Transparency in Action: FDA Comments on Pirfenidone

It's no secret: FDA review managers would like to make "complete response" letters public.

We've heard that directly from them, and now the idea is moving forward as one of a number of proposals from the agency's Transparency Task Force.

This idea, to put it mildly, provokes mixed feelings in industry. "Mixed" in the sense that sponsors love the idea of seeing their competitors' complete response letters, but hate the idea of having their own made public.

But a recent presentation by FDA officials during the American Thoracic Society's annual conference has us wondering what the fuss is all about.

As reported by The Pink Sheet (relying on a transcript by one of the Wall Street analyst firm, ThinkEquity, who attended the briefing), medical officer Banu Karimi-Shah discussed the recent complete response letter for Intermune's IPF therapy pirfenidone, and outlined the agency's position that the existing dataset does not meet the statutory definition of "substantial evidence," and therefore another clinical trial is required. Karimi-Shah also discussed issues around the adequacy of forced vital capacity as a surrogate endpoint, and the relevance (or lack thereof) of Japanese clinical data with a different formulation of pirfenidone.

FDA rejected the application May 4, over-ruling an FDA advisory committee that voted in favor of approval--though the committee had significant misgivings about the sufficiency of the data as a basis for approval.

This is not be the first time an FDA official has commented on a non-approval decision during a public forum, but the extensive discussion of FDA's issues with the application can hardly be described as routine. So we asked the agency whether the remarks were cleared by top FDA officials or posed any concerns regarding the appropriateness of discussing the elements of a Complete Response.

Here is what the agency told us, by email:

"The information presented by Dr. Karimi-Shah was presented and discussed at the Pulmonary-Allergy Drugs Advisory Committee meeting on March 9, 2010, so her presentation was already in the public domain. Intermune disclosed in a press statement on May 4, 2010, that the FDA issued a CR letter and the FDA requested an additional clinical trial to support the efficacy of pirfenidone, so this information was also in the public domain."

See? There is really no reason to argue about making CR letters public after all. Right?

Okay, our tongue is firmly in our cheek on that. We'll have much more on the reaction to the transparency proposals in an upcoming issue of The RPM Report.

Financings of the Fortnight Looks for Its Shadow

We are always on the lookout for leading indicators, no matter how faint the signal. If you tend an herb garden on your back porch, you might prefer the "green shoots" metaphor. Ever hopeful that the second law of thermodynamics isn't really the guiding principle ruling our lives, we humans also imbue natural events and public rituals with significance. Earthquakes as divine punishment! The groundhog's shadow! That said, we should say right off the bat that Genmark Diagnostics is no Punxsutawney Phil.

Yes, Virginia, there was an IPO last week, and its name was Genmark. But it wasn't the sort that necessarily means a damn thing. An obscure UK diagnostics firm formerly known as Osmetech that creates a US subsidiary, reverse-merges into it to reach US shareholders -- and only pulls in $28 million after shooting for as much as $45 million, for that matter -- is only that. An N of one.

Yet it came at a time when we were already thinking about diagnostics, and funding, and the funding of diagnostics. The low-profile offering, tucked just in front of the long holiday weekend, was also sandwiched between two conferences that opened different windows on the application of genetic information. At a consumer genetics show in Boston this week, funding strategies weren't explicitly on the menu, but as our correspondents noted, it's becoming ever more clear that cost breakthroughs in sequencing will lead to identification of medically significant genetic variations in patients. The question then becomes, what do you do with them?

That was the topic last week at the C21 venture conference in California's Napa Valley, where the diagnostics panel drew an eager crowd looking for ways to put money into -- buzzword alert! -- low-cost innovation. (That is, really cool stuff that doesn't cost a lot to make.)

And as our colleague Mark Ratner noted in his recent IN VIVO feature, despite the early days of most genetic research, a trio of well-known VCs -- Kleiner Perkins Caulfield & Byers, Mohr Davidow Ventures, and TPG -- have spread their diagnostic bets further, particularly into cardiology, after hitting the jackpot with breast-cancer test maker Genomic Health. Genmark isn't in their portfolios, but as we've seen on the drug side, any IPO activity after the long dry spell of 2008-2009 is worth scrutiny, not just as an indicator for current portfolio companies but for investors looking to jump in. One of the keys to diagnostics is getting pharma's attention in a variety of ways, such as using tests as a marketing tool when a drug rep is out detailing. We'll let Ratner explain:

The raison d'etre of new molecular tests is to significantly add to the information available to physicians to enable or change critical clinical decision-making. Especially at a time when the pace of new drug introductions is slowing and the opportunities to meet face-to-face with physicians therefore diminishing, as molecular diagnostics moves into new and broad markets like cardiology and metabolic disease, pharma could use this opportunity to its advantage in many settings.

In the case of a specific cardio test called Corus CAD, Ratner writes, "There's sufficient novelty and interest in genetics and genomics associated with coronary disease that [drug reps] could start a dialog with a physician about Corus CAD and at some point change to their drug-oriented message."

Diagnostic brethren such as LabCorp, Roche and Qiagen make splashy acquisitions; pure-play pharmas probably won't, though some are keeping their options open. Other deals will come from industrial giants such as General Electric and Procter & Gamble. But with massive hoards of cash to spend, any sign of pharma opening its coffers for diagnostics deals could mark a big change in the way VCs invest, which despite a few high-profile deals hasn't been that stunning. According to the Elsevier Strategic Transactions database, investment in diagnostics, over $1 billion annually for most of the past decade, is trending lower this year with $273 million through May.

Then again, life-science investing is down across the board this year. Have no fear, there's always plenty of material to bring you...



Tetraphase Pharmaceuticals: The antibiotic developer pulled in a $45 million Series C round to push its lead candidate into Phase II trials later this year, marking another step toward filling what public-health officials say is a ever-growing need: next-generation treatments to fight drug-resistant Gram-negative bacteria, as noted by our colleagues at START-UP. Tetraphase starts with a tetracycline backbone and then modifies the molecule at multiple positions to create an extremely large library. These molecules then can be screened for both their anti-infective properties and their potential to cause off-target toxicities. The lead compound, the intravenous TP-434, will likely focus initially on intra-abdominal infections. The Series C cash will also help push two more compounds -- TP-2758, for complicated urinary tract infections and TP-834, for the treatment of community acquired bacterial pneumonia -into Phase I. Excel Venture Management, a new investor for the biotech, led the round joined by existing backers: CMEA Capital, Fidelity Biosciences, Flagship Ventures, Mediphase Venture Partners and Skyline Ventures. Steve Gullans, managing director of Excel Venture Management, will join Tetraphase's board of directors. -- Carlene Olsen

NormOxys: The developer of small-molecule oxygen-enhancing drugs to treat a variety of diseases announced on May 24 a $17.5 million Series B financing. In addition to existing backer Index Ventures, Care Capital participated in the most recent financing round, with partner Argeris "Jerry" Karabelas joining the start-up's board of directors. It brings the firm's total funding to $30 million. With its novel platform technology and top-notch scientific pedigree, NormOxys has raised a sizeable but not extraordinary amount of additional cash from A-list backers and avoided too much dilution. It can now also aim for a more lucrative big pharma partnership -- whether it's a licensing deal or acquisition -- once the lead molecule, and thus the company's platform, have been derisked. The lead molecule is OXY111a, which the firm calls an "oxyren," for its oxygen-releasing capabilities. It changes the offloading capacity of hemoglobin so that more oxygen can be delivered to tissues where needed. If all goes to plan, it shouldn't result in excess oxygen delivery to normal tissue, which can cause damage because of free radical production. Equally important, say officials, is that the molecule triggering the actual physiological changes is oxygen itself, not the oxyren. Thus, potential off-target side-effects that have scuppered artificial blood substitutes such as Biopure's Hemopure, Northfield Laboratories' PolyHeme, and Baxter Healthcare's HemAssist, should be less problematic. OXY111a is entering Phase I trials with a later goal of testing it against chronic heart failure and an undisclosed cancer indication. -- Ellen Foster Licking

Exelixis: The San Francisco Bay Area public biotech is no stranger to all kinds of financing deals, and now it's turned again to debt to help expand the late-stage development of lead candidate XL184. Exelixis said June 3 it has secured loans worth $160 million from two lenders at an aggregate cost of capital under 10%. Part of the cash will pay back a loan from GlaxoSmithKline, a remnant of the firms' broad, six-year license-and-option deal signed in 2002. It will also fund XL184, which should enter Phase III trials for second-line glioblastoma by the end of 2010, with more Phase III trials possibly coming in 2011. XL184 was rejected by GSK before the six-year deal expired in late 2008, but Exelixis pivoted into a lucrative deal with Bristol-Myers Squibb, which pays 65% of XL184 development costs. It is currently in Phase III for medullary thyroid cancer and earlier-stage trials for glioblastoma. Exelixis is tapping Silicon Valley Bank for $80 million with a seven-year term loan at 1% interest. It's also borrowing $80 million from Deerfield Management, a five-year term with a maximum principal of $124 million. Interest is $6 million a year. Exelixis opened a line of credit with Deerfield in 2008 that, at the time, officials said they hoped never to draw down from. But with a 40% cut in staff in March the firm is shifting resources to late-stage development, which is still expensive even with big-pharma partners footing much of the bill. -- A.L.

Constellation Pharmaceuticals: Epigenetics pioneer Constellation added a corporate venture backer, GlaxoSmithKline's venture arm SR One, in a $22 million Series B financing announced June 2. In addition to SR One, previous investors Third Rock Ventures, The Column Group, Venrock Associates, and Altitude Life Science Ventures, which led the company’s $32 million Series A in 2008, all participated in the round. SR One’s cash should help Constellation keep pace with its main competitor, Epizyme, which obtained backing from Amgen Ventures and Astellas Venture Management in its own $40 million Series B last fall. Neither company has reached the clinic. Both are focused primarily on cancer, but Constellation of Cambridge, Mass. hopes to move eventually into diabetes, autoimmune, inflammatory and neurological diseases. Epigenetics focuses on chemical modification to chromatin, the proteins that package DNA, to create therapeutics that influence gene expression. Two classes of such drugs already are on the market: Celgene’s Vidaza and Eisai’s Dacogen, both DNA-methylation molecules approved for myelodysplastic syndromes, and Merck’s Vorinostat, a histone deacetylase (HDAC) inhibitor for T-cell cutaneous lymphoma. At least two other HDAC inhibitors are in late-stage development for oncology indications. -- Joseph Haas

Extra thanks to Mark Ratner for help with this week's post. Photo courtesy of flickr user avmaier.

Turn Out the Lights and Go Home, the Cleveland Clinic Has Cured Cancer, Convinced LeBron to Stay

ASCO approaches, and the season of cancer vaccine hype is upon us.

Exhibit A: Cleveland Clinic Researchers Develop Prototype Vaccine To Prevent Breast Cancer. That's the headline for this press release from the Cleveland Clinic's Lerner Research Institute, announcing a Nature Medicine letter, and featuring the quote below.

"We believe that this vaccine will someday be used to prevent breast cancer in adult women in the same way that vaccines prevent polio and measles in children," said Vincent Tuohy, Ph.D., the study's principal investigator and an immunologist in Cleveland Clinic's Lerner Research Institute Department of Immunology. "If it works in humans the way it works in mice, this will be monumental. We could eliminate breast cancer."

PR folks: you know you're hypey when even the Daily Mail takes a more measured tone in its headline. As blogger/consultant/sane person Sally Church points out, the drug development road and the odds are very long indeed. "Please, show us some solid DATA first before hyping a theory all over the internets, however well intentioned," she concludes.

Of course we wish Tuohy and company well and hope the optimism is well-founded. We hope we're not being too cynical. And for Cleveland's sake, we do hope LeBron stays put.

image from flickr user mrinray used under a creative commons license

Drug Safety 2010: Nissen Meets With FDA Leadership as the Avandia Advisory Committee Meeting Looms

The most important single event for FDA’s drug review in 2010 and possibly beyond is coming this summer: the advisory committee re-review of GlaxoSmithKline’s diabetes drug

Since passage of the landmark FDA Amendments Act of 2007, the drug approval climate at FDA has improved steadily. To view The RPM Report’s analysis on the drug approval climate, click here

It appears one potential conclusion that can be drawn is that FDA’s comfort level with the postmarket control and monitoring tools given to them through FDAAA is adding confidence to approval decisions.

But the Avandia re-review could change all that. Whether FDA chooses to pull Avandia from the market, keep the drug on the market, suspend use temporarily or further restrict its use, the agency must ensure that it does one thing: make a credible decision. Any outcome deemed to be unsatisfactory by FDA stakeholders in Congress, and the experts they listen to, puts the improving drug approval momentum in real jeopardy.

Just to recall briefly: In May 2007, a meta-analysis by Cleveland Clinic cardiologist Steve Nissen published in the New England Journal of Medicine found that Avandia (rosiglitazone) was associated with over a 40% increase in heart attack risk. The House Oversight & Government Reform Committee put together a hearing before FDA could respond to the study. In July 2007, FDA convened the Endocrinologic & Metabolic Drugs Advisory Committee and the Drug Safety & Risk Management Advisory Committee to assess Avandia’s future.

The joint committee voted 20-3 that the drug increases cardiac ischemic risk but subsequently voted 22-1 against withdrawal of the TZD. The panel meeting surfaced an “internal disagreement” between the Office of New Drugs and Office of Surveillance & Epidemiology over whether to withdraw rosiglitazone over heart attack risks.

On October 2, 2007, FDA’s Drug Safety Oversight Board voted (8-7) to keep Avandia on the market. The non-public vote was questioned by ranking Senate Finance Committee Republican Charles Grassley (Iowa) due to the lack of transparency. On November 14, 2007, FDA issued a black-box warning for Avandia warning of heart attacks. GSK agreed to conduct a long-term postmarket safety trial of Avandia compared to competitor Takeda’s Actos to confirm a higher CV risk for rosiglitazone; the trial was named TIDE. The TIDE trial is expected to be complete in 2015.

The Senate Finance Committee released a major report on February 22 bringing to light internal emails and memos related to Avandia and heightened CV risks. On February 26, House Agriculture Appropriations Subcommittee Chair Rosa DeLauro (FDA’s chief appropriator) gave a detailed critique of GSK’s RECORD study, which the company maintains supports Avandia’s safety profile.

Now FDA is scheduled to hold another re-review of Avandia, likely July 13-14.

"Congresswoman DeLauro is looking forward to the advisory committee meeting and its findings,” a spokesperson for DeLauro says. “She believes that the TIDE trial is unethical and should be halted immediately, and has urged the FDA before to remove Avandia from the market until a truly independent, science-based advisory panel can evaluate the safety and effectiveness of the drug.”

DeLauro and her staff met with FDA Principal Deputy Commissioner Joshua Sharfstein and Assistant Commissioner for Legislation, and former staffer to Rep. John Dingell, Jeanne Ireland on May 20. The topic? “Drug safety.”

DeLauro isn’t the only one meeting with FDA leadership. Nissen recently met with FDA Commissioner Margaret Hamburg and Sharfstein to make the case that the TIDE trial was unethical and that Avandia needed to be withdrawn.

The major threat to the approval environment and the current FDA review structure is that an outcome on Avandia that is viewed as lacking credibility will energize those who want to split the Center for Drug Evaluation & Research into two separate centers or offices. A split would still be a long-shot, but a possibility nonetheless.

“As far as the FDA’s organization, the Congresswoman believes that serious consideration should be given to creating two independent offices within FDA – one that would be responsible for reviewing drug applications, and another for post-market surveillance,” the DeLauro spokesperson says. “It is something she has been concerned with for awhile, and the Avandia case serves as a reminder of just how important it is to address this situation.”

Here are a few points to consider as the Avandia re-review approaches:

1) How many advisory committee members will be assembled? In July 2007, there were 23 panel members convened for the meeting. That is a large number of committee members, many of whom were given temporary voting status. The makeup of the committee will be equally important in terms of the balance between drug safety specialists and E&M committee panelists (to view the 2007 final roster, click here).

2) Will the full Actos safety data be presented? Our understanding is that FDA asked both GSK and Takeda for every shred of data related to Actos and have had the data for “months.” Whether or not those data are formally presented at the meeting will go to the heart of the credibility question whatever the committee and FDA decide to do with Avandia. The current buzz in Washington is that not all of the Actos data will be presented, but it is still too early to determine whether that will actually be the case in the end.

3) Will Nissen present? At the July 2007 meeting, Nissen did not make a formal presentation of his meta-analysis—the whole reason for the existence of the panel meeting—to the advisory committee. Instead, he sat in a chair along with the rest of the audience. Something similar happened with Sanjay Kaul, a Cardio-Renal Advisory Committee member who was barred from the advisory committee review of Eli Lilly’s anti-clotting drug prasugrel (to read The RPM Report story, click here).

4) Hamburg and Sharfstein have gone to great lengths to brand the Obama Administration’s FDA as a public health agency. The Avandia re-review represents the first major prescription drug safety, public health issue. How will they react? Hamburg has already gone to IoM for ethical and scientific guidance on postmarket studies (to read our analysis in The RPM Report, click here). Probably the best outcome for the drug industry at large would be a risk evaluation and mitigation strategies (REMS) program that controlled the use of Avandia, monitored patients on the drug, and provided FDA with valuable data on its cardiovascular risk profile. That result would validate the use of FDA’s drug safety authorities under FDAAA, hold together FDA’s current regulatory structure and keep the approval momentum going. But is that enough of a public health message for Hamburg and Sharfstein?

5) There are a number of important FDA officials who will be directly affected by the final decision on Avandia--maybe none more than the ones who will make that decision. Hamburg and Sharfstein will bear the brunt of public scrutiny around the decision. Perhaps no one will be under the microscope more than CDER Director Janet Woodcock, who concluded that Avandia should remain on the market in 2007 with stronger warnings. This is a major issue for FDA. Woodcock is held in high regard as a strong leader, effective manager, and there are few individuals at FDA who understand its operations—and runs them as efficiently—as Woodcock. While the FDA drug safety players are the same—Gerald Dal Pan and David Graham—the drug review management is different compared to 2007. In 2007, CDER Office of Drug Evaluation II Director Robert Meyer gave a public refutation of the conclusions drawn by Graham and Dal Pan that Avandia had to be withdrawn. Meyer is no longer at FDA and Curtis Rosebraugh is the current ODE II Director. However, Mary Parks was and remains the Division Director for Metabolic and Endocrine Drug Products. Both Rosebraugh and Parks will be important officials on the Avandia re-review. Lastly, CDER Deputy Director for Clinical Science Bob Temple will play a role in the Avandia decision but it is unclear exactly what kind and how big a role. Temple has presented publicly about FDA’s tough decision-making when it comes to taking a drug off the market.

There is still a lot of time before the advisory committee: much could change and there are sure to be surprises just as there were in 2007. But it would be an understatement to say there is a lot riding on Avandia.

While You Were Perfect

Twenty-seven up, 27 down. Roy Halladay's perfect game on Saturday against the Marlins is an oasis in a desert of slump for the Phillies, which in a way makes it a little more remarkable. The 20th PG in baseball history (this blogger was lucky enough to be in attendance for the 16th, David Cone's in Yankee Stadium), Halladay's gem has potentially led to the first post-facto sellout in baseball history: the Florida Marlins are selling unused tickets from the game at full face value. Video of all 27 outs here.

We hope you had a perfect Memorial Day/Bank Holiday weekend.

Meanwhile, while you were falling in an 0-2 hole ...

• Novo Nordisk, unhappy with mandated price-cuts in Greece, is taking its ball and going home. Or at least it's taking its modern insulin franchise off the market. Reuters reports that Novo is the first company to pull its drugs from Greece, but that dermatology-focused Leo Pharma yanked its medicines soon after.
• A Korean blockbuster is going global, after Merck buys from Hanmi Pharmaceutical the rights to incrementally modified hypertensive amlodipine product Amosartan in North America, China and Europe, PharmAsiaNews reports. The drug will be sold under Merck's brand Cozzar XQ.
• J&J's Centocor Ortho Biotech this morning bought the small, pulmonary disease focused biotech Respivert, which was founded by former GSK execs and backed by Advent Venture Partners, Fidelity Biosciences, Imperial Innovations and SV Life Sciences. Financial details aren't immediately clear but Imperial Innovations disclosed that it made a 4.7x return (£9.5mm gross) on its 13.4% stake in the company, a three-year investment. UPDATE: J&J inked a second respiratory-focused deal announced this morning. Orexo, a Swedish biotech, says it signed a three-program R&D collaboration with J&J, worth $10 million up front. Two of the assets come from Orexo, the third from J&J.
• Not long after its Phase III MermaiHD debacle, NeuroSearch CEO Flemming Pedersen resigns. No word on Pedersen's next move although the company's release notes he is taking another position.
• FDA will more closely monitor OTC manufacturing operations and require comprehensive changes at firms with systemic quality deficiencies as a result of its investigation of Johnson & Johnson's McNeil Consumer Healthcare, reports The Tan Sheet.
• AstraZeneca's attempts to extend its PPI franchise hit a snag as FDA issues a complete response letter for its esomeprazole/aspirin combo and rejects an expanded label for Nexium. Bloomberg reports.
• The Rose Sheet reports that increased scrutiny of anti-aging products entering the US presages "a major enforcement initiative" against illegal cosmetic claims that will impact domestic personal-care firms, large and small Oh and just to be clear, reading 'The Rose Sheet' doesn't actually make you look younger -- just smarter.
• Novartis/Roche's Xolair hits another hurdle as NICE rejects coverage of the drug by the NHS.

DotW: Navel Gazing

It was a week of painful navel-gazing from many in the venture community, as some of the industry’s best and brightest gathered in Napa for the annual C21 Bioventures conference at the Meritage Resort.

A panel of VCs kicked off the event with a gloom-and-doom overview of the private financing world. As Ilan Zipkin, a partner with Prospect Ventures succinctly put it, "It’s a good thing we’re not holding this meeting in San Francisco. Here in Napa there are no bridges to jump off."

Ouch. Are things really that bad in private biotech land?

As we’ve been pointing out for some time, for VCs, the answer is yes. Funds raising money now are having a tough time and the expectation is future fund sizes will be smaller too, with returns down across the board. As InterWest Partners’ Chris Ehrlich put it: "People feel worse about themselves. LPs, the life blood of capital for venture, are saying the role of VC an asset class is limited. That casts a pall." Ehrlich likened the current climate for VCs who came of age in the most recent decade as "born in the crossfire of a hurricane." (Our heart goes out to Ehrlich and we’d likely be far more sympathetic--if we weren’t in the publishing industry.)

For biotechs looking for financing, things are a bit more hopeful, thanks to the rise of corporate venture groups, including newly formed units from Boehringer Ingelheim and Abbott. But certainly expectations must be adjusted. In terms of exits, Alison Kiley of Alta Partners is telling her firms to "keep their heads down, operating as if there will be NO IPOs." And, as IVB has said in the past, the shift is away from big M&A to back-end licensing deals, with pharmas using their leverage to make smaller biotechs share the risk and cost of early stage drug development. Still, a negative discussion about the rise of option-based deals in the final panel of the first day suggests many in our own industry are refusing to face up to the new economic realities.

In the words of the immortal Charles Darwin, it’s worth remembering that "It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change."

Of course, VCs and early stage biotechs aren’t the only ones who need to adapt. J&J and BP come to mind as well. On that cheery note...we break for a holiday weekend and no more tsk-tsking from your mother for wearing white shoes. It's time to fire up the barbecue, crack open a cold one, and turn on the tunes (The Ramones "I want to be sedated" and Greed Day's "Basket Case" come to mind.) All the while reading another edition of …

Sanofi-Aventis/ Nichi-Iko: Sanofi’s deal team has been on a role, especially when it comes to inking very early stage collaborations (see below) or tie-ups with players in the consumer and generics spaces. (So much for the coming M&A storm, eh?) The French drug maker continues its eastward march, moving from Poland to Japan this week with a joint venture with one of the top Japanese generics’ firms, Nichi-Iko. Sanofi-Aventis owns 51% of the new J/V which is less than creatively named Sanofi-Aventis Nichi-Ikko K.K. (we’re guessing the abbreviation of choice will be SANI not SANK.) One of the J/V’s top initial priorities will be to rake over marketing and distribution rights in Japan for Sanofi’s anti-insomnia medicine Amoban, which generated 2009 sales of roughly €43 million. As our sister publication PharmAsia News has noted many a time, western pharmas are increasingly interested in tapping into the Japanese generics market because of a series of national policies that are encouraging generic drug use. (Japanese cos are interested too; hence Daiichi’s desire in 2008 to take partial ownership of Ranbaxy.) Pfizer, Merck, and Novartis have all made forays into the Japanese generics market, as has Teva. In allying with Nichi-Iko, Sanofi gains a considerable footprint in the island nation. Nichi-Iko owns five distribution centers and supplies drugs to 120,000 medical facilities in Japan. Last month the company reported generic sales grew 13.7%, with net profits up 103.9% for the quarter ending in February.—Ellen Foster Licking

Sanofi-Aventis/Massachusetts Institute of Technology: Another week, another corporate/academic research collaboration surfaces. This week it’s Sanofi-Aventis’ turn to make headlines, announcing a three-year, $4.2 million research collaboration with MIT’s Center for Biomedical Innovation. The collaboration's initial focus will be in the areas of nanotechnology and biologics. Although no funding has been awarded yet, the pharma is most interested in emerging technologies that provide new solutions for patients, such as next-generation nanoparticles for drug delivery, novel sensor technologies for diagnostic purposes, needle-free and wireless drug-delivery tools, and devices that monitor clinically relevant metabolites and biomarkers. As such, it fits Sanofi’s evolving belief that the drug companies of the future will be those that provide not just pharmaceuticals but end-to-end health care solutions in the vein of its recent acquisition of glucose monitoring play AgaMatrix. The MIT partnership will build on Sanofi's existing presence in Cambridge, Mass., which includes a 60-person research center and the company's vaccine subsidiary, Sanofi Pasteur Biologics. With Big Pharma companies looking at ways to reduce R&D spending, low-risk partnerships with academia and startup drug companies, in which drug makers get access to external R&D for a nominal price, are becoming more common. Pfizer recently announced a five-year tie up with Washington University in which university researchers are granted access to Pfizer compounds and data in a reprofiling effort. In the case of Sanofi's alliance with MIT, a joint steering committee will allocate annual grants ranging from $100,000 to $150,000 to academic researchers, with the French pharma holding an option on any completed research to fund further work.—Joseph Haas

Clovis/Avila: Clovis Oncology, which raised an impressive $145 million Series A in 2009, has partnered with three-year old Avila Therapeutics to develop and commercialize Avila's preclinical epidermal growth factor receptor (EGFR) mutant-selective inhibitor (EMSI) and a companion diagnostic. Under the terms of the deal, Avila and Clovis will collaborate on the preclinical development of the drug, which is being tested as a potential non-small cell lung cancer therapy. Clovis bears responsibility—and cost—for the drug’s clinical development and commercialization, as well as for the creation of the diagnostic. Total biobucks associated with the deal are $209 million, with Avila receiving an undisclosed upfront fee. For Clovis, the deal, announced May 25, marks the second asset the company has acquired since its initial financing. The company-- led by Pat Mahaffy and a band of cohorts formerly from the oncology play Pharmion--was formed with the aim of in-licensing oncology drug candidates in clinical development and pushing them through to commercialization. In November 2009, Mahaffy’s company bought Clavis Pharma’s Phase II lipid-conjugated formula of Eli Lilly's chemotherapy Gemzar (gemcitabine) in development for pancreatic cancer for $15 million upfront. In both the Avila and Clavis deals, the importance of a companion diagnostic targeting the appropriate patients has been a central part of the deal logic. Whether or not Clovis does the actual dx development is a different question. Earlier this year, Clovis signed a deal with Roche's Ventana Medical Systems, Inc. to develop and commercialize the diagnostic for the gemcitabine compound.—Jessica Merrill

Gentiva/Odyssey Healthcare: IVB doesn’t typically devote much space to healthcare services but the size of the Gentiva/Odyssey tie-up makes it impossible to ignore. Gentiva is a major provider of home health care services, while Odyssey is one of the leaders in hospice care in the U.S. Both companies have strong balance sheets and scale, so as Daily Finance writer Tom Tauli put it "assuming the integration is seamless, the result will be a powerful combination." Gentiva will spend about $1 billion to bring Odyssey’s 20 in-patient facilities and 92 Medicare-certified programs in-house, as well as the ability to provide a seamless transition from in-home care to end-of-life care. The $27-a-share price for Odyssey represents a 40% premium to the company’s closing stock price on Friday May 21, the day before the merger was announced. Hospice care is a relative new industry but one of increasing importance, given the aging demographics in the U.S. Analysts have been debating the merits of combining hospice and home-based care for some time, with proponents emphasizing synergies in shared referral and recruitment sources and marketing staff. Certainly the recent regulatory scrutiny over home health-care billing practices may have encouraged Gentiva to diversify, especially after it divested non-core assets in respiratory and infusion therapy back in February. Still, according to the WSJ, at least one analyst, Arthur Henderson of Jefferies & Co., was "taken aback by the magnitude" of the deal, Gentiva’s first in the hospice space. "We view this deal as an indication of management’s renewed vigor in driving accelerated growth through an aggressive acquisition strategy," Henderson said.--EFL

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

Ed. Note: Let's Go Flyers!

Put a Cap on It

Toyota. Massey Energy. British Petroleum. Johnson & Johnson?

That is not a list J&J wants to see. But, as the company testifies today about a series of recalls affecting its consumer product line, J&J's corporate brand is very much at stake.

Sometimes, it isn't so much what you do but when you do it that matters. For pharmaceutical manufacturers, quality control problems are an unfortunate fact of life. Even the best run companies run into problems. Manufacturing is complex, QC standards evolve, and global multinational management structures invariably mean pockets of underperformance. No one is perfect.

Unfortunately for J&J, there may not be a worse time for a company to have problems like it is having. A massive recall of well known consumer product brands like Tylenol would be a black eye any time. A recall at a time when FDA is moving back towards a tougher enforcement posture is even worse. When the newly installed FDA deputy commissioner (Josh Sharfstein) has made his public health bona fides by focusing on the risks of OTC medicines, including Tylenol, it is a double whammy.

But to face all that at a time when Congress is investigating industrial disasters in multiple sectors means moving from a major FDA issue to a potential life-and-death moment for the corporation. We're talking Enron here.

What can J&J do?

Well, like BP, they need to stop the gusher. The analogy to the oil pouring into the Gulf of Mexico is a stretch, but for J&J there is a distinct sense that the bad news keeps coming. Just this year, there was an FDA warning letter for failing to follow-up with alacrity on complaints about a "musty smell" associated with some bottles of Tylenol. That was followed by the shut down of its Fort Washington, PA facility and the recall of much of the company's OTC product line.

Heading into a Congressional hearing, J&J faced two more untimely developments: the final resolution of an investigation into off-label promotion of Topamax (including a guilty plea by the division responsible), and another FDA warning letter focused on its medical device manufacturing. (Read more here.)

Today's hearing (and a likely follow-up in the Senate) will bring more negative headlines and unflattering attention. The key for J&J is to make it stop.

There is hope: as Genzyme seems to have proven, a company can indeed put a cap on a seemingly out of control compliance issue. Cynics would say it took awhile, but once Genzyme brought in outside managers to take over its manufacturing QC, the company seems to have regained control of the situation. The company moved into a consent decree negotiation, achieved a resolution along the lines it predicted, and received approval for an important new product as a result. Genzyme has a lot of work ahead of it, but the gusher of bad news has been capped, for now at least.

We don't think J&J will have the same period of time to get its house in order that Genzyme had: progress from here better be fast and sure. But it can be done.

Then there is the uncontrollable element of luck. The hearing today coincides with what might be BP's last chance to seal the Gulf Oil leak. Whether that effort succeeds or fails, that will be the lead story tonight--and J&J's issues will get a bit less attention than they might have otherwise.

Of course, if BP succeeds in capping that gusher, it means even more pressure on J&J to stop the flow of bad news about its brand.

When Innovation Isn't Enough

There is always a self-congratulatory flavor to BIO’s annual meeting. Which is as it should be: it’s the lobbying group’s best venue for justifying its membership dues.

And I think they have – with exhibit 1 being their clever R&D tax credit, a $1 billion piece of reform money to provide a few hundred biotechs with non-dilutive cash most can’t get anywhere else.

And yet I still can’t shake the feeling that, by and large, BIO’s leaders – or maybe BIO’s members – are fighting the last war, over innovation, when the new fight is all about value.

Even a political idiot like me can get why Jim Greenwood reads gushing letters from patients about drugs that have saved their lives. And given just how few important biotech medicines have gotten approved lately, I understand why Dendreon’s Provenge gets a prominent mention. And I also get why Greenwood didn’t mention its cost ($93K for a full course of therapy). He would then have had to explain just how Dendreon calculated that Provenge will be cheaper than Taxotere per-month-of-life-saved (on theoretical average, Provenge gives you an extra three). Which would have been kind of boring.

But why wasn’t the Provenge price front and center in the more purely business speeches about cancer products (or frankly any biological therapy)? Given just how often people gave passing nods to the needs of payers (e.g., in Steve Burrill’s theories-of-everything talk), you’d figure that the Provenge price might be a relevant topic. Pricing is at least passingly important to a product’s commercial prospects and so apparently exceptional pricing might indeed be worth a chat, whether you think that price bodes well or ill for the industry (e.g., the Provenge price will be a) the straw that breaks the camel’s back or b) another gold nugget that shows just how strong the camel’s back still is or c) a meaningless topic because Dendreon, supply constrained, is only going to sell a few thousand therapies so total costs for any one payer won’t rise to a meaningful level). But I heard nothing about it.

Or let me put this another way. Greenwood said that "the recent recession and policy hurdles” hadn’t “diminished our passion to innovate.” First, I don’t think most investors or, frankly, executives would agree. For most VCs I know, passion for pharmaceutical innovation has turned into a massive case of indigestion (to continue the gastro-intestinal metaphor: VC portfolios are clotted with innovative companies).

But more importantly have Greenwood’s “recession and policy hurdles” increased our willingness to prove value – which isn’t the same thing as novelty and which Greewood’s r&ph will certainly require?

I don’t get the sense that drug companies have done much to show that they see the difference. (Full disclosure here: I’m now so interested in this subject that I’m part of a group exploring a new company focused on it.)

Innovation, by and large, can be judged pretty objectively. A new mechanism is innovative. A new compound too. But value is subjective – what’s valuable to you may be burdensome to me. Yet the industry’s main arbiter of value, clinical trials, too often proves value to only one audience: regulators.

That audience is certainly crucial. But everything we’ve learned over the last year says that a regulatory audience is hardly predictive of what other equally crucial audiences want: Lilly’s Effient, Bristol/AZ’s Onglyza and J&J’s Simponi and Ultram ER all provide customers with – well, given their commercial performance, very little they’re willing to pay the price for.

This isn’t to say that these drugs’ suppliers couldn’t create the necessary value. It’s to say that they haven’t, at least in part because they’re focused on just one audience.

Instead of simply proving that a pain drug reduces pain without causing other big problems, maybe the trial should prove that the pain drug does something the payer wants from it – maybe a reduction in follow-up visits to the doctor to get another pain drug. Or delays the prescription of an opioid. Or allows a generic to be used in most cases. Or shows that a GP, after a relatively low-cost visit, can prescribe the product without sending the patient along for specialist follow-up. Or can avoid an expensive diagnostic procedure. A me-too cancer drug (and there are plenty of them in development) could justify premium pricing by measuring, along with whatever purely clinical data it needs for approval, reductions in hospital-acquired infections, or length-of-stay.

I spoke with one CEO who told us that the nurses in hospitals testing his oncology drug loved it because they spent less time cleaning up after patients nauseated by the standard of care. I asked: Are you measuring how much less time they’re spending? No, he said.

Biotech wants to be paid like it’s always been paid: for promises of novelty. I’d be curious to hear a biotech claim that it should be paid, as the UK’s NICE pays for Millennium/J&J’s Velcade, when the drug delivers the value the payer and patients want. That value could be a particular medical outcome, or better quality of life, or lower medical costs. Or something that makes the payer’s services more attractive to the employers its competing with other payers to win as clients. But it isn’t necessarily whether it’s clinically better than placebo. Or even standard of care. Effient’s head-to-head trial against Plavix proved – in crude summary – that it’s clinically better. But payers clearly don’t see enough value to justify switching away from a drug soon to be generic.

So my suggestion: if BIO really wants to promote the long-term health of the biotech industry (and the broader pharma business as well), maybe the theme for the next convention should focus on customers.

How about “What’s In It for Me?”

image from flickr user zizzy used under a creative commons license

DotW: Wishful Thinking

The biotech M&A storm is coming. Really. So sayeth the good attorneys at the UK patent firm Marks & Clerk, based on survey data of 381 pharmaceutical execs who predict industry consolidation as various players attempt to hurdle the looming patent cliff.

Added to IN VIVO Blog’s To-Do List: Call Marks & Clerk to determine where to purchase the rose-colored glasses apparently so in fashion.

We admire the glass-half-full sentimentality. It’s cheaper than Prozac or Paxil (though purchasing either would help sales at certain pharmas). We’re just a bit skeptical that the patent cliff will translate into a big-pharma buying spree of innovative biotechs. Here's why: For starters, the big acquisitions of 2010 have mainly been about diversification, marketed products, generics, emerging markets or some combination thereof. Innovative pipeline material? Not so much. Big pharmas want revenue.

According to Elsevier’s Strategic Transactions database, the top deals of 2010 have been Merck’s acquisition of Millipore, Teva’s purchase of ratiopharma, Astellas’ flight into oncology with OSI, and Charles River’s take-out of WuXi. Of these, only the Astellas/OSI transaction fits the patent-cliff theory, in which a drug maker pays top dollar for a biotech to replace revenues lost to looming--or current--generic competition. And companies like OSI, with money-making products far from patent expiry, remain a relative rarity, which as we’ve pointed out in our reporting, is one reason that biotech’s price tag climbed as high as it did.

We’ve said it before. On the private side, companies can’t rely on the stalking horse of IPOs to force pharmas into acquisitions; M&A--when it happens-- will likely to be in the guise of earn-out heavy deals, with eye-popping returns (think >5X when all the milestones are factored in) for the future. (Want data? See here and here.)

Other forces are lined up to stifle the oft-predicted M&A storm. On the public side, many smaller biotechs are still struggling to attract investor love. (Will ASCO help?) For European companies, the debt crisis isn't going to help. With biotechs’ stock prices trending down, there’s simply not much pressure for Big Pharm to get involved in pricy bidding wars. Moreover, big pharma buyers are burdened with infrastructure and more early stage programs than they can afford to develop, suggesting that when they do bring programs in it will be via alliances not acquisitions.

Does IN VIVO Blog think there will be some M&A? Absolutely--and if there isn't, this column will get awfully lonely. But are we talking Perfect Storm? Boom Times? That smacks of wishful thinking. Any doubt? Take a look at this week’s round-up of deals, which emphasize R&D on the cheap, EMs, and branded generics.

Astellas/OSI: Japanese drug maker Astellas' pursuit of OSI Pharmaceuticals was rewarded on May 17, 2010 with a $4 billion merger agreement supported by both companies' boards. At $57.50 per share, the deal cost $500 million more than the original hostile bid that Astellas launched in late February, and it will consume roughly half of the drugmaker's available cash. It seems no other white-knight bid emerged to counter Astellas' hostile offer, which turned semi-friendly at the end of March. Astellas, meanwhile, had made OSI the linchpin of its strategy to become a global oncology player. To walk away empty-handed would have raised serious questions about Astellas management, especially in the wake of its previous hostile bid, an unsuccessful run at CV Therapeutics. The newly sweetened price is a 55% premium to OSI's stock price on February 26, 2010, the day before the Japanese firm publicly disclosed its $52-a-share hostile offer for the biotech. The price is also 50 cents more than the informal offer in the $55-to-$57 range that Astellas originally suggested in 2009, according to SEC filings. With its ability to do further big deals limited for now, Astellas must extract full value from both Tarceva and OSI's earlier stage molecules. The key will be retaining and integrating OSI's management team into Astellas' U.S. operations.—Ellen Foster Licking

Abbott/Piramal: Rumors have been circulating for weeks that Piramal, one of India's leading biopharma players, was up for sale. There was quite a bit of truth to the rumor mill, except the buyer wasn't one of the usual suspects: GlaxoSmithKline, Sanofi-Aventis, or Pfizer. The ultimate winner was Abbott, which also made waves with last week's collaboration with Zydus Cadila and the creation of its established product unit. Abbott says the deal gives it the numero uno position (in Hindi, that's nambara ēka) with 7% market share in the Indian pharmaceutical market. It doesn't come cheap. Abbott will pay a total of $3.7 billion for Piramal, but not all is upfront cash. Piramal gets an initial payment of $2.12 billion and then $400 million annually for the next four years starting in 2011. (A hedge, perhaps, to mitigate the snafus Daiichi Sankyo has encountered with Ranbaxy?) Structured this way, Abbott says the all-cash transaction will not impact its ongoing earnings per share guidance. The strategy behind Abbott's deal is obvious and one familiar to IN VIVO Blog readers. Indeed, it can be summed up in three catch phrases: diversification, branded generics, and emerging markets. --EFL

Pfizer/Washington University: The R&D belt continues to tighten, and nervous companies ask more loudly how best to cheaply and efficiently identify innovative medicines? What about academia? What about new uses for existing medicines? Why not combine the two? This week Pfizer announced a five-year collaboration worth $22.5 million with Washington University in St. Louis in what is essentially a re-profiling experiment of 500 compounds originated at Pfizer. Don Frail, the chief scientific officer of Pfizer’s Indications Discovery Unit and the brains behind the deal, said the partnership could result in the university participating in clinical trials and holding downstream financial rights to drug candidates. Pfizer, meanwhile, can tap the thinking of a different group of researchers, and it won't spend an additional dime (beyond the $22.5 million) developing idle programs. Indeed, just one moderately successful product from the tie-up could cover Pfizer’s investment many times over. Wash U researchers will submit proposals for studies of compounds to a joint advisory committee. Pfizer researchers will work with Wash U scientists, with the university owning rights to its discoveries and the ability to negotiate terms for their development and commercialization.--Joseph Haas and EFL

Quintiles/Kaiser Permanente: It's not the kind of deal we normally cover, but we were intrigued by a collaboration between a major CRO and a leading insurer/health provider. With a dearth of details in the press release, IN VIVO Blog is still intrigued. We thought perhaps this deal augured a future wave of partnerships, in which pharmaceutical companies—or their CROs—ally with groups to develop outcomes-based data to support the commercial prospects of drugs under development. While this may be one of the longer term outcomes of the project, for now the emphasis is on enhancing the quality and productivity of clinical research. As such, Kaiser’s Southern California Permanente Medical Group becomes Quintiles’ fourth global prime clinical research site, joining the University of Pretoria in South Africa, Queen’s Mary College in the UK, and Washington D.C.'s Washington Hospital. Adam Chasse, Quintiles’ head of global prime sites, says the interests of both groups are mutually aligned since SCPMG wants to expand its clinical research efforts while the CRO hopes to tap the physician expertise within Kaiser--as well as its diverse patient base.--JH and EFL

Sanofi/Nepentes: Once again Sanofi-Aventis is expanding its consumer products business with a $130 million offer for the Polish drug, dietary supplement, and cosmetics firm, Nepentes Group. Sanofi announced May 19 it would pay approximately $8-a-share to Nepentes’ main shareholders and $8.60-a-share to minority shareholders in order to establish a presence in Europe’s fifth leading consumer health care product market. According to “The Tan Sheet," Sanofi believes it can boost Nepentes’ growth by extending distribution of its products, which include Selsun Blue, Melisana Klosterfrau supplements, and the Marimer line of nasal sprays, to additional markets. The Nepentes transaction marks the seventh consumer deal for Sanofi since CEO Chris Viehbacher outlined plans in February 2009 to double the drug maker’s OTC offerings in five years, primarily through bolt-on acquisitions. The most costly so far is Sanofi’s acquisition of Chattem for $1.9 billion. It’s all part of Sanofi’s larger strategy to diversify into arenas less risky than branded pharmaceuticals while simultaneously tapping those necessary "pharmemerging" markets.--Malcolm Spicer

Image courtesy of flickrer furiousgeorge81.

Abbott Charges Into India

Rumors have been circulating for weeks that Piramal, one of India's leading biopharma players, was up for sale. And just as staunchly, management tried to quell the gossip (as recently as yesterday--if you are keeping track.)

Turns out there was quite a bit of truth to the rumorville. Only the buyer wasn't one of the usual suspects. Both GlaxoSmithKline and Sanofi-Aventis' names have been twinned with Piramal in part because of their aggressive moves into both emerging markets and branded generics.

The ultimate winner of Piramal? Abbott, which has been making its own waves in recent weeks through last week's collaboration with Zydus Cadila and the creation of its established product unit.

Abbott claims the deal gives it the numero uno position (in Hindi, that's नंबर एक or nambara ēka) with 7% market share in the Indian pharmaceutical market, but those bragging rights are costing it a pretty penny. Abbott will pay a total of $3.7 billion dollars for Piramal. Interestingly, not all of it is upfront cash--Piramal gets an upfront payment of $2.12 billion and then $400 million annually for the next four years starting in 2011. (A hedge perhaps to mitigate the snafus Daiichi Sankyo has encountered with Ranbaxy?)

Structured this way, Abbott says the transaction, which is still subject to Piramal shareholder approval, will not impact its ongoing earnings per share guidance in 2010. The diversified health care company plans to fund the deal with cash on the balance sheet.

The strategy behind Abbott's deal is obvious and one familiar to IN VIVO Blog readers. Indeed, it can be summed up in three catch phrases: diversification, branded generics, emerging markets. Abbott's CEO and chairman Miles White decided to elaborate however, stating in the press release announcing the news:

This strategic action will advance Abbott into the leading market position in India, one of the world's most attractive and rapidly growing markets. Our strong position in branded generics and growing presence in emerging markets is part of our ongoing diversified pharmaceutical strategy, complementing our market-leading proprietary pharmaceutical offerings and pipeline in developed markets. (Highlights courtesy of IN VIVO Blog.)

We'll have more on the deal later in "The Pink Sheet" DAILY and PharmAsia News. But for now we'll go out on a limb and say that one of the immediate impacts of the deal has got to be the increased liklihood of getting an authentic curry in Abbott Park, Illinois.

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