Financings of the Fortnight Checks the Rime of the Ancient Mariner

Water, water everywhere / And all the boards did shrink.

That's a line from Samuel Taylor Coleridge's poem about a crusty old salt with terribly poor judgment, but it might also describe the perplexing state of private biotech financing these days. Water, of course, signifies money -- unless you're Sigmund Freud. And for certain folks, there's plenty of it. Just ask the general partners of OrbiMed Advisors, who closed a $550 million venture fund in late February. Or ask the VC placement agent whom you'll meet in the upcoming issue of START-UP: "The dollars are still there but the number of managers getting it is shrinking." And he wasn't even quoting Coleridge.

So if Sammy Taylor were an eternal capitalist-optimist in sour times, he might have written this: Water, water everywhere / But at long last those who don't deserve it can't have any.

And indeed all the boards did shrink. Or more specifically, the number of boards, given public biotechs dropped like flies during the recession and no private start-ups bounded o'er the IPO main to replace them. And if you consider the ongoing shakeout in the venture world, that pool of board members will shrink, too. Perhaps corporate venture investors who tend not to take board seats will rethink that stance if they continue to take a bigger role in early-stage venture rounds. But that's a topic for another epic poem.

The real albatross for late-stage private biotechs right now is the IPO market. Is the window open? Just a crack, perhaps, as evidenced by the debuts of Ironwood Pharmaceuticals on Feb. 3, Anthera Pharmaceuticals on Mar. 1, and as we write this, perhaps AVEO Pharmaceuticals. But be careful what you wish for. None of the above three have been clean debuts, and another on the calendar, Trius Therapeutics, said Mar. 4 it would postpone because murky F.D.A. guidance on antibiotic non-inferiority trials forced it to modify a Phase III trial. (Note that some of Trius's peers say the regulatory situation hasn't delayed their trial timelines, as we reported here in "The Pink Sheet.")

Anthera and Ironwood got out thanks to the largesse of their venture backers, who bought about 40% of each issue. They still had to take haircuts; Ironwood wanted $270 million but "settled" for $188 million, and Anthera dropped its target of $64 million ($14 a share) down to $42 million ($7 a share). Meanwhile AVEO, with its triple-VEGF inhibitor tivozanib entering Phase III trials for kidney cancer, was aiming for $98 million but delayed pricing yesterday.

If this is really a window, where's the rush to file? In fact, there hasn't been a fresh registration this year (the sole filer, BG Medicine, is hoping the second time's a charm after it withdrew in January 2008). Perhaps private biotechs and their investors have squinted through the dank mist and glimpsed the IPOs hanging around the necks of the becalmed souls who've gone public in recent years. (See our previous edition for the ugly truth.)

Then curse ye, public investors! We're here to tell you about those needing financial shelter and finding any port in a storm, from massive European venture rounds to creative royalty deals. Now wherefore stopp'st thou me? It's time for...

Archimedes: UK-based specialty pharma firm Archimedes Pharma on March 2 scooped up £40 million from new investor Novo Growth Equity and got a new leader, to boot. The money was part of a whopping £65 million ($100 million) private round, one of the largest in European biopharma in the last 15 years. Archimedes will use the funds to establish a US presence and commercialize recently-filed fentanyl nasal spray PecFent -- until recently known as NasalFent -- for breakthrough cancer pain, both in the States and Europe. The company, which was founded in late 2004 by former Shire exec Richard de Souza, hadn’t planned to jump into the US on its own. But according to Novo managing partner Ulrik Spork, PecFent can capture maximum value across the most lucrative markets; certainly Warburg Pincus, the long-time private equity investor in Archimedes (which put up the remaining £25 million in the round) isn’t complaining. Archimedes’ investors hope that new CEO and president Jeffrey Buchalter's ride at Archimedes is smoother than his previous gig at Enzon Pharmaceuticals, where activist investors drummed him out of office in February after a long fight and the dismantling of the company. -- Melanie Senior

NPS Pharmaceuticals: NPS’s transaction with DRI Capital, announced March 2, uses a different structure than many royalty deals of the past couple of years. Typical agreements have been structured as loans backed by royalty streams (see our write-up from last September on Xoma’s $55 million deal with Goldman Sachs using royalties from the sale of Raptiva, Lucentis and Cimzia). But NPS will receive $38.4 million from DRI in exchange for cumulative, capped royalties from the sale of Regpara (cinacalcet HCl), which is licensed and sold in Japan and other Asian markets by Kyowa Kirin Pharma for secondary hyperparathyroidism associated with kidney dialysis. DRI receives any royalties from the drug from July 1, 2009 forward, but only until they reach $96 million or 2.5 times the purchase price. DRI gets a guaranteed (albeit capped) return on investment, unless Regpara absolutely tanks, while NPS, without debt or stock dilution, gets money to fund its pair of Phase III programs: Gattex (teduglutide), a glucagon-like peptide analogue for short bowel syndrome, and NPSP558, a hormone-replacement therapy for hypoparathryroidism. NPS received $10 million upfront and the potential for up to $175 million in milestones by licensing ex-North American rights for Gattex to Nycomed in 2007, but it hasn't done a major fundraising since a 2005 follow-on public offering that netted $78.5 million. -- Joseph Haas

Optimer Pharmaceuticals: On March 1, infectious disease company Optimer Pharmaceuticals netted $51.5 million in a follow-on public offering of 4.89 million shares (including full exercise of the overallotment) at $11. This is the first time the biotech has taken to the public markets since it completed its IPO three years ago -- one of the few successful in the IPO class of 2007, as we highlighted here. Follow-ons boomed in 2009, totaling $5.6 billion for the year, and more biotechs are queued up: Ablynx, Lexicon, and Micromet. The FOPO cash will help Optimer put together US and European filings for its lead antibiotic fidaxomicin, an RNA polymerase inhibitor for Clostridium difficile-associated diarrhea, in the second half of this year. With fidaxomicin, Optimer is looking to compete against ViroPharma’s Vancocin (vancomycin), a warhorse antibiotic and the only FDA-approved treatment for CDAD. Last month Optimer announced top-line data from its second pivotal Phase III trial showing fidaxomicin performed better than Vancocin in patients achieving clinical cure (91.7% vs. 90.6%) and had significantly lower recurrence rates and higher global cure rates. Could fidaxomicin’s success make Optimer an acquisition target or attract a big-pharma partner? So far the biggest alliance in the CDAD space is Merck’s exclusive worldwide deal for Medarex and Massachusetts Biologic Laboratory’s Phase II combination antibody treatment last year: $60 million up front and $165 million in pre-commercialization milestones. Optimer has already tried dealmaking with fidaxomicin, granting Par Pharmaceutical North American rights in 2005 only to have them returned two years later because Par was looking for a more near-term drug to launch at the time. -- Amanda Micklus

Ubiquigent: From small beginnings come great things, or so U.S. biotech Stemgent hopes with its three-year £3 million ($4.5 million) investment in Dundee, Scotland-based start-up Ubiquigent. The new firm will develop reagents for ubiquitin pathway drug development, using discoveries handed off from the newly formed protein ubiquitylation unit of the Scottish Institute for Cell Signaling (SCILLS), a government-funded lab at the University of Dundee that has fostered successful industry link-ups related to its protein phosphorylation (kinase) research. The ubiquitin pathway is a dimly understood cell signaling system, but the proof of concept for drug development is out there in the form of Millennium's proteasome inhibitor Velcade (bortezomib). The pathway regulates the lifetime and intracellular distribution of proteins and a variety of signal transduction and other physiological mechanisms, which certainly invites therapeutic intervention, but mapping the possibilities has also been likened to the vast complexity of the Human Genome Project. (The ubiquitin pathway also led to the 2004 Nobel Prize in chemistry.) Stemgent/Ubiquigent CEO Ian Ratcliffe helped establish the European division of reagent firm Upstate Group to exploit discoveries from the University of Dundee in 1999, so he knows the territory. Upstate was acquired in 2004 by Serologicals, which in 2006 was bought by Millipore, which this month was acquired for $7 billion by Merck KGaA. Perhaps Ratcliffe is at the beginning of another long roll-up. -- Shirley Haley

Photo courtesy of flickr user johnnyr1.

No+No=Yes: Pirfenidone and the Power of Orphan Drugs

Two wrongs may not make a right, but when it came to Pulmonary-Allergy Drugs Advisory Committee member Les Hendeles' views on the approvability of InterMune's idiopathic pulmonary fibrosis therapy pirfenidone, two "no's" made a "yes."

Hendeles, whose day job is professor of pharmacy and pediatrics at the University of Florida Health Science Center, first voted "no" to the question of whether InterMune's pivotal trials showed "substantial evidence" of efficacy in IPF, as measured by changes in forced vital capacity.

Hendeles was one of five committee members to vote "no" on that question; there were seven "yes" votes. Hendeles noted FDA's definition of "substantial evidence" and his view that the dataset--one study showing improvement in FVC, one failing to show a change, and no unequivocal indication of an overall survival benefit--didn't make the cut.

Then he voted "no" on whether InterMune had provided sufficient evidence of safety; there he was one of three "no's," vs. seven "yes" votes. Hendeles described pirfenidone as a "theophylline-like drug" and explained his vote by asking, "have you ever heard of Vioxx?"

Then he voted "yes" on approvability. That made him one of two committee members who ended up taking the formal position that InterMune failed to demonstrate "substantial evidence" of efficacy but that the drug should be approved.

His explanation of the apparent contradiction (as we note in "The Pink Sheet DAILY") was simple. Based on the indication of a mortality benefit and the complete lack of effective alternatives, he "would be on the first Delta flight to Japan," where pirfenidone is approved already, if faced with a diagnosis of IPF.

That, in a nutshell, explains the committee vote (and what is likely to be FDA's final action on the appication) perfectly.

Bear in mind that Hendeles is not some naif from academia with no idea how the regulatory process works. He has been involved in FDA advisory committees for three decades and has weighed in on many different aspects of the regulation of pulmonary drugs in that time. He knows the regulatory process pretty well.

The fact is that InterMune's dataset doesn't meet the letter of FDA's definition of substantial evidence. That's not just our opinion: FDA's own statistician says just that in her written summary provided for the committee.

But FDA is prepared to approve this application anyway, because the concept of substantial evidence is and always has been more flexible than that.

Plenty of sponsors have learned that the bar is often higher than the definition makes it sound. But this is an important case of where and when it can be lower.

IPF is a disease that all parties agree is horrific, involving a steady decline in lung function towards a certain and unpleasant death, with absolutely no treatement options that seem to do anything to help. It also has a relatively small (approximately 100,000 patients in the US) and reasonably well-defined patient population.

And these days FDA has the tools to approve drugs like this with more confidence. InterMune is proposing a Risk Evaluation & Mitigation Strategy to highlight the need for liver monitoring and limit the risk of phototoxicity. The company also plans to sell the drug via a centralized distribution system, though it is not proposing that as part of the REMS per se. (That seems like an increasingly common strategy, by the way--read more here.)

Committee members urged a registry, as well as deeper dives into potential markers of response. All that seems very easy for InterMune to do--and for FDA to accept as a reassurance that it will ultimately gather sufficient data to prove (or disprove) a mortality benefit from therapy.

Hendeles put it perfectly: Who wouldn't take pirfenidone, given its success in improving lung function scores in one trial, and consistent albeit not statistical signficiant sign of an increase in survival?

That may not be "substantial evidence" by the letter of the definition. But these days and for this type of therapy, it is probably sufficient.

image from flickr user RubyJi used under a creative commons license

The End of Free Drug Pricing in Germany?

According to local press, Germany's health minister Philipp Roesler is about to open fire against the branded drug industry with a proposal to break the sector's so-called 'price monopoly' and force them to negotiate lower prices directly with insurers.

Until now, Germany has been one of Europe's last bastions of "free" upfront drug pricing. Sure, the hurdles come afterwards, but both there and in the UK drug firms have--until now--been allowed to set more or less the price they like for new drugs.

"Focus" magazine reported on Saturday that Roesler would impose upon the branded sector fixed price ceilings for their products, should they not come to an agreement with the insurers. Either way, he's gunning for annual health care cost savings of €2 billion.

Direct price negotiations between insurers and drug firms have been legal since 2007. Unsurprisingly though, few if any branded companies have engaged in price-centric dealmaking (or indeed any dealmaking). Most prefer instead to focus on providing other benefits such as supporting compliance.

Meanwhile, as we reported in-depth last year in IN VIVO, the country's largest insurers have already squeezed out over €500 million in savings from the generics sector through inviting best-deal bids for two-year 'preferred supplier' contracts. That trend looks set to continue as firms compete for the next round of contracts.


This is also very likely what's prompting Roesler to try twist the branded sector's arm into likewise negotiating more competitive deals with insurers. We can't imagine that Christopher Hermann, chief negotiator and deputy CEO at the country's largest insurer, will have much to complain about. Frustrated up until now by the branded sector's reluctance to negotiate on price, he nevertheless appeared to see this coming when, back in early 2009, he told us: "I expect contracts around on-patent drugs to become more numerous, as in the next months and years there will be more contracts between health insurance funds and independent doctors' associations in Germany."

His point: insurance funds' negotiating clout is increasing as they wield more and more influence over precisely what drugs doctors prescribe (even though they're not allowed to dictate what drugs are prescribed, as they are in the case of generics).


Lesser of Two Evils?


If Roesler's plan is put into action, drug firms are unlikely to be able to afford to resist, given the alternative: imposed price ceilings that could impact prices not only in Germany, Europe's largest market, but also more broadly across Europe given that Germany service as a reference price market in several other (fixed-price) countries. Negotiating with sick funds may offer industry a little squeeze-room, for instance to provide or fund supplementary services. Such agreements also exempt them from an assessment by IQWiG, Germany's cost-benefit watchdog.

Indeed, another element of Roesler's plan--due to be presented this Wednesday--will allegedly require drug firms to submit, in parallel with a new drug application, a benefit-assessment study of their product, showing which patients the product will serve and which comparator drugs, if any, are already available.

None of this is particularly surprising in today's era of government spending cuts and (continued) targeting of drug manufacturers to make their quick-wins. But whilst it tastes bitter, it may also be an (the last?) opportunity for firms to avoid government-imposed price cuts.

Indeed, Novo Nordisk's CEO Germany, Willi Schnorpfeil , told us in mid-2009 that he would like to see a de-regulated market in Germany with price negotiations between drug firms and payors permitted from day one, as soon as a drug is authorized. Such a system—replacing the current set-up of free up-front pricing with complex rebate solutions and, potentially, centrally determined cost-benefit assessments slapped on thereafter--would allow faster market access to be a negotiating factor, too, he argued.

image by flickrer finlaystewart used under a creative commons license

While You Were Thanking the Academy

Two years ago it was pageboy, this year it's high-and-tight. My how styles change quickly.

"The Hurt Locker" triumphed during last night's Oscar ceremony, taking the big Best Picture and Director awards, Best Screenplay (orig.), best Editing, and nods in two sound categories. "Avatar" didn't go home empty handed, but Cameron & Co. probably figured on beating "Up" by more than just one statuette.

Meanwhile, you know how sometimes there are more technical awards that they don't bother to present in prime time? Where a 30 second montage will do just fine thank you? Well it's a little known fact that during THAT awards ceremony they show a montage of the awards deemed too dorky for the technical crowd.

The envelope, please ...

• Best Pitcher: Pfizer apparently wants Ratiopharm, and wants it bad. How bad? Let's just say Jeff Kindler wasn't hanging out along the Bayern/Baden-Wurttemberg border for kicks on Friday.


• Best Foreign Language FlimFlam: Merck KGaA has "indeed a few ideas," Reuters reports that the Frankfurter Allgemeine Sonntagszeitung reported. Acquisitions "are part of our strategy." In other news, the sun rose in the east.


• Best Drug Biopic: Everything you ever wanted to know about where Sutent comes from, courtesy Bloomberg.


• Best Use of Clinical Acronyms in a Supporting Role: Roche and Biogen Idec said this morning that they were halting certain trials of the Phase II ocrelizumab in RA (where it has been tested in trials called SCRIPT, FEATURE, FILM and STAGE) and lupus (BELONG and BEGIN). A DSMB determined that the safety risk (death from serious infections) outweighed the benefits in these populations, though trials in MS are ongoing.
  
• Best Reason to Keep In-Licensing: AstraZeneca said its first-line metastatic CRC hopeful Recentin was effective but did not meet its primary endpoint in the first of two pivotal trials. AZ hoped the drug would prove non-inferior to Avastin in the Phase III Horizon study in terms of progression-free survival. A second Phase III in glioblastoma should read out in the first half of 2010.


• Best Scoop: Our colleagues at OverTheCounterToday supplement your biopharma diet with consumer medicine goodness, and on Friday, revealed that Sen. McCain was withdrawing his support for the bill he introduced to significantly tighten regulatory requirements for dietary supplements.
  

Can a Biomarker Salvage Novartis' Joicela (AKA Prexige?)

In the "History of Troubled Drugs" playbook, lumiracoxib (Prexige, now called Joicela) is only a footnote, hardly a Vioxx or Avandia.

Prexige, however, may make a mark after all in pharma annals, far beyond its missed revenue opportunity or beneficial impact on patients. The drug, which is made by Novartis, is a selective COX-2 inhibitor, indicated for symptomatic relief of pain from osteoarthritis. COX-2s --as in the infamous Vioxx--are all but off the market in the US because of their cardiovascular side effects, but lumiracoxib binds to a different site on the COX-2 receptor, which may give it advantages that lift it from under the Vioxx shadow: minimal CV side effects, high selectivity, rapid cleansing from the blood and absorption into the inflamed joint.

The drug received European marketing authorization in November 2006 and launched in parts of Europe the following year. It has its own demons, however – rare but potentially fatal risk of liver failure at higher doses, and the FDA never approved it. In 2007, Novartis began under pressure from regulators to withdraw it from the market in the EU and elsewhere.

Now, as Joicela, lumiracoxib linked to a lab test may make a comeback. Novartis scientists have come up with a genetic marker, which they say can identify patients who are potentially at risk for lumiracoxib-associated hepatotoxicity. In essence, Novartis argues, patients who test negative for the marker aren't at high risk of liver side effects and can take the drug. Those who test positive for the marker should not get the drug.

It's an interesting case study in the murky, fragile world of companion diagnostics, which is starting to show up as more than a blip on pharma's radar. One indicator: Roughly a dozen or so diagnostic-drug companies deals with the aim of bringing a diagnostic and drug that are linked through to commercialization, were signed in 2009 --compared to seven in 2008. Novartis itself started a Novartis Molecular Diagnostics business unit--which is developing the diagnostic for Joicela and has 10 projects in the works --only little more than a year ago.

If Joicela makes it back on the market, pharma is likely to take note. For pharma, a biomarker strategy for rescuing flawed drugs holds tremendous appeal (think Exanta, Galvus, etc.), even if the ultimate market is nowhere near the original projections--especially if regulators accept data based on analysis of archived samples from previously completed studies. That's the approach Novartis has taken in Europe, where it submitted an application for marketing authorization in December 2009.

Novartis' next step in the US is less clear cut because the FDA has yet to propose a regulatory pathway for companion diagnostics --and the agency's paralysis has been a hurdle to say the least. Yet some good news happened on Feb. 25: Commissioner Margaret Hamburg for the first time publicly stated a timeframe: She expects the agency will propose companion diagnostics guidance this year.

Deals of the Week Meditates on Medivation's Medication

We dare you to say the phrase three times fast. Can’t do it? Maybe you should switch to Russian. Google translator not working? Try this simple phrase instead: Блин!

All kidding and alliteration aside, that was likely Pfizer’s reaction this week after the big pharma and its biotech partner announced two Phase III trials of the highly anticipated Alzheimer’s treatment dimebon failed to meet either of their primary endpoints.

The news had tongues wagging, and not just because this is yet another high profile late stage failure Pfizer can ill afford. Dimebon is a decades-old allergy drug that appeared to work in Alzheimer's by some unknown mechanism. The skeptics' chorus began in July 2008, when Medivation published stunning Phase II/III data showing drug-treated patients did significantly better than placebo-treated patients when assessed using standard neuropsychiatric evaluations. But that study comprised just 183 patients and was conducted in just one country, giving new meaning to the phrase “from Russia with love." Certainly Medivation loved the data; just two months after it published its study, the biotech inked a lucrative partnership with Pfizer worth $225 million up-front.

But this week we learned anew how alliance-driven love is a many-splintered thing. Medivation’s stock is down 70%, last we checked. And Pfizer has lost a chance to extend its Alzheimer’s franchise beyond Aricept, which goes generic at the end of this year.

We can't help but wonder what it all means for biotechs with unpartnered Alzheimer’s programs. Dimebon is far from the first to go belly-up after apparently successful Phase II data. (Remember Myriad Genetics’ Flurizan?) That’s bad news for companies such as Allon Therapeutics and Prana Biotechnology, which have Phase II meds in need of deeper-pocketed developers. Indeed, as big pharmas pledge their desire to play in this most lucrative CNS space, we won't be surprised if more go for financing strategies a la Lilly’s 2008 deal with TPG and Quintiles. At the very least, we expect upfront values to decline and more emphasis on milestone driven terms. (Not that this wasn’t happening anyway, especially for later stage assets.)

Which brings us to the end of our meditation on Medivation. Omm. If we have one piece of advice for Kristin Peck, the new SVP of business development at Pfizer, it would be to practice this mantra: Option-based deals. Option-based deals. Option-based deals. Ahh. Isn't that better?

As you watch your thoughts float by like clouds, please remember, there is no you or me, there is only...



Watson/Columbia Laboratories & Watson/Population Council: Watson announced a pair of deals this week to bolster its branded women’s health care products line, purchasing Columbia Laboratories’ marketed infertility drug, Crinone/Prochieve, and Population Council’s Phase III contraceptive vaginal ring. Watson will pay an upfront fee of $47 million in exchange for 11.2 million newly issued shares in Columbia and U.S. rights to Crinone/Prochieve, which pulls in about $20 million in annual sales. But the real opportunity for the infertility therapy is the prevention of preterm birth. Here Columbia will continue to lead development of the product (it’s in Phase III), but its costs are capped, with Watson picking up the tab if expenses exceed an undisclosed limit. Watson will also pay $45.5 million in clinical and regulatory milestones in this new indication. Financial details of Watson’s second tie-up of the week were undisclosed but apparently include the usual upfront, regulatory and sales milestones, and royalties. While both deals provide Watson’s 350-person sales force with additional branded products to sell, it’s worth remembering that the drug maker’s overall business is still primarily focused on generic offerings, which last year generated $2.3 billion in revenue. Still, in an interview with “The Pink Sheet” DAILY, CEO Paul Bisaro argues his company has made great strides in the branded market, noting the firm is on the verge of providing an array of women’s products, including a novel oral contraceptive and an emergency contraceptive currently under review at FDA.

Astellas/OSI Pharmaceuticals: On Mar. 1 Astellas launched a hostile $3.5 billion, $52-a-share bid for OSI Pharmaceuticals to grab part of the growing revenues of lung- and pancreatic-cancer treatment Tarceva. Astellas made a relatively modest U.S. oncology-focused purchase when it bought the Santa Monica, Calif. antibody R&D shop Agensys for $537 million in 2007, but it would love a larger commercial footprint in the U.S. similar to what its Japanese peers Takeda Pharmaceutical and Eisai have bought in recent years with their Millennium Pharmaceuticals and MGI Pharma deals, respectively. But at least one major OSI shareholder says not so fast, $60 a share is fair price, likely emboldened by the fact that during the year-long unsuccessful wooing of OSI management, Astellas kept suggesting a $55-to-$57 range. Not surprisingly, OSI's share price has traded all week between $56 and $57. Funny, that. The situation bears some resemblance to Astellas's $1 billion hostile bid for CV Therapeutics last year: a 40% premium, a lawsuit to prevent a poison pill, and a threat of a proxy fight. But Gilead Sciences rode in with a $1.4 billion topper and Astellas quickly backed away. This time, will OSI partner Roche play the white knight? Does it have to? After all, it already keeps 80% of ex-U.S. sales of Tarceva, and its U.S. arm Genentech co-promotes Tarceva stateside. Stay tuned, Astellas's tender offer ends Mar. 31. -- Alex Lash

Bausch & Lomb/NicOX: In August 2009, when NicOx took back full rights to its Phase II glaucoma drug NCX116, it promised investors to have a partner for the program in 2010. This week, the company made good, announcing an alliance with Bausch & Lomb. Since being taken private by private equity firm Warburg Pincus in 2007, B&L has been quietly rebuilding primarily by acquisitions or alliances that target innovative products. Interesting deals include the firm’s 2008 take-out of intraocular lens player eyeonics and alliances with the likes of Pfizer, Croma Pharma and Tubilux Pharma. Still the upfront value B&L is paying NicOx -- just $10 million for a Phase III-ready program -- suggests wariness. (Milestones up the potential deal value significantly to $170 million.) Thetrepidation is probably warranted. Recall that Pfizer lost interest in the program because mid-stage trials suggested modest clinical benefit at best compared to Pfizer's juggernaut Xalatan. That’s relevant because Xalatan will soon go generic; in the current payer-dominated environment, pricy new glaucoma medicines will have to show much better results in the clinic to warrant coverage by managed care plans.

Shionogi/QuatRx: Shionogi's U.S. subsidiary, Shionogi Pharma (formerly Sciele Pharma), acquired global development and marketing rights to QuatRx Pharmaceuticals' selective estrogen receptor modulator ospemifene, building on the company's sexual medicine and women's health portfolio. Shionogi Pharma will pay $25 million upfront and up to $100 million in milestone payments, and it expects to file a U.S. NDA in the second half of 2010 for the treatment of postmenopausal vulvovaginal atrophy. If approved, the once-daily tablet would be the first non-estrogen treatment option for vaginal atrophy; SERMs that are currently marketed in the U.S. have not shown beneficial effect for vaginal atrophy symptoms. QuatRx posted positive Phase III results in January 2008, announcing statistically significant results for all primary endpoints in its first Phase III study. At the time, the company planned to market the product on its own in the U.S. and partner elsewhere. -- Daniel Poppy

Merck KGaA/Millipore: There’s life in the tools sector yet. After disappointing investors with lackluster 2009 financial results, Merck KGaA put its own spin on diversification with a proposed acquisition of Massachusetts-based Millipore for €5.3 billion (US$7.2 billion). The addition of Millipore, which had interest from a number of suitors, adds $1.7 billion in sales to Merck KGaA's coffers and bulks up its chemicals division, which will now be responsible for an estimated 35% of the German firm’s revenues. But the move surprised analysts, in part because it was Merck's non-pharma divisions -- life-science chemicals and liquid crystals -- that had a poor 2009, dragging down overall revenues. However, the acquisition may add the benefit of much-needed biologics manufacturing expertise. Merck's therapeutic cancer vaccine, Stimuvax , is in Phase III clinical trials, and its recombinant protein atacicept is in Phase II/III trials for autoimmune disease. -- John Davis

GlaxoSmithKline/Abbott: As part of an ongoing collaboration, the companies said Mar. 3 that Abbott is developing a molecular test for selecting patients with melanoma who could benefit from GSK’s therapeutic vaccine targeting the MAGE-A3 antigen, which is expressed on melanoma cells but not normal cells. Last July, GSK engaged Abbott to develop a test for the first product expected out of its Antigen Specific Cancer Immunotherapy (ASCI) program: a diagnostic to select patients for its MAGE-A3 ASCI vaccine for non-small-cell lung cancer (NSCLC). MAGE-A3 ASCI is in Phase III trials in both melanoma and NSCLC. The latter study is more advanced, with enrollment slated for completion in 2011. Abbott will have to run separate trials to clinically validate its molecular test for the melanoma indication, and while the target is the same, there may be differences in sample prep because it is assaying a different tumor type. That said, the new development likely says more about GSK’s goals in immunotherapy than Abbott’s already-established skills as a companion diagnostics partner. As we chronicled last summer in IN VIVO, GSK’s immunotherapy program will span almost two decades before an anticipated first approval. Clearly, GSK wants to be comfortably armed with trial data using a validated companion diagnostic when it goes for approval, perhaps having used the Abbott screening test to identify a subset of patients with a sufficiently high delay in time to relapse. -- Mark Ratner

AstraZeneca/Merck: This week AZ officially swung the R&D axe and cut staff in 10 specific disease areas, including depression and anxiety, hepatitis C, acid reflux, and thrombosis. But it's still spending cash on cardio. AZ announced Mar. 1 it would payMerck $647 million to regain full rights to a group of drugs, including marketed hypertension medicines Atacand, Lexxel, and Plendil, plus the potential blockbuster Brilinta currently under review by the FDA and the EMA. Ties between the two big pharmas go back to 1982 when AZ predecessor Astra teamed up with Merck to co-develop and co-market several drugs in the U.S. Astra bought out Merck’s 50% ownership of the joint venture in 1998, setting up a series of option dates on which Astra -- or its successors -- could regain full rights. Thanks to this deal, AZ now owns all products from the JV except those related to the purple pill franchise Nexium and Prilosec. (Those meds are part of a second option agreement which can be exercised as soon as 2012.) Of the marketed products now wholly owned by AZ, only Atacand can truly be considered a blockbuster, with more than $1.4 billion in worldwide sales in 2009. Much of the deal was almost certainly driven by a desire to own full rights to Brilinta, which posted superior results to Sanofi/Bristol’s Plavix in an 18,000-patient trial in November 2009. According to Cowen and Company analyst Steve Scala, Brilinta if approved could generate annual sales of $600 million in 2012 and $1.5 billion in 2015.



Merck/GTX: As we noted in an earlier post this week, sometimes the bear really does get you.

Image courtesy of flickrer connerdowney used with permission through a creative commons license.

FDA To Increase Criminal Prosecutions Of Execs

The pharmaceutical industry spends plenty on lawyers for all sorts of things - patent challenges, product-liability litigation, employment matters. The list is long, but it may be time to add another reason - criminal defense of executives.

Sure, there have been some big fines paid of late for such things as off-label promotions, but the FDA is now saying it will increase prosecutions of executives as part of an effort to bolster its Office of Criminal Investigations. It's not the first time FDA has made noises intended to get drug execs thinking about doing hard time.

So why the renewed vigor now? The agency is responding to a report issued today by the Government Accountability Office, which found there is little oversight of the OCI. This is the office that's responsible for probing counterfeit drugs and other criminal activities, as well as misconduct by FDA employees. But oversight is so lax that the GAO concluded the FDA "has relied largely on the OCI director to determine which aspects of OCI's operations and investigations are made known to FDA's top management." So who's in charge? Apparently not the FDA commissioner.

For instance, the OCI has six field offices across the U.S., and each office is supposed to undergo evaluation at least every three years. But the GAO found that only seven evaluations, or roughly 30 percent of those required, took place between 1996 and last August. One office has not been reviewed in more than a decade, according to the GAO report, which was undertaken at the request of Charles Grassley, the Iowa Republican on the US Senate Finance Committee who has regularly investigated drug safety issues.

The FDA is sent a more detailed response today to Grassley (see this), although the agency already agreed with the GAO findings (there is a letter at the end of the GAO report that you can read). For those looking to connect dots, the recent Senate Finance report on Avandia made a point of noting that several big drugmakers have paid huge fines for criminal violations, such as off-label promotion, and that more diligent oversight is needed to ensure consumer safety. In other words, Grassley was leaning on the FDA to get tough. But will anyone get convicted?

The FDA response (read here) says the agency will "increase the appropriate use of misdemeanor prosecutions, which allows responsible corporate officials to be held accountable and is a valuable enforcement tool." So maybe it is time to find a full-service law firm.

photo from flickr creative commons sbaker

Celgene: Not So Lucky This Time

Back in early 2009, Celgene was looking rather pleased with the outcome from UK cost-effectiveness watchdog NICE of its multiple myeloma treatment Revlimid.

The drug had won a green light even though the company's "patient access scheme" (as NICE and companies like to refer to cost-sharing deals) really wasn't going to help the UK National Health Service coffers that much. Instead it was NICE's late-2008 end-of-life guidance--a relaxation of the strict cost-per-QALY (quality-adjusted life year) threshold that the agency usually uses to judge whether a drug should be reimbursed or not--that allowed the drug to be waved through.

Not so lucky this time, Celgene. NICE today announced that it would not be recommending myelodysplastic syndrome drug azacitidine (Vidaza) for reimbursement, despite a proposed patient access scheme (almost becoming obligatory for approval these days, it seems) and despite meeting the criteria to be considered under the less stringent end-of-life guidance rules.

Somewhat tantalizingly, Carole Longson, Health Technology Evaluation Center Director at NICE, acknowledged in a statement that the drug could "potentially prolong the life of people with these conditions by around nine months longer than standard treatment," and claimed it was "disappointed" not to be able to recommend it.

We suspect there are poker tactics involved here. If this isn't a call for the company to try harder on its cost-sharing proposals, then what is? Even with the patient-access and end-of-life rules, "the magnitude of additional weight that would need to be assigned to the original QALY for the cost-effectiveness of the drug to fall within the current threshold range would be too great," concluded Longson.

Celgene's already offering a 7% reduction on the drug's acquisition cost, estimated at about £45,000 per patient. But according to NICE's final appraisal determination document, even with this, the most plausible cost-per-QALY would be a whopping £63,000, over double the agency's unofficial threshold.

Unfortunately for Celgene, NICE determined that the cheapest comparator--best supportive care--was also the most appropriate, since it's what's given to the majority of UK patients. This only increased the relative cost of Vidaza; more so than it would have done, for instance, if compared with chemotherapy. What's more, opines Professor Rodney Taylor, deputy chair of the patient support group MDS UK, "they didn't cost [best supportive care] appropriately," underestimating, in his view, the cost of blood transfusions for example.

Celgene plans to appeal the decision, and will argue that the drug fits not only the end-of-life criteria, but also qualifies for various innovation criteria agreed by NICE with the Department of Health designed to increase access to highly novel medicines serving small patient populations. (Read this for more on the review of NICE that led to these proposals). The company is not at this point considering a more aggressive patient-access scheme.

This is the latest in a series of tough decisions emanating from NICE recently; another was its somewhat restrictive policy on second-line anti-TNF use in rheumatoid arthritis patients. These suggest that we were wrong to propose, in the light of the various loopholes that have appeared over the last year or so, that NICE was going soft. The teeth are still there, and sharp, it seems.

image by flickrer greenchartreuse used under a creative commons license

Merck/GTX: If a Collaboration Fails in the Forest, Does it Make a Sound?

As goes the old saying, sometimes the bear gets you. And sometimes the bear gets you and you don't really want to talk about it.

Such appears to be the case at GTX Inc.

GTX has since 2007 collaborated with Merck & Co. in the area of selective androgen receptor modulators to treat muscle and bone disorders. As part of that deal, Merck licensed from GTX the then-Phase II ostarine, a SARM in development for muscle loss in cancer patients. GTX got $40 million up-front and was eligible for about $422 million in milestones. The product was given the snazzy new nickname MK-2866. We covered the deal here.

But as often happens after a big merger (like Merck's Schering-Plough deal), there is some R&D fall out. We heard from Merck's new SVP and head of worldwide licensing David Nicholson at our PSO meeting last week that there is "no way Merck can afford to develop everything" in its R&D program ... "Our R&D model is to generate a lot of output - more than we can deal with," he said.

And so it shouldn't come as a surprise that Merck is opting out of some of its externalized R&D as well. Deep in the forest of Merck's 10-k you'll find this nugget:

Also in 2007, Old Merck and GTx, Inc. (“GTx”) entered into an agreement providing for a research and development and global strategic collaboration for selective androgen receptor modulators (“SARMs”), a new class of drugs with the potential to treat age-related muscle loss (sarcopenia) as well as other musculoskeletal conditions. Merck has discontinued internal development of MK-2866 (which is a SARM) under this agreement, and is currently discussing next steps with GTx.

Merck put out its 10-k on Monday. Not an official peep yet from GTX.

GTX has been reeling since last year when it received a surprise complete response letter from FDA around a different product, the 80mg dose of the selective estrogen receptor modulator toremifine. GTX was hoping to get the product licensed to reduce bone fractures in men receiving prostate cancer treatment.

News of the CRL sliced the company's market cap in half and then some, down to around $150 million, where it still hovers. If investors know about the setback around MK-2866, it hasn't registered in the marketplace. Perhaps the market is ambivalent--or confident in GTX's ability to make lemonade. Not every broken up alliance necessarily spells doom for a product, after all (Tracleer did OK after Genentech bowed out, Exelixis has done well licensing products GSK decided not to opt-into, etc.)

At the end of the third quarter 2009, GTX had about $55 million in cash. It reports full year numbers on March 15.

White House Healthcare Reform Summit: No Losers

The headlines were predictable immediately after the White House Healthcare Reform Summit:

“No Clear Winner in Seven-Hour Gabfest” – Politico

“More Talk, No Deal at Health Summit” – Wall Street Journal

“Obama’s Health Summit Talkathon” – Washington Post

“Bottom Line On Health Care Summit: Dems Push Ahead” – AP

Some news organizations had already issued a comprehensive list of “winners and losers” less than 10 minutes after the summit had concluded. But the real take home message from the White House Summit was there were no “losers.”

Make no mistake, putting on the event itself was a calculation intended to produce political theater that benefited the President and help the administration get some traction for the White House’s top domestic policy agenda item. And Obama did benefit from the public meeting. But so did some Republicans. And so did other Democrats. And so did the viewers who took time to tune in for a few minutes or the full day.

In short, the White House Summit, warts and all, produced the kind of discussion on a national issue of great controversy that many hoped would take place. There were talking points, sure. And there were carefully orchestrated maneuvers, such as House Minority Whip Eric Cantor (R-Va.) repeatedly pointing to the 2,000 page-plus bill, or House Rules Committee Chair Louise Slaughter (D-NY) retelling a story of how a woman had to use her dead sister’s dentures because she couldn’t afford her own. But those were side points to the substantive discussions that occurred in the majority.

Policy Wonk Obama. It’s difficult to find any single person more polarizing to an American public than a current sitting American President. A 50% approval rating is typically good news. Like him or lump him, though, Obama demonstrated a firm grasp of both the large issues, such as the individual mandate to buy health insurance, and the detailed nuances of how the Congressional Budget Office scores premium increases over time. It was at the very least reassuring to see the President know the issues from top to bottom. Put simply, Obama was very good. Moreover, Obama presided over the full meeting, which went roughly six and a half hours. In the end, he gave a defense of the comprehensive he has favored over an incremental approach:

"An interesting thing happened a couple of weeks ago, and that is a report came out that for the first time, it turns out that more Americans are now getting their health care coverage from government than those who are getting it from the private sector. And you know what? That's without a bill from the Democrats or from President Obama. It has nothing to do with, quote-unquote, ‘Obamacare.’ It has to do with the fact that employers are shedding employees from health care plans. And more and more folks, if they can, are trying to get into the Social Security system and the Medicare system earlier through disability or what have you, so that they can get some help ... The reason we didn't do it is because it turns out that baby steps don't get you to the place where people need to go. They need help right now.”

Lamar Alexander: The Right Responder. Republicans could not have picked a better first responder to the President than Lamar Alexander, the Tennessee Republican who is the Senate Republican Conference Committee Chairman. He came off as reasonable, knowledgeable, confident, and respectful. Here’s a snippet from Alexander’s response:

“When I went home for Christmas after we had that 25 days of consecutive debate and voted on Christmas Eve on health care, a friend of mine from Tullahoma, Tennessee, said, ‘I hope you'll kill that health care bill.’ And then, before the words were out of his mouth, he said, ‘But we've got to do something about health care costs. My wife has breast cancer. She got it 11 years ago. Our insurance is $2,000 a month. We couldn't afford it if our employer weren't helping us do that. So we've got to do something.’”

The message, skepticism aside: Republicans aren’t here to say no, we want you to go in a different, incremental direction. Alexander listed six ideas Republicans would be willing to work with Democrats on: A small-business health care plan. Helping Americans buy insurance across state lines. Put an end to junk lawsuits against doctors. Give states incentives to lower costs. Expanding health savings accounts. Eliminate preexisting conditions.

Tom Coburn Speaks, Obama Listens. There are few, if any, members of the Senate more conservative than the Oklahoma doctor Tom Coburn. It was surprising, then, to see on live television Obama listening closely to what Coburn had to say on health care waste, fraud, and abuse, and watch him take copious notes while Coburn spoke. In fact, at the very end of the day, Obama went back to his notes to point out the many point on which him and Coburn agree.

Coburn during his opening remarks:

“You know, when you compare the private sector fraud rates, it's 1 percent compared to Medicare and Medicaid. You know, there's estimates that there's $15 billion worth of fraud in Medicaid a year in New York City alone. So we haven't attacked that. We haven't gone where the money is. And my hope would be that we would look at where the money is. And if truly it's accurate -- and I don't know many people that will disagree that $1 in $3 doesn't help somebody get well and doesn't prevent it, then we ought to be going for that $1 in $3.”

Obama wrapping up the meeting:

"With respect to bending the cost curve, we actually have a lot of agreement here. This is an area where if I sat down with Tom Coburn, I suspect we could agree on 95 percent of the things that have to be done, because the things you talked about in terms of -- and I wrote some of them down. In terms of reducing medical errors, in terms of incentivizing doctors to coordinate better and work in groups better, in terms of price transparency, improving prevention, those are all things that not only do I embrace, but we've included every single one of those ideas in these bills.”

The Clinton Boogie Man Makes His Point. No one is perhaps as reviled in Democratic circles in the health care reform debate as Tennessee moderate Democrat Jim Cooper. The prominent House Blue Dog member is often blamed in part for the failure of Bill Clinton’s failed 1993-1994 effort because of his opposition. Liberals dislike him, to put it lightly. That’s why what he says publicly is being carefully watched by both sides of the aisle in 2010.

Obama went to Cooper in the afternoon, and the Tennessean gave one of the most thoughtful, persuasive remarks of the day:

“Mr. President, I'm thankful you have appointed a presidential fiscal responsibility commission, with Alan Simpson and Erskine Bowles, to try to force us as a Congress and force the nation to address these fundamental problems, because if you love Medicare, you need to act to save it fast. Every day matters. A report will come out issued by the Treasury Department. It comes out every year. It'll come out in the next few days. It's the only report that uses real accounting to describe America's fiscal problems, and the news is not pretty. It will reaffirm what's been discussed here about Medicare and Medicaid and other vital American programs being deeply in the hole. And the opportunity of costs for delay is extraordinary. So we can face these problems, Mr. President. We can solve them with political will, but the talking points won't do it. We've got to acknowledge the real questions.

And as every business person in America knows, if you can't measure it, you can't manage it. And too many people in the federal government are refusing to measure it, much less take the tough votes that are required, because the reason we have a Medicare Advantage program, Mr. President, as you know, is in 2003, when the other party was completely in charge of everything here, we passed a program that before now was almost completely unfunded and added $8 trillion in one bill to our children and grandchildren.

Now, those benefits if offered should be paid for. So this is a challenge for everybody in both parties, because nobody's hands are clean in this, but let's have a new day, a new beginning. I think we could do this. And this bill is a great place to start, because if you don't think this bill reduces the deficit enough, according to CBO, vote for more savings. If you want to reform Medicare some more, vote for it. Don't just talk a good game.

So I hope the American people are watching, because -- and they're going to be watching after the cameras are turned off, too. And I'm thankful you called this meeting, because this is a moment of truth for our country. And together, we can solve this problem.”

In the end, it’s about philosophy. Maybe no one summed up the critical question at hand better than Texas Republican and ranking Energy & Commerce Committee member Joe Barton:

“Mr. President. I want to commend you for asking us to come here. And I will say that never have so many members of the House and Senate behaved so well for so long before so many television cameras. So if we ever get to a conference committee, we may want you to be the moderator. I do think, though, that there is a fundamental difference in the vision that you and your friends on the majority have put forward and the vision that myself and those of us in the minority have put forward: It's the pivotal role of the government.

We believe that we should use free markets to empower people and give them choices. And for the best of intentions, yourself and most of your allies in the Democratic Party seem to believe that the government, either through a mandate or through a regulatory requirement, knows better and will do better for health care for most Americans.”

Barton encapsulated in his brief remarks the question at the heart of the health care reform debate and it was clear to everyone watching: If you want more government involvement in health care, you’re for them. If you don’t, you’re for us.

(Official White House Photo by Lawrence Jackson)