went on to declare that the U.K. NHS could have saved over £600 million between 2000 and 2009 if it had prescribed human instead of analog insulins. (The Germans reached a similar conclusion years before).

Now as with any analysis, the BMJ study wasn't perfect. Many would dispute the size and value of analogs' advantages over the human version. But by underscoring the high overall cost of insulin treatment, it comes to a conclusion that "should scare the daylights out of the major insulin companies," according to Diabetic Investor publisher David Kliff.

Indeed, NICE, the cost-watchdog for England and Wales, was quick to jump on the bandwagon, issuing a release Sept. 26 to remind the world that it recommends using human insulin treatment as first-line, and that had those guidelines been followed, those millions would have been saved.

If some payers aren't even convinced about the relative value of so-called 'modern' insulins (now 15 years old) and still recommend versions first introduced in the 1980s, what hope for the positively futuristic Degludec, a next-next-next generation version of this hormone first discovered in 1921?

Novo management itself hinted in this IN VIVO feature from 2007 that Degludec may represent the last innovation round in injectable insulin -- in other words, we're reaching the point where it can't get any better. The remaining challenges are education, adherence, convenience, delivery -- which, along with lack of new products, explains Sanofi's integrated service strategy.

Still, Degludec is better, Novo argues. But the company will have to work hard to prove it. A decrease in night-time hypoglycemic events may not be enough to convince all, though flexible dosing ("at any time of day, on any day"), a Lantus-beating half-life and a nice device will help.

Novo's remarks on pricing arguably represent its opening hand in payer-negotiations that will occur against a backdrop of already-raging pricing battles in the ranks of less-innovative insulins. Lilly in particular is attempting to squeeze whatever it can from a dwindling, market-trailing franchise that lacks new products: when Novo (prematurely, as it turned out) withdrew its human insulins in the UK in 2010, Lilly lowered the price of its human insulins to secure Novo's patients.

Meanwhile, Lantus goes off patent in 2015, after which time biosimilars (including one from Lilly) could start to pull down the price not just of Lantus, but of other basal insulins including Novo's own Levemir (though admittedly, biosimilar insulin isn't the most attractive target for large-molecule copycats).

In sum, we're not surprised Novo's saying it won't be greedy. The question is, will it get anything at all? And as regards the BMJ paper: "I expect there will be a reaction from leading diabetologists," predicted Thomsen.

In other words, keeping watching this space. There will be more to come.

image by flickrer james.gordon6108 used under creative commons

2010 Alliance DOTY Nominee: Pfizer/Biocon

It's time for the IN VIVO Blog's Third Annual Deal of the Year! competition. This year we're presenting awards in three categories to highlight the most interesting and creative deal making solutions of the year. The categories are: M&A Deal of the Year, Alliance Deal of the Year, and Exit/Financing Deal of the Year. We'll supply the nominations (four or five 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™


OK, it may not be the biggest DOTY or even the most creative in terms of structure. The terms are pretty plain vanilla - Pfizer pays $200M upfront to Indian biotech Biocon and an additional $150M in development and regulatory milestones, plus payments tied to commercialization. In exchange, it gets rights to sell Biocon's portfolio of biosimilar insulins throughout most of the world. Thus, this ain't the kind of deal that inspires heady talk in the biz dev community, which is more likely to eye the latest fancy risk-sharing schemes.

While the structure of Pfizer/Biocon is quite traditional, the concept is anything but. Indeed, the union of these two companies is, in fact, blatantly ambitious and could have far reaching implications. It demostrates a new way of doing business for pharma, touching on an battery of industry hot topics: biosimilars, pricing flexibility, diversification and emerging markets. Because of its conceptual radicalism, it is by far the best choice to win the DOTY award.

The alliance brings together two diametrically opposed companies that have surprisingly complementary interests: big, unwieldy Pfizer, which lacks a presence in diabetes, and Biocon, an aggressive, comparatively small Indian biotech, which, while far from naive, has limited global operations and ambitions to develop an oral insulin.

Pfizer now will sell all of Biocon's biosimilar insulins and insulin analogs, including recombinant human insulin, Glargine, Aspart and Lispro; in Germany, Malaysia, and India only, the partners will share commercial responsibilities. Biocon is in charge of global manufacturing, development and regulatory approvals. The partners assert -- and there's really no other word to describe their pitch - their broad portfolio will enble them to challenge the industry's diabetes mainstays. Take that, Novo Nordisk, Sanofi, and Lilly.

The deal was spearheaded by two aggressive business leaders who think outside the box: David Simmons, who has headed Pfizer's $10B Established Products Business Unit and recently took over Emerging Markets as well, and Kiran Mazumdar Shaw, chairman of Biocon . Simmons has spent the past two years scouring Asia and elsewhere for inexpensive outsouring opportunities to buttress his units' generics business, but the Biocon alliance is different and more strategic than his unit's previous deals with Indian generics manufacturers Aurobindo and Claris.

With insulin, Pfizer is plunging into the biosimilars fray. Simmons has said previously that Pfizer wants to play in this space, but until now, he hasn't articulated just how it will do so. By teaming up with Biocon, he's indicating Pfizer's willingness to essentially outsource its approach to this new business opportunity with an up-and-coming EM player.

For Biocon, too, the deal represents new territory. India's budding biotech industry is just that --budding -- and often seems to be stalled. Biocon, however, has stood out as an exception, with its long-time efforts to become a global innovator, backed by self-generated revenues from more traditional, lower margin businesses, such as contract research and drug development services, as well as sales of generic biologics to domestic markets. Like Simmons, Shaw seems intent on pushing beyond her company's comfort zone.

Timing is a key virtue of this deal - the partners have some -- not much - breathing room because they will roll out the insulins gradually. They won't discuss their regulatory strategy in the US, where they hope to launch in 2015, but FDA officials say the agency is "open for business" when it comes to biosimilars, despite lack of formal guidance in this area.

Emerging markets is the wild West of pharma these days, but Pfizer and Biocon have demonstrated admirable patience and a cautious, yet forward-thinking approach to a new business opportunity. Simmon's recent appointment as head of emerging markets, even as he retains his current position at EPBU, puts him in charge of one of Pfizer's major growth initiatives. How's that for validation of a strategy?

Financings Of The Fortnight Can't Tell if You're a Kingpin or a Pauper

In a still-dodgy fundraising arena, the question for biotechs looking for royalty-stream financing is this: How much will you have to give it away now?

We ask after noting several royalty deals of late. It's no flood, to be sure -- and we should pause to extend our thoughts and wishes to the good folks of Nashville and beyond -- but the rising tide caught our attention. The most recent example was the April 30 transaction in which NeurogesX transferred rights to future sales of recently launched pain-management drug Qutenza to Cowen Healthcare Royalty Partners (that's CHRP, not RHCP) in exchange for $40 million.

According to Elsevier’s Strategic Transactions Database, only one such deal occurred in 2007, when Enzon sold 25% of its worldwide PEG-Intron royalties to Drug Royalty for $92.5 million, but 10 have occurred since April 2008, including three in the past two months. (In addition to the NeurogesX/CHRP tie-up, April saw Dyax sell future royalties from Pfizer on hemophilia A drug Xyntha for $12 million, and in March DRI Capital obtained Asian royalty rights to hyperparathyroidism treatment Regpara from NPS Pharmaceuticals for $38.4 million.)

If it's the front end of a big wave, perhaps we should move our chairs to higher ground. Royalty deals are a non-dilutive source of funds, usually a good thing, but they're no sign of industry health, says Raghuram Selvaraju, head of healthcare research for Hapoalim Securities.

"Royalty arrangements are typically entered into by companies stuck between a rock and a hard place,” Selvaraju told the IN VIVO Blog. “Companies stuck in mid-stage development with no near-term prospect of revenues resort to equity lines of credit, which basically mortgage their futures and can be prohibitively dilutive because they have minimum draw-downs."

“[A royalty deal] looks cosmetically attractive because it’s not dilutive financing,” Selvaraju added, “but if a company is trading near its 52-week high, I always prefer to see it raise money in the public markets than do a royalty-based deal.”

Take NeurogesX. With no U.S. commercialization partner for Qutenza, it had to launch solo despite limited funds. Selvaraju believes NeurogesX could lose downstream revenues from Qutenza for many years, since there is wide disagreement on how big a market the drug will find. Estimates of its eventual annual sales range from $150 million to $700 million.

Everyone has a handful of betes noires that prove the world is slowly going to hell in a handbasket: dogs wearing sweaters, for example, or airlines charging for baggage. Selvaraju said we might want to add royalty deals to the watch list. “I don’t think they're going to increase in frequency unless we’re talking about the gradual demise of the biotech industry, which I hope is not going to be the case,” he said.

Are royalty arrangements inherently lopsided, even predatory, as Selvaraju suggests? We've talked to university tech transfer officers quite happy, for example, with a massive upfront bounty that can be spent right away on new buildings and faculty salaries, instead of waiting for a highly speculative stream of revenue royalties through the years. It's a rousing debate, and one for another day. We're just glad we went an entire two weeks without seeing any dogs in sweaters, unless you count some recent deals. But that's a matter for our DoTW friends. This red hot chili pepper is the latest edition of...

Lycera: Towards the end of last year, we noted here a flurry of “top-ups” to biotech venture rounds. A spin through Strategic Transactions shows that so far in 2010 nine companies have done additional tranches, including Lycera, which added $11 million to the $10 million it’s already raised in its Series A financing. It's already a decent figure, and the immunology biotech says it's working towards $36 million total, quite high for a Series A. The second tranche came with a new board member from Clarus Ventures and a new VP of preclinical development and program management, former Novartis and ArQule exec Robin Goldstein. Lycera said it's poised to move its first candidate into human testing in 2011. Rather than working with biologicals, which often require injectable administration, the 2006 start-up is focusing on small-molecule immunomodulators targeting two autoimmune pathways: ATPase (the cellular bioenergetics program) against pathologically activated lymphocytes and Th17 (ROR-gamma) inflammatory mediators. -- Amanda Micklus

NeurogesX: We couldn't leave you hanging without the nitty-gritty details. The San Mateo, Calif.-based biotech obtained $40 million April 30 from Cowen Healthcare Royalty Partners to help finance the US launch of pain-management therapeutic Qutenza in the US. In exchange, CHRP gets ex-US royalties and sales milestones payable by Astellas Pharma, which bought ex-US commercial rights one year ago for $42 million. Qutenza, a dermal synthetic capsaicin patch, was approved by FDA to treat post-herpetic neuralgia last November and launched by NeurogesX in April. Qutenza also was approved last May in Europe. Both the royalties and milestones from the Astellas deal now go to CHRP until that firm recoups its capital plus a pre-determined amount of return on investment, said managing director Gregory Brown. Instead of an interest rate, CHRP is banking on ex-US sales of Qutenza to ramp up to deliver a return quickly. “The ‘interest rate’ really would depend on how quickly the capital comes in,” Brown said. “If you think of it as something in the high teens, that’s probably not unrealistic.” Once CHRP has recouped its investment and return, the ex-US rights revert to NeurogesX. US sales proceeds are not affected by the deal. -- Joseph Haas

Idenix Pharmaceuticals: We’re highlighting this antiviral drug developer’s FOPO not for its size. At $21.4 million net, or 6.5 million shares for $4.35 each, it’s piddling compared with FOPOs we’ve seen this year from Lexicon or AMAG. This is more about the rebound. Idenix was able to raise a decent amount of cash despite the hammer blow last year of its main partner and owner, Novartis, turning down an option on Idenix’s lead agent, HCV nucleotide prodrug IDX184. In a Roche/Genentech-like big-sibling structure, Novartis has options on all Idenix’s drug candidates after proof-of-concept as long as it maintains a 40% stake. Novartis owns 43% of Idenix post-FOPO, by the way. After the rejection last October, Idenix’s stock price tumbled to a low of $1.84. Thanks to favorable interim safety data from a Phase IIa of IDX184 in combination with pegylated interferon and ribavirin, the stock has recently gone back up as high as $4.76 a share. The company also announced positive Phase I results for another HCV candidate, IDX320. Meanwhile, the firm is broadly cutting costs and says that between the FOPO proceeds and milestones from GSK/Pfizer’s Viiv Healthcare (for the NNRTIs it partnered with GSK in 2009), it will have enough funds to sustain itself through the second half of next year. -- A.M.

MannKind: We usually don't discuss follow-ons in FOTF until the cash is in hand, but we couldn't help but note that MannKind, struggling to get its inhaled insulin through the FDA and onto the market, recently filed a shelf registration for up to $200 million. In the firm's most recent earnings call, MannKind CFO Matthew Pfeiffer disclosed it but said "currently, we have no plans to do an offering." "Currently" is such a useful word. Pfeiffer went on to clarify, kind of, by saying MannKind wanted the registration "in the event that an opportunity would arise such as financing or a strategic transaction, which would be in the company's interest to issue debt, equity, or warrants." Pfeiffer told analysts to expect MannKind first to draw down its line of credit from "Al" -- that is, Al Mann, the company founder. The line still has $145 million available. Not everyone is convinced. Oppenheimer & Co. analyst John Newman wrote in a note that MannKind will need more cash soon because the F.D.A. is likely to require new studies for Afrezza: "Although MNKD claims it has a line of credit that would negate the need for a cash raise, we note that the company raised cash in 2009, despite the credit line." -- Alex Lash

Production notes: Joseph Haas played bass and wrote the introduction this week, and Amanda Micklus (drums) and Maureen Riordan (mellotron) provided invaluable research help. The photo is courtesy flickr user mararie.

While You Were Augmenting Your Wardrobe

Congratulations to South African Trevor Immelman who held off the field at Augusta to win his first Masters' championship and claim the green jacket (it always fits!). We had money on Tiger knew he could do it. We're by no means avid golfers, though we enjoy watching the majors and very occasionally swing the sticks ourselves. But when you think about it, golfing's a lot like blogging. Golf, blog, both four-letter words. Both addictive hobbies. Both require minimal physical conditioning, and both go better with a few beers. Both rely heavily on links. And both provide ample opportunity to break out one's Bill Murray impersonation.

In sporting news closer to our hearts, the Flyers split the first two games of their best of seven conference quarterfinal series with the Capitals, largely by keeping the superhuman Alexander Ovechkin in check for about 114 out of a possible 120 minutes. This blogger is sticking to his Flyers-in-5 prediction.

On to the industry news where a few tidbits have begun trickling out of AACR, more news outlets are picking up on the newly infamous Vytorin "minutes", and the New York Times is running a front page story about a new pricing system for expensive medicines that is quickly becoming popular with insurers. Not so much with patients, whose co-payments are skyrocketing under the new system. Says the Times: "The system means that the burden of expensive health care can now affect insured people, too." Moving on ...

• Woe is UK biotech, repeats the Telegraph, which recounts some of the sub-sector's sadder stories. For companies to succeed they'll need new sources of finance, the piece points out--Plethora's Paul Capital deal (DOTW'd here) is the latest example of such creativity.
  
• Reuters notes that although inhaled insulin might be dead (or if you're Mannkind, not quite), but plenty of firms are still interested in inhalation delivery of other proteins. Maybe so, but chances are the safety hurdle for such therapies just got a bit higher, and post-marketing surveillance could be onerous.
  
• Plenty of news out of the big AACR meeting in San Diego. Amgen presented data on some preclinical anti-angiogenesis compounds; Introgen presented preliminary Phase III data for its Advexin head and neck cancer candidate; Infinity presented preclinical data on its IPI-926 Hedgehog antagonist. Follow all the news here.
  
• So I jump ship in Hong Kong and make my way over to Tibet, and I get on as a looper at a course over in the Himalayas. A looper, you know, a caddy, a looper, a jock. So, I tell them I'm a pro jock, and who do you think they give me? The Dalai Lama, himself. Twelfth son of the Lama. The flowing robes, the grace, bald... striking. So, I'm on the first tee with him. I give him the driver. He hauls off and whacks one - big hitter, the Lama - long, into a ten-thousand foot crevasse, right at the base of this glacier. Do you know what the Lama says? Gunga galunga... gunga, gunga-galunga. So we finish the eighteenth and he's gonna stiff me. And I say, "Hey, Lama, hey, how about a little something, you know, for the effort, you know." And he says, "Oh, uh, there won't be any money, but when you die, on your deathbed, you will receive total consciousness." So I got that goin' for me, which is nice.

Masters photo from flickr user John Trainor used under a creative commons license.

Dead AIR?

Alkermes said today that it expects Eli Lilly to discontinue the companies' AIR Insulin collaboration:

Lilly has informed Alkermes that it is evaluating its business case for AIR Insulin and Alkermes expects Lilly to make a decision to discontinue the program in the next week. Alkermes is not aware of any safety, efficacy, or manufacturing issues that have arisen regarding AIR Insulin since Lilly’s last public update on the program.

Loyal IN VIVO Blog readers won't be completely shocked--over the past few months in our writing and reporting on the demise of Exubera we've noted repeatedly the current difficulties associated with drug delivery in general and the problems with succeeding with inhaled insulin specifically.

We expect Lilly is treating Alkermes a bit better than Pfizer treated Nektar--perhaps avoiding some Howard Robin-esque harsh words and a $135 million "i'm sorry" payment.

Since this is Lilly's proprietary insulin, Alkermes presumably isn't even getting back a partnerable asset on the cusp of finishing Phase III development, with a means of delivery much more discreet than the much-maligned Exubera inhaler.

Your move, Mannkind.

UPDATE: It's official, says Lilly.

Nektar Takes A Deep Breath

Deep breath in. Deep breath out. Nektar execs, have you found your quiet place, yet?

It's been a stressful few months for Nektar employees. The company's 13-year marriage with Pfizer soured last October when the pharma unexpectedly decided to stop selling its inhaled insulin Exubera. True, Pfizer did cough up a hefty divorce settlement--a $135 million forgive-me gift, plus a promise to help with insulin supply and on-going clinical trials. (For more on the future of inhaled insulin, see here.)

Yesterday came the news that Nektar is eliminating approximately 150 positions--110 existing jobs plus 40 unfilled openings--as it restructures the company to "transition form a drug delivery service provider to a therapuetics drug development organization." In addition, the company announced that Hoyoung Huh, the company's COO and head of its pegylation business unit, is leaving to become CEO of BiPar Sciences, an up-and-coming biotech developing oncology therapies.

We've said it before. (No doubt, we'll say it again.) It's a terrible time to be in drug delivery. Making money in this space has always been tough--it's not enough anymore to take an existing molecule and dress it up with a PEG molecule to extend its shelf-life or aerosolize it for delivery to the lungs. Payers and physicians want proof that a new formulation isn't just convenient, but that it's superior to existing available medicines. As David Steinberg, an analyst with Deutsche Bank, told START UP in December: "The old model of drug delivery is completely broken down. To be successful you have to think far more innovatively."

Thing is, it takes a lot of money--and risk--to engineer a delivery system robust enough to deliver a real therapeutic advantage. Look at the field's lone success story in recent years--XenoPort. The company's share price has increased more than six-fold since its 2005 IPO, thanks to the success of its gabapentin pro-drug, XP13512, for restless leg syndrome and neuropathic pain. Last February GlaxoSmithKline agreed to fork over $75 million in cash and another $500 million in development, regulatory, and sales milestones for the compound. (Just for the record, Xenoport raised approximately $270 million in equity capital and another $160 million from partners to get enough data to convince the pharma of XP13512's value.)

So, the big lesson from XenoPort's success? Delivery technology ain't enough. XenoPort was only able to sign this monster deal with GSK because XP13512 is a new chemical entity with hard-to-duplicate molecular advantages. (The nifty formulation technology is an added bonus to investors -- a key part of its discovery platform.)

Of course, there is a corollary to this lesson (This IS a Windhover publication.) To be successful in drug delivery today means spending research dollars on two fronts: not only do you have to spend money to engineer the delivery system, but you also have to spend money to discover and develop novel, first-in-class or best-in-class compounds. Which leads this IN VIVO blogger to wonder, why even bother with the delivery piece of the puzzle?

Seem's like Nektar's board and CEO, Howard Robin, have been asking the same question. As part of the company's restructuring, Robin noted in a press release that "We are transforming Nektar into a world-class drug development company."

My friends and colleagues know I'm a big believer in the "I think I can" strategy. But it's tough to see how Nektar's transformation will occur near term. True, the company's inhaled amikacin, which is being co-developed with Bayer AG, is expected to enter Phase III clinical trials later this year, and its two leading PEGylated small molecule programs, PEG-irinotecan and oral PEG-naloxol, just entered Phase II clinical trials. But will there be the leadership to push these two products through development now that Nektar's PEG champion and resident brainiac, Hoyoung Huh, is jumping ship to take the helm of BiPar Sciences?

Maybe "the decision to step down as COO was a difficult one," as Huh asserts in another press release issued today. After all, he hasn't severed ties with the company completely. He'll be serving on the company's Board of Directors until 2009 or until a replacement has been identified according to SEC documents. Or maybe, Huh, whose CV lists an MD, a PhD, and a stint as a McKinsey partner, saw the darkening skies and approaching stormy seas and left for the relatively calmer waters of private biotech.

February 27 should be an interesting day. That's when Nektar will release results for the fourth quarter and full year of 2007. Meantime, Nektar employees, remember: deep breath in; deep breath out.

Photo courtesy of Flickr user Transguyjay through a creative commons license.

Novo Scraps Inhaled Insulin

The dismal failure of Pfizer/Nektar’s Exubera loudly called into question whether inhaled mealtime insulin was commercially viable at all.

The answer—surprise, surprise--is that it’s not, at least according to Novo Nordisk. The Danish firm announced last night that it was scrapping its Phase III inhaled insulin program, which uses Aradigm’s AERx liquid aerosol system.

The slight irony here is that the (already painfully delayed) AERx program was killed because it failed to show “sufficient clinical or convenience benefits” over the various insulin analogs already available to patients—including, prominently, those using Novo’s own FlexPen, a discreet and simple-to-use injection device.

Novo’s decision doesn’t mean that other late-stage inhaled insulin wannabes, including Lilly/Alkermes and MannKind will follow suit. But as we argued in this IN VIVO feature, Pfizer’s snafu means the going will be tough. Novo was at best going to be third to market, and the brick-sized device (far larger than Lilly/Alkermes’) had long been recognized as a problem—that’s why Novo had begun a next-generation program in-house. And the product required refrigeration.

So the writing was on the wall. In fact it’s somewhat of a relief that Novo has finally put this long and expensive project to bed, taking a non-recurring cost of about $260 million (DKK 1.3 billion), which will hit 2007 operating profit. Mads Krogsgaard Thomsen, CSO and EVP of Novo Nordisk had already last year acknowledged that “this is not going to be a huge product.” Now it won’t be one at all.

Not that this spells the end of pulmonary delivery for Novo. The problem with all of the current batch of inhaled insulins, according to Thomsen, is that they’re short-acting, meal-time insulins that must be taken alongside basal insulin—the ones available with tiny, pain-free injection devices. Exubera's failure showed that patients (and payors) understandably, were reluctant to add onto that regime something even more complex. And Pfizer, for reasons we outline here, failed to reverse the treatment sequence by persuading physicians to prescribe insulin earlier on.

So given that meal-time insulin is typically a fifth or sixth step in diabetics’ chain of medication (which progresses from diet-and-exercise, through oral anti-diabetic drugs to GLP-1s and then basal insulin) why did drug companies focus their inhaled efforts on this and not basal insulin? “Becase we had no choice,” says Thomsen, technological limitations meant that prandial insulin was the only one which could be formulated for inhalation.

Those limitations are no longer, he continues. Novo now intends to focus on developing pulmonary forms of basal insulin and GLP-1. We outlined in a feature last summer the importance of glucagon-like-peptide (GLP-1) analogs (and Phase III GLP-1 analog liraglutide in particular) to Novo’s business, so it’s no surprise that GLP-1s feature in the firm’s fresh set of pulmonary delivery plans.

These are a way from the market, however—liraglutide itself can’t be formulated for inhaled delivery because its half-life is too short; nor can Lilly’s first-to-market Byetta. Still, “we’re not starting from scratch, either; we have an inhaled, bioavailable GLP-1 candidate in late-preclinical trials,” asserted Thomsen on a conference call following today’s news.

Novo’s shares were down nearly 4% this morning; chances are Aradigm might have a bad day when the US exchange opens. But Novo’s put on a brave face. “We’re going from being followers in a commercially unattractive area, inhaled meal-time insulin, to leaders in a highly commercially-attractive area—a new generation of inhaled long-acting basal insulins and GLP-1 analogs.”

While You Were Making History*

755*

IN VIVO Blog picked up on a few news items you may have missed over this fine summer weekend.

• The irony. Foot and mouth disease is back in Britain--though so far confined to a small area near the twin Pirbright laboratories of the UK's Institute for Animal Health and Merial Animal Health (a veterinary JV between Merck & Co. and Sanofi-Aventis).


• The agony. Mannkind is having trouble licensing its inhaled insulin product, the company's CEO said on Friday. The company's shares fell like they were whacked over the head with an Exubera bong. Wait, they were?


• The ecstacy! OK maybe not ecstacy, because we couldn't find anything resembling such excitement. But spending $16 billion (or selling out for $16 billion) must feel pretty good. The WSJ is reporting this morning ($ sub. reqd.) that Akzo Nobel is spending its Organon cash as ICI will accept a sweetened takeover offer.
  

(AP Photo/Chris Carlson)

Sorry, I Still Don’t Get It

Pfizer launched its first TV campaign for Exubera this past week in an attempt to breathe a little life into the stalled inhaled insulin brand. And with just $4 million in quarterly sales after 18 months on the market, Exubera needs all the help it can get.

But will the “Now I Get It” campaign be enough to put Exubera on a faster track? As we pointed out in an IN VIVO article in May, Exubera has some pretty major marketing hurdles: 1) it’s not clear that inhaled insulin is any more effective than the injectable stuff; and 2) there’s that pesky long-term pulmonary safety signal.

But perhaps the biggest hurdle is the size of the inhalation device. As big as a can of tennis balls, it’s not exactly something you’d like to whip out at a restaurant. Pfizer tries to dispel that notion in the commercial: a man is shown holding and closing the device while having a meal with a friend—but in such a way as to disguise the actual size of the thing.

The size problem isn’t new: as reported by The RPM Report, during FDA’s 2005 advisory committee review of Exubera, one panelist noted that despite the increase in “metrosexuals carrying purses,” the inconvenience of carrying the device may actually prevent patients from complying with their treatment regimen. Embarrassment also may be a factor: as the Pharma Marketing Blog points out, the inhaler looks like a large bong.

It’s also interesting to note that the commercial doesn’t ever discuss the convenience factor of inhaled insulin—in fact, the word “needle” is never uttered. But maybe that’s because for the majority of patients, inhaled insulin can’t replace injections. Instead, Pfizer sells Exubera as a treatment to help control blood sugar levels.

Inhaled insulin should be an easier sell, and with a number of other inhaled insulin products coming down the pike (all with smaller inhalation devices), Pfizer is running out of time. It’s a slick commercial, but it’s doubtful that the introduction of DTC ads for Exubera will help Pfizer overcome device envy.

But hey, don’t take our word for it: judge for yourself. To see a clip of the broadcast ad, click here, and tell us what you think.

A Boon for Byetta?

As doctors, patients and regulators rush to make sense of the recent NEJM study showing an increased risk of heart attack among patients taking GSK's Avandia, it looks like good news for Lilly's Byetta.

The GLP-1 analog--or 'smart drug', as Lilly execs like to call it, since it stimulates insulin secretion in a glucose-dependent way, reducing the risk of hypoglycemia--has already done pretty well since its launch in June 2005. It suffered a brief blip in sales when Merck's DPP-IV inhibitor Januvia arrived (since Januvia, although less effective, comes in pill form and Byetta is a twice-daily injection) but has since recovered. Sales will be about $700 million this year.

And things can only get better. "Both Januvia and Byetta will benefit from Avandia's problems, and as physicians see that Januvia isn't that great, they'll move to Byetta," David Kliff, publisher of Diabetic Investor, told the IN VIVO Blog.

Januvia seems safe--so far--but doesn't actually work that well, as we explained in a previous issue of IN VIVO. Byetta, on the other hand, not only is extremely effective at controlling blood sugar (it prevents sugar lows plus, because of its effect on glucagon, sugar highs) but also helps diabetic patients lose weight.

And that, frankly, is just perfect, since many diabetics are overweight, and since insulins tend to exacerbate that problem. So rather than being stuck on insulin, getting fatter and with poorly controlled blood sugar levels (only about a third of insulin users actually control their blood sugar effectively), patients "start a cycle of success," enthuses Lilly's global brand development leader for Byetta, David Vondle. "They have more energy, start feeling better, so they take a walk, and that helps with weight loss...and they're just more optimistic," he says.

Lilly's GLP-1 team probably feels pretty happy, too (unlike their cousins in the insulin department, who blew it). Not only has first-to-market Byetta brought a huge improvement to patients' lives, but there's an even bigger paradigm-shift on the way: a once weekly Byetta. "Every doctor is salivating for Byetta LAR," says Kliff.

They'll have to salivate until 2010, but it may be worth the wait: patients will be able to take just one weekly injection, rather than twice daily. That's 13 fewer injections per week.

That's a selling point if ever there was one. And, as with Avandia, where there's a winner, there's a loser. In the GLP-1 space, it might just be Novo Nordisk's human GLP-1 analog, liraglutide. It's due out a year or so before Byetta LAR, but Novo's not always the timeliest, and liraglutide is a once-daily. Read more in the next issue of IN VIVO.

Europe's Best-Kept Biotech Secret?

European investors pining for a biotech champion used to muse about the lack of a Genentech- or Amgen-equivalent on the Continent. (Despite Amgen's recent woes--of which you can read a detailed analysis in May's IN VIVO--a few probably still wish for one.)

But maybe some are overlooking what’s in their own back-yard. Shares in Denmark’s Novo-Nordisk have almost doubled in the last two years as the firm has quietly pushed to number one in the insulin market, beating big guys Eli Lilly and Sanofi-Aventis.

With sales of €5 billion ($10 billion) last year, and a market cap just short of $40 billion, Novo’s only half an Amgen. But its challenges aren’t half as big, either.

For one thing, Novo doesn't face a Mircera-equivalent competitive challenge to its insulin portfolio. Nor does it face safety issues--in part since insulin isn't widely used in indications outside diabetes. Insulin's also less expensive than many other protein drugs, so, although on payors' hit lists for bio-genericization, it faces not quite the same reimbursement risk as EPO. (That's probably why insulin is almost completely absent from European biosimilar firms' pipelines.)

Although patents on basic recombinant insulin are long gone (while Amgen still holds on to EPO and sons), engineered analogs have a while to run. And anyway, new entrants still struggle, it seems, even Pfizer-sized ones.

More importantly, the glucose-control pathway offers a related protein, GLP-1, for Novo to take mastery of. Glucagon-like peptide is a hormone that enhances insulin secretion in a glucose-dependent way. Shame for Novo that Lilly and Amylin are already there, selling first-in-class Byetta and doing fine, thank you.

Still, Novo's CSO Mads Thomsen told the IN VIVO Blog they can do better with likely second-to-market GLP-1 analog liraglutide; in terms of administration, dosing and side-effects. Meantime Novo is hedging its bets in the growth hormone space, in hemostasis management, and with newer efforts in inflammation and cancer.

But unlike Amgen, whose pipeline betrays a future with many more small molecules, and in many more therapeutic areas, Novo is sticking to its core capabilities—protein engineering. That’s why it yanked its oral anti-diabetic efforts in January (too competitive, too genericized, and what can follow Merck's Januvia anyway?).

Novo needs liraglutide to work as well as says it does. But if liraglutide does come good--we could know early in the second half of this year when the first batch of Phase III data is due--Novo may yet be likened to Europe’s Amgen. Albeit, perhaps, the Amgen of last year, not this year.

More Insulin Problems

Pfizer isn't the only company having problems with an alternative delivery form of insulin.

Emisphere Technologies has been working on oral insulin for more than a decade--and finally its board got fed up.

In October 2006, the company reported disappointing Phase II results with its oral insulin--no difference from placebo. The stock tumbled by more than 50%. By January the long-time CEO, Michael Goldberg, MD, was out. The firing was led by Mark Rachesky, who joined Emisphere's board in 2005 when his fund, MHR Institutional Partners, loaned the company $15 million, later changing the straight debt to a convert--at $3.78 a share. That's unprofitably close to the company's current stock price (and less than half the Emisphere price when Rachesky did the covert deal).

Goldberg was blamed for poor execution of the key trial (as well as the fact that the company hasn't made much progress in its nearly nineteen years of life). The original trial design called for the oral insulin to be tested in very sick but stable patients; to accelerate the enrollment, the company apparently relaxed the criteria. In a subsegment look at patients who met the original criteria--an often unreliable analysis--oral insulin apparently did perform well. But now the company needs a new trial to prove the point. And this isn't the first trial that wasn't well executed: its oral heparin test was hurt by a poor liquid formulation whose taste turned off patients.

The company is by no means dead--it's managed to hire a new CEO, Michael Novinski, the former president of Organon USA. And it's brought on a board of big-name diabetologists to advise it on trial design and execution. It's got a new formulation with apparently three times the absorption of the older version--thus reducing cost-of-goods and increasing patient convenience.

But oral insulin won't win on convenience. And it won't win by eliminating the pain of injections. New smaller needles make taking insulin relatively painless. The big advantage will be eliminating embarassment, says one insider: "What diabetics hate is at a restaurant having to pull up their shirt and stick themselves in the stomach with a needle." Exubera doesn't solve that problem: puffing on a big device is no less inconspicuous than sticking one's belly with a needle.

A pill should be a lot more acceptable. And yet that's not enough. The market for insulin reformulations is being shaved by better needle technology and by new products, like the injectable Byetta and the oral Januvia. And as Pfizer is learning from Exubera, managed care doesn't want to pay for convenience. Emisphere's product, to be truly important, will have to show better outcomes. It may be able to get on the market by showing equivalency to injectable insulin--but to make Emisphere, and oral insulin, a success, it will need to keep diabetics healthier, too. That's a much more expensive task than most proponents of oral protein delivery ever figured they'd have to accomplish.