GSK’s Tempero: Pushing Entrepreneurialism to the Limit?

We’re not sure why they didn’t shout about it, but GlaxoSmithKline has, according to a report in Xconomy last week, stealthily launched Tempero Pharmaceuticals, a Cambridge, MA-based start-up focused on regulatory T-cells for treatments in auto-immune disease and inflammation.

Jose Carlos Gutierrez-Ramos, head of the Immuno-Inflammation Center of Excellence for Drug Discovery at GSK that has seeded this newco, had flagged up the project to IN VIVO for this February feature. We blogged it here, too, but heard nothing since.

And yet “this is a very exciting project for us,” JC confirmed today to The IN VIVO Blog. Indeed, Tempero—though not technically a spin-out—takes GSK’s ongoing Drug Performance Unit (DPU) R&D experiment a step further. Need a refresher? The Big Pharma is already trying to foster a biotech-like culture internally, through the creation last year of these small, pathway-focused DPUs, each on a three-year funding cycle overseen by an investment board that includes a couple of external CEOs and VCs too.

Tempero, though, is (or will be) a fully external DPU—the plan is to bring VCs in on a later B round. If they come, that would provide the sort of outside validation GSK’s after for what will become GSK assets. Gutierrez-Ramos explained in February that GSK will buy back those investors at a certain return—granted, presumably, clinical milestones are met—thus providing them with a pre-determined exit.

"Pre-determined exit" and "certain return" probably sound rather sweet these days to VC ears. The devil is in the detail---figuring out what return will be enough for the VCs, and worthwhile for GSK. And the timeframe for all this.

GSK isn't commenting on any of those questions, or indeed on Tempero, other than to say that:

".....GSK has created a new Discovery Performance Unit which will be a separate company dedicated to researching and discovering small molecule drug candidates targeted to regulatory T-cells and effector Th 17 cells, which are thought to play a key role in autoimmune diseases. We believe its planned status as a stand alone company will stimulate innovation and provide the flexibility to respond to research leads, thus creating the best chance of success."

Of course, the point for GSK is to share more R&D risk, as it and other Big Pharma are doing as much as they can, including via the increasingly popular option-based deal structure. In this case, though, rather than share risk with an existing biotech partner, GSK has created one itself and gone directly to VCs to unload risk—since it apparently couldn’t find an existing company with the focus it was after.

Gutierrez-Ramos earlier described the Tempero set-up as “pushing entrepreneurialism to the limit,” and “forcing these guys [within the company] to deliver.” Just how much forcing the external VCs will need isn’t clear, but hopefully GSK will have more to say at that point.

image by flickrer su-lin used under a creative commons license

Novartis Puts Its Money Where Its Mouth is, Too

Last month we heard about how Proctor & Gamble and partner Sanofi-Aventis have agreed to reimburse a health insurer, Health Alliance, for the costs of any fractures suffered by patients taking osteoporosis drug Actonel. That’s putting one’s money where one’s mouth is, as P&G’s NAM general manager pointed out in this NYT piece.

Now you've of course read all about the pay-for-performance style deals that are increasingly popular in Europe—whereby, for instance, a company agrees to re-fund the cost of a drug if it doesn’t work, or help pay for part of it. But the Actonel deal is a bigger deal: it’s pay-for-non-performance. That could get expensive. We’ve no doubt that P&G/Sanofi have gone mad with their small-print. But still, this is potentially the top of a very slippery slope for drug firms in their desperate bid to win favorable coverage.

Turns out Novartis is doing something similar with its own bone drug, Reclast—this time in Europe (where it’s sold as Aclasta). The Swiss firm is running two pilot studies, in Germany and Italy. According to Joe Jimenez, CEO of Novartis Pharmaceuticals, “we pay for hospitalization and nursing care if there’s a fracture” for patients taking Aclasta, which is given as a once-yearly infusion.

That’s faith in the product for you—given that Novartis won’t easily, with a once-yearly infusion, be able to claim non-compliance. (P&G/Sanofi might: Actonel is once-weekly.) And indeed, Jimenez was quick to add that he “does not see more broad-scale use” of such programs (even though the pilots, running for one or two years, are not yet complete). “Reimbursement is not going to be an issue for us” in the US, he argues. “The drug stands on its own benefit. Clinical evidence of efficacy tends to be enough.” (Though not, apparently, in Italy and Germany.)

Still, one big reason these companies are bending over backwards to get their drug nicely fitted into formularies and onto reimbursement lists is the imminent arrival of Amgen’s denosumab, currently under FDA review but expected to be approved before year-end. That drug is the company’s future, and you can be sure it will market the hell out of it.

Amgen’s most obvious trump: denosumab is not a bisphosphonate like Actonel and Reclast. D-mab builds up bone, rather than preventing its breakdown. (For more on future osteoporosis drugs, read this.) It also thus circumvents the bad bisphosphonate press that is emerging after many years of market usage: osteonecrosis of the jaw, bone pain, ‘frozen’ bone…all thought to be a result of blocking the normal bone regeneration process over the long-term.

Now sure, both Reclast and D-mab are really looking to take share from oral bisphosphonates which account for over 90% of osteoporosis sales volume. But if there’s only a bit of share to go around (and let’s face it, with generic Fosamax about, oral BPs aren’t going to go away) Novartis will be up against Amgen big time. “And you can assume we’ll aggressively defend what we’ve built” asserts Jimenez, in case it wasn’t clear. He points to Reclast's good fracture reduction data (he’s right; D-mab doesn’t beat it), and the drug’s once-yearly administration. But convenience isn’t going to be the trump-card for a 15-minute infusion given in specialist centers only—not over a twice-yearly subcutaneous injection.

The trump card for Novartis may well be denosumab’s as-yet-unknown long-term safety profile, particularly as, according to Jimenez, the drug “is still in the system after six months, unlike Reclast which is cleared within 24 hours.” BPs long-term safety may not be great, but in such matters it might be a case of better the devil you know--and of putting your money where your mouth is.

image by flickrer johnmuk used under a creative commons license

NICE Deal, Celgene

We imagine that Celgene is pleased with its cost-sharing scheme around multiple myeloma drug lenalidomide (Revlimid), approved, at least provisionally, by the UK cost-effectiveness watchdog NICE.

Having failed to get its GBP4,300-a-month drug past NICE the first time around, Celgene had a re-think, and came back with a plan. The UK's National Health Service, it suggested, should pay for the drug for 26 treatment cycles--that's about two years' worth--in those patients with previously-treated disease. Celgene would fund the drug (used in combination with dexamethasone) in patients benefiting from it thereafter.

Sound fair? The thing is, that the median time to progression figure for patients with this disease, as per trial data presented by Celgene to back up its submission, is 11 months. (TTP is what's typically used to determine whether patients continue to receive a therapy--in other words, whether it's working). So Celgene's onto a good deal, right, since it won't have many patients to fund?

Wrong, argues Celgene. It's just not possible to find the true median TTP or overall survival data from these trials because of limited follow-up and patient withdrawals. So Celgene used a model to extrapolate what is sees as more accurate TTP and survival data. That, is says, reveals that 15-20% of patients may continue to benefit from the drug beyond 26 treatment cycles. Even that estimate, the company argues, might be too conservative, since much existing overall survival data is based on current clinical practice, whereby Revlimid, an immunomodulatory agent, isn't part of the mix at all.

Those arguments were clearly sufficient for NICE (although it's worth mentioning that the agency has been under significant pressure to make a popular decision in recent months). And Celgene had two major tailwinds helping it: a) Recently-issued NICE guidance on end-of-life medicines, which relaxes the cost-effectiveness criteria for products that extend life for those with terminal diseases affecting fewer than 7000 new patients each year, and b) simple administration.

Celgene will administer the 'you-pay-then-we-pay' scheme itself, and easily, piggybacking on the drug's existing risk minimization plan, which is a condition of its license. (Since the drug is related to thalidomide, it must not be used in pregnant women.) That's a big deal, since the main barriers to any risk- or cost-sharing scheme in the UK, as we suggested in a previous post, appear to be practical ones.

Some critics say that NICE is bowing to popular pressure, with this and with recent revised guidance around kidney cancer treatment Sutent. That's a shame, they continue, because if Obama does copy it or any aspect of it in the US, he should copy the old NICE, not what some describe as the more submissive new one.

Now sure, with more risk-sharing proposals on the way, its value-assessment methods under scrutiny, plus the bunch of other responsibilities that come with its increased influence on drug pricing, NICE is going to have to be smart. (We'll have more about this in the next edition of The RPM Report.) But it's hard to argue with the ethics of providing end-of-life medicines, and of increasing patient access. It's also hard to argue with the economic benefits that come to Britain if access improves. Besides, at least companies and the UK Department of Health are engaging on such matters, even if the outcomes may appear, to some, to favor one side or the other.

More Velcade-Style Risk-Sharing in the UK?

It appears that Janssen-Cilag feels a lot better now about its pay-for-performance scheme around multiple myeloma drug bortezemib (Velcade) than it did when the program was introduced in 2007.

The Velcade Response Scheme (VRS) came about out of desperation: cost-effectiveness watchdog NICE had turned down the drug as too expensive, so Janssen-Cilag, to its credit, said to the UK’s state payer, the Department of Health, ok, well if we promise to charge only when the drug is effective (and refund you if not), then will you give this to patients?

The answer was yes. And now, not only have all of the UK’s Primary Care Trusts have signed up to the VRS, according to a Janssen spokesperson, but this scheme “may now be a good example of how a performance-based scheme could be structured.” That’s not a statement from Janssen; it’s from a position document issued last year by the British Oncology Pharmacy Association on risk-sharing schemes.

Indeed, such schemes have, perhaps inevitably, become a rather more regular feature of the UK drug landscape—making Janssen feel more pioneering than desperate (though Janssen isn’t the first to guarantee performance; Pfizer tried with Lipitor too).

Most of the other recent flavors of risk-sharing programs around expensive cancer drugs emerged, like VRS did, as a result of a negative NICE appraisal. Merck-Serono offered the Cetuximab Cost-Share Program around Erbitux in metastatic colorectal cancer, which involved refunding primary care trusts the cost of any vials of the drug used for patients that fell into a pre-agreed ‘non-responder’ category at up to 6 weeks. Roche instigated the ‘Tarceva Access Program’ for its NSCLC drug erlotinib, offering a rebate, in the form of a credit note against any future Roche purchase, for the amount that the drug cost over and above the cost of the incumbent NSCLC treatment docetaxel (Sanofi-Aventis' Taxotere) for an average patient duration (with an upper limit on the total number of packs).

Now granted, Roche’s program was initially introduced as a means to claw market share off docetaxel, which it was struggling to do ahead of NICE guidance. But when NICE found Tarceva to be un-cost effective—with questions around the lack of comparative data with docetaxel in particular--the scheme was formally proposed to NICE as part of a re-review. In November 2008, NICE issued positive guidance—but only on condition that the overall treatment cost remained in line with that of docetaxel. Roche had to drop the price by about 7.5%.

Critics say such programs are simply a way for industry to coerce NICE into a ‘yes’. Maybe. But there’s no denying that such schemes represent a logical way to improve patient access without breaking the bank. Indeed, the new UK drug pricing contract, the PPRS, formalizes a bunch of patient access schemes, including risk-sharing programs. And NICE, as we heard from CEO Andrew Dillon last week, would prefer such schemes to be proposed up front, before a drug is submitted for review, rather than as a last-resort of the drug fails the cost-test.

Small wonder, then, that in the last three or four months since the PPRS was published, the department of health has been in contact with various companies about schemes around several “high profile” drugs, according to David Thomson, Lead Pharmacist at the Yorkshire Cancer Network and author of the BOPA position statement.

The big problem is administration. As it is, it’s complex to administer rebates and track outcomes. The more different schemes are available, the harder that becomes. “Anecdotal evidence suggests that the VRS [and a similar scheme around Sutent] aren’t necessarily bringing the expected levels of financial benefit to the National Health Service,” Thomson told The IN VIVO Blog.

Add to this the problem of patchy uptake or availability of some of the existing handful of programs across the country, and the possibility of multiple risk-programs across a single drug for different indications, and it’s easy to see why BOPA's pushing for some sort of risk-sharing plan template....and why we may not, after all, see a flood of VRS-followers soon.

image by flickr user fboosman used under a creative commons license

(Final) Deals of the Year Nominee: Lilly/TPG-Axon/NovaQuest

Ah, awards season. Why should film critics have all the fun? And voting! It's not just for presidential elections. This year your IN VIVO Blog team is nominating a handful of alliances, acquisitions, financings, regulatory negotiations and legislative compromises in our First Annual DOTY competition. And then you, dear readers, will vote (early and often, we hope) for the winner. Imaginary federal and international biopharmaceutical statutes prohibit us from awarding a monetary prize. But our winners, when they die, on their deathbeds, they will receive total consciousness. So they've got that going for them, which is nice.

Aaand, last but not least: It's not just cash-poor biotech firms that need the occasional helping hand to finance their drug development efforts. Even for the likes of Eli Lilly (and, say, Bristol-Myers, which has blazed this particular trail among larger companies), hedging pre-market risk is part of the game plan when cash is becoming more expensive and clinical development and regulatory affairs more uncertain.

In July, Lilly announced an agreement with TPG-Axon Capital and Quintiles Transnational Corp.'s NovaQuest partnering group under which Lilly's partners will pay up to $325 million in development funding for its two lead Alzheimer's disease compounds, a gamma secretase inhibitor and an A-beta antibody, each ready to begin Phase III testing.

In exchange, TPG (which provides the bulk of the capital) and NovaQuest (10% of the funding and strategic development advice) will receive success-based milestone payments and mid-to-high-single-digit royalties on future sales of the two compounds. Quintiles CRO arm will act under a traditional fee-for-service contract. Finally, to sweeten the deal and hedge the risk shouldered by TPG and NovaQuest, those partners will also receive an additional undisclosed royalty on a third, unidentified product that Lilly has out-licensed to a third party. (See our coverage of the deal here.)

Not to show you how the sausage is made, but there was some internal dispute here at IVB over what this deal signifies within pharma, if not its overall importance.

See, on one hand, the deal is forward-thinking and increasingly necessary in a difficult R&D climate; with the cost of capital increasing even for the likes of Lilly and its Big Pharma brethren it allows Lilly the flexibility to take multiple shots on goal in Alzheimer's or other diseases. It's also the first publicly announced deal (we've heard rumors of deals signed but still private) in which a private equity player takes a big financing role in a Big Pharma's development program -- something they've done in small and mid-sized companies (e.g., Symphony Capital) but which Big Pharma has always shunned.

There will now likely be further variations on this theme: former AstraZeneca CFO, now Goldman-Sachs partner Jon Symonds says he's working on putting together a pool of PE capital for developing Phase I and II Big Pharma (and maybe other) compounds, which could be pulled together as soon as January. That structure, incidentally, addresses one of the big problems for PE players (and probably one of the big sticking points of the Lilly/TPG negotiations, which apparently took about a year and a half): how do you put together a marketbasket of enough develop-able compounds to offset the awful odds facing any single on of them. The drug company wants to put as few as possible in the basket; the PE investor wants as many as it can get.

On the other hand, there is something odd about offering deal-of-the-year honors to a Big Pharma company for creative financing to mitigate risk during the year when a lot of people who are supposed to be the experts in this kind of thing are bankrupt, unemployed--or begging the taxpayers for assistance.

And it is especially odd, given that (as we wrote here) Lilly is a model of a Big Pharma company that is focusing on innovative products--rather than diversifying into OTCs or related business like some of its peers. The logic of focusing--that investors want to diversify for themselves, rather than turn their money over to Novartis management to diversify for them--seems to apply here too. Shouldn't Lilly's investors just hedge for themselves, rather than have Lilly management do it for them?

Still, everyone agrees that the deal allows Lilly to shed risk (in return for a smaller reward) in this notoriously difficult therapeutic space in a creative transaction that could prove to be a model for private equity/pharma deals going forward. It's just that we don't agree about whether that's a GOOD THING.

So there you have it--your last IN VIVO Blog Deals of the Year! Nominee. Got it in just under the wire. Why Lilly/TPG/NovaQuest? For the new-model dealmaking, for the sexy private equity angle. For the Controversy!

We'll see you later, at the ballot box.

image by flickr user jacob.theo used under a creative commons license.

Getting Out From Behind the Counter

So close, and yet so far away.

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

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

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

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

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

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

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

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

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

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

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

FDA’s Careful Reading of the EPO Market

The headlines today focus, quite logically, on the big question that the Food & Drug Administration will be asking the Oncologic Drugs Advisory Committee on March 13: should the approval of EPO (Amgen’s Aranesp and Johnson & Johnson’s Procrit) for use as supportive care in oncology be rescinded?

In briefing materials posted on FDA’s website today, the agency lays out the issues it wants the committee to discuss, including the possibility of removing the indication for use of the drugs in the cancer setting. (EPO products are also used to treat anemia in other indications, primarily kidney disease.)

The possibility of FDA withdrawing the approval of what has been a standard component of chemotherapy regimens for almost 15 years is truly astonishing to consider. But it is by no means surprising that the committee will be asked to discuss that possibility. When FDA announced the latest ODAC visit for EPO in January, the agency made very clear that it would be at least raising the possibility of withdrawing that indication altogether. (You can read our analysis of the issues at stake March 13 here.)

The more interesting reading for biopharma executives trying to make sense of the new drug safety climate comes in an appendix to the briefing materials, containing the review of potential risk management options for EPO by FDA’s Office of Surveillance and Epidemiology.

Assuming the committee supports leaving at least some oncology indications in place for EPO, the discussion will quickly turn to risk management options. And, as of the end of this month, FDA is armed with the power to make those programs mandatory.

The FDA Amendments Act, signed into law in September, spells out a series of tools that FDA can require as part of Risk Evaluation & Mitigation Strategies. What it does not do is spell out how, in practice, FDA will choose which tools to apply—and how to determine what is or is not an effective strategy.

That is where Appendix 2 in the briefing documents comes in.

To us, it reads like a case study in how the agency will define the metrics for success in REMS.

The message it sends is unmistakable: "success" for a sponsor facing a serious safety question looks an awful lot like failure in a commercial context. When FDA wants to know if a REMS is working, it will look at market data or other commercial tracking statistics for evidence that use is declining—either overall or in submarkets of concern.

The analysis is filled with market research statistics. The agency uses retail prescription data to look at how use of the drugs has been affected by risk management steps taken so far. The review acknowledges reimbursement changes by the Centers for Medicare & Medicaid Services as an important factor as well (though we would argue that CMS’ policy probably is the biggest reason for reduced use of EPO.)

But the agency drills down much deeper, looking into metrics like settings of use. Aranesp, FDA finds, is used most commonly in outpatient clinics (54% of vials sold), while Procrit’s largest in non-federal hospitals (39%). Outpatient pharmacies are relatively small markets for each brand, FDA notes. “Interestingly, the long-term care channel accounted for approximately 10% and 5% of sales distribution for Procrit and Aranesp, respectively.”

The agency also looks at indications associated with use of the drugs. “The top two diagnoses or indications associated with the use of Procrit and Aranesp as reported by office-based physician practices were ‘other and unspecified anemias’ (ICD-9285), and ‘chronic kidney disease’ (ICD-9 585), each accounting for roughly 60% and 12% of use during year 2007.”

FDA and the committee will discuss options ranging from informed consent procedures to “voluntary” limits on advertising to restricted distribution programs—including programs that would restrict use by setting of care or by indication. So data on prescription trends, settings of use and indications will be useful for determining what types of risk management tools might work—and, more importantly, for future assessments of whether the programs are in fact working.

And, let’s be blunt: until FDA has better measures it will be looking for less use of a product with safety considerations. That is one of the uncomfortable new realities of the era of REMS: investing in marketing campaigns that intended to produce overall reductions in prescriptions, reductions in off-label indications, or reductions in vials shipped to “interesting” submarkets, like long-term care.

Zyprexa Depot: The Real Meaning of Delayed Release

FDA’s “non-approvable” decision on Eli Lilly’s long-acting olanzapine (Zyprexa) depot reiterates the reality of the new "Safety First" climate: product labeling and educational programs simply aren’t going to cut it as a comprehensive risk minimization program--especially if there are acceptable and well-understood alternatives on the market.

Going against the recommendations of its advisory committee, FDA declined to approve the long-acting olanzapine injection yesterday, stating that it needed “more information to better understand the risk and underlying cause of excessive sedation events.” In clinical trials, 1.2% of schizophrenia patients became profoundly sedated one to three hours after administration—to the point where some slipped into a coma.

Lilly presented FDA with a risk management plan to address the excessive sedation risk, including a bolded warning in Zyprexa labeling, a recommended post-injection observational period and a patient and physician education program. The company also said it would continue to monitor sedation events via a 5,000-patient observational study.

FDA’s Psychopharmacologic Drugs Advisory Committee bought into the program, agreeing with Lilly that with the appropriate labeling around the excessive sedation events, Zyprexa depot was effective and "acceptably safe" as a schizophrenia treatment in adults.

But FDA ultimately disagreed, pointing to a case in which a patient became excessively sedated three to five hours after the injection—a significantly later onset than what had been seen earlier in clinical trials. For FDA reviewers, that event no doubt called into question whether Lilly’s proposed risk management plan could adequately protect patients.

The Zyprexa non-approvable decision provides an early look into how FDA will view risk management in light of its new drug safety authorities under the 2007 FDA Amendments Act. Under the new law, sponsors are required to submit Risk Evaluation & Mitigation Strategies for all new drugs, or provide a justification to FDA for why one is not needed.

Risk management isn’t new: drug sponsors certainly have experience with designing programs to minimize the risk associated with new products. But Zyprexa demonstrates that the old rules no longer apply—especially for a line extension of an already-approved product. FDA is raising the bar, and industry would be wise to act accordingly.