The Cost of Money

Just how tight is money in biotech?

Well, you could look at the number of companies trading below cash (81, per Rodman & Renshaw). Or the number of months without a significant US biotech IPO: 14, per Strategic Transactions).

Then there are the anecdotal measures. One recent anecdote of interest: Dyax’s $15 million debt royalty financing from Cowen. Dyax has been around forever (well, OK – since 1989) and hasn’t managed to get a drug to market yet (it isn’t alone in that, of course). It’s got one drug at the FDA now (DX-88, or ecallantide, for hereditary angioedema – an orphan drug candidate which hasn’t had the smoothest of development programs) and a couple of still preclinical candidates. But that’s largely because most of Dyax’s life was spent on developing its phage display technology and finding companies who wanted to exploit it.

The relatively predictable stream of revenues from the platform business, Dyax realized, could in fact help finance the pipeline and they turned to Paul Royalty, which in return for what now Dyax figures was a 25% IRR for Paul, borrowed $30 million against, and repaid through royalties on, the platform business’ proceeds (called the Licensing and Funded Research Program, or LFRP).

Fast forward two years. Paul Royalty’s Greg Brown has joined the newly set up Cowen Healthcare Royalty Partners and he does a new deal with Dyax – one that allows the company to pay off the final $35 million it still owed Paul with a new LFRP-secured $50 million loan, again repaid through royalties. The deal looks like a comparative bargain: a 16% interest rate (given the kind of money outfits like Paul could make, competition for providing royalty financing was getting competitive and rates were going down – see for example this piece from IN VIVO).

But now Dyax has gone back to the well, in a financing environment which has become considerably bleaker. Moreover, the future of Dyax’s big bet -- ecallantide – is looking a bit dicey. An FDA advisory panel voted that the drug’s risk-benefit profile supported approval in adults, but the vote was a narrow one (6-5, with two abstentions). They nixed approval for kids. Safety, they said, wasn’t adequately assessed – very tough in an orphan disease (See our Pink Sheet analysis).

Cowen’s loaned an additional $15 million to Dyax – but the interest rate is 34% higher (21.5% annually) and assures the financier of doubling its money, since Dyax can’t prepay the loan for 3½ years. Cowen also gets more security (it gets repaid with bigger chunks of the LFRP revenues) – and some upside through warrants.

OK, you gotta do what you gotta do. But let’s face it. Just as there’s no free lunch, there’s really no dilution-free financing, either. Especially now.

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

Seroquel Lessons: Raised Eyebrows and Furrowed Brows

The very interesting Washington Post front page story on March 4 about an unfavorable Seroquel study that may have been “buried” during clinical development ends with a comment from the principal investigator of the CATIE trial, the large NIH comparative trial of antipsychotics.

Post writer Shankar Vedantam says “Jeffrey Lieberman, a Columbia University psychiatrist who led the federal study, said doctors missed clues in evaluating antipsychotics such as Seroquel. If a doctor had known about Study 15, he added, ‘it would raise your eyebrows.’"

That’s an intriguing observation, especially since Lieberman was not only the lead investigator for the NIH study but also for a smaller comparative study commissioned by Seroquel manufacturer AstraZeneca which was conducted during the course of the large NIH comparative project.

As we wrote at the time of the first CATIE results in 2005, AstraZeneca was one of the most aggressive participants in the atypical antipsychotic field in its preparations for the release of comparative information from CATIE.

During 2003, while CATIE was already underway, AstraZeneca commissioned a 52-week comparative trial of Seroquel, Lilly's Zyprexa and J&J's Risperdal in first-episode psychosis, a trial that closely paralleled CATIE but compared a response in a category of patients that was excluded from the NIH trial.

Called CAFÉ (Comparison of Atypicals in First Episode Psychosis), AstraZeneca’s trial even echoed CATIE’s name. The two studies shared about 14 of the sites included in CATIE.

CAFÉ may have added information about another group of patients but it also improved the results for Seroquel noticeably and gave AstraZeneca something positive to say when the CATIE results were released.

The recent Post story raises issues about studies that might not have been reported to keep unfavorable information from the light of day.

The real world is even more complicated. As the CATIE/CAFÉ situation reminds, studies can be designed and run by similar teams that make it difficult to parse a useful meaning from the research. And that's an important message for the future.

During a period while the policy and budget communities in Washington are rallying around comparative effectiveness as a way to align health care spending with the most sensible and cost effective treatments, the CATIE experience is a useful warning of a tough road ahead for that effort.

Previous experience presages a particularly difficult path ahead for the advocates of comparative research as an educational tool – what could be called the Baucus school of comparative effectiveness.

The way comparative trials have been run to this point suggests there will be plenty of furrowed, confused brows in the future as well as raised eyebrows.

Harvard's Biederman: After Me, There Is Only God

Do you remember Joseph Biederman? (Hint: He's the guy pictured below left not the big man on the right.)

He's the Harvard University psychiatrist who is one of several prominent academics being investigated by the US Senate Finance Committee for allegedly failing to properly disclose payments from the pharmaceutical industry, while also conducting grants for the National Institutes of Health (see background).

In Biederman's case, he allegedly failed to fully report approximately $1.6 million in consulting fees from various drugmakers between 2000 and 2007, according to the committee. And court documents released late last year suggested he also pushed Johnson & Johnson to fund a research center at Massachusetts General Hospital that would advance J&J's commercial goals (take a look).

As a result, Biederman is currently enmeshed in litigation in the Superior Court of New Jersey, where three drugmakers - AstraZeneca, Eli Lilly and J&J's Janssen unit -are being sued in connection with risks associated with their antipsychotic medications. Attorneys for the families who filed suit fought to interview Biederman under oath because his work has been crucial to the widespread acceptance of the pediatric usage of antipsychotics.

Now, though, Biederman is hoping Superior Court Judge Jamie Happas will agree to have his deposition sealed, because he doesn't want the extent of his involvement with the companies publicized. However, we understand The New York Times is already gearing up for a story, which prompted Biederman's attorneys to write this letter to Happas.

What's in the deposition? Dozens and dozens of pages of detail relating to Biederman's activities, but we encourage you to peruse both sections of the document. (Please see here and here.)

One exchange in particular caused us to do a double take. On page 47, Biederman is quizzed about his professional ranking at Harvard. He notes that his resume is used for academic promotions.

Lawyer: "What does that mean?"

Biederman: "To move in the ranks from one rank, for example, at Harvard, there is instructor, from instructor you move to assistant professor, from assistant professor you move to associate professor, from associate professsor you move to full professor."

Lawyer: "Full professor?"

Biederman: "Hm...mmm."

Lawyer: "What rank are you?"

Biederman: "Full professor."

Lawyer: "What's after that?"

Biederman: "God"

Lawyer: "Did you say God?"

Biederman: "Yeah."

No mere key opinion leader is he.

If FDA Pulls a Drug, Which One Will It Be?

This podcasting stuff is fun, but sometimes we even surprise ourselves.

During our most recent IN VIVO Blog podcast, we (meaning my fellow podcaster Ramsey Baghdadi) made a bold prediction: that there will be a high profile drug safety withdrawal this year, in effect to make the point that it is no longer business as usual at FDA.

We (meaning me) were very surprised to hear that prediction, and frankly disagreed. Its not that we don't think the new FDA leadership will take steps to show its independence from industry, its just that it seems inconceivable that they would go to the extreme of pulling an FDA-approved drug to make that point. More Warning Letters, sure. Tough regulatory responses to manufacturing problems, yes. A clampdown on direct-to-consumer advertising, okay. Heck, maybe even putting a CEO in jail the next time sloppy manufacturing or unethical marketing causes patient harm.

But pulling a drug? That's crazy.

Then we started thinking about it a bit. If you had told us in 1990 that David Kessler would, as commissioner, pull a perfectly harmless national brand of orange juice from the shelves nationwide simply to make a point about truth in labeling, we would have called you crazy. But he did. (Remember Citrus Hill "Fresh" OJ? P&G does.) And he did as part of a frankly anti-regulatory Republican administration, no less.

So, given all the attention that the Democratic leadership in Congress has focused on drug safety--and especially on a few prominent examples where they view FDA as having failed in its public health mission--maybe it isn't so inconceivable that the new commissioner will end up pulling one to demonstrate unequivocally that the "old" FDA is gone forever.

Now, bearing in mind that this is pure speculation on our part, we then got to thinking: if FDA decided to go that route, which drug would they pull?

It isn't too hard to come up with candidates. To our mind, the criteria would be relatively simple: what are the drugs where Congress has raised the most concern, where the impact of a withdrawal would do the most to enhance FDA's credibility as a regulator (in the eyes of those who equate being tough on industry with credibility), and where the commissioner could make the case most convincingly that the drug would never have been approved if the agency knew everything it now knows about the risk/benefit profile.

Here is our top five, but we want to know what you think too. And, to repeat: this to get you thinking about the "what ifs," not a prediction of (or call for) any product withdrawal.

Avandia -- As the poster child for drug safety in 2007, GlaxoSmithKline's diabetes medicine would obviously be vulnerable if the new FDA leadership wants to signal a break with the past. Recall that FDA itself was publicly split on whether Avandia should stay on the market, and that it was the subject of a review by the agency's Drug Safety Oversight Board, which voted 9-8 in favor of continued marketing. The new leadership at FDA could simply reconvene that board--with its new membership in the new Administration, and perhaps convene it in public to embrace the Administration's commitment to "transparency"--and we bet the outcome could easily go the other way. That would certainly make Rep. Henry Waxman happy.

Ketek -- FDA took a grilling for the review of Sanofi-Aventis' antibiotic because of a severe case of clinical investigator misconduct in the pivotal trials. The agency ultimately decided that the dataset in support of Ketek is strong enough without the suspect results to continue marketing. However, the new leadership could easily take the position that there is no way to trust any of the data in the Ketek NDA and therefore that the approval is rescinded. That would make Sen. Chuck Grassley happy.

Celebrex -- Pfizer's celecoxib is the only cox-2 inhibitor left on the market. Pulling it would certainly tell the world that the Vioxx era is over once and for all. To be fair, Celebrex is probably one of the most thoroughly studies medicines ever marketed at this point--but that wasn't good enough for Merck's Arcoxia.And with a big settlement soon to be announced regarding Pfizer's marketing of its cox-2 brands, a withdrawal could play as just desserts.

Accutane -- Roche's off-patent acne drug has been marketed for years under a series of risk management programs intended to minimize the potential for birth defects associated with the drug. Ironically, it is only in the past few years that the agency finally thinks it has a program in place that works. But the risk/benefit ratio for the drug has also been a tough case, given that the drug is for cosmetic use, and that only got tougher when questions were raised about potential risk of suicidality with the drug. And those questions have been one of the toughest issues for FDA politically, since Rep. Bart Stupak's son is among those who committed suicide while on therapy with the drug. If FDA is looking to please its Congressional critics above all else, that step may do more than any other to achieve that goal.

OTC cough/cold remedies -- Incoming deputy commissioner Josh Sharfstein led the charge on relabeling over-the-counter cough/cold products to restrict pediatric use. But is he satisfied that FDA went far enough? He can make the call himself soon enough.

Alright, so what do you think? Take our poll below and we'll post the results next week.

The IN VIVO Blog Podcast: All FDA Edition

Mike and Ramsey make another stab at Three Things in Three Minutes. Running time ... about 8 minutes.

How will new FDA leadership impact the drug industry? What's the story with the Hamburg-Sharfstein tag-team deal? Will a renewed emphasis on food safety split the agency? Will there be a bonus topic? (Of course there will ...) Just click on the IVBP logo below to get started...

Don't forget, you can access the podcast via iTunes also.

FDA Commish To Employees: Keep Quiet or Else!

Frank Torti, the acting FDA commissioner, has an important message for all agency employees--you won't make a peep if you know what's good for you.

In an unusual memo distributed last Friday afternoon, Torti ensured the agency is committed to transparency and “the principles of open government.” But after dispensing with the obligatory qualifier, he then went on to warn FDA employees the agency “must comply with its obligations to keep certain information in its possession confidential.”

He then writes those obligations are spelled out in the Food, Drug, and Cosmetic Act, the Freedom of Information Act (FOIA), the Trade Secrets Act, and the Privacy Act, as well as FDA regulations. But if agency employees violate these provisions, they may face disciplinary sanctions, criminal liability and the FDA could be sued for damages.

Torti cites five sweeping categories of info that must be kept under wraps: trade secrets; confidential commercial info; personal privacy data; law enforcement records and privileged intra-agency and inter-agency documents, such as emails, memos and letters between between FDA employees. This last category can be a veritable treasure trove, however, because it can include opinions issued by FDA employees and materials prepared in connection with litigation – the sort of stuff that makes a good headline.

The missive, which an FDA spokeswoman tells us speaks for itself, may have its roots in a recent pair of embarrassing episodes that stemmed from the discussion or release of what FDA officials may view as privileged info. Earlier this year, nine FDA scientists wrote President Obama’s transition team that the review process for medical devices was ‘corrupted and distorted by agency managers.’

An example surfaced last week in a report in The Wall Street Journal, which detailed how a lobbying campaign overcame internal dissent among FDA staffers, who objected to the approval of a ReGen Biologics device for knee injuries. Former FDA commish Andy von Eschenbach acknowledged the affair was handled poorly.

And last month, the FDA removed Sanjay Kaul, a well-known cardiologist at the Cedars-Sinai Heart Institute in Los Angeles, from a meeting of its Cardiovascular-Renal Drugs Advisory Committee at the last minute over the potential for intellectual bias.

The move caused an uproar after it became known that officials at Lilly, whose prasugrel blood thinner was to be reviewed, called FDA offices prior to the meeting to complain about Kaul, who had been openly critical of the drug. The FDA's head of the Office of New Drugs, John Jenkins, later admitted the "disinvitation" was a mistake.

It's unclear whether the memo is directly related to either of those incidents, or if it was issued for more general reasons, although a good source suggests the recent flaps likely had a lot to do with it, because such memos are rare. In any event, one thing is clear: we managed to get a copy, so it doesn't seem to have struck too much fear in the hearts of FDAers. The irony of it all.

Prasugrel Backlash Doesn't Deter Kaul

Sanjay Kaul doesn’t get discouraged easily.

The very public debacle over Kaul’s potential intellectual conflict of interest with Lilly/Daiichi Sankyo’s anti-clotting agent prasugrel has not deterred the cardiologist from fulfilling his obligation as a member of the Cardiovascular-Renal Drugs Advisory Committee.

According to information posted on FDA website, Kaul will participate in the committee review of Sanofi-Aventis’ antiarrhythmic dronedarone (Multaq). Dronedarone will be his first meeting as a permanent member of the Cardio-Renal advisory committee after being “disinvited” from the February 3 prasugrel panel due to a potential intellectual bias.

At the time, Office of New Drugs director John Jenkins expressed hope that Kaul, a well-known cardiologist at the Cedars-Sinai Heart Institute, would remain a member of the advisory committee, despite that fact that his disinvitation sparked a very public—and at times nasty—post-meeting debate over the integrity of FDA’s advisory committee process. (We’ll have more on that in the next issue of The RPM Report.)

“Dr. Kaul is a new standing member of the Cardio-Renal advisory committee. This would have been his first meeting as a standing member,” Jenkins said in a post-prasugrel interview. “We hope that he will continue to serve and will be a productive member of the committee going forward.”

Jenkins was careful to clarify that Kaul was not to blame for the incident. “He did everything he was supposed to do,” he said. “There’s been some suggestion out there—and maybe it’s even from the FDA press statement—that in some way he did not provide us with the information. That’s not correct.”

“He submitted all the paperwork that was required to be on the committee and to be screened for the committee. And when questions were raised about the abstracts, he responded very promptly.”

Kaul is also expected to participate in the second day of the meeting, which will consider the approvability of Johnson & Johnson’s novel factor Xa rivaroxaban (Xarelto) for use in prophylaxis of deep vein thrombosis. Like prasugrel, rivaroxaban is an antithrombotic, and like prasugrel, it may unseat the standard of care, in this case warfarin/heparinoid therapy.

And if all that isn’t enough reason to tune in this week, here’s one more. Pharmaceutical industry critic and Public Citizen Health Research Group director Sidney Wolfe will be at the conference table, representing the Drug Safety & Risk Management Advisory Committee.

While You Were Studying Bracketology

Allow me to lapse into first-person singular as to not tar my colleagues' collective basketball wisdom with the brush of my own ignorance. Living in the UK, I no longer get to watch enough college basketball to have any solid inkling of which teams and players are likely to have a great March (as if i ever really did). But by most people's reckoning that should put me in good stead for the office pool--he or she who knows least has a great shot at winning--as I select teams based on past allegiances, a 25-year-in-the-making unified theory of NCAA tournament upsets, a deeply ingrained belief that the Big East is overrated, and my two-and-a-half-year old's affection for birds and extreme dislike of "scary monsters." In other words, lots of guessing and prejudice. Its a lot like drug development. Hey-O!

Anyway watch out for the West's 14 Seed, if Cornell's shooters get open from beyond, it's curtains for Missouri ... Meanwhile, while you were filling out your bracket ...

• Astellas takes its directors, its lawsuit and its cash, and goes home: "Astellas is a disciplined acquirer and does not see value for Astellas stockholders in CV Therapeutics at the price level of the sale announced on March 12."
• Headline of the day: "Chuck Norris sues, says his tears no cancer cure" at Reuters. (Seven companies to announce today they are no longer pursuing drugs based on Norris' bodily fluids.)
  
• The "day of reckoning" has arrived for Massachusetts health care costs, says the NYT. Part of the solution: to revamp the way doctors and hospitals are paid by the state. "They want a new payment method that rewards prevention and the effective control of chronic disease, instead of the current system, which pays according to the quantity of care provided." This would be a first.
  
• MRSA is living high on the hog, says Nicholas Kristof, who asks of POTUS and his Ag secretary: "So Mr. Obama and Mr. Vilsack, will you line up to curb the use of antibiotics in raising American livestock?"
• Elsewhere in Op-Ed land, David Shaywitz writes in the Washington Post about the need for better understanding of academic science, or at least for politicians to gain an understanding of how that particular sausage is made. "University research is not a pure enterprise; its researchers have feet of clay and are subject to an array of professional biases," he says. "Consequently, our myopic obsession with industry conflicts of interest may have the unintended consequence of distracting us from some of the more important sources of prejudice and concern."
• One last nugget from the NYT (hey there just aren't that many papers left, OK?): reporting from the annual meeting of the Academy of Allergy Asthma and Immunology, the paper describes a new and promising (not to mention tasty) treatment for peanut allergy: a daily (and medically supervised) small dose of peanuts. The race for the pegylated peanut is ON!

DotW: The Future of Primary Care?

If you haven't seen this video from the funny people at The Onion, you must check it out. Could Despondex, a drug designed to treat the irrationally exuberant, be a future blockbuster in the drastically reordered world of primary care?



This week's unprecedented deal activity--Merck's $41.1 billion buy-out of Schering, Gilead's white knight bid for CV Therapeutics, and Roche's rapprochement with Genentech--admittedly leaves this IN VIVO Blogger reeling--and more than a little tired.

But the Merck/Schering deal echoes many of the themes raised by Pfizer's bid for Wyeth: a desire for diversification beyond traditional pharmaceuticals; the need for late stage products that brigde the revenue gap associated patent expirations; and the belief that bigger is better in an age where reimbursement is a challenge and regulatory uncertainty is as least as great as R&D risk. Merck had already taken steps to push a new commercial model. The acquisition of Schering will likely only accelerate the shift though it's hard to know now what the final strucutre of the newly merged organization will look like.

In the meantime, it's hard not to wonder at the potential market size of a drug like Despondex. We guarantee the negative economic news of late means its much smaller than it might have been six months ago. And it's not like there aren't natural remedies for the disorder. Just mention the words "financial runway" to any small biotech exec or "down round" to venture capitalists.

Some other people who aren't good candidates for the drug include Xoma, Cadence, Synta, and Neose employees. Xoma received news this week that it's listing on the NASDAQ is at risk because of steep declines in the company's share price. Cadence, which diluted the hell out of itself with an $86.6 million private placement last month, announced Thursday that is was shelving work on Omigard, its late stage gel for catheter-related infections. Synta, meanwhile, revealed it was laying off 40% of its staffers in the wake of the high profile failure of its melanoma drug elesclomol. And it's the end of the line for troubled Neose, which is auctioning off the last of its worldy goods (preview date March 24). And what about members of "Friends of an Independent Genentech" (we call them FIGs) or sales and marketing reps for Big Pharma? (Have you heard about the layoffs?)

But there are a few people who might benefit from the drug. It stands to reason Jeff Kindler, CEO of Pfizer, might need a short course thanks to his 2008 compensation package. We emphasize "short" since he's probably not over the moon--his pay did drop 5% to a mere $13.1 million last year. And then there's Fred Hassan, who helped orchestrate Merck's take-out of Schering-Plough--just don't call it a change of control. As IVB reported earlier this week, Hassan stands to receive at least $37 million for brokering the deal with Merck, but his pay could jumpt to$60 million if powers that be believe change of control applies to ownership structure but not occupancy of the corner office. (IVB calls that having your cake and eating it too.)

So what if the drug only works for these two men? Hey, maybe that really is the future of primary care! And here's a solution to the marketing dilemma: just call it personalized medicine and charge a fortune for the drug. Does an overpaid, middle-aged white male suffering from excessive happiness count as an orphan indication? (Check out future twitter feeds from Mike, Ellen, Ramsey, and Chris to find out.)




Merck/Schering-Plough: It was hard to pick top honors for biggest deal of the week, but we are going with the Merck/Schering-Plough tie-up since Roche/Genentech (see below) has felt like a foregone conclusion for at least a week (sorry FIGs). We confess Merck's unexpected bid for its cardiovascular partner Schering had folks at IVB at a loss--we even told you last week we didn't think this deal was coming given the historic importance Merck has placed on R&D and organic growth. But Merck, much like Pfizer in its bid for Wyeth, is looking to the mega-acquisition to stem lost profits from its top-selling drug Singulair which loses patent protection in 2012. It also desperately needs to refill its pipeline following some high profile development setbacks. But if the cost-savings from the acquisition will elevate Merck's earnings growing as key drugs lose patent protection, it's less clear whether Schering will help or hinder the company's efforts to compete in a changing healthcare environment, increasingly focused on productivity, agility and specialized, targeted medicines. "The strength of the combination of Merck and Schering-Plough's pipeline, the complementary product portfolio with long periods of exclusivity, the strong commercial models, the expanded global presence, the sustainable cost savings for long-term growth go far beyond just one or two products," CEO Richard Clark said during a same-day conference call. A big positive of Schering's portfolio is that it is less vulnerable to generic competition than many other large pharmas; it's not expected to hit a patent cliff until 2014 and beyond, providing more time to bring pipeline drugs to market. Schering's marketed portfolio includes the tumor necrosis factor inhibitor Remicade, the allergy medication Nasonex, the brain tumor treatment Temodar, and the hepatitis C drug Pegintron. Schering is also relatively more diversified than Merck, bringing a larger biologicals business and substantial operations in animal health and over-the-counter drugs. Combined, Merck and Schering-Plough will have sales of nearly $47 billion based on 2008 sales. No one product, Clark said, will account for more than 10 percent of the combined company's sales. Just getting the deal done required some pretty fancy legal maneuvering, as Merck and Schering found creative ways to do an end run around a change of control clause related to Schering's partnership with J&J for Remicade. The complicated arrangement, dubbed“Project Solar” in SEC documents that reference Merck as “Mercury” and Schering as “Saturn,” involves structuring the deal as a reverse merger in which Schering remains the surviving company. Don't forget, however, that the lasting entity will be called Merck, headed by Merck CEO Richard Clark, and that Schering shareholders will own only a 31 percent stake.

Roche/Genentech: It's official. $95 is the magic number. (We thought it was 3.) Nearly 8 months after Roche launched its initial bid for Genentech, it has succeeded in obtaining the blessing of the biotech's Special Committee. The nearly $47 billion marriage, which assumes enough minority shareholders will tender their stock, may be off to a rocky start if Franz Humer and company can't convince high flying Genentech employees such as CEO Arthur Levinson, president of product development Susan Desmond-Hellman, and EVP for research and CSO Richard Scheller to remain with the company. Roche's patient wooing took a more urgent tone last Friday, when the Swiss pharma upped it's hostile tender offer from $86.50 to $93 a share. The gambit was enough to lure Genentech's special committee back to the bargaining table to address widely divergent opinions on the biotech's value. (Recall last fall $112 was the target price Genentech was vying to obtain.) The subsequent maneuvering hinged on debate over two key points - Roche argued Genentech's value was plunging due to worsening financial markets. Meanwhile, anticipation has continued to grow ahead of the results of the eagerly awaited clinical trial that could greatly expand the market for cancer treatment Avastin. Tellingly, SEC documents released on Thursday show that the Special Committee was increasingly worried about the current economic crisis. Not only has there been a "significant deterioration in financial markets," but the Obama administration's emphasis on reducing health care costs has added uncertainty to the outlook for pricing medications, according to documents Genentech filed with the SEC. In hopes of finalizing the deal, the two companies eliminated a provision in their long-standing affiliation agreement that allowed shareholders to receive a higher price than the tender offer during a so-called squeeze-out. That clause has long been a sticking point for Roche, providing shareholders with little incentive to tender at what might ultimately be a lower price. Moreover, the special committee noted in SEC filings that with this sweetened offer, "the company's stockholders will avoid the risks associated with a negative outcome in the Avastin trial, including potential declines in the trading prices of the shares, a determination by Roche not to purchase any shares, or should Roche determine to purchase any shares that it would do so at a reduced price."

Gilead/CV Therapeutics: What does it say about the week's deal flow that a $1.4 billion dollar white knight bid is third on the deals of the week hit parade? Not to be outdone by the likes of Big Pharma and its Big Biotech cousin, Gilead made news with its $20-per-share offer for CV Therapeutics, which has been fighting off a hostile $16-a-share bid from Astellas. With $3.24 billion in cash and equivalents on hand at the end of 2008, Gilead has the resources--and apparently the moxie--to do the deal. While its focus has traditionally been on antivirals - it markets the HIV therapies Atripla and Truvada - it has also built a budding cardiovascular franchise centered around its pulmonary arterial hypertension drug Letairis and a Phase III drug for resistant hypertension called daruesentan. There's a strategic fit argument, therefore, when it comes to Gilead's buying CVT: the Palo Alto-based biotech provides the company with some additional diversification in a bulked up cardiology franchise--CVT already markets Ranexa and Lexiscan--as well as a ready-made sales force to market the products. "Gilead is essentially buying a sales force for darusentan via Ranexa, but they only get 10 percent of Lexiscan," noted Leerink Swann analyst Joseph Schwartz in an interview with "The Pink Sheet" DAILY. That's because in the U.S., Lexiscan is already partnered with Astellas, with CVT receiving a 10% royalty on sales. Although some analysts have called the price Gilead is paying for CVT excessive, questions about the true ownership of Lexiscan may have nudged Gilead into shelling out the extra $4-a-share. That's because the original 2000 deal between Astellas predecessor Fujisawa and CVT included a "standstill" agreement voiding the deal if Fujisawa or an affiliate tried to buy stock in CVT beyond that specified in the deal. And what happened on Feb. 27? Astellas turned up the heat on CVT, turning its spurned offer into a tender to CVT shareholders, while also filing a lawsuit in Delaware Chancery Court seeking to overturn both the "standstill" and a poison pill that CVT's board extended for one year just before it was set to expire this February. It remains unclear whether Astellas' actions have placed it in breach of the 2000 contract, which could mean full rights to Lexiscan return to CVT. If they do, outright ownership of Lexiscan will certainly boost Gilead's bottom line.



MedImmune/Micromet: Perhaps it isn’t fair to lump this evolving situation into the ‘No-deal’ of the week category, but Micromet’s co-development deal with MedImmune for its lead bi-specific T-cell engaging antibody blinatumomab has definitely been downsized. And, as CEO Christian Itin repeated several times on a conference call that doubled as an explanation of the new arrangement with MedImmune and Micromet’s 2008 results, that isn’t necessarily a bad thing. MedImmune opted out of its US development role for blinatumomab (a.k.a. MT103), a BiTE antibody in development for hematological cancers, but it hasn’t washed its hands of the project entirely. MedImmune will complete development of a commercial scale manufacturing process for the candidate on its own dime. It will also retain an option to regain commercial rights to blinatumomab upon first US approval, at pre-defined but undisclosed terms. And the two companies announced they were pursuing—from scratch—a new BiTE program in hematological cancers as well (the geographic split—MedImmune gets North American rights and Micromet RoW—is the same). To date MedImmune has not put blinatumomab into the clinic in the US, though an IND was approved in early 2007. Micromet has taken blinatumomab into the clinic in Europe, where in Germany the candidate is in a Phase II study in adult patients with acute lymphoblastic leukemia (ALL) and a Phase I study in relapsed non-Hodgkins Lymphoma (NHL). Interim data for both trials will be presented in June at the European Hematology Association meeting in Berlin, according to Itin. So why did MedImmune opt out? Itin declined to speculate beyond suggesting that the companies’ focus so far on rare malignancies might not be a broad enough opportunity for MedImmune parent, AstraZeneca. It’s “not too unusual that the path isn’t at the center of focus for a large pharma company,” he said. Furthermore there have been no disappointing data out of any trial, Itin said, and “the trial is recruiting at higher speed than we predicted.” Micromet now has global rights to develop the drug, at a cost made more palatable by MedImmune’s commitment to funding both manufacturing process development. Blinatumomab isn’t the first MedImmune project that AZ has given back to a partner on pretty good terms. Late last year the Big Pharma handed back to Infinity Pharmaceuticals IPI-504 an Hsp90 inhibitor in Phase III, as well as an oral back up in Phase I. The difference for Micromet is that it cannot turn around and partner US rights or global rights to blinatumomab so long as MedImmune/AZ’s option remains outstanding--Chris Morrison.

Galson’s Next Career Move: Tobacco Chief?

For former FDA official Steve Galson, the news that CNN medical correspondent Sanjay Gupta has withdrawn from consideration as President Obama’s top choice for Surgeon General means that he still has a job—at least for a little while longer.

Galson, the former director of FDA’s Center for Drug Evaluation & Research, has served as acting Surgeon General since October 2007. Since then, he has kept a relatively low profile, even for his office, which hasn’t had a publicly visible Surgeon General since C. Everett Koop during the Reagan Administration.

Gupta’s star power would have changed all that, but it looks like that’s not in the cards. For Galson, that means holding down the fort a little longer while Team Obama regroups and settles on a backup. When this does all shake out, Galson will have a lot of options—a return to FDA among them—as we’ve blogged in this earlier post.

So we’d like to put forth a suggestion made by one of our intrepid readers: should Congress agree to give FDA regulatory authority over the tobacco industry, who better to head the Center for Tobacco Products than former acting Surgeon General Steven Galson?*

Here’s why: Galson is a former FDA official, so he’s walked that beat before. He is a rear admiral in the Public Health Service, so he’s got that angle covered. He’s worked for the Centers for Disease Control & Prevention, so he knows all about the risks associated with tobacco use. And he’s been at the Environmental Protection Agency—hey, isn’t tobacco an environmental hazard?

We think it’s a brilliant fit, and the timing might work out perfectly. Once a permanent Surgeon General is named, Galson isn’t likely to stick around. While he has said he’d consider a return to FDA, that depends in large part on the inclinations of the expected commissioner nominee, Margaret Hamburg. (Which, despite what you may have read elsewhere, you heard about here first. Just saying.)

Anyway, given that congressional action on tobacco is a foregone conclusion, the Administration will be looking for someone to head up FDA’s oversight. Hamburg may choose to take an active role, given her resume, but she’ll still need someone to head the center. We figure that at about that time, Galson will be looking to make his next career move. What perfect timing!

Naturally, there are a lot of “ifs” in that scenario: if FDA gains the authority to regulate tobacco; if the law clears the legal challenges that are sure to follow; if Galson is offered the job; and if he is willing to accept it. (And if the world hasn’t ended by the time all that happens.)

Given all that, it may not happen. But it sure is fun to think about.

*Not based on fact or rumor; just a career suggestion.