Big Pharma Gets Serious About Cutting the Fat

Infrastructure? Who’s talking about infrastructure?



We mean obesity. According to our affiliated publication “The Pink Sheet,” the pharmaceutical industry’s role in treating diseases tied to obesity was a recurring theme during the Pharmaceutical Research & Manufacturers of America’s 2008 annual meeting.

Exhibit A: Jerry Mathers, formerly “The Beaver” on Leave it Beaver (pictured above). Mathers spoke to PhRMA about how he put on a bit of weight when he opened a catering business and ultimately developed type 2 diabetes.

Which inspired this immortal line from PhRMA CEO Billy Tauzin:

“If you really want to see the health care cost driver in America, try doing what ‘The Beaver’ did. Try looking past your belly button. If you can’t see past your belly button, you’ve seen the larger part of our problem.”

According to “The Pink Sheet,” there was plenty more talk about chronic illnesses stemming from obesity. National Institutes of Health Director Elias Zerhouni discussed. (You can read about the annual meeting here; a subscription is required.)

One of the few speakers who did not directly discuss obesity was Merck CEO Richard Clark, the new chairman of PhRMA, whose address focused on rebuilding trust in the industry. (A theme, alas, that is all too common at PhRMA annual meetings, but one we think is particularly important to Merck.)

Clark is also particularly interested in the health care burden of obesity, given the big—and now, perhaps, troubled—bet Merck has made on the potential anti-obesity agent taranabant. If you haven’t been following it closely, the Merck drug seemed to show pretty good efficacy at the lowest studied dose—but also a high rate of psychiatric adverse events at higher doses. (UPDATE: We orginially suggested that Clark helped shape the PhRMA meeting agenda. Merck tells us that the agenda is in fact put together by the outgoing association chairman--Amgen CEO Kevin Sharer, in this case.)

The agenda was also a little thin (sorry) on big name political figures—another all-too-common trend for PhRMA during election years. The biggest name was Arkansas Governor Mike Huckabee, who knows a thing or two about weight loss himself. But Huckabee’s appearance also underscores the tough months ahead for industry, since none of the three remaining Presidential contenders can be called a fan of Big Pharma.

No one knows when or if the pharmaceutical industry will have a meaningful impact on the obesity epidemic, but we will venture one prediction: given the commercial and political pressures on industry, PhRMA companies will be leaner by this time next year.

And if industry wants to turn that picture around, this is not the time for navel gazing.

While You Were Snowed Under

Nothing like a little early April snow to get the airport tied up in knots. If you, like us, were traveling into or out of Heathrow on Sunday morning, you have our sympathies. Find us at the BIO-Europe Spring conference in Madrid (eventually the skies cleared and BA got its act together) if you want to commisserate over a glass of Rioja... and before we get to the weekend's news we would be remiss if we didn't mention that both the Flyers and the Sixers each made the playoffs. The playoffs!--who wouldda bet on that?

• Novartis has taken a huge stake in Alcon, the world's largest ophthalmology company. The Big Pharma spent about $11 billion buying 25% of the firm from majority owner Nestle, and has the option to increase that stake to 77% by buying Nestle's remaining interest in the company for $181 per share, or about $28 billion, between January 2010 and July 2011. (Nestle can also require that Novartis buy this remaining stake.) The Alcon portfolio allegedly complements Novartis' existing contact lens and ophthalmology drug businesses and it certainly adds specialty focus and some more diversity to the drugmaker's commercial offerings and pipeline. We'll have more on this deal later.


• Amicus CEO John Crowley was reportedly running for the Republican nomination in New Jersey's upcoming Senate race, and now he's reportedly not running. From the Politico story: “John was deeply impressed with the outpouring of support for his potential candidacy for the U.S.Senate," Crowley friend and advisor Bill Spadea said. "Many people both locally here in New Jersey and nationally had been encouraging him to run over the past week, but given his tremendous level of responsibility to his family, his company and to the U.S. Navy, he’s decided not to enter the U.S. Senate race this year."


• The New York Times reports that drug companies are getting nearer to securing 'pre-emption' of lawsuits against companies when patients are harmed by FDA approved products, as the Johnson & Johnson Ortho Evra patch case reaches the Supreme Court. The Supremes already granted a similar legal shield to medical device makers earlier this year.

Photo from flickr user leejordan used under a creative commons license

Venture Round: Weekly Wrap Up

Remain calm. All is...

Well, not so good.

The start of April means one thing and one thing only. Well, okay actually it means several things. But for the purpose of this item, the start of April presents us with the first first chance to quantify how good a year we're having or not having.

That's right. It's first quarter numbers times.

It's too soon for venture capital figures. Those won't be out for a few weeks. But venture trackers Dow Jones and Thomson Financial both dutifully released their first quarter figures for exits in the industry. And we'll release ours from our Strategic Transactions Database, too -- in this post.

We'll skip over IPOs for this particular post. Not much to report there anyway. Let's zero right in on mergers and acquisitions since they rely less upon the whims of Wall Street...

To summarize, the first quarter stunk.

Dow Jones' Venturesource said that 14 VC-backed health-care companies got sold in the first quarter for about $1.1 billion, off 42% from the $1.9 billion total during the first three months of 2007.

Thomson identified only five acquisition of venture-backed companies. Three of the five deals came with disclosed prices that amounted to $229 million. The finally dollar tally didn't compare too well to the first quarter of 2007, when four life sciences companies were acquired for $1 billion.

And our Strategic Transactions Database reports a similarly disappointing drop -- but very different numbers. We include all privately-held companies, including those that never raised venture capital. These figures include acquisitions of some companies outside the US as well as some private-equity plays. For example, last year's largest deal was the $3.6 billion acquisition of Molnlycke Health Care by Investors AB and Morgan Stanley Principal Investments.

In our broader sampling of the first quarter, 27 privately held companies sold for $1.7 billion. Cardinal Health's acquisition of Enturia for $490 million topped the list as the largest investment. Better than what others are reporting, no doubt. But those figures compare less than favorably to the 35 companies acquired in the first quarter of last year for $8.7 billion.

Yes, that's a pretty significant drop. But, it's only one quarter. Remain calm. All might be well. (You'll have to wait until the six-minute mark to see the scene. Still, it's funny.)

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VentureWire this week reported that Open Prairie Ventures is in the midst of raising a $125 million fund. Open Prairie is one of those Midwest firms that concentrates on the regions most VCs see through plane windows.

VCs often overstate the opportunities presented in these regions but Open Prairie certainly nailed a good one with its $1 million-plus investment in TomoTherapy Inc., the innovative imaging company that went public last week.

While we reported in last month's Start-Up that a few TomoTherapy investors have started to cash out, Open Prairie didn't make our list because they haven't had to file a Form-4.

But the firm has been selling. Between shares sold in the company's May IPO and a secondary in November, Open Prairie scored more than $16 million. On top of that, Open Praire still holds 1.4 million shares in Tomotherapy, which are worth roughly $20 million at the current stock price.

In an interview with IN VIVO Blog, partner Jim Schultz deemed the TomoTherapy investment a "fund maker." It's hard to argue with the term since it returned almost all the capital of Open Prairie's first $40 million fund.

Schultz confirmed that Open Prairie has closed on $20 million of a $140 million. (Ah, we do miss the days when all VCs spoke as freely about their fund raising efforts.) Open Prairie intends to invest 40% of the new fund into health-care companies, with a focus on those that include an element of information technology as well as those life sciences companies targeting the agricultural industries.

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Here's another one of those non-coastal VC efforts.

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We'd be remiss if we didn't identify other investors who have sold off their shares in TomoTherapy's IPO and secondary, so let's present our SEC Documents of the Week. In addition to Open Prairie, Venture Investors, Avalon Technology, The Endeavor Group, Ascension Health Ventures and Wisconsin Alumni Research Foundation sold off more than $24 million in Tomotherapy shares during the IPO, according to that S-1.

Meanwhile, those groups plus the Mayo Foundation, Sunshine Summit, State of Wisconsin Investment Board and Robert W. Baird & Co. Inc. brought in more than $133 million by selling shares through a secondary offering last fall, according to the S-1.

***

Two stent companies recorded capital this week, clearly showing venture interest remains strong in the devices.

First, CardioMind Inc. drew down $22 million, the second tranche of a $33 million financing it raised last year. The capital came after the company hit the milestone of instituting its first-in-man trials, aka Care II. Then, Tryton Medical Inc., secured a $14 million Series C to help pay for development of its bifurcated stent.

“We’re still bullish in the drug-eluting stent market,” says Hank Plain, general partner of Morgenthaler Ventures, who helped start stent-maker Xtent Inc., a company we wrote about recently in IN VIVO the magazine.

Look for more on where VCs are playing their stent bets in the April issue of START-UP.

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Finally, Highland Capital once again is running a pretty neat program for budding entrepreneurs. The bi-coastal venture firm is opening up its offices to a few select team of individuals with business ideas that need vetting. Winners get capital, use of Highland's offices and access to senior partners. In return, Highland asks for an opportunity to invest in any ventures that raise capital within six months. A write-up of the first program, which Highland ran last year, suggests an IT-leaning, but no doubt Highland would welcome opportunities in life sciences. Thanks to PE Wire for the tip.)

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As always, we welcome your comments. If you have any private suggestions, comments or care to know why I'm worried about my rotisserie baseball team email me here.

Deals of the Week: Play Ball

Fans of peanuts, popcorn, and Joe Torre bobbleheads unite. America's national pastime is again underway. (Contrary to popular opinion, it's NOT bashing pharma.) On March 30 President Bush threw out the ceremonial pitch at the Washington Nationals' home opener; the pitch wasn't bad but the crowd booed loudly anyway.

Schering Plough's Fred Hassan and Merck's Dick Clark can probably emphasize with POTUS. The stocks of both companies took a beating this week after results of the long-delayed ENHANCE study were finally presented at the ACC meeting in Chicago. Following the presentation of data showing that Vytorin does not lower the risk of heart attack more than generic statins, a panel of four independent cardiologists opined that the results meant the drug should be used less often. And then the gloves came off, as the soap opera escalated into a "he said, he said" affair played out in the blogosphere. (Seems like at least one phama exec could use a review of basic kindergarten etiquette.)

In other news, Pfizer also struck-out, announcing that it's antibody-based drug, tremelimumab did no better than conventional chemotherapy in treating patients with advanced melanoma judged to be surgically incurable. Medarex and its partner Bristol-Myers Squibb also got caught up in the fall-out: some industry experts doubt their ipilimumab, also in Phase III trials, will prove effective given that it has a similar mechanism of action to the Pfizer molecule.

And with that, it's clearly time for the seventh inning stretch...or maybe simply a break from the baseball metaphors.

Takeda/Cell Genesys: Cell Genesys tied up its Phase III GVAX Prostate immunotherapy with Takeda in a deal worth $50 million upfront and an additional $270 million in milestones. In addition, Takeda will pay Cell Genesys tiered, double-digit royalties based on net sales of the GVAX immunotherapy in the US; in all other regions, Cell Genesys will receive flat double-digit royalties. Just as important, going forward Takeda will pay for all external development costs associated with the the immunotherapy's clinical development and will also pick up the tab for all additional development and commercialization costs. For more on why the deal makes financial sense for Cell Genesys check out this post from earlier in the week and our coverage in the April issue of IN VIVO.

Teva/Bentley Pharmaceuticals: The Israeli generics monolith is at it again. This time the acquisitive Teva acquired Bentley Pharmaceuticals, a generic maker with a strong presence in Spain, in a deal worth about $360 million. For Teva, the driving factor behind the deal was its desire to boost its presence in sunny Spain, where generics are one of the fastest growing sectors of that country's pharmaceutical market. Wachovia Capital Markets analyst Michael Tong told Reuters that the deal further reinforces Teva's position to be "best in class" in generics. "The potential growth of generic utilization in international markets represents a key growth driver for generic drug companis in the near to intermediate term," he said. Curious to know more about Bentley? Check out this article from 2003, when we chronicled the New Hampshire-based company's hard-driving strategy to exploit Spain's intellectual property loop-holes.

Paul Capital Healthcare/Plethora Solutions Holdings: Plethora Solutions, which develops drugs to treat various urological conditions, is celebrating a plethora of riches thanks to a financing agreement reached with Paul Capital. As part of a revenue interest financing agreement, Plethora could receive up to $28 million from the international healthcare fund, which has invested more than $900 million in the biopharma and medtech sectors. Upon signing the deal, Plethora will receive $15 million upfront, which the company says it will use to fund late stage trials of two drugs, PSD502 to treat premature ejaculation, an PSD510 to treat erectile dysfunction. In return for Paul Capital's generosity, Plethora has agreed to pay the firm revenue interest generated based on the sales of PSD502, PSD510, and ErecAid. Financings of this kind have become more common in recent months as private equity plays flush with cash look to deploy their riches to needy companies who aren't feeling the love from the public markets.

LATE UPDATE: Plethora isn't the only firm in some cash-for-royalties action this week. Just this morning we noted VIVUS Inc.'s deal with Deerfield Management, coincidentally also in the ED space. Deerfield is providing $30 million for Phase III studies of VIVUS's PDE5 inhibitor avanafil in exchange for $10 million worth of the biotech's stock plus a royalty on sales of the biotech's already marketed ED treatment alprostadil (MUSE) and potential royalties on avanafil. Interestingly, VIVUS has retained the rights to buy back the royalty stream from Deerfield at a set price of $25 million during the first three years of the deal, and $28 million during the fourth year (that option cost Vivus $2 million).

(Image via Wikimedia Commons)

Waiting for Sentinel: The Active Surveillance Revolution is Coming Soon

It sounds like the Food & Drug Administration is about ready to unveil its plans for a national active surveillance network, dubbed Sentinel. (Though hopefully that will be the only resemblence to the meanies in The Matrix.)

This long-discussed project was given a big push by the drug safety law enacted in 2007. The potential implications are truly revolutionary for biopharma companies—displacing the drug sponsor from its historic role as the center of the information flow about its own products.

The potential implications are one thing. The real implications will depend heavily on how the program is implemented—and by whom.

The new law directs FDA to set up a public-private partnership to help build an integrated national database of pharmacy claims, and develop the tools for analyzing signals to make regulatory decisions.

The law doesn’t say what role the pharmaceutical industry should or should not have in the system, how the agency should decide what signals to communicate publicly, or whether the claims data should be used for more than just safety assessments and made available to support other forms of research or even formulary decisions.

It is a safe bet that former Commissioner Mark McClellan will be involved; he championed the idea during the latter stages of the FDA legislative debate. In fact, the agency would really like to hand at least some of the project off to the newly formed Reagan-Udall Foundation chaired by McClellan but Congress has complicated that by prohibiting FDA from transferring funds to the Foundation.

The law does include some timelines and deliverables that mean the agency needs to get moving—something that regulators are eager to do anyway.

“Sentinel is a program you will be hearing about very soon,” FDA Commissioner Andrew von Eschenbach told the Food & Drug Law Institute annual meeting March 26.

How soon? Well, all we can say for sure is that it will be a month sooner than it was the last time we heard von Eschenbach discuss the idea, during an address to the National Press Club at the end of February.

But we do know a bit about where the agency is likely to be heading. Here are some “principles” that Associate Commissioner for Policy Jeff Shuren—who is the agency’s point person on Sentinel—outlined during Windhover’s FDA/CMS Summit in December. Shuren stressed that these are his personal thoughts.

(1) Scientific Credibility: Sentinel must win the “trust and confidence of patients, medical community, industry and other stakeholders.”

(2) Integrity: “The management structure and data analysis of this new system could be insulated from undue influence, whether by stakeholders or the political process.”

(3) Inclusiveness: “Stakeholders should have the opportunity to provide input into the standards and processes used by the system.”

(4) Transparency: “Protocols and study results should be made available to the public.”

(5) Privacy Protection and Data Security: This is “of paramount importance.”

Those principles seem hard to argue with.

Not everything is so simple, however. Shuren raised just a couple of the tough questions FDA and other stakeholders need to wrestle with.

For instance, there is the question of standards for interpreting safety signals in the Sentinel system. “When and with what level of confidence, can conclusions be drawn from the data?” Shuren asked.

“Even if we do not develop standards for such decision making—and it would be truly a challenging and controversial undertaking—we at least need to realize that there are likely different levels of confidence or certainty under which to make decisions regarding the treatment of a single patient versus formulary or coverage determinations versus decisions to change a product’s labeling," Shuren said. Which in turn raises the question: what access should FDA grant to the Sentinel data for other entities, like the Medicare agency or private payors, to support coverage decisions?

Those are the types of questions where most in industry would agree the right answer is worth waiting for.

FDA’s 12-Step Program

The first step in any recovery is recognizing that there is a problem.

Based on a recent shift in public comments, it sounds like FDA Commissioner Andrew von Eschenbach has accomplished that important first step in a recovery program for the agency: he is now acknowledging publicly what others have been lamenting for some time—that FDA has reached a crisis point in its ability to complete its mission with its available resources.

While von Eschenbach says he first recognized the resource issues soon after joining the agency, he is starting to become more forceful and use stronger language than in previous public appearances.

The change in tone began with an interview that appeared in the Wall Street Journal on February 27, in which von Eschenbach sought to correct a misperception that he didn’t think FDA needed more resources. He followed that with a keynote address two days later at the National Press Club, during which he talked about the “potential for tremendous peril” during a time that he referred to as a “turning point” for FDA.

But the real change seemed to come during what is likely to be von Eschenbach’s final keynote at the Food & Drug Law Institute’s annual meeting last week. Using a term he has largely avoided in the past, von Eschenbach acknowledged that the agency is in the midst of a “crisis” as it struggles to meet all its responsibilities on a shoestring budget.

“This agency is burdened with an enormous portfolio of responsibilities of incredible scale and scope that have been growing over time,” he said. “And they have been growing in a manner that is somewhat akin to children putting ornaments on a Christmas tree. Each one of them maybe very important but the process was done without planning without precision and without prioritization.”

That increase in regulatory mandates is “further complicated by one more catastrophic element added to this formula for potential disaster,” he said. “All of this in context of uncontrolled expansion and accelerating complexity compounded by in effect reduction in resources available at FDA with which to cope with these changes.”

Those reductions—which prevented FDA’s budget from keeping pace with inflation—“were so subtle that when one looks at the bottom line, there was an apparent deception,” von Eschenbach said. The agency’s work force appears adequate on the surface, but in reality is overextended, aging, unstable and “working and coping with inefficient tools.”

Those statements come in stark contrast to von Eschenbach’s testimony during House Energy & Commerce Oversight & Investigations Subcommittee hearing just two months ago. The hearing—called by subcommittee chairman (and persistent thorn in FDA’s side) Bart Stupak—discussed an FDA Science Board report released late last year that described an agency “at risk” and unable to meet its scientific mission.

Von Eschenbach was asked to comment on the findings, and whether the agency needed more money to complete its mission. The commissioner chose his words carefully: while acknowledging that he had asked HHS Secretary Michael Leavitt for more appropriations for fiscal year 2009, he refused to specify how much, given that the hearing was held before President Bush had released his proposed budget.

And in an exchange with Rep. John Dingell (D-Mich.), von Eschenbach commended the FDA Science Board for its work on the report, but disagreed with the notion that FDA’s scientific base is weak. “It’s not that it’s bad,” he said. “It’s at a level of excellence that needs to continue to improve, and continue to expand.”

Since then, the Administration released a budget proposal that gives a 2.9% increase in appropriations (we wrote about that here), and von Eschenbach started to become a little more vocal about what it will take in monetary resources to get the agency back on track.

That should come as welcome news for the biopharma industry. Simply put, an underfunded, overworked agency is bad for drug sponsors. As we reported in The RPM Report this month, inadequate resources in FDA’s drug center resulted in a decision to prioritize the implementation of new drug safety standards ahead of product reviews.

Drug sponsors should hope FDA continues on its recovery path. FDA and von Eschenbach have achieved the first step; in the typical 12-step recovery program, the second step is believing that a higher power can restore sanity. Perhaps that's where Congress comes in.

How does Cell Genesys Spell Relief? T-A-K-E-D-A

These days an ailing biotech can't do better than look to Takeda for a cure (er, partnership). In February, Amgen announced its monster two part deal--worth well north of $1 billion--with the Japanese pharma. On late Monday afternoon, Cell Genesys announced its own $320 million agreement with the company.

While not in the biobucks stratosphere, this deal ain't chump change either. Especially considering it centers around a promising, but unproven technology: Cell Genesys' Phase III GVAX immunotherapy for prostate cancer. It's a "truly validating deal," noted Joe Pantganis, an analyst with Canaccord Adams, on the company's March 31 conference call discussing the news. (If there is such a thing as a validating deal anymore, we suppose.)

As part of the deal, Takeda agreed to fork over $50 million in up-front payments, plus additional regulatory and commercialization milestones worth up to $270 million for exclusive world-wide rights to the product. In addition, Takeda will pay Cell Genesys tiered, double-digit royalties based on net sales of the GVAX immunotherapy in the US; in all other regions, Cell Genesys will receive flat double-digit royalties. Not quite a profit split, but again, by no means stingy.

Just as important, going forward Takeda will pay for all external development costs associated with the the immunotherapy's clinical development and will also pick up the tab for all additional development and commercialization costs. Cell Genesys even managed to wrangle a co-promote option--US only--out of the Japanse firm. Finally, the deal only includes the prostate cancer immunotherapy. Cell Genesys is free to develop its GVAX technology to treat other cancers.

"It's the best possible deal and the best possible partner," said Dr. Stephen Sherwin, Cell Genesys's chairman and CEO.

There's no doubt the deal makes financial sense for Cell Genesys. On its fourth quarter earnings call in late February, the company's CFO, Sharon Tetlow, reported it had just $147 million in cash. Not bad for a biotech, but not good considering the $100 to $105 million burn the company forecasted for 2008, thanks largely to the significant costs associated with its prostate cancer immunotherapy trials, VITAL-1 and VITAL-2. With one partnership, the company has managed to off-load the lion's share of these costs, giving it some much needed breathing room, while still enjoying upsides in terms of development and generous royalties.

Still, just $50 million for a Phase III product? (Recall that GSK paid, up-front, more than $100 million in cash and $350 million in equity at a 36% premium for Genmab's Phase III Hu-Max CD20 antibody for CLL, NHL and RA, though that deal was certainly an outlier.) Isn't prostate cancer a blockbuster indication--especially if Cell Genesys can get it approved for use earlier in the treatment cycle? Yes, and no. Cell Genesys and Takeda must travel a long road together before they can claim their GVAX immunotherapy is a true blockbuster. And the relatively low up-front for a late-stage product reflects the risks associated with a cellular therapy of this kind.

You see, Cell Genesys's GVAX Prostate is supposed to work like the traditional vaccines given for influenza or measles. It's comprised of cancerous cells from two different cell lines taken from very advanced--and very malignant--prostate tumors. (These cells have been irradiated so they can't multiply after injection into the patient.) In theory the cells display many of the common antigens found in refractory prostate cancer.

The hope is these antigens will trigger the patient's immune system to start recognizing these cells as a threat, clearing the cancer from the body. But to be effective, the immune system needs a little help. As a result, Cell Genesys has also engineered its GVAX Prostate cell mixture to spit out an important immune stimulatory molecule called GM-CSF. It's this combination of GM-CSF plus the antigens that leads to the supposedly greater efficacy of GVAX Prostate compared with other cancer immunotherapies. (Remember the fuss about Dendreon's Provenge?)

At least in theory. As Adam Feuerstein of TheStreet.com noted in a post Tuesday, the clinical data associated with Cell Genesys' prostate immunotherapy come from Phase II trials that were small in number and non-randomized. In other words, there's a high probability that GVAX Prostate could fail to achieve its Phase III endpoints. (Results from the VITAL-1 trial aren't expected until the second half of 2009 at the earliest.)

Thus, Sherwin and his team deserve kudos for inking such a rich deal for such a risky product. (It's more than competitor Dendreon has managed. That biotech's Provenge is still unpartnered despite the completion of two Phase III clinical trials and a third underway.)

But perhaps Takeda deserves accolades as well. True, the company is desperate to extend its reach beyond Japan given that country's sluggish growth and harsh price cuts. And, like other pharmas, Takeda certainly faces its own patent cliff. But the Japanese pharma is taking bold steps to play in the large molecule arena; according to Windhover's Strategic Transactions Database, Takeda has signed 9 large molecule alliances since 2006. While most of the deals have focused on antibody technology--a la the Amgen partnership--the company is no stranger to risky ventures. Last summer, Takeda became one of the first pharmas to collaborate with aptamer pioneer, Archemix (more on Archemix, and aptamers, in the next IN VIVO).

Given the controversy swirling around cancer immunotherapies, it seems likely many other pharmas would have steered clear of Cell Genesys's GVAX Prostate. But perhaps Takeda sees something those other companies are missing. Takeda is, after all, the company that brought the leading prostate cancer therapy, Lupron, to market.

What's that saying linking risk and reward?

Library of Congress photo (via Flickr) used under a creative commons license.

NEJM: The Market-Cap Executioner ... You're Next, ARBs

I received a call on Monday from a close friend of The RPM Report who started the conversation with: "So, has the New England Journal of Medicine ever destroyed as much market cap in two days as they did in the past 48 hours?"

Well, the issue in late May 2007, which contained cardiologist Steve Nissen's Avandia meta-analysis was not good for GlaxoSmithKline's market cap. Remember when GSK lost $13 billion in cap in a few days? If you forgot, click here or here.

NEJM may be on its way to eclipsing the old record the magazine already owns. Of course, on Sunday, everyone was privy to the actual ENHANCE study results on Merck and Schering-Plough's Zocor/Zetia combo Vytorin. I couldn't help but think of this when I contemplated how badly burned the companies must feel by the study results. As my blolleague (blog colleague) Chris Morrison pointed out earlier, Merck lost about $12 billion in market cap and Schering-Plough lost about $8 billion in market cap during early trading. Yuck. To see the results from ENHANCE, click here.

But one study that's getting drowned out in the ENHANCE frenzy is the ONTARGET study comparing angiotensin-receptor blockers (ARBs) against angiotensin-converting–enzyme (ACE) inhibitors. ONTARGET compared the ACE inhibitor ramipril (Altace) with the ARB telmisartan (Boehringer Ingelheim's Micadis, Bayer Schering Pharma's Pritor/Kinzal) and a combination of the two.

Here's what the investigators found:

"Telmisartan was equivalent to ramipril in patients with
vascular disease or high-risk diabetes and was associated with less angioedema. The combination of the two drugs was associated with more adverse events without an increase in benefit."

You can read the whole study, published in the May 31 NEJM, by clicking here. Wasn't the whole point of taking an ARB to reduce side effects?

An editorial in the same issue of NEJM written by John McMurray titled "ACE Inhibitors in Cardiovascular Disease--Unbeatable? " was pretty explicit in advising prescribers. Here's an excerpt:

As the fourth and largest comparative trial, the ONTARGET study confirms, beyond doubt, that angiotensin-receptor blockers (ARBs) are not better than angiotensin-converting–enzyme (ACE) inhibitors at reducing fatal and nonfatal cardiovascular events. Of course, physicians and patients might still choose to use an ARB if it is as effective as an ACE inhibitor but better tolerated or less costly.

Wow. Here are some of the ARBs on the market: AstraZeneca's candesartan (Alatacand), Sanofi-Aventis' irbesartan (Avapro), Sankyo/Forest Labs' olmesartan (Benicar), Merck's losartan (Cozaar), and Novartis' valsartan (Diovan). These are not nothing products: Novartis generated over $4 billion in sales from Diovan in 2007; Benicar accounted for more than $750 million in revenue in 2007 and is growing quickly in the US.

McMurray concluded by saying that ONTARGET together with an earlier study

"show that telmisartan and valsartan provide a benefit similar to that of a proven ACE inhibitor. ... However, because ARBs are more costly than ACE inhibitors and have more side effects, their primary value is as an alternative for patients who cannot tolerate ACE inhibitors because of cough."

McMurray ends with nixing an ARB/ACE combo:

"The addition of an ARB to an ACE inhibitor has no benefit and causes an increased number of adverse events in patients with arterial disease but seems to be beneficial in patients with heart failure, although the trials in heart failure did not test the addition of an ARB to a full dose of a proven ACE inhibitor."

To read the full editorial, click here.

There's been a lot of buzz around comparative effectiveness, a comparative center, the impact of comparative effectiveness on personalized medicine, so on and so forth. The ONTARGET study and NEJM editorial should prove to be an interesting marker of how comparative effectiveness will impact the commercial market.

We already saw what ENHANCE did to Vytorin. And it wasn't pretty.

Whither Thrombin?

On seeing today’s New York Times article “Seeking Alternative to Animal-Derived Drugs,” my first thought was that it could’a/should’a mentioned the January 2008 approval of the first recombinant human thrombin, which has the potential to replace bovine- and plasma-derived equivalents now on the market. But as noted in stories in IN VIVO and The RPM Report this month, ZymoGenetics, the developer of recombinant thrombin, can’t seem to catch a break these days, especially from Wall Street analysts.

"moo"

ZymoGenetics saw its recombinant thrombin, Recothrom, the first product it decided to commercialize on its own, as a way to balance the risk in its portfolio. Management has noted that all previous recombinant clotting factors -- along with insulin, hGH and a host of women's health hormones -- had succeeded in clinical trials and in the market. When it initiated the program, “we thought the major risk wouldn’t be clinical trials or commercial, but whether we could manufacture with an appropriate cost of goods,” says CEO Bruce Carter. Bovine thrombin, sold by King Pharmaceuticals, carries a Black Box warning about the severe bleeding risks associated with potential antibody formation. It’s also blocked from the market in Europe because of fears around potential transmission of Mad Cow disease.

But despite the implicit logic that a recombinant product is safer, for various reasons, it’s near impossible to directly correlate bleeding and bovine thrombin, and therefore there's no baseline with which to measure improvement in patient outcome, which poses a problem for reimbursement. As a surgical adjunct, recombinant thrombin also has to make its way through hospitals’ Pharmacy & Therapeutics Committees before it’s stocked, which takes time.

Plus, because Recothrom is a biotech product (and as a biotech company, ZymoGenetics is covered by biotech analysts with little experience following the launch of such a device-like medical product), there appears to be even more uncertainty over how to gauge the product’s trajectory in the market.

It’ll take time to prove the value proposition. Oppenheimer’s Kevin DeGeeter, for example, in a March 31 note, perhaps unfairly used Recothrom’s modest February sales ($26,164) to say that while it’s still very early in the product launch, there are concerns that conversion from bovine-derived thrombin “will take much longer than the Street expects.”

In any event, it is true that ZymoGenetics is in a tough position in a tough biotech stock environment, as it starts to be judged less on the value of its pipeline than on its commercial performance. It'll also be facing a cash crunch later this year and, with hindsight, probably should have financed in 2007 instead of waiting for a potential bump in stock price on the Recothrom approval.

The company likely could have done a better job of prepping analysts for a slow conversion process and launch, instead of believing validation would have come more easily after it found a partner (Bayer) to help with the US launch and open up the European market, and got the drug through FDA with a broad label despite analysts' worries over that.

That said, a tipping point favoring a safer if somewhat more expensive thrombin could come anytime, especially in this politically charged, safety-first health care environment.

Photo from Flickr user foxypar4 used under a creative commons license

Making Friends for FDA

If you can’t find friends, create them: that appears to be the strategy at the embattled Food & Drug Administration.

FDA Commissioner Andrew von Eschenbach is clearly feeling more isolated in Washington and is in need of vocal supporters. Asked at a recent American Enterprise Institute meeting about the impact of celebrity survival stories on the advancement of oncology drug development, he noted wistfully that getting celebrity support was easier at his previous job running the National Cancer Institute.

“Celebrities, that was my former life,” von Eschenbach said. “At NCI, we had just wonderful people who would speak on behalf of the importance of the agency. We do not have that many celebrities speaking on behalf of the FDA. In fact, we do not have very many people at all speaking on behalf of us. If you would like to sign up, we’d sure like to have you.”

But he may have a solution to getting long-term support for the agency: he wants FDA to train its own cadre of supporters—to create its own empathetic and understanding constituency.

Von Eschenbach has begun featuring the establishment of an FDA-led, two-year fellowship program as one of his top initiatives before leaving the agency. He has highlighted the program in speeches to AEI and the Food & Drug Law Institute annual meeting (March 26).

The goal of the program is to train each year about 1,000 individuals near the starts of their careers in a credentialed program on the duties and skill sets necessary to support FDA decisions.

FDA would hope to be able to entice about 200 of each graduating group to stay on for careers within the agency. The other 800 would go out into academia and industry with a better understanding and empathy for FDA’s regulatory tasks. That group would represent a growing base of people who would be pre-trained to accept and understand FDA’s regulatory duties.

As the commissioner explains it, the people who get the fellowship training and go on to careers outside the agency will be the “sons and daughters of FDA, intimately knowledgeable of, and aware of, FDA policies and practices and also having an opportunity of communication and rapport with those within the agency.”

They will create a growing constituency for the agency that will help mitigate some of the sharp criticism of the agency’s regulatory activities. Von Eschenbach has been talking about the possibility of training a new cadre of FDA regulatory science specialists for over a year, but the recent discussions describe the programs as being beyond the conceptual stage and into the stage where FDA is talking with potential outside groups to take on parts of the training.

The fellowship program will be launched within the next six months, he told AEI. FDA has been talking with the Reagan-Udall Foundation about running the program. An FDA spokesperson says that the foundation is looking at the agency’s request that it take on management of the fellowship program.

The Reagan-Udall Foundation was chartered under the FDA Amendments Act, headed by former FDA Commissioner Mark McClellan and is the subject of funding controversy on Capitol Hill (see here). It is one of two high priority projects that the current FDA management is pushing in the waning days of authority that could establish long-lasting commitments by FDA to entities run by former commissioner McClellan. The other project is the Sentinel post-marketing surveillance system.

Von Eschenbach told FDLI that the foundation is actually further along on the project and has accepted the challenge to make the fellowship project work. “One specific initiative that the foundation has committed to, and agreed to take on as one of its first efforts,” von Eschenbach told the FDLI annual meeting, “is to support the creation and implementation of an FDA credentialed fellowship program.”

FDLI, which represents the food and drug bar, has also been in contact with FDA to partner on part of the fellowship training. Von Eschenbach said he would like to continue discussions with FDLI “about the important role that you could play in creating modules for the fellowship program” on regulatory law and policy.

Von Eschenbach sees the fellowship program as a key component of a strategy to address the daunting challenge of adding new staff (a goal of 700 hires this year) and replacing its aging workforce (30% of the existing workforce qualifies for retirement). Training an outside cadre of FDA experts can be dangerous. The agency’s advisory committees have in effect trained a number of academics in the nature of FDA decisions over the past thirty years and emboldened some to act outside the agency as surrogates for FDA. But with so few seemingly loyal allies and friends, it is easy to see why an FDA commissioner would find the appeal of training a new constituency for the agency.